Mail Boxes Etc Franchisees Head to Trial with Crucial Exhibits in Hand
LOS ANGELES – As Mail Boxes Etc. franchisees prepare for their long-awaited trial set for August 3, new documents and testimony have surfaced in exhibits that may shed a brighter light on the intricacies of the dispute. As in similar lawsuits against the United Parcel Service franchisor, the MBE franchisees are claiming the shipping giant 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. Significant segments of the trial will focus on the actual construction of the contracts between the parties, and how those agreements were interpreted and negotiated.
According to court records, on June 5, H. Scott Sirlin of Gordon & Rees filed the Offer of Proof and Proposed Exhibit List in Los Angeles Superior Court on behalf of his franchisee clients in the Morgate LLC v. Mail Boxes Etc. The exhibits consist of thousands of pages of documents including the massive franchise disclosure documents, numerous depositions of key players, retail strategy reports, the UPS asset purchase agreement, Gold Shield test program agreements and results, MBE/UPS operations manuals, contract carrier agreements and the franchisor’s extensive report from Boston Consulting Group determining the health of the franchise system.
This latest filing lists the legal principles governing inferences, interpretation and construction in the franchise structure. It states, “Inference of fact plays an important part in the interpretation and construction of contracts.” Some of the facts relevant to contract interpretation are given, concluding that under the Mail Boxes Etc. franchise agreement the franchisor and franchisees built Mail Boxes Etc. into the largest and most successful mail and shipping business in the world with over 4500 store in place worldwide by 2000. United Parcel Service, Inc. (UPS), a Mail Boxes Etc. vendor, acquired the Mail Boxes Etc. franchisor in 2001 and suddenly and unilaterally imposed drastic changes to the franchise agreement that destroyed the Mail Boxes Etc. brand, took away the independence of the franchisees to set price and select vendors, and changed the franchise business plan from a multi-shipping model to one that mandated shipping through UPS.
Expert witness Edward Kushell will testify that the renewal clause is allegedly used in the industry to induce franchisees to make the long-term commitment to build the franchise. Testimony will attempt to show that the right to renew is used to induce franchisees to make substantial investments in their franchises, the system and the brand name by creating an expectation that the franchisees would be able to operate their franchises long enough to recoup their investments. Kushell will further testify that the right to renew is coupled with the right to transfer in order to induce franchisees to make the long-term commitment to their franchises and the system by building a long-term value in their franchises which they can realize by selling or transferring it in the future.
Franchisee plaintiffs will also give live testimony claiming they were induced to make long-term commitments to building the MBE system as a result of the franchise renewal clause and their right to transfer their units.
Franchisees are also awaiting a court order certifying a national class of plaintiffs consisting of approximately 3,500 Mail Boxes Etc. franchisees who converted to The UPS Store as part of the Gold Shield program. The national class of plaintiffs alleges fraud by defendants Mail Boxes Etc. and UPS.
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Related Articles:
- Over a Thousand Franchisees Demand to See Televised UPS Store Trial
- Appeal Court Reverses Decision, Sends Mail Boxes Etc. to Trial
- Mail Boxes Etc. Remains Confident It Will Prevail in Court
- California Superior Court Rules for Franchisor Mail Boxes Etc.
| Attachment | Size |
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| Offer of Proof Exhibits.pdf | 387.76 KB |
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I usually try not to comment on these corrupt US franchise systems. But whatever happened to the good old days when people like this were tarred and feathered and sent on their way.
Something has gone terribly wrong in a justice system that allows this to drag on while people continue to get screwed while the scumbags potentially have an ‘out’ to live in luxury from the gains of their blatant and obvious abuses. Not that it is any different here.
The more things change; the more they stay the same.
After 10 years (corporate customer) my zee informed me (by a xeroxed note) that they are closing on the 31st of August and I need to notify all who mail to me that I will have a new address. Of course that is up to me to find one and hope that my notice gets to South Africa, Venezuela, Columbia, Australia, New Zealand, the European Patent Office, US Patent Office, and numerous others including government agencies such as the USDA, EPA and FDA here and their equivalents abroad.
Of course, all email signatures, letterhead and marketing materials are now obsolete, websites, product labels and the like (these are regulated products) will need to be replaced. This is going to cost me BIG BUCKS.
