Below is a public document where Leo Goldberger and Curt Swanson, owners of Dryer Vent Franchise are being sued by several franchisees for fraud and breaking their own franchise agreements:

IN THE CHANCERY COURT FOR DAVIDSON COUNTY, TENNESSEE

AT NASHVILLE

WILL FARRIS, )

Plaintiff, )

)

) No. 22-1311-I

)

DRYER VENT SQUAD )

FRANCHSING, LLC, LEIBY )

GOLDBERGER, and CURT )

SWANSON, )

)

Defendants. )

______________________________________________________________________

MEMORANDUM IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND TEMPORRY INJUNCTION

______________________________________________________________________

Comes the Plaintiff, Will Farris, by and through counsel, and hereby submits the following Memorandum in Support of Application for Temporary Restraining Order and Temporary Injunction.

INTRODUCTION

In the Summer of 2022, a lawsuit filed by one of the owners of Defendant Dyer Vent Squad Franchising, LLC against the other two owners made public that Defendants had concealed from prospective franchisees various fraud and franchise-law related lawsuits and administrative actions that DVS was required by federal law to disclose in its Franchise Disclosure Documents (“FDD”). The concealed items would have let prospective franchisees, such as Mr. Farris, know that Defendants Leiby Goldberger and Curt Swanson had a history of being sued by franchisees for fraud and violation of other franchise laws, had been sanctioned by two state attorney generals for violation of franchise laws, including the concealment of material facts in other FDD’s, and that Mr. Goldberger had criminal convictions for federal felony credit card fraud and conspiracy to commit credit card fraud.

Defendants’ reaction to these revelations has been to refer to them as “lies” and “slander,” without ever offering any specific factual retort or explanation, to invent a “conspiracy” between those franchisees who dared to investigate the revelations (and thus realize that they were true), and to engage in a smear campaign against anyone who dared to let other franchisees know that Defendants had committed fraud.

Mr. Farris is one of the franchisees that was not fooled by Mr. Goldberger’s bluster and gaslighting. Unsurprisingly, he has determined that he does not want his franchise business ultimately controlled by persons with Mr. Goldberger and Mr. Swanson’s history, which is a decision that was removed from him during the franchise purchase process by Defendants’ fraud.

Mr. Goldberger has emphatically announced, however, that he will not agree to rescind any franchise agreement. Further, DVS has made it impossible for Mr. Farris to operate his business either within or outside of the DVS system by terminating the parties’ Franchise Agreement without cause, blocking Mr. Farris’ access to his operating software, and taking over his business emails and telephone number.

As set forth below, there is little doubt that Mr. Farris will ultimately prevail on his claims. Mr. Farris has suffered and will continue to suffer immediate and irreparable injury unless the Court grants Mr. Farris the injunctive relief he is requesting. Although Plaintiff contends that there was no contract due to fraud or alternatively that the Franchise Agreement has been rescinded by DVS’ wrongful termination of the Agreement, Plaintiff requests that the Court exercise its equitable powers to grant injunctive relief to allow Plaintiff to maintain the business into which he has invested time and money while he transitions out of the DVS franchise system. This injunctive relief will cause little, if any harm to DVS, and is critical in refusing to allow Defendants to profit from their egregious dishonesty and other misconduct.

FACTS
FRAUDULENT MISREPRESENTATION AND CONCEALMENT OF MATERIAL FACTS IN DVS’ FRANCHISE DISCLOSURE DOCUMENT

DVS is in the business of selling and supporting independently owned franchised businesses that operate under the DVS brand, trademarks, and allegedly proprietary system of operations. A franchisee of DVS provides dryer vent cleaning services in a territory that is designated by DVS.
In August 2021, Mr. Farris began discussing with representatives of Dryer Vent Squad Franchising, LLC (“DVS”) the potential purchase of a DVS franchise. Farris eventually purchased a DVS franchise on or about September 10, 2021, and a copy of the Franchise Agreement between Mr. Farris and DVS is attached as Exhibit 1. In connection with the purchase of the franchise, DVS provided him with the Franchise Disclosure Document (“FDD”) attached as Exhibit 2 on or about August 20, 2021. The FDD has an “issuance date” of January 4, 2021. (Farris Dec., ¶ 1).
Farris understood that the disclosures in the FDD were required by law and were meant to protect prospective franchisees. The disclosures in the FDD were important to Mr. Farris in his decision of whether to purchase a franchise. Mr. Farris read the FDD carefully to look for red flags that might impact his decision. Mr. Farris noted that under “Item 3 LITIGATION,” DVS stated: “No litigation is required to be disclosed in this Item.” (Farris Dec., ¶ 2).
In the Summer of 2022, Mr. Farris became aware of the following things of which he had no previous knowledge:

(a) The New York Assurance and Discontinuance. In September 2016 in the matter styled In the Matter of Investigation by Eric T. Schneiderman, Attorney General of the State of New York, of Patch Boys Franchising, LLC. and Leiby Goldberer, a/k/a Leo Goldberger, the Office of the Attorney General of the State of New York and Patch Boys Franchising, LLC and Leiby Goldberger entered into an Assurance and Discontinuance Pursuant to Executive Law § 63(12) (the “New York Assurance and Discontinuance”). A copy of the New York Assurance and Discontinuance is attached as Exhibit 3. The FDD stated that Mr. Goldberger had been the owner of Patch Boys Franchising from 2015 to 2020. The New York Assurance and Discontinuance states as follows:

With regard to issue of whether Mr. Goldberger was convicted of a felony, the Goldberger Affidavit states that, “I was convicted of a felony as follows: United States of America v. Chaim Ruttner and Leiby Goldberger (United States District Court for the Southern District, 1:98-mj-02630-UA-l). In 1999, Mr. Goldberger pleaded guilty to one count of conspiracy to commit credit card fraud, in violation of 18 U.S.C § 1029(b)(2), and two substantive counts of credit card fraud in violation of 18 U.S.C 1029(a)(2) and (a)(5). He was sentenced to six months in jail.” Although this was required disclosure, this information was not disclosed in the 2015 Franchise Disclosure Document or the proposed 2016 Franchise Disclosure Document.

(See Exhibit 3, p. 3)(emphasis added).

Patch Boys and Mr. Goldberger agreed to pay a $10,000 fine, offer rescission to its existing franchisees in New York, comply with the provisions of the New York Sales Act, and not to sell franchises in New York within or from New York without a current registration or exemption.

