Dady Jabs Super 8 on Franchisees’ Right to Free Association
Franchisee Group Warns, Comply or We Will Pursue Legal Remedies
MINNEAPOLIS (Blue MauMau) - J. Michael Dady, Dady & Garner, didn't pull any punches in his February 13 letter to Super 8 Motels president John Valletta. "Over the past month, we have become aware of derogatory statements you have made about O8A [Owners 8 Association] and its leadership." Dady took issue with Valletta discrediting the franchisee association and its leadership, pressuring franchisees not to join, and threatening retaliation against its members. He warns, "We are writing to provide you with notice that these statements likely violate state franchise protection statutes which prevent a franchisor from prohibiting, restricting, or inhibiting its franchisees' right to free association."
False Hopes
Court Bars Georgia Defendants from Selling Bogus Business Opportunities
From the press release:
"At the request of the Federal Trade Commission, Judge Charles A. Pannell, Jr. of the U.S. District Court for the Northern District of Georgia, Atlanta Division, has issued an order finding that several Georgia-based defendants violated the FTC Act and the Commission's Franchise Rule and Business Opportunity Rule by pitching fraudulent ink cartridge business opportunities to consumers.The court order entered against Holiday Enterprises, Inc., and its principals Richard J. Morrell and Richard J. Cascario, permanently bars them from similar violations in the future and requires them to pay $8.98 million for consumer redress.
The order also requires a relief defendant in the case to pay $250,000 for financially benefitting from the scheme.
The Commission's Complaint
In its original complaint, filed in December 2006 as part of "Project Fal$e Hope$," the FTC charged that Holiday Ink, Inc. sold ink cartridge display racks by misrepresenting that purchasers would earn a substantial income, misrepresenting the locations available for the racks, and using shills to reinforce those false claims.
The FTC also charged that the defendants did not provide complete and accurate disclosure documents, did not provide an earnings claim disclosure, and did not have a reasonable basis for their earnings claims.
Consumers invested a minimum of $7,950 for three racks, and up to $55,950 for 20 racks, to take part in the business opportunity.
The Summary Judgment
The summary judgment against the defendants, granted by the court and filed on February 5, 2008, states that the Commission provided ample proof that Holiday Ink, et al., violated the FTC Act by "routinely and knowingly" making material misrepresentations to consumers in connection with their sale of business opportunities.
These misrepresentations included the assertion that consumers could earn substantial income by buying one of the defendant's business opportunities and that buyers would receive ink cartridge display racks and cartridges through which they could derive "substantial income and guaranteed profits."
The court found the defendants had no substantiation for such claims, and also misrepresented that they would provide buyers with "high-traffic, high-volume" locations in which to place their display racks and that they had "references" who were successful and profitable distributors.
In fact, the "references" were nothing more than employees of the defendant or unsuccessful distributors.
The court also found that the defendants violated the FTC's Franchise Rule in a variety of ways, including failing to make required disclosures about the company and its principals, failing to disclose information on litigation in which they have been involved since 2001, and failing to provide potential buyers with the names of previous buyers of their business opportunity.
The court also found defendants Morrell and Cascario individually liable for their knowing participation in the deceptive acts of the corporate defendant, and relief defendant NMC Properties, Inc., liable for its ill-gotten gains.
Through the summary judgment, the court permanently barred defendant Morrell from promoting, advertising, marketing, offering to sell, or selling any franchise, business opportunity, or business venture.
The judgment permanently barred both individual defendants from making, or assisting others in making any statement or representation of material fact in connection with the sale of any venture, franchise, business opportunity, or other product or service.
The court also barred the defendants from violating the Franchise Rule and the Business Opportunity Rule in the future and from distributing their customer information.
In addition, it entered an $8.98 million monetary judgment against them, along with a separate $250,000 judgement against relief defendant NMC properties."
Now this is an interesting twist on the usual payphone, dvd, or atm distributorship fraud.
