Appeal Court Reverses Decision, Sends Mail Boxes Etc. to Trial

LOS ANGELES (Blue MauMau) - "We reverse the judgment," was the decision handed down Friday in California’s Court of Appeal, in a lawsuit filed by three MBE franchisees against United Parcel Services and Mail Boxes Etc. in Superior Court. As in similar litigation, franchisees claimed that UPS withheld crucial information and made misrepresentations in persuading them to convert to its new concept, The UPS Store, following its acquisition of Mail Boxes Etc. in 2001.

The franchisees' appeal was filed in January 2007 after the California Superior Court Judge Wendell H. Mortimer, Jr., now retired, granted UPS and Mail Boxes Etc. summary judgment —a decision based on the merits of the case without a trial—as to all their allegations. But the Appellate Court not only determined that the franchisees were successful in showing that all allegations stated in their case were suited for trial, he also awarded them costs related to their appeal, including attorney fees. The judge addressed three of the causes of action in his decision, but stated in light of the court's finding it saw no need to deal with the remaining thirty causes of action.

The Appeal court ruling gave a factual history of the franchisees' lawsuit. All three are members of the Platinum Shield Association, one of three organizations litigating against UPS. Through their attorneys, Gordon & Rees, they claimed that after its conversion program UPS and Mail Boxes Etc. began to abandon and undermine the existing MBE franchisees in order to violate its obligations of its franchise agreements. They also allege that in acquiring MBE Inc. and its trademark, trade name, and related intellectual property, UPS conspired to destroy the MBE franchised business and distribution system, and established in its place "The UPS Store," a network of UPS-favored businesses. By permitting its affiliate UPS to enter into agreements with other competitive retail outlets, it also alleges that its MBE company implemented anti-competitive practices.

But the franchisees' complaint went beyond that. According to allegations, UPS and Mail Boxes Etc. had actually collaborated prior to acquiring the MBE franchise system with the intent of eliminating the MBE Center business model, coercively converting it into The UPS Store. MBE operators also accused the company of depriving franchisees of their contractual rights under their franchise agreements to sell or transfer their franchised businesses, and to renew automatically their MBE franchise agreements for successive 10-year periods.

Because of the timing of receiving the decision late Friday, attorneys for the franchisees, Miles Scully and Amy Darby of Gordon & Rees, and attorney for UPS/MBE, Jane Barrett, Morrison & Foerster, were not reached for comment. An update will be published after they are contacted.

But former MBE franchisee Howard Spanier, president of the Platinum Shield Association, had much to say about the decision. In a telephone interview he said, "The Court of Appeals gave us a total victory. The court reversed every single claim that UPS and Mail Boxes Etc. made, and awarded cost on appeal to the plaintiffs." He also feels it was a complete repudiation of UPS and MBE's position, and that it was the last major hurdle for them. Spanier, who had been a franchisee in Malibu for eighteen years and one of MBE's top-performers, was forced to give up his Mail Boxes Etc. identity in 2006. He said UPS blocked his renewal as an MBE franchisee, despite the fact that his agreement allowed it. Mail Boxes Etc. Inc. would only allow him to renew as a UPS Store. "I considered that option to be financial suicide since under the UPS Store business model profit is totally controlled by UPS," he said in a statement.

Spanier said UPS must now face a public trial, where UPS and MBE will be forced to explain their anti-franchisee actions in front of a jury. “We can’t wait to finally have our day in court,” he added.

The decision is the third time that the California Court of Appeals has reversed the lower court and upheld the case of the UPS and Mail Boxes Etc. franchisees. The previous decision by the Court of Appeals was to grant certification of a national class action against UPS on behalf of the UPS Store franchisees.

With regard to the class certification, Spanier reported, "Our attorneys will file a formal motion to certify the class within the next two weeks. The motion will be heard by Judge Highberger on July 8, 2008. The motion will be based on the recent California Court of Appeal decision."

Attachment	Size
appellate court decision 5.23.08.pdf	62.91 KB
Class Action Certification.pdf	265.28 KB