Coffee Beanery Franchisees Testify for Arbitration Fairness Act
Williams: "Our Dream Was Trampled Upon by Binding Mandatory Arbitration"
WASHINGTON, D.C. (Blue MauMau) - Last Thursday, Deborah Williams and Richard Welshan, franchisees of Coffee Beanery, went before the House Subcommittee to tell their story of how mandatory arbitration in franchising contributed greatly to their demise. In Deborah Williams' testimony she stated, "I am 54, bankrupt and on the verge of being homeless, all because of a binding mandatory arbitration clause." Williams and Welshans are supporting the “Arbitration Fairness Act of 2007, Bill H.R. 3010, sponsored by Rep. Hank Johnson, D-GA., which would ban pre-dispute mandatory binding arbitration, in which consumers. . . give up their rights to sue and agree to enter arbitration instead." U.S. Reps. Elijah Cummings, D-Baltimore, and John Sarbanes, D-Towson, are co-sponsoring the bill.
Although franchisees do not come under the "consumer" label, some advocates for the bill are adding franchising to their message. Paul Bland, staff attorney for Public Justice, said in his testimony, "H.R. 3010 would ban the use of pre-dispute binding mandatory arbitration in consumer, employment, franchise and medical contracts." His article, Yesterday's Hearing on Arbitration, for Public Citizen gives highlights and testimonies of the hearing.
Williams said the entire process was very powerful and exhausting. As she told her story of how they had to travel 500 miles for the 11-day arbitration costing $100,000 in fees, Rep. Chris Cannon R-UT, fighting against the bill, tried to get her to admit that she could only blame herself for her problems. He indicated that she did not research the Coffee Beanery on the Internet and discover in advance that they were defrauding people. According to Bland's testimony, "Ms. Williams described the various steps that she had taken to do due diligence about the Coffee Beanery prior to becoming a franchisee, but Rep. Cannon persisted in trying to get her to say that her problems were all her own fault." Williams said Rep. Cannon asked her, "I guess you think all franchisors are unfair?" She said she stood her ground in answering. "I told him no. That is not what I said."
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Am I reading this correctly??
"Rep. Chris Cannon R-UT, fighting against the bill, tried to get her to admit that she could only blame herself for her problems. He indicated that she did not research the Coffee Beanery on the Internet and discover in advance that they were defrauding people."
Is fraud now legal since potential franchisees can research the internet and discover that the company is defrauding people?
Geez, next thing you know it will be the parents fault that their child was molested by the sex offender next door since they should've done their research to discover that they were moving next door to a known sex offender. Let the sex offender walk, the parents didn't do their due diligence.
Arbitration is
About keeping people from having thier day in court. testimony that given states that law suite are down. Could this be because you would have to arbitrate?
Think bout it. Most [eople would have to travel out of thier home state, and then the biggie:LOSER PAYS RULE
Then there is the myth that it is much faster. Seven months for Discovery?
But more importantly, e]read the arbitrators award in D&R case.
How many think that a Judge would have beeen able to get away with ruling against the FTC and State Law?
I think Mr. Tingler would agree that this case has set State Regulators on thier ear.
Why bother, when an arbitrator can make up the rules to justify her decision?
Then we have Maryland. Glad to see that somebody brought this back up.
What part did Cantone play in all of this? CB is after all, in violation of the Consent Order.
The Maryland Legislature must have felt that a private right of action would be needed for injured zees to try and regain loses.
Did Cantone have the right to interfere with R&D's Civil Suit?
In arbitration it is very easy to hide from public view this kind of made up law that suits what ever the arbitrator likes.
How many Judges would be able to rule opposite in a closed case?
CB had a chance to defend the suit brought by Maryland , but choose to enter into the Consent Order to settle the suit.
Do you still think that Cantone and CB were not aware of what was to come next?
WAKE UP AND SMELL THE COFFEE
CB and Arbitration
The attorney for CB is also an arbitrator for the AAA
The AAA is written in the FA for CB
That should be a conern.
Just looking at R&D's arbitration award should be enough, but it seems that discussing law and DD is not really what it seems on BMM
How can any of you talk about DD and then post that for anyone to ingnore the FTC or a State Regulator is OK?
Does this not mean DD is a waste of time if an arbitratior is determined to rule for the bad guy?
Arbitration is a privitized jusicial sysytem
CB knows how to use this system.
CB had another outrageous ruling when it was decided that a strip mall owner who was contracted by Kevin Shaw to build a cafe, ended up being a SILENT partner.
Of course the cafe started a down hill plunge right from jump. This strip mall owner had not been given a UFOC
What you ask was the arbitrator decision?
Kevin Shaw did not have to disclose to the strip mall owner because he disclosed to him self. Talk all you want about DD, just hope that it never goes before an arbitrator. There is a whole new world of law out there that does not play by the rules.
By the way the CB case happened to be a subject at the ABA Fourm on Franchising.
It is only a select few who feel that this was a fair and just award.
