The Federal Trade Commission (FTC) recently published a statement that it believes “contractual requirements and limitations that impede Bureau investigations are contrary to public policy and therefore unenforceable.” Franchisor attorney & arbitrator David J. Kaufmann went as far as issuing a TRO (Temporary Restraining Order) to prevent military veteran and franchisee Jim Lager from participating in public forum on franchise legislation and franchise practices conducted by the FTC & NASAA (state franchise regulators). Attorneys Vince Slusher & Kristen L. Perry of FAEGRE DRINKER BIDDLE & REATH LLP are attempting to use the Defendant’s participation in the FTC forum and his complaint to the FTC as grounds to deny him bankruptcy protection from any damages the franchisor-biased (IMHO) Kaufmann will likely decree.
I’m seeking clarification from the FTC. Does the stated protection from confidentiality and non-disparagement clauses published by the FTC’s Bureau of Competition also apply to franchisees sharing their experiences with the FTC’s Bureau of Consumer Protection? Are franchisees protected from “contractual requirements and limitations” that seem “contrary to public policy and therefore unenforceable” when they file complaints or answer the FTC’s Requests for Information? by Sean Kelly
(UnhappyFranchisee.Com) Earlier this year, the FTC announced it was seeking comments from the public on how franchisors exert control over their franchisees ( FTC Seeks Public Comment on Franchisors Exerting Control Over Franchisees and Workers ).
The sad irony is: The franchisees most knowledgeable about franchisor control are afraid to share their experiences due to… you guessed it… franchisor control & dominance.
The FTC Franchise Rule was intended to give prospective franchisees access to the most critical element of due diligence: the experiences and opinions or current and past franchise owners of the brand they are considering.
Franchisors are required to disclose contact information for current and recent franchisees in their disclosure documents for this very reason.
But so far, the FTC has allowed franchisor attorneys, lobbyists and arbitrators to do end-runs around this requirement through confidentiality, non-disclosure, & non-disparagement clauses & by burying disputes in private arbitration.
Recently, the FTC’s Bureau of Competition stated that it believes “contractual requirements and limitations that impede Bureau investigations are contrary to public policy and therefore unenforceable.”
(See the FTC’s Contracts That Impede Bureau of Competition Investigations.)
This is excellent news. However, it is unclear as to whether the FTC affords the same protection for franchisees filing complaints or answering their own Requests for Information.
If so, could franchisees (including military veterans like Jim Lager) being silenced – and retaliated against – for speaking out be granted protection from this FTC exemption?
Thuggish Franchisors & Their Hired Bullies Have Chilled Meaningful Franchise Discussion
Disclaimer: The statements here are my personal opinions – and mine alone. The decision of what and when to publish are also mine alone… and not motivated by a desire to seem my work appear as EXHIBIT XXXXIIIII on PACER. It is my educated opinion that franchisors who take extreme measures to silence former franchisees from sharing their experiences and honest opinions can be accurately described as thuggish, as are the highly paid and impeccably groomed attorneys they hire as professional bullies. I may be wrong. Perceptions vary. In this particular instance, my opinion is that arbitrator David J. Kaufmann is a supremely arrogant person whose bias against franchisees in favor of the large franchisors is evident not only in his rulings, but in his published opinion pieces (Read: AAA Franchise Arbitrator Kaufmann Flaunts Pro-Franchisor Bias). I openly invite all those I write about to provide corrections, challenges and rebuttals to show me the flaws in my logic, information or interpretations – outside of court.
Franchisor attorney & arbitrator David J. Kaufmann stated that Lager’s sharing his experience with the dark side of franchising would be a violation of a non-disparagement clause – even if Lager didn’t name PIRTEK, his most recent franchisor.
The clearly biased (IMHO – see disclaimer) arbitration proceeding forced franchisee Lager to seek protection from a Texas bankruptcy court.
PIRTEK USA’s expensive legal minions filed suit to try to keep any arbitration awards decreed by “King” David Kaufmann to be ruled non-dischargeable in their former star franchisee’s bankruptcy.
