Home
  

CERTA PROPAINTERS - FDD UFOC ITEM 3 Detail

ITEM 3: LITIGATION

FRANCHISOR INITITED LITIGATION INVOLVING THE FRANCHISE RELATIONSHIP

Royalty Collections suits filed in 2007

Certa ProPainters, Ltd. v. James Rozell; Certa ProPainters, Ltd. v. Chris Valley; and Certa ProPainters, Ltd. v. Anthony Zaborny.

SETTLED LITIGATION

Certa Pro v. Ronald Bacskai and David Moura. On or about March 24, 2003, Certa Pro instituted arbitration proceedings before the American Arbitration Association, Nos. 14 114 00732 03 and 14 114 00733 03, against two franchisees, Ronald Bacskai and David Moura. Certa Pro asserted that Messrs. Bacskai and Moura breached their franchise agreements and other agreements with Certa Pro by failing to pay royalties, operating a competing business and misusing Certa Pro''s proprietary marks. Messrs. Bacskai and Moura, filed a counterclaim asserting that Certa Pro breached its obligations under their agreements, violated the Massachusetts consumer fraud act, breached its fiduciary duty and the covenant of good faith and fair dealing, and tortuously interfered with, and defamed, their business. The matter was amicably settled and the parties agreed that Messrs. Bacskai and Moura would pay Certa Pro $31,100 for unpaid royalties and that they would individually execute new franchise agreements with Certa Pro.

Jay Seward v. Certa Pro , et al. On or about November 5, 1997, the plaintiff filed this action in the Superior Court of the State of California, Santa Clara County, Case No. CV769045. This case alleged intentional misrepresentation, negligent misrepresentation, breach of contract, promissory fraud, breach of covenant of good faith and fair dealing, violation of California Corporations Code Sections 31201, 31301 and 31302, and violation of the California Business and Professions Code Section 17200 all in connection with Certa Pro''s offer and sale of a franchise to the Plaintiff. Mr. Seward sought unspecified damages in excess of $50,000. On or about February 25, 1998, the parties agreed to submit this matter to arbitration before the American Arbitration Association of California. This case was settled in 1999 (see Note land Note 2 below).

Hoffman v. Certa Pro . et al. On or about July 21, 1998, the plaintiff filed this action in the Superior Court of the State of California, Orange County, Case No. 795852. This case alleged fraud and deceit, intentional misrepresentation, concealment, negligent misrepresentation, breach of contract, promissory fraud, breach of implied covenant of good faith and fair dealing, violation of California Corporations Code Sections 31201, 31301 and 31302, and violation of the California Business and Professions Code Section 17200 all in connection with Certa Pro''s offer and sale of a franchise to the Plaintiff. Mr. Hoffman sought unspecified damages in excess of $50,000. This case was settled in 1999 (see Note 1 and Note 2 below).

Couqhlin v. Certa Pro , etal. On or about July 22, 1998, the plaintiff filed this action in the Superior Court of the State of California, San Diego County, Case No. 721738. This case alleged fraud and deceit, intentional misrepresentation, concealment, negligent misrepresentation, breach of contract, promissory fraud, breach of implied covenant of good faith and fair dealing, violation of California Corporations Code Sections 31201, 31301 and 31302, and violation of the California Business and Professions Code Section 17200 all in connection with Certa Pro''s offer and sale of a franchise to the Plaintiff. Mr. Coughlin sought unspecified damages in excess of $150,000. This case was settled in 1999 (see Note 1 and Note 2 below).

Kuhn v. Certa Pro , et al. On or about July 21, 1998, the plaintiff filed this action in the Superior Court of the State of California, Santa Clara County, Case No. CV774754. This case alleged fraud and deceit, intentional misrepresentation, concealment, negligent misrepresentation, breach of contract, promissory fraud, breach of implied covenant of good faith and fair dealing, violation of California Corporations Code Sections 31201, 31301 and 31302, and violation of the California Business and Professions Code Section 17200 all in connection with Certa Pro''s offer and sale of a franchise to the

Plaintiff. Mr. Kuhn sought unspecified damages in excess of $50,000. This case was settled in 1999 (see Note 1 and Note 2 below).

