SHONEY’S Franchise Owner’s Statements Ruled Defamatory

A U.S. Bankruptcy Judge has ruled that statements posted to UnhappyFranchisee.Com, YouTube and Facebook by former Shoney’s franchise owner Ed Bay are defamatory and any debt resulting from the defamation is not dischargeable under bankruptcy law.

(UnhappyFranchisee.Com)  Former Shoney’s franchisee Ed Bay posted statements on the Internet (some on this very site) calling Shoney’s CEO Davoudpour a crook, a liar and a snake oil salesman, and stating that Shoney’s lacked proper management in training, HR and purchasing.

In the matter of Shoney ‘s North America, UC v. Edward Ray Bay , United States Bankruptcy Court for the Southern District of lndiana, Adv. Proc. No. 15-59014A,  U.S. bankruptcy court judge Basil H. Lorch III ruled that some of Bay’s statements are defamatory, and subject to an award of damages that will not be dischargeable through Mr. Bay’s bankruptcy.

Shoney’s was represented by Mark S. VanderBroek of the Atlanta law firm Nelson Mullins Riley & Scarborough LLP.

Ed Bay, who is bankrupt and can’t afford counsel, represented himself.

Shoney’s, a Forbes “Worst Franchise,” Prevails Over Bankrupt Former Franchisee

For more than 35 years, Ed Bay worked at various times as an employee of Shoney’s North America, for a Shoney’s franchisee, and as a Shoney’s franchisee.

On June 4, 2014, we published a post stating that Shoney’s was included in a Forbes list of their picks for the Worst Franchises, and we invited readers to share their opinions.

See:  SHONEY’S Rated a Worst Franchise by Forbes. Do You Agree?

Some of Ed Bay’s spirited comments to that post (under the name “Former Franchisee”) were among those deemed by Judge Basil H. Lorch III of the U.S. Bankruptcy Court of The Southern District of Indiana to be defamatory.

There is no doubt that Mr. Bay – who is bitter and angry at his treatment and termination by Shoney’s and a defiantly outspoken critic of Mr. Davoudpour – made himself an easy target for litigation.

What’s a little more puzzling is why Mr. Davoudpour & Shoney’s North America would spend the time and money to pummel an already bankrupt former franchisee.  That a disgruntled former franchisee called the CEO a “snake oil salesman” seems pretty insignificant compared to the fact that a major business publication like Forbes named Shoney’s to its “worst franchises” list.

Be that as it may, we have moved the “Former Franchisee” comments ruled to be defamatory to the sections below, and posted the relevant excerpts from  Judge Lorch’s  Judgment and Findings of Fact and Conclusions of Law .

Franchisee’s Characterization of CEO David Davoudpour as “a Crook and a Liar” Ruled Defamatory

June 4, 2014, former Shoney’s franchisee Ed Bay posted this comment:

I wouldn’t deal with David Davoudpour again if franchises were free. Shoney’s is a dead brand. He is a crook and a liar. Run from this guy as fast as you can!

Four days later, Ed Bay added this comment to our site:

Check Shoney’s website, click on their franchising page you will find a disclaimer the says Shoney’s won’t sell franchises in the 15 states that have franchise regulations. (until they figure out the particulars is those states). Those 15 states offer some degree of PROTECTION to franchisees, why would anyone but a “snake oil’ salesman not want to sell franchises everywhere.

I have to agree with the other comments… If you come into the Nashville restaurants you will find it obvious things are not going too well for Shoney’s.

According to the Judgement issued by Judge Lorch, Ed Bay could not prove his contentions that David Davoudpour is a “crook and a liar”:

At trial, Bay admitted that Davoudpour never personally lied to him and that he never interacted directly with Davoudpour aside from making a statement to him at a meeting among Davoudpour and other franchisees…

[Shoney’s Senior VP of Operations] Steve Sanders and Shoney’s franchisee Kaye Couch testified that Davoudpour is honest and truthful and that they have not known him to lie or be dishonest in his business dealings.

Judge Lorch ruled that Ed Bay’s statements that David Davoudpour was “a crook and a liar” and a “snake oil salesman” were defamatory. According to the Judgement:

Several of Bay’s “Former Franchisee” postings on UF.com contain objectively false statements.

First, the Court finds Bay’s statements referring to Davoudpour as a “crook and a liar” and “snake oil salesman” to be false.

