CV 06-854 Baskin-Robbin 10-23-0 - Modesto Bee

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

_________________ 

BASKIN-ROBBINS, INC., ) 

et al., ) 

) No. CV 06-854-PHX-EHC 

Plaintiffs, ) 

) 

vs. ) Phoenix, Arizona 

) October 23, 2007 

ACORN LANE ARIZONA, INC., ) 9:04 a.m. 

et al., ) 

) 

Defendants. ) 

_____________________________ ) 

BEFORE: 

THE HONORABLE EARL H. CARROLL, JUDGE 

REPORTER'S TRANSCRIPT OF PROCEEDINGS 

BENCH TRIAL 

APPEARANCES: 

For the Plaintiffs: 

Gust Rosenfeld 

By: Charles William Wirken, Esq. 

201 East Washington, Suite 800 

Phoenix, Arizona 85004 

For the Defendants: 

Holland Law Firm 

By: Joseph Edward Holland, Esq. 

970 South Main Street, Suite D 

Snowflake, Arizona 85937 

Official Court Reporter: 

Candy L. Potter, RMR, CRR 

Sandra Day O'Connor U.S. Courthouse, Suite 312 

401 West Washington Street, Spc 36 

Phoenix, Arizona 85003-2151 

(602) 322-7246 

Proceedings Reported by Stenographic Court Reporter 

Transcript Prepared by Computer-Aided Transcription 

Case 2:06-cv-00854-EHC Document 95 Filed 09/22/2008 Page 1 of 142

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I N D E X 

WITNESS: DIRECT CROSS REDIRECT RECROSS 

JOHN CARLSON 

By Mr. Wirken 9 

By Mr. Holland 37 


JERRY TILSON 




CHAD CONDIT 



By the Court 130 


JERRY TILSON 


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Plaintiffs rest 93 

Defense rests 134 

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INDEX OF EXHIBITS 

EXHIBIT IDENT RECEIVED 

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NO. 

DESCRIPTION 

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1 Franchise Agreement for 

Peoria Avenue store 11 9 

2 Franchise Agreement for 

Thunderbird Road store 11 9 

3 Notice to Cure dated 5-10-05 

Re: Peoria Avenue store 

with proof of delivery 19 9 

4 Notice to Cure dated 8-18-05 




Re: Peoria Avenue store 9 

6 Notice to Cure dated 10-13-05 






8 Notice to Cure dated 2-24-06 


with proof of delivery 23 9 

9 Notices of Default dated 

4-21-05, 5-26-05, 6-27-05 

7-13-05 and 9-23-05 

Re: Peoria Avenue store 17 9 

10 Notice to cure dated 5-10-05 

Re: Thunderbird store with 

proof of delivery 55 9 

11 Notice to cure dated 8-15-05 


proof of delivery 9 



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NO. 

DESCRIPTION 

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13 Notice to cure dated 10-13-05 






15 Notice to cure dated 2-24-06 



16 Notices of Default dated 

4-27-05, 5-26-05, 6-27-05, 

7-13-05 and 9-23-05 re: 

Thunderbird Road store 9 

17 Memo dated 10-20-05 from 

Baskin-Robbins to Acorn Lane 65 9 

18 Memo dated 12-23-05 from 


19 Memo dated 2-24-06 from 


20 Notice of Termination re: 

Peoria Avenue store with 


21 Notice of Termination re: 

Peoria Avenue store with 

proof of deliver 35 9 

22 Certificate of trademark 

registration for Baskin 31 

Robbins logo 9 



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NO. 

DESCRIPTION 

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23 De-identification checklist 9 

24 Photographs of exterior of 








28 Asset sale and purchase agreement 

dated 1-10-05 9 

29 Waiver letter dated 1-19-05 

for Peoria Avenue store 9 

30 Waiver letter dated 1-19-05 

for Thunderbird Road store 9 

31 Agreement to transfer unit by 

the sale of assets 

(Peoria Avenue store) 

dated 2-3-05 9 

32 Agreement to transfer unit by 

the sale of assets 

(Thunderbird Road store) 

dated 2-17-05 9 

33 Settlement statements dated 

2-3-05 and 2-17-05 9 

34 Ice cream selling price history 

and summary of tub prices 

through 5-21-06 47 9 

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NO. 

DESCRIPTION 

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35 Accounts receivable status 

report as of 12-1-06 for 

Peoria Avenue store 9 

36 Accounts receivable status 

report as of 12-1-06 for 

Thunderbird Road store 9 

37 Sales recap for Thunderbird 

Road store for 2004 9 

38 Sales recap for Peoria Avenue 

store for 2004 9 

39 Sales recap for Thunderbird 

Road store for 2005 9 

40 Sales recap for Peoria Avenue 

store for 2005 9 

41 Dean Foods Company invoices to 

Acorn Lane in 2006 29 9 

42 Gallonage summary by period for 

Thunderbird Road store for 2006 9 

43 Gallonage summary by period for 

Peoria Avenue store for 2006 9 

44 Report of gross sales and fees 

due as determined from ice cream 

gallonage by John Carlson 31 9 

45 Letter dated 8-16-07 from ADOR 

to plaintiffs' attorneys 9 

46 ADOR certificate of lack of 

record dated 8-16-07 9 

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NO. 

DESCRIPTION 

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47 ADOR transaction privilege tax 

returns for February, March 

and April 2005 9 

48 Verification of bill bond with 

attached documents, including 

Glendale privilege (sales) and 

use tax return for February 2005 9 

49 Plaintiff requests for 

production of documents and 

defendants' responses 9 

50 Summary of franchise (royalty) 

and advertising fees 136 

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THE CLERK: 

Civil 2006-854, Baskin-Robbins, Inc., 

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versus Condit, et al, on for civil bench trial. 

THE COURT: All right. For the plaintiff we have? 

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MR. WIRKEN: 

Charles Wirken, Your Honor, for the 

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plaintiffs Baskin-Robbins. 

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defendants. 

THE COURT: 

MR. HOLLAND: 

And for the defendants? 

Joseph Holland, Your Honor, for 

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THE COURT: All right. Well, Mr. Wirken, ordinarily, 


I suppose, we could have an opening statement. 

I am generally 

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familiar with the file and the problems. 

I don't really know 

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what it would involve. 

Do you have some brief statement you 

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want to make for the record? 

MR. WIRKEN: No, Your Honor. I was prepared to make a 

brief opening statement just to refresh your memory, but it 

sounds as though you've done that on your own. 

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THE COURT: 

MR. HOLLAND: 

And Mr. Holland, anything you wish to say? 

You indicated that you're familiar with 

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the -- with the case, and that you understand the issues, I 

think we would waive our opening statement as well. 

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statement? 

THE COURT: 

MR. HOLLAND: 

So you don't have anything -- opening 

No, Your Honor. 

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THE COURT: All right. Fine. Let's proceed then. 

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MR. WIRKEN: 

Plaintiffs call John Carlson, Your Honor. 

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DIRECT EXAMINATION - JOHN CARLSON 

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THE CLERK: 

Please raise your right hand. 

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(JOHN CARLSON, PLAINTIFFS' WITNESS, SWORN) 

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THE CLERK: 

And would you please state your name, sir, 

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for the record and spell your last name? 

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THE WITNESS: 

John Carlson, C-A-R-L-S-O-N. 

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THE CLERK: Thank you, sir. Please be seated. 

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MR. WIRKEN: 

Your Honor, before beginning my 

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examination of this witness, I'd like to take care of a 

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housekeeping detail first. 

And that is to move the admission 


of Plaintiff's Exhibits 1 through 49. 

No objections were made 

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to these exhibits when they were disclosed in the last pretrial 

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disclosures. 

So pursuant to Rule 26 I believe that their 

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admission would be proper at this time. 

Mr. Holland? 

THE COURT: Any objections to Exhibits 1 through 49, 


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MR. HOLLAND: 

THE COURT: 

objections. 

MR. WIRKEN: 

No, no objections, Your Honor. 

Exhibits 1 through 49 are admitted without 

Thank you, Your Honor. 

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DIRECT EXAMINATION 

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BY MR. WIRKEN: 

Q. Mr. Carlson, would you state your name again for the 

record? 

A. John Carlson. 

Q. By whom are you employed, Mr. Carlson? 

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A. Baskin-Robbins USA. 

Q. What is your position with Baskin-Robbins? 

A. Director of Operations Southwest. 

Q. How long have you been employed by Baskin-Robbins? 

A. Twenty-five years. 

Q. How long have you been in your current position? 

A. Since 2003. 

Q. Do you have responsibility for any particular geographic 

area of the country? 

A. From west Texas to Hawaii. 

Q. And that, of course, includes Arizona? 

A. Yes, it does. 

Q. Would you briefly tell the Court something about your 

duties as director of operations, particularly as those duties 

relate to this case and the issues in this case. 

A. I manage eight franchise operations managers that cover the 

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entire length of my area. 

So they work directly with the 

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franchisees to assist them in basic operations, development, 

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basically all the store policies. 

So all the interchange that 

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goes on between franchisees and the company is handled by my 

team. 

Q. Who is the -- and tell me again the name of the level of 

folks below you, those eight people are franchise service 

managers? 

A. They were called that up until recently, now they're 

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Case 2:06-cv-00854-EHC Document 95 Filed 09/22/2008 Page 10 of 142


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operations managers. 

So for the purposes of this time period 

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they were franchise service managers. 

Q. And the franchise service manager for the Phoenix area who 

works at your direction, who would that have been? 

A. That's Jerry Tilson. 

Q. And he's in the courtroom with us here today? 

A. Yes, he is. 

Q. Thank you. 

Do your duties include some responsibility for 

monitoring payments that are made or not made by franchisees? 

A. Yes, we're responsible for everything that occurs in our 

region. 

Q. You have before you a stack of exhibits. Exhibits 1 and 2 

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are copies of franchise agreements. 

One for each of the two 

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stores in this case. 

A. Correct. 

Q. You're familiar with the terms and provisions of those 

agreements? 

A. Yes, I am. 

Q. And, in fact, Exhibits 1 and 2 are the agreements for the 

two stores that were operated by the Condits? 

A. That's correct. 

Q. If we could, please, throughout our conversation here this 

morning if we could refer to them by their road names, their 

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road locations. 

One is on Peoria Avenue and one is on 

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Thunderbird Road; is that correct? 

A. Yes, it is. 

Q. The stores are also designated by Dunkin' Donuts -- pardon 

me, Baskin-Robbins. 

By the way, Dunkin' Donuts is a sister company? 

A. Correct. 

Q. The stores are designated by Baskin-Robbins by a number, 

are they not? 

A. Yes, by a PC number. 

Q. And "PC" stand for what? 

A. Profit center. 

Q. With regard to payments that are required to be made by 

franchisees, what payments are required and with what frequency 

by those franchise agreements that are in front of you? 

A. Franchisees are obligated to pay on a weekly basis two 

fees, which are a system and product advertising fee, which is 

five percent, and then an ongoing royalty fee, which is 5.9 

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percent. 

So this is assigned to every dollar of retail sales 

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that goes in and out of the store. 

As I mentioned, they're 

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required to report this on a weekly basis, and payments are 

also taken on a weekly basis as well. 

Q. You said that the fees are a percentage of sales? 

A. Correct. 

Q. Are they a percentage of gross sales? 

A. Percentage of gross sales; correct. 






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Q. What is the -- what defines the weekly period for which the 

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fees are due? 

What day of the week is the end of the week? 

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A. Commences on Sunday, ends on Saturday. 

Q. And by what time after the end of that week that ends on a 

Saturday is the franchisee supposed to report gross sales and 

pay fees? 

A. Until the following Thursday. 

Q. And in what manner are they to report gross sales? 

A. They report them electronically through the franchise sales 

reporting system, also known as the FAST System, where they 

would capture their weekly sales number, and then they would 

see a calculation that would indicate how much they owe. 

Q. Does the system calculate the fees for the franchisee? 

A. The system currently does, yes. 

Q. And now these franchise agreements that are involved in 

this case are both dated in February of 2005? 


Q. And was the FAST System in place at that point in time? 

A. The FAST System commenced April 2000. 

Q. Of 2000? 

A. Correct. 

Q. And were these particular stores, the Peoria Avenue store 

and the Thunderbird store, were they equipped to report sales 

via the FAST System? 

A. Yes. You require an internet connection to do that. 

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Q. And those stores had those internet connections? 

A. They would have had to to order ice cream as well. 

Q. When the franchisee reports gross sales and the system 

calculates the fees that are due, how then does the franchisee 

make the payment? 

A. There's an electronic system set up, an EFT system, that 

will automatically debit one of their bank -- their assigned 

bank account to withdraw those fees. 

Q. We probably all know, but for the record what does "EFT" 

mean? 

A. Electronic funds transfer. 

Q. So is each franchisee required to have a dedicated bank 

account for purposes of making those payments? 

A. Yes, they are. 

Q. As I mentioned, these franchise agreements were entered 

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into in February of 2005. 

Do you know when these franchisees, 

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the Condits, began operating those stores? 

A. They would have been operating them from the day of 

commencement indicated on the first page of the franchise 

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agreement. 

So, for example, on Exhibit 1 the franchise 

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agreement for Peoria is indicated as commencing on the 17th of 

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February 2005. 

And the -- and the following Thunderbird 


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location is indicated as commencing on the 3rd of February 

2005. 

Q. Incidentally, were these two stores previously operating 

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under other ownership? 

A. Yes, they were continuously operated. 

Q. So the stores were being transferred to the Condits? 

A. Correct. 

Q. Before the Condits assumed the operation of the stores, 

were they required to undergo some training with 

Baskin-Robbins? 

A. Yes. All members of the Baskin-Robbins franchise 

community, when they sign on, have to attend a program in 

Burbank, California, which consists of operations and other 

training, financial training. 

Q. Is there a name for that training? 

A. Baskin-Robbins Business Management Education Program. 

Q. Is the franchisee required to designate someone to be the 

manager for one or both stores? 

A. Each store is required to have management personnel in 

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place. 

They're not required by the agreement to attend the 

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training, just the franchisee is. 

bring managers if they so choose. 

But they're also welcome to 

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Q. Do you know who among the Condits attended the training? 

A. I believe that was Chad Condit. 

Q. Do you know whether he brought any other employees or 

managers? 

A. From the records indicate that two management personnel 

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were also in attendance. 

So that would have been three people 

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representing the network. 

Q. And at the school in California, are they then schooled in 

how to operate the store? 

A. Everything from scooping a perfect two-and-a-half ounce 

scoop to making a cake to understanding the nuances of being 

successful financially operating a store. 

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THE COURT: 

THE WITNESS: 

How long is the program? 

Five weeks. 


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Q. And included in the training is there instruction on the 

use of the system for reporting sales and paying fees? 

A. Yes, there is. 

Q. Do some people not pass the school? 

A. Yes. As a matter of fact we do have a small rate, but we 

do have a series every year of people that don't make it 

through for whatever reason. 

Q. But in this case Chad Condit apparently passed? 

A. Was a successful graduate, yes. 

Q. Nevertheless, after the Condits assumed the operation of 

these two stores, did there arise a problem with the reporting 

of sales and the payment of fees? 

A. Yes, there did, there was. 

Q. How soon after they began operating in mid February? 

A. We had a string of miss dates throughout the summer. So 

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initially there was some successful reportage. 

But there was a 

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gap in late 2005, and that ultimately turned out into a 

consistent failure to report in 2006. 

