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Zarco Speaks on Future of Dunkin', Ethics of Outside Counsel

Robert Zarco in Toronto's ABA Forum on Franchising
Attorney Robert Zarco, Photo/ABA Forum on Franchising at Toronto

TORONTO - Robert Zarco, one of America's leading franchise attorneys, gives an exclusive interview to Blue MauMau while attending the  American Bar Association's Forum on Franchising in Toronto. He discusses the future of  Dunkin' Brands Inc., a franchisor to some 13,000 Dunkin' Donuts and Baskin-Robbins franchises, and the ethical responsibility of law firm Gray Plant Mooty in relation to recent legal controversies.

BMM: Why the sudden concern over the legal tactics of Dunkin' Donuts? Weren't these practices going on for a decade?

ZARCO: The prevalance became much more severe in the last three to four years. There were many more disputes where Dunkin' Donuts had taken a much heavier hand and extracted legal fees from franchisees.

BMM: Did Dunkin's legal counsel practice extortion?

ZARCO: I view them as extortionistic-type practices because they would surface during conversations that were shielded from public disclosure under the guise of private communications...[pause]  It delayed this conduct from surfacing.

BMM: Did Dunkin' entrap franchisees as has been rumored?

ZARCO: There are cases...

Look at the article by Janet Sparks and see what was said in court.

BMM: Given the publicity risk, why would Gray Plant Mooty take on the Watergate office when Schmeltzer Aptaker dissolved?

ZARCO: [scoffs] Three hundred fifty lawsuits! It is highly lucrative to represent Dunkin' Donuts. Their [Gray Plant Mooty's] leading motivation had to be the financial compensation derived by a law firm which acceded to Dunkin's legal department.

BMM: Is the leadership of a law firm itself responsible for the actions of a local office?

ZARCO: An organization that permits this conduct from any of its divisions must share the blame.

However [pauses]... It's tough for the executive board of a very large corporate-type law firm to clamp down and discourage new and protracted legal work which generates substantial legal fees — which are ultmately borne on the backs of franchisees — during a time in which the economy and especially large law firms are struggling financially.

There is an inherent conflict that exists there: balancing ethical considerations with financial compensation.

BMM: What about the future of Dunkin's relations with franchisees?

ZARCO: Dunkin's new corporate management team will be proactive enough and have learned a valuable lesson from past management's inappropriate and unscrupulous conduct. They will not encourage or support such aggressive and draconian tactics to be undertaken by their current in-house or outside legal teams.

BMM: Any evidence of a change?

ZARCO: In fact the best indicator of this new collaborative approach to the franchisor / franchisee relationship is to have an upper-level manager analyze and evaluate each and every one of the pending lawsuits and attempt to reach a quick — and fair — resolution for both parties.

I understand that this process may be in its formation stages.

  • EDITOR'S NOTE: Stephen Horn joined Dunkin' as legal counsel in 1998; for 10 years prior to that Horn was working as outside counsel to Dunkin' while a member of the law firm of Schmeltzer, Aptaker & Shepard. Horn worked in the Watergate office. When Schmeltzer disbanded, the Watergate office, now led by Robert Zisk, became part of the law firm of Gray Plant Mooty. Gray Plant Mooty recently announced salary cuts and "shared sacrifices" to avoid layoffs during the economic downturn. The law firm has been named as one of the "Best Places to Work."
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Staff reporter for Blue MauMau