Shoney’s presented evidence of Davoudpour’s extensive background and success in the restaurant business and Shoney’s witnesses testified that Davoudpour is honest, truthful, and is not known to lie or be dishonest in his business dealings. Aside from his own viewpoint and his allegations from the parties’ previous lawsuit, Bay did not produce any evidence suggesting that Davoudpour engaged in criminal behavior or told untruths to Bay or the public.

While Bay may contend that these comments are merely expressions of opinion and are protected by the First Amendment, his statements imply a former franchisee’s personal knowledge of facts which would lead to the conclusion that Davoudpour is a crook and a liar.

Franchisee’s Characterization of Shoney’s Management Ruled Defamatory

Judge Lorch ruled that Ed Bay’s characterization of Shoney’s management team (or lack thereof) was false and, therefore, defamatory.

The Judgement states:

…Bay made at least one other false and defamatory statement on UF.com when he wrote that as of March 2014, there was “no [Shoney’s] VP of Training, no VP of Human Resources, no VP or Director of Purchasing, all critical to franchise support.”

In fact, Patti Nash has been Shoney’s VP of Training and Human Resources since April 2013 and was identified  as such on Shoney’s website by late 2013. While it is technically true that Shoney’s did not employ an individual as VP or Director of Purchasing, this communication is also false and misleading when taken in context…

Within the context of the comment about why Shoney’s is a “worst franchise” and in light of the overall message of Bay’s posting activity, Bay communicates that Shoney’s lacked proper management and oversight of several key business functions that are “critical to franchise  support,”  including purchasing.   This  ignores the fact  that Shoney’s  had contracted  with SpenDifference to manage and operate  its supply  and purchasing   services.

Accordingly, the Court finds this entire statement about Shoney’s management to be false.

Shoney’s Attorneys Threaten Former Franchisee With Imprisonment

There are many lessons to be gleaned from the ongoing dispute between CEO David Davoudpour, Shoney’s North America LLC & former franchisee Ed Bay.

The first is that the legal system provides a lot of protection for verifiably accurate statements or statements of opinion, but if you make statements that sound factual you better be able to provide proof.

Ed Bay, in our opinion, raises many valid issues in his postings about Shoney’s, but he screwed up when he made statements of fact that he couldn’t prove, the worst probably being that David Davoudpour is a “crook.”  If you are going to state that someone breaks or has broken the law, you better have a conviction or two to back it up.

The conduct of CEO David Davoudpour also provides a powerful lesson:  Just because you have the legal power to crush a vocal detractor doesn’t mean that it’s in your best interest to do so.

Davoudpour has the right, and maybe even the obligation, to defend the Shoney’s brand and his professional reputation.

But does threatening to bury an already bankrupt middle-aged man, unrepresented by counsel, under more debt than he can ever pay off really enhance David Davoudpour’s reputation as an executive, as a businessperson, and as a human being?

Earlier this week, Shoney’s attorney wrote this threat to Ed Bay:

It has been more than two and a half weeks since the Court entered its Judgment and Order, and you have failed to comply with the Court’s order that you remove your defamatory statements from the unhappyfranchisee.com website and your YouTube channel.

So far you have not removed any of the statements that the Court found to be false and defamatory, and which continue to damage Shoney’s reputation and business.

This puts you in contempt of the Judgment and Order, and subjects you to sanctions which could include monetary fines, awards of attorneys’ fees, and, ultimately, imprisonment.

Attorney Mark S. VanderBroek and his client David Davoudpour know full well – or should know full well – that UnhappyFranchisee.Com does not remove content or comments, and has successfully fought off litigation intended to force us to do so.  This was made clear in our letter refusing to remove the same comments back in June, 2014, posted here:

SHONEY’S: Our Response to the David Davoudpour Take-Down Request

Attorney Mark S. VanderBroek and his client David Davoudpour know full well – or should know full well – that Ed Bay does not administrative access nor the ability to edit or delete comments on UnhappyFranchisee.com…  yet they not only allowed the court to issue an impossible demand upon Mr. Bay, they used that impossible demand as a way to threaten him with prison.

Will Destroying Ed Bay Improve David Davoudpour’s Reputation?

Does this exercise of power over a broke and unrepresented detractor make David Davoudpour look like a fine upstanding business leader?

Or does it make him look like a thin-skinned, pompous asshole and a vindictive bully?