Significantly, after the New York Assurance and Discontinuance, Patch Boys (while still owned by Mr. Goldberger) disclosed the New York Assurance and Discontinuance in its 2018 and 2019 FDDs (See Exhibits 4 and 5);

(b) The Borgen Case. Both Mr. Goldberger and Mr. Swanson were defendants Borgen v. Patch Boys Franchising, LLC, Leiby Goldberger, Curtis Swanson, and William Weber, No. 0:20-cv-02364-MJD-JFD, United States District Court for the District of Minnesota (the “Borgen Case”). As Mr. Farris understands it, the complaint in the Borgen Case, which is attached as Exhibit 6, alleges that Mr. Goldberger made numerous misrepresentations, both inside and outside the FDD, in connection with the sale of a franchise on behalf of Patch Boys. The plaintiff in the Borgen case alleged causes of action involving fraud, unfair and deceptive trade practices, and violations of franchise law. Mr. Farris has been informed that Borgen case was filed on November 20, 2020 and was closed on January 12, 2022. (See Docket Sheet attached as Exhibit 7);

(c) The Anderson Case Both Mr. Goldberger and Mr. Swanson were defendants in Anderson v. Patch Boys Franchising, LLC, Leiby Goldberger, Curtis Swanson, and William Weber, No. 0:19-cv-03119-JRT-DTS, United States District Court for the District of Minnesota (the “Anderson Case”). As Mr. Farris understands it, the Complaint in the Anderson Case, which is attached as Exhibit 8, also alleges that Mr. Goldberger made numerous fraudulent representations to a prospective franchisee on behalf of Patch Boys. The plaintiff in the Anderson case asserted the same causes of action that had been asserted in the Borgen case, involving fraud, unfair and deceptive trade practices, and violations of franchise law; Mr. Farris has been informed that the Anderson Case was filed on December 19, 2019 and was closed on December 20, 2020. (See Docket Sheet attached as Exhibit 9). As the docket sheet demonstrates, the Anderson case was dismissed by an agreed order of dismissal, when no motion for summary judgment or other dispositive motion was pending. Although Plaintiff has not yet been able to obtain the settlement agreement in the Anderson case, there appears to be little doubt that the case was settled;

(d) The Reliable Case. Mr. Goldberger was a defendant in Reliable Check Cashing Corp. v. Banco Popular, Supreme Interior Management, Inc. and Leiby Goldberger, No 11726/09, Supreme Court, King’s County, New York (the “Reliable Case”). In the trial court’s opinion resolving various dispositive motions in the Reliable case, which is attached as Exhibit 10, the court begins its discussion of the case by stating that “[i]t is undisputed that Banco Popular was defrauded by Goldberger and Supreme Interior Management [Mr. Goldberger’s company].” As the opinion points out, Mr. Goldberger was sued for cashing $83,000 in bad checks. Significantly, the opinion, which is dated November 7, 2012, notes that “Supreme Interior Management and Goldberger have never appeared and are in default.”[1]

(e) The Minnesota Consent Order. On July 30, 2021 in the matter styled In the Matter of Patch Boys Franchising, LLC, a Delaware Limited Liability Company, State of Minnesota Department of Commerce File No. 54957, Patch Boys Franchising, LLC and Leiby (Leo) Goldberger as principal entered into a Consent Order (the “Minnesota Consent Order”) with the Commissioner of the Minnesota Department of Commerce whereby Patch Boys and Goldberger acknowledged that they violated the Minnesota Franchise Act, MN Stat. 80C.01 et seq, by selling unregistered, non-exempt franchises in Minnesota, agreed to pay a civil penalty in the amount of $7,500, agreed to refrain from violating any laws, rule or orders in Minnesota, including the Minnesota Franchise Act, and would not sell franchises in Minnesota until the Patch Boys’ FDD was registered. The Minnesota Consent Order is attached as Exhibit 11.

(Farris Dec., ¶ 3).

If any of the items discussed in the previous paragraph had been disclosed in the FDD, it would have substantially affected Mr. Farris’ decision to purchase a DVS franchise. For example, if the New York Assurance and Discontinuance had been disclosed, Mr. Farris would have learned that: (a) Mr. Goldberger, who was the President and CEO of Patch Boys, had been convicted of federal felony credit card fraud and conspiracy to commit credit card fraud; and (b) Mr. Goldberger had concealed these convictions in a previous FDD. Had Mr. Farris known these things, he would have never agreed to purchase a DVS franchise. (Farris Dec., ¶ 4).
Similarly, had Mr. Farris known that Mr. Goldberger and Mr. Swanson had been sued twice within a year for fraud in connection with franchise sales and failing to disclose items on a FDD, he would not have purchased a DVS franchise. Knowledge of the Minnesota Consent Order and the Reliable Case, in which the court found that Mr. Goldberger had defrauded a bank, would have had a similar effect. (Farris Dec., ¶ 5).
Disclosure of these items would have naturally led to the revelation of other facts that would have had a material impact on Mr. Farris’ decision to purchase a franchise. For example, revelation of the New York Assurance and Discontinuance, which identifies the style and case number for Mr. Goldberger’s felony credit card fraud and conspiracy convictions naturally leads on to the publicly available opinion in that case, in which the Second Circuit Court of Appeals denied Mr. Goldberger’s motion for a resentencing. The Second Circuit stated in that opinion:

It is also worth noting that, outside of his relationship with Rabbi Ashkenazi, Goldberger’s post-arrest conduct has been the opposite of exemplary. While out on bail, he has been convicted, in the New York state courts, of check kiting. There is also evidence that Goldberger has stolen at least $1,000 in merchandise, and possibly much more, from his employer. While it is not logically impossible for a defendant to engage in repeated criminal conduct after his arrest and still later demonstrate extraordinary acceptance of responsibility, it is highly unlikely.

United States v. Ruttner, 4 Fed. Appx. 66, 68 (2d Cir. 2001)(attached as Exhibit 12). Thus, disclosure of the New York Assurance and Discontinuance would have revealed yet another criminal conviction of Mr. Goldberger, for a crime committed while he was out on bail. Furthermore, paragraph 9 of the New York Assurance and Discontinuance indicates that the check-kiting conviction was also not disclosed on the Patch Boys FDD or revealed to the New York Attorney General’s Office.

Since knowledge of any of the items that the Defendants concealed from Mr. Farris in the FDD would have substantially impacted his decision to purchase a DVS franchise, knowledge of two or more of them would have had even more of an impact. (Farris Dec., ¶ 6).

