Case 2:09 Cv 00126 DBH Document 52

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE CASCO BAY VENDING, LLC, ) ) and ) ) THEODORE MORTON, ) ) and ) ) NICOLE MORTON, ) )

Plaintiffs ) v. ) )

BACON WHITNEY, LLC, ) CRAIG R. JALBERT as Trustee ) -Assignee for the Benefit of Creditors ) Of Bacon Whitney, LLC, ) INTELLIVEND, LLC ) and ) CHRISTOPHER ROLLINS, ) )

Defendants )

CIVIL ACTION NO. 2:09-CV-00126-DBH

THIRD AMENDED COMPLAINT PLAINTIFF DEMANDS TRIAL BY JURY

Nature of the Case

NOW COME Casco Bay Vending, LLC (“Casco Bay Vending”), Theodore Morton and

Nicole Morton (collectively “Plaintiffs”) and complain against Bacon Whitney, LLC (“Bacon

Whitney”), Craig R. Jalbert as trustee-assignee for the Benefit of Creditors of Bacon Whitney,

LLC, (the “Trustee”), IntelliVend, LLC (“IntelliVend”) and Christopher Rollins (“Rollins”)

(the defendants other than the Trustee may be referred to herein collectively as the

“Defendants”).

The Parties

1. Plaintiff Casco Bay Vending is a Maine limited liability company with a principal

place of business in Portland, Maine.

Case 2:09-cv-00126-DBH Document 52 Filed 09/11/09 Page 1 of 28

2. Plaintiff Theodore Morton is an individual residing in Hampton Falls, New

Hampshire.

3. Plaintiff Nicole Morton is an individual residing in Hampton Falls, New

Hampshire.

4. Defendant Bacon Whitney is a Massachusetts limited liability company with a

principal place of business in Newton, Massachusetts.

5. Defendant Trustee is, upon information and belief, an individual residing in

Newton, Massachusetts who serves as the trustee-assignee for the benefit of creditors of Bacon

Whitney.

6. Defendant IntelliVend is a limited liability company organized under the laws of

Massachusetts.

7. Defendant Rollins is an individual residing, upon information and belief, in New

York.

Jurisdiction and Venue

8. This Court has jurisdiction pursuant to 28 U.S.C. §1331. Diversity is established

from the fact that Plaintiffs and Defendants are residents of different states.

9. This action also falls within the Court’s diversity jurisdiction pursuant to 28

U.S.C. §1332, because the amount in controversy exceeds the sum or value of $75,000, exclusive

of interest and costs.

10. Venue is proper in the District of Maine pursuant to 28 U.S.C. §1391(b)(2)

because a substantial part of the events giving rise to this action occurred in this District and the

franchise territories and vending equipment that are the subject of this action are located in this

District.

Facts

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11. Plaintiff Theodore Morton is the sole Member of Casco Bay Vending.

12. Plaintiff Nicole Morton is the spouse of Theodore Morton.

13. Casco Bay Vending is a limited liability corporation engaged in the business of

supplying vending machine and related services for the provision of snacks and beverages.

14. Defendant Bacon Whitney is a limited liability company which was engaged in

the business of franchising vending machine services and leasing vending and related machines

to franchisees prior to its insolvency in 2008.

15. Upon information and belief, Elders and Bacon Whitney are owned by the same

members and/or have common ownership, including, but not limited to John Halpern and George

Denny.

16. As a result of the common ownership, common management, and commonality in

purpose to facilitate the sale of franchises, Elders was at all relevant times the alter ego of Bacon

Whitney.

17. Beginning in the summer of 2008, and through the recommendation of Raj

Mehra, Executive Vice President for Bacon Whitney, Plaintiffs Theodore Morton and Casco Bay

Vending retained Rollins to perform the services of a consultant and advisor to assist Theodore

Morton and Casco Bay in the acquisition of business opportunities in the form of a lease and

franchise with Bacon Whitney.

18. Rollins had worked closely with Bacon Whitney and Bacon Whitney’s president,

Mark Bruno, in the past and, upon information and belief, he was intimately aware of the fact

that Bacon Whitney was experiencing financial and operational difficulties at the time he became

the consultant for the Plaintiffs.

19. As part of his consulting services, Rollins agreed to provide a business plan to

Casco Bay Vending and to validate the financial representations made by Bacon Whitney to

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Casco Bay Vending and Theodore Morton in connection with the sale of franchise territories

located in the State of Maine.

20. Acting on the advice of Defendant Rollins, Theodore Morton and Casco Bay

Vending negotiated with Bacon Whitney to purchase a vending franchise from Bacon Whitney.

21. Acting on the advice of Rollins, Theodore Morton and Casco Bay Vending also

entered into negotiations with Elders Financing to procure loans to purchase the Bacon Whitney

franchise.

22. Upon information and belief, Rollins was aware at all relevant times, due to his

past involvement with Bacon Whitney, that Bacon Whitney was experiencing severe financial

difficulties during the time period leading up to the closing on the sale of the franchise and

Leases with Casco Bay Vending, but Rollins failed to disclose such facts to Plaintiffs.

