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Court Allows MBE/UPS Store Franchisees to Move Forward with Jury Trial

LOS ANGELES (Blue MauMau) -  On Tuesday, a federal court in California ruled that two groups of franchisees under the moniker Brown Shield Association (BSA) were entitled to a jury trial, in spite of franchisor Mail Boxes Etc. and The UPS Stores filing a motion against it. Judge Otis D. Wright II stated that although the franchisees were "sophisticated investors, not hapless or necessitous men," the franchise company had slightly more bargaining power with respect to its "take it or leave it transaction," referring to the franchise contracts.

The Brown Shield Association is one of several franchisee groups bringing litigation against the company after UPS purchased Mail Boxes Etc. and converted the concept to its new model. Each litigant group has four chosen plaintiffs representing approximately 200 other franchisees. The first trial set for January 20, 2009, will be for those who bought into The UPS Store concept. The second scheduled for March 10, will be for Mail Boxes Etc. franchisees who later converted to UPS's new model.  Both groups claim they were deceived into investing in the franchise which has proven to be economically unviable.  Mail Boxes Etc. argued in the case that the franchisees voluntarily waived their rights, clearly stated in the franchise agreements they signed.

But as the court conducted its inquiry into the legal dispute, it explored whether the UPS Store operators understood that they were waiving their rights to a jury trial. MBE attempted to show that they were inconsistent in their arguments. They explained, first they said they didn't understand the waiver, but then argued that they did know they were waiving their rights only if such waivers are permitted under California laws. But Judge Wright ruled in the franchisees' favor saying that it was obvious from discussions of the franchisees that they misunderstood the waiver provision in their contracts.

The court further stated that although the waiver provision was indeed in all capital letters in a stand-alone section of the agreements, that wasn't enough. It found that to be counterbalanced with the fact that the provision was in a lengthy agreement with numerous exhibits attached. Therefore, the court was reluctant to find that the waiver clause was conspicuous.

Attorneys Michael Hankes and Peter Lagarias, representing the two groups, said they were extremely pleased with the ruling. "We are obviously very happy with the decision stating we get to keep the jury," said Hankes in an interview.  "This is the first case that will be in a jury setting, as the others were sent to arbitration."

Lagarias agrees, stating, "The right to a jury trial is one of our greatest constitutional rights in this country, and the court has ruled consistent with federal case law. It analyzed the fact that these are take it or leave it agreements and reached the conclusion that this wasn’t a knowing waiver." He said they are ready to proceed and develop the case for a jury trial.

Hankes has been representing MBE and UPS Store franchisees since 2001. Lagarias was brought in to the litigation in 2003.

In response to this latest ruling, Mail Boxes Etc. issued a statement from its Public Relations Department saying, "Tuesday's ruling has nothing to do with the merits of the case; it is merely procedural. We respect the courts ruling, however, continue to maintain our position that we have violated no laws or elements of the franchise agreement and we look forward to the opportunity to present our case to the jury."

As one anonymous franchisee stated, "This is a big win for the Brown Shield Association. Mail Boxes and UPS were fighting like hell to keep this out from in front of a jury."

Related articles:

MBE Decision on Jury Trial.pdf48.56 KB
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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at or at 303-799-7398.