Quiznos deployed the full weight of its legal firepower on franchisee detractor Bob Baber.

They were so successful in crushing Bob Baber both financially and spiritually that the father of two fatally shot himself in a Quiznos bathroom.

Is that the big win you are going for, David?

Because – and this is my opinion, not a verifiable fact, and I could be wrong – I don’t think ability to completely annihilate  a former franchisee is the what will keep Shoney’s off future Forbes “Worst Franchises” list.

Related Documents:

Shoney ‘s North America, UC v. Edward Ray Bay, Judgment and Findings of Fact and Conclusions of Law

Demand letter to Ed Bay from Shoney’s attorney dated June  8, 2016

 

ALSO READ:

SHONEY’S Rated a Worst Franchise by Forbes. Do You Agree?

SHONEY’S: Request to Remove Anonymous, Defamatory Posting on unhappyfranchisee.com

SHONEY’S: Our Response to the David Davoudpour Take-Down Request

SHONEY’S CEO David Davoudpour Invited to Defend Himself. Again.

FRANCHISE DISCUSSIONS by Company

ARE YOU FAMILIAR WITH THE SHONEY’S FRANCHISE, DAVID DAVOUDPOUR OR ED BAY? 

WHAT DO YOU THINK?

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Contact UnhappyFranchisee.com

TAGS: Shoney’s franchise, Shoney’s franchise opportunity, Shoney’s franchise lawsuit, David Davoudpour, David Davoudpour lawsuit, Edward Bay, Ed Bay, defamation, Shoney’s defamation, Davoudpour defamation, judge Basil H. Lorch III,  attorney Mark S. VanderBroek, Nelson Mullins Riley & Scarborough LLP

6 thoughts on “SHONEY’S Franchise Owner’s Statements Ruled Defamatory

  • August 8, 2016 at 6:44 pm
    Permalink

    I’m not going to be going into any restrooms to harm myself anytime soon.

    The narrative readers should remember is this: I was unrepresented in the adversary proceeding, leaving Shoney’s and Davoudpour the luxury of spinning any story they wanted before the court and having the court believe them. I have appealed the courts ruling.

    Shoney’s continues to close restaurants claiming they will reopen, when in fact they never reopen. One of the best examples is when the flagship restaurant in Madison Tennessee closed for remodel a press release in the Nashville Tennessean claimed the unit would reopen later in the fall of 2015, http://www.tennessean.com/story/money/2015/08/07/first-shoneys-tennessee-closing-major-remodel/31282201/. Months later, after the remodel was supposed to be completed, they came out with another press release claiming they had lost their lease.

    Today Shoney’s is half the size it was when Davoudpour bought the chain in 2007.

  • August 19, 2016 at 2:15 pm
    Permalink

    I have experienced personally that the legal system is tilted towards the franchiser and does not help or listen to the franchisees’ issues. Even SBA knowingly fatten franchiser’s pockets. Tax payers should know these details. Franchise system had good intentions till these bad players started to exploit the “good faith” of honest innocent citizens.

  • August 22, 2016 at 7:29 pm
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    Franchising today, in many circumstances. in nothing more than modern day racketeering, the IFA and the US Chamber of Commerce do everything within their considerable power to unwind what little regulation does exist, the Courts favor the guy with the deepest pockets (which is almost never the franchisee) and then all of this gets left out of the FDD.

  • October 8, 2016 at 7:11 pm
    Permalink

    On their bizbuysell.com ad Shoney’s claims they have 160 locations in 16 states, on their Website I
    only find approximately 130, how can a chain with only 130 units miscount?

  • December 5, 2018 at 7:14 am
    Permalink

    Sean, This is just an update, an FYI so to speak: Shoney’s North America, LLC and David Davoudpour sued me in an adversary proceeding for 2 MILLION dollars in the Bankruptcy Court…let that sink in. Shoney’s North America, LLC was awarded a $10,000 Judgement after spending what they said was “near six figures” on their litigation. Why would a Franchiser spend near $100,000.00 to sue a broke guy? Says a lot about the quality of their lawyers.

    Here is another one for you, yesterday (12/05/2018) during an exemption hearing in my home town, Shoney’s North America, LLC’s lawyer insisted the remaining $11.93 in the joint checking account my wife and I maintain should be paid the Shoney’s North America, LLC.

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