Note 1: To avoid continuing litigation costs and without admitting any wrongdoing, Certa Pro, together with the other defendants, entered into settlement agreements with all the plaintiffs on or about August 12, 1999. At the same time, Certa Pro also entered into a settlement agreement with another former franchisee, John Novak, who had made similar claims but never filed an action: Certa Pro agreed to pay the plaintiffs and Mr. Novak a total of $280,000. of which $40,000 was paid at the time of settlement and $240,000 was to be paid over a period of 18 months. The plaintiffs all dismissed their lawsuits with prejudice, and all parties executed mutual general releases. All amounts due under the settlement agreements have been paid.

Note 2: Charles E. Chase, the President of Certa Pro and Steven S. Rogers, one of Certa Pro''s directors and the Chief Executive Officer of its parent corporation, The Franchise Company (U.S.) Inc., were all named in each of these cases because of their relationship to Certa Pro.

AFFILIATE LITIGATION

Alorisa Glassworks. Inc.. et al. v. Stained Glass Overlay. Inc.. et al. Alorisa Glassworks, Inc., a former franchisee of Stained Glass Overlay (SGO), which purchased its franchise in 2005, 19 days after our parent company sold SGO, filed suit against SGO, certain of its employees and SGO''s affiliate (collectively the SGO Defendants), as well as SGO''s former owner, which is also our current parent company, The Franchise Company (US), Inc. (TFC), and SGO''s former director, Steven Rogers, who is also one of our directors, in March 2006, in the Superior Court of California, Alameda County, Case No. RG0261157, alleging violations of the California Franchise Investment Law, unfair competition law, common law fraud, breach of a guaranty and seeking rescission of the franchise agreement and damages. In August 2006, the court granted the SGO Defendants'' motion to compel the case against them only to arbitration, and also granted separate motions by TFC and Rogers to stay the action as against them. A Case Management Conference has been scheduled in the Superior Court action for May 21, 2008; TFC and its president deny all of the allegations and will vigorously defend if the matter proceeds.

INJUNCTIVE ORDERS

The following injunctive or restrictive orders or decrees are currently effective against Certa Pro''s affiliate corporation, College Pro:

In the Matter of College Pro Painters (U.S.) Ltd. (Case No. EF-92-011). On September 3, 1991, College Pro entered into a Consent Order with the Securities Commissioner of Maryland in an administrative proceeding. The Commissioner alleged that College Pro violated the Maryland Franchise Registration and Disclosure Law by selling unregistered franchises in Maryland. The Commissioner found that College Pro sold unregistered franchises in Maryland and did not provide each prospective franchisee with an disclosure document. College Pro paid Maryland $10,000 for administrative costs associated with the investigation. College Pro is now registered to sell franchises in Maryland and is in compliance with the order.

Commonwealth of Virginia ex. rel. State Corporation Commission v. College Pro Painters (U.S.) Ltd. (Case No. SEC 920019). On February 25, 1992, College Pro assented to an Order of Settlement with the State Corporation Commission of Virginia. The State Corporation Commission alleged that College Pro violated the Virginia Retail Franchising Act by selling unregistered franchises in Virginia. College Pro did not admit or deny these allegations and entered into a settlement agreement whereby it agreed to comply with Virginia Retail Franchising Act and pay a penalty of $4,500. College Pro is now registered to sell franchises in Virginia and is in compliance with the Order of Settlement.

In the Matter of College Pro Painters (U.S.) Ltd. (File No. FR9206716/MJR). On February 1, 1993, College Pro entered into a Consent Cease and Desist Order with the Minnesota Commissioner of Commerce. The Commissioner alleged that College Pro violated the Minnesota Franchise Act by selling unregistered franchises in Minnesota. College Pro paid a $8,200 penalty.

In the Matter of College Pro Painters (U.S.) Ltd. (File No. FR9306506/JRL). On October 19, 1993, College Pro entered into a second Consent Order with the Minnesota Commissioner of Commerce. The

Commissioner alleged that College Pro violated the Minnesota Franchise Act by continuing to offer and sell unregistered franchises in Minnesota. College Pro paid a $25,000 penalty.

Other than these twelve actions, no other litigation, criminal or civil, alleging a violation of any franchise law, securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, and misappropriation of property or comparable allegations is required to be disclosed in this disclosure document.



Note: This was obtained from the web on Feb. 12, 2010.
Source: http://www.franchoice.com/franchise/CERTA_PROPAINTERS/fdd/ITEM_3
            (emphasis by this website's publisher)
  

 

[an error occurred while processing this directive]