Condit family ordered to pay Baskin-Robbins over $46,000
By Linda Bentley | November 5, 2008
FPPC seeking nearly $2.5 million in damages against Condit kids
PHOENIX – On Oct. 22, U.S. District Court Judge Earl Carroll found in favor of Baskin-Robbins, which sued Acorn Lane Arizona, Inc. in March 2006, along with its owners, former Calif. Congressman Gary Condit, his wife Carolyn, daughter Cadee and son Chad, for breach of contract and failure to fulfill the obligations of their franchise agreements for two ice cream stores they operated in Glendale, Ariz. during 2005 and 2006.
Since Baskin-Robbins did nothing to stop the sale of ice cream after the franchise agreements were terminated, Carroll declined to find the Condits liable on the trademark infringement and unfair competition claims.
Carroll did, however, hold the Condits, as shareholders and officers, personally liable for the activities carried out in the name of Acorn Lane even though the corporation was administratively dissolved before the franchise agreements were terminated.
The franchise agreements imposed financial reporting and payment obligations on franchisees, whereas the Condits were required to submit gross sales to Baskin-Robbins each week for the preceding week ending Saturday and pay weekly franchise fees of 5.9 percent and weekly advertising fees of 5 percent of the gross sales.
Gross sales were to be reported electronically through Baskin-Robbins’ franchise sales reporting system known as “FAST,” which then automatically calculated the fees owed.
Chad Condit successfully completed the five-week Baskin-Robbins Business Management Education Program in Burbank, Calif., including training on FAST, where franchisees are taught everything from how to scoop ice cream to how to succeed in store financial operations.
According to Baskin-Robbins, Condit received additional FAST training in the field from Jerry Tilson, the company’s operations manager.
While the Condits neglected to report some weekly sales, they also failed to pay fees and, in some instances, paid with bounced checks.
In December 2005, Tilson met with Gary and Chad to discuss their being in arrears on reporting and payments, He offered them a 30-day “collection hold” providing they agreed to report all previous sales and pay all future fees.
On behalf of Baskin-Robbins, Tilson offered to buy the two stores for $20,000 to try to resolve the situation.
The three agreed to meet again on Jan. 16 to discuss the matter further, but the Condits failed to show up, failed to pay their arrearages, ceased to report sales, pay franchise and advertising fees, and, by Feb. 24, 2006, the overdue accounts totaled nearly $14,000.
On Feb. 27, 2006, Baskin-Robbins delivered notices to cure their defaults within 15 days or their franchise agreements would be terminated.
The Condits failed to cure their defaults and, on March 16, Baskin-Robbins delivered notices of termination that included a demand they immediately comply with their post-termination obligations under the franchise agreements.
During the bench trial held on Oct. 23, 2007, Chad testified he spent over $10,000 on the Baskin-Robbins training course, which was in addition to the $65,000 he said his family paid for each franchise.
He claimed the focus of the course was on scoop size, freezers and cakes, said the FAST system was only mentioned minimally and the process for making payments was not a focus of training.
Although he admitted receiving additional training from Tilson on FAST, Chad stated it was never for longer than ten minutes and said he was not “computer savvy,” citing he’s never made an online purchase.
Acknowledging he was responsible for reporting sales and paying fees each week, Chad admitted he did not fulfill those responsibilities, but argued he was not trained to do so, blaming Baskin-Robbins for their failure to train him.
Chad said he saw the notices to cure but did not correlate them with termination, only that they were behind in payments.
He testified he never saw a termination notice and only realized the franchises were terminated when he read about it in the newspaper and claimed his family lost $250,000 in the franchise deals.
Carroll’s order noted Chad was 40 years old at the time of trial, he is a college graduate with a bachelor’s degree in human resources, served as a Petty Officer in the Navy in intelligence operations from 1991 through 1995, was assistant to the governor of California and had written a book prior to becoming involved with the Baskin-Robbins franchise stores.
Carroll stated Chad’s testimony about not knowing how to operate FAST for reporting and payment purposes was “not credible, given his education, life experience and store operations training.”
Even if he didn’t know how to operate FAST, Carroll didn’t find that a legitimate reason to fail to comply with reporting and payment obligations under the franchise agreements.
Carroll also determined the claim that Baskin-Robbins fraudulently induced the Condits to enter into the two franchise agreements was “not supported by the evidence.”
In conclusion, Carroll found Baskin-Robbins was entitled to damages in the amount of $46,056 for franchise and advertising fees, late fees and collection costs, plus interest for 2005 and 2006, and ruled plaintiffs may file for attorney’s fees within 30 days after entry of judgment.
In January 2006, just two months prior to Baskin-Robbins filing its complaint against Gary Condit, his wife Carolyn, daughter Cadee and son Chad in U.S. District Court in Arizona, the Fair Political Practices Commission (FPPC) filed a civil action (www.fppc.ca.gov/litigation/FPPCcivil01-06.pdf) in Superior Court in Sacramento, Calif. against Chad and Cadee Condit, charging them with illegal personal use of Justice PAC funds from March 11, 2002 to June 30, 2003, in violation of the Political Reform Act of 1974.
The complaint cites the purported mission of Justice PAC, a political action committee established “to explore the press coverage” of their father, who was a still a congressman at the time, was used as a guise to illegally divert PAC funds for personal use.
“As a result of their scheme,” the complaint alleges Chad and Cadee Condit “illegally received $226,000 in payments … for no discernable work,” and stated, “In a little more than a year, because of the unlawful actions of defendants, Justice PAC went from having $270,793 in cash-on-hand to just $1,513.87.”
Under the Act, the defendants are liable for up to three times the amount of expenditures illegally made and received. The FPPC is seeking nearly $2.5 million in damages against Justice PAC, Chad Condit, its treasurer, and Cadee Condit.
At the time the complaint was filed, FPPC Enforcement Division Chief John Applebaum was quoted as saying, “This civil complaint speaks for itself. We believe this matter involves serious violations of the Political Reform Act, and we are asking the court to impose civil penalties commensurate with the seriousness of the case.”
Photo: Gary Condit