Q. If you take a look at Exhibit 9, sir. 

A. Okay. I have it. 

Q. Okay. That exhibit is a collection of five letters from 

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Dunkin' Brands. 

And why don't you -- why don't we pause here, 

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and would you tell the Court the relationship between 

Baskin-Robbins and Dunkin' Brands. 

A. Dunkin' Brands is the parent company of both Baskin-Robbins 

USA and Dunkin' Donuts, Inc., as well as Togo's Eateries, Inc. 

So they're the umbrella organization for those three fast-food 

quick service restaurant brands. 

Q. And we see the names of those restaurants in the lower 

right-hand corner of these letters in Exhibit 9? 


Q. What is the nature of these letters that are collected in 

Exhibit 9? 

A. It's a notification indicating that sales had not been 

reported for the following weeks, which indicate from the 19th 

of February consecutively through the 9th of April 2005. 

Q. Do you call these default letters? 

A. Yes, they're failure to pay or default letters. 

Q. Are these issued by the collections department at 


A. Yes. 

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Q. Or at Dunkin' Brands? 

A. At Dunkin' Brands, they service all the brands. 

Q. And that collections department is headquartered where? 

A. Canton, Mass. 

Q. Massachusetts? 

A. Correct. 

Q. So would I be correct in reading the first letter of April 

21, 2005, in Exhibit 9 to mean that there was a failure to 

report and pay within weeks of the Condits' assumption of the 

operation of these stores? 

A. Correct. 

Q. And are all of these letters that are collected here in 

Exhibit 9 of the same nature, default letters? 

A. That is correct. 

Q. For failure to report and/or pay fees? 

A. Right, all five letters indicate that. 

Q. Is -- we call these default letters. Are notices to cure 

something different than these default letters? 

A. Yes. Notices to cure actually come from an outside 

attorney and are provided to the store to follow up on 

situations that have not been rectified. 

Q. So the default letter comes from Baskin internally? 

A. The company; correct, Baskin-Robbins. 

Q. Would you say that that's a relatively informal notice of 

the default? 

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A. Correct. 

Q. And that the notice to cure, is that a more formal notice 

of default? 


Q. Is the notice to cure something that is provided for in the 

franchise agreement? 

A. Yes, there is detailed information on the notice to cure 

process in the franchise agreements. 

Q. If you take a look, please, sir at Exhibit 3. 


Q. Is that an example of a notice to cure? 


Q. And that letter comes from your outside counsel? 


Q. Which in Arizona is myself? 


Q. What was the nature of the default for which notice was 

being given in this Exhibit 3 letter of May 10, 2005? 

A. It's for failure to pay. It's a 15-day notice indicating 

the termination of the franchise agreement will result if 

payment for the periods indicated is not completed in the 

desired -- in the required 15-day time period. 

Q. Was it just for a failure to pay? 

A. Failure to report and failure to pay. 

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THE COURT: 

Let me ask, Mr. Wirken, do you have a 

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summary exhibit now covering all of these notices and the 

amounts? 

MR. WIRKEN: Yes, we do, Your Honor. We're going to 

provide you with a total of the amounts -- 

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THE COURT: 

What's the exhibit number? 

09:20:46 

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MR. WIRKEN: Well -- 

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THE COURT: 

MR. WIRKEN: 

No, do you have an exhibit? 

Yes, Your Honor. 

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For 2005 we're going to be looking at Exhibits 8 at 15 


for dollar amounts. 

And for 2006 we're going to be looking at 

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Exhibit 44. 

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THE COURT: All right. Well, they're in evidence. I 

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just want to know. 

And let's proceed to move along. 

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MR. WIRKEN: Yes. Okay. I think one of the issues in 

this case, Your Honor, as raised by the defendants is whether 

there was a breach, and whether they were given notice to cure 

the breach. 

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THE COURT: 

Well, we have all of these notices now. 

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They're all in evidence. 

MR. WIRKEN: All right. If I could take a moment to 

introduce you to the exhibits through his testimony, and I'll 

make this abbreviated. 

09:21:34 


THE COURT: 

I can look at the list, the cure dates, 

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and for the particular property. 

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MR. WIRKEN: 


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THE COURT: 

It's in evidence, so I can read. 

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MR. WIRKEN: Very well. If you would indulge me for 

one moment with this question. 

THE COURT: Let's proceed. Go ahead. 

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MR. WIRKEN: 

Because I think, Your Honor, there's a 

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document here that -- 

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THE COURT: 

Let's proceed. 

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MR. WIRKEN: 

-- most of us would not be familiar with. 

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Q. Mr. Carlson, Exhibit 3 has attached to it a printout of 

some figures. 


Q. What do you call that document that was enclosed with the 

notice to cure? 

A. It's the accounts receivable status report. 

Q. And who generates that? 

A. That comes from the collection group. 

Q. Does this document show the fees that are due week by week? 

A. It includes an estimate of fees due week by week. Because 

there were no sales reported we had to estimate. 

Q. And how -- 

A. That's why they're all identical. 

Q. How do we know looking at the document that this is 

involving estimates based on failure to report? 

A. The numbers week to week are identical to the penny. 

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Q. Is there also some abbreviation that distinguishes an 

estimate from an actual calculation? 

A. Correct, it lists EST, which is an abbreviation for 

estimate. 

Q. Is that in the description column in the middle of the 

table? 

A. It is. 

Q. All right. And if sales had actually been reported and 

therefore an actual calculation of fees due could be made, 

would there be some other designation in the description 

column? 

A. It just would have said "franchise fee" and "advertising 

fee." 

Q. Would it have said "actual"? 

A. It would have indicated "actual" if it were an actual 

number to the penny. 

Q. Okay. And there are a series of notices to cure here. Do 

all of these follow the same format with the accounts 

receivable status report? 

A. They do. 

Q. So the franchisee when he receives the notice to cure also 

receives that back-up detail for what is owed for what weeks? 

A. Correct. 

Q. And is there a group of such notices to cure for each of 

these stores that are before you in the exhibits? 



09:23:23 







1 

2 

A. There is. 

Q. Was there also preceding the first of the notices to cure 

3 

default letters for both stores? 

I highlighted one of the 

4 

stores. 

Were there also such informal default for the other 

5 

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15 

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18 

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stores? 

A. For both Peoria and Thunderbird; correct. 

Q. If we -- if you would, Mr. Carlson, I believe in Exhibit 

8 -- take a look at that and we'll try to focus in on the 

amounts owed here. 


Q. Is this the last of the notices to cure that was issued for 

the Peoria store prior to termination? 

A. Prior to notice of termination, yes. 

Q. And there's an accounts receivable status report attached 

to it? 

A. There is. 

Q. And this letter is dated in '06. Does it concern weeks and 

fees for both 2005 and 2006? 

A. The accounts receivable status report commences in January 

of '06 and then runs -- runs from there, includes down on the 

second page prior year 2005. 

Q. Let's focus on 2005 for the moment. 

09:24:18 

09:24:52 

09:25:05 

09:25:24 


THE COURT: 

Is there a figure, a total? 

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25 

MR. WIRKEN: Yes, 3,203. 

THE WITNESS: For 2005. 

09:25:45 


Case 2:06-cv-00854-EHC Document 95 Filed 09/22/2008 Page 23 of 142


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MR. WIRKEN: For 2005. 


Q. At this point, Mr. Carlson, were fees ever reported for any 

weeks in the year 2006? 

A. In the year 2006 it is indicated commencing January 1st all 

the way through -- all the way down, you see, it actually lists 

as actual, which implies that either Mr. Condit or one of his 

associates did report sales during that period. 

Q. Are the invoice numbers on the accounts receivable report a 

code for a date? 

A. Yes. They indicate the time frame associated with the 

transaction date. 

Q. And is the invoice number code date reversed, so to speak, 

with the year first? 

A. Correct, 2005. 

Q. So 05-10-01 would mean October 1 of '05? 

A. Correct. 

Q. That's the week ending on Saturday, October 1? 

A. Correct. 

Q. But can you find the week that begins the first week in 

09:25:57 

09:26:26 

09:26:44 

09:26:58 

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January of '06? 

Is that the week ending January 7 '06? 

22 

A. That would -- I'll have to double check. I don't have my 


calendar in front of me. 

I believe that was probably the time 

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frame starting '06. 

So that would be 06-01-07, which is about 

25 

two thirds of the way down the page. 

09:27:33 




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Q. On the first page of the accounts receivable status report? 

A. Correct. 

Q. And is that calculation there of fees due based on an 

actual reported sale or an estimate? 

A. The first week there is an estimate. 

Q. And all the weeks thereafter in '06, are they actual or 

estimates? 

A. They're estimates. 

09:27:43 

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THE COURT: 

Do you have an exhibit, Mr. Wirken, as to 


11 

the actual and the estimated by way of some report that we 

could look at for an exhibit? 

09:27:55 

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MR. WIRKEN: 

those exhibits now. 

Your Honor, there were -- I'm showing you 

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15 

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THE COURT: I understand that. But what I'm asking, 

do you have a summary sometime so that when we get to the 

bottom of the problem, estimated and actual. 

09:28:08 

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MR. WIRKEN: 

For '06 I'm going to take him to Exhibit 

18 

19 

20 

21 

44. '05 is a bit of a problem here because some was reported, 

some was paid, some of the checks bounced. 

THE COURT: All right. Well, at sometime do you have 

a summary that shows all of that information on one document? 

09:28:27 

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MR. WIRKEN: 

One of those documents is right in front 


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of us, sir, as Exhibit 8. If Mr. Carlson could explain -- 


Q. On the second page, Mr. Carlson, of Exhibit 8 on the 

09:28:39 




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accounts receivable status report, that is page 2. 

A. Okay. 

Q. Do you see a second section there of weeks? 

A. I do. 

MR. HOLLAND: I'm sorry, page 2 of Exhibit 8? 

09:28:57 

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MR. WIRKEN: 

Exhibit 8, the accounts receivable status 

7 

report, page 2. 

8 

THE WITNESS: 

It would be the fourth page of the 

9 

exhibit. 


MR. WIRKEN: 

That's correct. 

09:29:11 

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Q. Are there -- does that page show you weeks in '05 for which 

there are fees owed? 


Q. And were there -- were there fees reported but not paid, or 

that the payments bounced? 

A. Yes, you can see the indication on the description where it 

says "check number" and a credit, that is a check that cleared. 

And as you go further down, obviously "NSF" means nonsufficient 

09:29:28 

20 

funds for an EFT transfer. 

And you can see that listed there 

09:29:46 

21 

as well. 

So sales were -- were reported, but there wasn't 

22 


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money in the bank account to satisfy the electronic funds 

transfer request. 

Q. Okay. To summarize, Mr. Carlson, with regard to that 

portion of the exhibit you were just referring to, those weeks 

09:30:08 




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appear to have been in August and September of '05? 


Actually there is an NSF check from -- dating back to 

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July of '05 as well. 

But most of them are August through 

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September. 

Q. So for that period in August and September of '05, there 

were payments that were made that bounced, and they total 

$3,203? 

A. Correct. 

Q. And then later in '05, if you go back to the first page of 

the exhibit, there are weeks beginning October 1, '05, through 

December 31, '05, for which fees were reported but not paid? 

A. They were reported. This captures the reporting. The 

actual franchise fee reporting payments are captured on the 

second page. 

Q. But these fees that are shown here on the first page for 

the weeks in October, November and December of '05 show amounts 

due? 

A. Correct. 

Q. Had those fees been paid they wouldn't be listed here, 

would they? 

A. Correct. 

09:30:27 

09:30:38 

09:31:02 

09:31:14 


THE COURT: 

That's about the third time I've heard 

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this now -- 

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MR. WIRKEN: 


09:31:22 




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THE COURT: -- Mr. Wirken, I'm serious about it. And 

I want a summary exhibit at some time that's going to do 

something for me. 

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MR. WIRKEN: 

All right. 

5 

THE COURT: 

I take it at sometime you've got a figure 

09:31:31 

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that you want to get a judgment for. 

MR. WIRKEN: Yes. I wanted to lay that foundation. 

Thank you. 

THE COURT: All right. Let's proceed. 


MR. WIRKEN: 

I'm ready to move on. 

09:31:40 

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Q. To Exhibit 15, Mr. Carlson, if you would. 


Q. Okay. And very quickly, is that the last notice to cure 

that was sent with regard to the other store, the Thunderbird 

store, the last notice to cure sent before termination? 


Q. It also has an accounts receivable status report attached? 

A. Correct. 

Q. And we would read it the same way we were reading Exhibit 

8? 


Q. To determine the fees due for '05? 


Q. All right. And again, there are weeks in '05 that were 

09:32:04 

09:32:15 

09:32:25 




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reported but not paid, and weeks in '05 that were paid where 

the payments bounced? 

A. Just as in the previous; correct. 

Q. Okay. Let's move to -- 

If the clerk would please give the witness Exhibits 39 

through 44. 

Mr. Carlson, I believe you said that no fees were 

reported for any weeks in 2006. 


Q. If -- I'm sorry, I said -- I misspoke. You said that no 

sales were reported for any weeks in 2006? 

A. We just had the estimates; correct. 

Q. Okay. When sales are not reported by a franchisee, how 

does Baskin-Robbins go about calculating the fees that are owed 

by the franchisee? 

A. We go back and look at estimates for the market, as well as 

09:32:44 


09:33:27 

17 

ice cream shipments. 

Everything we sell in the store 

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ultimately springs from the ice cream that is sold. 

Q. Okay. Do we -- I'm sorry, I forgot actually -- 

Did you include 41? 

09:33:43 

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THE CLERK: 

Yes. 

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24 


MR. WIRKEN: Okay. I beg your pardon. 

Q. 41 is a binder in front of you, sir. That binder is one 

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exhibit. 

And what -- what is the contents of that binder? 

09:33:53 




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A. These are the invoices from our supplier, Dean Foods Corp. 

Company, that captured the amount of ice cream both ordered and 

delivered to the store listed on the payment -- front page. 

Q. From whom does the franchisee, in this case the Condits, 

from whom do they purchase the ice cream? 

A. From Dean Foods Company. 

Q. Is Dean Foods someone that is licensed to make the ice 

cream? 

A. Yes, they make our ice cream throughout the United States. 

Q. And does the franchisee order directly from Dean's? 

A. They do. 

Q. And do they pay directly to Dean's? 

A. They do. 

Q. And does Dean's provide Baskin with copies of the invoices 

of the ice cream purchased and shipped, delivered to the 

franchisee? 

A. Yes. 

Q. So you're able at Baskin to monitor the quantity of ice 

cream that's being purchased from a franchisee? 

A. Correct. 

Q. From that quantity of ice cream are you able to translate 

the quantity into gross sales? 

A. Yes. 

Q. How do you go about doing that? 

A. We do it by gallons. So if the number of gallons sent to 

09:34:15 

09:34:26 

09:34:37 

09:34:49 

09:34:57 




31 

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each store, there's a corresponding sales number that goes with 

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it. 

We have both the market average for Phoenix as well as the 

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national average. 

Q. Did you prepare a report expressing your calculations in 

this case that we marked as Exhibit 44? 

A. Yes, I did. 

Q. And that report focuses just on 2006; is that correct? 


Q. How long has Dunkin' been using that methodology to 

calculate gross sales from gallons of ice cream? 

A. The original formula was developed by Mr. Robbins, the 

founder of the company. 