DEFENDANTS’ MISMANAGEMENT OF THE FRANCHISE SYSTEM

Since Mr. Farris executed the Franchise Agreement, the problems that one would expect based on the matters that were concealed from Mr. Farris in the FDD have begun to manifest themselves. For example:

(a) DVS has provided little, if any, substantial support to Mr. Farris’ franchise. His franchise has been without dryer vent cleaning/repair support since June 2022;

(b) In July 2022, a heated dispute over the management of DVS arose between Messrs. Goldberger and Swanson, on the one hand, and Thomas Scott, the third member of DVS on the other. This dispute led to the exclusion of Mr. Scott from any management of DVS and the removal of him as an officer, as well as litigation between the parties, in which Mr. Scott has made multiple allegations of dishonesty against Messrs. Goldberg and Swanson. (See Complaint in Scott v. Goldberger, et. al., attached as Exhibit 13). Other lawsuits have ensued. Regardless of who is on the right side of these disputes, they have had a substantially negative impact on the franchisees;

(c) For example, the franchisee websites were managed by Brand Journalists, LLC, a company owned in whole or in part by Mr. Scott. According to a lawsuit filed by Brand Journalists (See Complaint in Brand Journalists, LLC. v. Goldberger, et. al., attached as Exhibit 14), DVS and other entities, at Mr. Goldberger’s direction, failed or refused to pay the annual hosting invoices for the websites, apparently due to the dispute with Mr. Scott. According to Mr. Scott, the failure to pay for the hosting services resulted in the websites being inaccessible. Mr. Scott also alleges that rather than simply paying the hosting services, Defendants hacked into the Brand Journalists’ server, downloaded copies of the websites and changed the domain names to point to a different server controlled by Defendants. Mr. Goldberger apparently then tried to install the copied websites onto this server. This did not work, resulting in another significant drop in leads for the franchisees. For whatever reasons, and whomever was at fault, the franchisees had no working websites for some time. Eventually, Defendants were able to put up working websites, but the new websites have multiple problems. Defendants have done absolutely nothing to correct these problems, despite multiple complaints and suggestions by franchisees;

(d) The management of DVS, including Messrs. Goldberger and Swanson, has apparently acted so unprofessionally that most support staff have either quit or have been fired for no good reason. For several months, the franchisees have had virtually no administration support, marketing support, financial consulting, business coaching, or really, any communication with DVS other than rambling emails sent to all franchise owners. DVS now only has one support staff, who is supposed to be providing support for the franchisees of at least four separate franchise systems but is, in reality, able to offer very little, if any, useful support; and

(e) The online store for branded products has disappeared.

(Farris Dec., ¶ 7).

In addition to the franchise fee and royalties, Mr. Farris has invested substantial money and time in the franchise. The business idea behind the franchise is sound. Nevertheless, Mr. Farris would not have purchased the franchise had he known of the matters that Defendants concealed from him, and Mr. Farris does not desire to continue in business as a franchisee of DVS. (Farris Dec., ¶ 8).

NOTICE OF DEFAULT AND SUBSEQUENT TERMINATION OF THE FRASNCHISE AGREEMENT BY DVS

The Franchise Agreement requires Mr. Farris to pay certain royalties and other fees. Regarding these payments, Section 4.6 provides:

(a) Method of Payment. Franchisee shall pay the Royalty Fee, Marketing Fund Contribution, and any other amounts owed to Dryer Vent Squad by pre-authorized bank draft or in such other manner as Dryer Vent Squad may require.

(b) Calculation of Fees. Franchisee shall report monthly Gross Sales to Dryer Vent Squad by the 5^th of the following month. If Franchisee fails to report monthly Gross Sales, then Dryer Vent Squad may withdraw estimated Royalty Fees and Marketing Fund Contributions equal to 125% of the last Gross Sales reported to Dryer Vent Squad, and the parties will true-up

fees after Franchisee reports Gross Sales.

(See Exhibit 1, p. 8).

Pursuant to the Franchise Agreement, if the franchisee does not pay royalties DVS may ultimately terminate the franchise agreement. However, the right to terminate is subject to a ten-day cure period, set forth in Section 14.2(a) as follows:

Subject to 10-Day Cure Period. Dryer Vent Squad may terminate this Agreement if Franchisee does not make any payment to Dryer Vent Squad when due, or if Franchisee does not have sufficient funds in its account when Dryer Vent Squad attempts an electronic funds withdrawal, and Franchisee fails to cure such non-payment within 10 days after Dryer Vent Squad gives notice to Franchisee of such breach.

(See Exhibit 1, § 13.2(a), p. 20 )

DVS may also Terminate the Franchise Agreement for failure to report gross sales. However, the right to terminate for failure to report gross sales is subject to a 30-day cure period, pursuant to Section 14.2(b):

Subject to 30-Day Cure Period. If Franchisee breaches this Agreement in any manner not described in subsection (a) or (c),[2] and fails to cure such breach to Dryer Vent Squad satisfaction within 30 days after Dryer Vent Squad gives notice to Franchisee of such breach, then Dryer Vent Squad may terminate this Agreement.

(See Exhibit 1, § 14.2(b) p. 20 )

Both cure periods begin to run upon notice of the breach to the franchisee. Significantly, Section 18.9 of the Franchise Agreement specifically provides that all notices sent under the Agreement “shall be effective upon receipt.” (See Exhibit 1, § 18.9, p. 27)(emphasis added).
Pursuant to Section 14.3, upon termination of the Franchise Agreement, the franchisee must do several things, including the following set forth in Section 14.3(iii):

notify the telephone, Internet, email, electronic network, directory, and listing entities of the termination or expiration of Franchisee’s right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and authorize their transfer to Dryer Vent Squad . . .

(See Exhibit 1, § 14.3, p. 22).

Purportedly on or about November 23, 2022, DVS sent Mr. Farris the notice of default attached as Exhibit 15 (the “Notice of Default”). Although the Notice of Default is dated November 23, 2022, it was not delivered to Mr. Farris until November 28, 2022.

(Farris Dec., ¶ 9).[3]

The notice of default alleges that Mr. Farris had failed to pay $2,359.00 in royalties and had failed to comply with the reporting requirements of the Agreement: The notice of default states:

TAKE NOTICE: That you are hereby notified that you must cure your default related to the failure to comply with reporting requirements within ten days following your receipt of this Notice. Franchisor also the right to pursue recovery of any expense incurred enforcing its rights under the Franchise Agreement should the dispute escalate to termination and/or litigation. If you do not cure your failure to comply with reporting requirements within ten days of your receipt of this Notice, Franchisor will, among other things, terminate your Franchise Agreement and seek recovery of all fees, damages, and other legal remedies and rights afforded to Franchisor under the terms of the Franchise Agreement.