23. During the negotiations with Bacon Whitney and Elders, Bacon Whitney

represented that it had contractual rights to the customers in the franchise areas being sold to

Casco Bay Vending, including very large customers such as UNUM and LL Bean, when that

was not the case.

24. During the negotiations, Defendant Bacon Whitney grossly overstated and

misrepresented to Ted Morton and Casco Bay Vending the cash flow from the customers in the

franchise territories being sold to Casco Bay Vending.

25. Bacon Whitney and, upon information and belief, Rollins were aware that Bacon

Whitney had become insolvent, and was in an unstable and declining financial condition during

the weeks before the Closing and as of the Closing, but the Defendants failed to disclose such

facts to the Plaintiffs.

26. Although Rollins failed to produce the promised business plan to Theodore

Morton and Casco Bay Vending, Rollins assured, and represented to, Theodore Morton and

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Casco Bay Vending that Bacon Whitney was solvent, that Bacon Whitney had the ability to

perform its contractual obligations, and that, if Bacon Whitney ever did go out of business,

Casco Bay Vending could protect itself by buying the vending machines for current value and

continuing on with its vending business.

27. Theodore Morton and Casco Bay Vending placed their trust in Rollins, and relied

on his assurances and representations, in determining to proceed with the Bacon Whitney

franchises and leases.

28. On September 11, 2008, Defendant Elders Finance and Casco Bay Vending

entered into loan agreements for loans totaling $308,000 (hereinafter the “Loans”) to finance the

purchase of the Bacon Whitney/Casco Bay Vending Franchise Agreements.

29. On September 11, 2008, Plaintiffs Theodore Morton and Nicole Morton executed

agreements to act as Guarantors under the Elders Loan Agreement.

30. On September 12, 2008, Plaintiff Casco Bay Vending entered into two (2)

Operator Franchise Agreements (hereinafter “Franchise Agreements”) with Defendant Bacon

Whitney, whereby Bacon Whitney agreed to grant franchises to Casco Bay to operate vending

equipment and other related equipment as a Bacon Whitney franchise in two territories in

Maine.

31. On September 12, 2008, and simultaneous with the execution of the Franchise

Agreements, Plaintiff Casco Bay Vending entered into two (2) Lease Agreements (hereinafter

“Leases”) with Defendant Bacon Whitney, whereby Bacon Whitney agreed to lease equipment

to Casco Bay, which included vending machines, beverage dispensing equipment, and other

equipment to support the vending machines and beverage dispensing equipment.

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32. On September 12, 2008, Plaintiffs Theodore Morton and Nicole Morton executed

an agreement to act as Guarantor of the obligations of Plaintiff Casco Bay Vending under the

Franchise Agreements and the Leases.

33. The closing on the sale of the franchise areas by Bacon Whitney occurred on or

about September 12, 2008 (the “Closing”).

34. At the Closing, Casco Bay Vending paid Bacon Whitney $508,000 as

consideration for the franchise and lease rights, with $308,000 of the purchase price being

financed (at least on paper) by Elders.

35. Prior to the Closing, Bacon Whitney represented to Theodore Morton and Casco

Bay Vending that the franchise territories being acquired by Casco Bay Vending had customer

revenues in excess of $1,400,000 per year, when, in fact, the revenues for the territories were

substantially lower than the amount represented by Bacon Whitney and these facts were known

to Bacon Whitney as its internal documents reflected the actual, lower receipts from customers

for the territories sold to Casco Bay Vending.

36. Even though Nicole Morton had no involvement and/or ownership in Casco Bay

Vending and Nicole Morton’s guarantee was not required to meet underwriting standards of the

Elders’ loans and/or the Franchises and Leases, Elders and Bacon Whitney required her

guarantee of the Elders loans and the Bacon Whitney Franchises and Leases as a condition of the

Closing on the sole basis that she was the spouse of Theodore Morton.

37. Casco Bay’s primary Bacon Whitney contact, Raj Mehra, was terminated as an

employee of Bacon Whitney within days of the Closing and Bacon Whitney terminated other key

personnel within the two months following the Closing which prevented Bacon Whitney from

meeting its contractual obligations to Casco Bay, including providing support, training and the

timely turnover of customer accounts.

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38. Subsequent to the Closing, Bacon Whitney was unable to hand over the LL Beans

account and other accounts to Casco Bay Vending, which caused substantial damage to Casco

Bay Vending.

39. Bacon Whitney also breached its Lease and Franchise Agreements by failing to

equip the vending machines with monitoring technology, failing to comply with warranties, and

failing to provide and maintain machines in a functioning condition as required by the

agreements.

40. As a result of the problems with the hand over of the LL Bean account and other

accounts, Bacon Whitney agreed that Casco Bay Vending would be relieved of the obligation to

pay royalties in an amount sufficient to reimburse Casco Bay Vending for lost revenues and

Casco Bay Vending would be given an additional franchise area at no charge but the

documentation on this agreement could not be completed because Bacon Whitney terminated its

in-house attorney due to Bacon Whitney’s insolvency.

