Janet Sparks writes at Blue MauMau that after five years of legal wrangling with franchisor Dunkin’ Donuts, accumulating nearly $2 million in legal fees, and placing six franchised shops into bankruptcy after desperate attempts to sell them, Irwin J Barkan has been more than ready for his day in court. For the past year, he has been awaiting a judge to allow his case to a jury trial.

Last week he got his wish.

On September 15, Judge Ronald R Lagueux issued an order denying Dunkin’ Donut’s motion for summary judgment based on the magistrate judge’s May 26 report and recommendation. He ruled that Barkan’s company D&D Barkan and his five separate entities would have a jury trial date set after pre-trial memorandums were submitted within the thirty-day deadline from the date of his order. He also ruled that the testimony of Barkan’s substitute damage expert could be allowed in the case after his original expert died suddenly last year.

Barkan first entered into five franchise agreements with Dunkin’ Donuts in 2001-2002, to open five stores in Providence. Between that time and 2003 he also entered into several store development agreements (SDAs) to open additional shops within a specific time period. But Barkan experienced development disputes with Dunkin’ from the get go and his stores steadily operated at a loss, throwing him into financial stress. He then sought the help of Dunkin’ to refinance his debt through The CIT Group, a lender associated with Dunkin’ corporate.  After negotiations advanced, on June 15, 2004 the parties entered into a settlement agreement under terms that Dunkin’ would help Barkan refinance and amend his development agreements, postponing the dates by which he had to meet certain payments and store-opening obligations. In exchange, Barkan agreed to release any claims against Dunkin’ and to remain current on all obligations under the settlement agreement.  

However, after signing the new settlement agreement, things went badly astray. Dunkin’ informed Barkan that CIT would not refinance his debt. But Barkan alleges that what really happened was that CIT  rejected the refinancing because Dunkin’ employees did not provide the lender with the proper paperwork to evaluate the application, according to what a CIT employee told Barkan. In an effort to resolve this new set of financial difficulties, Barkan tried to sell his existing stores, along with the franchise agreements and related assets. But the sale did not happen and in January 2005 Dunkin’ informed him that he and his companies were in default due to his failure to make over $1 million in payments and threatened to terminate his agreements.

Barkan filed his original lawsuit against Dunkin’ on February 8, 2005, alleging the company had failed to make a good faith attempt to arrange refinancing, causing failure to his business. He also received a temporary injunction. Because Dunkin’ had sent out termination notices with a seven-day cure period on February 14, 2005, Barkan plaintiffs filed bankruptcy petitions for the stores in strategic Chapter 11 reorganization. Barkan did not file for personal bankruptcy and paid off creditors.  

Magistrate Judge’s Report and Recommendation

Judge Almond’s report tracked the negotiations and activities of Barkan, Dunkin’ and CIT, during three pertinent time periods: leading up to June 2004 settlement agreement; after the execution of that agreement and before CIT denied Barkan’s request for loan restructuring; and the aftermath, when Barkan’s businesses finally floundered. The judge stated that the essence of the dispute between the parties was whether Dunkin’ defendants fulfill their contractual obligation to “work with” CIT to arrange refinancing for Barkan and his entities.

Judge Almond also tracked the “murky” events of the various transactions, and characterized the conflicting allegations as a “factual quagmire”. He surmised, “Because these factual controversies could be reasonably resolved in favor of either party, summary judgment is not appropriate at this state of the proceedings.”

Read more at: Blue MauMau