TAKE NOTICE: That you are hereby notified that you must cure your default related to the failure to make royalty payments within ten days following your receipt of this Notice. Franchisor also the right to pursue recovery of any expense incurred enforcing its rights under the Franchise Agreement should the dispute escalate to termination and/or litigation. If you do not cure your failure to comply within ten days of your receipt of this Notice, Franchisor will, among other things, terminate your Franchise Agreement and seek recovery of all fees, damages, and other legal remedies and rights afforded to Franchisor under the terms of the Franchise Agreement.

(See Exhibit 15)(emphasis added)

Farris has had funds available in his business account for payment of any past due royalties and could have cured the payment default within the ten-day cure period. DVS removed Mr. Farris’ ability to cure any reporting default by locking him out of the franchise software, as discussed below. (Farris Dec., ¶ 9).
DVS has not provided Mr. Farris with a notice of termination. However, on December 5, 2022, seven days after Mr. Farris received the Notice of Default (and thus three days before the cure period expired for payment of royalties and 23 days before the cure period for reporting sales had expired), DVS locked Mr. Farris out of his business management software, which included his calendar and payment center, his Google email account which contained all vendor and customer communications, as well as his phone number. In other words, DVS took actions it was only allowed to take upon termination of the Franchise Agreement under Section 14.3(iii). Farris has no knowledge of any incoming calls or emails that may cause him a loss in revenue, as Mr. Goldberger appears to be answering all incoming calls. Mr. Farris essentially been stripped of his ability to run his business or to seamlessly remove his business from the DVS franchise system and continue to operate it. (Farris Dec., ¶ 10).

MR. GOLDBERGER’S UNHINGED RESPONSE TO THE FRANCHISEE LAWSUITS

In addition to DVS, Mr. Goldberger and Mr. Swanson also own other franchise entities, including Clozetivity Franchising, LLC and Frost Shades Franchising, LLC. A number of franchisees in these systems other than Mr. Farris have filed lawsuits or instituted arbitration proceedings against Defendants, all alleging fraudulent inducement.
On December 15, 2022, Mr. Goldberger sent the email attached as Exhibit 17 to all franchisees. In this email, Mr. Goldberger offers no explanation or apology for concealing any of the five items from the FDDs. Instead, Mr. Goldberger falsely asserts that the allegations against him and Mr. Swanson regarding such concealment of items from the FDDs as “abuse, lies and garbage” and confidently announces that THE TRUTH WILL ALWAYS PREVAIL! Goldberger insists that this lawsuit and others are all just part of a conspiracy lead by Thomas Scott, and announces that “I will definitely NOT allow anyone to break off, and I will fight till my very last breath to protect our great company and our good name AT ANY COST.”
Goldberger’s December 15, 2022 email also accuses Mr. Farris of “FRAUD, Misappropriate transfer of funds, Unjust enrichments, Breach of Contract, Defamation, CONSPIRACY and CONVERTION.” Mr. Goldberger claims that “We are filing a 23-COUNT lawsuit” against Mr. Farris and others for these claims.[4]
Farris is not a “proxy” of Thomas Scott. Mr. Farris is the sole owner of his DVS franchise, and the decisions related to the franchise, including whether to file this lawsuit, are his completely. Thomas Scott has not and does not direct, advise, or influence Mr. Farris’ actions with respect to the franchise. (Farris Dec., ¶ 11).
Plaintiff has reason to believe that DVS is continuing to sell franchises without disclosing any of the litigation items it concealed from Plaintiff.

ARGUMENT
STANDARD FOR INJUNCTIVE RELIEF

The standard for preliminary injunctions in federal and state courts is a four-factor test: (1) the threat of irreparable harm to plaintiff if the injunction is not granted; (2) the balance between this harm and the injury that granting the injunction would inflict on the defendant; (3) the probability that plaintiff will succeed on the merits; and (4) the public interest. S. Cent. Tennessee R.R. Auth. v. Harakas, 44 S.W.3d 912, 919 (Tenn. Ct. App. 2000). All four parts of this test weigh heavily in Plaintiff’s favor.

PLAINTIFF HAS A SUBSTANTIAL LIKELIHOOD OF SUCCESS ON THE MERITS

Plaintiff was Fraudulently Induced into Entering into the Franchise Agreement and Related Agreements

Disclosure Requirements of the FTC’s Franchise Rule

The sale of franchises in the United States is regulated by the Federal Trade Commission (FTC). The FTC’s trade regulation rule governing the sale of franchises has been labeled by the FTC and is commonly known as the “Franchise Rule.” One of the primary reasons for the creation of the Franchise Rule was to combat the widespread use of misrepresentations and failure to disclose material facts by franchisors in connection with the sale of franchises.

The Franchise Rule requires a franchisor to provide a prospective franchisee with certain disclosures, contained in a written Franchise Disclosure Document (“FDD”), prior to the purchase of the franchise. The Franchise Rule refers to these required disclosures as “Disclosure Items,” and the Rule enumerates several items of required disclosure in 16 C.F.R. § 436.5.

Under Item 2: Business Experience, the franchisor is required to disclose the name and position of the franchisor’s directors, trustees, general partners, principal officers, and any other individuals who will have management responsibility relating to the sale or operation of franchises (the “Franchisor Principals”) See 16 C.F.R. § 436(b). Mr. Goldberger, as the CEO of DVS, is a Franchisor Principal for DVS and was disclosed as such in the FDD. (See Exhibit 2, p. 3). However, it is significant to note that Mr. Goldberger is identified in the FDD only as “Leo Goldberger,” while his real name is Leiby Goldberger. Mr. Swanson is not listed as a Franchise Principal, although he is one of three owners of DVS and according to a March 2022 version of the DVS FDD is identified as a Franchisor Principal and the “Chief Experience Officer” of DVS since DVS’ formation in 2020. (See Exhibit 18, p. 11)

Under Item 3: Litigation, (“Item 3”), a franchisor must disclose whether the franchisor, the franchisor’s predecessors, or the Franchisor Principals, among others:

(a) has pending against that person an administrative, criminal, or material civil action alleging a violation of a franchise, antitrust, or securities law, or alleging fraud, unfair or deceptive practices, or comparable allegations;

(b) has pending against that person civil actions, other than ordinary routine litigation incidental to the business, which are material in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations;

(d) Has in the 10-year period immediately before the disclosure document’s issuance date:

(1) been convicted of or pleaded nolo contendere to a felony charge;

(2) been held liable in a civil action involving an alleged violation of a franchise, antitrust, or securities law, or involving allegations of fraud, unfair or deceptive practices, or comparable allegations;

(3) is subject to a currently effective injunctive or restrictive order or decree resulting from a pending or concluded action brought by a public agency and relating to the franchise or to a Federal, State, or Canadian franchise, securities, antitrust, trade regulation, or trade practice law.

