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CIT Testimony Blocked in Dunkin' Trial

PROVIDENCE, RI — After six years of litigation with Dunkin’ Donuts over losing his six stores and store development agreements to open new restaurants, franchisee Irwin Barkan was convinced that the franchisor intentionally interfered in his efforts to refinance his debt. Now because of new information he has discovered on his own, Barkan feels even stronger in his beliefs.

He said there is no doubt in his mind that Dunkin’ stopped the financial restructuring in its tracks, pushing his company into bankruptcy in order to eliminate him from the system.

On October 12, 2010, Barkan sent Dunkin’ Donuts CEO Nigel Travis a certified letter with a link to a video, copying general counsels Richard Emmett and Arthur Anastos. The professionally taped video shows an interview by Barkan of Shelly T. Rush, former vice president of CIT, at that time the financial arm for Dunkin’s franchisee loan program. Although Dunkin’ attorneys had informed Barkan that Rush was terminally ill, unable to testify by deposition prior to his December trial, the video tells a different story.

Dunkin’ attorneys Arthur Pressman and Jeffrey Brenner of Nixon Peabody had successfully petitioned the court in September 2009 to depose Rush and subordinate Laura Sneed, stating both “played a critical role at all relevant times to the action.”  Rush, the only individual authorized to accept or decline Barkan’s refinancing of debt, as per his 2004 settlement agreement, was not subpoenaed to give depositions.  Instead, Dunkin’ only subpoenaed Sneed to give testimony in Arizona, where both were employed prior to their division of CIT being acquired by Wells Fargo.

With a gaping hole left in Barkan’s offense in proving his case, the judge issued a surprising directed verdict, bypassing the jury, stating there was no evidence of fraud or breach of contract related to Dunkin’ assisting Barkan in the refinancing of his debt, the central liability issue of his lawsuit.

Barkan’s letter to Travis prefaces the video link explaining, “In February, 2010 after the trials and out of concern for Ms Rush’s health Barkan looked for information on her condition.  Searching for an obituary, Barkan discovered instead her recent entry in a road race.”

Although this latest information uncovered by Barkan has nothing to do with his appeal of the judge’s decision, scheduled for oral argument next Wednesday, it does shine a bright light on the dark hole at the center of his case. 

For purposes of publishing this article, Blue MauMau was given access to the same video given to Dunkin’.

Crucial Answers from the Interview

The interview video highlights the three individuals involved in the CIT restructuring program of Barkan’s company D&D Barkan LLC:  Shelly Rush, CIT vice president of portfolio, Laura Sneed her employee, and Bethany Blowers, employee of Dunkin’ Donuts treasury department.

Beginning his interview, Barkan showed Shelly Rush the order the judge signed allowing Dunkin' to depose her and Laura Sneed, who she supervised. He asked, “Did you ever see the subpoena for the second deposition [Sept. 2009]?”  Her response was no.  Rush explained that Sneed came to her office saying the two of them were going to be asked to give depositions. Rush called her former attorney, representing her in her previous discovery deposition in 2008, to get more information. She related to him that she had just finished chemotherapy and was scheduling her surgery for breast cancer and needed to know.  When he called her back he stated Rush did not have to worry about giving any more information.

“So nobody ever asked you to give testimony that second time?” Barkan asked.  Rush said, “No, not really. I never got any letter.”

She stated that she possibly would have testified if she had been asked, but no one from Dunkin’ or Nixon Peabody had called her. At that time she was still working at Wells Fargo, which had acquired CIT.

When Barkan showed Rush his refinancing application of 17 pages, Rush said she was surprised that she hadn’t seen it.  “Yes, this is a standard document that we do for all our customers when they ask for restructure. Because of the size of your account, I should have seen the information behind it, just because Laura [Sneed] did not have the authority to approve a restructure of this size, regardless of a vendor [Dunkin’] supporting it . . .” Rush said the size of Barkan’s application was pretty normal.

Barkan related to Rush that Laura Sneed had claimed that she remembered getting part of his application but not all of it, including bank references and other important documents. But it was nowhere to be found in CIT files. He asks, “Is that surprising?” Rush said yes. “Normally, they would be in the hard copy file,” and then she explained the procedure.

