LOS ANGELES (March 31, 2010) — Eighteen current and former Big O Tires Inc. franchisees in California, representing 33 outlets, are suing Big O Tires L.L.C. and its parent corporations TBC Corp. and Sumitomo Corp. of America (SCA) for unfair competition, breaches of franchise agreements and associated complaints.
Big O denies all claims asserted against it in the lawsuits and maintains the franchisees involved are a “splintered minority of franchisees” that have “failed to operate their stores well in the current economy and have resorted to baseless lawsuits.”
Centennial, Colo.-based Big O, whose franchise program operates about 500 locations in 20 states, said it “intends to vigorously defend each of these lawsuits and will assert all affirmative claims/counterclaims where appropriate.”
The franchisees, banded together as Tire Dealer Alliance of California (TDA)—a group Big O said it does not recognize—claim they have been seeking to resolve their issues with TBC/Big O for at least the past three to four years and offered to have the case mediated. TBC rejected that offer, attorneys for the plaintiffs said.
The mass tort complaint, filed Dec. 2, 2009, in the Superior Court of the State of California for the County of Los Angeles, seeks “declaratory relief” for various alleged breaches of franchise agreements, restraint of trade violations, interference with contractual rights, fraud in the inducement, negligent misrepresentation, violations of California's Cartwright Act, violations of unfair competition law, and other misconduct. The suit seeks unspecified monetary damages.
Separately, the group's attorneys—Hornberger & Brewer L.L.P. of Los Angeles and William Brandt of Salem, Ore.—have filed two additional cases against the same defendants on behalf of three individual franchisees whose cases have “extraordinary elements that set them apart from the Mass Tort case.”
In its statement on the case, Big O noted that the Los Angeles Superior Court recently dismissed seven of the 12 claims brought in one of these suits, that of Ayele Hailermerian, a former franchisee. The court also dismissed Big O's affiliates, Palm Beach Gardens, Fla.-based TBC and New York-based SCA, from this suit because, according to Big O, Mr. Hailermerian had no viable claims against either entity.
Big O said it has filed similar motions in the other two lawsuits “and is optimistic it will receive similar rulings.”
Many of the franchisees' complaints center on their views that TBC/Big O Tires showed favoritism toward larger franchisees, offering “secret, discriminatory payments, rebates, refunds, commissions, unearned discounts, special services, privileges and/or their equivalent” to certain franchisees but not others.
The suit is seeking a permanent injunction enjoining Big O from continuing those alleged practices.
An underlying concern is what the plaintiffs claim is the existence of a two-tiered franchise system that “creates an unfair competiton between franchisees.” They also allege Big O “operates its own company-owned stores in competition” with the plaintiffs.
The plaintiffs' lawsuit also states the franchisor does “not represent the interests of the average, single-store franchisee,” and that the “Big O Tire Dealers of America (BOTDA) is an organization that is dominated by big, successful, in most cases multi-store franchise operators who receive untold special benefits” from Big O/TBC.
Other complaints and allegations in the plaintiffs' lawsuit include:
* “Non-compete” clauses are not enforceable under California law;
* Big O's failure to fulfill its end of the franchise agreement in at least eight ways, including not providing tires at competitive prices, not providing “meaningful, ongoing” assistance, not developing a warranty replacement program, etc.;
* Not enforcing certain provisions of the franchise agreement equally;
* Restraint of trade;
* “Willful and malicious” misrepresentation of certain franchise program benefits;
* Violating California's Unfair Practices Act “by providing secret, discriminatory unearned rebates or discounts that injure competitors and tend to injure competition.”;
* Hiring “incompetent and unfit” persons to be managers, supervisors, etc.; and
* Violating California's Cartwright Act by imposing “unlawful restraints of trade” in order to drive certain franchisees out of business.
(The act prohibits agreements among individuals or companies that restrain trade.)
The plaintiffs said they decided to take legal action at this time after failing to get relief from TBC/Big O directly and after seeing Big O stores fail or be taken over by the parent firm, as happened last fall in Southern California when TBC/Big O acquired 22 franchised stores in the Los Angeles and San Diego metropolitan areas owned by longtime Big O franchisee C.S.B. Partnership/Christopher Phillips.
The plaintiffs' attorneys said they will be moving soon to have all three cases consolidated into a single case to be heard in Los Angeles Superior Court, Central Civil West Division. A decision on the consolidation motion is expected within 45 days, they said. If this motion is upheld, the cases will be set for trial in March 2011.
Big O also pointed out that the U.S. District Court for the District of Colorado issued a temporary restraining order recently against Ralph Felix, a plaintiff in one of the California lawsuits, in a suit filed by Big O to enjoin Mr. Felix from continuing to use Big O Tires' trademarks after one of his franchise agreements expired. The court ordered him to turn over his customer list and telephone numbers as required by his franchise agreement, Big O said.
TBC—which also operates the Tire Kingdom Inc., National Tire & Battery (NTB) and Merchant's Inc. retail chains—acquired Big O in 1996.
To reach Bruce Davis: [email protected]; 330-865-6145.