7-Eleven Ex-Franchisee Sues Marks & Klein for Malpractice, Negligent Legal Services

After three years of litigation with his franchisor, a seasoned multi-unit 7-Eleven franchisee has sued his lead counsel and law firm for malpractice, alleging the attorneys placed their own financial interests above his and did not live up to their fiduciary obligation to protect him as a client, one who was unsophisticated in legal affairs.

The former six-unit convenience store franchisee, Karamjeet Sodhi, surmises that he lost his franchises after 30 years of ownership, received no award or compensation whatsoever in the lawsuit, causing him to pay dearly for the attorneys’ negligent and faulty advice and representation. In addition to his losses, the former franchise owner states he had to pay legal fees exceeding half a million dollars, due to the firm over billing him at every turn.

The franchisee claims in his case, Karamjeet Sodhi v. Gerald A. Marks, Esq., Marks & Klein, LLP, et al., that Gerald A. “Jerry” Marks and Marks & Klein breached their fiduciary duties in representing him in fighting against franchisor 7-Eleven. The attorneys failed to keep him reasonably informed about his rights, duties and obligations in the litigation. Instead, they capitalized on his lawsuit in order to generate fees for themselves in excess of any benefit that could possibly have been obtained by his legal action against 7-Eleven. Sodhi alleges Marks & Klein charged him “grossly excessive hourly rates, in breach of its own fee agreements, which were unconscionable considering the skill and experience of its attorneys.” The law firm also failed to challenge the court’s summary judgment order and award of counsel fees, according to his complaint.

Core of 7-Eleven franchisee litigation

As background to the case, Karamjeet Sodhi began his business in 1988 in New Jersey, eventually purchasing six convenience store franchises from 7-Eleven Corporation. In 2013, the franchisee was served with a notice of material breach and termination pursuant to his franchise agreements with the chain. 7-Eleven notified Sodhi that it was terminating all six of his franchise stores.

Subsequent to the termination notice, 7-Eleven filed a lawsuit, 7-Eleven, Inc. v. Karamjeet Sodhi, et al., in New Jersey federal court asserting Sodhi committed incurable breaches of the franchise agreements with 7-Eleven. Sodhi defended his business against the accusations and filed a counterclaim for damages. At that time, the franchisee retained Jerry Marks of Marks & Klein LLP to represent him. The attorneys responded to the franchisor’s claims and filed a counterclaim alleging violation of the New Jersey Franchise Practices Act (NJFPA); Breach of the Implied Covenant of Good Faith and Fair Dealing; violation of the Fair Labor Standards Act, and violation of the New Jersey Law against Discrimination.

Before trial, the U.S. District Court of New Jersey granted 7-Eleven’s motion for summary judgment. Specifically, the court determined that 7-Eleven was within its rights to have terminated Sodhi’s franchises, and that the franchisee was not entitled to any compensation from 7-Eleven. In its decision, the court said the franchisee did not provide adequate support for the claims asserted in his counterclaim. Specifically, the court found that the opposition to 7-Eleven’s summary judgment motion, filed by Marks & Klein, “failed to comply with Local Civil Rule 56.1 because it failed to cite to the record to support the denial of material facts set forth in 7-Eleven’s statement of undisputed material facts.”

Therefore, the court “deemed those facts to be undisputed, and found further that defendants [Jerry Marks and Marks & Klein] provided only ‘boilerplate, conclusory assertions’ in support of a number of the affirmative allegations articulated by defendants in support of plaintiff’s [Sodhi’s] counterclaim in the lawsuit.”

The district court’s specific findings on the motion for summary judgment were that Marks & Klein attorneys failed to produce “any evidence” supporting their client’s claims for violation of NJFPA and that there was good cause for 7-Eleven’s termination of the franchise agreements. The finding of good cause barred the franchisee’s claim for violation of the implied covenant of good faith and fair dealing, and that he should not be classified as an employee for purposes of the FLSA. It states, “the plaintiff’s FLSA claim fails as a matter of law, and that his NJLAD claim was unsupported and failed as a matter of law.”

Karamjeet Sodhi, through other counsel, appealed the district court’s decision to the Third Circuit Court of Appeals. The Third Circuit affirmed the district court’s decision.