Q. That would be some time ago? 

A. 1945. 

Q. How long have you been using the methodology? 

A. Since the first day I worked in the store, 1979. 

Q. Is this a methodology that you employ to monitor 

franchisees? 

A. Yeah, it's sort of the body temperature of the franchise 

store, that the averages are an indication of how efficient the 

operation is. 

Q. And you also use it when sales are underreported? 

A. Underreported, yes. 

Q. Or when sales are not reported? 

A. Correct. 

09:35:14 

09:35:34 

09:35:47 

09:36:04 

09:36:17 




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Q. In Exhibit 44 have you prepared a chart that summarizes 

your calculations of the gross sales based on quantity of ice 

cream purchased? 

A. Yes, I have. 

Q. What -- first of all, is that Exhibit 1 to your report? 

A. That's Exhibit 1, it's a little spreadsheet, yes. 

Q. Actually Exhibit 1 to Exhibit 44. It might be confusing. 

There are also two other pages attached to Exhibit 44 marked as 

09:36:33 

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Exhibits 2 and 3. 

They look like pictures taken off of a 


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computer screen. 

A. Yes. 

Q. Or prints. 

What are -- what is on those screens, what do you call 

those screens? 

A. That's a print from our store information data base, which 

captures the performance of each of the stores, indicating the 

number of gallons purchased over a 12-month period. 

09:36:56 

09:37:03 

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THE COURT: 

Let me ask, does this exhibit, for 

19 

20 

instance, show whether or not the ice cream that was 

purchased -- the ice cream was purchased from Dunkin', was 

09:37:20 

21 

22 

actually paid for by the franchisee? 

cream they got? 

Did they pay for the ice 


24 


THE WITNESS: 

Yes, they did. 

25 

Q. So as the ice cream is ordered and delivered to the 

09:37:35 




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franchisee, it's being reported to Baskin, and Baskin is 

collecting that information in its data base? 

A. Correct. 

Q. And then you can call up those figures in exhibits -- in 

the form of a screen that we see here attached to your Exhibit 

44? 


Q. And using that information, you then made a calculation of 

the estimated gross sales? 


Q. For 2006? 

09:37:52 

09:38:02 

12 

THE COURT: 

That's been asked and answered a number of 

13 

times also, Mr. Wirken, please. 

14 

15 


MR. WIRKEN: 

I'm sorry, Your Honor. 

16 

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Q. With regard to 44, Mr. Carlson, what is your total estimate 

of the gross sales for the two stores in this case for 2006 

from January through September? 

A. $345,245. 

20 

THE COURT: 

How much? 

09:38:33 

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25 

THE WITNESS: $345,245. 


Q. And against that gross sales number, would you then apply 

the percentage amounts for franchise fees and advertising fees? 

A. Yes. The royalty fee at 5.9 percent would be $20,369.46. 

09:38:49 




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The system and product advertising would be $17,262.25. 

Q. And those two numbers, which total something in the range 

of $37,600, would be the total of Baskin's claim in this case 

for fees due for the year 2006 for these two stores? 


Q. And the total for 2005 I will summarize otherwise for the 

Judge. 

Now then, Mr. Carlson, moving on from -- 

THE COURT: Pardon me. I thought Exhibit 44 was the 

two stores. 

MR. WIRKEN: It is the two stores for 2006, 

Your Honor. 

What I meant to say a moment ago is that I will 

summarize for you the fees due for 2005 for the two stores. 

09:39:19 

09:39:38 

15 

THE COURT: 

You don't have an exhibit for that? 

09:39:51 

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MR. WIRKEN: We have it. It's in bits and pieces in 


THE COURT: All right. Well, you're going to prepare 

a summary. 

20 

MR. WIRKEN: 

Yes. 

09:40:00 

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THE COURT: 


22 

MR. WIRKEN: 




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25 

Q. I take it, Mr. Carlson, that the defaults that were 

specified in the informal default letters and in the formal 





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notices to cure were never completely cured? 


Q. And did Baskin then make a decision to terminate these two 

franchises? 

A. Yes, we did. 

Q. And the notices of termination are those that are marked as 


7 

8 

9 


front of you yet. 

A. I do not. 

And I think you may not have those in 


Q. I've gotten ahead of myself. Sorry. 

09:40:37 

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THE CLERK: 

That's all right. 

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Q. 20 and 21, Mr. Carlson. 

A. Okay. I've got them. 

Q. Okay. And those letters are dated March 15, 2006? 


Q. And they come not internally from Baskin-Robbins, but they 

come from your outside counsel? 

A. They do. 

Q. Now, I notice that on the notices to cure and the notices 

of termination, there's a designation that above the 

addressee's name and address that the letters are being sent by 

overnight delivery and first class mail. 

Is there some provision in the franchise agreement 

about how notices are to be given to the franchisee? 

09:41:03 

09:41:14 

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A. Yes, they're provided to the store address. 

Q. Is there -- I suppose we could read this for ourselves, but 

is there any requirement in the franchise agreement as to how 

the notices are to be given? 

A. Basically as identified here, overnight mail, first class 

mail. 

Q. And so in this case, is it true that there were redundant 

notices or duplicate notices being sent in each instance, one 

overnight and one by regular mail? 


Q. After termination, does the franchisee who has been 

terminated have certain obligations, or certain requirements 

imposed on the franchisee after termination pursuant to the 

agreements? 

A. Yes, there is. 

Q. What are they supposed to do? 

A. Primarily to de-identify the locations, to remove all 

trademarks and other indicating marks saying that the location 

is a Baskin-Robbins. 

Q. And so I take it what they're not supposed to do is to 

continue operating as Baskin-Robbins? 

A. Correct. 

Q. They're not supposed to continue using the Baskin-Robbins 

name? 


09:42:02 

09:42:17 

09:42:32 

09:42:43 

09:42:51 



CROSS-EXAMINATION - JOHN CARLSON 

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Q. The Baskin-Robbins trademarks? 

A. Correct. 

MR. WIRKEN: Thank you, Mr. Carlson. That's all that 

I have. 

5 

THE WITNESS: 

Thank you. 

09:43:09 

6 

THE COURT: 

Mr. Holland. 

7 

MR. HOLLAND: 

Yes. 

8 

CROSS-EXAMINATION 

9 

BY MR. HOLLAND: 


11 

Q. Mr. Carlson, what's Dunkin' Donuts' worth? Do you know the 

approximate value of that company? 

09:43:28 

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MR. WIRKEN: 

THE COURT: 


Objection, irrelevant. 

Sustained. 

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Q. Let me -- let me ask you about the FAST System. You 

indicated that the FAST System requires internet connection; is 

that right? 

A. It requires connection to the internet, yes. 

Q. Can you make payments other than through the FAST System? 

A. In extreme cases you can send a check, but the requirement 

is to submit it by internet. 

Q. Do any of your stores or any of the stores you oversee not 

have internet connection? 

A. That would be -- all of them that are currently on these 

09:43:37 

09:43:55 

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agreements would require it, yes. 

There are older agreements. 

09:44:14 




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Q. That do not require internet connection? 

A. Yes. 

Q. And those payments are made how? 

A. By check. 

Q. Do you accept checks from -- from agreements that are 

governed by this franchise agreement? 

A. Not normally, no. 

Q. Can you specify "not normally" -- can you tell me an 

occasion where you would accept a check? 

A. Usually upon termination or transfer. 

Q. A notice to cure, would that be an occasion that would 

warrant an acceptance of a check? 

A. In extreme cases, yes. But we suggest they do it through 

the system to ensure that they get proper credit in a timely 

manner. 

Q. You indicated that there was a training program that's in 

09:44:24 

09:44:42 

09:44:58 

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18 

Burbank, California. 

Massachusetts? 

Isn't there also a training program in 

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A. There currently isn't any longer. There was at one point 

two programs, one of which was a short program that was begun 

there and then completed in Burbank. 

Q. Chad was required -- or the Condits rather, were required 

to attend both the Massachusetts and the Burbank, California 

training? 

A. Correct. 


09:45:22 




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Q. They were also required to go to Chandler, Arizona for some 

training some three months; isn't that right? 

A. I'm not familiar with that, no, I couldn't answer that 

question. 

Q. Is there a training program that requires you to go to 

Chandler, Arizona for any period of time? 

A. It's not a requirement that I'm aware of, no. They may 

have spent time in another store, but I don't know. 

Q. How many of your franchisees spend time in other stores 

like Chandler? 

A. That would be their choice, not a requirement. 

Q. That's not something you require of them, that's what they 

voluntarily ask to do? 

A. In cases, yes, that would be their choice. 

Q. In what cases would that be? 

A. Whenever -- 

Q. You said "in cases." 

A. Whenever they choose to do that is supplement to their 

standard training. 

Q. Okay. In cases where there's a concern -- for example, I 

know Mr. Soley would -- it was required that Mr. Soley -- 

THE COURT: Pardon me. You say you know, so let's 

rephrase the question and let's proceed. 

09:45:32 

09:45:49 

09:46:00 

09:46:08 

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MR. HOLLAND: 

I'm sorry, Your Honor. 




40 

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Q. Isn't it true that Mr. Soley had to approve a franchisee 

before Dunkin' Donuts would agree to accept them? 


Q. And when Mr. Soley expressed a concern, would that be an 

occasion that warranted additional training? 

A. It might have been a suggestion, but I certainly wasn't 

09:46:36 

7 

there during that conversation. 

I couldn't answer that. 

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Q. Okay. Have you been to this training? 

A. Yes. 

Q. How much time do they spend in the training on the FAST 

Program? 

A. It is part of the standard business management section. So 

if he were going to say how much time, it's probably about an 

hour. 

Q. An hour on FAST and that's the extent of the FAST training? 

A. Yes. 

Q. That's in Burbank? 

A. Burbank. 

Q. Or Massachusetts? 

A. In Burbank. 

Q. In Massachusetts do they mention the FAST System? 

A. It would be mentioned initially, but no proper training 

would be conducted there. 

Q. And how long does it take to learn the FAST System? 

A. It -- 

09:46:54 


09:47:13 

09:47:25 




41 

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Q. On average. 

A. On average, most franchisees leave there with the knowledge 

3 

of how to do it. 

We don't have problems with sales reporting. 

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And if we do, we address those. 

Q. If there was a problem with sales reporting and a 

franchisee indicated that he was unable to understand the FAST 

System, what would be done? 

A. The operations manager would assist them. 

Q. The operation manager for the Condits was Mr. Tilson? 


Q. Okay. Would additional training be provided? 

A. Yes. 

Q. And whose discretion -- at whose discretion would that 

training be provided? 

A. At the discretion of the operations manager. 

Q. If additional training was requested by the franchisee, 

would he be entitled to receive it? 

A. He would certainly receive that support. 

Q. You say "he would certainly," do you know if he would 

receive that support or do you just speculate? 

A. No, I know they would receive that support. 

Q. How do you know that he would receive such support? 

A. That's part of the responsibility of the OM -- I'm sorry, 

operations manager, to make certain that sales are reported. 

Q. So if sales weren't being reported, then you're assuming 

09:47:37 

09:47:51 

09:48:02 

09:48:14 

09:48:28 




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that the operation manager would then address the issue? 

A. They would certainly address the issue. 

Q. What's -- what's -- tell me again the relationship of Dean 

Foods to Dunkin' Donuts or Baskin-Robbins specifically. 

A. They're a licensed supplier. 

Q. Are they -- are they under the same umbrella, a sister 

company, a mother company? 

A. No, they're not, they're a separate independent 

corporation. 

Q. Same governing board? 

A. No. 

Q. Does Dean Foods have an obligation to make reportings to 

Dunkin' Donuts -- or to Baskin-Robbins? 

A. Yes, they do. 

Q. Where does that obligation arise? 

A. I'm not sure I understand. 

Q. Is that a contractual obligation? 

A. Yes, it is a contractual obligation. 

Q. Now I want to -- I want to talk about -- you indicated that 

on Exhibit 8 there were insufficient funds at times, and you 

indicated that there were bounced checks; is that right? 

A. I no longer have that exhibit in front of me, but if it 

indicates NSF that would be the case. 

Q. NSF, insufficient checks, those would be bounced checks? 

A. Bounced electronic payments. 

09:48:56 

09:49:08 

09:49:19 

09:49:36 

09:49:54 




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Q. Those are electronic payments where there were insufficient 

funds in the bank account? 


Q. Do you know who made the reporting of the Condit -- in the 

Condit situation, who made those reports, do you know? 

A. Who -- 

Q. Who made the FAST reports? 

A. We don't know who did that personally, it's all done 

electronically. 

Q. Was there a way to track that? 

A. It just comes from the store. 

Q. So any submission from the FAST System that comes from the 

store is assumed to be from the franchisee? 

A. They hold the passwords. 

Q. I'm sorry? 

A. They would hold the passwords. 

Q. It requires a password to access the FAST System? 

A. Yes, it requires a password to access the system. 

Q. Who knows that password? 

A. That would be the franchisee and the administrators of the 

system at Dean Foods. 

Q. Does -- 

A. I'm sorry, at Baskin-Robbins. 

Q. Does -- does the operations manager know that password? 

A. No. 


09:50:17 

09:50:28 

09:50:43 

09:50:56 




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Q. Jerry Tilson wouldn't know that password? 

A. Unless it was shared. 

Q. And that password is required to make -- just so we're 

clear, that password is required to make an accounting through 

FAST? 

A. Yes. 

Q. Do you have many franchisees who default on -- on -- like 

in this -- let me rephrase. 

Are there many franchisees that default for 

nonpayment? 


09:51:38 

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MR. WIRKEN: 

Objection, irrelevant, form of the 

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question. 

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THE COURT: 

Sustained to the form of the question. 

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Q. What percentage of franchisees that are being sued for 

default settle out of court? 

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MR. WIRKEN: 


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THE COURT: 

Sustained. 

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MR. HOLLAND: 

Your Honor, it goes to a personal 

09:51:56 

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vendetta that my client believes -- 

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THE COURT: 


Sustained. 

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Q. I want to address your -- the estimation of gallonage. You 

have an actual way -- you said there was an actual and an 

09:52:17 




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estimated way of computing losses for royalty fees based on 

gallonages; isn't that right? 

A. I'm not sure I understand. You say "actual" versus 

"estimated." 

Q. And maybe I -- estimated is, you testified is where you use 

a factor based on the amount of gallons that were sold, and 

from that factor, that state-wide factor you estimate -- 


Q. -- the amount of profits. 

What is that number, do you have a number? 

A. $29 a gallon. 

Q. $29 a gallon of gross revenue or profit? 

A. Of gross sales, sales. 

Q. Each gallon will generate $29 of sales? 

A. Yes. 

Q. And the gallonages -- each gallon costs $18 I think it was 

in Exhibit 44 or Exhibit 41? 

A. That would be -- that's a three-gallon container. Each tub 

of ice cream is three gallons. 

Q. Each tub -- do you know the cost of the tub of ice cream? 

A. At the time I believe it was $18 and change, 18.70 or 

something. 

Q. Okay. And that's good. 

But the price per gallon is $29? 

A. The retail sales generated from each gallon of ice cream. 

09:52:32 

09:52:52 


09:53:24 

09:53:39 




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Q. What's the margin of error on that estimation? 

A. It's an average for the entire state of Arizona. So that 

would be all the sales done in all of the stores in Arizona 

divided by the number of gallons sold to all the stores in 

Arizona. 

Q. I don't mean to cut you off. 

I understand how it's generated and how you come by 

09:54:02 

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that number. 

there? 

