In a case that could have broad impact on the franchising industry, a New Jersey Superior Court judge ruled that the wives of Snap-on Tools dealers have the independent right to sue the franchisor in a jury trial and are not bound by arbitration clauses in the franchise agreement. Snap-on had argued that the spouses’ claims were to be brought before the American Arbitration Association.
“Part of what we are alleging here is Snap-on specifically wanted to keep the wives out of the business,” said Gerald Marks of Marks & Associates, who is representing the three wives, Nancy Casey, Abbye Goldwasser and Maritza Franco. Each claim financial duress and emotional damage to their marriage and families because of alleged fraudulent business practices by Snap-on.
Officials at Snap-on would no speak on the record, but did release an official letter stating that the judge’s opinion “had nothing to do with the actual claims,” and only addressed “the forum” for hearing the claims.
“The New Jersey judge’s ruling is not binding on any other court, nor is it binding on any other judge- even in New Jersey,” the statement read. The company cities two other cases in Texas “virtually identical” to the New Jersey case where judges decided in Snap-on’s favor and sent the cases to arbitration. “Snap-on disagrees with the ruling in the New Jersey court and is considering its procedural options.”
Judge Mathias E. Rodriguez’s decision has nationwide implications for Snap-on and other franchisors, Marks said. “Franchising has relied very heavily on arbitration clauses to prevent airing its dirty linen in public,” he said. “This has repercussions for every franchise company that seeks to keep its disputes private in arbitration. Because this not only applies to wives, it applies to relatives of the franchisee who have given money, based upon fraudulent promises.”
The cases originated from a lawsuit brought by Snap-on against Casey’s husband, Brian, a Snap-on franchisee. “They said that he owed $241,000 after having been a dealer for approximately four years,” Marks said. “We said there was a lot of fraud, and the arbitrator not only agreed with us, knocked out the debt, but awarded Brian $314,000.”
Nancy Casey was also a victim of fraud, Marks said. According to her complaint, she financed the purchase of her husband’s franchise with a $40,000 inheritance, but Snap-on did not allow her to co-sign the franchise agreement.
“That’s a whole interesting aspect,” Marks said. “Does the sale of a franchise constitute the sale of a consumer item? At least in New Jersey, that looks like that may be the case.”
Marks is “about to sue in several other states” on behalf of other wives of Snap-on dealers. He also filed a class-action lawsuit for several terminated franchisees against Snap-on in Florida for deceptive business practices.
With the Florida complaint, Marks is “jurisdiction searching,” Snap-on’s official statement read. In a similar New Jersey case, “the judge ruled in favor of Snap-on and sent all of the complaints to arbitration, and the same should happen here,” the statement read.