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Thursday, October 10, 2013

Tanfran RICO: Bryan Punturo's No Stranger to Back-of-the-Envelope Calculations

While Bryan Punturo battles it out in court with Richard “R.C.” Hermann  over charges including defamation, "false light" invasion of privacy and tortious interference with a business relationship, only Miss Fortune has discovered that Punturo's no stranger to back-of-the-envelope calculations that come back and bite you in court. And while Punturo was ultimately successful in his 2004 case (detailed exclusively below), it's interesting to see how "widely divergent" financial projections can come back to haunt you with almost karmic precision. 

Read what the TC Ticker can't tell you!

THE CASE
Aron Schrotenboer and Aron Alan, LLC sued Tanfran, Inc. and Bryan Punturo in 2004 for violations of the Michigan Franchise Investment Law (MFIL) in the sale of four Mirage Tanning franchises. 


IS IT A MIRAGE?
Aron Schrotenboer first met with Bryan Punturo in 1999 in Plainfield, Michigan to discuss purchasing the Mirage franchise in Plainfield. Schrotenboer would eventually sign four franchise agreements for the following locations in Michigan: (1) Rockford, (2) Cadillac, (3) Grand Rapids, (the “Beltline” location) and (4) Walker (the “Standale” location).

During the meeting he received profit and loss statements for the Plainfield location for (1) January through December 1998 and (2) January through February 1999. Both documents included handwritten notations and calculations made by Schrotenboer and his father, who accompanied him at the meeting.  

After the meeting, Punturo mailed Schrotenboer additional material, including a “Presentation Outline” and “Sheet 13,” which showed revenue for the Plainfield location for March through December 1997 and January through February 1998. Sheet 13, based on the months listed, reported Plainfield income in 19972 as $181,357 and $43,066 for 1998. According to the Presentation Outline, the 1998 income was $435,000 for Fort Wayne, $325,000 for Plainfield and $425,000 for Grand Rapids (28th Street).

Despite the conflicting information, Aron enter into a franchise agreement with Tanfran, and later entered into three additional franchise agreements. 

Schrotenboer formed Aron Alan, LLC in 2000, signed the first franchise agreement in February 2000 and signed the last franchise agreement in January 2002. Aron Alan LLC contended that the company relied on the above information when they decided to enter the franchise agreements. 

In the spring of 2004, Schrotenboer met with two other franchisees to discuss problems they were having with Punturo. That summer, Aron Alan, LLC obtained documents that provided different financial figures--specifically, lower annual profits--than the ones Punturo presented in 1999. 

In August 2004, Aron Alan and Aron Schrotenboer filed a complaint against Tanfran and Bryan Punturo in the Northern District of Indiana alleging a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., and various state law claims. On December 1, 2004, the Indiana court transferred the case to Michigan's Western District Court. 
  
Aron Alan, LLC sought rescission of the franchise agreement and monetary damages for claims of fraud, breach of contract and unjust enrichment, as well as claims under MFIL.


THE DECISION
Upon comparing the Sheet 13 and the Outline to the profit and loss statements, a reasonable person would have been prompted to inquire of Punturo which gross income figure for 1998 was correct - the $152,659.56 figure from the 1998 profit and loss statement; the $325,000 figure from the Outline; or the $43,066 figure from theSheet 13.

The court held that the given the conflicting information that Aron possessed, no reasonable person could have relied upon the “widely divergent figures” without making further inquiry. Because reasonable reliance is an element of an MFIL claim, and such reasonable or justifiable reliance was absent, the court threw out Arons’s claim.


Miss Fortune sends good wishes to both Hermann and Punturo--we'll see you in court!
 



 



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