But certainly there's a margin of error, isn't 


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A. It's an average. 

Q. You don't have a margin of error for the number of gallons 

to revenues? 

A. Like I say, it's an average. 

Q. Isn't there occasion where there would be a loss of ice 

cream gallonage? 

A. When you say "loss," I don't understand the question. 

Q. The ice cream gallons don't always come out exactly to 29 

gallons you -- or $29 a gallon, do they? 

A. That's the average. That's why we call it an average. 

Q. Okay. At the time that the Condits agreed to the 

franchising agreement, do you know the cost of ice cream? 

A. At the time they agreed to it I don't have the exact number 


09:54:26 

09:54:42 


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in front of me. 

Maybe -- 

I believe it was part of an exhibit. 

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Q. Exhibit 44, I believe that's -- 

09:55:15 




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MR. WIRKEN: 

I think you want 34, Counsel. 

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THE WITNESS: 

Yes, that's it. 

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Q. Exhibit 34 tells the price per -- per three-gallon tub? 

A. That would be the last page in that exhibit. 

So if they initiated their franchise agreement in 

2004, that would be the time frame he was looking at. 

Q. I'm looking at February 23rd or 24th, 2004, $17.26 per tub? 


Q. And there was a price increase in April of 2005, wasn't 

there? 

A. There was a price that was -- actually it was in February 

of 2005. The initiation date is 2-27-2005. 

Q. And that's when the price of ice cream jumped up to $18.35? 


Q. What are these figures on the far right, these percentages? 

A. That's the percentage increase over prior period. 

Q. So there was a time where the price decreased in 2003, 

according to this? 

A. Correct, as well as in 2006. 

Q. What would determine what the price of the ice cream being 

charged to a franchisee would be? 

A. The price is created through a wholesale price mechanism, 

which would take all of our costs, tabulate them, and then put 

09:55:30 

09:55:53 

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the cost out to our supplier and then through to our 

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franchisees. 

So it's based on commodity pricing and 

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transportation pricing. 

Q. Okay. And you're stating that in 2003 the -- the price of 

gallonage actually went down, and it went down again in 2006, 

and each other time it went up; is that right? 

A. Covered by this report; that's correct. 

Q. I want to talk about the franchise agreement itself. I 

think the two franchise agreements are identical, isn't that 

right, with the exception of the address? 


Q. We can turn to either one of those franchise agreements, 

Exhibit 1 or 2. 

A. I don't think those are still here. 

THE COURT: All right. While we're doing that, it's 

almost 10:00 o'clock, and it's been a long morning for the 

09:57:08 

09:57:42 

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court reporter. 

And so we will take a recess until 10:15 and 

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go ahead at that time. 

(Recess at 9:58 a.m., until 10:17 a.m.) 



Q. Mr. Carlson, does the franchise agreement allow the 

operations manager, or Mr. Tilson in this case, to go through 

cash registers of the franchisees? 

A. I'm not sure I understand your question, "go through." 

10:17:45 

10:18:06 




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Q. If -- if there's a contention that sales are not being 

reported or that franchise royalties aren't being paid, is he 

entitled to go to the store and go through the register? 

A. The operations manager at the franchisee's request can 

assist in pulling that information. 

Q. Can he insist upon going through the register? 

A. I'm not certain I understand exactly what you're trying -- 


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THE COURT: 

and let's proceed. 


The register, let's find out what that is 

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Q. Well, let me ask you this, the cash registers, aren't those 

a manner or means of reporting sales? 

A. They capture the sales. 

Q. Okay. And you indicated that through the FAST System those 

registers are linked to the internet and they upload those 

sales revenues? 

A. You're confusing two different systems here. 

Q. I'm sorry. The FAST System is not linked to the register? 

A. The FAST System is an internet connection through a website 

you would go on and report those sales. 

Q. What are the registers? 

A. Cash register is an electronic box that captures the money 

and the sales reporting. But not -- 

Q. Are those registers provided by Baskin-Robbins? 

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franchisees. 

Q. They're purchased through an independent agency not in any 

way affiliated by Baskin-Robbins? 

A. Through an authorized supplier. 

Q. Do you know who that authorized supplier is? 

A. There are several. 

Q. If a franchisee is reported not to have uploaded sales 

information through the FAST System, is Jerry Tilson entitled 

to go to the franchisee's location and look through the 

register? 

A. Only if the franchisee asks him to do that or allows him to 

do that. 

Q. If the franchisee is not present, is he allowed to go 

through the register? 

A. Wouldn't have the keys to do it. 

Q. I'm sorry, the keys? 

A. It requires a key. 

Q. The register requires a literal key? 

A. Some of it -- depending on which register is in the store, 

some of them require a physical key, some of them require a 





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password. 

There are several systems, I could not speak for 

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which specific system would be in their store without looking. 

Q. Are you familiar with operating managers such as Jerry 

Tilson -- I believe that's what you call them, operating 

manager? 





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A. Operations manager. 

Q. Operations manager. 

Are you familiar with an operations manager going 

through cash registers of franchisees? 

A. Again, only if they're asking for assistance, they can 

provide that assistance. 

Q. If they're not asking for that assistance -- 

THE COURT: That's been asked and answered now. Let's 

proceed. 


Q. I want to talk about inspection of the stores. You 

indicated that these stores are inspected on a regular basis; 

is that right? 


Q. What does that inspection entail? 

A. It can be everything from a store visit, just to stop by 

and sample product, make sure that the latest marketing 

programs are up and operating, or it can be a more detailed 

sanitary inspection, which may take several hours that would 

involve temperatures, cleanliness, et cetera. 

Q. At what times are inspections made? Is it a regular 

inspection? 

A. Some of them are announced, some of them are unannounced. 

Q. Do you know when the last inspection was made of the 

Condits' stores? 








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A. I wouldn't be able to say that without referring to other 

records. 

Q. Were there inspections made after March of -- March of 

2006? 

A. I wouldn't have the specific dates, but I know that there 

were inspections made. 

Q. On those occasions do you know if the Condits were informed 

of the lawsuit that was pending against them at that time? 

A. I can't assume anything, that's -- I'm assuming -- 

Q. I'm not asking you to assume. I don't mean to cut you off. 

But if you know, do you know if they were -- if it was 

mentioned, a lawsuit or a termination of the franchise 

agreement at that time? 

A. Seeing that they received the notice to cure and the notice 

to terminate, I would -- 

Q. Let's talk about receipt of the notice to cure, notice to 




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terminate. 

You indicated that that notice is mailed to the 

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franchise location; is that right? 

A. The store address; correct. 

Q. And how do you go about ensuring that the franchisee 

received that notice? 

A. There is a signature when the package is delivered via 



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Fed Ex. 

manager. 

And there's also follow-up from the operations 

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Q. And that signature bears a Condit name? 





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A. I do not -- I don't have it in front of me. It could be 

anyone in the store. 

Q. I'm turning you to Exhibit 3. This is a notice to cure. 

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And it relates to profit center 631450. 

I believe that is the 

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profit center on Peoria Avenue; is that right? 


Q. The last page of the exhibit has a signature. Do you know 

whose signature that is? 

A. I can't read it, but the signed for by letter above it 

says, J. Water. 

Q. Is that a franchisee? 

A. Not that I'm aware of. 

Q. Do you know if that's a worker? 

A. Not that I'm aware of. I don't -- I have no -- no way of 

10:23:36 

10:23:55 

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understanding exactly who that person is. 

It would have been 


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an employee or some other representative of the store. 

Q. Okay. Exhibit 4 is the notice to cure. And I don't even 

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see a signature line on this one. 

Can you identify it anywhere 

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in Exhibit 4 where there's a signature taken for that? 

A. The final page indicates signed for by S. Delman. 

Q. Do you know S. Delman? 

A. No, I do not. 

Q. Do you know who S. Delman is? 


THE COURT: Are we talking about Exhibit 4? 






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MR. HOLLAND: Yes, the last page of Exhibit 4, 

Your Honor. That is a notice to cure at the Peoria site. And 

the signed for line, about -- just less than halfway down the 

page. 



Q. Do you -- there are several notices to cure. And I don't 


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want to go through all of them. 

Exhibit 6 is another notice to 

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cure signed by B. Vuera. 

Do you know B. Vuera? 


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Q. Do you know if this is a -- an employee of Baskin-Robbins? 

A. Of Baskin-Robbins -- of Baskin-Robbins USA? 

Q. Sure. 

A. I do not know of that person. 

Q. Is it an employee of Acorn Lanes? 

A. I do not know that. 

Q. Exhibit 7, last page says K. Ann signed for this notice to 



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cure. 

You don't know K. Ann either, do you? 

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Q. Exhibit 8, last page, J. Fone signed for this. Do you know 

J. Fone? 


Q. Do you know of J. Fone? 


Q. Do you know of K. Ann? 






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THE COURT: 

Let me just find the last page of some of 

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these here and see what -- 

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MR. HOLLAND: 

I'm sorry, Your Honor, I don't mean to 

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go too fast for you. 


Q. The last page of Exhibit 10, do you have that? 


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THE COURT: 

Let's wait until I get done with Exhibit 

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8, all right? 


MR. HOLLAND: 

I'm sorry. 


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right, I see it. 

THE COURT: You gave -- oh, I see, signed for by. All 

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All right. 



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Q. Exhibit 10 says it was signed for by B. Pappas. Do you 

know of B. Pappas? 


Q. Is there any instance you can show where the Condits 

actually -- any of the Condits -- Carolyn, Cadee, any of the 

defendants or Acorn Lane -- actually received these notices? 

A. We don't have any of their signatures. I can't speak to 

whether they received them subsequently. 

Q. Okay. You indicated that the FAST training was about an 

hour long; is that right? 

A. I can't say specifically, but for approximately an hour. 







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Q. And who does that training in Arizona? 

A. In Arizona, I can't speak for that. I would -- I would say 

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that they -- we have a variety of trainers. 

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into specific files and seeing which training inspector 

participated in which classes, I couldn't name them. 

Q. Is there a Jaime, director of training in Chandler in 

Arizona? 

A. I'm not familiar with that person's name, no, I don't know 

that person's name. 

Q. If I were to tell you that Jaime trained the Condits in the 

Chandler store, would you have any reason to refute that? 

A. I don't know a Jaime, so I can't speak for whether that 

person trained them or not. 

Q. Okay. Are you aware that the Condits requested assistance 

with the FAST Program after some of these notices to cure were 

obtained? 

A. I know that Mr. Tilson spent some time with Chad 

specifically and instructed him again on how to use that 

system. 

Q. And are you aware that Chad asked Mr. Tilson for additional 

training? 

A. I believe that's what I just said, yes. 

Q. I just want to be clear here -- 





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THE COURT: 

He said it, now let's proceed. 

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Is Tilson listed as a witness? 




REDIRECT EXAMINATION - JOHN CARLSON 

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Yes, he is. 

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THE COURT: All right. Fine. 


Q. Are you aware that that training was denied? 

A. I'm not aware of that. 


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MR. HOLLAND: 

I have no further questions for this 

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witness. 

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THE COURT: All right. Thank you. 

Any further of this gentleman, Mr. Wirken? 


MR. WIRKEN: 

Very briefly, Your Honor. 


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REDIRECT EXAMINATION 

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Q. Just to clarify, Mr. Carlson, Dean's Foods Company, the 

vendor or supplier of Baskin-Robbins ice cream under license, 

is an entirely separate independent company from Dunkin' Brands 

and Baskin-Robbins? 

A. Correct. 

Q. And with regard to Exhibit 34, if you have that. 


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MR. HOLLAND: 

I'm sorry, which exhibit? 

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MR. WIRKEN: 34. I believe it's the ice cream price 


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history. 

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don't see it. 

THE WITNESS: I'm not sure I can find it here. I 

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Here it is, out of order. 

I'm sorry. 

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Yes, I have it. 





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Q. I think that there was a mistake in -- when Mr. Holland was 

examining you about the year. 

These franchisees took over in February of '05, not 

'04; correct? 

A. Correct. 

Q. I think he was asking you the price of ice cream when they 

took over. And that would have been in February of '05. And 

we would see the price per ice cream on both of these pages of 

Exhibit 34? 

A. Yes. So the price from the 5th of July, 2004, until the 

26th of February, 2005, would have been 17.71. 

Q. What is on the second page of Exhibit 34? 

A. That is a detailed item-by-item description of sales price 

by item, going beyond just the three-gallon tubs. 

Q. On exhibit -- on the second page, sir? 

A. Oh, I'm sorry. The second page. 

So this -- this page with the description is just for 

the three-gallon tub price. 

Q. And the first page has the prices for three-gallon tubs and 

other items? 

A. Correct. 

Q. And the three-gallon tub price, is that for the tub or is 

it per gallon? 

A. It's for the three gallons in the tub; correct. It's a 









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unit price. 

Q. So a tub with three gallons in February of '05 would be 

$18.35? 


Q. Not $18 per gallon? 

A. Correct. 

Q. All right. The relationship between the cash register and 

the internet connection using the FAST System -- 


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THE COURT: 

What is the question? 


MR. WIRKEN: 

I haven't posed it yet. 


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Q. Does the cash register -- does the franchisee take 

information from the cash register and then input it separately 

on the computer via FAST System? 

A. Correct. 

Q. So to clarify Mr. Holland's questions, there's not an 

upload from the cash register to the internet? 

A. No. There are a few units in the system that do that. I 

don't believe the Condits were on that system. 

MR. WIRKEN: Thank you, sir. That's all I have. 

THE COURT: Thank you, sir. You may step down. 

Next witness. 




THE WITNESS: 


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MR. WIRKEN: 

Plaintiffs call Jerry Tilson. 

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THE CLERK: 

Please raise your right hand. 




DIRECT EXAMINATION - JERRY TILSON 

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(JERRY TILSON, PLAINTIFFS' WITNESS, SWORN) 

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THE CLERK: 

And would you please state your name, sir, 

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for the record and spell your last name? 

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THE WITNESS: 

It's Jerry Tilson, T-I-L-S-O-N. 


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Q. Would you adjust the microphone, Mr. Tilson? 

Thank you, sir. 

Who is your employer, sir? 

A. Baskin-Robbins USA. 

Q. And your position or title with Baskin? 

A. I'm operations manager. 

Q. Formerly known as franchise services manager? 


Q. Same position, different name? 

A. Yes. 

Q. How long have you been with the company? 

A. Seven years. 

Q. How long have you been in that position? 

A. Seven years. 

Q. Do you have responsibility for Baskin stores in any 

particular geographic area? 

A. For the state of Arizona. 

Q. What are some of your duties in that position with regard 

to the issues in this case? 








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A. I advise and consult with the franchisees on how to run 

their business, help them with operations, and also do store 

inspections, maintain standards. 

Q. Do you also have some responsibility for monitoring 

payments of royalties or advertising fees? 

A. Yes. When I'm made aware that there's a deficiency there, 

yes, I do. 

Q. Okay. Were you involved in the transition of these stores 

from their prior owners to the Condits? 

A. Yes, I was. 

Q. How were you involved? 

A. I was the franchise services manager, so I did the 

paperwork -- I was there at the signing when the old franchisee 

signed over ownership to them. 

Q. Sort of like a close of escrow? 

A. Right, exactly. 

Q. Were you involved in providing any training to the Condits 

at the time of that transfer? 

A. We go through a regular kind of training about operations 




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and some business practices. 

So, yes. 


