Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Former Dunkin’ Donuts franchisee allegedly transferred assets to avoid franchisor’s judgment, (Jan 6, 2015)

By Linda O’Brien, J.D., LL.M.

A former franchisee of Dunkin’ Donuts allegedly engaged in a conspiracy with his relatives to wrongfully transfer more than $1 million of his assets for the purpose of avoiding a judgment entered in favor of the franchisor in a franchise termination action, according to a complaint filed in the federal district court in Newark, New Jersey (Dunkin Donuts Franchising LLC v. Patel, January 5, 2015).

Dunkin’ Donuts Franchising LLC is in the business of franchising Dunkin’ Donut shops throughout the United States. Baskin-Robbins Franchising LLC is in the business of franchising Baskin-Robbins ice cream stores throughout the United States.

The complaint states that in November 2010 and August 2011, Kamlesh Patel, along with two business partners, executed franchise agreements to operate two Dunkin’ Donuts and Baskin-Robbins stores in Missouri. Patel signed the agreements on behalf of his company, Sai Food & Hospitality, LLC (SFH), and personally guaranteed SFH’s obligations under the agreements. Subsequently, Dunkin’ Donuts terminated the franchise agreements with SFH after learning that Patel and other members of the company had engaged in fraudulent conduct in obtaining the franchise agreements. Dunkin’ Donuts also filed suit in the federal district court in Missouri to enjoin SFH’s operation of the franchises and to recover damages under the agreements.

In May 2014, following a bench trial, the court entered a declaratory judgment in favor of Dunkin’ Donuts and awarded the franchisor over $757,000 in attorneys’ fees and costs. The judgment against Patel and his business partners made Patel jointly and severally liable for the full amount of the award. Since the entry of the judgment, Dunkin’ Donuts has engaged in discovery to obtain information regarding Patel’s assets. However, Patel’s responses to the discovery have been vague, inaccurate, and incomplete, the complaint alleges.

Due to Patel’s refusal to comply with discovery requests, in November 2014, Dunkin’ Donuts issued subpoenas to Patel’s financial institutions. The subpoenas allegedly showed that more than $1 million has been transferred from joint accounts Patel held with his wife and father-in-law following the trial in Missouri. Also following the trial, Patel allegedly transferred ownership of real property in New Jersey to his wife, father-in-law, and mother-in-law. The transfers were fraudulently made for the sole purpose of hindering and delaying the collection efforts of Dunkin’ Donuts, according to the complaint.

Dunkin’ Donuts asserts claims for avoidance and recovery of fraudulent transfers, civil conspiracy, and breach of contract. The action seeks injunctive relief, damages, post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 2:15-cv-00010-SRC-CLW.

Attorneys: Joan M. Schwab and Robert B. Nussbaum (Saiber LLC) and David E. Worthen and Julia C. Colarusso (Gray, Plant, Mooty, Mooty & Bennett, P.A.) for Dunkin’ Donuts Franchising LLC and Baskin-Robbins Franchising LLC.

Companies: Dunkin’ Donuts Franchising LLC; Baskin-Robbins Franchising LLC

News: FranchisingDistribution NewJerseyNews