WIRELESS TOYZ: Joe Barbat Boasts Victory in Franchise Lawsuit
(Unhappy Franchisee) Franchise company Wireless Toyz Inc. will not have to pay a Colorado franchisee the $200,000+ award he won in a 2010 lawsuit, according to a story in Crain’s Detroit business.
[Related reading: WIRELESS TOYZ Fraud Case: Franchise Company, Simtob Must Pay; Barbat Cleared,
WIRELESS TOYZ: Joe Barbat Claims Lazy Franchisees Have Selves to Blame,
WIRELESS TOYZ: Joe Barbat Fraud Trials]
In February, 2010, a jury verdict against Wireless Toyz and its finance director and VP of franchise development Richard Simtob, awarded franchisee David Abbo and Colorado Toyz Inc. $180,600 in damages against Wireless Toyz and $20,000 against Simtob on a single count of silent fraud. “Silent fraud” occurs when one person defrauds another by “failure to disclose material facts or creating a false impression, rather than through overtly false statements.”
Earlier this month, Oakland County Circuit Judge Shalina Kumar threw out the prior verdict and ruled in favor of Wireless Toyz. Kumar found that jurors in the trial weren’t instructed that Abbo must have relied on a false impression from Wireless Toyz to prove silent fraud. She also found that a disclaimer in the franchise agreement appears to contradict any alleged ‘extracontractual statements’ that may have been misleading.”
Other lawsuit claims, which included fraud, negligent misrepresentation and violations of franchise law either, were dismissed or resulted in no damages.
Wireless Toyz issued a celebratory press release that called the lawsuit “frivolous,” and seemingly attempted to position the judge’s ruling as an endorsement of the high ethical and moral fortitude of the embattled Wireless Toyz franchise organization. However, it seems that the dismissal was more a result of inadequate jury instruction in the original trial as well as disclaimers in the franchise agreement known as merger or integration clauses, rather than the integrity of the Wireless Toyz sales process.
Here is the Wireless Toyz franchise lawsuit press release in its entirety:
___________________________________________________________________
Wireless Toyz and CEO Joe Barbat Prevail in Franchise Law Suit
SOUTHFIELD, Mich.–(BUSINESS WIRE)–Wireless Toyz, Joe Barbat its founder and CEO, Richard Simtob and Jack Barbat have prevailed in a frivolous lawsuit filed by a disgruntled franchisee. After a four week trial last year before the Oakland County Circuit Court, the jury found no cause of action on eight of the nine counts alleged. Earlier this week, the honorable Judge Shalina D. Kumar granted judgment in favor of Wireless Toyz and its aforementioned executives, vindicating them from all charges. Judge Kumar held that plaintiffs’ claims were barred as a matter of law, and further ruled that:
“This ruling speaks to the true ethics and moral principles of how Wireless Toyz operates and was founded”
Defendants correctly argue that the evidence adduced at trial established that Plaintiffs were not defrauded or mislead regarding the extent of their franchise.
The Court finds that the evidence shows that Defendants did not conceal the existence, nature, uncertainties or financial effects of the franchise opportunity.
The Court finds that under Michigan law, the merger/integration clauses and signed acknowledgements are valid, binding and enforceable, and bar Plaintiffs’ claim, which is based upon alleged extra-contractual and oral misrepresentations and omissions, as a matter of law.
“This ruling speaks to the true ethics and moral principles of how Wireless Toyz operates and was founded,” states, Barbat. “My objective was to see justice prevail, although it was a long and costly road, I was confidant that in the end justice would indeed prevail,”
Brian Witus of the law firm, Cohen, Lerner, Rabinovitz & Witus, P.C., states, “The jury verdict and Judge Kumar’s ruling constitute a complete vindication of Wireless Toyz. Wireless Toyz, Joe Barbat, Richard Simtob and Jack Barbat have vigorously defended this lawsuit in order to protect the name, integrity and reputation of Wireless Toyz, its exceptional franchisees and its valued customers.”
In October of 2009, Barbat re-acquired the company he founded. Since then, the company has experienced positive momentum with increased same store sales in 2010. Barbat is focusing his time and effort on enhancing Wireless Toyz’s business model. “We have hired a new operations manager, an accountant and will be opening new stores in 2011 and 2012. I am glad to put this chapter behind us and am committed to focusing on building the business by creating jobs and strengthening our already proven concept in the wireless industry.” said Barbat. This only goes to show that with Barbat back at the helm, Wireless Toyz is looking forward to continued success in the future.
About Wireless Toyz
Wireless Toyz is the largest independently owned chain of cellular superstores. Each Wireless Toyz outlet brings together cellular phones, accessories and service plans from multiple carriers, including Sprint, T-Mobile, Verizon, AT&T, Metro PCS, Cricket, Boost, as well as satellite TV offerings from industry-leading DirecTV. This broad selection simplifies shopping for consumers by eliminating visits to multiple stores. The company is headquartered in Southfield, Michigan, opened in 1996, and began franchising in 2001. The company had only nine locations that year, and today, 11 years later, it operates 95 stores in 12 states.