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Q. At the time of the transfer or transition in February of 

'05, did you give any of the Condits any training with regard 

to reporting of sales via the FAST System? 


Q. Who did you give that training to? 





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A. To Chad Condit. 

Q. Which of the stores were -- were you in one of the stores 

at the time? 

A. We were in the Thunderbird store. 

Q. Would that be after Mr. Condit had already attended the 

Baskin-Robbins school out of state? 

A. Yes. 

Q. Have you been to that school, sir? 

A. Yes. 

Q. And do you agree with Mr. Carlson's testimony that the 

school provides training in the use of the FAST System? 

A. Yes, I do. 

Q. Do you recall the length of the training provided at the 

school regarding FAST? 

A. It was maybe an hour. 

Q. Is that typically a sufficient period of time for one to 

master the use of the system? 

A. Absolutely. 

Q. Is it any more involved than taking that number off of a 

cash register for the total sales for the prior week and keying 

it in to some form on a computer screen via the internet? 

A. That's -- that's all it is. It's just entering the gross 

sales and the computer figures, the fees. Once you -- 

Q. I'm sorry. 

A. Once you hit "submit," then you get a confirmation that 









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you've -- your fees have been paid, and it tells you when 

they're going to be withdrawn from the bank account. 

Q. Okay. Is it any more complicated than making a purchase on 

line via the internet? 

A. No. 

Q. Aside from the training you provided to Chad Condit 

regarding the reporting of sales at the time that they were 

taking over the stores, did you later provide him additional 

training, even though it may be repetitive training, regarding 

the use of the FAST System? 

A. Yes. 

Q. On how many occasions? 

A. Two occasions. 

Q. Do you remember when? 

A. Not exactly. It was sometime in the -- in the Spring. It 

would have been in the April, May period of time. 

Q. Of '05? 

A. Yeah, '05. 

Q. And later that year? 

A. And then later that year. 

Q. Did he seem to understand the use of the system after you 

provided him the instruction? 

A. He told me he did. 

Q. Did he ever ask you for any additional training regarding 

the use of the system that you refused to provide him? 









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A. No. 

Q. In addition to the default letters that we have here that 

came from the collections department at Baskin-Robbins in 

Massachusetts, and the notices to cure that came from Baskin's 

local counsel, did you have personal communication with the 

Condits, any of them, regarding their delinquency in paying 

fees? 

A. Yes. 

Q. On more than one occasion? 

A. Several occasions. 

Q. Why were you doing that? 

A. Because as part of my job I was trying to get them to 

report their sales and report and pay their fees, and I wanted 

to be sure that they were aware that this was a serious matter. 

Q. Were you being copied on the delinquency letters or the 

default letters coming out of Baskin headquarters? 

A. Yes, I was. 

Q. Were you being copied on the notices to cure that were 

being sent by counsel? 

A. Yes. 

Q. Would you follow up on those communications if you were in 

the store doing an inspection? 

A. If the franchisee was there, yes. 

Q. Who among the Condits was responsible for running these 

stores, in your observation? 









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A. Chad Condit. 

Q. Was he your point of contact with Acorn Lane Arizona? 

A. For the most part, yes. 

Q. Was there somebody else? 

A. I had occasional contact with Gary Condit, but it was 

mostly Chad. 

Q. Was Chad working in the stores? 

A. Yes, for most of the period of time that I dealt with him. 

Q. Was Gary working in the stores? 

A. No. 

Q. In addition to the default letters that came out of Boston 

and the notices to cure that came from counsel, did you send 

any written communications to the Condits regarding their 

delinquencies? 


Q. If you would take a look at Exhibit 17 in front of you, 

sir. 

A. Okay. 

Q. Is that a letter or a memo, I don't know what to call it, 

that you wrote? 

A. Yes, it's a letter I wrote. 

Q. And you addressed it to Gary -- and you addressed it to all 

of the Condits? 


Q. And how did you get this to them? 









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A. I had my assistant send it to them by Fed Ex. 

Q. And the subject of this memo, in short, is the failure to 

report sales and pay fees? 

A. Correct. 

Q. Take a look next at Exhibit 18. 

And before I ask you about that, did you have a 

meeting in person with Gary Condit and Chad Condit about this 

problem of nonreporting and nonpayment? 


Q. When was that? 

A. That was December 23rd of 2005. 

Q. Does the memo that's marked here as Exhibit 18 summarize 

the -- that meeting that you had with Chad and Gary Condit? 


Q. Was that an occasion at which time you provided any further 

training regarding the use of the FAST System? 

A. I -- I talked about the use of the FAST System and how to 




18 

do it. 

And then I helped with getting some weekly sales 

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for -- for Chad. 

Q. Okay. Were there ever any times when you were in one of 

these stores, Peoria or Thunderbird, meeting with Mr. Condit, 

talking about the use of the FAST System, where you sat down 

and demonstrated it and inputted or reported some of his sales? 

A. Yes. 

Q. How often did you do that or how many times did you do 






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that? 

A. Twice. 

Q. Do you remember when? 

A. It was in the April, May period of time of 2005. And the 

second one, I don't recall right offhand. 

Q. Okay. Well, let's refer to the accounts receivable reports 

in a minute to get into that further. 

At the December meeting, were the Condits aware -- did 

they acknowledge to you that they were behind in the reporting 

of payment of fees? 

A. Yes, they did. 

Q. Were they asking you then for any further training on FAST 

that you refused to provide? 

A. No, I didn't refuse to provide it. They asked for 

additional help, and I did not refuse it. 

Q. Were they asking for some forbearance from Baskin-Robbins 

with regard to the payment of fees? 

A. Well, I offered them a 30-day collection hold. 

Q. On any particular terms or conditions? 

A. Well, they had -- they had to catch up the fees that they 

were behind on. They had to stay current. And they had to 





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report weekly their sales going forward. 

And they had to catch 


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up what they were behind on in sales reporting. 

Q. And is all that summarized in Exhibit 18? 

A. Yes. 





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Q. After you met with them -- or as you were meeting with them 

on December the 23rd of 2005, did you all agree to meet again 

on a later date? 

A. Yes. 

Q. When was -- when were you to meet? 

A. We were to meet on January 16th. 

Q. Where were you going to meet? 

A. At that same store, Peoria. 

Q. Did you show up for that meeting? 


Q. Did Chad or Gary show up? 

A. No, they didn't. 

Q. Did you get any message from them saying they couldn't make 

it? 

A. No. 

Q. Any explanation as to why they weren't there? 

A. When I finally got ahold of Chad, he said that he had 

forgotten and Gary was out of town. 

Q. What was to be the purpose of the meeting on January 16th? 

A. To follow up on how we were doing as far as reporting sales 

and paying back fees. 

Q. Had the Condits satisfied the conditions to which you all 

agreed at the December 23rd meeting? 

A. No, they had not. 

Q. Did you write that up in what's been marked as Exhibit 19? 









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Q. And was Exhibit 19 something that -- and let me ask this 

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question both of Exhibits 18 and 19: 

those memos or letters to the Condits? 

Did you send copies of 

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A. I had my assistant send them, yes. 

Q. Again by Fed Ex? 

A. By Fed Ex. 


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MR. WIRKEN: 

If the clerk could provide Mr. Tilson 

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with Exhibits 8 and 15, please. 


Q. Let's take Exhibit 15 first, Mr. Tilson. 

On the accounts receivable status report, if you could 

turn to that, the first page of it that's attached to the 

notice to cure letter. 

A. Okay. 

Q. Do you see a group of weeks that are ending from September 

24, '05, to December 31, '05, for which sales were apparently 

reported and there are actual fees set forth here as being due? 

A. I'm sorry, those dates again were? 

Q. September 24, '05. It's the fifth week down in the invoice 

column. 

A. Okay. 

Q. And running down almost to the bottom of that column, the 

week ending 12-31-05. 

A. Okay. 







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Q. Those are all actual fees? 

A. Yes. 

Q. Which would require the reporting of sales? 

A. Yes. 

Q. Is that -- do you recall whether that is a group of the 

weeks' sales that you reported while working with Mr. Condit to 

assist him in using the FAST System? 

A. Well, what I did is I pulled the sales from the register 

and I sent them to the collection department, and somebody 

there was the one that entered them. 

Q. Okay. When you say you pulled them from the register -- 

A. Yes. 

Q. -- what do you mean? 

A. Well, in the Aloha register system they have a record 

keeping of all sales, and you can go in there and you can pull 

weekly sales reports, which is what franchisees are supposed to 




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do. 

And they pull sales reports after Saturday, Sunday 

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morning, whenever. 

And then you use that to report sales on 

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Thursday. 

So I went in, and Chad had asked me to pull the 

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sales, and I pulled the sales and I had them on a list and I 

sent them into the office to be recorded. 

Q. Okay. And in -- if you would turn your attention back to 

Exhibit 8, again the accounts receivable report attached to 


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that notice to cure letter. 

On the first page of the 

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notice -- of the accounts receivable report. 





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A. Okay. 

Q. Starting with weeks -- again the same weeks, almost the 

same weeks, starting October 1, '05, running through 12-31-05. 

Those fees are shown as actual, again based upon actual 

reported sales -- 

A. Yes. 

Q. -- correct? 

A. Yes. 

Q. Would you have done the same thing, pulled sales from a 

register -- 

A. Yes. 

Q. -- and reported those to collections -- I'm sorry, to 

the -- 

A. Actually to collections, yes. 

Q. To collections? 


Q. And that was something you did at Gary's request? I'm 

sorry, Chad. 

A. Not Gary's request, Chad's request. 

Q. I misspoke. 

Why was he asking you to do that? 

A. He was having problems pulling the right weeks. If I 

remember correctly he had reports pulled, but they were -- they 





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weren't the right day for the week. 

In other words, he was off 

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a day or two, so I went through and pulled them for him. 





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Q. All right. I'm sorry, I had one more question, I think, or 

a couple more questions about each of those exhibits you just 

had. 

A. Okay. 

Q. Mr. Tilson, if you'd go back to Exhibit 8. 

A. Okay. 

Q. On that first page of the accounts receivable status report 

for those weeks ending 12-31-05, there is not a total shown in 

there for the fees owed for '05, but had we tallied them on the 

calculator to be $4,657, during the recess? 

A. Yes. I saw them totaled, yes. 

Q. Okay. So the amounts Baskin would be claiming for this 

particular store for 2005 for these unpaid fees would be, in 

part, the total of this column of figures through December 31, 

'05, $4,657? 

A. Yes. 

Q. And if you turn to the second page of the report, that last 

block of figures there, shows some NSF EFT payments in '05? 

A. Correct. 

Q. Totaling $3,204? 

A. Right. 

Q. That would also be part of Baskin's claim for 2005? 

A. Yes. 

Q. So if we add those two numbers together, 4657, 3204, we get 

7861? 









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A. Okay. Yes. 

Q. And then on Exhibit 16. 

A. 60? 

Q. 15, I beg your pardon, I misspoke. 

On the first page of the accounts receivable report 

there are some estimated fees for weeks in August and September 

of '05; correct? 

A. Yes. 

Q. Before they become -- just those, what is it, four weeks of 

estimated fees? 

A. It looks like that. 

Q. And -- 

A. Yes, yes. 

Q. And those total $1,930? 

A. Well, I haven't totaled them, so I don't know what they 

total. 

Q. Okay. Whatever they total, that would be part of Baskin's 

claim for moneys due for '05? 

A. Yes. 

Q. And then continuing down that column, the actual fees that 

were calculated that we spoke about a few minutes ago, whatever 

those total? 

A. Yes. 

Q. Through the end of December '05, would also be part of 

Baskin's claim for '05? 









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A. Yes. 

Q. And then lastly on the next page, the last block of figures 

that total $963, that's for some NSF payments in '05? 

A. Yes. 

Q. After giving credit due for a couple of payments? 

A. Correct. 

Q. All right. 

After the notices of termination were sent to the 

Condits in mid March of '06, did you have occasion to go to the 

stores, to go by the stores and to see whether the Condits had 

complied with their requirements under the franchise agreements 

to de-identify? 


Q. Okay. How soon after mid March '06 did you first go by the 

stores? 

A. I wouldn't know exactly unless I saw some -- had some 




17 

documents in front of me. 

I don't recall. 

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Q. Did you go to the stores between mid March of '06 and mid 

September of '06? 

A. Yes, definitely. 

Q. More than once? 

A. Yes. 

Q. And you went to each store? 

A. Yes. 

Q. During that period of time were the stores de-identified? 






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Were the Baskin-Robbins' name signage taken off? 

A. No. 

Q. Were they continuing to operate the stores during those 

times? 


Q. Were they operating them as Baskin-Robbins stores? 

A. Yes, yes, they were. 

Q. Would a member of the public driving by one of those 

stores, driving up to one of those stores, going into one of 

those stores between mid March of '06 and mid September of '06, 

would a member of the public have any reason to know that the 

Condits were no longer franchisees of Baskin-Robbins? 

A. No. 

Q. The stores looked the same as any other Baskin-Robbins 

stores? 


Q. There was no attempt made to cover up the names or signs? 

A. No. 

Q. No attempt made to advise the public by way of a sign on 

the door that, we're no longer a franchisee? 

A. No. 

Q. After the termination of the fran -- well, let me ask a 

preliminary question. 

Franchisees, are they provided any manuals or 

materials for their use in operating the stores? 









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A. Yes, they are. They get them -- on a transfer situation 

the manuals are normally there in the stores, so that's where 

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they get them. 

But, yes, they are provided them. 

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Q. Is there an operating manual? 

A. Yes. 

Q. Are there some other manuals like the cake decorating 

manual? 

A. There's a cake decorating manual, there's a food safety and 

sanitation manual, there's a number of different manuals. 

Q. And those manuals are specific to the operation of a 

Baskin-Robbins store? 

A. Yes, they are. 

Q. They're proprietary? 

A. Yes. 

Q. And upon termination of the franchise those manuals are to 

be returned to Baskin-Robbins? 

A. Correct. 

Q. Did the Condits ever return those materials and manuals to 

you? 

A. No. 

Q. To this day have they ever been returned? 

A. No. 

Q. Are there a set of manuals for each of the stores? 

A. Yes. 

MR. WIRKEN: Thank you, Mr. Tilson. That's all I 








CROSS-EXAMINATION - JERRY TILSON 

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have. 

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THE COURT: All right. Mr. Holland. 

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MR. HOLLAND: 

Yes. 


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Q. Mr. Tilson, you indicated that Mr. Carlson was correct that 

it only takes about an hour to train on the FAST System; isn't 

that right? 

A. Yes. 

Q. I believe your words were mastery within an hour? 

A. Excuse me? 

Q. You could master the system within an hour? 

A. Yes, you could. 

Q. You also indicated that you gave Chad Condit additional 



15 

training. 

During that time of additional training did you 


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address the issues of reporting -- reporting sales? 

A. Well, I told him when they had to be reported, what days 

they had to be covered, which was Sunday through Saturday, and 

what day they had to be reported on, yes. 

Q. You indicated that he had some misconceptions as to how 

that was reported? 

A. He -- he did at one point, where he didn't understand which 



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days, he was pulling the wrong days, he was off by a day. 

think he was pulling -- I don't recall what days he was 

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pulling, but he was off on the week. 

He wasn't pulling the 





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exact days. 

Q. On those occasions you made the reporting? 

A. On those days I pulled the reports from the register. I 

did not make the reportings. 

