Forza Coffee Franchisee Now Suing Franchisor's Attorney and Wife

Interior of Forza coffee shop. Photo/Forza Web site

GIG HARBOR, Wash. (Blue MauMau) - A former Forza Coffee franchisee has now amended her original lawsuit against franchisor Dugout Brothers, Inc. and its owners to include the company's outside attorney responsible for preparing the franchise disclosure documents for the purpose of selling franchises. In the latest complaint filed December 13 in Pierce County Court by attorney Howard E. Bundy, Robert Gregg Hutchins, his firm Robert G. Hutchins P.S., and his wife are all named as legal defendants.  Because Washington is a community property state, his spouse was named, on information and belief that she benefited from the wrongdoings of her husband. They are also defined as "persons" under the Washington Franchise Investment Protection Act, because they allege Hutchins knew the documents he prepared had misrepresentations and omissions of material facts, knowing they were out of compliance with applicable law.

Hutchins had been retained by Dugout Brothers in May 2005, for the sole purpose of preparing the Uniform Franchise Offering Circular (UFOC), now referred to as the Franchise Disclosure Document (FDD). The original lawsuit filed last February came about after Sheri Lynn Tanson made the decision to purchase the franchise in July 14, 2006, under her company name Monkey Bean, LLC, at which time she submitted an application and non-refundable application fee of $100 to Dugout Brothers. As a result, she received a "Franchise Offering Circular" dated September 30, 2005. Although the franchisor had made material changes to its organization between September 30, 2005 and July 14, 2006, she did not receive an updated version. Those revisions, which were required to be disclosed by law, included a change in key personnel and in the company's financial condition, according to the amendment.

On September 20, 2006, Tanson delivered a check to Dugout in the amount of $25,000 for the initial franchise fee, and in January 2007 she signed a franchise agreement and another document entitled "Completion Certificate" which authorized release of the initial franchise fee from the "impound account."  In April 14, 2007, construction of her coffee shop was completed and her Forza franchise was opened for business.  As a condition subsequent to becoming a Forza franchisee, Tanson invested an additional $300,000.

Because Tanson received a UFOC that had expired, Bundy claims that the franchisor violated the Washington Franchise Investment Protection Act. He states that not only were there required material changes that should have been disclosed in a revised version of the UFOC, but that there were further undisclosed changes during that period when Tason could have rescinded the so-called "escrow agreement."

Some of the alleged deficiencies in the out-of-date UFOC include the following: misinformation regarding earnings claims; failure to make proper disclosure in several items and instead gives unauthorized marketing materials; failure to disclose that Carpenter had been a licensee of Cutters Point Coffee, Inc., through Dugout; misinformation in disclosing how royalties were to be calculated; failure to disclose kickbacks from vendors; and failure to make mandatory disclosures regarding the effect of Dugout Brother not having a federal principal register trademark registration.

Bundy did not wish to give comment regarding the case.

Company's Response to Allegations

Although the accused, Hutchins, refused to give comment for this article, last April he stated in a Gateline.com piece that the company denies the allegations, saying they were without merit. He also said they intend to defend the case vigorously. Also In the article, Brad Carpenter said he attempted to supply all appropriate training to help Tanson, but she refused it. According to him, she did not complete certain tasks necessary for the business to succeed, such as buying the appropriate signage. "This is a woman who desired to have a franchise with us and we allowed it, and unfortunately it didn't work out. A month or so later, she needs someone to blame, so she blames the franchisor," he further stated. 

Hutchins' attorneys James A. Krueger and Lucy R. Clifthorne, Vandeberg, Johnson & Gandara, LLC, filed an answer to the amended complaint on January 13. As part of their answer, they state that the Hutchins legal defendants had no liability under the Franchise Investment Protection Act because they did not offer or sell any franchises to Tanson or anyone else. They further state that they had no duty of care to her and her company, stating, "Any duties owed were to Dugout Brothers, Inc. as a client and a franchise seller."  They also allege that Tanson's damages, if any, were caused by her own negligence because she mismanaged her business.

In answer to the franchise owner’s allegations, they further claim that Tanson abandoned her business without notice, removed and disposed of its furnishings and equipment, rebuffed purchase inquiries and launched a lawsuit. They allege that she has no rights to rescind her agreements

Request for Relief

On behalf of his client, Bundy claims the wrongful actions of Dugout Brothers, the Carpenters and Hutchins caused damages in various amounts. If the court determines that rescission of agreements is appropriate, he asks for guidance as to how to accomplish it. He is seeking an award of exemplary damages up to three times actual damages as permitted by certain sections of the Act, and for costs and reasonable attorneys fees, and other relief the court deems appropriate.

Hutchins' attorneys are asking the court to dismiss with prejudice the amended complaint brought against him. They are asking for costs and attorney fees incurred in defending the action, including time spent by Hutchins in defending himself.