Judge Confirms Half a Million Against Northwest Aquifer

After Getting over Diversity Hump, Collectibility Could Be Bigger Hurdle

SEATTLE, Wash. (Blue MauMau) - After hitting a snag in determining what court should rule in the confirmation of the arbitration award against Northwest Aquifer Surveying, the case was decided on July 24 by Judge Marsha J. Pechman, U.S. District Court, Western District of Washington, in favor of franchisees. Attorney Howard R. Morrill, Bundy & Morrill said, "Once we got over the "diversity hump" it was great to have this chapter closed." Morrill had originally filed his motion in federal court, which the opposing counsel objected to, stalling the decision. When the previous Blue MauMau article was published, more discussion ensued with attorney Paul Steinberg's post, Moses (not Morrill) had the answer, addressing the "diversity of citizen" issue.

But with that hurdle now behind him, Morrill said, "Ultimately, it's just another instance in which you may have the right to go get a judgment, but there is still the same question. "Why did we have to get the judgment in the first place?" As previously reported on Blue MauMau, the arbitrators in the case had found that Northwest Aquifer had violated the anti-fraud provision of Washington state's franchise statute. The violation occurred when the franchisor made claims to franchisees in disclosure documents, which constituted a “material misleading statement or omission.” As a result of the arbitration award and judgment, Judge Pechman granted franchisees the right to recover nearly half a million dollars in losses. But again Morrill explained, "It would have been more common for the franchisor to just pay it. Now it's a matter of collectibility."

Practical Advice

Morrill said it was obviously gratifying to get the judge's order in terms of recognizing the wrong and recognizing the redress. But he said, "One of the problems in dealing with franchisors today is that they are not franchising because they have money, they are franchising because they don’t have money." When he gets a chance to talk with prospective franchisee clients before the fact, Morrill said he goes over the company's financial statements with them. When franchisors aren't well financed, Morrill asks, "Before you tell me what you will be getting from the franchisor in the way of support, why don't you explain to me how they can provide it," in view of its financials. He emphasizes that there has never been a means test to become a franchisor.

Another Morrill classic tale is that when there are already a dozen or more franchises in the system, people get the impression that the franchisor must have a lot of money in its pocket. He tells them that it costs a lot of money to be a franchisor doing things the right way, but when they do it the wrong way it costs even more.

Northwest Aquifer Surveying, Inc. (National Water Surveying, Our Story) is now operating under the name National Water Surveying. In 2006, Entrepreneur.com listed the franchisor No. 44 in its Top Franchise Ranking.