MAC TOOLS Guilty of Franchise Fraud?

Mac Tools calls its distributorship business opportunity a “Journey Worth Your Lifetime.”  The spouse of a former Mac Tools distributor has another term for it:  “Illegal franchise.”

Elba Maria Ceballo claims that Mac Tools knowingly misclassifies its distributorship program as a “business opportunity,” and, in doing so, fails to comply with federal franchising laws.

Mac Tools Distributorship:  A Journey Worth Your Lifetime?

According to the Mac Tools website:

“Being a Mac Tools Distributor is a life-changing opportunity and commitment.

“We believe it is a Journey Worth Your Lifetime. It gives you the freedom and responsibility to go as far and as high as your abilities and hard work take you.

“You are on the road and master of your own fate.

“Yet you are part of a company and community with an esteemed heritage, innovative strategies for growth and one that is completely dedicated to your own personal success.”

…OR Illegal Franchise?

A recent press release by the plaintiff’s law firm Marks & Klein, LLP provides an overview of the complaint:

“Wife of Mac Tools Franchisee Permitted to Proceed With Fraud Claims in N.J. State Court

“NEWARK, N.J., Oct. 12, 2011 /PRNewswire via COMTEX/ — A federal judge has cleared the way for the spouse of a former Mac Tools distributor to proceed with fraud claims against the division of Stanley Black & Decker, Inc. /quotes/zigman/590745/quotes/nls/swk SWK +0.69% in a New Jersey state court.

“The Hon. Mary Cooper of the United States District Court for the District of New Jersey issued an Order and written opinion on Oct. 5 granting the motion of Elba Maria Ceballo, the wife of a former Mac Tools distributor, to remand her lawsuit back to New Jersey Superior Court, Middlesex County (Ceballo v. Mac Tools, Inc. et al, 3:11-cv-04634-MLC-DEA). Ms. Ceballo’s lawsuit charged that Mac Tools violated FTC (Federal Trade Commission) regulations by selling her and her husband a tool sales route as a “distributorship” when, in fact, it was an undisclosed “franchise.”

“’FTC regulations provide important protections to individuals and families who invest in small route sales and other franchised businesses,’ said Ms. Ceballo’s attorney, Gerald Marks of Red Bank, NJ-based Marks & Klein, LLP. ‘One of the major protections is the requirement that the seller of a franchise provide a buyer with a Franchise Disclosure Document (FDD) that contains over 22 items of information, including the names of all current and former franchisees so that the prospective purchaser can contact them to determine if they feel they believe the business investment is worthwhile.’

“Ms. Ceballo, a resident of Perth Amboy, NJ, contends that although she was entitled to receive an FDD, one was not provided because Mac Tools fraudulently mislabeled its business as an ‘independent distributorship.’

“After the lawsuit’s original filing in State Court, Mac Tools removed the case to federal court, arguing that Ms. Ceballo only named a district manager of Mac as a defendant to keep the case in state court and avoid federal jurisdiction. Marks & Klein immediately moved to remand the case back to state court, arguing that Ms. Ceballo had independent, factually specific fraud claims against the district manager and that the federal court did not have jurisdiction.

“’Despite Mac’s protestations that our client named the district manager solely to manipulate jurisdiction, the Court rejected Mac’s arguments and agreed that Ms. Ceballo had asserted valid claims against all of the named parties,’ said lead counsel Marks, who has represented tool dealers in various franchise and distributorship systems for the past 20 years. ‘We are extremely pleased with the Court’s decision to properly remand this case to State Court, where it belongs. Mac’s suggestion that its district manager employee was named solely to defeat federal court jurisdiction was a red herring and a futile attempt to avoid what may become a class action.’

“Louis D. Tambaro, another member of Marks & Klein, added: ‘We are excited for the opportunity to try our claims on the merits before a New Jersey state jury of Ms. Ceballo’s peers. Unfortunately, we have had to contend with Mac Tool’s efforts to throw up procedural roadblocks; however, those delay tactics were handily defeated and will similarly not be tolerated in the future. “’

“’We expect Mac to make additional efforts to stall the case,’ Mr. Tambaro continued, ‘but are confident that the case will be rightly and favorably decided by a Middlesex County jury.’

SOURCE Marks & Klein, LLP

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