41. Rollins continued to provide consulting services to Casco Bay Vending and

Theodore Morton after the Closing and Rollins advised Casco Bay Vending and Theodore

Morton to work with Bacon Whitney and to refrain from exercising their legal rights, even as

Bacon Whitney defaulted under the Franchise Agreements and Leases, and, upon information

and belief, even as Rollins pursued acquiring the assets of Bacon Whitney.

42. During the fall of 2008, as a result of its insolvency, Bacon Whitney made an

assignment for the benefit of creditors to Craig R. Jalbert, as Trustee-Assignee for the benefit of

Creditors of Bacon Whitney.

43. On December 8, 2008, the Trustee-Assignee, Craig R. Jalbert, pursuant to an

Assignment for the Benefit of Creditors under Massachusetts law, MASS. GEN. LAWS GL. Ch.

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203, § 40, et seq. , entered into a Management Agreement with IntelliVend covering all of the

Bacon Whitney assets.

44. Upon information and belief, Rollins is the manager and sole member of

IntelliVend.

45. Plaintiffs Theodore Morton, Nicole Morton, and Casco Bay Vending, were

induced to enter into the above-described Agreements and Guarantees by false and misleading

statements and omissions of all of the Defendants, Bacon Whitney, and Rollins, including the

following:

a. that Bacon Whitney had contractual rights to customers in the franchise

territories, such as LL Bean. Theodore Morton met with John Hotchins, CEO of

Bacon Whitney, on August 26, 2008 at Hotchins’ office and Hotchins represented

that Bacon Whitney had a 12 year contract with Aramark and LL Bean so that

Morton did not need to worry about losing revenues on the basis of any problems

with LL Bean.

b. that Bacon Whitney had cash flow in excess of $1.4 million from the

franchise territories being sold to Casco Bay Vending. Raj Mehra, of Bacon

Whitney, provided Theodore Morton with Bacon Whitney statements dated

8/28/08 for the Route 103 route and the Route 104 route and he represented that

the statements were based on actual numbers. In the weeks before the closing,

Rollins confirmed to Theodore Morton and Casco Bay Vending that the franchise

territories had the revenues represented by Bacon Whitney;

c. that Bacon Whitney was financially stable and solvent. In response to

Theodor Morton’s questions regarding the financial condition of Bacon Whitney,

John Hotchins CEO of Bacon Whitney told Theodor Morton that Bacon Whitney

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was on solid ground, that Bacon Whitney was financially strong, and Bacon

Whitney was able to proceed with its business plan. These representations were

made by Hotchins to Morton on the phone on several dates including the first

week of August 2008, the second week of August, 2008 and in person at a

meeting on or about September 4, 2008 at Hotchins’ office. Theodore Morton also

spoke on numerous occasions with Steve Kowalik, who was the Area Vice

President, Northeast for Bacon Whitney in the month prior to the Closing and

Kowalik represented that Bacon Whitney was in a strong financial condition.

Theodore Morton also questioned Rollins regarding the financial strength of

Bacon Whitney and Rollins represented repeatedly, between August6, 2008 and

the closing on September 12, 2008 that Bacon Whitney was in good financial

condition, Bacon Whitney had 18 months working capital on hand, and the

investors in Bacon Whitney were 100% behind the venture; and

d. that Bacon Whitney had the present ability to perform the franchise

services that it promised to provide to Casco Bay Vending pursuant to the Lease

and Franchise Agreements. At the September 4, 2008 meeting between Hotchins

and Morton, Hotchins represented that Casco Bay Vending would have the

necessary help from Bacon Whitney (including the services of Mary Boyle and

Smitty Bell) for as long as it took for Morton to get comfortable with running the

franchise territories.

e. That Bacon Whitney owned a specified number of functional vending

machines. This information was contained in lists provided by Raj Mehra Bacon

Whitney to Theodore Morton in late August or early September 2008.

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f. That Casco Bay could acquire the vending machines and continue in

business with the franchise territories if Bacon Whitney became insolvent.

Rollins represented to Theodore Morton that he had spoken to Bacon Whitney

and “the worst that can happen is that Bacon Whitney goes away and you end up

with it all” – meaning the machines and franchise territories. Similar

representations were made by Rollins to Theodore Morton in the weeks before the

closing and were repeated in an email from Rollins on September 10, 2008.

g. That Bacon Whitney would install monitoring technology on the vending

machines and replace the malfunctioning vending machines. Steve Kowalik of

Bacon Whitney assured Theodore Morton in early September 2008 that Bacon

Whitney would send up all their techs to the Maine territories and all the

monitoring technology would be in place prior to handover of the franchise

territories from Bacon Whitney to Casco Bay Vending.

46. At the time Bacon Whitney, and/or Rollins made the representations listed above

to Ted Morton and Casco Bay Vending, each of the representations was not true, and each of the

Defendants knew that such statements were untrue.

47. After Rollins and IntelliVend took control of the Bacon Whitney assets, they

made demands upon Theodore Morton and Casco Bay Vending to make payments of royalties

that IntelliVend claimed were due Bacon Whitney, even though Bacon Whitney had previously

agreed to abate royalties due to Bacon Whitney’s breach of the Franchise Agreements and

Leases.