Q. Now, how was the reporting made? 

A. You -- you pull the report from the register, say for a 

particular week, you then go to a computer and you get on 


8 

Franchisee Central, and you enter into Fast. 

And then on the 

9 


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Fast, the first screen that has the PC number and the date, and 

you click on that date, that's the date that's due, and you 

enter the sales from that sales report that you got from the 


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register. 

And once you enter it, it automatically figures the 

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continuing franchise fee and the advertising fee. 

click "submit" and you send it. 

And you 

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Q. And you're testifying that you did not make those 

reportings on the FAST System? 

A. No. 

Q. But you did pull figures from the cash register? 

A. Yes. 

Q. Who made the reporting on the FAST System? 

A. Well, I sent -- I sent the figures to the collections 

department, so somebody there I'm assuming entered them. 

Because the way our system works, they have to be entered 



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weekly. 

If you were to enter one payment, say, for two months, 

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it would look like a weekly payment, and the other weeks would 





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still be -- appear to be not paid. 

So they have to be entered 

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on a weekly basis, that's the only way the system works. 

They've got to be on a weekly basis. 

Q. You received copies of all the Dean Foods invoices; is that 

right? 

A. No, I did not receive a copy of them. 

Q. You did not receive copies? 

A. No, I did not. 

Q. Who receives copies of Dean Foods invoices? 

A. I think Mr. Carlson did. 

Q. That was directly to your supervisor, Mr. Carlson? 

A. Yes. 

Q. Can anyone purchase product from Dean Foods? 

A. I guess. I mean, they can't purchase Baskin-Robbins ice 


11:00:14 

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cream unless they're a Baskin-Robbins franchise. 

But Dean 

11:00:28 

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Foods I think makes other products, I think. 

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Q. Let me rephrase. Can -- can -- let me ask this, can a 

franchisee order product from anyone other than Dean Foods? 

A. No, they cannot. 

Q. Can anyone besides a franchisee purchase -- purchase 

Baskin-Robbins product? 

A. No. 

Q. Is Dean Foods informed when a -- when a termination of 

franchising agreement takes place? 

A. I don't know that. 

11:00:43 

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Q. How would they know to stop providing Baskin-Robbins 

product? 

A. They wouldn't unless they were informed. 

Q. And there's no internal mechanism within Baskin-Robbins to 

inform them? 

A. There may be, but I'm not aware of it. 

Q. You indicated that Chad was working -- working at the 

stores for most of the period of time that you dealt with him. 

Was there a period of time you dealt with him where he wasn't 

working at the stores? 

A. Starting in I would say January or February of '06 I no 

longer could get contact with Chad. 

Q. January or February of '06? 

A. Yes. 

Q. This suit was brought -- or the franchising agreement was 

terminated in March '06? 

A. Yes. 

Q. So until the last few months you had contact with Chad and 

he was working in the store? 

A. I had -- yeah, he was -- he was working the stores up 

through, I would say into January of 2006. 

Q. You continued to make visits to the stores after? 


Q. After January 2006? 

A. Yes. 

11:01:13 

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Q. After the franchising agreements were terminated -- 

A. Yes. 

Q. -- in March 2006? 

A. Yes. 

Q. How long did you make visits to the stores? 

A. Right up until they were closed. 

Q. When was your last visit? 

A. It was in September at the Thunderbird store, early 

September. 

Q. Isn't it true that you made suggestions during those visits 

as to how to improve the store? 

A. Yes. 

Q. You continued, knowing that the franchising agreement had 

been -- had been terminated, you continued to make suggestions 

as to how to improve the store? 

A. Yes. 

Q. Your job is to improve stores regardless of whether or not 

the franchising agreement is in place? 

A. Well, to protect customers and the employees and the image 

11:02:18 

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of the Baskin-Robbins, yes. 

As long as it still says 


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Baskin-Robbins on the front, I want to be sure it's being run 

properly. 

Q. On those subsequent visits -- I'm talking about the visits 

that happened after the franchising agreement had been 

terminated. 

11:03:18 




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A. Yes. 

Q. On those subsequent visits, did you advise anybody at the 

stores that the franchise agreement had been terminated? 

A. I may have -- the only person I may have talked to about 

that would have been Helen Condit. 

Q. You know Helen Condit? 

A. Yes, I do. 

Q. You know Helen Condit to be the wife of Chad? 

A. Yes, I do. 

Q. And did you discuss that issue with Helen Condit on any 

occasion? 

A. I think there were two occasions when I discussed that with 

her. 

Q. Did you inform her that the franchising agreement had been 

terminated? 

A. I told her that -- that they were in default, and that they 

hadn't paid fees. 

Q. But you knew that they had been terminated -- 

A. Yes. 

Q. -- those franchising agreements? 

A. Yes. 

Q. And you didn't advise her specifically that those franchise 

agreements had been terminated? 

A. I don't remember in the conversation if I said specifically 

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that it was terminated or not. 

I know we had a couple of 

11:04:12 




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conversations about it. 

Q. Mr. Carlson indicated that the only authority you would 

have to go through a cash register is if you were requested to 

by the franchisee; is that right? 

A. Right. 

Q. Was that your understanding of your job? 

A. Yes. 

Q. Isn't it true that you went through the -- through the cash 

registers when Chad Condit was not in the store? 

A. I went -- I pulled sales reports. If you're talking about 

pulling sales reports, is that what you're referring to? 

Q. You were in the cash registers looking at numbers and 

figures while he was not there. 

A. Yes. And at the -- at the Thunderbird store I think he was 

11:04:37 

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still at Peoria. 

We had done this at Peoria and I'd gone 

11:05:07 

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there, and then done it the same -- pulled the same period of 

reports for him at Thunderbird. 

Q. He had confronted you about you going through those cash 

registers when he was not present, hadn't he? 

A. No. 

Q. He never asked you not to go through those cash registers? 

A. No. 

Q. Had you ever argued with Mr. Chad Condit? 

A. About what? 

Q. About anything. Had you ever had a heated debate, an 

11:05:19 

11:05:35 




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argument? 

A. Not a heated debate. We've had some disagreements. 

Q. Those disagreements were about reporting the sales? 

A. Among other things. 

Q. What other things? 

A. Standards in the store, lack of cakes in the cake case. 

Just operational things in the store that were not up to 

standard. 

Q. He disagreed with you on those occasions? 

A. Yes. 

Q. As to how that store might be managed? 

A. Yes, yes. 

Q. I want to ask you about the upgrades that Baskin-Robbins 

11:05:47 

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was requiring of their franchisees. 

As part of your job you 

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enforced those upgrades that were being asked of them? 


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MR. WIRKEN: 

THE COURT: 

THE WITNESS: 


Overruled. 

I'm going to have know what upgrades 

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you're talking about, because I don't know what you're talking 

about. 


Q. Isn't it true that Baskin-Robbins requested the franchisees 

to upgrade the stores, put several thousand dollars into 

upgrades? 

A. We had a program going on, which is still going on now, 






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where, yes, we were transforming the stores to our new image 

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which we have out there. 

And franchisees were eligible to do 

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it if they wanted to voluntarily. 

If their remodel date was up 

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or -- in other words, if -- in their franchise agreement they 

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have a remodel date. 

If that date was current or if their 


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franchise was expiring where they have to remodel also, they 

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were required at that point to remodel. 

But if neither of 

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those things were happening, if the remodel date wasn't up, 

then it was just an option for them, they could do it if they 

wished. 

Q. Do you know the remodel date of the Condits or of Acorn 

Lanes' franchise agreements? 

A. One of them, I think the Peoria store, was I believe March, 

either March or April of '07. 

Q. So they had not run their remodel date -- their remodel 

date hadn't run? 


11:07:34 

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18 

19 

THE COURT: 


THE WITNESS: 

One at a time, one at a time. 

Sorry. 

20 

21 

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24 

Q. They were not obligated to do upgrades? 

A. They were not obligated to do upgrades. 

Q. Had you suggested they do upgrades? 

A. They had asked about them, and I had said that really I 

couldn't talk to them about them, because they hadn't attended 

11:07:48 

25 

a meeting. 

We have a district advisory council meeting where 

11:08:08 




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we really discuss this in full, and they hadn't attending that. 

So they asked about it at the December 23rd meeting and I told 

them I couldn't discuss it with them, so I left them with a 

copy of the UFOC and another document that they needed to sign 

before I could discuss it with them. 

Q. You were their trainer, were you not? 

A. I was -- that's part of my job. 

Q. As a trainer you couldn't discuss it with them until they 

had gone to a meeting? 

A. No, because -- because it was -- it required that they be 

disclosed with the uniform franchise offering circular before 

we could discuss this remodel, for everybody in the company. 

Q. You offered to purchase the two stores owned by the 

Condits, didn't you? 

A. Yeah, at one point in time, yes. 

11:08:28 

11:08:37 

11:09:00 

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THE COURT: 

MR. HOLLAND: 

THE WITNESS: 


Do what? 

Purchase them from the Condits. 

Yes. 

20 

21 

Q. That purchase was for $20,000? 



22 


24 

MR. WIRKEN: 

THE COURT: 



Overruled. 

25 

Q. Had you ever owned a Baskin-Robbins business? 

11:09:13 




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A. No. 

Q. Had you ever owned a business? 

A. Yes. 

Q. Didn't that business go bankrupt? 

5 

MR. WIRKEN: 


11:09:25 

6 

THE COURT: 

Sustained. 

7 


8 

9 

Q. Does Baskin-Robbins run any of their own stores as their 

own franchises? 


MR. WIRKEN: 


11:09:45 

11 

THE COURT: 

Sustained. 

12 


13 

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15 

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Q. Okay. Did you ever collect royalty fees from Chad Condit? 

A. He, at the December 23rd meeting, gave me a check for I 

think it was $4,200. 

Q. He gave you a check, but it wasn't up -- through FAST? 

A. No, it was a cashier's check that I sent into collections. 

Q. Had he given you more than that one check? 

A. I believe he gave me one other one on another occasion. 

Q. Had he ever done any reporting through FAST himself doing 

the reporting not with your assistance? 

A. I -- I didn't see any other than -- other than when I was 




24 

sitting next to him and he put a couple of weeks in. 

to my knowledge. 

But not 

25 

Q. Do you know a Jaime who works in the Chandler -- in the 





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Chandler profit center where Chad did his training in Chandler? 

A. No. 

Q. She would be a director of training? 

A. Not in the Chandler store, no. 

Q. Is there -- is there a director of training that does all 

of the training in a certain area? 

A. The director of training is based out of Burbank. 

Q. Okay. Is there a trainer for the FAST System in the area 

where the Condits were? 

A. Well, not specifically for the FAST System. There's a 

trainer that lives here in the Valley of the Sun, lives here in 

Phoenix. 

Q. Who is that trainer? 

A. Her name is Dana Stannard. 

Q. Does Dana work in Chandler? 

A. She works actually throughout the country. She trains 

mostly in Burbank, but she can train in any state where they 

have a need. 

Q. Did she do the training for the Condits? 

A. She may have. 

Q. You don't know? 

A. Well, no, because I wasn't in that training class. I know 

that they had some training in the Chandler store for a while. 

We had a program in Arizona where we had training in Phoenix as 

well as in Burbank. 


11:11:18 

11:11:32 

11:11:48 

11:12:02 




89 

1 

2 

Q. Go ahead. 

A. So the training would have likely been partly in Burbank 

3 

4 

and then partly in the Chandler store. 

been the one running that training. 

And Dana would have 

5 

6 

7 

Q. So you did require the Condits to go to training in 

Chandler? 

A. At that time we had -- we had a training location here in 

11:12:13 

8 

Arizona. 

We don't anymore, and we only had it for maybe a year 

9 


11 

and a half or so, but I think it was during that period. 

Q. They also had to be trained in Burbank? 

A. Well, they were -- some of the weeks were in Burbank and 

11:12:27 

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13 

some of the weeks were in Chandler. 

the same training. 

It wasn't duplication of 

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Q. They were also trained in Massachusetts? 

A. There was one week in Massachusetts, yes. 

Q. In the Massachusetts, Burbank and Chandler training, how 

much time was devoted to the FAST System? 

A. I would say about an hour. 

Q. For all three combined? 

A. Correct. 

Q. And where was that hour to take place, Burbank, Chandler or 

Massachusetts? 

A. Well, I would -- I don't know for sure. 

Q. Have you gone through the training yourself? 

A. Yes, I have. 

11:12:39 

11:12:56 

11:13:09 




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Q. Do you participate as a trainer in the training? 


Q. Okay. Exhibit 15 was the last exhibit we had -- we had 

visited, I believe with Mr. Wirken, has an accounts receivables 

status report. Do you have that -- 

A. Yes. 

Q. -- exhibit in front of you? 

A. Yes, I do. 

Q. It shows there was a credit of $4200 in January of '06; is 

that right? 

A. Correct. 

Q. That credit was -- was paid for what purpose? 

A. That was for fees for that store. 

Q. Was it paid in full of those fees? 

A. I don't believe so. 

11:13:49 

11:14:02 

11:14:16 

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THE COURT: 


THE WITNESS: 

Is that the check that you got? 

Yes, sir. 

19 

20 

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24 

25 

Q. That was -- that was received in hand as a check? 

A. Correct. 

Q. Okay. All other credits were also in hand as a check, were 

they not? 

A. It would appear that there was another one here on the 

second page. 

Q. That $3900? 

11:14:24 

11:14:41 



REDIRECT EXAMINATION - JERRY TILSON 

91 

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A. Yeah; correct. 

Q. So they paid you $8,100 just one month before terminating 

the franchise agreement? 

A. It appears so. 

5 

MR. HOLLAND: 

No further questions. 


6 

THE COURT: Thank you. Anything further, Mr. Wirken? 

7 

8 

9 


MR. WIRKEN: 


REDIRECT EXAMINATION 


11 

Q. Mr. Tilson, just briefly here. You were asked if you made 

an offer to purchase -- I don't know -- it wasn't clear to me 

11:15:15 

12 

13 

whether it was one or both of these stores for $20,000. 

think your answer was yes. 

And I 

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Were you making that offer personally or was that an 

offer being made on behalf of the company? 

A. It was an offer being made on behalf of the company. 

Q. Was that part of some discussion to try to resolve this 

situation? 

A. Yes, it was. 

Q. Okay. And to be clear with regard to your business to the 

store after termination, you were doing so for what purpose? 

A. Well, to protect the customers that were still frequenting 

the store, and our brand, and to provide a safe environment so 

we didn't hurt anybody. 

Q. Is it typical in your experience that Baskin-Robbins would 

11:15:42 

11:16:00 

11:16:35 



REDIRECT EXAMINATION - JERRY TILSON 

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continue to have you or other people in your position inspect 

terminated stores so long as they're continuing to operate as a 

Baskin-Robbins store? 

A. Absolutely. 

Q. And would you continue to do that until a franchisee closes 

or a court closes the store? 

A. Yes. 

Q. Is there a reason why pending the -- the continued 

operation of a terminated store by a franchisee, is there a 

reason why you don't tell Dean's Food, stop selling them ice 

cream? 

A. Well, we wouldn't want them to use another type of ice 

11:16:54 

11:17:16 

13 

cream. 

You wouldn't want to actually damage the business, 

14 

15 

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because if we're in the process of termination, it hasn't 

actually been terminated. 

Q. Have you seen -- have you had the experience of a 

terminated store using some other brand of ice cream and 

palming it off as Baskin-Robbins? 

