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AFA Enews 12 Vol. 1, No. 1 |
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October 6, 2003 |
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(Continued from page 11) To further its long term objective, Dunkin’ Donuts, Inc. first delivered a notice of termination to Mr. Fallah, claiming that Mr. Fallah interfered with Dunkin’ Donuts, Inc.’s goodwill by interrupting franchise meetings being conducted in South Florida. Several months later, Dunkin’ Donuts, Inc. sent a second supplemental notice of termination, this time claiming that Mr. Fallah unlawfully transferred his franchise agreements to other corporations that were owned by him. Dunkin’ Donuts, Inc. thereafter delivered a third notice of termination to Mr. Fallah several months thereafter, finally claiming that Mr. Fallah and the other defendants intentionally underreported gross sales, failed to maintain required records, and committed tax fraud in the operation of their businesses. Despite Dunkin’ Donuts, Inc.’s argument that evidence of motive was irrelevant for purposes of establishing a breach of contract claim, U.S. District Court Judge Harrington allowed Mr. Fallah to introduce evidence of this objective at trial as it tended to test the credibility of Dunkin’ Donuts, Inc.’s witnesses. Two weeks before the start of trial, after unsuccessfully attempting to strike Mr. Fallah’s claim for a jury trial by dropping all of its claims for monetary damages, Dunkin’ Donuts, Inc. dropped its allegations of improper transfer and intentional underreporting of gross sales. However, Dunkin’ Donuts, Inc. continued to claim that Mr. Fallah engaged in “massive tax fraud” in the operation of his businesses, by allegedly concealing over $1,000,000.00 in gross sales dating back as far as 1995. In particular, Dunkin’ Donuts, Inc. claimed inter alia, that Mr. Fallah had used corporate funds to pay-off his personal credit cards, had improperly classified gross income as shareholder loans to avoid paying taxes, and had unlawfully created a management company that served to divert money that would otherwise be subject to taxation. Ironically, neither Mr. Fallah nor any of the other defendants were ever investigated, charged, or convicted by any federal or state governmental agency, and there was never any publicity surrounding the alleged conduct of these defendants. In effect, Dunkin’ Donuts, Inc. stepped into the shoes of the I.R.S. and prosecuted Mr. Fallah for criminal tax evasion in order to demonstrate that Mr. Fallah breached the express terms of his franchise agreements. In addition to introducing evidence of Dunkin’ Donuts, Inc.’s improper objective, Mr. Fallah defended this action by demonstrating to the jury that the basis for Dunkin’ Donuts, Inc.’s contentions was flawed. In addition to not having obtained through discovery evidence regarding the amount of money contributed by a former shareholder (a fact necessary to prove the total amount of shareholder loans that could have been made by the individual defendants), Dunkin’ Donuts, Inc. relied on numerous charts and summaries prepared by a paralegal employed by its outside counsel which were shown to be false and otherwise misleading. Notably, these same charts and summaries formed the basis of the opinion and testimony of the accounting “expert” employed by Dunkin’ Donuts, Inc. After deliberating for less than two hours, the seven person jury returned a verdict in favor of Mr. Fallah and the other defendants and against Dunkin’ Donuts, Inc. The franchisees were represented by Robert Zarco, Esq. and Robert F. Salkowski, Esq. of Zarco, Einhorn & Salkowski, P.A., an AFA Affiliate Member. Contact Messrs. Zarco and Salkowski at 305-374-5418 or rzarco@zarcolaw.com and rsalkowski@zarcolaw.com . |
Robert Zarco vs Dunkin’ Donuts |