Then again there are those who have to make a living , so making this case look as though it could have been avoided or that the legal advice is to blame, might help you look appealing to retain for DD.
This was never about the law. The law was tossed aside and ignored.
The best DD in the world can not stand up against a system that is allowed to make up rules and laws.
Why have State Regulators, the FTC or DD attorney's when in the end it really dosen"t matter?
Accurate statements?
A couple of things in Deborah's statement seem to contradict what has previously been stated here and in other documents provided on this website.
1. As stated in her statements in front of the Judiciary Committee:
'The gift card program and Pepsi contract were not disclosed in our initial contract as required by law, but we had invested so much money that we had no choice but to accept the exorbitant additional fees.'
I thought that it had been previously stated that R&D never participated in the gift card program. That is also mentioned in Arbitration Award. Also, was it ever determined what your damages on the Pepsi contract was?
2. As stated:
'In addition to our costs, we were required to pay the Coffee Beanery $150,000, plus their attorneys’ costs and fees.'
This statement makes it seem as if the attorneys' costs were on top of the $150,000, but doesn't the $150,000 include attorneys' costs? It seems as if it does reading the arbitration award.
I guess which statements are more accurate? The statements in front of the House Judiciary Sub-Committee or what was previously stated here and in other documents.
Spin vs. Fact
As one who sees substantial merit in Congress addressing arbitration clauses, I must nevertheless correct 2 misperceptions given by Mr. Bland's article.
First: it is unlikely that the AAA forced the zee to arbitrate 500 miles from home. A well-drafted dispute resolution clause specifies the situs of the arbitration/litigation. My guess is that the contract signed by the zee specified a particular place (likely the zor's hometown) for the arbitration. Such clauses are enforceable in franchise contracts, even before Doctor's Associates Inc v. Casarotto [ 517 U.S. 462 (1996)].
Second: One of the comments on Mr. Bland's blog is from someone who says "The arbitration took place 500 miles from her home. Hey, Fred, are you under the impression that plaintiffs inthe court system have to travel 500 miles to have their claims heard? Not in the U.S."
The person who wrote that comment is simply wrong. This is well-settled law going back to Burger King v. Rudzewicz [ 471 U.S. 462 (1985)]; where the franchisee had to travel to the franchisor's home state to litigate.
Even if passed, a federal law banning pre-dispute ADR clauses in franchise contracts would not change the fact that a choice of venue and choice of law provision is likely to remain in a well-drafted contract. Moreover, where zee and zor are in different states and the litigation must take place in the zor's hometown, the zee may be up against zor counsel who is a "repeat player" in the courthouse, and even a contributor to the judge's re-election campaign.
As to "fairness" it is worth remembering that arbitrators are often criticized as being more likely to apply equitable principles, and that arbitrators may (depending on state law) not be bound by substantive and evidentiary rules which would apply in court. Franchisees are often better served by a more flexible jurisprudence (such as AAA arbitration) than they will find under FRE and FRCP.
The assumption that the franchisee would save money (or obtain a more "fair" result) by litigation is not necessarily correct, although in practice arbitrations can often be more expensive than litigation.
Is this the reason...
that we see Mandatory Arbitration Clauses in Contract (from one of my favorite websites)?
http://www.madisonrecord.com/news/194837-tillery-maneuvers-for-retro-madison-county-courts
In this case you have an attorney (for a class action) suing Dell because Dell's computers didn't perform to what they said. If Dell doesn't have an arbitration clause in their terms & conditions they are set up to go to court where the plaintiffs may make maybe $100 each and the plaintiffs attorneys will make millions. Why oppose arbitration if you are the plaintiffs? Because you may have to pay Dell their attorneys' fees, and who would pay those, the plaintiff looking to make a $100?
In this case Dell is protecting themselves from a frivilous lawsuit by trying to demand arbitration. Maybe if there weren't so many attorneys (sorry to put down your profession a little, Paul, Michael, Richard) looking to make a quick buck and sue for everything under the sun companies wouldn't have to have these clauses (by the way, Dell states that of the five cases they've put before arbitration, they've lost three).
For the people that enjoy reading legal snippets and such, I recommend that website. You can see how out of control some lawyers can be and the frivilous lawsuits that are filed. And yes, there are more arbitration stories, including some where the courts found that the arbitration clause was unenforceable, and some cases where they found it was.
Paul Bland Is A Stephen Colbert Look-Alike
Inquiring minds want to know -- Is Paul Bland really Stephen Colbert's secret twin brother? From the photo, they look a lot alike. Is this Stephen we are watching on the video or Paul?
"Unequal" in H.R. 3010
Did anyone notice the part on page 6 lines 22-25 which discuss statutes "intended to... regulate contracts or transactions between parties of unequal bargaining power."
That needs to be reworded, or just about every demand to arbitrate will be preceeded by litigation.
As to the Cannon/Bland exchange, I wouldn't make too much of it. Regardless of who had the better argument, it is not relevant to the matter of whether a pre-dispute arbitration clause should be enforced by the courts.