48. Upon information and belief, at the time that IntelliVend took over the Bacon

Whitney assets and thereafter, IntelliVend was undercapitalized and did not have the necessary

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resources and personnel to operate the franchise territories and to fulfill the obligations of the

franchisor and IntelliVend continues to lack such resources.

49. Bacon Whitney and IntelliVend have failed to meet the obligations of the

franchisor and lessor under the Franchise Agreements and Leases by failing to provide training,

trademarks, technical support, technology, functioning machines, calculation and payment of

commissions to customers, and the good will that had been promised to Ted Morton and Casco

Bay Vending when they agreed to acquire the franchise territories.

50. Casco Bay Vending has lost numerous customers in the franchise territories due

to the failure of Bacon Whitney and IntelliVend to pay commissions due to the customers and

the failure to service the vending machines.

51. Bacon Whitney has gone out of business and the good will associated with the

Bacon Whitney franchise has been damaged beyond repair.

52. Pursuant to both the Franchise Agreements and the Leases, Bacon Whitney

breached such agreements when it became insolvent and made an assignment for the benefit of

creditors.

53. Casco Bay Vending has provided notice to Bacon Whitney and IntelliVend that

Bacon Whitney is in breach of the Franchise Agreements and the Leases due to its insolvency,

assignment for the benefit of creditors, its misrepresentations, and its failure to perform its

contractual obligations and Bacon Whitney and IntelliVend have failed to cure defaults as

required by the agreements.

54. When Bacon Whitney assigned its assets to the Trustee and the Trustee assigned

the assets to IntelliVend, IntelliVend took the assets that were covered by Casco Bay Vending’s

lease, subject to the terms and conditions of the Leases, pursuant to Article 6 2 A of the Uniform

Commercial Code.

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55. Casco Bay Vending has demanded that Bacon Whitney and/or IntelliVend sell

Casco Bay Vending the vending machines at the current market value as required by the Leases,

but Bacon Whitney and/or IntelliVend have refused to do so.

56. Ted Morton, Nicole Morton and Casco Bay Vending have been damaged by the

actions of the Defendants because they paid for franchises and leases in a fully functioning,

financially stable, national franchise system, but now find that they are operating their vending

business without the promised services, benefits, and/or revenues, with customer relationships

which are damaged due to Bacon Whitney’s and IntelliVend’s failure to meet their obligations,

with an assignee of the franchisor which has inadequate resources to fulfill Bacon Whitney’s

obligations, and with no party willing to assume responsibility for the obligations that were

breached by Bacon Whitney.

57. Casco Bay Vending presently utilizes no trademarks and/or services provided by

Bacon Whitney and/or IntelliVend, other than the vending machines which Casco Bay Vending

is entitled to purchase pursuant to the Leases.

COUNT I Defendants

Fraud/Deceit 58. Plaintiffs reallege all of the foregoing paragraphs.

59. Prior to the Closing, Defendants Bacon Whitney and Rollins intentionally made

the misrepresentations of material fact to the Plaintiffs as described in Paragraph 46 above and

elsewhere in this complaint.

60. Defendants Bacon Whitney and, upon information and belief, Rollins, had

knowledge of the following material facts, but failed to disclose these material facts to the

Plaintiffs:

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a. that Bacon Whitney did not have contractual rights to certain customers,

such as LL Bean;

b. that Bacon Whitney had substantially lower levels of cash flow from its

clients in the territories acquired by Casco Bay Vending than Bacon Whitney

represented to the Plaintiffs; and

c. that Bacon Whitney was financially unstable or insolvent, and was on the

verge of laying off employees and closing some or all of its operations; and

d. that Bacon Whitney had breached its obligations to customers by failing to

pay commissions to customers and failing to service vending machines.

61. Defendants Bacon Whitney and Rollins intentionally and deliberately made the

statements and omissions of material fact described in the preceding paragraphs in order to

induce the Plaintiffs into executing the various Agreements and Guarantees that are the subject

of this Complaint.


justifiably induced to enter into the Agreements and Guarantees that are the subject of this

Complaint, by statements and omissions of all the Defendants, Bacon Whitney and Rollins.

63. Defendants have damaged Plaintiffs and the Defendants are liable to the Plaintiffs

for fraud.

COUNT II

Breach of Contract Franchise Agreements

64. Plaintiffs reallege all of the foregoing paragraphs.

65. Bacon Whitney is insolvent and has made an assignment for the benefit of

creditors.

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66. Pursuant to the terms of the Franchise Agreements, Bacon Whitney, is in default

when:

a. the Franchisor becomes insolvent or makes an assignment for the benefit

of creditors;

b. the Franchisor makes any misrepresentations.

67. Bacon Whitney breached the Franchise Agreements by becoming insolvent and

by making misrepresentations.

68. Bacon Whitney also breached the Franchise Agreements by failing to provide

services, by misrepresenting the revenues in the territories, and by failing to provide technology

and functioning vending machines.

