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Log In / Register | Apr 24, 2014

Coffee Beanery Franchisees Win on Appeal; Arbitration Decision Vacated

ANN ARBOR, Mich. (Blue MauMau) - After the long, strenuous legal battle between The Coffee Beanery and two of its franchisees, the Court of Appeals issued its opinion yesterday in favor of the coffee shop owners. Deborah Williams and Richard Welshans, under WW LLC, appealed the district court's denial of their motion to vacate the American Arbitration Award. The opinion of the three-judge panel stated that at issue was whether the Arbitrator showed manifest disregard of the law when she issued her ruling. They stated, "Because we conclude that the failure to disclose a prior felony conviction for grand larceny violates the Maryland Franchise Registration and Disclosure Law, and because the Arbitrator showed a manifest disregard of the law in concluding otherwise, we REVERSE the judgment of the district court and VACATE the Arbitrator's award."

In an interview today with the franchisees and attorney Harry Rifkin, Williams said, "We've lost over a million dollars, we've lost our home and our credit standing. We have lived without medical insurance for five years. We can't get back those five years." She said they have gone through mental anguish and torture every day knowing that there was a predator franchisor out there that not only ruined their lives, but also the lives of 99 other franchisees of Coffee Beanery.

Welshans agreed, but feels the opinion is their vindication. "Barron basically said on every point going down that we didn't prove our case and in the end decided that we lost the case 150 percent. Thankfully, there were three judges who took a look at the hard facts of our case and said this is the most egregious thing we've ever seen and ruled in our favor."

Arbitrator JoAnne Barron had made her decision based on her findings that the franchisees did not prove their claims of common law fraud or fraudulent inducement and misrepresentation by Coffee Beanery and its officers, or their violations of the Michigan and Maryland franchise investment laws. She also ruled that the franchisees were not entitled to rescission of their franchise agreement, and they did not prove damages.

As part of her award, she ruled that Coffee Beanery was not required to disclose that Kevin Shaw, son of CEO JoAnne Shaw and officer of the company, had a felony conviction for grand larceny, as it was not the type of felony subject to disclosure.

Williams and Welshans were held liable for past due royalties and other Coffee Beanery expenses, and for AAA fees and compensations.

Attorney Harry F. Rifkin, Cohan, West, Rifkin & Cohen, P.C., said their intent is to pursue their case to a jury trial. "We believe that we will be able to obtain a substantial judgment, and that after we get the pending case reopened we can move for summary judgment on liability and get a jury trial on damages."

Rifkin said they are confident that justice will finally be done, although nothing will provide a full recovery no matter how much money they obtain. "Nothing will fully restore the victims of Coffee Beanery, Joanne Shaw, Kevin Shaw and the others to the positions they were in beforehand." But he added, "We hope this will prevent them from victimizing more people in the future and help the people who are already involved in The Coffee Beanery to get justice."

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Coffee Beanery-Sixth Circuit opinion.pdf306.83 KB
CoffeeBeaneryReplyBriefforAppellants.doc89 KB
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