The selling of refilling ink cartridge business opportunities obviously mirrors the real ink cartridge franchises.
The implicit pitch is that while you cannot afford a Cartridge World franchise, you can afford to buy this business opportunity.
Now this pitch has to remain implicit - the mark has to sell himself on the scheme believing that he is getting something for nothing.
(If I can get access to the marketing materials, I will post them.)
False Hopes
Court Bars Georgia Defendants from Selling Bogus Business Opportunities
From the press release:
"At the request of the Federal Trade Commission, Judge Charles A. Pannell, Jr. of the U.S. District Court for the Northern District of Georgia, Atlanta Division, has issued an order finding that several Georgia-based defendants violated the FTC Act and the Commission's Franchise Rule and Business Opportunity Rule by pitching fraudulent ink cartridge business opportunities to consumers.The court order entered against Holiday Enterprises, Inc., and its principals Richard J. Morrell and Richard J. Cascario, permanently bars them from similar violations in the future and requires them to pay $8.98 million for consumer redress.
The order also requires a relief defendant in the case to pay $250,000 for financially benefitting from the scheme.
The Commission's Complaint
In its original complaint, filed in December 2006 as part of "Project Fal$e Hope$," the FTC charged that Holiday Ink, Inc. sold ink cartridge display racks by misrepresenting that purchasers would earn a substantial income, misrepresenting the locations available for the racks, and using shills to reinforce those false claims.
The FTC also charged that the defendants did not provide complete and accurate disclosure documents, did not provide an earnings claim disclosure, and did not have a reasonable basis for their earnings claims.
Consumers invested a minimum of $7,950 for three racks, and up to $55,950 for 20 racks, to take part in the business opportunity.
The Summary Judgment
The summary judgment against the defendants, granted by the court and filed on February 5, 2008, states that the Commission provided ample proof that Holiday Ink, et al., violated the FTC Act by "routinely and knowingly" making material misrepresentations to consumers in connection with their sale of business opportunities.
These misrepresentations included the assertion that consumers could earn substantial income by buying one of the defendant's business opportunities and that buyers would receive ink cartridge display racks and cartridges through which they could derive "substantial income and guaranteed profits."
The court found the defendants had no substantiation for such claims, and also misrepresented that they would provide buyers with "high-traffic, high-volume" locations in which to place their display racks and that they had "references" who were successful and profitable distributors.
In fact, the "references" were nothing more than employees of the defendant or unsuccessful distributors.
The court also found that the defendants violated the FTC's Franchise Rule in a variety of ways, including failing to make required disclosures about the company and its principals, failing to disclose information on litigation in which they have been involved since 2001, and failing to provide potential buyers with the names of previous buyers of their business opportunity.
The court also found defendants Morrell and Cascario individually liable for their knowing participation in the deceptive acts of the corporate defendant, and relief defendant NMC Properties, Inc., liable for its ill-gotten gains.
Through the summary judgment, the court permanently barred defendant Morrell from promoting, advertising, marketing, offering to sell, or selling any franchise, business opportunity, or business venture.
The judgment permanently barred both individual defendants from making, or assisting others in making any statement or representation of material fact in connection with the sale of any venture, franchise, business opportunity, or other product or service.
The court also barred the defendants from violating the Franchise Rule and the Business Opportunity Rule in the future and from distributing their customer information.
In addition, it entered an $8.98 million monetary judgment against them, along with a separate $250,000 judgement against relief defendant NMC properties."
Now this is an interesting twist on the usual payphone, dvd, or atm distributorship fraud.
The selling of refilling ink cartridge business opportunities obviously mirrors the real ink cartridge franchises.
The implicit pitch is that while you cannot afford a Cartridge World franchise, you can afford to buy this business opportunity.
Now this pitch has to remain implicit - the mark has to sell himself on the scheme believing that he is getting something for nothing.
(If I can get access to the marketing materials, I will post them.)