A Love of Food I, LLC v. Maoz Vegetarian USA, Inc – Case Brief Summary (Federal Court)

In A Love of Food I, LLC v. Maoz Vegetarian USA, Inc., 70 F Supp 3d 376, 138962, 2014 WL 4852095, [D DC 2014] a federal district court in the District of Columbia, applying New York law, held that a franchisee did not suffer proximately caused damages where the FDD was disclosed after the first personal meeting but before the franchise agreement was signed. (See id. at 411-412.)

Despite granting summary judgment on liability to plaintiffs on the section 683 (8) claim, the Maoz court held that there were no damages, explaining:

"This Court also concludes that plaintiff is not entitled to monetary damages as a result of defendant's failure to disclose the offering prospectus at the first possible meeting of the parties. The causation requirement is even harder to fulfill in this context than it was with the other technical violations of the franchise laws at issue, for it is undisputed that defendant provided a copy of the offering prospectus at some point prior to the execution of the franchise agreement . . . , so at most there was a slight delay in providing plaintiff with the requisite information (i.e., a nominal violation), and no reasonable jury could find that plaintiff's significant business losses were the result of untimely disclosure, as the NYFSA requires. In fact, Plaintiff's claims in this case have nothing whatsoever to do with the timing of defendant's disclosure of the 2007 Offering Prospectus, as might have been the case if there was any evidence that the plaintiff had insufficient time to review the prospectus prior to purchasing the franchise. Instead, and quite to the contrary, the gravamen of plaintiff's claims homes in on the content of the Offering Prospectus; plaintiff asserts, in particular, that plaintiff had so studied and accepted the information in the 2007 Offering Prospectus that they relied to their detriment on what defendant had stated therein when plaintiff undertook to purchase a franchise. It is clear beyond cavil that plaintiff cannot have it both ways: it cannot maintain that it relied heavily on the offering prospectus, on the one hand, and suggest, on the other, that the disclosure of that same document was so tardy that plaintiff did not have time to review it, causing compensable damages. Because there is no evidence connecting the untimely disclosure to plaintiff's business losses, and especially in light of plaintiff's explicit argument that it relied on the content of the Offering Prospectus, this Court finds as a matter of law that Plaintiff will be unable to prove causation. Thus, despite the technical NYFSA violation, plaintiff is not entitled to damages." (Id. at 412.)