Judge Rules Quiznos Case Cannot Be Dismissed

NJ Suit Claimed Quiznos Took $75 Million in Franchise Fees Providing Nothing in Return

DENVER (Blue MauMau) - In a decision handed down just hours ago, Judge Wiley Y. Daniel, U.S. District Court in Colorado, ordered that Quiznos' entire Motion to Dismiss in the Raymond Bonanno, et al. v. The Quiznos Franchise Company, LLC, et al. class action lawsuit must be denied. The original action filed in New Jersey claimed Quiznos collected approximately $75 million in franchise fees while providing nothing in return for the 3,000-plus franchisees. Judge Daniel's decision states, "Plaintiffs allege that this "scheme goes all the way to the top of the organization." And he said, in the Amended Complaint, filed August 27, 2007, franchisees stated, "Defendant Rick Schaden, when recently asked about the problem of repeated sales of the same unit in Phoenix, Arizona, stated words to the effect, sell the area again.'"

In giving further information in the case, the judge also divulges that franchisees allege that this deceptive conduct "has been institutionalized by Quiznos and has become a part of the way it does business, to the detriment of thousands of hapless franchisees around the United States."

Franchisee attorney Justin Klein, Marks & Klein, said they feel this is the correct decision. He said, "Quiznos has publicly tried to discredit a lot of the claims that the franchisees have filed against them, and this shows that that is not the case. We are going to continue to vigorously pursue these claims." When asked what this means to the other lawsuits filed, Klein said, "Every judge is different. We will continue to pursue those as well."

Background of the Case

The original lawsuit filed in New Jersey State Court on February 16, 2006, asserted eight claims for relief: two were based on fraud under Colorado Consumer Protection Act, and the other claim asserts common law fraud stemming from Quiznos' fraudulent inducement of the franchise agreement. Others claims include breach of contract and of covenant of good faith and fair dealing. In March, 2006, Quiznos removed the case and sent it to the district court on the basis of federal diversity jurisdiction, under the Class Action Fairness Act. On November 17, 2006, Judge Cavanaugh denied Quiznos' motion to dismiss and transferred it to the Colorado district court pursuant to the forum selection clauses in the franchise agreement.

Judge's Basis for Decision

Judge Daniel explains what he based his decision on in denying Quiznos' Motion to Dismiss, stating a new Supreme Court decision. He also gives his analysis of each of the claims made in the franchisees Complaint, and addresses each of Quiznos' issues in its motion. Under one, stating whether the Schadens should be dismissed, Judge Daniel explains that Quiznos points to a provision in the franchise agreement that franchisees will not make claims against any individual employees and agents of Quiznos. But the judge rules, "Again, this argument involves the issue of whether the franchise agreement is unconscionable. Therefore, based on my previous analysis, Defendants' [Quiznos Franchise Company] request is denied.

A Quiznos spokesperson stated, "This case was filed on behalf of Quiznos franchisees who agreed to open a store but have failed to do so. Today, the court did not rule on the merits. It simply said that that plaintiffs’ complaint, as pleaded, is sufficient to survive a preliminary motion to dismiss. When the court considers the merits, Quiznos is confident that it will prevail."
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