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Lawsuit with franchisees shows complexity of business litigation

Disclosure documents that were recently filed following the sale of Quiznos Franchising Company LLC have shed a lot of light on the company's financial and legal difficulties in recent years. The disclosure shows that in-store sales are down and the number of stores has dramatically decreased in recent years, which is unwelcome news for any company.

Despite the financial difficulties, Quiznos was recently sold and got a fresh infusion of cash from investors after they successfully proposed a debt restructuring plan. However, the sandwich purveyor may not be in the clear. The disclosure documents also show that the company has faced 91 lawsuits over the past eight years, some of which remain active.

There is one major remaining class action lawsuit, which is made up of 18 former franchise owners who chose not to be a part of a previous settlement, accuses the company of violations of an organized crime act. Specifically, the former franchisees say that Quinzos used a "fraudulent scheme to sell mandated essential goods at inflated prices." This essentially means that Quiznos required franchisees to buy specific goods and then conspired to fix high prices for those goods. Along with those allegations come other similar criminal allegations, such as violations of the Consumer Protection Act and conspiracy.

This case shows just how many different factors can be at play during business litigation. In the remaining case, in addition to the criminal and fraud allegations, the franchisees are also contesting that their franchise contracts are unenforceable.

Business litigation and contract disputes are not always this complex, but the case does illustrate the many possible challenges that a company can face. This is one reason why having experienced counsel with a wide range of knowledge can be beneficial to a company.

Source: Blue Maumau, "Quiznos Disclosure Shines Light on Settlements, Litigation," Janet Sparks, Dec. 13, 2012.

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