A Gwinnett County jury has awarded Michele and Lorraine Reymond (the “Reymonds”), former franchisees of Legacy Academy, Inc. (“Legacy”), $1,155,000 after concluding Legacy made misleading and deceptive earnings claims to the Reymonds as an inducement to enter into a franchise agreement, and simultaneously denied Legacy’s claim against the Reymonds for approximately $700,000 in royalty and attorney’s fees under that franchise agreement. The Reymonds were represented at trial by Cary Ichter and Dan Davis.
The underlying relationship started in 2001, when Legacy represented to the Reymonds that they could expect, based on the performance of existing Legacy daycare centers, to have a net income, before taxes and depreciation, of $259,000 in their first year of operation, and $439,000 in their second and third years of operation. In fact, the Reymonds, like many other Legacy franchisees, never made anything close to this amount in their first three (3) years of operations.
In 2010, the Reymonds filed suit in the Superior Court of Gwinnett County alleging violation of a legal duty arising under 16 C.F.R. § 436.1 pursuant to O.C.G.A. § 51-1-6 (a statute that creates a right to recover for violations of legal duties that do not otherwise provide a private right of action), fraud, negligent misrepresentations, Georgia RICO, and rescission of their franchise agreement. Legacy filed a counterclaim in which it sought to recover six percent (6%) of the Reymonds’ gross income as royalty fees due under the franchise agreement from November 2010 until September 2026—an amount which easily totaled six (6) figures and which Legacy later represented as some $650,000.
On March 25, 2013, the case proceeded to trial. After a full week of evidence, the jury returned a verdict in favor of the Reymonds. Importantly, the jury specifically concluded that Legacy and its owners and officers—Frank and Melissa Turner—had engaged in at least two (2) acts of theft by deception, which is a criminal offense.
Currently, Legacy is involved in five (5) other lawsuits with former Legacy franchisees, all of whom are represented by Ichter Thomas, LLC, and all of who have similar claims alleging fraud and/or a pattern of racketeering activity. This wave of litigation follows an earlier arbitration involving five (5) other Legacy franchisees who were also represented by Cary Ichter. In 2010, the Superior Court of Gwinnett County confirmed an arbitration award finding Legacy had also given “misleading financial information in the [Federal Trade Commission’s (“FTC”)-required Uniform Franchise Offering Circular (“UFOC”)] and outside the UFOC to [these other franchisees] and [in doing so] violated the disclosure requirements of [16 C.F.R. § 436.1],” and, as a result, awarding those five (5) former franchisees more than $1 million in damages and rescinding both $1 million in promissory notes and the franchise agreements at issue.
Whether helping franchisors with litigation avoidance, such as complying with the FTC rules concerning disclosures to franchisees, or franchisees with avoiding potentially catastrophic financial ruin from business relationships induced by deceit, Ichter Thomas, LLC is ready and able to provide a full array of legal services on your behalf. If you are interested, please call Cary Ichter or Dan Davis at 404-869-7600.
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Tagged as: agreements, franchisee, franchisor, fraud, racketeering
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