The fairness of arbitration
That is the question?
I'm still waiting for an answer to why an arbitrator can rule on a case that has been settled?
How can an arbitrator rlue CONTRARY to the FTC and STATE LAW?
All of you who tout DD and bad attorneys have not yet answered how this is acceptable.
Do you not understand that all of the DD in the world cannot over come an arbitrator that rules against established law.
Take a look around and see what is going on.
The UPS case is a great example of how franchising is confined to the world of BMM.
If the US Post Office was accused of over charging the American Public it would be on the Front Page of every News Paper in this Country, and yet we are the only ones who are aware of this case.
Maybe you people like to talk in here thinking that you are the only ones who can change the course of franching.
Maybe you are in here trying to convince people that you would have been able to save the zees in the CB case and the UPS case from what is happening.
The truth?
No you could not because it would have the same outcome.
You just have not come up against the IFA and the protected few or you just aren't admitting it.
For future reference maybe we should be asking what you have daone to save anyone from the likes of the protected few.
Staying on the Author's Topic
Since the article is about the need for government intervention, the government regulation forum posters had relevent comments to the news story. These comments would not be appropriate for our other stories. In fact, they really are a long-term discussion with the membership at large and are most appropriate in the forum area.
The government regulation posters are discussing arbitration and government intervention - albeit loosely.
I would remind them that readers speed read on the Net. If they want readers, keep comments short. And stay on the topic of the article.
Mr. Blue MauMau
Representative Cannon knows how franchising works!
Representative Cannon, a good Mormon, revealed that he knows how franchising really works in the status quo of the cooperation of the FTC with the IFA when he tried to get Deborah to admit that she failed because she didn't do her "due diligence." Most politicians work on the premise that "the end justifies the means" and he is no different. He rationalizes, perhaps, that the status quo serves the greater good or maybe he is actually ignorant as to how the franchisors and the FTC have set the trap for prospective middle-class American entrepreneurs, to include returning Veterans who are offered SBA Patriot Express Loans, who will stimulate the economy for the government and earn profits for the franchisors, the lenders, the brokers, the advisors, and the attorneys.
(Deborah couldn't explain that she couldn't do efficient due diligence because of the ommissions in the UFOC and, of course, they apparently didn't get into this subject matter, or did they?)
It is of course a "given" that the FTC uses the "due diligence" argument to defend against their failure to provide for disclosure of clear information in the Rule/UFOC's that would permit franchisees to perform effective due diligence. The compromise and Deal that is obvious in Item 19 and Item 20 of the UFOC's to obscure the actual success or failure rate of the franchise is obvious -- as demonstrated by the lack of information in the UFOC's concerning the success or failure of first-generation franchisees.
The UFOC's act as an efficient red herring to avoid any discussion or disclosure of the franchisor-known statistics concerning the success or failure of their first-generation franchisees. The UFOC's act to protect the franchisors from charges of fraudulent inducement to contract. The UFOC's permit franchisors to sell flawed business plans to the public. Maryland has demonstated that they are not interested in the success or failure rate of the Coffee Beanery and are only interested in Coffee Beanery's compliance with disclosure under the Maryland UFOC. The SBA demonstrates that they are not interested in the failure rate of franchises that are obscured in the Item 20 transfer columns. The UFOC's are a license to steal for those who are inclined to steal and who sell franchises to the public at any rate of failure of their first-generation franchisees.
Was Representative Cannon suggesting that the Internet whereon franchisors use their government UFOC to sell and hype unproven business plans and flawed business plans was an effective source for due diligence?
Of course, we realize that the FTC regulates Internet Advertising and that the position of the Franchisor has every protection of the law and that prospective franchisees have no lobby representing them in the Congress. Current franchisees don't lobby because they don't want to harm their own asset in which they lose their entire investment and they are silenced under the terms of the unilateral contracts. Current franchisees want to save their investments and can't badmouth their franchisors and are busy working to break even and, hopefully, to make profits. If they don't continue to stand at breakeven, even with low pay and long hours, they will lose their entire investments if they can't service their debt. The contract provides that they will lose their entire investment if they just quit or that they will have to sell their investment at a loss, below their original costs, if operating at breakeven ---or give their investment away in a squeezed fire sale to a second-generation franchisees if they are operating at a loss. They give their investments away to second generation franchisees who will try to get a ROI on the small investment. The first-generation franchisee does this to avoid personal bankruptcy but often continues to pay on the debt incurred through the use of the equity in his home or his 403 or 401 as collateral for the loan.
Those who are tricked with the help of government into signing these adhesory franchise agreements that protect the franchisors have no voice with the Congress and will be ignored. One man ---one vote --- is always good news for big business. And one franchisee in binding arbitration is good news for franchisors.
