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Mark Golob & Nikolaus Reed Target Franchisee Speech

Franchisors and their attorneys bringing frivolous claims to silence franchisee speech are nothing new.

Butterfly Fitness (now owned by Diversified Health) is only the most recent example in franchising.

The former head of Butterfly is Mark Golob.

Golob was found by the State of California to have "willfully made an untrue statement of material fact" in violation of California law. Golob's company filed bankruptcy in September 2011 but failed to provide required tax documents and the court threw him out of court.

The Golob clan was also sued by various franchisees including Eric Rosner in New Jersey and Donna Barnhart in California; their former business partner Linda Evans was one of the first to sue back in 1999. Golob has also been the subject of arbitration complaints, including by noted franchise attorney Mario Herman in 2008. The Golob franchisees attracted national media attention including an article in Forbes.

Mark Golob is now suing investigative reporter Sean Kelly, host of the UnhappyFranchisee.Com website. In 2008, Kelly conducted a series of interviews with franchisees of Butterfly Fitness.

The lawsuit filed a few days ago does not specify what the date of publication is. In California, the statute of limitations is one year from the date of publication [ Cal. Code of Civil Procedure 340(c)] and the state has a "single publication" rule [Cal. Code of Civil Procedure 3425.3]. The attorney for Golob is Nikolaus Reed, who tells prospective clients:

Unfortunately, the statute of limitations does not last long (ONE YEAR) and if you do not seek compensation from the offender before that time, no one can help you

Nikolaus Reed's lawsuit states that the basis for suing Sean Kelly is that his website refers to Mark Golob's "checkered past" and "history of litigation in the health club industry."

As a rule,

  1. a defamatory statement must be capable of being proved true or false,
  2. an expression of opinion is not actionable under the US Constitution, and
  3. saying someone has a "checkered" past is not defamatory, [Schuler v McGraw-Hill, Business Week Online, et al, 989 F.Supp. 1377 (D. N.M. 1997)].

Even if "checkered past" is placed into a larger context, it would not be defamatory in a case where the plaintiff (e.g., Mark Golob) has been found by a state official to have lied in a franchise filing, and filed for bankruptcy [c.f., Fountain v. First Reliance Bank, 730 S.E.2d 305, 310 (Sup. Ct. S.C. 2012)].

That Golob has a "history of litigation" can be proven factually true by a search on www.Pacer.Gov, the state court filings, and the UFOC/FDD.

And of course, contributions by readers of UnhapppyFranchisee.Com would fall under the protections of Section 230, as Mr. BlueMauMau told Scott Hammel back in 2011 when attorney Scott Hammel was representing Mark Golob.

So why is Nikolaus Reed suing someone when there is no valid cause of action?

Same reason as all the past incidents in franchising: as an attorney, Nikolaus Reed can be an extortionist and get away with it. It is far cheaper for Sean Kelly to delete news articles about Mark Golob than to travel to California and hire an attorney. Mark Golob & Nikolaus Reed know that, they rely on that; truth and free speech be damned.

The cost of defending a lawsuit (particularly in a distant state) is likely to make franchisees and journalists think twice before criticizing a franchisor in the future. The American Bar Association even had a workshop for attorneys to teach them the ropes.

Franchisors threaten franchisees on a regular basis, and it is not simply small franchisors.

  • Steven Caldeira (now-head of the International Franchise Association) previously threatened to sue journalist Janet Sparks if she published a story about the extortionate litigation tactics of Dunkin Donuts (Sparks published anyway, and the Dunkin attorney at the center of the scandal left the company).
  • The entire board of the Toasted Subs Franchisee Association was threatened with termination for posting an online memorial to a deceased Quizno's franchisee (a court later ruled against Quizno's).

Students of franchise history recall that:

In all those cases history shows that the attorneys were partially successful, and that their clients went on to continue to ruin unsuspecting franchisees:

Courts are for the administration of law and attorneys are officers of the court having a responsibility for something more than their pecuniary interest. Attorneys such as Nikolaus Reed are a blight on the legal profession.

The one fortunate factor for Sean Kelly is that California has an anti-SLAPP statute.

This lawsuit should unite all decent franchisor and franchisee advocates, as well as any American who values freedom of speech.


Mark Golob v. Sean Kelly, Superior Court, County of Mendocino CA, filed Feb 5, 2014

For Mark Golob: Nikolaus W. Reed, San Francisco CA

GolobvKellySummons.pdf3.03 MB
Golob Cease & Desist Order.pdf484.96 KB
Butterfly Fitness BR filing Sept 2011.pdf181.68 KB
Rosner v Golob.pdf720.86 KB
Barnhart v Golob.pdf1.07 MB
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About Corbin Williston

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Corbin is the online pen name of a contracts aficionado who needs to get a better hobby.

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