16 C.F.R. § 436(c).

For purposes of the disclosure rule, the definition of “’held liable,’ is extremely broad and “means that, as a result of claims or counterclaims, the person must pay money or other consideration, must reduce an indebtedness by the amount of an award, cannot enforce its rights, or must take action adverse to its interests.” 16 C.F.R. § 436(c)(1)(iii)(B).

For each litigation matter disclosed under Item 3, the disclosure must state the title, case number or citation, the initial filing date, the names of the parties, the forum, the relationship of the opposing party to the franchisor and a summary of the legal and factual nature of each claim in the action, the relief sought or obtained, and any conclusions of law or fact. Additionally, the disclosure must state: for pending actions, the status of the action; for prior actions, the date when the judgment was entered and any damages or settlement terms; for injunctive or restrictive orders, the nature, terms, and conditions of the order or decree; and for convictions or pleas, the crime or violation, the date of conviction, and the sentence or penalty imposed. See 16 C.F.R. § 436(c)(3).

“All information in the disclosure document shall be current as of the close of the franchisor’s most recent fiscal year.” 16 C.F.R. § 436.7(a). Additionally, a franchisor’s FDD must be updated annually within 120 days of the close of the franchisor’s fiscal year, and material changes to a franchisor’s disclosures in between annual updates must be completed within a reasonable period of time after the close of each fiscal quarter. 16 C.F.R. § 436.7(b). If a franchisor fails to update the FDD within 120 days of the close of its fiscal year, and quarterly if necessary, it cannot complete franchise sales without an applicable exemption.

Despite the fact that DVS only listed Mr. Goldberger as a Franchisor Principal, Mr. Goldberger and Mr. Swanson are both Franchisor Principals with respect to DVS, and thus DVS was required by the Franchise Rule to disclose facts required by Item 3 for which either Mr. Goldberger or Mr. Swanson was a party.

The failure to comply with the FTC’s Amended Franchise Rule is an unfair or deceptive trade practice in violation of Section 5 of the FTC Act. See, e.g. Fed. Trade Comm’n v. Minuteman Press, 53 F. Supp. 2d 248, 258 (E.D.N.Y. 1998).

The FDD provided to Mr. Farris by DVS has a purported issuance date of January 4, 2021. (See Exhibit 2, p. 1). It was provided to Mr. Farris on August 20, 2021. It therefore should have disclosed all litigation matters that were subject to disclosure as of January 4, 2021. Further, the FDD should have been updated to include all material changes within a reasonable time after the close of each quarter in 2021 before it was provided to Mr. Farris and all material changes that had occurred as of the close of the first quarter of 2021.

Misrepresentations and Concealment of Material Facts in the FDD

In Item 3 of the FDD, DVS represented that “[n]o litigation is required to be disclosed in this item.” (See Exhibit 2, p. 4). This was an intentional misrepresentation, as there were several matters that should have been disclosed in Item 3, including:

(a) The New York Assurance and Discontinuance. The New York Assurance and Discontinuance is a civil action involving a violation of franchise laws and fraud under which Mr. Goldberger was held liable within ten years of January 4, 2021. Any doubt regarding whether the New York Assurance and Discontinuance should have been disclosed in the FDD is removed by the fact that Mr. Goldberger disclosed the New York Assurance and Discontinuance in the Patch Boys 2018 and 2019 FDDs.

(b) The Borgen Case. The Borgen Case was a case involving allegations of fraud and violations of franchise laws. The Borgen Case was pending as of January 4, 2021 (and was still pending when the FDD was provided to Mr. Farris). Further, although Plaintiff does not yet have a copy of the settlement agreement, there clearly was a settlement in the case, meaning that it was a case in which Patch Boys, Mr. Goldberger and/or Mr. Swanson were “held liable” within ten years of the issuance of the FDD.

(c) The Anderson Case The Anderson Case[5] was a case involving allegations of violation of franchise laws and fraud to which Mr. Goldberger had been a party in the year prior to both the issuance of the FDD and the date that it was provided to Mr. Farris. Also, like the Borgen Case, there clearly was a settlement in the case, meaning that it was a case in which Patch Boys, Mr. Goldberger and/or Mr. Swanson were “held liable” within ten years of the issuance of the FDD.

(d) The Reliable Case. The Reliable case contained allegations of fraud, and in fact a finding of fraud against Mr. Goldberger. At this time, Plaintiff does not know when the default judgment was entered against Mr. Goldberger. However, in New York, as in most jurisdictions, a judgment is not final unless it “is dispositive of all factual and legal issues in the case, judicially settles the case between the parties, and will issue only after all factual and legal issues have been decided ” Slewett & Farber v. Bd. of Assessors, 438 N.Y.S.2d 544, 556 (App. Div. 1981), modified sub nom. Slewett & Farber v. Bd. of Assessors of Nassau Cnty., 430 N.E.2d 1294 (N.Y. 1982)(citations omitted). All of the factual and legal issues in the Reliable Case were not decided until at least November 7, 2012, when the Court granted summary judgment to Reliable on its claim against Banco Popular. Therefore, Mr. Goldberger was not “held liable” for fraud until at least that date, which was well within ten years of the FDD issuance date and the date it was provided to Mr. Farris.

(e) The Minnesota Consent Order. The Minnesota Consent Order is dated July 30, 2021. Using that date, DVS was not yet required to update the FDD to include the Minnesota Consent Order. However, at this point Plaintiff does not know when the State of Minnesota commenced proceedings against DVS, but it is logical to assume that such proceedings were commenced sometime prior to July 30, 2021, and if they were commenced prior to the close of the second quarter of 2021, the FDD should have been updated prior to DVS providing the FDD to Mr. Farris. It is also worth noting that the Minnesota Consent Decree was not disclosed by DVS in its FDD issued on March 7, 2022. (See Exhibit 18, p. 11 ).

At least in the action brought in this Court,[6] Plaintiff seeks an equitable rescission due to fraud. “To be successful, a party making a fraudulent inducement claim has the burden of proving that the defendant (1) made a false statement concerning a fact material to the transaction (2) with knowledge of the statement’s falsity or utter disregard for its truth (3) with the intent of inducing reliance on the statement, (4) the statement was reasonably relied upon, and (5) an injury resulted from this reliance.” Baugh v. Novak, 340 S.W.3d 372, 388 (Tenn. 2011). The first element of a fraudulent inducement claim can also be established where a party to a contract has a duty to disclose material facts and conceals those facts. See Odom v. Oliver, 310 S.W.3d 344, 349 (Tenn. Ct. App. 2009). Although discovery has not really even commenced, Plaintiff can establish the elements of fraudulent inducement by affirmative misrepresentation and concealment with the proof already at Plaintiff’s disposal.