I'm sure that Representative Cannon isn't one of those ignorant representatives the IFA talked about recently ---one of those Representatives (the IFA says) who doesn't know the difference between a franchisor and a franchisee. I'm sure that he justified his bullying of Deborah as just good politics and protection of his party's protection of big business. The Corporations always get what they pay for and Mormons, just like Christians and Jews, separate their personal values from their "business" values when push comes to shove and they have to play for their team.
Arbitration clauses in adhesory contracts
For those interested in the topic of arbitration clauses in franchise agreements, and the effect of an analysis involving determination as to whether the franchise contract is a "contract of adhesion" this case from federal court in Pennsylvania might be of interest:
Michael Shaffer v. Susan Graybill & Minuteman Press
Note that the court speaks of the lower court's improper conflation of fraud in the inducement with contracts of adhesion.
And while I would disagree with the court's assertion that a contract of adhesion is only found in consumer contracts, that is a definitional matter since the court takes a tautological position that since an adhesory contract is only found in the consumer context, a franchise contract cannot possibly be adhesory. The court's premise is flawed; at best it leads us to speak of "consumer adhesory contracts" and "business adhesory contracts."
Procedural unconscionability of pre-dispute ADR clauses
Michael Webster raised the question (over in the Red Lion thread) of procedural unfairness with regard to pre-dispute arbitration clauses in franchise agreements.
Webster raises a good point, and I think it is important to remember that the US likely differs from Canada in this regard. Any discussion of Janet Sparks article and Mr. Webster's points really should begin with a reading of a famous Supreme Court case, Carnival Cruise Lines v. Shute [ 499 U.S. 585 (1991)].
Whether you agree with the Court's reasoning or not, this case remains good law.
Interesting Take on Arbitration Act
http://online.wsj.com/article/SB119439707749084617.html?mod=googlenews_wsj
ARBITRATION
Everyone needs to keep in mind that unlike BINDING MANDATORY ARBITRAQTION the Arbitration Fairness Act will give people the choice of arbitration or court.
The WSJ, as well as some posters here on BMM, are talking like the FAA would ban arbitration. That is not the intent or the language of the bill.
I would like to know why people are not more upset about having a Constitutional Right taken away from them? How can anyone believe that not having a choice of how to settle your disputes, BEFORE you even know what they are, is a bad thing.
All of the people who want to arbitrate can still do so.
In case anyone is wondering how the IFA feels about the FAA, let me just tell you that they are NOT HAPPY. They are trying to Lobbying aginst the FAA, that has to tell you something
Pre-dispute arbitration clauses and the UFOC --Paul Bland
But, doesn't this bill permit the parties to arbitrate if they agree to arbitrate. And, isn't the purpose of the Bill to prevent "mandated arbitration" clauses in consumer contracts that work to the disadvantage of the consumers.
Won't the fact (if the bill passes) that the corporations, to include the franchisors, will know that the consumers can get before a judge tend to make the corporations deal more fairly with the public?
How clever of Paul Bland to get the Congress to realize that the franchise contract is a consumer contract that needs to be regulated in the interests of the consumer.
Guest 101 Regarding Rep. Cannon
An arbitrator and a judge did rule on this matter as well as an offer of recission was made to the franchisee and subsequently rejected by them.
The Truth Shall Set You Free!
TIF
JD?
In reading Deborah's testimony I think she is refering to the Lighting System $14,000 and Pastry Case $8,000
The Gift Card and Pepsi are undisclosed contract. Since there is no dollar amount associated with the two contracts it is clear that she was summing up that portion of her statement.
I think you should be more concerned about having the right to choose how you settle disputes then worrying about how her statement reads.
Every contract you sign has an arbitration clause in it. Cell phones, credit cards, mortgages, car loans and even your bank accounts.
If arbitration is such a good thing, why is it mandatory?
If there really are consumers that are satisfied with an arbitration result, why didn't they testify?
These are the facts you should be questioning.
Get your head out of your butt and take a look at what is going on here.
It may not be a big deal to you now, but some day it might be, and now is the time to change it.
These people only want to be able to choose.
Why do you think no one hears from Tinker?
Watch and see what happens to UPS in arbitration.
JD you are not a brain surgeon so stop trying to impress people with things that really don't matter
Forced to Michigan
It is important to understand that D&R were forced to arbitrate in Michigan.
One very important fact in this story is R&D had an attorney and were already in the process of this case before the AG got involved. In every UFOC it clearly discloses that the UFOC has not been checked for accuracy and if you think there is a problem then you should contact the FTC or your State Regulator.
This is what R&D did.
The second thing that you have to remember is that in order to offer and sell franchises in Maryland you have to consent to the Maryland Franchise Registration and Disclosure Laws. R&D's FA agreement was amended to accomadate Maryland Law.
What does this mean?
The franchisor consents to suit in Maryland for those violations.
R&D had filed a Civil Suit on 12/14/05 in Maryland District Court.
The Coffee Beanery filed to compel arbitration on 1/31/06 in MICHIGAN.
This alone was a violation of Civil Procedure, none the less they got away with it.
After the ruling from the AG there was no doubt that Md. Law had been violated.
