November 2011 Archives

For those of you eagerly awaiting my comments on your baseless and delusional perceptions of who I really am, and what really happened here-- free of speculation--a simple phone call to me would have certainly set your misperceptions very straight!

However, because of the cowardly approach of writing anonymously, which merits no respect, I am unable to confront my meek adversaries. Steinberg and Webster, you guys just do not get it!

Therefore,this is the ONLY time that I will write on this blog on this issue! I have many more valuable causes in which to invest my time!

You really believe that S and W out- foxed me? Who are you kidding? Believe as you wish! Steinberg's op-ed piece wreaks in professional envy! How unfortunate for you miserable souls!,

Ask Mike Regan from Kahala and David Rauch from S and W if they feel the way you do! I assure you that they do not!

Because David Rauch chose to share through an academic piece how the historically competing worlds of franchisor and franchisee can work together and align their interests to achieve a common goal for the benefit of both parties, demonstrates intellectual, business, professional and social maturity!

Although it is no secret that Kahala has in the past and currently is in the midst of very tense relations with both it's franchisees and some of it's Area Developers, as unorthodox as it may be, it must be credited with it's creative and pro-active approach of seeking assistance from it's long-time adversary in order to protect the Brand from a highly inflammatory public relations crisis!

The reality is that the franchisees were even more worried than Kahala because it was their stores which were being boycotted in order to send the message of public disapproval to Kahala? But it was the franchisees whose sales were plummeting and therefore became justifiably alarmed!

My agreement to represent the NIACCF and collaborate with Kahala was done only after receiving specific and unequivocal direction from the NIACCF and its franchisees to take all action necessary to protect the Brand so that the franchisees, who so heavily rely on it, will NOT continue to be damaged by it's complete destruction.

I never "crossed the line", or "betrayed the franchisees" or "went to the dark side", or "sold my soul" to Kahala or any one else! Never have and never will! No conflict of interest exists with Kahala.

The only reason that Kahala agreed to pay the Modest sum of attorneys fees that I was requiring to be paid by the NIACCF( franchisee association) to retain me was because without such financial contribution, the NIACCF would not have been able to afford my firm's legal services and would not have been able to support the defense of the Brand name which the franchisees so heavily rely upon.

So if the franchisor wanted the assistance and support of the NIACCF in derailing the CNBC public relations efforts to disparage the Cold Stone brand, then it was only fair and appropriate that Kahala and NOT the franchisee association pay the legal bills associated with this coordinated effort.

Frankly, I believed it was a rather brilliant strategy to have the franchisor pay for a benefit to be derived by the NIACCF and the franchisee stores as well as the franchise system for protecting the brand. If the same situation would arise today where the franchisees wished to take legal action to defend their businesses but could not afford to do so, and the franchisor would have an interest in protecting it's brand, rest assured that I would be knocking on the Franchisors door to pay the bill and without creating any potential conflict of interest!

The bottom line is that the brand and the franchisee stores were well served- all without any financial or other cost to the franchisee association-NIACCF.

I still actively represent the NIACCF as well as a majority of the Area Developers in Cold Stone on issues of concern to them vis a vis Kahala. Rest assured that my commitment to the franchisees is unwavering and my integrity and honor will never be compromised! However, I refuse to discuss my strategies, legal advice or other sensitive matters on the Internet as my duty is solely to and always will remain with the franchisee!

It is unfortunate that those accusing me have no facts whatsoever which support the baseless accusations. Get on the board and become actively involved in your franchisee associations legal affairs committee and you will see the light! Clearly, you must be living in the dark as you have no backbone or internal fortitude or sufficient character to identify yourself in this blog!

I owe no one, except my clients, an explanation as to why or how I give particular legal advice in the manner that I do. And whether you approve or not of how I practice law, frankly, I do not give a damn! It has benefitted and served my clients really well over the last 25 years.  

My family, partners, and employees as well as many charitable organizations, community programs, religious institutions, universities and law schools have substantially benefitted financially from my unselfish generosity. All this after having grown up poor, mowed lawns since the age of seven, cleaned toilets on my hands and knees while at Harvard and worked over 3000 hours per year, year after year over the last 20 years while owning my law firm.

So criticize till your hearts desire. It will make no difference!

Life is like a game of chess. Make one move at a time. Move up- not down, and when you reach the Top, you may move as you like!

This has been a guest post by ROBERT ZARCO.

The ABA Forum on Franchisng strives for balance, objectivity, and a focus on legal accuracy. The overall goal is to emphasize collegiality and foster personal relationships between franchisee side and franchisor side attorneys.

Snell & Wilmer's article in The Franchise Lawyer about how Coldstone collaborated with its "franchisee association" is a major blow to the ABA Forum on Franchising's overall goal. The S&W article is a bombshell.

