What categories of claims does Dady and Gardner handle?
There are a few categories of claims that we handle, and one kind of category of claim would be (around here we just have a label for it) “Category 1 claims”, meaning: was the franchise opportunity oversold to you? There are very specific laws – federal laws, state laws, and common law principles – that apply to the sale of a franchise opportunity. If those laws are not honored, if the franchise is not lawfully sold with full and fair disclosure of all material facts, without overstating anything or without misrepresenting anything or without failing to disclose some material fact, then we have an opportunity to get our clients out of that relationship and recover what are frequently referred to as restitution damages – that is, the amount of money sufficient to make them whole as if they’d never invested in this opportunity in the first place.
That would be a Category 1 claim, and we refer to those often. We’ve handled hundreds of Category 1 claims – getting people out of relationships and when we can, because we can prove some violation of an applicable legal principle, get their money back. If there’s a statute that applies or a fee shifting provision in their franchise agreements, we can also get their attorney fees paid for.
A second category of dispute that we get often is what we call (again here at Dady & Gardner, it’s just our moniker, not in any law book or anything) a “Category 2 dispute”. That’s just a moniker that we use to refer to something is wrong once the relationship is up and running. It may be that the goods that our clients are required to purchase to remain in the franchise system are overpriced, so they can’t make any money. Is there something they might do about that? It may be that the franchisor has opened another location, or is about to, very close to our client’s operation, and is therefore going to diminish or eliminate the profitability of that location. Or it may be, this has happened more recently, that the franchisor has decided to compete in a different way with our clients, such as internet marketing.
We had the first internet encroachment case in America, at least the first published decision. We had a franchise system, a drugstore system called Drug emporium, that gave our clients exclusive territorial rights to operate their drugstores, but they decided “What we’re going to do is we’re going to start marketing our Drug Emporium drugstores on the internet.” We said, “you can do that, but you can’t do it within the specified radius of our stores because we have exclusive rights.” They said “no, no, it’s a different system.” We said (Michael Dady said), “What’s the difference if you enter the drugstore through the doors or the windows?” Get it? Kind of trying to be funny about that. And indeed, the three arbitrators on the arbitrator panel agreed with us, and entered an injunction stopping them from marketing to clients within the protected radius of our drugstores, saying it didn’t make a difference, because a drugstore on the internet is the same thing as a brick-and-mortar type of drugstore.
So that would be an example of a Category 2 claim that we have. When we have a Category 2 claim, we’re looking at: what does the writing say, might there be some common law or judge-made principles that come in to play like Good Faith and Fair Dealing, might there be some statutes that come in to play as well that we can invoke to offer our clients the protection or remedies that they appear to be entitled to.