There is much about this case that is not understood. Having to arbitrate in Michigan is one of them.
An arbitration clause is within istself "a contract"
That contract was breached when the arbitrator heard and then ruled on Md. violations.
The arbitrator had no choice but to rule contrary to Maryland Law and find that CB complied with Md. Law, or R&D would have then filed suit in Maryland when the arbitration was over. R&D did not arbitrate the Md. Consent Order as everyone seems to think, they were forced to arbitrate thier orginial complaint that was filed in Maryland.
CB knew that they could challange the Md. Order in arbitration and over turn it.
They chose not to challange the Order in Maryland.
The contract clearly disclosed that violations of Md. Law would be heard in Maryland in any Court that R&D wanted to file.
No one is trying to do away with arbitration. Everyone should have a choice of arbitration, civil court, or medation.
Why is this such a threat to Congressman Connor?
This is America after all.
It would not be allowed for a contract to read that "you waive your right ot arbitrate, and must settle your disputes in court."
To waive your right to a trial by jury is a Constitutional Right, and when you are debating in Congress to give people the right to choose, then this should be cause for concern.
As for R&D, there is much to this stroy that has not been told. When this story finishes playing out, I think everyone will be speachless.
You read it correctly! Rep. Chris Cannon defends the FTC
You read it correctly. Rep. Cannon, in fighting against this Bill, is defending the FTC policy that has produced a federal Rule and State UFOC's that protect the franchisors and their unilateral contracts while pretending to have provided disclosure that helps franchisees to determine the risk of the investment. Mandated arbitration is part of the legal trap that is set for franchisees with the help of government regulation.
All of the attorneys know that the UFOC's were provided by the FTC Rule for the purpose of preventing franchisors from being charged with fraudulent misrepresentation and fraudulent inducement to contract. Franchisors and their agents in actual practice are permitted to say anything and make all kinds of misrepresentations in the sales process but can disclaim all of these representations in the actual contract that is disclosed in the government UFOC.
Prospective franchisees think the franchise agreements (the contracts) are unnegotiable and a "take it or leave it" proposition because of the government UFOC. They believe they have to sign the unilateral contract if they want to do business with the franchisor who has promised them success and profits outside of the contract. If franchisees read the UFOC and the Contract, they think these are just legal technicalities and that the network that is standing up in the total columns of Item 20 of the UFOC represents the viability of the franchised business plan.
Prospective don't understand that the network may be composed to a great extent with second and third generatikon franchisees who have gotten the first-generation's failed business for almost nothing or at a great discount from building the original unit that rents and wears the famous brand name.
The FTC Rule changes appear to indicate that the FTC knows that the franchisors and their agents will solicit directly from the Internet in the future. The FTC regulates advertising on the Internet but they appear to be allowing franchisors to post their UFOC's on the Internet to use them as a sales tool to recruit "marks" right off of the Internet.
Rep. Cannon is not a loose cannon, so to speak. He knows that the "due diligence" argument is the only defense the FTC has for their weak and ineffective Rule and the UFOC's that protect the franchisors and give the American public who buy franchises a false sense of security because of the appearance of government endorsement. Rep. Cannon knew exactly where to aim his cannon when questioning Deborah, the ex-CB franchisee.
The SBA Franchise Registry bears the names of many brand franchisors who have very high risks of failure of first-generation franchisees and yet these franchises are eligible for guaranteed government loans. What does this tell you?
The constructive fraud of the Rule and the UFOC is the real problem for the consumers of American franchises but when a status quo favors all of the parties involved, except the franchisee, i.e., the status quo favors the franchisor, the lenders, the advisors, the attorneys, and the government, the voice of the franchisee is a voice in the
wilderness.
My country 'tis of thee, sweet land of liberty and really big business who owns the government.
"Beguiling Heresy" Coauthored by Paul Steinberg
Why doesn't Mr. Blue Mau Mau, if he is really interested in fair coverage for franchisees, try to educate franchisees by making articles that appear in law reviews, like the one above written by Paul Steinberg, available to readers of Blue Mau Mau.
I can't but think that the law has gotten so pro-business because the law belongs only to the attorneys and to the courts and not to the greater public who suffers from the alliance of the law with big business.
Arbitration Clauses -----The Judge has Ace up Sleeve
Apparently, because the courts have defined franchise agreements as not being "consumer" agreements, the law is arranged to provide that franchise agreements will not be treated the same as consumer contracts.
We see this in the case of Michael Shaffer v. Susan Graybill & Minuteman Press, as cited in above posting.
The judge always has that "Ace" up his/her sleeve and lean on the letter of case law that has been developed to protect regulatory policy that always protects the franchisor.
I hope Deborah and Richard of the Coffee Beanery Injustice will read this case and understand what happened to them. THE DECK IS STACKED IN FAVOR OF THE LAW THAT IS IN FAVOR OF THE FRANCHISORS.
