LEGACY ACADEMY Committed Franchise Fraud, Court Rules

Legacy Academy and franchisors Frank Turner and Melissa Turner committed fraud and criminal theft by deception against its franchisee, according to Superior Court of Gwinnett County. The Georgia Court of Appeals has affirmed the precedent-setting decision. Orininlly published August 19, 2014, updated 10/1/15.  See link to important update below.

(UnhappyFranchisee.Com)  Legacy Academy franchisee Mamilove, LLC, et al. and law firm Ichter Thomas have scored a big victory, scoring both a significant financial award and setting new Georgia case law in the process.

The Georgia Court of Appeals affirmed the judgment of the Superior Court of Gwinnett County finding Legacy Academy, Inc. (“Legacy”) and its owners, Franklin Lee Turner and Melissa Veal Turner (the “Turners”), committed fraud and criminal theft by deception with respect to a former Legacy franchisee.

On July 16, 2014, in Legacy Academy, Inc., et al., v. Mamilove, LLC, et al. (Case No. A14A0718), the Georgia Court of Appeals affirmed the judgment of the Superior Court of Gwinnett County finding Legacy Academy, Inc. (“Legacy”) and its owners, Franklin Lee Turner and Melissa Veal Turner (the “Turners”), committed fraud and criminal theft by deception with respect to a former Legacy franchisee.

Jury Finds Legacy Academy Guilty of Fraud;  Franchisees Awarded $1.1M

Legacy Academy LogoFollowing a week-long trial last April, a jury concluded Legacy and the Turners fraudulently induced Michele and Lorraine Reymond (the “Reymonds”) to enter into a franchise relationship with Legacy by falsely representing a pro forma financial statement was based on the historic performance of then-existing franchisees.

Legacy and the Turners appealed the trial court’s judgment on the jury’s verdict for a host of reasons, including purported errors when the trial court denied Legacy and Turners’ motions for summary judgment, directed verdict and a new trial.

In a full-Court decision, however, the Court of Appeals rejected all these arguments.

As a result, the Reymonds’ franchise agreement with Legacy has been rescinded and the Legacy and the Turners are jointly and severally obligated to pay the Reymonds monetary damages in the principal amount of $1,155,000.

UPDATE!!!  The Georgia Supreme Court reversed the decision in Michelle & Lorrane Reymond’s (Mamilove, Inc.) lawsuit and ruled in Legacy Academy’s favor.  That nullified the damages award.  Read the Judge’s decision and what the franchisee’s did wrong here: LEGACY ACADEMY, INC. v. Mamilove LLC Franchisee Award Reversed (Court Ruling)

Legacy Academy has had contentious and turbulent relationships with its franchisees, some of which have been documented on UnhappyFranchisee.Com:

LEGACY ACADEMY Franchise Complaints

LEGACY ACADEMY Ichter Thomas Wins Suit for Legacy Academy Franchise Owners

ICHTER THOMAS Another Win Against Legacy Academy Franchise

LEGACY ACADEMY Franchise Marketing Representations

We have also had our own issues with Legacy Academy and its attorneys:

LEGACY ACADEMY Issues Cease & Desist Letter to UnhappyFranchisee.Com

LEGACY ACADEMY Are Frank & Melissa Turner “Disreputable”?

LEGACY ACADEMY UnhappyFranchisee.Com Complies With Legal Request/Threat

LEGACY ACADEMY Invited to Respond to Franchise Complaints

Ichter Thomas Makes Franchise Law in Georgia

Now, for the first time, the Georgia Court of Appeals has held that franchisees can state a claim against franchisors that breach their disclosure obligations under the Franchise Rule pursuant to O.C.G.A. § 51-1-6.  Furthermore, the appeal was decided by a seven-judge Court, with a four-judge majority concurring in the judgment.  As a result, the Court’s decision is binding precedent.  See Ga. Ct. App. R. 33(a).

Read more at ICHTER THOMAS: Franchisees Can Now Use FTC Franchise Rule to Sue in Georgia.

According to a release by Ichter Thomas:

Of particular note, however, the Georgia Court of Appeals ruled, for the first time, that franchisees can assert claims for relief under O.C.G.A. § 51-1-6 for violations of duties arising under the Federal Trade Commission’s (“FTC”) franchise rule, 16 C.F.R. Parts 436 and 437 (the “Franchise Rule”).  The FTC promulgated the Franchise Rule pursuant to its authority under the FTC Act, 15 U.S.C. §§ 41-58, for the stated purpose of “prevent[ing] deceptive and unfair practices in the sale of franchises and business opportunities….”  FTC, Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunities, 72 Fed. Reg. 15,445 (Mar. 30, 2007).  As a result, the Franchise Rule imposes substantial, pre-sale disclosure requirements on franchisors concerning a variety of issues, including their business experience; litigation history; fees; supply chain restrictions; assistance and support to franchisees; renewal, termination, transfer and dispute resolution procedures; and financial performance representations.

