Menu
Blog Banner Image

The Franchise Memorandum

Manufacturer Found in Violation of Connecticut's Business Opportunity and Unfair Trade Practices Laws

In James D. Cohen v. Roll-A-Cover, LLC, 2011 Conn. App. LEXIS 473 (Conn. App. Sept. 20, 2011), defendants—manufacturers of a Roll-A-Cover residential pool cover system—appealed the trial court’s holding that they had violated Connecticut’s Business Opportunity Investment Act and Unfair Trade Practices Act (CUTPA) through the sale of New Jersey territories to a distributor. The plaintiff/distributor had signed a distribution agreement for the exclusive rights to distribute the pool cover product in New Jersey. During negotiations, Roll-A-Cover had made certain claims regarding the high demand for its product and failed to provide plaintiffs with a disclosure document. However, Paragraph 49.0 of the distribution agreement stated:  “Distributor…warrants represents and agrees that this agreement is not a franchise, under the laws of the State of Connecticut or any other jurisdiction….Distributor represents that the Products are one of several products or services sold by Distributor and these Products do not constitute the sole or substantial source of sales by the Distributor.”

Following a nine-day trial, the trial court issued its decision finding for plaintiff on all counts, including corporate and personal violations of Connecticut’s business opportunity law and CUTPA, and awarding $575,000 in damages and attorney’s fees. Roll-A-Cover appealed, claiming that (i) paragraph 49.0 clearly excludes the contract from the business opportunity law; (ii) plaintiff’s net worth also excludes Roll-A-Cover from the business opportunity law; (iii) plaintiff failed to prove ascertainable loss in Connecticut; (iv) Roll-A-Cover’s officer should not be personally liable; and (v) damages were inappropriate.  Applying the clearly erroneous standard, the Court did not find error in the trial court’s findings, holding that (i) one paragraph disclaiming the existence of a franchise relationship could not override 48 others in the distribution agreement that tended to establish such a relationship; (ii) the net worth exclusion did not exempt Roll-A-Cover from all provisions of the business opportunity law; (iii) Roll-A-Cover failed to show a conflict between Connecticut law and the law that Roll-A-Cover contended should apply (iv) the corporate officer knowingly made misleading statements to plaintiffs; and (v) in light of the analysis, the appeal on damages was moot. 

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

To subscribe to monthly emails for The Franchise Memorandum, please click here

Topics

Archives

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Blog Authors