Wall Street Journal wants to paint picture
Is the Wall Street Journal trying to paint a picture that it is the "evil" trial attorneys. who win the big awards from the "dumb" juries and who defend the underdogs in the courts. who are the bad guys?
The Wall Street Journal would naturally not be interested in getting clean decks of cards to work with in the courts.
We know that Big Business wants juries to be disposed of in Civil Cases and arbitration achieves this end ---- and of course the "plea bargain" in the criminal law keeps cases away from juries. Government plays "deal or no deal" with defendants who can't shoot craps in the courts.
Bad journalism
Even our resident Ranter could write a better piece than that WSJ garbage. If that were the best the opponents could come up with, the legislation would fly through Congress.
It would be a mistake to think that the WSJ rant is the argument being made on the Hill.
Conversely, it would be a mistake to think that just because Ralph Nader likes the bill, we should favor (or reject) it. I hear Ralph likes to use toilet paper, and Anne Coulter prefers sandpaper, but I am still going to continue to use toilet paper despite my visceral dislike of Ralph and veneration of Anne.
Arbitration Fairness Act would remove Ace from the Deck
Of course, the business community to include the franchisors will lobby against the Arbitration Fairness Act because they will lose one of their Aces if this act passes. There is no doubt that unilateral contracts are abused by the stronger parties who can abuse under the terms of the unilateral contracts.
Under current law, the deck is stacked nicely in favor of the franchisors and they don't want any changes to the status quo. The government licenses their behavior with UFOC's in compliance with federal regulatory policy.
Those special interests who deliberately ignore the languarge of the act that provides only that franchisees and other consumers will have a choice of arbitration or the courts. The legal trap that is now set for franchisees under the UFOC may or may not be threatened if the AFA is passed.
Since when does business or government care about the constitutional rights of the citizens. The government is in business for itself and "the government gives and the government taketh away" according to who it is who is writing the rule of law.
Your argument is a tad specious
with respect to franchises. The provisions to arbitrate are detailed in the UFOC and franchise agreements. There is nothing preventing you from NOT signing. I am not saying that I agree with mandatory arbitration; however, I am saying that you can't argue that you weren't offered a choice - you can either do it the way the franchisor has specified or you can not sign the agreement. Franchising is not mandatory, and arbitration in franchise agreements is not a surprise. I agree with others who say that most arbitration provisions are onerous (with respect to choice of law/venue/jurisdiction) and should be supported by separate consideration; however, if you were made aware of the provision before you signed it, but signed it anyway, well...you did agree to be bound by it.
I have more of an issue with the credit cards and other service providers that modified the terms of their agreement to include arbitration long after the contracts were signed. Your choice at that point is typically to have the agreement "cancelled" at which point you are promptly required to pay the balance.
If you are against him, Rep. Cannon must be good
"My country 'tis of thee, sweet land of liberty and really big business who owns the government."
... and vote for Ralph Nader.
Keep singing those tunes, anti-businessman. It resonates so well with small business owners. What you lack in persuasion, you make up for in volume.
Before you are done, Chris Cannon will have a lot of supporters.
TIF wrong
There was not a ruling from a Judge.
If you read the testimony even the guy from the AAA says "You can not appeal an arbitration award."
Maybe that is what your referencing.
The arbitrator also ruled that the FTC and Maryland were wrong. Explain that.
Do not lose sight of what is being voted on. Making arbitratration a choice is not all that is at stake.
When we start thinking that it is acceptable to sign away a Constitutional Right, there should be cause for alarm.
Also if you lookup Maryland Franchise Registration and Disclosure Laws, you will see that a franchisee has the right to file suit in court.
deborah said the fa was amended to confirm these rights.
R&D filed a suit in Maryland Court a month and a half before CB filed to compel arbitration in Michigan
There was not a "recission" offer made. Unless the franchise fee and some equiptment refund is your defination of recission.
I thought that recission was putting you back to where you were prior to the purchase.
Don't forget they had already filed a case in Maryland almost a year before the state issued "a form of recission'"
Whatever you want to believe, the arbitrator ruling contrary to the FTC set franchising back quite a few years.
It is almost impossible to get Franchising Laws enforced as it is.
Actually,
The point of my post was that R&D's biggest complaint was the misrepresentations in the Coffee Beanery UFOC. I would think that they would be a little more cautious with their testimony in front of the House Sub-Committee, since there are pieces that contradict what they have previously stated.
If I remember correctly Tinker demanded arbitration. People with good cases may win in arbitration. The Sona franchisees claim they won in arbitration, even though they didn't get everything they asked for.
I don't care about consumer arbitration on a franchise forum
The discussions here are about franchising not cell phone contracts and the like. You need to get your head out of your ass, sir.
Jamar Delvind
Worried about Tinker and Meineke
Yes, I too! am worried about Tinker who went up against the great power of Meineke in Arbitration and who indicated that she would get back to us even if she had to sign a confidentiality agreement.
Maybe they made her sign an agreement in the arbitration not to discuss the arbitration and not to post on Blue Mau Mau or anywhere else?
