Wasch Raines LLP Managing Partner Adam G. Wasch spoke with Beth Ewen of the Franchise Times in her article “I Heart Mac & Cheese Sues NY Franchisee for Slander” about the firm’s experience with franchisor defamation lawsuits. Wasch has been lead trial counsel for aggrieved franchisees in two franchisor defamation lawsuits.
Wasch obtained a final judgment in arbitration at trial for a group of six franchisees in an emerging day spa franchise system with a defamation counterclaim in February 2019. The crux of the defamation case was that the franchisees “conspired” to take down the franchise system. Wasch was able to prove with evidence that the franchisor had committed multiple violations of the FTC Franchise Rule in its Franchise Disclosure Document and, therefore, committed per se violations of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 et seq. Wasch also was awarded damages for breaches of the Franchise Agreement and fraud. The Arbitrator found that the defamation claims of the franchisor were without merit and awarded the franchisor no damages. The franchisees obtained an award of approximately $1 million in arbitration against the franchisor and its principals which was confirmed by an Orange County, Florida court.
Wasch also represents a franchisee in a now-defunct franchise system which has sued a large group of franchisees in federal court for defamation in litigation. The court would not extend a temporary restraining order obtained by the franchisor due to a lack of evidence of defamation. The firm’s client has since been dismissed from the suit after a Motion to Dismiss was granted by the federal court.
The article in the Franchise Times delved into the dispute between I Heart Mac & Cheese and its franchisees. Wasch weighed in on the dispute, and franchisors bringing defamation claims in general:
Adam Wasch, attorney with Wasch Raines LLP, is representing an I Heart Mac & Cheese franchisee in Athens, Georgia, who is suing the brand. He has spoken with Torres of New York, he said, but has not been retained by her. He said defamation lawsuits against franchisees are unusual, in part because they then bring the dispute into the public eye. Franchisors prefer to make private settlement offers in exchange for an NDA, or non-disparagement agreement.
Also, they often draw more litigation that must then be included in a franchisor’s Item 3 on its franchise disclosure document for 10 years. “That’s why it’s uncommon, because it’s more than likely to result in a counterclaim for all the actual problems and the substance about what is being claimed as being defamation,” he said.
Speaking in general, he called a defamation suit a “bullying” tactic. “It usually occurs when there’s already a dispute and the franchisor wants to get out in front of potential claims and will use it as a way to intimidate franchisees from coming after them,” Wasch said.
Speaking in specific to the growing number of I Heart Mac & Cheese disputes, he said, “This is a situation where a lot of people are looking for a way out or their money back and they’re all talking, because no one’s really comfortable with proceeding, and the franchisor feels he can sue his way out of it and aggressively pursue litigation. So far, that strategy has been working. This is going to get messier before it gets better. I don’t foresee any end in sight.”
Wasch is a regular contributor to the Franchise Times and other franchise and industry-related publications. Wasch Raines LLP’s franchise attorneys represent both franchisees and franchisors in disputes in court and in arbitration. If you are in need of counsel to represent your interests in a franchise dispute, please contact the head of our franchise litigation practice group, Adam G. Wasch, at 561-693-3234 or email awasch@waschraines.com.
About Wasch Raines LLP
Wasch Raines LLP is a business and franchise law firm providing a comprehensive range of services to emerging and established businesses and franchise companies in a variety of industries. Through its unique business model, the firm offers its clients the benefits of having a cost-efficient in-house general counsel and a full service litigation team. For more information, click here to contact us or call (561) 693-3221.
