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.

Authors

Archives

Search for Articles

Follow Us