Commercial: Default judgment entered against 7-Eleven franchisee

Where franchisee failed to respond to the complaint, alleging it continued operating the business after the franchise agreement was terminated, and the facts supported the claims for breach of contract, trademark infringement and unfair competition, it was adjudged liable for these claims.

Background

7-Eleven Inc. brought this action against Sisara LLC, Ram Kumar Lamichhane and Sanu Maya Lamichhane for breach of their franchise agreement, trademark infringement and unfair competition. Sisara failed to appear by counsel or otherwise timely respond to 7-Eleven’s claims. As a result, 7-Eleven moved for entry of default against Sisara, which the clerk granted.

On June 23, 2025, 7-Eleven filed a suggestion of bankruptcy as to Ram and Sanu Lamichhane. Thereafter the court stayed the proceedings as to those two defendants. That stay does not extend to the remaining defendant, Sisara. This matter is now before the court on 7-Eleven’s motion for default judgment against Sisara.

Breach of contract

Texas law governs the enforcement of the franchise agreement in this case. “In Texas, the essential elements of a breach of contract action are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach.”

Here, 7-Eleven and Sisara entered into a valid, written contract under the franchise agreement. Second, 7-Eleven performed its obligations under the franchise agreement by leasing the Store’s premises to Sisara and financing Sisara’s purchase of inventory for the Store. Third, Sisara breached the franchise agreement by failing to pay the open account balance and failing to comply with its post-termination obligations under the agreement.

Fourth, 7-Eleven has been damaged by Sisara’s refusal to surrender the store and its equipment and has been irreparably harmed by Sisara’s infringement of 7-Eleven’s trademarks after its license expired upon termination of the franchise agreement. Furthermore, 7-Eleven is entitled to monetary damages based on Sisara’s breach of the franchise agreement, including its failure to pay the balance on the open account.

Trademark/competition claims

In the case of a “holdover franchisee”—i.e., a franchisee whose trademark license has been terminated—many courts have found that the continued use of the franchisor’s trademark is especially likely to cause confusion, and proof of such use almost presumptively constitutes trademark infringement. Here, 7-Eleven terminated the franchise agreement on July 9, 2024, but Sisara continued to use 7- Eleven’s trademarks and held out their convenience store to the public as an official 7-Eleven franchise.

There can be no doubt, then, that Sisara “used” the marks “in commerce” and “in connection” with the sale of goods. Further, it is clear that an “ordinarily prudent” consumer would be confused by the continued operation of the Store as a 7-Eleven brand. On July 8, the store was licensed and consumers were purchasing 7-Eleven goods. But as of July 9, the store was no longer licensed, yet it continued to operate (by all appearances) as a normal 7-Eleven store just as it did the day before, giving the ordinary consumer no way of knowing these goods were suddenly no longer authorized.

Because the same facts that support a claim of trademark infringement would also establish a claim for unfair competition, the court likewise finds that the complaint establishes a claim for unfair competition.

Promissory note

Once 7-Eleven terminated the franchise agreement, the note became immediately due and payable on July 9, 2024. As alleged in the complaint, Sisara failed to pay the outstanding balance of the note after it became due and payable. Accordingly, the court finds that Sisara has breached the terms of the note.

Damages

As of September 2024, Sisara paid $51,045.10 on the note to 7-Eleven, leaving a principal balance of $54,157.40 remaining. Accordingly, the court will award 7-Eleven damages in the amount of $54,157.40 for Sisara’s breach of the note. Next, the adjusted total owed on the open account from unpaid debits is $129,515.42. Finally, the court finds that 7-Eleven is entitled to a permanent injunction against Sisara to enjoin any further trademark infringement, unfair competition and unlawful possession of the store.

Plaintiff’s motion for default judgment as to Sisara LLC granted.

7-Eleven Inc. v. Sisara Inc., Case No. 7:24-cv-00448, Aug. 26, 2025. WDVA at Roanoke (Cullen). VLW 025-3-345. 17 pp.