Sample Franchise Disclosure Document – Item 3: Litigation Example

Litigation attorney


Pending Actions

Blank v. Belmont Mufflers, Inc., No. 06-111 (M.D. Fla. filed August 1, 2007). Five franchisees filed suit against us for breach of contract, alleging that we failed to furnish equipment in the time period stated in our franchise agreement. These franchisees seek damages of $350,000. A trial is scheduled for later in 2007.

Prior Actions

Doe v. Belmont Mufflers, Inc., No. 05-312 (IRT) (S.D.N.Y. filed March 1, 2005).Our franchisee, Donald Doe, sought to enjoin us from terminating him for nonpayment of royalty fees. On April 3, 2006, Doe withdrew the case when we repurchased his franchise for $90,000 and agreed not to enforce non-compete clauses against him.

Governmental Actions

Indiana v. Belmont Mufflers, Inc., No. 05-123 (S.D. Ind. filed April 1, 2005). The Attorney General of Indiana sought to enjoin us, our president Jane Doe, and franchise coordinator Phillip E. Smith, from offering unregistered franchises and using false income representations. The court found that we had offered franchises, that the offers were not registered, and that we had made the alleged false representations. The court enjoined us from repeating those acts.

FTC v. CFT, International Inc., No. 03-222 (D. Minn. filed March 1, 2003). The Federal Trade Commission filed suit against our parent CFT International, Inc., that guarantees delivery of pipe and equipment to our franchisees. The Commission alleged that CFT violated the Commission’s Mail or Telephone Order Merchandise Rule. The Commission obtained an injunction and a civil penalty of $20,000.

Litigation Against Franchisees in the Last Fiscal Year

During fiscal year 2007, Belmont Mufflers initiated seven lawsuits against franchisees as follows:

Suits to Collect Royalty Payments

Belmont Mufflers vs. Smith, No. 457-123 (E.D. La. 2007) Belmont Mufflers vs. Jones, No. 07-890 (S.D. Fla. 2007) Belmont Mufflers vs. Taylor, No. 07-123 (D. Nev. 2007)

Suits to Enforce System Standards

Belmont Mufflers vs. Stevenson, No. 28-098 (C.D. Cal. 2007) Belmont Mufflers vs. Rogers, No. 2244 (D. R.I. 2007)

Suits to Enforce Covenant-Not-To-Compete

Belmont Mufflers vs. Baker, No. 07-123 (S.D. Fla. 2007) Belmont Mufflers vs. Harris, No. 072244 (D. Nev. 2007) Other than these actions, no litigation is required to be disclosed in this disclosure document.

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