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Attorney Cary Ichter[Left, attorney Cary Ichter of Ichter Thomas]

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Franchisees, however, cannot sue to enforce the Franchise Rule.  See Holloway v. Bristol-Myers Corp., 485 F.2d 986, 987 (D.C. Cir. 1973) (“[P]rivate actions to vindicate rights asserted under the Federal Trade Commission Act may not be maintained”).  In addition, several courts have concluded that, even if a franchisor violated the Franchise Rule, the franchisee is still stuck with the franchise agreement.  See, e.g., Vino 100, LLC v. Smoke on the Water, LLC, 864 F. Supp. 2d 269, 281 (E.D. Pa. 2012) (“[A] franchisee may not use a franchisor’s alleged noncompliance with Rule 436 to invalidate a franchise contract”); Holiday Hospitality Franchising v. 174 W. Street Corp., 2006 WL 2466819, at *6 (N.D. Ga. Aug. 22, 2006) (“[T]he Defendants have not cited—and the Court cannot find—any case in which a court has voided an otherwise valid and enforceable franchise agreement because of regulatory violations”).

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Furthermore, while the FTC can enforce violations of the Franchise Rule, it often does not.  See GAO-01-776, FTC’s Enforcement of the Franchise Rule 3 (July 2001) (“FTC staff told us that limited resources and other law enforcement priorities prevent[] FTC from pursuing every meritorious complaint and investigation involving franchises and business opportunities”).  All of this is a particular problem for franchisees in states that, like Georgia, do not have any statutes, i.e., disclosure, registration or relationship laws, of general application.  Cf. Georgia Motor Vehicle Franchise Practices Act, O.C.G.A. § 10-1-620 et seq.

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O.C.G.A. § 51-1-6, however, provides that “[w]hen the law requires a person to perform an act for the benefit of another or to refrain from doing an act which may injure another, although no cause of action is given in express terms, the injured party may recover for the breach of such legal duty if he suffers damage thereby.”  Courts applying Georgia law have previously held this statute allows private litigants to sue for a breach of legal duties arising under federal statutes (and the regulations promulgated pursuant thereto) that themselves do not confer the right to sue.  See, e.g.,  Pulte Home Corp. v. Simerly, 322 Ga. App. 699, 746 S.E.2d 173, 179-80 (2013) (Clean Water Act); Cardin v. Telfair Acres of Lowndes County, 195 Ga. App. 449, 450, 393 S.E.2d 731 (1990) (OSHA).

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Now, for the first time, the Georgia Court of Appeals has held that franchisees can state a claim against franchisors that breach their disclosure obligations under the Franchise Rule pursuant to O.C.G.A. § 51-1-6.  Furthermore, the appeal was decided by a seven-judge Court, with a four-judge majority concurring in the judgment.  As a result, the Court’s decision is binding precedent.  See Ga. Ct. App. R. 33(a).

For more information on Georgia-based Ichter Thomas, see the profiles for attorneys Cary Ichter and Dan Davis in our Franchise Attorneys Directory.

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TAGS: franchise, franchise opportunity, franchise complaints, franchise Lawsuits, franchise law, Georgia franchise law, Georgia franchise attorneys, attorney Cary Ichter, Ichter Thomas, Legacy Academy, Frank Turner, Melissa Turner, unhappy franchisee

5 thoughts on “LEGACY ACADEMY Committed Franchise Fraud, Court Rules

  • August 19, 2014 at 4:21 pm
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    @Viewers, I wonder if Pete Frese and Dennis Jarrett are worried…Maybe even Afshin Cangarlu and Foad Rekebi have some items of concern as well.

    Similar Issues between Stratus Franchising, LLC. and Legacy Academy:

    a) Fraudulent Inducement
    b) False Pro-Forma
    c) False Validators
    d) FDD issues

    In fact, are we sure Pete Frese and Dennis Jarrett don’t own Legacy Academy?

  • September 8, 2014 at 8:47 am
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    Reasoned source- they learn from each other, there is a franchiser association. With your logic, these guys perhaps own Discovery Point franchising too.

    Are all these Legacy Academy buildings sold without SBA guarantees? It is suspicious that all franchise information was hidden from SBA. Loan Census and other SBA franchise listings do not show Legacy Academy as SBA guaranteed franchise or any loans issued ever. Perhaps they used a different pseudo name. Any idea what is going on? There may be more fraud with this franchise. Moreover, discovery point bought the equipment package after the appraisal was done on the equipment. Perhaps the same happened here too as they were friends and have the same business model. Cary Ichter, please note this. One can back-out the manufacturing dates from the serial numbers of computers, appliances and you will be perhaps surprised to find that those were manufactured after the appraisal was done.

  • September 23, 2014 at 8:03 am
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    Are these Legacy center’s SBA guaranteed? Like Discovery Point, Legacy did not mark them as franchised loans so that SBA cannot trace these failures back to the franchise. They both played tricks with the system with the help from banks and should be brought to justice. Millions of tax payers Dollars have been used on their lavish life styles. They are so selfish that they do not hesitate to harm families with young children again and again.

  • August 26, 2015 at 10:34 am
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    Did the supreme court reversed the RICO claims? These childcare franchises are rogue and have money to pay lawyers to get them out of everything. Avoid these franchises, they will destroy you financially and your children will blame you for knowingly dragging them in these.

  • May 19, 2016 at 1:57 pm
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    Reasoned source- they learn from each other, there is a franchiser association. With your logic, these guys perhaps own Discovery Point franchising too.

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