Item 3 LITIGATION
Except for the seven actions
described below, there is no litigation that must be disclosed in this
Franchise Disclosure Document.
Litigation
Against Franchisees Commenced in the Past Fiscal Year
Litigation to Collect Past
Due Royalty Fees and Other Amounts
Big Boy Franchise
Management LLC v EASA. Inc.. Christopher Khourv. and Rana Khourv. Macomb County (MP Circuit Court case number 07-1025-CZ. Hon. David F. Viviano. Filed on
March 7, 2007. This matter was settled by a settlement and Consent Judgment
entered on November 13,2007 against Defendants.
Big Boy Franchise
Management LLC v EASA. Inc.. Christopher Khourv. and Rana Khourv: Arbitration action filed
with the National Arbitration Forum, case number FA070200019373. Filed on
February 13, 2007. The parties are in the process of selecting an arbitrator.
Big Boy Franchise
Management v Khulood Karachv. Macomb County (MP Circuit Court case number
07-0010-CK. Hon. David F. Viviano. Filed on January 2, 2007. This matter remains
pending.
Litigation
Alleging Franchisee''s Breach and Abandonment of Franchise Agreement
Big Boy Franchise
Management LLC v TCCC. Inc.. Shahpar Taleghani. Jamshid Taleghani. Cynthia
Taleghani. and Hildegard Taleghani. jointly and severally. National Arbitration
Forum. Claim
filed December 7, 2007, alleging that Defendants breached their obligations
under two franchise agreements by abandoning restaurant operations at two
locations prior to the end of the term of the franchise agreements resulting in
loss of franchise fees and other damages. A case number has not yet been
assigned and the demand is in the process of being served upon the Defendants.
Big Boy Franchise
Management LLC and Big Boy Food Group LLC v Manistee Big Bov. Inc. and Heide
Siklich. Manistee County (MI) Circuit Court, case number 07-012885-CK. Hon.
James M. Batzer. Big Boy filed a complaint on May 15, 2007, alleging
that Defendants breached their obligations under a franchise agreement by
abandoning restaurant operations prior to the end of the term of the franchise
agreement resulting in loss of franchise fees and other damages.
Other Actions
BBB Restaurants. Inc. v Big
Bov Franchise Management LLC and QSC Restaurant Corporation v Big Bov Franchise
Management LLC. National Arbitration Forum. Case Numbers FA0701000882173 and
FA0701000921780, respectively. On December 15, 2006, our franchisees, BBB
Restaurants, Inc. and QSC Restaurant Corporation, filed arbitration claims
after Big Boy terminated the Area Development Agreements and Management
Agreements with each of them for non-compliance with the Development Schedule
set forth in the Area Development Agreements. The cases involved related
parties and similar claims and were consolidated pursuant to an order of the
Arbitrator. In the cases, Claimants alleged Big Boy violated the California
Business and Professions Code Section 20020 and 20021 (California Franchise
Relations Act); Breach of Contract and Breach of Covenant of Good Faith and
Fair Dealing with respect to Encroachment of Area Development Agreements and
Management Agreements and Wrongful Termination of Area Development Agreements
and Management Agreements. Claimants requested damages, costs and attorney
fees. Big Boy filed counterclaims against BBB Restaurants, Inc.
("BBB") and QSC Restaurant Corporation ("QSC") in the
arbitration proceedings. In its counterclaims, Big Boy alleged that BBB and QSC
breached their obligations under the Area Development Agreements by which BBB
and QSC each were to develop a number of franchised Big Boy Restaurants within
a specified territory in Southern California by failing to timely open their
first such restaurants in the territory. Big Boy alleged that the delay in
opening the franchised restaurants and therefore the failure to abide by the
development schedule set forth in the Area Development Agreements caused Big
Boy to incur damages in the form of (i) loss of royalty fees from the first
franchised location from the period July 27, 2006 (the date by which the
franchised location was to be opened) forward, (ii) loss of Big Boy commissary
sales from July 27, 2006 forward, and (hi) damage to Big Boy''s goodwill and
reputation. Big Boy alleged monetary damages in excess of $250,000. Big Boy has
alleged that BBB''s and QSC''s breaches of their obligations under the
development schedules in the Area Development Agreements gave Big Boy the right
to terminate the Area Development Agreements, and that Big Boy did in fact
validly exercise such right of termination such that Big Boy was free to
contract with other area developer with respect to the same territory. Each of
these cases was settled by the parties pursuant to one written Settlement
Agreement dated October 18,2007. Pursuant to the Settlement Agreement, Big Boy
agreed to refund to BBB and QSC an aggregate amount equal to $210,000.00 and to
waive the payment of certain contested past due amounts and the parties agreed
that the Area Development Agreements and Management Agreements are in fact
terminated and of no further force or effect.
