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PHOENIX – After Cold Stone Creamery recognized a new independent franchisee association, the franchisor turned its back on those very franchisees who dared ask for too much—more transparency.* As a result, the association filed a lawsuit against the franchise company. That’s when Cold Stone went after the association heads rather than bother with the association.
A Florida district court ruled that a lawsuit brought against Cold Stone by the independent franchisee association should be put on hold until the disputes were individually arbitrated.
Cold Stone had argued that the franchisees represented by the National Independent Association of Cold Stone Creamery Franchisees had all signed franchise contracts agreeing that any and all disputes must be resolved through individual arbitration in Arizona, not Florida. The court also agreed in its May 21 ruling that the NIACCF did not have “association” standing in the Florida lawsuit.
First on Cold Stone’s list of franchisees to arbitrate were three leaders of the independent group, Rudy Puig, president, Ed Reesman, chair of purchasing committee, and Frank Caperino, treasurer.
Prior to NIACCF filing its complaint, association directors had been vocal in the press about their frustrations with Cold Stone and holding company Kahala, in trying to establish a dialogue to improve franchisee profitability. They pushed hard to get the franchisor to be more transparent. Association leaders asked why their main product, sweet cream, was so expensive, how their advertising dollars were being spent, and how much money Cold Stone was collecting on unredeemed gift cards.
The franchisor refused to cooperate and instead went straight for the franchisee association leaders. Although rare, this heavy-handed approach has been tried before. It happened some years ago in Cohn v Taco Bell and more recently when Quiznos unsuccessfully pursued the leaders of a Quiznos independent franchisee association.
Robert Zarco of Zarco Einhorn Salkowski & Brito filed the NIACCF complaint for declaratory relief on January 23, 2012. Although the independent group did not identify the franchisees or state specifically how many store owners they represented, the association asserted it had standing to file the legal action. Zarco stated in the complaint, “At least one of its members (indeed, all of its members) will suffer injury in fact by the real and immediate threatened harm from Cold Stone’s actions in failing to provide information pertaining to . . . certain monies that Cold Stone Creamery, Inc. has received from third parties. . . designated to be utilized for the benefit of Cold Stone franchisees.”
The complaint did not ask for any monetary compensation for the association members.
One month after the lawsuit was filed, Cold Stone filed its motion to compel arbitration in Arizona against NIACCF’s president Rudy Puig and purchasing committee chair Ed Reesman. On May 15, 2012 the franchisor filed another against Frank Caperino, NIACCF’s treasurer. Court dockets show the latter was dismissed on July 20 for lack of proper jurisdiction. The case is now closed.
Boston attorney Arthur Pressman of Nixon Peabody, representing Cold Stone with law firm Snell & Wilmer, verified that Caperino sold his stores and is no longer in the franchise system. “He gave Cold Stone a full release prior to leaving,” he explained.
Since he was out of his office, Pressman could not confirm or deny that Reesman had also left the chain. He said Puig’s company Nutty Buddies’ arbitration is pending. After oral argument the court will rule.
Attorney Zarco stated that Reesman settled another dispute with Cold Stone and left the system. He said Puig is still in arbitration in Arizona. Zarco said the judge had not yet decided on the case.
“The fact that Cold Stone is putting pressure on and attacking the leadership of the association, in our view is inappropriate, especially if that is the only motive,” he stated. In closing Zarco declared, “We are going to pursue our claims against Cold Stone and aggressively defend their claims against us.”
*Editor's note: Blue MauMau incorrectly reported that "Cold Stone Creamery helped launch an independent franchisee association." To the best of our knowledge this is not the case. The National Independent Association of Cold Stone Creamery Franchisees was incorporated in Miami by franchisee Rudy Puig and attorney Robert Zarco.
|NIACCF v Cold Stone Order.pdf||41.38 KB|