First, the statement in Item 3 of the FDD that “[n]o litigation is required to be disclosed in this item” is an affirmative misrepresentation of fact, as clearly there were several items whose disclosure was mandatory under the Franchise Rule. The Franchise Rule also creates a legal duty to disclose the items that were not disclosed, meaning that the concealment of each of these items constituted fraudulent concealment.

Second, there is no question that the facts that were misrepresented/concealed were material to the transaction. The FTC has in essence determined that they are material by mandating that they be disclosed. Furthermore, it would appear to be axiomatic that a putative franchisee’s knowledge that the CEO of the proposed franchisor: (a) has been sued multiple times for franchise fraud; and (b) has been sanctioned by a state attorney general for failing to disclose in an FDD that he has a previous felony convictions for two counts of federal credit card fraud and one count of conspiracy to commit credit card fraud; and (c) had been found liable of defrauding a bank by cashing $83,000 in bad checks would be material to the franchise transaction. Further, disclosure of these items could have easily led to even more material information, including that Mr. Goldberger was convicted of check kiting while out on bail from his federal credit card fraud charges.

Third, there is no doubt that DVS, Mr. Goldberger, and Mr. Swanson knew exactly what they were doing when concealing these material facts. Since at least one of them was a party to all of the lawsuits/administrative actions that should have been disclosed, they obviously had knowledge of them. According to the FDD, Mr. Goldberger has been involved in franchising as a CEO since 2015, and there is no doubt that he was fully aware of FDD disclosure requirements. He and Mr. Swanson have been sued multiple times for failing to make required FDD disclosures. Mr. Goldberger, in fact, had already been sanctioned by the New York Attorney General by concealing his felony convictions from a FDD, and subsequently disclosed the New York Assurance and Discontinuance in the 2018 and 2019 Patch Boys FDDs.

Although it is not necessary, further evidence that Defendants were acting intentionally is that Mr. Goldberger was only identified as “Leo” Goldberger in the FDD, meaning that a search for publicly available records would not likely reveal the Anderson, Borgen, or Reliable Cases, in which Mr. Goldberger was sued as “Leiby Goldberger.” Significantly, Mr. Goldberger was identified as “Leiby ‘Leo’ Goldberger” in the 2018 and 2019 Patch Boys FDD, which preceded both the Anderson and Borgen Cases.[7]

The reliance element is satisfied by establishing that the misrepresentation or concealment was a substantial factor in the decision to purchase the franchise. See, e.g. Green v. Green, 293 S.W.3d 493, 511 (Tenn. 2009). It is hard to imagine that any reasonable person contemplating a franchise purchase would not be substantially influenced by the revelation that the franchisors principals had been sued multiple times for fraud and violation of franchise laws and had been sanctioned by the New York Attorney General for concealing felony fraud convictions from prospective franchisees.

Regarding the final element of fraudulent inducement, it is important to note that Plaintiff is not required to establish “actual monetary damages” when seeking an equitable rescission for fraud. See ““actual damages,” “Goodale v. Langenberg, 243 S.W.3d 575, 585 (Tenn. Ct. App. 2007). Rescission due to fraud is available where the plaintiff only establishes “incidental damages.” See Id.. In any event, Plaintiff has suffered concrete injury as a result of Defendants’ fraud. As a result of this fraud, Plaintiff is now forced into a situation where his business is ultimately controlled by perpetual fraudsters and a convicted criminal. Plaintiff should not be required to wait until the adage that “the best predictor of future behavior is past behavior” manifests itself. A contrary finding would make the litigation disclosure requirements of the Franchise Rule meaningless.

The Court need not make this decision, however, because the character of Messrs. Goldberger and Swanson has already been the source of concrete harm to Plaintiff and the other franchisees. Those two men are now in a bitter struggle with their co-owner, Thomas Scott, which has as its roots the fraudulent conduct of Messrs. Goldberger and Swanson, and, as described in Plaintiff’s Declaration, has caused substantial harm to the franchisees. Even before this conduct arose, Defendants breached their contractual duties to Plaintiff and the other franchisees, and they have now essentially taken away Plaintiff’s business by wrongfully repudiating the Franchise Agreement, as is discussed below.

DVS has Wrongfully Repudiated the Franchise Agreement

Mr. Farris contends that no valid contract between he and DVS ever existed because of Defendants’ fraudulent inducement. DVS will undoubtedly disagree, however, and will argue that the parties are or were bound by the Franchise Agreement. DVS, however, has been dishonest regarding the Franchise Agreement and if, in fact DVS did not vitiate the agreement by committing fraud in the inducement, it has now wrongfully repudiated the agreement, thereby giving Mr. Farris another ground to support a claim for rescission.[8]

DVS Repudiated the Franchise Agreement by Wrongfully Terminating the Agreement Before Expiration of the Cure Period

The Franchise Agreement allows DVS to terminate the agreement for certain breaches, but only after notice and the failure to cure within a specified time period. However, “[a] party acts at his peril if, insisting on what he mistakenly believes to be his rights, he refuses to perform his duty.” HIFN, Inc. v. Intel Corp., No. CIV.A. 1835-VCS, 2007 WL 1309376, at *14 (Del. Ch. May 2, 2007). When a party wrongfully terminates a contract in violation of its terms, that party has repudiated the contract, thereby excusing further performance from the non-repudiating party and providing that party with an election between alternative forms of relief, including rescission. See, e.g. In re Estate of Upchurch, 62 Tenn. App. 634, 649, 466 S.W.2d 886, 892 (1970)

As set forth in detail in the Facts Section above, the Franchise Agreement provides that:

(a) the franchisee must pay royalties and report monthly gross sales;

(b) in the event that a franchisee fails to pay royalties, DVS may terminate the Franchise Agreement only if the breach is not cured within ten days after DVS provides written notice of default;

(c) in the event that a franchisee fails to report sales, DVS may terminate the Franchise Agreement only if the breach is not cured within thirty days after DVS provides written notice of default;

(d) All notices under the Franchise Agreement (which would obviously include a notice of default) are effective upon receipt.

Since Mr. Farris received the Notice of Default on November 28, 2022, he had until at least December 8, 2022 to cure any payment default. DVS dishonestly stated in the notice of default that Mr. Farris only had ten days to cure the gross sales reporting default. As already demonstrated, Mr. Farris had thirty days to cure this default, and this cure period does not expire until December 27, 2022.

