What constitutes 'routine litigation incidental to the business' for All States M.E.D.?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
- The following is added at the end of Item 3:
Except as provided above, with regard to the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations.
- C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10 year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud or securities law, fraud, embezzlement, fraudulent conversion or misappropriation of property, or unfair or deceptive practices or comparable allegations.
- D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency, or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
The 2024 Franchise Disclosure Document for All States M.E.D. does not define what constitutes 'routine litigation incidental to the business.' However, it does state that no administrative, criminal, or civil actions alleging felonies, violations of franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable allegations are pending against the franchisor, its predecessors, individuals identified in Item 2, or affiliates offering franchises under the franchisor's principal trademark.
Furthermore, the FDD states that there should be no pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature, or financial condition of the franchise system or its business operations. The document also states that no such party has been convicted of a felony or pleaded nolo contendere to a felony charge, or within the 10-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging violation of a franchise, antifraud or securities law, fraud, embezzlement, fraudulent conversion or misappropriation of property, or unfair or deceptive practices or comparable allegations.
In summary, while the FDD does not provide a specific definition of 'routine litigation incidental to the business,' it implies that such litigation excludes significant legal issues related to the integrity of the franchise system, financial impropriety, or violations of relevant laws. A prospective franchisee should seek clarification from All States M.E.D. regarding what types of legal actions they consider routine and incidental to the business.