Another interview question asked by Barkan was, “During the entire process when you were dealing with me, were you ever shown any information about me, about us personally?”

Rush answered no.

“So you had no idea what our financial position was, good or bad?” he further asked. 

“Correct.” She continued saying her response to his application was not based upon what his financial condition was. If she had seen his financials and other related documents, she thought her decision process might have been different. Rush added that CIT normally relies on the vendor, in this case Dunkin’, to relay the information and knowledge they have, and to answer questions about the refinancing to be sure there is substance behind financial statements.

Again Barkan asked, “But it’s 100% clear that you never saw, and Laura never showed you or talked about the personal financials?”

Rush answered, “Yes. But ultimately they don’t have that control over who makes that decision of a restructure because the notes were owned by CIT.  We had recourse with Dunkin'. But there was no flow from Dunkin' on good information to me.” She said she absolutely asked for it because she needed to understand it. Normally there would be a lot of conversations, going back and forth. But Rush said with Bethany Blowers at Dunkin’, that didn’t happen. With most of their other vendors, she usually talked to the vice presidents on multi-million dollar structures, and they take a lot of discussion prior to making a decision. “That’s normal. I didn’t have it in this case.”

Rush said she didn’t feel Blowers was at the right level in dealing with a settlement agreement such as Barkan’s, related to his CIT application. Although she didn’t know what Blowers authority level was, she said usually someone at a higher level would be involved. Everything should have been in writing.

At that point in the interview Barkan explained to Rush why he signed the settlement agreement dated June 15, 2004, releasing all claims against  Dunkin’. He stated that it was to resolve all disputes between the company and him regarding, among other things, monies owed by Barkan plaintiffs to CIT under loans that were guaranteed by Dunkin’. In exchange, Dunkin’ would work with Barkan in an attempt to refinance his debt.  The settlement contract was supposed to make them "buddies again.”

When attorney Pressman deposed Laura Sneed the first time in 2008, he asked her what her particular duties were regarding a restructure. Sneed answered, “Gathering the necessary information, review and deciding whether it was in my credit limits, then I would approve it. If it wasn’t, I would have to put it in writing and take it to whoever had the credit authority to approve it.”  Rush said she didn’t recall ever seeing in writing Sneed’s request for the restructure for Barkan.  He then asks, “All that discussion was going on between Beth [Blowers] and Laura [Sneed] and they are telling me everything is done. But you never even heard my name, right?  Rush answered, “Yes.”

Rush said when the conversation came up about two of his six stores closing, she asked Sneed why she didn’t tell her [Rush] about the closures, stating that would have an impact on what was happening with his application. Rush related that that was the most striking and strong request for information that she made to Bethany Blowers up to that point. But Rush said she never got the information. She told Barkan she didn’t feel Blowers was being truthful at that time, that she wasn’t giving Rush the whole story.

In Blowers’ deposition, she stated that she didn’t remember why Rush decided not to restructure Barkan’s finances. Barkan asked, “Do you think she [Bethany Blowers] was withholding information and she knew she could have given you the information? Rush responded saying yes, that if Blowers had answered her questions correctly everything would have gone differently with Barkan’s refinancing.  Rush felt Blowers should have referred the matter to her boss.

According to the taped interview, Barkan reminded Rush that the judge ended the trial, not the jury. He then stated that Dunkin’s lead attorney Arthur Pressman, in his presentation to the judge and jury during the trial, gave the impression that Bethany Blowers, Dunkin’s main employee in its treasury department, was the most important person in the refinancing of Barkan’s debt in working with CIT.  Rush said she did not agree with that.

Barkan asked, was she [Blowers] diligent? Was she reasonable?  Rush answered no to both questions. Did she act in good faith?  Rush responded, “Blowers acted in good faith for her company [Dunkin’ Donuts], yes.” Barkan then asked, “Did she use her best efforts on my behalf?” Again, Rush said no.

Dunkin’ Response

Although Dunkin' refused requests for an interview with Nigel Travis or other company officials, Michelle King, director of global public relations issued this statement, “Dunkin' Brands won this case on a directed verdict close to a year ago, which we believe speaks to the merits of Mr. Barkan's case. If you or Mr. Barkan have questions as to why Ms. Rush wasn't subpoened, you should talk to his attorneys."

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