November 25, 2025|Franchise Frontlines
November 25, 2025 | U.S. District Court for the District of New Jersey | Unpublished Opinion
Executive Summary
In an unpublished decision, the District of New Jersey granted summary judgment in favor of Choice Hotels International in a trademark infringement action against a former franchisee that allegedly continued to operate as an Econo Lodge more than four years after the franchise agreement was terminated. According to the opinion, Choice alleged that AMBA Corporation and its principal continued to use Econo Lodge marks on signage, in marketing materials, and in direct communications with consumers despite receiving a termination notice, multiple cease-and-desist letters, and a court-ordered preliminary injunction. The court found no genuine dispute of material fact regarding infringement, granted permanent injunctive relief, ordered disgorgement of profits, awarded damages based on the royalty structure in the franchise agreement, and designated the matter an exceptional case warranting attorney’s fees. The court also recounted a protracted litigation history involving repeated noncompliance that ultimately led to a contempt order and the seizure of infringing signage by the U.S. Marshals Service.
Relevant Background
As the court recounts it, the parties entered into a franchise agreement in 2003 authorizing defendants to operate an Econo Lodge hotel in Bellmawr, New Jersey. The agreement remained in place for nearly two decades. According to Choice, defendants defaulted on their payment obligations in 2020. The opinion states that Choice terminated the agreement in January 2021 and directed defendants to halt all use of the Econo Lodge family of marks. The complaint alleged that defendants did not comply and continued to hold out the hotel as an Econo Lodge on exterior signage, interior materials, digital listings, and in conversations with the public.
Choice sent two infringement notices prior to filing suit, asserting that defendants continued unauthorized use of the marks. After the lawsuit commenced, the court issued a preliminary injunction, which defendants did not oppose. The opinion states that defendants allegedly continued using the marks even after entry of the injunction. Given the alleged continued noncompliance and a lack of response from defendants, the court granted Choice’s contempt motion and authorized the U.S. Marshals Service to seize infringing signage and paraphernalia from the property.
The court observed that defendants’ participation in the litigation fluctuated significantly and that counsel twice moved to withdraw due to noncommunication and nonpayment. The court ultimately recognized compliance with the injunction in March 2025, more than seventeen months after the order was entered. Choice then moved for summary judgment, which defendants opposed only as to the calculation of monetary relief.
Decision
The court found that summary judgment was appropriate because the record contained no genuine factual dispute regarding any of Choice’s five causes of action. According to the opinion, the Econo Lodge marks were incontestable, Choice owned them, and defendants continued using them after termination. The court emphasized that continued use of a franchisor’s marks by a former franchisee creates a significant likelihood of consumer confusion because guests may believe the hotel remains part of the branded system. The court therefore held that the Lanham Act’s core requirements were met.
The court extended this analysis to Choice’s state-law trademark infringement and unfair competition claims, explaining that New Jersey law parallels the federal framework. On that basis, the court granted summary judgment on all liability issues.
As to permanent injunctive relief, defendants did not oppose the request. The court noted that the Lanham Act creates a rebuttable presumption of irreparable harm after a finding of infringement and that defendants had not rebutted it. The court also found that public interest considerations favored protecting consumers and preserving the integrity of trademark rights.
The court next assessed Choice’s request for disgorgement of profits. After reviewing the equitable factors, the court concluded that disgorgement was warranted. The court highlighted that defendants continued using the marks after termination, after receiving cease-and-desist letters, after the court issued an injunction, and even after U.S. Marshals removed signage. The court held that this conduct demonstrated willfulness and supported awarding profits attributable to the alleged infringement.
The opinion then turned to actual damages. Choice calculated damages under the royalty structure in the franchise agreement by applying a 7.5 percent monthly fee to estimated monthly revenue derived from available business records. Defendants contested the calculation but produced no competing evidence. The court determined that, because only upward adjustments were possible under the agreement and no evidence suggested a downward adjustment, there was no genuine dispute as to the monthly fee percentage. The court therefore accepted Choice’s damages calculation.
Choice sought treble damages, but the court declined to enhance the award. The opinion explains that deterrence alone does not justify enhanced damages and that actual damages, combined with disgorgement and fee-shifting, sufficiently compensated Choice.
Finally, the court addressed Choice’s request for attorney’s fees. The Lanham Act permits fee awards in exceptional cases involving willful infringement or bad-faith litigation conduct. The court pointed to defendants’ continued use of the marks after termination, their noncompliance with the preliminary injunction, the need for a contempt order and U.S. Marshals intervention, and defendants’ repeated failures to participate in discovery or comply with litigation obligations. Based on this record, the court found the matter exceptional and awarded fees.
Looking Forward
This case reinforces several themes relevant to franchisors that rely on brand identity as the foundation of a franchise system. First, unauthorized use of marks after termination presents a direct threat to brand consistency, system uniformity, and consumer trust. Courts regularly treat holdover use as a textbook form of infringement, and they are willing to authorize strong remedies—including seizure orders, contempt sanctions, and monetary recovery—to protect the integrity of franchise marks. This opinion illustrates how methodical enforcement, paired with timely notices and a clear litigation record, positions franchisors to secure decisive relief.
Second, the decision emphasizes the importance of well-constructed franchise agreements. Clear de-identification obligations, structured royalty provisions, detailed reporting requirements, and explicit termination procedures help franchisors document the basis for enforcement and facilitate recovery when disputes arise. Courts may also rely on these contractual structures when assessing actual damages under a royalty-based model, particularly when a holdover operator does not cooperate in discovery.
Finally, franchisors may take from this case a reminder of the broader importance of system-wide brand protection. Enforcement actions serve not only to address isolated misuse but also to preserve the reputation and goodwill of the brand for compliant franchisees. As courts continue to treat unauthorized post-termination use of marks as a significant infringement risk, franchisors benefit from proactive brand monitoring, consistent enforcement protocols, and coordinated engagement across legal, compliance, and operations teams. Decisions like this underscore how important it is to act promptly when a franchise relationship ends and to ensure that former operators do not continue holding out their businesses as part of the system.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