It is hard to believe that the ABA Forum would not carefully vet this piece before it appeared in The Franchise Lawyer, even if the The Franchise Lawyer is a legal newsletter and not a Law Journal.

The role of the ABA Forum on Franchising is troubling for the following reasons.

For more than a decade, the Forum has shied from contentious debate. It has chosen (wisely, in my opinion) to stress civility and a "just the facts" approach.

Essentially, the article is discussing public relations: a franchisor was accused of behaving badly against most of its franchisees in a television show aired on CNBC, citing large franchisee failure rates.  The franchisor sent a fat bank wire to the franchisee attorney on behalf of the non-franchisor controlled franchisee association, whereupon that franchisee attorney went on television to say that only disgruntled franchisees were at  fault for the rash of franchise failures. 

Is there a lesson in there for the readers of The Franchise Lawyer? Umm... it is unlikely that Justin Klein is now going to take a check from Ric Cohen, or Michael Dady will go on the payroll of franchisor The UPS Store. So the article is of rather limited utility in informing franchise attorneys?  There is very little legal point to this article.

Wors is the legally ludicrous argument in the pages of an ABA publication. With nary a single citation to law, the article suggests that statements of opinion are defamatory, something a first year law student knows is simply not true, at least not in the United States:

Cold Stone believed the allegations that there are "hidden fees," that Cold Stone profited from subleasing locations to franchisees, and that Cold Stone forced franchisees to buy unnecessary equipment were defamatory and false.

Cold Stone also believed that the allegation that there was a "yet-to-be-filed class action" was false. [emphasis added]

Apart from the matter of what is "hidden" and "unnecessary" is in the eye of the beholder, the article implies that the subleasing markup did not exist. Note the careful use of the word "profited" rather than "marked up":

Cold Stone most certainly did mark up leases by at least 2%, and did not always remit lease payments to the landlord even though Cold Stone debited the franchisee bank accounts.

While it is true that the editors of The Franchise Lawyer are not defamation experts, this is not exactly a tough point of law.

Of equal ethical importance, the editors of the publication are no doubt familiar with some uncomfortable details such as Cecil Rolle's prominent play in the infamous Zarco letter to CNBC and the resulting ethical storm.

The omission of any discussion about Rolle is puzzling, since The Franchise Lawyer lauds the Zarco letter as being the catalyst for CNBC to cave in, and the Zarco letter is less than three pages of type, with more than a full page being devoted to a blistering attack on Rolle. Logically one would think that The Franchise Lawyer would mention that the primary focus of this wonderful strategy is to attack your ex-franchisees.

Did The Franchise Lawyer editors demand a full and balanced article?

Well, read it for yourself. Pay close attention to what is not discussed, in particular any discussion of the actual contents of the Zarco letter, or the legal requirements to pursue a defamation action against a publisher.

(Some time after the BlueMauMau articles appeared, a television executive explained that NBC legal was aware that the program was not defamatory but that the producers just did not want to deal with franchising anymore.The individual indicated that after dealing with the brouhaha, he felt as though he had walked through a sewer. Those familiar with the backstory to the CNBC program may well feel the same way.)

Now, I have the utmost admiration for all the good work that Robert Zarco has done for franchisees over the past decades. I disagreed with him as to how he handled the Cold Stone matter. But I did so publicly. Zarco was a good sport and replied to me publicly.

I also admire S&W because they are doing their job, and doing so in a methodical and devestatingly effective manner.

Snell & Wilmer wrote a clever article for its masterful grasp of the use of publicity to eviscerate a litigation adversary. The tactical brilliance of Snell & Wilmer's litigation strategy is to be admired. When I die, I want to be reincarnated as a S&W litigation associate.

They came not to praise Zarco, but to bury him.

S&W's story in The Franchise Lawyer is intended to inform Zarco's colleagues. S&W placed the story on legal blog sites such as JDSupra in order to ensure that non-ABA Forum on Franchising attorneys did not miss it, and also to ensure that news feeds such as Google would both push the story and ensure search engine users would find it.

That S&W comes out with this publicity at the worst possible time for Zarco is no accident. Not only does the story harm Zarco, but it also reinforces the case, which former franchisee Cecil Rolle is (according to reliable sources close to Rolle) pressing with both Florida's disciplinary body for attorneys and possible direct litigation. Having patiently waited until the story was off the front pages, S&W now puts the story back in the headlines and in a way which Zarco cannot defuse.

And S&W did so with the imprimatur of the "American Bar Association, Fall 2011 Vol. 14 No. 4 " (When was the last time a major law firm could not do a proper BlueBook cite? But then again, it has more impact being published in the "American Bar Association" rather than "The Franchise Lawyer" fall edition.)

However, for the ABA Forum on Franchising to be a part of this is more than not sporting. Wading into an ongoing legal and ethical morass, while avoiding discussion of it is not worthy of the Forum. In confirms suspicions about the ongoing irrelevance of the policy of collegiality.