LAS VEGAS (CN) - Six defendants in a weight-loss franchise fraud will be lighter by $6.7 million after refusing to defend themselves against claims from frustrated franchisees, a federal judge ruled.
U.S. District Judge Andrew Gordon ordered Bouari International Franchise, A New ME, A New Me Business, Bouari's Closet, Carol Ann Chaney and Franchise Growth Systems to pay a total of $6,656,495 in damages, plus punitive damages.
Lead plaintiff Paris G. Arey was among two dozen people and businesses who in 2013 accused Las Vegas-based Bouari International Franchise et al. of inducing them to buy franchises to market weight-loss programs and products.
Gordon awarded the damages after entering default judgments against the defendants, who did not participate in the proceedings.
"The plaintiffs lost significant sums of money investing in failed franchises based upon the defendants' actions and misrepresentation," Gordon wrote.
He said it "would be unfair and prejudicial to the plaintiffs" to continue with a costly lawsuit in which defendants are not inclined to defend themselves.
"Although courts prefer cases be decided by trials, here the defendants' defaults were not due to excusable neglect and the objective facts alleged in the complaint indicate there is little likelihood of a factual dispute," Gordon wrote.
He said the complaint and its supporting affidavits are sufficient to award damages plus doubled damages for the punitive amounts.
"Those documents also demonstrate that the actions and misrepresentations of the defendants were made with oppression, fraud, or malice," Gordon wrote.
He denied plaintiffs' request for $100,000 in "development costs and attorney's fees," saying they did not explain what development costs are or provide evidence supporting them.
In the original, Aug. 2, 2013 complaint, Arey and 10 other plaintiffs and their franchises said Chaney claimed to have a doctorate in nutrition, and they relied upon this expertise in deciding to buy franchises - only to learn that Chaney's doctorate is from an unaccredited university that no longer exists.
Bouari also lied about conducting studies on 30,000 people to confirm the effectiveness of its weight-loss program, improperly collected franchise insurance premiums and other fees, hid $200,000 in advertising costs, did not maintain supplies, and made other misrepresentations, in order to collect a $39,000 franchise fee and charge unwarranted fees, the plaintiffs claimed.
"Chaney admitted that the goal of the business was simply to sell franchises," Arey said in the complaint.
Bouari International Franchise changed its name to DeNovo Clinic and continued operating as a weight loss clinic and franchise, Arey said in the original complaint.
A phone number listed for Bouari International Franchise in Las Vegas is the same phone number used by DeNovo Clinics, where no one answered a phone call on Tuesday night.
DeNovo Clinic says on its website that it is a wellness and weight-loss clinic that focuses on nutrition and provides "customized support" on wellness and weight loss and provides participants with "high quality, all-natural products that ensure wellness and weight loss."
Attorney Kling Rybicki of Royse City, Texas, filed the default judgment motion on plaintiffs' behalf and was not immediately available by telephone Tuesday night.
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