69. As a result of Bacon Whitney’s breaches of contract, Casco Bay Vending is

entitled to any and all contractual remedies under law flowing from that breach, including, but

not limited to, monetary damages, rescission, reformation and/or specific performance.

COUNT III Breach of Contract

Leases


71. Defendant Bacon Whitney is insolvent, made an assignment of the benefit of

creditors, and has ceased to operate it business.

72. Pursuant to the terms of the Leases, Defendant Bacon Whitney, as Lessor, is in

default when:

a. the Lessor becomes insolvent or makes an assignment for the benefit of

creditors;

b. the Lessor ceases to operate its businesses;

c. the Lessor makes any misrepresentations with the Agreement; and

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d. Lessor breaches any term of the Lease

73. Defendant Bacon Whitney breached the Leases by becoming insolvent, ceasing to

operate its businesses, making material misrepresentations, and otherwise breaching the Lease

(including failing to equip the vending machines with monitoring technology, failing to repair or

replace malfunctioning machines, and by refusing to sell Casco Bay Vending the vending

machines upon Bacon Whitney going out of business).

74. As a result of Defendant Bacon Whitney’s breaches of contract, Plaintiff is

entitled to any and all contractual remedies under law flowing from that breach, including, but

not limited to, monetary damages, rescission, reformation and/or specific performance and

Plaintiff is entitled to acquire the vending machines as provided in the Leases.

COUNT III Breach of Implied Duty of Good Faith and Fair Dealing


76. The actions of Bacon Whitney and Rollins, including, but not limited to, the acts

of fraud, misrepresentation and failure to disclose crucial information as described in this

complaint, represent a violation of the implied contractual duty of good faith and fair dealing

owed to each of the Plaintiffs.

77. The actions of the said Defendants have damaged the interests of Casco Bay

Vending, Theodore Morton and Nicole Morton.

COUNT IV Negligent Misrepresentation


79. Prior to September 12, 2008, Defendants Bacon Whitney and Rollins negligently

made misrepresentations of material fact to the Plaintiffs, without ascertaining the accuracy of

the information, as detailed in Paragraph 46 above and elsewhere in this complaint.

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80. Defendants Bacon Whitney and Rollins negligently failed to disclose these

material facts to the Plaintiffs:

a. that Bacon Whitney did not have contractual rights to certain customers,

such as LL Bean;

b. that Bacon Whitney had substantially lower levels of cash flow from its

clients than it represented to the Plaintiffs; and

c. that Bacon Whitney was financially unstable or insolvent, or about to

become insolvent.

d. that Bacon Whitney intended to lay off employees shortly after the

Closing in a manner which would make it impossible for Bacon Whitney to

perform its obligations under the Franchises and Leases.

81. Defendants Bacon Whitney and Rollins made the statements and omissions of

material fact outlined in the preceding paragraphs in a manner in which Defendants should have

known that Plaintiffs would act in their peril by executing the various Agreements and

Guarantees that are the subject of this Complaint and Defendants failed to exercise reasonable

care with respect to the statements and omissions of fact.


justifiably induced to enter into the above-described Agreements and Guarantees by statements

and omissions of all of the Defendants, Bacon Whitney, Elders, and Rollins.

83. Defendants are liable to the Plaintiffs for negligent misrepresentation.

COUNT V Breach of Fiduciary Duty


85. Plaintiffs Theodore Morton and Casco Bay Vending contracted with Rollins to

provide consulting services.

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86. As a consultant and trusted advisor to Theodore Morton and Casco Bay Vending,

Rollins owed a fiduciary duty to the Plaintiffs.

87. Ted Morton and Casco Bay Vending placed a high degree of care and confidence

in Rollins and proceeded with the justifiable understanding that Rollins would protect their

interests as they negotiated with Bacon Whitney and Elders regarding the Franchise Agreements

and the Lease.

88. Defendant Rollins breached his fiduciary duty to the Plaintiffs by concealing and

failing to disclose that Bacon Whitney was financially unstable and insolvent, or about to

become insolvent, prior to, and at the time that the Plaintiffs executed the Franchise Agreements

and the Leases, failing to disclose that Bacon Whitney was misrepresenting the financial

performance of the franchise territories, and providing Plaintiffs with false assurances that

Rollins had investigated the financial condition of Bacon Whitney and the franchise territories

and that Plaintiffs could safely proceed to enter into the franchise arrangements with Bacon

Whitney.

89. After the Closing, Rollins continued to act as the consultant and advisor to the

Mortons and Casco Bay Vending and Rollins advised that Plaintiffs not exercise their legal rights

against Bacon Whitney during time periods in which Rollins was, without Plaintiffs’ knowledge,

pursuing the purchase of the Bacon Whitney assets and Rollins failed to disclose that his

interests were in conflict with the Mortons and Casco Bay Vending as Rollins was pursuing the

purchase of the Bacon Whitney franchisor rights.

90. Defendant Rollins breached his fiduciary duty to the Plaintiffs by concealing and

failing to disclose the state of affairs with the insolvent Bacon Whitney franchise system and by

failing to reveal his own conflicting interests as a potential future purchaser of the assets of

Defendant Bacon Whitney.