A. Not a terminated store, no. 

Q. But that's something that would be of concern if you 

stopped the supply of Baskin stores -- Baskin ice cream? 

11:17:31 

11:17:44 

22 

MR. HOLLAND: 

Leading. 


THE COURT: It's been asked and answered. Let's 

24 

proceed. 

25 

MR. WIRKEN: Thank you, Mr. Tilson. That's all that I 

11:18:05 



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have. 

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3 

4 

MR. HOLLAND: 

THE COURT: 

MR. HOLLAND: 

I have a few follow-up, Your Honor. 

About what? 

About the purchase of the store. 

5 

6 

7 

8 

Mr. Wirken objected -- 

THE COURT: No, I allowed you to go into it. So we're 

not going to have anything further there. 

Anything else? 

11:18:13 

9 

MR. WIRKEN: 

Nothing further, Your Honor. 


THE COURT: All right. You may step down, sir. Thank 

11:18:22 

11 

you. 

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13 

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Any other witnesses, Mr. Wirken? 

MR. WIRKEN: No, Your Honor. The plaintiffs rest. 

THE COURT: Plaintiffs rested. It's now 11:20. 

Let me ask you someplace, Mr. Wirken. 

11:18:32 

16 

17 

MR. WIRKEN: 

THE COURT: 

Yes. 

As to an amount of the claim asserted by 

18 

19 

20 

21 

Baskin-Robbins in this case. 

MR. WIRKEN: Yes, Your Honor. It has three 

components, Your Honor. 

We're talking about some amount of fees for 2005 -- 

11:18:45 

22 

THE COURT: 

Just tell me what they are. 


MR. WIRKEN: 

All right. 

24 

THE COURT: 

Is there an exhibit? 

25 

MR. WIRKEN: 


11:18:58 



94 

1 

THE COURT: 

What is the exhibit number? 

2 

MR. WIRKEN: 

Well, one part of it is covered by 

3 

Exhibit 44. 

4 

THE COURT: 

Is there -- is it all in one exhibit? 

5 

MR. WIRKEN: 

No, Your Honor, it is not. 


6 

THE COURT: 

All right. 

7 

MR. WIRKEN: 

Exhibit 44 is for the unreported sales, 

8 

9 

the unpaid fees for 2006. 

Mr. Carlson -- 

And that was described to you by 


THE COURT: 

I'm not interested in who described it, I 

11:19:21 

11 

want an amount. 

12 

13 

14 

MR. WIRKEN: $37,661. 

THE COURT: And that's just for 2006? 

MR. WIRKEN: Yes, Your Honor, that's for 2006. 

15 

THE COURT: 

At one store? 

11:19:35 

16 

MR. WIRKEN: 

At both stores, Your Honor. 

17 

THE COURT: Both stores. All right. 

18 

MR. WIRKEN: 

And, of course, we're also asking for the 

19 

interest pursuant to the franchise agreement from the time 

20 

those fees should have been paid. 

But for ease we would simply 

11:19:46 

21 

22 


24 

go back to September 28th of 2006, even though some of that 

money was due earlier. 

THE COURT: All right. Well, 2006, are there -- is 

there some aspect of it in 2005? 

25 

MR. WIRKEN: 

Yes, Your Honor, there is. 

11:20:03 



95 

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THE COURT: 

Let's do that. 

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3 

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MR. WIRKEN: Okay. I need to ask you to permit me to 

do a bit of math on that and get back to you. 

THE COURT: All right. Well, let's do it during the 

recess. 

MR. WIRKEN: Okay. And then there's one other item, 

11:20:14 

7 

8 

Your Honor. 

termination. 

And that is for the operation of the stores after 

The damages we're claiming for on the trademark 

9 


infringement claim or the unfair competition claim is the 

amount of the gross sales after termination on March 16th, 

11:20:28 

11 

12 

which is calculated or calculable from Exhibit 44. 

sales for that period of time total -- 

The gross 

13 

THE COURT: 

File an exhibit. 

14 

MR. WIRKEN: -- 240,000. 

15 

THE COURT: 

File an exhibit with it. 

11:20:46 

16 

MR. WIRKEN: 

It is on that, Your Honor. 

17 

18 

19 

THE COURT: All right. On what? 

MR. WIRKEN: On Exhibit 44. 

THE COURT: All right. Fine. You told me 37,000. 

20 

MR. WIRKEN: 

That's for the fees that are due, 

11:20:55 

21 

Your Honor. 

22 


THE COURT: Well, I'll look at Exhibit 44. 

Anything else? 

24 

MR. WIRKEN: 


25 

THE COURT: Nothing for 2005? 

11:21:01 



DIRECT EXAMINATION - CHAD CONDIT 

96 

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MR. WIRKEN: 

Yes, Your Honor, but I would like to 

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3 

4 

5 

6 

7 

calculate that during the recess. 

THE COURT: Oh, that's what you're going to do. Okay, 

fine. 

MR. WIRKEN: Yes. Thank you, sir. 

THE COURT: All right. Any witnesses, Mr. Holland? 

MR. HOLLAND: Yes, Your Honor. I call Chad Condit. 


8 

THE COURT: 

All right. 

9 

MR. HOLLAND: 

Are we going to recess before that? 


THE COURT: 

No, we're going to take him until shortly 

11:21:20 

11 

before 12:00 o'clock. 

12 

(CHAD CONDIT, DEFENSE WITNESS, SWORN) 

13 

THE CLERK: 

And would you please state your name and 

14 

spell your last name for the court reporter? 

15 

THE WITNESS: 

Chad Condit, C-O-N-D-I-T. 

11:21:45 

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THE CLERK: Thank you. Please be seated, sir. 

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19 

THE COURT: 




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21 

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24 

25 

Q. Chad, prior to operating the Baskin-Robbins franchises that 

are at issue here, had you had any experience operating any 

Baskin-Robbins franchises? 

A. No, sir. 

Q. What is your prior experience, business experience? 

A. I did not own a fast-food restaurant or any food 

11:21:59 

11:22:17 




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experience. 

I was in government, the Navy, and worked for the 

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3 

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State of California prior to -- and wrote a book prior to the 

Baskin-Robbins experience. 

Q. What was your past when you worked for the State of 

California? 

A. I was assistant to the governor of California. 

Q. Governor? 

A. Gray Davis. 

11:22:37 

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THE COURT: 

Who? 


THE WITNESS: 

Governor Gray Davis. 

11:22:42 

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Q. You said you were in the Navy. What was your capacity in 

the Navy? 

A. I worked in navel intelligence from '91 through '95. 

Q. Had you any prior work experience in, I believe -- how did 

you hear about the Baskin-Robbins, or what interested you in 

the Baskin-Robbins franchise? 

A. Their cappuccino blast. 

Q. Say again? 

A. I liked their cappuccino blast. It's a drink they sell. 

And I liked the product, they make good ice cream. 

Q. Sure. When you were -- when you contacted Baskin-Robbins 

with interest in obtaining a franchise, who did you talk to? 

A. I talked to the gentleman I bought the store from. I was 

11:22:57 


25 

just shopping around looking for stores for sale. 

And then 





98 

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eventually ended up with a gentleman by the name of Mr. Soley 

or Scoley, and ended up having to go through him to be 

approved, which was a long process, a year or eight months. 

Q. Do you remember Mr. Soley's job title? 

A. No, he was a big shot. He had several states that he was 

in charge of. 

Q. Did that take place in Arizona? 

A. Yeah. He was from Nevada, I believe, and he flew in and 

11:24:01 

9 

met -- met with me a couple times. 

And he had real 


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reservations about my background, my experience as to whether I 

would be able to hold up and be a good franchisee and 

run -- run the ice cream shop. 

Q. Do you remember specifically what those reservations were 

or what -- what sparked those reservations? 

A. Just my lack -- I think it was my lack of food service 

knowledge and my lack of the fast-food industry, so to speak. 

But I persuaded him, I went to several different meetings and 

11:24:17 

11:24:35 

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eventually persuaded him. 

And he, in fact, called Jerry 

19 

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to -- Mr. Tilson to one of the meetings. 

Q. Jerry Tilson was present at that meeting? 

A. At one of the meetings. I met with Mr. Soley a couple of 

different times. 

Q. What did Mr. Tilson say on that occasion? 

A. I think Mr. Soley just asked Jerry if he was comfortable, 

and Jerry said yes. 

11:25:00 

11:25:14 




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Q. Did Mr. Soley express any of his reservations at that time 

during that meeting? 

A. He expressed reservations at every meeting, because he was 

skeptical of my -- my abilities to be an ice cream man, I 

5 

guess. 

He just didn't -- with my government experience and 

11:25:31 

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7 

8 

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11 

my -- I didn't have -- he didn't think I -- and he, I guess, 

ended up being right. 

Q. In your perception, why was it that Mr. Tilson believed you 

to be qualified? 

A. He was trying to help sell the stores for Mr. Holmgren, 

because Mr. Holmgren is the gentleman that I bought the stores 

11:25:47 

12 

from. 

And they were -- they were not doing very well, and he 

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was just trying to help his franchisee that he had been working 

with. And so he gave his recommendation, is my assumption. I 

don't know why Jerry said he was comfortable, but that's what 

he said. 

Q. Is Mr. Scott Holmgren, is he still a franchisee of 


A. I don't know. I -- he lost his wife, and I don't know 

what -- if he is or not. 

Q. Did he have any other stores? 

A. He had four stores, and we bought two of those stores. 

Q. So he continued to operate for some time after -- after 

having sold you those two stores? 

A. That's my belief, yeah. 


11:26:19 

11:26:34 




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Q. I want to talk about the training that Baskin-Robbins 

2 

provided to you. 

Can you tell us about the training? 

3 

4 

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A. The training was expensive. We spent over $10,000 on being 

trained in the different areas, including traveling, going and 

doing the investment. 

They focus a lot on the scoop size and the freezers 

11:26:53 

7 

and the cakes and the stuff. 

But FAST, this whole thing that 

8 

I'm sued about, not doing FAST, was mentioned very little at 

9 

any of these trainings. 

The process that I was going to have 


to do was not mentioned at all. I doubt an hour. They both 

11:27:15 

11 

said an hour, but it wasn't a factor in the training. 

The 

12 

training focused on the temperatures, the cakes and the scoop 

13 

size and stuff like that. 

And we spent a month or so, five 

14 

weeks in Chandler with Dana. 

I told you Jaime, but it was 

15 

Dana. 

And every morning we'd show up at 8:30 and we'd work all 

11:27:39 

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day at that store and learn how to physically do the work at 

Baskin-Robbins. 

But we didn't at any of these trainings cover the 

process for payment to Baskin-Robbins. It wasn't a focus. And 

it really caught me off guard when I did assume the role of 

taking over the stores. 

Q. We heard testimony that it was as easy as making on-line 

11:27:57 


purchases. 

Have you ever made an on-line purchase? 

24 

25 

A. Believe it or not I never have. I don't -- I wrote a book, 

a 300-page book called Sources, and I wrote it by pencil. 

11:28:14 


Case 2:06-cv-00854-EHC Document 95 Filed 09/22/2008 Page 100 of 142



1 

I'm -- I'm not computer savvy. 

My kids make fun of me, but I'm 

2 

not. 

And to be sued for the -- this amount because I didn't 

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4 

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6 

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8 

learn this fast enough, to me is not fair. 

But no, I've never made an on-line purchase. 

Q. You did receive word that you were in default the first few 

times after not having made -- 

A. The FAST, yeah. Yeah, Jerry came in -- and Jerry and I 

clashed right away, because I didn't feel comfortable with him 

11:28:39 

9 

coming into the store and wrestling through the store. 

And he 


did go through the cash registers, because I had some of the 

11:29:01 

11 

kids tell me that they did. 

And some of the employees were 

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uncomfortable with his presence there. 

So -- but I paid him when he said, you're behind. 

usually just gave him a check or cashier's check or money 

I 

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order. He attempted to try to train me. I didn't get it. And 

he never spent more than ten minutes showing me, because it was 

11:29:20 

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always in the hustle of the day. 

I was at the store, he had 

18 

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some other store to go to. And I didn't get it. I didn't get 

the whole mechanism of FAST as good as I should have. 

And they sued me 14 months after I bought the store. 

11:29:40 

21 

It just seems to me this was a marriage, so to speak. 

We both 

22 


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signed a contract. I'd agreed to do some certain things. I 

wanted to do them. I wanted these stores to work. This is 

what I had chosen to do after my government service, and I 

25 

really honestly wanted them to work. 

It didn't because I 

11:29:58 





1 

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didn't learn FAST fast enough for them. 

And I wanted to get caught up in the payments. 

I had 

3 

made several payments right up through January. 

February, we 

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made a $6,000 payment, and they sued me a couple weeks later. 

So -- 

Q. I don't mean -- are you done? 

A. Yeah. 

Q. When you asked for subsequent training on the FAST Program, 

you just indicated that it was ten minutes here, ten minutes 

11:30:18 


there. 

How many times did you ask for subsequent training? 

11:30:31 

11 

12 

A. I went as far -- as far as to ask for Dana, the lady that I 

trained with in Chandler, to come locate in my store for a 

13 

month. 

I asked Jerry specifically, can I have Dana come in and 

14 

teach me how to run this better and be a better franchisee? 

He 

15 

16 

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19 

20 

turned me down out of hand and said it wasn't even an option. 

As far as his FAST training goes, maybe two, three, 

four times he would do it and have me watch, and leave. 

Q. Did -- you say he did it. Did you ever physically do the 

work of reporting the FAST? 

A. Not to my knowledge. I may have sat there and he said plug 

11:30:54 

11:31:16 

21 

22 

this in, but I didn't know what the heck I was doing. 

didn't know I was completing the FAST transaction. 

So I 


I wanted to do it right for them. 

I liked the 

24 

product. I liked the ice cream. I wanted to be a good 

25 

franchisee. 

But from the very get go, it was a problem 

11:31:36 





1 

2 

3 

4 

with -- with the increase in ice cream, with Jerry coming into 

the store and -- when I wasn't there, doing things that my 

managers or workers didn't think was appropriate. 

From then at that meeting December -- in December with 

5 

my dad and I and Jerry, it's not true. 

He said, you guys are 

11:31:57 

6 

7 

going to have to upgrade, it's going to be several hundred 

thousand dollars. And we -- we couldn't do that. The store 

8 

wasn't doing good. 

I wasn't -- I wasn't -- either I was a bad 

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ice cream guy or something, but it wasn't doing good, and I 

knew I couldn't afford that kind of cost. 

Q. At the time of purchasing these stores, how much did you 

purchase the stores for? 

A. 130,000 I believe was the -- 65 apiece. 

Q. For the two. 

You said you purchased them from -- from Scott? 

A. Holmgren. 

Q. Holmgren. 

And did -- did Jerry Tilson help facilitate that sale? 

A. I think just after Scott and I talked, Jerry was involved. 

And he was at -- like he said, at the signing. 

Q. Okay. And you testified you never made any reports, that 

Tilson made all the reports that were made? 

A. Right. 

Q. Did you and Mr. Tilson ever have arguments? 

A. Yeah. 

11:32:17 

11:32:31 

11:32:47 

11:33:07 





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Q. What -- 

A. I didn't like him coming in the store when I wasn't there 

and doing what he did, rustling through the stores and 

intimidated the workers. 

Q. Tell me what he did. 

A. Well, touching the cash register when the owner is not 

there. 

11:33:15 

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MR. WIRKEN: 

Objection, lack of foundation, 

9 

Your Honor. 