Of course my poor zee didn't have any compunctions about taking my next years payment 30 days ago with not a word of the problem. I have noted with interest that all of the postings here and in other places barely mention the customer. Therein lies another part of the problem. Poor customer service starts with zee. Of course, since UPS had their name on the door they will also have to be a part of the solution.
I can spell fraud too!
The customers are not mentioned much because the fight is between a & b.
Many owners are digging deep into their pockets to keep their stores open and their customers happy. If UPS knows that 77% of the stores are failing or at risk and continues to open and churn stores without disclosing these number to zees....???
starts with someone having what they think is a bright idea. The idea gets thought over for a while by the person whose idea it is. When you are the person thinking over your own idea - one you thought was a grerat idea - it gets better every day. No one is there to challenge the aassumptions that "support" it.
In the case of a large company, depending upon whose idea it is, there may be no one who dares hallenge the assumptions. Remember the imperatives of corporate loyalty protocols and the notions of political correctness.
When you overlay that with the fact that you are playing with other people's money - stockholders - and not your own, the implementation of the "great" idea is easier - after all, it's not your money.
Business replication that is successful requires that the "grerat" idea be exposed to challenge by someone who can afford to be fired and who is retained to be the expert on being an asshole, finding fault and asking "what if" questions until everybody wants to stick a knife in him. If the "great" idea can survive the asshole/acid test, then maybe it might have a reasonable chance into developing into a successful business model.
"Great" ideas need to be reality tested. You don't take a whole other business system and convert it to your "great" idea replication model without first having it field tested and debugged on a smaller scale.
There is an enormous difference between the "great" idea business model that has been analyzed without field testing and the "great" idea that has actually been reality tested in the field - where the rubber meets the road.
Going from idea to acquisition without interim challenges and reality testing on a smaller scale is very frequently - most frequently - a failure in the intermediate or short term. UPS retail stores and FedEx-Kinko are such models - wrong headed, inadequately challenged and reality tested "great" ideas about using other people's money.
Corporate development departments are little more than cheerleading squads. Thys would never face up to that, but that's what they are.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
product/service extensions acquisitions all fall under the umbra "conglomerate" transactions.
The idea is that a succesful concept has extension potential that can be accomplished through internal gradual growth (expensive) or through acquisitions (quicker).
In the 1960s, conglomerate acquisitions went through a hay day of popularity. During an eight year period, I worked on or around over 60 such acquisitions - most of which were eventually spun off. The acquiror could not successfully operate the model of the acquired company, even though all the business theories seemed to make it look like all you had to do was retain the key management of the acquired company for a while and know how to manage cash.
That proved itself by the mid 1970s to be unreliable. These extension acquisitions by UPS and Fed Ex are of the same ilk, and it comes as no surprise that they are coming acropper.
Once managers have an assignment to "grow" the company in a certain direction, and that assignment is coupled with financial backing, it is impossible for any such team to say that it can't be done succesfully. They see themselves as having the opportunity to become top level corporate executives by closing deals that are the subject of glib board committee presentations.
Some of these experiences were hilarious, and I regret that I cannot write stories about them and about how they came to be put together.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
>>Isn't the very definition of a franchise that it is a proven successful business model? <<
UPS at retail had a 2 year test of a few stores that proven that their retail business model was not successful. They then bought the MBE name and proceeded to kill it!
The Mail Boxes Etc. model was a proven successful model based on very personal high touch customer service and choice of carriers to best fit each customers needs. The forced conversion took away the proven parts and substituted a program that was destined to fail!
Sort of like taking a radiator cap off a new car, putting it on a clunker and expecting it to run like a new car.
Thank God you have a great leader and a great number of committed members. I really hope UPS wins.
Hopefully all people will have a choice between arbitration or litigation.
to fight. My hats off to you. The patience you folks have endured is amazing. Who was your leader? He must be one hell of a leader.
I hope the judge and jury will see the injustice done to you.
Here's to all the fighters!
will there be hope for future zees. All zees need to band together and march iin our nation's capitol and let our leaders know how bad it is. People who don't talk and do something there will be more victims.This has been going on way too long.
If I ever meet Miles Scully and his associate Amy Darby I would shake their hand and say good job. Hopefully the judge and jury will see the injustice done to these people.
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