The MBE Platinum Shield Association

August 14, 2005 20:23 ET

MBE Platinum Shield Association and Legality of UPS Store Franchise Under Attack in Courts; California Court of Appeals Decides in Favor of Franchisee Challenge

MALIBU, Calif.--(CCNMatthews - Aug 14, 2005) -

United Parcel Service, (UPS) is currently engaged in multiple legal disputes with an estimated 150 Mail Boxes Etc., (MBE) franchisees and potentially hundreds of The UPS Store franchisees. On Monday, August 1, the California Superior Court responded to a July 26 request by the California Court of Appeals involving franchisees and UPS. The California Court of Appeals ruled the trial court had erred in dismissing a cause of action brought by MBE-branded franchisees against UPS for interfering with MBE-branded franchisees' franchise agreements. The California Court of Appeals also confirmed that UPS Store franchisees who converted to The UPS Store through the conversion in March 2003 have standing to sue UPS under the California Franchise Investment Law. Finally, the Court of Appeals found the trial judge should reverse his ruling, previously removing from the complaint factual allegations relating to UPS' plan to acquire MBE franchisees for its own corporate gain. Following the directives of the California Court of Appeals, the California Superior Court revoked its prior rulings.

Miles Scully, a partner at Gordon & Rees and lead counsel in this case, stated, "The significance of this decision cannot be overstated. UPS does not want to be forced to make the disclosure required by the California Franchise Investment Law."

These actions are significant because the court confirmed The UPS Store franchisees have the right to challenge the legality of the new UPS-owned The UPS Store franchise system which was established in 2003. Additionally, the court restored claims of tortious, or wrongful, interference with the relationships between Mail Boxes Etc. storeowners and their vendors and customers. The court reversal also allows the plaintiffs to pursue their allegations of UPS control over price, service and other business decisions of the franchisees. UPS requires The UPS Stores to charge retail prices established by UPS without regard to franchisees' expenses or geographic area. The court's action additionally opens up the potential for franchisees to seek punitive damages in their lawsuits.

The San Diego based law firm of Gordon & Rees and the Mulcahy Law Firm in Irvine, California represented the plaintiff franchisees in this appeal. Both firms are currently involved in legal action on behalf of franchisees from both MBE stores and The UPS Stores.

Gordon & Rees also participated in the representation of two individual Mail Boxes Etc. stores in recent arbitrations. UPS settled one arbitration in favor of the franchisee and, in the second case, the arbitrator issued a ruling finding that UPS breached the franchise agreement and the implied covenant of good faith and fair dealing and further ruled that UPS violated Section 17200 of The California Business and Professions Code and the Massachusetts Deceptive Trade Practices Act. UPS has not disclosed financial terms of the latter arbitration. The arbitrator's decision was filed and issued in February 2005.

In March 2001, UPS purchased the Mail Boxes Etc. Corporation for approximately $192 million. At that time, Mail Boxes Etc. was comprised of 3,400 independent franchise locations in the U.S. and about 1,000 others internationally. It was the largest consumer shipping and packaging network in the world.

In early 2003, UPS launched a campaign to convert 3,400 U.S. Mail Boxes Etc. stores into The UPS Stores. The UPS Store franchise campaign was called The Gold Shield Program. UPS and its wholly owned subsidiary Mail Boxes Etc. (MBE) chose not to issue a new Franchise Offering Circular for The Gold Shield Program. The Franchise Offering Circular, also known as an FOC, is a mandated disclosure document. The Federal Trade Commission requires that an FOC be provided to all potential franchisees to review in order to evaluate the franchise prior to purchase.

Instead UPS used a five-page amendment to the 2003 Mail Boxes Etc. FOC. MBE franchisees assert, in addition to other claims, that this failure to issue a new FOC did not comply with the California Franchise Investment Law.

Approximately 12 percent of the MBE franchisees rejected the 2003 conversion proposed by UPS. An estimated 150 MBE franchisees then formed The Platinum Shield Association, (PSA) to organize litigation in opposition to the UPS takeover. This year, The UPS Store franchisees have organized The Brown Board Owner's Assoc. (www.brownboard.com) to represent their grievances against UPS.

The Platinum Shield Association amended their litigation action in March of 2004 to include The UPS Store owners. Both groups of franchisees contend that UPS intentionally failed to disclose performance and financial data in addition to multiple violations of other franchise laws. Franchisee plaintiffs in litigation and arbitration against UPS currently span the United States.

For interviews and more information please contact MBE storeowner and Platinum Shield President Howard Spanier, in California 805-279-4319, or all hours, including weekends Mara Woloshin, in Portland, OR 503-241-3834; cell: 503-310-4504.

Contact Information

  • The MBE Platinum Shield Association
    Howard Spanier, 310-456-2733 or 805-279-4319 (cell)
    or
    Woloshin Communications Inc.
    Mara Woloshin, 503-241-3834 or 503-310-4504 (cell)