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91. Defendant Rollins is liable to Plaintiffs Theodore Morton and Casco Bay Vending

for breach of fiduciary duty.

COUNT VI Unfair Trade Practices


93. Prior to September 12, 2008, Defendant Bacon Whitney and Rollins intentionally

made deceptive representations to the Plaintiffs and failed to disclose material facts to Plaintiffs,

as described above.

94. Defendants Bacon Whitney and Rollins intentionally or recklessly made the

statements and omissions in order to induce the Plaintiffs into executing the various Agreements

and Guarantees that are the subject of this Complaint.


justifiably induced to enter into the above-described Agreements and Guarantees by false

statements and omissions of all of the Defendants, Bacon Whitney and Rollins, as described

hereinabove.

96. Defendants’ conduct constitutes unfair or deceptive acts in the conduct of trade or

commerce in violation of MASS. GEN. LAWS GL. Ch. 93A.

97. Plaintiffs are entitled to treble damages pursuant to MASS. GEN. LAWS GL. Ch.

93A, § 11.

COUNT VII Violation of Maine Business Protection Act

98. Plaintiffs repeat and reallege the foregoing paragraphs.

99. The sale of the franchise territory and the lease of the vending machines by Bacon

Whitney to Casco Bay Vending constitutes a “Business Opportunity” pursuant to 32 M.R.S.A. §

4691(3).

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100. The Defendants failed to provide Casco Bay Vending with the required disclosure

specified in 32 M.R.S.A. § 4692, et seq.

101. Defendants violated 32 M.R.S.A. § 4699 by misrepresenting income, sales and

profits of the franchise areas and by making false or deceptive representations regarding Bacon

Whitney’s financial condition and the strength of its franchise system.

102. Such actions have damaged Plaintiffs.

COUNT VIII Request for Declaratory Relief Pursuant to ALM Gl ch. 231A, Section 2 and 28 USC

Section 2201


104. IntelliVend, as the assignee of Bacon Whitney, LLC, has taken the franchise

contracts and the leases subject to any claims or defenses of Casco Bay Vending, Theodore

Morton and/or Nicole Morton against Bacon Whitney.

105. As a result of the breaches by Bacon Whitney of the franchise agreements and the

leases (including, without limitation, Bacon Whitney’s insolvency and transfer of its assets to the

Trustee for the benefit of creditors) and the failure and/or inability of Bacon Whitney or

IntelliVend to cure such breaches, Casco Bay Vending has demanded that IntelliVend cooperate

in the termination of the franchises and leases by agreeing to transfer the vending machines to

Casco Bay Vending for the current market value of such machines as required by paragraph 14

of the leases.

106. IntelliVend has refused to comply with the requirement of conveying the vending

machines as required by the leases.

107. IntelliVend has also taken the position that, upon termination of the franchise

agreements and leases with Casco Bay Vending, IntelliVend can prevent Casco Bay Vending

from doing business within its current franchise areas in the State of Maine.

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108. Casco Bay Vending presently wishes to terminate the franchise agreements and

leases, with the court and/or arbitrator determining: (i) the amount, if any, due from Casco Bay

Vending, Theodore Morton and Nicole Morton to IntelliVend after the value of the machines is

determined and the damages due from Bacon Whitney to Casco Bay Vending, Theodore Morton

and Nicole Morton are applied as an offset and after all defenses of Casco Bay Vending,

Theodore Morton and Nicole Morton to the claims of IntellliVend are adjudicated; and (ii) that

the title to the vending machines shall be immediately transferred to Casco Bay Vending by the

current title holder, and (iii) that there is no restriction on Casco Bay Vending continuing to

conduct its business anywhere in the State of Maine or elsewhere.

109. Given the dispute between Casco Bay Vending, Theodore Morton, Nicole Morton

and IntelliVend regarding the parties’ rights and obligations under the franchise agreements and

leases, the Plaintiffs request that the court and/or arbitrator issue declaratory relief pursuant to

ALM Gl ch. 231A, Section 2 and/or 28 USCS Section 2201 et seq. and determine (i) that Bacon

Whitney has defaulted pursuant to the franchise agreements and leases by, among other things,

becoming insolvent and transferring its assets to a trustee for the benefit of creditors; (ii) that

IntelliVend has taken the assignment of the franchise agreements and leases with Casco Bay

Vending subject to all claims and defenses of Casco Bay Vending; (iii) that Casco Bay Vending

can now terminate the franchise agreements and lease agreements that were assigned by Bacon

Whitney to IntelliVend and that IntelliVend has an obligation to transfer immediately all

vending machines in the possession of Casco Bay Vending to Casco Bay Vending for the current

market value of such machines, less the amount of the offsetting amounts due to Casco Bay

Vending by Bacon Whitney and IntelliVend; (iv) that Casco Bay Vending is not prohibited by

the franchise agreements and/or leases from continuing to conduct its business in the State of

Maine or elsewhere; (v) that IntelliVend’s claims against the Plaintiffs are void ab initio due to

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the fraudulent conduct of Bacon Whitney and the claims are unenforceable due to Bacon

Whitney’s and IntelliVend’s breach of the franchise agreements and leases; and (vi) that Nicole

Morton and Theodore Morton’s obligations to Bacon Whitney and IntelliVend pursuant to the

guarantees are extinguished because they were fraudulently induced to enter into the guarantees

and as a result of the other defenses asserted by Nicole Morton and Theodore Morton to such

claims.

