Video Transcription

Hi. My name’s Jeff Goldstein of the Goldstein Law Group. We represent franchisees on a national basis. Today I wanted to speak to you briefly about a recent case regarding expert witnesses. Expert witnesses are normally used in franchise cases to prove damages, so the franchisee saying he was wrongfully terminated and therefore he’s entitled to a future income stream that he lost, and the franchisor arguing on the other side that because the franchisee acted improperly and the franchisee had to be terminated, it would lose the franchise fees for the rest of the term that the franchise should have operated.

Usually, as I say, the profits, lost profits for either party or both parties need to be supported by an expert whether it’s an economist, an accountant, somebody with financial background to testify in court. Usually getting an expert to testify for a franchisee is difficult because they’re very expensive. And it’s also more difficult for a franchisee to prove damages, for many reasons, than it is for a franchisor.

There is an interesting recent case where an expert for a franchisor was caught with his pants down and didn’t meet many evidentiary standards to allow his testimony to be admitted, and some of the effects are somewhat humorous. The first was the expert for the franchisor who was testifying about the franchisor’s damages was asked whether he would recommend to one of his own clients whether that client should invest in the franchisor. The expert said that he wasn’t able to determine that. The second is when he used sampling methods for franchisees to get revenues. He admitted that he only called franchisees that he knew and were his friends. Third, there was a similar issue regarding whether he speculated on other numbers. The expert actually admitted under oath that he speculated on some of the numbers that he used in his analysis. The fourth that I pulled out of the case was that the expert admitted that he relied on Wikipedia for a lot of his factual analysis, and it wasn’t a… And he recognized that it wasn’t necessarily accurate and usable, reasonable to rely on that exclusively to give his report of lost damages for the franchisor. There were other defects as well. And as I say, this is one example of where an expert for a franchisor failed and his testimony was stricken by the judge, when the case is usually the opposite and franchisee is unable to develop evidence through an expert on his damages.

The bottom line here is that franchisees are usually disadvantaged because it’s usually a lack of money that creates an expert like this. And as I say, I see many cases where franchisees will lose because of a lack of ability to fund a meaningful expert. So this is just another area where the disparity in income and the disparity in resources between franchisor and franchisee also plays out in the ultimate resolution of a case in court.

Thanks for joining us today, and we hope that you join us for other issues on these videos.

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