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Randall v Lady of America- What does it mean for the rest of us?
I purchased a franchise in 2008 and was given completed financials, business plans, Profit and Loss statements, false average job size, and expected margin information from a Georgia based franchisor. All of the provided information was inflated and falsified to make this business look like a good deal. Does the Randall v Lady of America set any sort of precedence for a Georgia based franchisor? I have a lawyer but at $250 an hour I only like to present good ideas. We have sent them a letter stating we’re voiding the contract based on “Fraud in the inducement.” They were quick to fire back a response that we signed our rights away when singing the franchise agreement. Parole evidence rule. No denial, just legal stuff. See below for a Top 5 Landmark Lawsuits Affecting Franchisees of 2007 found on www.bluemaumau.com
1. Randall v Lady of America – Federal judge rules that written disclaimers in the disclosure document cannot defeat a franchisor's false promises. Franchisees claimed that they had been deceived on expected earnings in the buying process by company representatives and hand-outs during Discovery Day. Even though such misrepresentations were disclaimed in the offering circular, the franchisees sought to have their agreement obligations to the franchisor rescinded. The franchisor filed a counter-suit for damages from future unpaid royalties that resulted from the franchisees leaving. Solish observes, "This case may prove to be influential because it is thoroughly reasoned, even if those of us on the franchisor side believe the reasoning to be incorrect. The exact opposite position was taken in several cases from other parts of the country last year."
- forums:
Somebody must speak out," the
Somebody must speak out," the old lady began; "and I mean to set the example. Telling the truth," she declared, turning severely to her daughter, "is a more complicated affair than you seem to think. It's a question of morality, of course; but--in family circles, my dear--it's sometimes a question of convenience as well. Is it convenient to upset my granddaughter's governess, just as she is entering on her new duties? Certainly not! Good heavens, what does it matter to my young friend Sydney whether her unnatural mother lives or dies? Herbert, I second your proposal to tear up the paper with the greatest pleasure
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Effect of integration clause on prior fraudulent earnings claim
Did the FDD have an Item 19 claim? Are you seeking rescission? Are you intending to continue to operate the same type of business after you take down the franchisor trade dress?
It sounds like you may have signed a contract that contains a "merger/integration" and a "no reliance" clause. As Solish noted, the case law goes both ways on this issue.
At the end of the day, if you simply de-identify and leave the franchise system, then there is the risk that they will take action against you. In that circumstance, it may matter whether your case is heard in arbitration or in a court. Also, the franchisor would have to disclose this information in their next FDD and if they are a small franchisor they might not want to have this information in the FDD for all to see.
Randall v Lady of America
Welcome.
Here are two important articles that give insight into Randall v Lady of America, and may help this forum discussion get started.
Top 5 Landmark Lawsuits Affecting Franchisees of 2007, submitted by franchise attorney David Sager of Day Pitney and Jonathan Solish of Bryan Cave
The Victory of Common Sense: Why Randall v. Lady of America Matters, written by the franchisee attorney who won the case, Michael Garner
For what it's worth, Blue MauMau back in 2006 called the Lady of America franchise system as one of the worst, primarily because it didn't look like the owner-operators could make money. According to a 2005 SBA list, Lady of America franchisees had the second highest failure rates among brands tracked by the SBA in paying back their SBA-backed loans.
See 15 Worst Franchises.
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