COUNT X Recovery Against Trustee


111. During the fall of 2008, as a result of its insolvency, Bacon Whitney made an

assignment for the benefit of creditors to Craig R. Jalbert, as Trustee-Assignee for the benefit of

Creditors of Bacon Whitney.

112. On December 8, 2008, the Trustee-Assignee, Craig R. Jalbert, pursuant to an

Assignment for the Benefit of Creditors under Massachusetts law, MASS. GEN. LAWS GL. Ch.

203, § 40, et seq., entered into a Management Agreement with IntelliVend covering all of the

Bacon Whitney assets.

113. As a Trustee-Assignee, Craig R. Jalbert, is responsible for the payment of debts of

Bacon Whitney.

114. Reserving all rights against to recover against Bacon Whitney, Elders, Rollins and

IntelliVend, Plaintiffs seek payment of the judgment in this action, and all other debts of Bacon

Whitney to the Plaintiff, from the Trustee-Assignee Craig R. Jalbert.

COUNT XI Negligence


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116. Rollins as the consultant to the Mortons and Casco Bay Vending, had a duty to

represent their interests with reasonable care, and not the interests of Bacon Whitney, with

respect to the sale of the franchise territories and the leases.

117. Rollins had a duty to disclose information in his possession relating to the

financial instability and the financial prospects of Bacon Whitney (including accurate

information relating to Bacon Whitney’s contracts with its customers and the performance of its

territories) in his dealings with the Mortons and Casco Bay Vending.

118. At the time that Rollins was acting as consultant to the Mortons and to Casco Bay

Vending, Rollins was being paid $13,500 per month by Bacon Whitney and was acting upon the

interests of Bacon Whitney in attempting to ensure that the sale of the franchise territory was

closed with the Mortons and Casco Bay Vending even though the franchise territories had severe

problems with their business model and their performance.

119. Rollins failed to disclose to the Mortons and Casco Bay Vending that he was

being paid $13,500 as an employee or consultant to Bacon Whitney at the same time that he was

holding himself out as a trusted advisor to the Mortons and to Casco Bay Vending.

120. Rollins failed to disclose material adverse facts regarding Bacon Whitney and

Rollins confirmed the revenues from the territories when such revenue projects were grossly

inaccurate and misleading.

121. Rollins also failed to disclose that he had a very close relationship with the

officers of Bacon Whitney due to his being employed by Bacon Whitney.

122. Rollins also failed to disclose that he was pursuing the purchase of the assets of

Bacon Whitney in view of its likely insolvency proceedings.

123. Rollins acted in a negligent manner in his dealings with the Mortons and Casco

Bay Vending and is liable to the Mortons and Casco Bay Vending for all resulting damages.

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COUNT XII Fraudulent Transfer

124. Plaintiffs repeat all of the foregoing paragraphs. 125. During the fall of 2008, Rollins arranged for IntelliVend to acquire the assets of

Bacon Whitney from Craig R. Jalbert as Trustee/Assignee for the Benefitof Creditors of Bacon

Whitney, LLC.

126. The Trustee and IntelliVend signed an Agreement dated December 18, 2008

which calls for a purchase price for the assets of Bacon Whitney involving the following sums:

$1,250,000, assumption of certain liabilities, payment or satisfaction up to $300,000 of

commissions payable to vending customers, assumption of sales and use tax not to exceed

$330,000, and assumption of vacation pay due to former employees hired by IntelliVend.

127. As part of the transfer, IntelliVend obtained all of the equipment owned by Bacon

Whitney throughout its franchise system.

128. As of December 31, 2007, Bacon Whitney had valued its fixed assets including

computer, software computer equipment, leasehold improvements, vending equipment, furniture

and fixtures and fleet at a value of $10,204,264 pursuant to its balance sheet.

129. The transfer of the Bacon Whitney assets to IntelliVend was made by the

Defendants with actual intent to hinder, delay or defraud creditors including Casco Bay Vending.

130. Bacon Whitney and/or the Trustee did not receive a reasonably equivalent value

in exchange for the transfer of the assets to IntelliVend.

131. The transfer was made to an entity owned and controlled by an insider,

Christopher Rollins, who was previously a highly paid consultant and an employee of Bacon

Whitney and a close business associate of the officers and principal shareholders of Bacon

Whitney.

132. The purchase price for the transfer has been concealed.

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133. At the time of the transfer, Bacon Whitney had been threatened with lawsuits or

actually sued for its obligations.

134. At the time of the transfer, Bacon Whitney was insolvent.

135. The transfer involved all of the assets of Bacon Whitney.

136. The transfer of the assets was pursuant to a scheme whereby the assets were

transferred to the Trustee and then to the shell corporation of IntelliVend established by

Christopher Rollins in order to eliminate claims of creditors against the assets.

