Waxing the City Franchisor LLC v. Katularu

Background

Waxing the City Franchisor LLC (WTC) licenses a system for operating personal-care businesses, including waxing, skincare, eyelash, and brow services. Its franchisees receive access to confidential information and trade secrets, including an Operations Manual, training materials, and a client database containing contact information, service and product preferences, and appointment history and frequency.

Eial Katularu, whom the court refers to as Eyal Katz, and Alessandro Romaniello operated Waxing the City studios in the Phoenix metropolitan area. Katz was party to franchise agreements for studios in Chandler, Phoenix, and Scottsdale. The agreements prohibited Katz, during their terms, from owning, operating, or assisting any business offering hair-removal services. They also required franchisees to protect WTC’s confidential information and prohibited use of WTC customer information after the agreement ended.

The Glendale studio’s agreement was between Romaniello and WTC. Katz later operated that studio, but WTC did not argue that it had entered into a franchise or confidentiality agreement with Katz concerning his operation of the Glendale studio. In 2024, Katz opened Wild Honey Skin Co., LLC, at the former Glendale studio location. Wild Honey offered waxing and laser hair-removal services, employed the same estheticians who had worked at the Glendale studio, and appeared to target the former studio’s customers.

Motion and Legal Standard

WTC moved for a preliminary injunction against Katz and Wild Honey. A preliminary injunction is temporary court relief issued before a final decision to prevent threatened harm while the lawsuit continues. The court considered four factors: WTC’s likelihood of success on its claims, the risk of irreparable harm, the balance of harms to the parties, and the public interest. WTC had the burden of establishing each factor.

Likelihood of Success

The court concluded that WTC was likely to succeed on its breach-of-contract claim concerning the in-term non-compete provisions in Katz’s Chandler, Phoenix, and Scottsdale agreements. Wild Honey primarily offered waxing and laser hair removal, so Katz’s operation of that business plainly conflicted with the agreements’ terms. The court also found that WTC had shown a legitimate business interest in protecting its goodwill and ability to re-franchise the Glendale territory.

Although the in-term non-compete provision did not contain a geographic limit, the court determined that Minnesota law allowed a court to narrow an overly broad restriction rather than invalidate it entirely. The court indicated that the restriction would likely be limited to the Phoenix metropolitan area, which WTC identified as the relevant market. That restriction would cover the Glendale location.

The court also concluded that WTC was likely to succeed, at least in part, on its trade-secret claims under the Minnesota Uniform Trade Secrets Act and the federal Defend Trade Secrets Act. The court did not find sufficient evidence that Katz or Wild Honey had misappropriated WTC’s Cerology training information or Operations Manual. But WTC’s customer database was password-protected, available to Katz on a need-to-know basis, and identified in the agreements as WTC’s property. Wild Honey and Katz did not deny that Wild Honey served the Glendale studio’s former customers, and Wild Honey’s pre-opening social-media posts referred to “our wonderful clients.” The court therefore found likely misappropriation of WTC’s client data.

The court rejected WTC’s claim, for purposes of the preliminary injunction, that Katz had violated the confidentiality provisions in the Chandler, Phoenix, and Scottsdale agreements by misusing client information. WTC had not argued that Katz obtained the Glendale studio’s information through his credentialed access under those three agreements, and WTC had not shown that Katz had a franchise or confidentiality agreement concerning the Glendale studio.

Other Preliminary-Injunction Factors

The court found that WTC would suffer irreparable harm if Wild Honey continued operating. The harm included loss of goodwill, interference with WTC’s ability to re-franchise the Glendale territory, and continued use of WTC’s client data. The balance of harms favored WTC because Katz’s operation of Wild Honey conflicted with agreements to which he was a party. The public interest also favored relief because parties to franchise agreements should be able to rely on agreed non-compete and information-protection terms.

Order

The court granted WTC’s motion for a preliminary injunction. During the lawsuit or until further order, Katz is barred from directly or indirectly owning, operating, assisting, or having an interest in a business offering hair-removal services in the Phoenix metropolitan area, including Wild Honey at the former Glendale location. The injunction does not prohibit Katz’s ownership and operation of the Waxing the City studios licensed to him in Chandler, Phoenix, and Scottsdale.

Katz is separately barred from any direct or indirect involvement with Wild Honey. Katz and Wild Honey are barred from misappropriating WTC’s client data. They must provide WTC’s counsel proof of steps taken under the order within seven days.

The court awarded WTC its reasonable attorney fees and costs incurred in bringing the motion under the franchise agreements and Katz’s personal guaranties. WTC had to submit an itemized request for those fees and costs within fourteen days for a later determination of the amount. WTC also had to post a $1,000 cash or surety bond within seven days.