Mr. Goldberger’s zeal to punish Mr. Farris prevented DVS from providing Mr. Farris with the contractually obligated (and very short) period to cure. On December 5, 2022, three days before the ten-day cure period for non-payment of royalties expired and twenty-three days before the cure period for failure to report gross revenue expired, DVS, without further notice, locked Mr. Farris out of his franchise management software, which included his calendar and payment center, his Google email account which contained all vendor and customer communications, as well as his phone number. Customer and other calls to his phone number are going to DVS and are being answered by Mr. Goldberger. In other words, DVS terminated the Franchise Agreement and took actions DVS believed it had after such termination, including those set forth in Sction14.3(iii). Although Plaintiff had the ability to cure the alleged payment default during the cure period, DVS terminated the Franchise Agreement before either cure period expired. DVS, in fact, eliminated Mr. Farris’ ability to cure the reporting default by blocking him from the system used to do the reporting.

Tennessee courts have held repeatedly that where a party has the right and the ability to cure, the non-breaching party cannot terminate and has the obligation to perform unless and until the breach is not timely cured. Numerous examples of this principle can be found in construction cases, where there is a common law (and now a statutory) duty to provide notice and an opportunity to cure defective work by a contractor. One of the earliest of these cases is McClain v. Kimbrough Const. Co., Inc., 806 S.W.2d 194 (Tenn. Ct. App. 1990). In McClain, a masonry subcontractor was terminated by the general contractor, who believed that the subcontractor had breached the subcontract by performing defective work. 806 S.W.2d at 196-97. The Tennessee Court of Appeals held that the subcontractor had the right to notice of the breach and an opportunity to cure, and that the general contractor “did not give [the subcontractor] notice [and an opportunity to cure] before unilaterally terminating the subcontract and hiring another brick mason to finish the job.” Id. at 199. Thus, the general contractor had no right to terminate the contract. Id.

Similarly, in Bates v. Benedetti, No. E2010-01379-COA-R3CV, 2011 WL 978195 (Tenn. Ct. App. Mar. 21, 2011), a homeowner terminated a contractor for faulty performance. The Court of Appeals held that the homeowner was obligated to give the contractor notice and an opportunity to cure before terminating the contract for faulty performance, and her “failure to do so bars her right to recover in this case.” Id. at * 4.

The instant case is not a construction case, of course. But these cases unequivocally stand for the proposition that where a party has the right to notice and an opportunity to cure, the non-defaulting party is still bound by the contract and cannot terminate unless and until the defaulting party cures, or it becomes clear that the defaulting party will not be able to cure. This appears to be a universal rule. See, e.g. Marquette Venture Partners II, L.P. v. Leonesio, 1 CA-CV 09-0166, 2011 WL 1867517, at *4 (Ariz. App. 1st Div. May 3, 2011)(“A non-breaching party is only discharged from the contract if (1) a material breach occurs and (2) a cure is no longer possible”); Volvo Trucks N.A. v. State, Dept. of Transp., 779 N.W.2d 423, 432 (Wis. 2010)(“Only if the breach is not cured to the level of substantial performance may the injured party terminate the contract.”).

As of December 5, 2022, Mr. Farris still had that day and three more to cure the payment default, and he had the ability to do so. Under the authorities cited above, DVS’ termination of the Franchise Agreement before the cure period expired was a wrongful repudiation of the Franchise Agreement.

DVS Repudiated the Franchise Agreement by Terminating the Agreement for a Non-Material breach

Further, regardless of the cure period, that in order for a contractual breach to be sufficient to relieve the non-breaching party of its contractual obligations, the initial breach must be “material.” E.g. Franks v. Bilbrey, 2022 WL 4588871, at *6–7 (Tenn. Ct. App. Sept. 30, 2022).

In determining whether a breach of contract is material such that the non-breaching party could avoid performance, Tennessee courts have adopted the criteria established in the Restatement (Second) of Contracts, § 241 (1981), which enumerates the following factors to consider:

(1) The extent to which the injured party will be deprived of the expected benefit of his contract;

(2) The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;

(3) The extent to which the party failing to perform or to offer to perform will suffer forfeiture;

(4) The likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; and

(5) The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Bilbrey, 2022 WL 4588871, at 7.

The failure to pay the small sum of approximately $2,000 cannot possibly deprive DVS of the full value of the Franchise Agreement, and DVS could easily be adequately compensated for this amount. Terminating the agreement, on the other hand, constitutes a complete forfeiture to Mr. Farris. Mr. Farris was completely capable of curing the defaults. And finally, if anyone has acted in bad faith, it is DVS.

Absent an Express Termination, DVS Repudiated the Franchise Agreement through Its Conduct

The Notice of Default provides that DVS “will terminate” the Franchise Agreement if the default is not cured, and converting Mr. Farris’ franchise phone number so that it connects prospective customers to Mr. Goldberger, taking away email access, and blocking Mr. Farris from the franchisee software system are actions that DVS can only take in the event that the Franchise Agreement has been terminated. It thus appears clear that DVS has expressly terminated the Franchise Agreement, especially since the Agreement does not appear to require a formal notice of termination. In the event, however, that DVS claims it has not terminated the Franchise Agreement, its actions nevertheless constitute a repudiation of the Agreement.

“A party to a contract can take certain actions or make certain statements that repudiate it.” UT Med. Grp., Inc. v. Vogt, 235 S.W.3d 110, 120 (Tenn. 2007)(citations omitted). “Such a repudiation can occur when a party “commits a voluntary act which renders the party unable or apparently unable to perform the contract, or when “the words and conduct of the contracting party amount to a total and unqualified refusal to perform the contract.” Id. (citations omitted).

DVS’ voluntary actions in essentially blocking Mr. Farris’ ability to run his business through the DVS franchise system undoubtedly rendered Mr. Farris unable to perform the contract. Further, this conduct amounts to a total and unqualified refusal by DVS to perform the Agreement.

Mr. Farris is entitled to rescission of the Franchise Agreement

“One of the remedies available for fraudulent inducement is rescission of the contract.” Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct. App. 2000). Also, “It is well settled that where one party repudiates the contract, and refuses longer to be bound by it, the injured party . . . may treat the contract as rescinded, and recover upon quantum meruit so far as he has performed. . . .”[9] Brady v. Oliver, 147 S.W. 1135, 1141 (Tenn. 1911); see also UT Med. Grp., Inc. v. Vogt, 235 S.W.3d 110, 120 (Tenn. 2007)(“Believing that another party has committed an anticipatory breach of a contract, the non-breaching party may elect to take one of three courses of action: (1) rescind the contract and pursue remedies based on a rescission . . .”); World Healthcare Sys., Inc. v. SSI Surgical Servs., Inc., 2011 WL 2199979, at *7 (E.D. Tenn. June 7, 2011)(“When a party commits an anticipatory breach, the non-breaching party may . . . rescind the contract and pursue remedies based on a rescission); Bauman v. Smith, 499 S.W.2d 935, 938 (Tenn. Ct. App. 1972)(“It is the general rule that upon the breach of a contract the injured party may, by election, rescind and recover the value of any performance by him, or he may stand by the contract and recover damages for the breach.”).