137. The transfer of the Bacon Whitney assets constitutes a fraudulent transfer and is

in violation of the Uniform Fraudulent Transfer Act, as adopted in Maine and elsewhere,

including 14 M.R.S.A. §§3575, 3576.

138. Plaintiffs are entitled to avoidance of the transfer to the extent necessary to satisfy

their claims and damages in the amount equal to double the value of the assets as conveyed,

provided in 14 M.R.S.A. §3578.

Request for Jury Trial

Plaintiff requests a jury trial on all issues triable by a jury

WHEREFORE, Plaintiffs request that this Honorable Court enter judgment in Plaintiffs’

favor:

a. Finding that Defendants Bacon Whitney and Christopher Rollins

committed fraud in inducing Plaintiffs to enter into the various agreements

and Guarantees that are the subject of this lawsuit;

b. Finding that Defendants Bacon Whitney and Christopher Rollins

committed negligent or intentional misrepresentations and/or omissions in

their dealings with Plaintiffs;

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c. Finding that Defendant Bacon Whitney and/or IntelliVend are in breach of

the Franchise Agreements and Leases with Plaintiff Casco Bay Vending;

d. Finding that, as a result of Defendants Bacon Whitney’s fraud and breach

of contract and IntelliVend’s breach of contract and all other available

defenses, Plaintiffs Theodore Morton and Nicole Morton are excused of

their obligations under their Guarantees and that Casco Bay Vending is

relieved of its obligations to Bacon Whitney and IntelliVend;

e. Finding that Rollins breached fiduciary duties owed to Plaintiffs;

f. Finding that Defendants violated both the Maine Sale of Business

Opportunities Act and the Massachusetts Unfair Trade Practices Act;

g. Finding that Casco Bay Vending has the right to terminate the franchise

agreements and lease agreements that were assigned to IntelliVend by

Bacon Whitney due to Bacon Whitney’s default prior to the assignment

and/or due to IntelliVend’s default subsequent to the assignment.

h. Finding that IntelliVend, as the assignee of Bacon Whitney, has taken the

franchise agreements and leases subject to all claims and defenses of

Casco Bay Vending, Theodore Morton and Nicole Morton against Bacon

Whitney.

i. Declaring that IntelliVend has no legal basis to enforce the Leases and

Franchises against Plaintiffs and determining that Casco Bay Vending is

entitled to acquire the vending machines at current market value less the

amount of the offsets and/or recoupment amounts and to continue with its

business free of any non-compete provisions in the Leases and/or

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j. Determine all offsetting amounts that Casco Bay Vending, Theodore

Morton and Nicole Morton may apply against the claims of IntelliVend

due to the actions of Bacon Whitney, determine the offset for all damages

caused by IntelliVend to Casco Bay Vending during the period subsequent

to the assignment, determine the current market value of the vending

machines in the possession of Casco Bay Vending, and determine the

amount, if any, due by Casco Bay Vending, Theodore Morton and Nicole

Morton to IntelliVend in connection with the termination of the franchise

agreements and lease agreements.

k. Finding that Rollins and Bacon Whitney violated their duty of good faith

pursuant the Uniform Commercial Code.

l. Finding the Trustee-Assignee, Craig L. Jalbert, liable for debts of Bacon

Whitney to the Plaintiffs;

m. Finding Rollins liable for negligence;

n. Finding IntelliVend and Rollins liable to Casco Bay Vending based on

their causing a fraudulent transfer of the assets of Bacon Whitney.

o. Awarding Plaintiffs all damages, as well punitive damages (including

damages double the value of the property transferred to IntelliVend), costs

and attorneys fees as a result of the foregoing findings;

p. Order that IntelliVend convey good and clear title to the vending machines

that are in the possession of Casco Bay Vending to Casco Bay Vending

posthaste;

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q. Grant Plaintiffs all statutory and equitable remedies, including avoidance

of the transfer of the Bacon Whitney assets to IntelliVend, injunctive

relief, and reformation of the contracts to prevent IntelliVend and Bacon

Whitney from further damaging Plaintiffs.

r. Awarding Plaintiffs such other relief as may be necessary or appropriate.

DATED at Portland, Maine on September 3, 2009.

Respectfully submitted,

/s/ David J. Perkins David J. Perkins, Bar Number 3232 Attorneys for Plaintiffs

Perkins Olson, P.A. Thirty Milk Street Post Office Box 449 Portland, Maine 04112--0449 207-871-7159

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28

CERTIFICATE OF SERVICE

I, David J. Perkins, attorney for Plaintiffs, hereby certify that service of Third Amended

Complaint was duly made upon the individuals indicated as receiving service via the “ECF

Filing” system.

DATED at Portland, Maine on September 3, 2009.

Respectfully submitted,

/s/ David J. Perkins David J. Perkins, Bar Number 3232 Attorney for Plaintiffs

Perkins Olson, P.A. Thirty Milk Street Post Office Box 449 Portland, Maine 04112--0449 207-871-7159


Documents

Case 2:09 Cv 00126 DBH Document 52