November 25, 2025|Franchise Frontlines
November 25, 2025 | Minnesota Court of Appeals | Nonprecedential Special Term Order
Executive Summary
In a nonprecedential special-term order, the Minnesota Court of Appeals remanded a district court’s denial of a stay pending appeal in a franchise non-compete dispute between Ellie Fam LLC, a Minnesota franchisor of mental-health clinics, and former franchisees operating in Arizona and Nevada. After the franchisees rescinded or terminated their franchise agreements and began operating independently, the district court entered a temporary injunction enforcing restrictive covenants and prohibiting operation outside the franchise system. The district court denied the franchisees’ motion to stay enforcement pending appeal. On review, the Court of Appeals declined to grant a stay but remanded for additional findings regarding whether the appeal raises important questions of law and whether the public interest—particularly patient continuity of care—should factor into the stay analysis.
Relevant Background
Ellie Fam LLC is a Minnesota franchisor of a system of mental-health clinics. The appellants are franchisees operating clinics in Arizona and Nevada. In February 2025, the franchisees notified the franchisor that they were rescinding or terminating their franchise agreements based on alleged breaches and began operating their clinics independently.
The franchisor commenced actions in district court and moved for a temporary injunction enforcing restrictive covenants contained in the franchise agreements. On August 18, 2025, the district court granted a temporary injunction prohibiting the franchisees from using confidential information in an unauthorized manner or operating mental-health clinics except under the franchise agreements. The district court stayed enforcement of the injunction for 90 business days.
The franchisees appealed and moved in district court for a stay pending appeal. The district court denied that motion. The franchisees then sought a stay from the Court of Appeals.
Decision
The Court of Appeals framed the issue under Minnesota Rule of Civil Appellate Procedure 108.02. An appeal does not automatically stay enforcement of an order. A party must first seek a stay in district court, and the appellate court reviews the denial for abuse of discretion.
In assessing whether a stay is warranted, Minnesota courts consider factors that may include: (1) whether the appeal raises substantial issues or important questions of law; (2) the risk of irreparable injury to the parties; and (3) the public interest, including the effective administration of justice.
The district court had considered two factors: whether the appeal raised substantial issues and the balance of harms between the parties. It concluded that the franchisees merely disagreed with the district court’s application of law to fact and that the harm to the franchisees did not outweigh the irreparable harm to the franchisor absent enforcement.
The Court of Appeals did not conclude that the district court abused its discretion outright. However, it held that additional findings were necessary for effective appellate review in two respects.
First, although the district court identified the “important questions of law” factor, it did not specifically analyze whether any issue on appeal qualified as such. The Court of Appeals could not discern from the order whether the district court had meaningfully evaluated that factor beyond defending its prior reasoning.
Second, the Court of Appeals found that the public interest might be relevant on the facts presented. The district court had previously acknowledged concerns about continuity of care for the franchisees’ patients and had temporarily stayed enforcement of the injunction to minimize disruption. Yet in denying the stay pending appeal, the district court focused only on harm to the parties themselves and did not clearly weigh the public interest.
The Court of Appeals therefore denied the stay request at that time but remanded to the district court for additional findings regarding: (1) whether the appeal raises important legal questions that could require reversal; and (2) whether the public interest, including patient impact, is a relevant factor and how it should be weighed.
The appellate court emphasized that whether to grant a stay remains within the district court’s sound discretion.
Looking Forward
Although nonprecedential, the order highlights practical considerations for franchisors seeking to enforce restrictive covenants—particularly in regulated or patient-facing industries.
First, even where a temporary injunction has been granted, enforcement during the pendency of an appeal is not automatic. Courts will scrutinize stay requests under a multi-factor balancing framework that extends beyond the merits of the injunction itself.
Second, when the underlying franchise system involves health care or other essential services, courts may treat continuity of service as a potentially relevant public-interest factor. Franchisors pursuing injunctive relief in such contexts may benefit from proactively addressing how enforcement can be structured to minimize disruption to patients or consumers.
Third, appellate courts require sufficiently detailed findings to permit meaningful review. A district court’s generalized conclusion that an appeal lacks merit may not suffice where the stay analysis calls for a specific evaluation of whether important legal questions are presented.
This decision does not alter the enforceability of franchise non-compete covenants. Rather, it underscores that enforcement timing—especially during appellate proceedings—requires careful attention to procedural standards and equitable balancing. In complex and sensitive matters, particularly those affecting third parties such as patients, courts may require explicit findings on public-interest considerations before allowing or denying continued enforcement pending appeal.
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 LLP 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.