Just hope she will get back here and talk about the weather or something so that we know that she is okay. Surely, she can do this.
Yes, JD is an accountant who is crazy about numbers and who likes to find problems with humbers and who says he has no fish to fry but his fish always seem to feed the franchisor's rationale for cheating the franchisees.
He, apparently, has had his head in that place for so long that his IQ has been reduced from lack of oxygen.
He even told me once that he had a plan where franchisors could disclose the failure or success of their franchises in the UFOC but then he got mad at me and wouldn't post the plan.
He doesn't really understand that Coffee Beanery tried to hide the bad record of the Cafe Concept in the UFOC and this is why they underwent rescission ----because there were ommissions and misrepresentations in the UFOC.
But, what on earth is Maryland doing? How can this injustice in arbitration be explained?
Coffee Beanery Injustice is Example of Abuse of Arbitration
If you really study all of the information available on the Coffee Beanery Injustice and understand what happened, you cannot but realize that this is just the tip of the iceberg. Deborah and Richard just have the moral courage and guts to stand up and be counted and try to expose what is going on with federal arbitration and franchising.
When the State came in and investigated and negotiated a Recission that would not save Deborah and her partner from bankruptcy and/or financial ruin, they were already in court under Maryland Law. Somehow, they were misled and tricked into a position from which they could not recover after the State investigated the matter and negotiated a rescission and a consent decree with the Coffee Beanery.
If you can accept that the FAA became law to serve the greater good by preventing long disputes in courts from disrupting the economy, you can accept that it is federal policy to protect the franchisors from actions for fraud that, if won, could bring down their entire network, and not just one franchisee.
The mandated arbitration of disputes on a one- on -one basis serves the interests of the franchisor and protects the franchisor's network from destruction. The UFOC's generally protect the franchisors from charges of fraudulent inducement or misrepresentation but violations of the Rule/UFOC's are punished under State Laws with private rights of action. The State Laws that give franchisees a private right of action may be vulnerable to franchisor actions to declare these statutes unconstitutional under the
double jeopardy protections of The Constitution.
The FTC and the State AG's have the discretion to determine whether violations of disclosure under the UFOC's are technical violations or substantive violations of state laws. The FTC and many of the States, like Maryland, have "school programs" in which franchisors are rehabilitated out of view of the public for "technical" violations of the Rule or the UFOD. Rescission, however, is the remedy of the State for substantive violations.
It is obvious that Coffee Beanery was guilty of a substantive violation of the UfOC and not just a technical violation because Maryland insisted on a Rescission and the Coffee Beanery, through DLA Piper, agreed to make partial restitution for the substantive violations of the Maryland UFOC while admitting no guilt and while demanding that the franchisees give up their private right of action under Maryland law.
It is obvious that Rescission, a tool of the state, as well as the State UFOC's, are really vehicles to protect and stand up the franchise networks and not tools of the state to protect franchisees from high risk investments in franchises. Special Rescissions for franchisors that involve incomplete restitution, or partial restitution, are meant to offer an incentive to those franchisees who are breaking even or making profits NOT to accept the rescission and to remain standing in the network. The concept of the greater good again defeats the franchisees who are tricked into buying high-risk franchises through the red herring of the Rule and the UFOC's.
It appears now that federal policy makers want to make Rescission the ONLY bite out of the apple and remove the rights of franchisees to any private right of action under the State Franchise Statutes by rendering the Rescission the last word on any substantive violation of the UFOC. If Rescission is the last word and the rescission itself requires the franchisees to give up their private right of action regardless of whether they accept or reject the rescission, it is all over for the franchisee. It is a good solution for the predator franchisors who indulge in fraud to build their networks.
I hope that when the story of R&D plays out that I will be speechless and that this story will expose the dark side of franchising and arbitration and bring needed changes to the law. Franchising should be regulated at least as well as securities are regulated by the SEC.
Congress is NOT saying
... that franchises are consumer contracts. That is why the proposed bill has a separate portion specifically including franchise purchases.
A consumer contract involves an item purchased for personal or household use. It most certainly does not involve purchase of a business.
Why are zees so eager to have franchise purchases classified as "consumer" contracts? Why not just make the argument that they are (usually) adhesory contracts between persons of unequal bargaining power which the government must oversee, at least to the extent of minimizing opportunism and/or negative externalities.
Now, that is a logical position. One may agree or disagree, and one may debate the degree of government regulation. But we don't waste time calling a pig a horse; that is just stupid and implies that your position can not be defended on the merits--in fact, a persuasive argument has been made for disclosure legislation, and one can be made for relationship legislation.
Franchise Agreements are not consumer contracts
You have got to be kidding to think that franchise agreements are consumer contracts. If they are what are leases?
The Truth Shall Set You Free!
TIF
For shame BMM!