Accordingly, if Plaintiff prevails on either the fraudulent inducement or repudiation claims, he will be entitled to rescission of the Franchise Agreement as a remedy. Rescission of the Franchise Agreement means, of course, that all provisions on the Franchise Agreement and the ancillary agreements, including the restrictive covenants, are unenforceable.

PLAINTIFF IS SUFFERING OR WILL SUFFER IMMEDIATE AND IRREPERABLE INJURY

Solely due to Defendants’ fraud, Mr. Farris is now stuck owning a franchise that is ultimately controlled by a franchisor owned and controlled by persons with a long history of fraudulent conduct towards franchisees and, with respect to Mr. Goldberger, a history of multiple criminal convictions involving dishonest conduct. No reasonable person in Mr. Farris’ shoes would have purchased a franchise from DVS had Defendants not intentionally concealed this history. Defendants’ conduct since Mr. Farris’ purchase of the franchise reflects the character of Mr. Goldberger and Mr. Swanson, culminating in DVS’ wrongful termination and repudiation of the Franchise Agreement. In addition to paying a franchise fee of $35,000, Mr. Farris has invested considerable time and money into building his business.

Mr. Farris should be allowed to conduct his business outside the DVS’ franchise system without fear of interference from DVS through the guise of enforcing the noncompetition agreement. This is especially true now that DVS has terminated the Franchise Agreement and essentially shut down Mr. Farris’ ability to operate as a DVS franchisee.

Mr. Farris loses customers and goodwill every day that phone calls to his business number are intercepted by Mr. Goldberger and every day that he does not have access to his business systems. Interference with prospective customers in the guise of enforcing an unenforceable restrictive covenant will have the same effect. Reducing this harm to monetary damages will be extremely difficult if it can be done at all. Further, it is well settled that this court has held that loss of customer goodwill and fair competition resulting from breach of a restrictive covenant constitutes irreparable harm. See e.g. Hall v. Edgewood Partners Ins. Ctr., Inc., 878 F.3d 524, 530 (6th Cir. 2017).

THE BALANCE OF HARMS FAVORS PLAINTIFF

In considering a request for injunctive relief, “the court must carefully weigh the balance between that harm and the harm that granting the injunction will inflict on the defendant.” Moore v. Lee, 644 S.W.3d 59, 67 (Tenn. 2022). Plaintiff is faced with the loss of his entire investment. DVS, on the other hand, will suffer little, if any harm as a result of the injunctive relief sought by Plaintiff, and all of this harm was caused by Defendants themselves.

THE PUBLIC INTEREST WILL BE SERVED BY GRANTING PLAINTIFF INJUNCTIVE RELIEF

The Franchise Rule was developed to combat rampant fraudulent and deceptive practices by franchisors. The public interest is clearly served by providing relief to a franchisee that has been victimized by blatant and multiple violations of the Franchise Rule’s disclosure requirements. Further, although Plaintiff seeks rescission of the Franchise Agreement, Plaintiff’s claim is based in part on DVS’ repudiation of the Franchise Agreement by terminating the Agreement in violation of the express terms of the Agreement. The Tennessee Court of Appeals has held that “the public interest will be served by enforcing the parties’ contracts as written” NuLife Ventures, LLC. v. AVACEN, Inc., 2021 WL 1421201, at *7 (Tenn. Ct. App. Apr. 15, 2021).

CONCLUSION

For the reasons stated herein, Plaintiff respectfully requests the Court to grant Plaintiff’s request for a Temporary Restraining Order and Temporary Injunction as set forth in Plaintiff’s Application for such relief.

Respectfully Submitted,

s/ Gregory H. Oakley Gregory H. Oakley, BPR #16237

4300 Sidco Dr., Suite 200Nashville, TN 37204

Ph 615-369-9996

Fx 615-515-4491

Email [email protected]

Attorney for Plaintiff

[1] The pleadings and docket sheet for the Reliable case are apparently not available online. Plaintiff has not yet obtained the same.

[2] Subsection (a) is non-payment of royalties. Subsection (c) contains a long list of items of default, which does not include failure to report gross sales.

[3] Apparently, on or around November 23, 2022, DVS sent Notices of Default to all of the franchisees who have sued DVS. Although all of these notices are dated November 23, and were sent by Federal Express, they were apparently sent with “morning 2 day” shipping and were specifically scheduled for delivery on the morning of November 28. (See Declaration of Kane Scott, attached as Exhibit 16).

[4] Mr. Goldberger claims in the email that “[y]ou can check out the entire lawsuit at https://thomasscottbrandjournalistsfraud.blogspoy.com.” This link takes one to a website containing an amended complaint in a Chancery Court lawsuit filed in October 2022, in which Mr. Scott is the only current defendant and which has never involved Mr. Farris in any way.

[5] In both the Borgen, Anderson, and Reliance Cases, Mr. Goldberger was sued as “Leiby Goldberger,” not “Leo Goldberger”

[6] Plaintiff is barred by the arbitration provision of the Franchise Agreement from filing a legal action for a claim other than rescission due to fraudulent inducement.

[7] It is also telling that there is no question but that the Reliable Case was within the ten year disclosure period for the Patch Boys 2018 and 2019 FDDs (the case was not filed until 2009), but the Reliable Case is not disclosed on either of those FDDs.

[8] Plaintiff did not include a claim for rescission due to repudiation in the Complaint and has not amended the Complaint to include such a claim for two reasons. First, the events giving rise to the repudiation claim had not occurred at the time the Complaint was filed. Second, a claim for rescission due to repudiation is distinct from a claim for fraudulent inducement, and a repudiation claim may be subject to the arbitration provision of the Franchise Agreement. However, the Franchise Agreement allows Plaintiff to seek temporary injunctive relief in this Court with respect to any claim, and thus although Plaintiff may ultimately be required to pursue his repudiation claim in arbitration, it is the proper subject for Plaintiff’s request for injunctive relief.

[9] The non-repudiating party may also “ keep the contract alive for the benefit of both parties, being at all times himself ready and able to perform, and, at the end of the time specified in the contract for performance, sue and recover under the contract; or he may treat the repudiation as putting an end to the contract for all purposes of performance, and sue for the profits he would have realized if he had not been prevented from performing.” Brady, 147 S.W. at 1141.