Asking Enforcement Agencies for Help

Contrary to Popular Belief, State and Federal Enforcement Agencies Do Not Necessarily Have a Duty to Protect Individuals from Fraud and Other Abuses

People think on broad strokes. I have had people insist that they can say anything they like about anyone because they would be protected by the Constitution’s guaranty of free speech. When I tell them that just aint so, they are gob smacked. I explain to them that the Constitution may give them the right to say almost anything, but it doesn’t insulate them from liability for their acts/statements. They can still be sued by someone falsely accused. Their reaction is usually to insist that everything is rigged to protect the big guys. 

In the context of franchise matters, people erroneously believe that state and federal enforcement agencies have some sort of duty to them personally to protect them from fraud and other abuses. That just aint so either. 

The Federal Trade Commission and the various state agencies charged with enforcement of franchise investment and relationship laws are not there to protect you in your particular case. They are there to “enforce” and administer policy as the policy is expressed in applicable statutes that they are charged to administer.

They do this by writing regulations, administering registration programs, showing up at hearings about some subject they have responsibility for and sending out “cease and desist” notices. They almost never try actual cases, either administratively before administrative law judges or in courts. The reason for this is that what they are given are largely unfunded mandates.

There are simply no resources to maintain trial competent enforcement staff. You aren’t trial competent if you don’t try cases. Their staff attorneys don’t/very rarely try cases.  If you look at their track records, you will see almost no trials to enforce anything with which they are charged. Since they don’t know how to present evidence in any trial mode (for the most part), they are more likely to lose in an all out conflict situation if they are left to their own resources without outside assistance, except in the most egregious cases where the evidence is so palpable that the “case” is just “handed to them”.  

Large, well funded potential defendants are represented by large, influential, highly credentialized law firms and lawyers who will try a case. The imbalance in their respective resources is substantial. There is also an overlay of the degree to which the regulators may wish to curry favor with outside law firms and companies in the hope of future employment. Within the federal government, to be certain, the revolving door between the regulators and the regulated is open and notorious.

Large military contractors get to sell dysfunctional weapons systems to military services that have no need for them. The Generals do not raise objections to billions wasted on unwanted, needless, dysfunctional weapons systems because the defense contractors hire generals as employees, lobbyists, consultants, directors after the Generals retire.

Dangerous and useless drugs are approved by the FDA because the FDA is populated by drug company people who rotate into and out of the FDA and back to their companies. In the FTC/Justice Department, the hope is frequently that the tenure there is a stepping stone to the big law firm or big company law department. The relationship has a very palpable incestuous aspect that contributes to make the agency practically useless to the victimized franchisee.

While that is certainly not always the case and there are many good, honest and hardworking agency people who take their responsibilities very seriously, what I have just described occurs with sufficiently frequency for it to be a major factor in any decision to go to an enforcement agency for help. 

If you do go to the agency for help, you have to have sensitivity for where your matter will be on the agency’s priorities list.

Agencies go to the legislature every year for appropriations funding. They take along statistics showing how accomplished they have been in the last year in fulfilling their mandates. The bigger the number of victories, the better they look. A list of 100 cease and desist order compliance victories is much more impressive that a report showing that much of the staff was preoccupied all year in preparing investigations and for trials against recalcitrant miscreants.

The C&D matters are easy and quick. The documentation is all on a disk with only a few blanks to fill in. They don’t get paid to work late hours and they don’t get paid more to bring litigated cases. Moreover, the agency leader knows full well that if a defendant hires the right law firm, that firm will make its way to a legislator on the agency’s budget control committee who, for campaign contributions, will “make a phone call or two”.

When the agency leader gets a call from the attorney general saying that a matter is getting in the way of important state business (or some such similar sounding statement), all the work of the serious staff attorneys will be for naught when the plug gets pulled on the case. It doesn’t happen like that a lot, but the cases don’t happen a lot either. It happens with sufficient relative frequency that it has to be taken into consideration by any enforcement agency making a prosecute/don’t prosecute decision.  

The way to overcome this impediment is to save the agency personnel from doing a lot of work that may be sidetracked. You do this by having your lawyers do all the work and handing the case to the agency all tied up in a neat ribbon. Your lawyers also stay in contact with the agency staff ready to provide answers and guidance whenever anything comes up. Your lawyers, on your bill, become the “ghost” prosecutors. 

If you do manage to get an agency to move and the result is positive, you will not be awarded legal fees for the reason that the court’s reaction will be that you simply piggy backed on the agency’s work and not vice versa. You can’t tell the court that it was you who did the agency’s work for it. That would embarrass the agency and it would be even more reluctant ever to help out in any other matter, especially with that law firm involved. So, if you can invest in a really good law firm, you might well consider forgetting about “help” from any enforcement agency, state or federal. You do this on a case by case basis, to be certain.

You can also expect a storm of denial and protest about my saying this, as it aint something you’re supposed to know about.