Towne v. Robbins
| Decision Date | 12 October 2004 |
| Docket Number | Civil No. 02-1688-MO. |
| Citation | 339 F.Supp.2d 1105 |
| Parties | Robert A. TOWNE, Cynthia J. Towne, and Towne-Murphy, Inc., Plaintiffs, v. Anthony ROBBINS, Becky Robbins, Robbins, Robbins Research International, Inc., Anthony Robbins & Associates, Inc., The Anthony Robbins Companies, Brad N. Hunsaker, and Sam Georges, Defendants. |
| Court | U.S. District Court — District of Oregon |
C. Thomas Wesner, Jr., Wesner Coke & Clymer, P.C., Dallas, TX, J. William Savage, Savage Bowersox Supperstein, LLP, Portland, OR, for Plaintiffs.
Alec J. Shebiel, Joy Ellis, Keith S. Dubanevich, Michael Ryan O'Connor, Robert C. Weaver, Jr., Garvey Schubert Barer, Portland, OR, Daniel J. Friedman, Daniel G. Murphy, Peter S. Selvin, Loeb & Loeb, LLP, Los Angeles, CA, for Defendants.
In this franchise dispute, plaintiffs bring several claims against well-known motivational speaker Tony Robbins and his companies. On September 7, 2004, the court held that plaintiffs' claims under the Oregon Franchise Act were largely barred by the Act's limitations provision. See Towne v. Robbins, 331 F.Supp.2d 1269 (D.Or.2004). The issue now before the court is whether plaintiffs' ORICO, RICO, fraud, and special-relationship claims also are time barred. For the reasons discussed below, the court holds that these claims are barred, except to the extent a RICO claim can be based on events occurring within four years of this lawsuit and fraud and special-relationship claims can be based on alleged misrepresentations which occurred in connection with the 2001 decision to continue their franchise. Thus defendants' motion for partial summary judgment regarding limitations is GRANTED IN PART AND DENIED IN PART. (Doc. # 154).
The court discusses only those facts — as construed in favor of the non-movant plaintiffs — which are considered relevant to the limitations issues presented. In September 1990 plaintiff Robert Towne left his job as an account manager at a California software company to join Robbins Research International ("RRI"). At that time, Mr. Robbins used RRI to distribute his motivational tapes and other related products. In deciding to enter into a business relationship with Robbins, the Townes expressed as a primary goal gaining "financial independence by 1997." In addition, in their original application submitted to Robbins, the Townes, relying on materials provided by Robbins, projected they would earn about $250,000 in net income in distributing Robbins' products. Ms. Towne, in her deposition, stated that this $250,000 projection was important to their decision to enter into the business relationship, and, according to her: Persuaded the distributorship provided "an unprecedented business opportunity," the Townes moved to Portland from California to begin acting as distributors for RRI.
Sometime in late 1990 or early 1991, Robbins decided to convert his mode of business from distributorships to franchising operations. The distributorship agreements gave distributors a right of first refusal to become franchisees. The Townes were assured that a conversion to franchising operations presented the "superior" business model. For instance, Brad Hunsaker, a high-level employee of the Robbins organization, told the Townes that operating a "Portland franchise would be more profitable than the distributorship."
As required by the Federal Trade Commission, Robbins submitted to prospective franchisees a Uniform Franchise Offering Circular ("UFOC"), an informational packet organized by the Robbins organization disclosing information pertinent to deciding whether to enter into a franchise agreement. The UFOC stated that at least two lawsuits alleging fraud had been filed against RRI by former distributors. The UFOC also informed potential franchisees that the franchisor would not be RRI but a new company created by Mr. Robbins, Anthony Robbins & Associates ("ARA").
Without reviewing in any detail the UFOC or showing it to their lawyers, Mr. Towne, his wife Cynthia Towne, and another couple, Randy and Kathleen Murphy, teamed up and decided to enter into a franchise agreement offered by ARA in July 1991. The Townes and Murphys created a new company to act as franchisee and called it Towne-Murphy, Inc.1 The 1991 franchise agreement had a life of five years with a renewal option.
In the early '90s, however, the Townes were not successful. In their complaint, the Townes contend that they made little money from 1991 through 1996, despite Robbins' promise of significant profits. Specifically, in 1991 and 1992 the Townes made no positive net income; in 1993, they made about $15,500; in 1994, they made about $4,500; in 1995, they made about $2,500; and in 1996, they made about $19,000. Given this track record, Mr. Towne stated he and his wife were struggling even to provide "necessities" for their children.