Jim Lager’s crime? He refused to go away quietly.
He refused to be gagged & silenced. He challenged the franchisor and franchisor attorney absolute dominance & power to quash any leaking of their alleged misdeeds.
(Normally, King David Kaufmann would be able to make his irrefutable pronouncements under cover of secrecy – no matter how ludicrous)
In their bankruptcy court filings, ruled public by the judge and available on PACER, attorneys Vince Slusher & Kristen L. Perry of FAEGRE DRINKER BIDDLE & REATH LLP are attempting to deny the successful franchisee they refused to renew bankruptcy protection because he shared his experiences with the federal agency charged with overseeing franchising.
Their Motion for Summary Judgement states:
…[Lager] also admits that he understood that there was a TRO which prohibited from sending his Complaint to the FTC and that he knowingly violated it, also sending similar complaints to other agencies with the hope that they would take adverse action against PIRTEK. As a result, PIRTEK is entitled to summary judgment on Count III of its Complaint…
In this irony-rich episode of Welcome to Franchiseville, PIRTEK USA’s attorneys submitted 1000+ pages to the Court which included the very documents & complaints the Australian-based brand was supposedly trying to keep out of the public eye.
They submitted these documents, including Lager’s online FTC complaint, knowing that they would now be posted publicly.
Here are some excerpts downloaded from the public PACER database:
If Lager is Army Veteran Lager is Denied Bankruptcy Protection, Will His Gag Order Be Ruled Unenforceable?
I don’t know if the FTC statement that “contractual requirements and limitations that impede Bureau investigations are contrary to public policy and therefore unenforceable” has relevance to Lager’s situation or to prospective franchisees’ right to know, as intended by the FTC Franchise Rule.
I’m a non-lawyer and don’t live in the overcomplicated world of tangled webs of deceit that ensure that financial-might-makes-right in many, if not most, instances.
But I can say that here, in the court of Public Opinion & Information, it’s clear that ANY “contractual requirements and limitations that impede” prospective franchise investors’ right to hear the experiences and candid opinions of current & former franchisees should be considered “contrary to public policy and therefore unenforceable.”
INVITATION: We believe that open, honest & respectful public discussion & debate is a requirement for a functioning of democracy, and are proud to live in a country that protects free speech. Here on UnhappyFranchisee.Com. Unlike those who prefer closed courtrooms and private proceedings to the virtual town square, it costs nothing to provide corrections, clarifications, rebuttals or contrary points of view. We invite our litigious friends to come out from behind their lawyers and speak their Truth directly – and to consider allowing their franchisees and former franchisees the same basic right.
See all PIRTEK USA Posts.
See posts in the PIRTEK USA v. Lager Franchise Perils Series
The words and opinions expressed here are solely the opinions of Sean Kelly, who invites corrections, rebuttals and respectful debate. Sean Kelly is an independent investigative journalist with 35 years of franchise industry experience. Since founding UnhappyFranchisee.Com in 2006, his reporting has exposed & shut down several predatory franchise & investment schemes. Sean Kelly is a franchise watchdog who prompted and aided the FBI investigation that shut down the 165-victim multi-million-dollar NY Bagel franchise scam and landed perpetrators Dennis Mason & Joseph Smith in federal prison. Sean was featured in the ABC Four Corners expose of 7-Eleven wage theft in Australia and has served as an advisor to Dateline NBC. He has withstood bullying, intimidation & frivolous lawsuits as high as $35M and never lost. His crack editorial staff and fact checkers include Chick, Gem, Red, Pru & Joanie the Rescue Chicken.
Contact the author at UnhappyFranchisee[at]Gmail[dot]com
TAGS: PIRTEK, PIRTEK USA franchise, FTC, Federal Trade Commission, PIRTEK Australia, Kim Gubera, Glenn Duncan, Peter Duncan, Michael Joblove, Venable, Faegre Drinker, David Kauffman, Kauffman Gildin & Robbins, Jim Lager, Sean Kelly, Franchise litigation, franchise arbitration, Franchise NDAs, Franchise gag orders