Founder Joe Barbat took a hiatus from the business in December 2007, selling off some of his shares and retaining his position as chairman of the board. In October 2009, Barbat returned as major shareholder and put together a new team to enhance the success of Wireless Toyz.
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This press release makes it sound like the judge declared that Wireless Toyz is right and is an honest and ethical and aboveboard company. I don’t think that’s what his ruling said at all.
I think the franchisees’ lost because the one-sided legal contracts and CYA clauses simply overpowered justice in this case. It’s not that misrepresentations didn’t happen, just that it doesn’t matter if they happened because franchisees sign away their rights when they sign the franchise agreement.
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Why not check out the real story? Here is what the court says: Defendants correctly argue that the evidence adduced at trial established that Plaintiffs were not defrauded or mislead….The Court finds that the evidence shows that Defendants did not conceal the existence, nature, uncertainties or financial effects of the franchise.
Can someone clarify this in plain English? What I want to know is whether it came out that extra-contractual representations WERE made but it doesn’t matter because of the m&i clauses, or whether it was determined that no such claims were made?
The unprofessionally written press release just makes it more confusing. For example, the court didn’t call it frivolous and it doesn’t meet the legal definition of frivolous lawsuit but the press release implies the court deemed it frivolous despite the fact the franchisees initially won.
Cheesy propaganda disguised as news makes the company look suspect.
I am legal counsel for Wireless Toyz, Joe Barbat and Richard Simtob. I am writing this in response to your comments to a public relations firm that distributed a press release regarding a recent decision of Judge Shalina Kumar in the case of Abbo v Wireless Toyz, et al. To answer your question, Judge Kumar specifically ruled that “the evidence adduced at trial established that Plaintiffs were not defrauded or mislead regarding the extent of hits, chargebacks and other costs” and that “the evidence shows that Defendants did not conceal the existence, nature, uncertainties or financial effects of hits and chargebacks.” Judge Kumar relied upon the express disclosures, descriptions and disclaimers in the Uniform Franchise Offering Circular, and Plaintiffs’ express representations and acknowledgements. Plaintiffs’ allegations and legal claims directly contradicted all of the contemporaneous written documents between the parties. Judge Kumar also ruled that Plaintiffs’ Silent Fraud claims were entirely barred as a matter of law based upon both the merger/integration clauses, as well as Plaintiffs’ other signed representations and acknowledgements. Judge Kumar’s ruling makes it clear that Plaintiffs’ Silent Fraud claims should never have been presented to the jury in the first instance, or any other claims based upon supposed extra-contractual statements or omissions. Furthermore, there were no findings, and no evidence as noted by Judge Kumar, that Wireless Toyz, Joe Barbat or Richard Simtob made any misrepresentations or omissions whatsoever. Accordingly, your website should remove the prior posting and advise your readers that the posting has been withdrawn as it was not and is not accurate. This is not “cheesy propaganda” as you suggest, but rather findings of fact and conclusions of law rendered by an Oakland County Circuit Court judge. Thank you for your anticipated cooperation.
Mr. Witus:
First, congratulations on your win in court. Second, thanks for joining the conversation at UnhappyFranchisee.com. We welcome all opinions, corrections, and clarifications so that our readers can see both sides of an issue and draw their own conclusions. In doing so, we do not delete posts or comments. Not to worry… I think the fact that the judge found no legal basis for fraud claims against your client Wireless Toyz and its executives is clearly established here. You and your clients are welcome to address any and all statements, on an ongoing basis, by posting comments or submitting a statement to unhappyfranchisee[at]gmail.com.
While some chest-thumping may feel justified to your client at the end of a long and costly legal battle, the initial press release and (I believe) the subsequent revision published by a PR firm on behalf of your client have some disturbing elements. The first is the mischaracterization (in my opinion) of the lawsuit as “frivolous.” According to USLegal.com, “Frivolous lawsuits are those filed by a party or attorney who is aware they are without merit, because of a lack of supporting legal argument or factual basis for the claims.” According to attorney Damon Davis on Killian Law Blog, “A frivolous lawsuit is a lawsuit which lacks both legal and evidentiary support…. It is a claim that does not just have weak evidence, but lacks any evidence…”
As a jury initially awarded the plaintiffs a sizeable award, this case does not seem to meet the legal definition of a frivolous lawsuit. Do you disagree?
Second, the victory-dance tone of the press release is, in our opinion, unseemly. Can a franchisor really “win” such a dispute? As a commenter pointed out, such disputes also indicate franchisor failure either in franchisee selection, sales representations, support or relations. Perhaps the next press release can highlight what Wireless Toyz is doing to prevent future misunderstandings with franchisees rather than dancing on the financial graves of those who once believed in them and their franchise concept.
Again, congratulations to you and your client on your legal win, and thanks for contributing to the discussion.
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