In fact, the performance of the franchise was so bad in 1991 that the Murphys decided to sever their ties with the Robbins organization. Mr. Murphy testified it was apparent upon reviewing his W-2 for 1991 that the business had been a complete failure. He also contemplated suing ARA. The Townes bought out the Murphys' interest for $5,000.
As mentioned, the initial franchise agreement had a renewal option which came due in July 1996. At that time, the Townes were experiencing substantial financial hardship. Nevertheless, they decided to renew the franchise agreement, signing an agreement in July 1996 which renewed the franchise relationship for an additional five years.
Aside from experiencing failures in the '90s as to their specific franchise, the Townes also discovered by at least 1993 that ARA was struggling financially. In June 1993, for instance, the Townes were informed that RRI, which was providing all the funding for ARA, was over $2 million in debt and laying off employees because it could not make payroll.
Throughout the '90s, several former distributors and franchisees brought suit against Robbins and his companies for fraud. In fact, in a 1990 memo (which the Townes never saw), Mr. Hunsaker expressed concerns about the possibility of having to confront "wholesale legal action ... in the nature of a class action or something as damaging as a RICO action ... as a result of obvious misrepresentations that were made during the early part of our history." Although it does not appear defendants were ever sued in a class action, they have been sued several times over the years. As mentioned, the UFOC disclosed two lawsuits alleging fraud claims. And, as disclosed in a 1992 memo written by Mr. Hunsaker and sent to franchisees, five former distributors had sued RRI in three separate lawsuits. Robbins settled many of the cases which had been brought against him. Mr. Hunskaker, however, in a February 7, 1992, memo blamed the litigant-distributors themselves for the failed businesses; thus, according to Mr. Towne, he and his wife did not believe defendants were at fault for the failed businesses.
As further evidence of the widespread struggles of Robbins franchisees, defendants point to a July 4, 1993, memo sent to the Townes from a fellow franchisee stating that at least 80% of the franchisees were losing money. Thus it is clear that plaintiffs were not alone in their disappointment with their franchise's record.
Aside from private lawsuits against Robbins and his companies, the FTC in 1995 announced that RRI and Robbins had agreed to settle allegations they had made misleading earnings claims to franchisees. The settlement was publicly disclosed; the Wall Street Journal reported on the settlement as follows:
The [FTC] said Mr. Robbins and his San Diego company, [RRI], have agreed to settle previously undisclosed charges that they misrepresented the earnings potential of Robbins franchisees. Mr. Robbins and his company have agreed to pay $221,260 in redress to franchisees, the FTC said. According to the FTC, "few, if any" Robbins franchisees made earnings between $75,000 and $300,000 a year, as allegedly represented by Robbins. The franchisees, who paid fees between $5,000 and $90,000 for franchises, organize motivational seminars and sell motivational tapes. Brad N. Hunsaker, director of legal services for Robbins research, said, "There are some franchisees who did, and are doing very well at this business."
Along with the other franchisees, the FTC sent the Townes a copy of its settlement with RRI. As he had grown accustomed to doing, Mr. Hunsaker wrote a memo to the franchisees spinning the FTC action: "We believe [settling with the FTC] is simply the most prudent and efficient way to resolve our dispute with the FTC concerning how we negotiated distribution agreements with our business partners in the late 1980s." The Townes emphasize Hunsaker's reference to "business partners in the late 1980s'" led them to believe the underlying conduct did not affect them, because their business agreements dated from the early '90s.
By 1997, the Townes had sunk deeper into debt. In a March 20, 1997, letter written to their mortgage company seeking relief from payments they owed for property in California, Mr. and Mrs. Towne summarized their financial difficulties which resulted from their struggling franchise and revealed their knowledge of Robbins' litigation troubles:
We invested the last of our available savings into our new business in 1990 and 1991 which was very hard on us financially. The business did not do well from the start. It is a franchise which looked great at first, but has put over 70 business owners out of business. Many of the franchises have sued the franchisor for its lack of support and follow through on its promises. The franchisor has settled in most cases. Our business nearly bankrupt our partners ... in late 1991. It has had some good months, but many more bad...
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