One of the affirmative defenses raised by Mr. Jaroslawicz is pursuant to NY General Business Law 349, which is a consumer protection statute. This is the rare exception which proves the rule, and may not survive this case.

It is true that appellate authority binding in Kings County (Brooklyn) holds that franchise agreements are covered by GBL 349 if they are part of a marketing scheme impacting "consumers at large" Akgul v. Prime Time Transp., Inc. (2 Dept. 2002) 293 A.D.2d 631, 741 N.Y.S.2d 553

In turn, Akgul cites to Connolly v. Wecare Distribs., 143 Misc.2d 637, 541 N.Y.S.2d 163, a 1989 case from a trial court in upstate NY.

The rulings in these cases are deceptive, and this may have implications for the Dunkin' franchisees.

• In Akgul, the "franchisees" were actually livery car drivers who were determined to be "employees" in a prior NLRB proceeding. The drivers purchased/leased a car and the employer/franchisor provided the drivers with fares and processed payments.

• In Connolly, the "franchisees" bought a few hundred dollars of cosmetics and could become multi-level marketers. Most importantly, the Connolly court noted:

...defendant's attempted comparisons of its sales of distributorships to the sale of fast-food franchises, to which it thinks GBL Section 349 should not apply, is unconvincing. Such fast-food franchises cost many thousands of dollars and require relatively sophisticated investors who would normally seek legal and accounting advice before acting, as opposed to WeCare distributors who allegedly buy (or charge) several hundred dollars worth of merchandise at a WeCare recruitment meeting. While there may be similarities between buying a fast-food franchise and paying for a WeCare distributorship, the differences significantly outweigh them.

If Dunkin' doesn't get the GBL 349 claim dismissed at trial, I suspect that they will fight this all the way to the Court of Appeals. There are a lot of Dunkin' stores (and a lot of franchisees) in New York state, and I suspect that the IFA folks will be there with amicus briefs.

If franchisees can fall within the purview of consumer protection statutes, that is good for them. But franchisees reading the pleadings in this case should not get the idea that this is the mainstream view, nor that the current case law will stand. Indeed, the Connolly court indicates why the "ignorant franchisee" defense normally does not succeed even with a sympathetic bench.

Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400