Although the court ruled, prior to trial, in favor of 7-Eleven’s motion for summary judgment, dismissing Sodhi’s counterclaim, 7-Eleven, Inc. expressed that it was agreeable to entering discussions with the franchisee and his attorneys concerning a settlement. The legal documents states that Sodhi wished to pursue and ultimately accomplish settlement in his case. But counsel Jerry Marks and his firm, Marks & Klein, thought otherwise and refused.

Attorney Marks specifically told franchisee Sodhi that a settlement was not worth pursuing because he was certain that Sodhi would receive a substantial award at trial by way of verdict. Attorney Marks said, according to the lawsuit, that even if 7-Eleven prevailed on its claims, and even if the district court permitted 7-Eleven to ‘take back’ Sodhi’s stores, that 7-Eleven would have to pay him the “market value” for his stores. Marks told his franchisee client that he could not lose at trial, that he only had “upside” in continuing to litigate, and that he should not even discuss settlement.

Based on attorney Gerald Marks’ legal analysis, he told 7-Eleven his client, Sodhi, would not agree to compromise his claim in a settlement.

Franchisee sues Marks & Klein attorneys for malpractice

As a result of the botched litigation, Sodhi filed a complaint against attorneys at Marks & Klein on May 1, 2018, in Superior Court of New Jersey, Law Division. It states, “Defendants [Gerald Marks and Marks & Klein] analysis of the law was negligent and simply wrong.” Through his attorneys, PinilisHalpern in Morristown, New Jersey, Sodhi asserts that Marks & Klein counsel’s “incorrect and negligent analysis of law, and the obstinate and unprofessional refusal to engage in settlement discussions, constituted negligent and substandard advice to plaintiff [Karamjeet Sodhi].” He contends in his lawsuit that he paid dearly for “this negligent and faulty advice” not only in obtaining no award or settlement, but he also paid legal fees exceeding $500,000.

Other defendants listed in are ABC Cooperations 1-10 are entities, not currently known to plaintiff, but more specifically described as law firms that also rendered services; and John Does 1-10, individuals, not currently known, more specifically known as attorneys who provided legal services in the litigation.

The lawsuit filed against the attorneys lists three counts: For Profession Negligence; Breach of Fiduciary Duty; and Breach of Contract. He asks the court for rescission and restitution in the form of return of all consideration paid to defendants [Marks & Klein attorneys], compensatory damages, for interest, attorney fees and costs of suits, and for other relief the court deems just and proper.

Marks & Klein attorneys no stranger to malpractice lawsuits

Marks & Klein has been the subject of several malpractice lawsuits in recent years. After spearheading the $206 million class action settlement of 8,000 Quiznos franchisees in 2010, an appellate court disqualified the law firm in 2012 in a case representing a franchisee, one who had opted out of the settlement. The court cited a conflict in attorney-client privilege when Marks & Klein hired one of the Quiznos lead attorneys.

Another suit was brought by the ERA Franchising System franchisees alleging the law firm failed to limit franchise owners' exposure to $383,000 in attorney fees. The award in favor of ERA was part of the underlying franchise agreement litigation that was brought by the real estate franchisor against its franchisees for breach of contract.

In early 2015, a district judge ruled that Gerald Marks and his firm were disqualified from further participating in a franchisee lawsuit against 7-Eleven, claiming unlawful termination. The decision was centered on “how attorney Marks paid a witness for his testimony against the franchisor.” The judge ruled that the witness, a former employee of 7-Eleven, was improperly compensated.

Gerald Marks did not return a phone call and text from Blue MauMau requesting his comments on the malpractice litigation against him and his firm prior to publishing.

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Response from Marks & Klein after publication of this article

Related Reading:

• Complaint Filed against Gerald Marks, Marks & Klein
• Justia- 7-Eleven Inc. v. Karamjeet Sodhi
• 7-Eleven Class Action Franchise Lawsuit Brewing
• Franchise Terminations and Self-Inflicted Harm
• 7-Eleven COO over Franchisee Relations Leaves amid Turmoil
• 7-Eleven Whistleblower Alleges Predatory Practices,  Churning, Personal Vendettas
• Marks & Klein’s Fatal Error in Representing ERA Real Estate Franchisees