To not have a law review article on franchising readily available...is unconscionable! On top of that, I've just noticed that you do not have anything by CCH available either! How dare BMM not provide services for free that anonymous guests would otherwise have to pay fees to the appropriate businesses for! This is obviously some sort of alliance between BMM and WestLaw and LexisNexis to keep the common folk ignorant about all the sinister doings of those vile attorneys!
Oh, I also want the secrets to winning MegaMillions without paying Steinberg's retainer (I would send it to him, but, oppressive student loans being what they are...)
IP issue
I don't own the copyright, but if Mr. MauMau gets the OK from Penn State Univ, he is free to put up on BMM.
Or drop me an email offline with your address and I will send it to you.
Sure hope Mr. Blue Mau Mau asks Penn State for
Sure hope that Mr. Blue Mau Mau asks Penn State University Law School for permission to post the above article on Blue Mau Mau.
This would give prove to the premise that our
State Universities are not helping government to implement regulatory policy that hides the risk of the investment and sets up franchisee prospects as marks for the franchisors.
WSJ --all Media brainwash dumbwads --Red Poppy Day
WSJ and all Media brainwash FRAMwads according to their interests.
Americans don't even realize that the genesis of the Red Poppy that they buy out on the streets today is a poem, a WAR PROTEST or a WARNING of a Canadian Physician who wrote "Where Poppies Grow in Flanders Field."
4th Appellate Division We
4th Appellate Division
We have already mentioned that franchise agreements, in some cases, have the
same qualities of adhesion contracts as do certain consumer contracts, such as were
discussed in Discover Bank, supra, 36 Cal.4th 148, with regard to the availability of
group arbitration. These franchise agreements also resemble employment agreements to
the extent that the franchisees' livelihoods are involved.............
Anne Coulter is Pro-Franchising
I think I remember reading it in her book "If Democrats Had Any Brains They'd Be Republicans"
The Truth Shall Set You Free!
TIF
If my Argument is specious, yours is disingenuous, Bubba!
You know, Bubba, that franchisees have signed these contracts believing that the contracts are standard and uniform and that they can't be bargained. The prospective franchisee believes that the contract can't be bargained because of the government UFOC that implies that the franchisee is being protected and that the franchise contract is NOT negotiable. Because the franchisee prospects believe that the contract is not open to bargaining and because they believe all of the representations made before the contract is signed as to the profit and the benefits of the relationship, they sign these contracts with no thought of disputes with their franchnisor.
The attorneys suggest that these contracts can be bargained and that franchisees can stand in different contractual relationships to the franchisor, but is this true?
You, again, in your arguments, do not point out that the Arbitration Fairness Act does not prohibit arbitration or mediation but, instead, permits the franchisee to choose and protects the franchisee's and the franchisor's right to due process of law in the courts with real judges.
Bubba is wrong
about the arbitration clause in franchise agreements. Many zees have had the terms of the arbitration clause amended and ended up in arbitration any way. This happens more times then you think
She's probably trying to figure out how she lost...
And how many truck beds she'll have to coat before she can pay off Meineke and her lawyer.
Are you related to Tinker?
-999-
Jamar is Rude or stupid?
Welcome! Jamar! Apparently, you are new to the discussions and don't understand that the thread is involved with franchising and mandated arbitration required in franchise contracts and consumer contracts for cell phones and other consumer goods.
They are connected in the big picture that indicates that the corporations can steal from the people in small and large amounts because of unilateral (look this up Jamar) or adhesory (look this up too, Jamar) contracts that mandate arbitration when there is a dispute between the consumer and the corporation over the terms of the contract.
If contracts could NOT require or mandate arbitration as the only means to settle the dispute, and consumers could get into the courts, even the small claims courts, the corporations would have the incentive NOT to use systemic schemes to cheat their customers quite as much as they do now!
What side of the fence are you on in franchising or are you one of those morons who believes that franchising will provide you with profits and a good job?
JD Don't worry
About R&D. Deborah testified that she was not and could not talk about the Consent Order as there was an open and on going investigation.
I think that R&D have good legal council and are very aware of what is on the Congressional Record.
Item 20 Ranter - while you're waiting please hold your breath...
Richard and Deborah had their shot at a reasonable result; they rolled the dice and they blew it when they did not accept the offer of recission. You and they can dislike the result all you want but they over played their hand.
So whine all you want it won't change a thing.
The Truth Shall Set You Free!
TIF
Jamar: Why it matters
Traditionally, the courts were hostile to arbitration clauses. That changed in the early 1970s when business contracts began incorporating ADR clauses. Then in the 80s there were a series of cases involving individual investors, and in the 90s there were cases involving employees, and the matter of vindicating statutory(!!) legal rights (or more specifically, not vindicating them) through private arbitration.
In short, arbitration clauses (and judicial acceptance of them) have expanded like The Blob.
Some people argue that this has affected the course of judicial embracing of the arbitration clause. As a result, many of those opposing pre-dispute arbitration clauses are focusing on their use in everyday consumer contracts. The tactic is to show they affect a lot of people and should be curbed; presumably any anti-ADR legislation targete