He's talking about something that happened when he 


wasn't present. 

11:33:24 

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THE COURT: 


Sustained. 

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Q. Were you ever -- did you ever confront Mr. Tilson 

about -- about his actions? 

A. Yeah. I told him he wasn't allowed behind the counter. 

Q. Did Mr. Tilson continue to go behind the counter? 

A. Yes. 

Q. Would you say that your relationship with Mr. Tilson was 

amicable, friendly? 

A. No, not -- not after the first couple weeks. 

Q. You recognized him as your trainer? 

A. My trainer? No, he wasn't my trainer. Dana -- Dana -- 

that's why I requested Dana to come stay in my store, like she 

11:33:36 

11:33:52 

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was in Chandler. 

Her job was to be in Chandler, make Chandler 

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a good store and train people. 

I thought if she came to my 

11:34:12 





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store that would rub off and my store would become better. 

Q. Did Dana -- was Dana employed by the franchisee in 

Chandler -- 

A. No. 

Q. -- or by Baskin-Robbins? 

A. Corporate. She's a corporate person, I believe. 

Q. Could she have performed her corporate duties from your 

store? 

A. I just figured if she was training people she would rub off 

on my store and it would become better. I don't know. I 


11:34:36 

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looked at her as someone who knew what she was doing. 

And 

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that's why I went to Jerry and said, put her in my store, let 

her train in my store for a while. 

Q. You and Jerry were on the outs. Did the arguments ever 

become heated, what you would characterize as heated? 

A. Yeah. 

Q. Did you perceive that Jerry Tilson was willing to work with 

you? 

A. No, I didn't. Maybe for the first month, but I got a 

direct feeling that Jerry didn't want to see this work, 

because -- maybe he thought I was stupid, couldn't do FAST, I 

11:34:53 

11:35:13 

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don't know. 

all. 

But I didn't get a helpful feeling from him at 

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Q. You acknowledged he was not your trainer. Was he your 

supervisor? 

11:35:29 




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A. No. 

Q. How would you characterize Jerry Tilson? 

A. He's a corporate -- corporate guy. He worked for 


Q. Did he -- he did have a say in whether or not you could 

obtain your franchise though, did he not? 

A. He -- because Mr. Soley included him in that, because of 

11:35:36 

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Mr. Soley's concerns. 

I think Mr. Soley was covering his 

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fanny, just in case I wasn't a good franchisee, so he brought 

Jerry in and said, are you comfortable with this? 

THE COURT: Let me ask you a question. You talk about 

11:36:00 

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you all the time. 


Who is the agreement with with 

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THE WITNESS: 

Me. 

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THE COURT: 

I thought it was with Acorn. 

11:36:13 

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THE WITNESS: 

Well, Acorn Lane, yeah. 

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THE COURT: 

Are you Acorn? 

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THE WITNESS: 

I'm a representative of Acorn, today, I 

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am. 

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THE COURT: 

We'll talk about -- I'll have some 


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questions later on about some of this. But in any event -- 

MR. HOLLAND: Perhaps I can -- 

THE COURT: I don't know what. He's told me or I've 

heard all the time, he wasn't my, he wasn't my, this and that. 

I'm being sued about it. Acorn is being sued. He's a party in 

11:36:40 


Case 2:06-cv-00854-EHC Document 95 Filed 09/22/2008 Page 106 of 142



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the case, I guess. 

MR. HOLLAND: 

Yes. 

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THE COURT: But where's Gary? Sometime are there 

articles of incorporation for Acorn? 

MR. HOLLAND: Yes. Let me ask a few questions about 

Acorn then. 

THE COURT: Well, we'll take a recess now, it's 20 

11:36:54 

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minutes of 12:00. 

And if there are any articles of 

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incorporation, I want to see them as well. 

Seems to me we need 


to know that. 

This gentleman here seems to think he's been the 

11:37:09 

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sole party involved in this case. 

about that later on also. 

And maybe I'll find out more 

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But in any event, we need to get something besides 

conversation. And that's all I'm hearing, I, I. That's not 

very persuasive or credible. 

11:37:28 

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THE WITNESS: 

I apologize. 

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THE COURT: All right. We'll take a recess, be back 

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at 1:15. 

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THE WITNESS: 

Am I dismissed? 

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THE COURT: 

Yeah, sure. 

11:37:40 

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What was your rank in the Navy? 

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THE WITNESS: 

Petty officer. 


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(Recess at 11:37 a.m., until 1:14 p.m.) 

THE COURT: All right. Well, thank you. 

Do you want to come back up, Mr. Condit? 

13:14:31 





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Well, 1:15 back in court. 

During the recess I had occasion to look through the 

file and determined that this witness personally guaranteed 

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both of the franchise agreements there. 

And I'll have some 

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other questions about termination dates and things like that if 

they're not cleared up in my mind. 

So in any event, those are the things I was kind of 

interested in in the background. 

So, let's go ahead, Mr. Holland. 

13:15:18 


MR. HOLLAND: 

And, Your Honor, if there are any 

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questions on Acorn Lanes, I believe we had stipulated that it 

was a defunct corporation. 

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THE COURT: 

I don't know about a defunct corporation. 

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It was supposedly dissolved. 

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Who is Shadeed (ph)? 

Who is Shadeed Condit? 

13:15:46 

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THE WITNESS: 

Cadee, C-A-D-E-E? 

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THE COURT: 

Yeah, whatever. 

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THE WITNESS: 

She's my sister. 

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THE COURT: 

And where does she live? 

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THE WITNESS: 

Colorado. 

13:15:57 

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THE COURT: 

And I notice that she was signing some of 

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the pleadings or motions apparently when she was out of the 


state, and I don't know whether she was served or not. 

But in 

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any event, I was interested in that. 

She -- I think she is the 

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one who signed on behalf of the corporation. 

13:16:14 





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So, let's go. 

Q. Chad, we were talking about notices that you had received 

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for your breach. 

Can you describe the notices and how you 

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received them? Notice to cure. For example, Exhibit 3 is 

13:16:36 

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notice to cure. 

I think I've gone over some of those notices. 

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A. Yeah. I saw some. I didn't take them as termination. I 

just tried to get caught up with Jerry on payments via check. 

Q. Sure. Did you anticipate you would be -- or that Acorn 

Lanes would be sued as a result of these notices? 

A. No. 

Q. What did you understand these notices to be? 

A. That I was behind on payments, or I owed them money. 

Q. Did you try to make those payments current? 

A. I tried to get caught up as best I could, yeah. 

Q. Was Baskin-Robbins accepting those payments? 

A. Yes. 

13:17:01 

13:17:17 

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THE COURT: 

Let me ask, just simply move the matter 

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along. 

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Do you have any record at all, Mr. Condit, as to the 

amount that you paid by check or otherwise? 

And I suppose Mr. Wirken can also be thinking about 

13:17:29 


that. 

But someplace we need to find out -- I need to find out 

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what payments were actually made. 

The only thing I've heard, I 

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think, is very limited in that regard. 

13:17:51 





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THE WITNESS: 

I don't have records of what we paid 

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throughout -- through the year. 

Other than -- I know we paid 

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6,000 in February and 4200 in December. It's -- 

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THE COURT: 

Out of a total of how much money owed? 

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THE WITNESS: 

I don't know. 

13:18:14 

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THE COURT: 

Did you ever stop and calculate in some 

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way? 

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MR. HOLLAND: Your Honor -- 


MR. HOLLAND: That is one of the questions -- 

13:18:21 

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THE COURT: 

I'm losing my patience. 

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MR. HOLLAND: Sure. Sorry, Your Honor. 


Q. Can you tell me, Chad, how is the -- how is the process 

determined for calculating royalties, as you understood it? 

A. It's 11 percent of the sales, or 10.9 percent of the sales, 

out of the sales reports. 

Q. Did you understand how to do the FAST input in the 

up-loading -- 

13:18:34 

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THE COURT: 

He's testified he doesn't know a thing 

13:18:56 

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about it. 

So let's proceed. 

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Q. I want to talk about the notice of termination. Did you 

ever receive a notice of termination? 

A. No, sir. 

13:19:07 




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THE COURT: 

According to the record, a notice of 

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termination dated March 15th, 2006, was submitted in this case, 

as being when it was done. 

Any quarrel with that, Mr. Holland? 

MR. HOLLAND: No, Your Honor, just -- 


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THE COURT: 

MR. HOLLAND: 

Then let's proceed. 

Just that he did not have notice of 

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that. 

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THE COURT: 


So, fine. 

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Q. Okay. How is it that you found out about the termination 

of the franchise agreement? 

A. I read about it in the newspaper. 

Q. Do you remember which newspaper it was? 

A. I believe it was the Modesto Bee, that we were being sued. 

Q. Do you monitor that paper? 

A. No. 

Q. Was it your personal knowledge, or how did you go about 

finding out about the -- 

A. Somebody from California had showed us the paper. 

Q. So when you found out about the -- that you were being 

sued, what did you do? 

A. We contacted Cynthia Becker. 

Q. When I say "you," I mean Acorn Lane. When Acorn Lane was 

being sued you contacted Cynthia Becker? 

13:19:38 

13:19:58 

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A. Yeah. 

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THE COURT: 

Now that's different than termination when 

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they found out they were being sued, Mr. Holland. 

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MR. HOLLAND: 

Very well. 

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Q. Prior to the notice of termination, were you under the 

impression you were being -- you were involved in a lawsuit? 

A. No, no, sir. 

Q. When was your first indication that you were involved in a 

lawsuit? 

A. When I read it in July in the newspaper. 

Q. You indicated that you contacted Cynthia Becker. She was 

your attorney, was she not -- 

A. Yes, sir. 

Q. -- in this matter. 

Do you know what she did? 

A. I believe she contacted the folks that were suing us. 

Q. Baskin-Robbins? 

A. Yes. 

Q. Did you attempt to -- did you attempt to make those 

payments? 

A. We attempted to mediate or get with the other side and see 

what could be worked out as far as payments. 

Q. You attempted to settle? 

A. Yes. 

13:20:40 

13:20:51 

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THE COURT: 

Look at the file again, Mr. Holland. 

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There's records going towards this, a motion to mediate and 

what happened, and the proposal that there be a settlement 

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agreement if parties were agreeable. 

There was never a request 

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for a settlement agreement -- or a settlement hearing. 

13:21:40 

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MR. HOLLAND: 

Okay. 

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Q. Did you ever offer up the registers to find out how much 

was owed? 

A. Yeah, we -- as part of the mediation we were offering up 

the registers. 

Q. Did they, in fact, take the registers? 

A. No. 

Q. Do we even know how much is owed? 

A. No. 

13:21:55 

13:22:08 

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THE COURT: 

THE WITNESS: 

MR. HOLLAND: 

Do you still have the registers? 

Yes, sir. 

Your Honor, the registers are here in 

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court. 

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THE COURT: 

Well, I'm not going to look at them, and I 

13:22:15 

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don't know that you're capable either. 

But in any event, let's proceed. 


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MR. HOLLAND: 

Sure. 

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Q. Can you tell by looking at the registers how much are owed 





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in royalties? 

A. You could -- I guess you could pull up the sales reports 

and they could calculate it. 

Q. Are you able to access those sales reports? 

A. No. 

Q. What does that require to access those sales reports? 

A. I don't know. 

13:22:36 

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I understand. 

THE COURT: 

They're in the register, according to what 


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MR. HOLLAND: Yes, Your Honor. Essentially those 

are -- it requires the help of Baskin-Robbins with their 

program to access it. 

13:22:42 

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THE COURT: 


Whatever. 

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Q. When you received notice that the franchise was terminated, 

did you try to remove any signs? 

A. On Thunderbird we acted fairly quickly to take the signs 

down. 

Q. I believe it's exhibit -- Exhibit 24. 

Could you hand him 24 through 27, please? 

Can you identify Exhibit 24? 

A. That looks like Peoria. 

Q. The second page, is that also Peoria? 

A. I believe so -- yes, it is. 

Q. Was this Peoria before or after you received notice of the 

13:22:59 


13:24:11 




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termination of your franchise agreement? 

A. I don't know when it was. 

Q. Did the signage come down after you received notice? 

A. Not on Peoria. 

Q. Why not? 

A. The landlord would not permit us to take the Baskin-Robbins 

sign down. 

Q. Did you continue to operate out of the Baskin-Robbins under 

the Baskin-Robbins number -- or name? 

A. No, we basically closed down Peoria. 

13:24:29 

13:24:39 

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THE COURT: 

THE WITNESS: 

Do you know the date it was closed? 

I want to say the first part of August. 

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THE COURT: Of 2006? 

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15 


THE WITNESS: 

Yes, sir. 

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Q. When was it that you realized that the -- the franchise 

agreement was being terminated -- or was terminated? 

A. The end of July. 

Q. So within a few weeks you had taken down -- or you had 

closed up shop in Peoria? 

A. Yes, sir. 

Q. Prior to July -- prior to your knowledge of having the 

franchise agreements terminated, did you continue to buy 

Baskin-Robbins' product? 

A. Yes. 

13:25:09 

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Q. Did -- I believe Jerry Tilson indicated that he had been to 

the store during that time; is that right? 

A. Yes, that's what I understand. 

Q. Did you have any recollection of Jerry Tilson indicating 

that your franchise agreement had been terminated? 

A. No. 

Q. Exhibit 25, do you recognize this exhibit? 

A. Yes, sir. 

Q. There are two pictures that look like they depict a 

13:25:46 


Baskin-Robbins menu. 

Do you know which store this is in? 

13:26:12 

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A. That looks like Thunderbird to me, but I'm not definite on 

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that. 

But it looks like Thunderbird. 

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Q. Do you know when these pictures were taken? 

A. No, sir. 

Q. And Exhibit 26, can you identify that for me? 

A. Yeah, that's Thunderbird. 

Q. Do you know when? 

A. It was sometime after we found out that we were being sued, 

because the signs are down. 

Q. I was going to say, I notice there is no Baskin-Robbins 

sign in this picture. 

How long did you continue to operate without the 

Baskin-Robbins signage at Thunderbird? 

A. Without the signage -- I couldn't tell you the exact date. 

September maybe. 

13:26:29 

13:26:52 

13:27:16 




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Q. Okay. Exhibit 27, again it looks like some display cases 

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for ice cream and some menus. 

were taken? 

A. That's Thunderbird. 

Do you know where those pictures 

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Q. And you know that because? 

A. Because of the remodel -- the remodeling. 

Q. Do you see any Baskin-Robbins' signs or menus there? 

A. No. 

Q. Were you operating at that time, at the time this picture 

was taken, as a Baskin-Robbins? 

A. No. 

Q. Was that because you knew that the franchise had been 

terminated? 

A. Yes. 

Q. Do you know when -- I'm sorry. Did you say did you know 

when this picture was taken? 

A. I do not. It would be sometime after the end of July 

sometime, because the remodeling had taken place. 

Q. Okay. You indicated that the Peoria store, the store owner 

13:27:32 

13:27:51 

13:28:01 

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wouldn't allow you to take down the signage. 

What did you do 

13:28:24 

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when you couldn't take down the signage? 

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A. Just closed shop. 


Q. Is the sign still up today? 

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Q. You stated that you bought the stores for 130,000? 

13:28:35 




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A. I believe that's correct, 120 or 130. 

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THE COURT: 


THE WITNESS: 

Apiece? 

No, together. 

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6 

Q. At the time you purchased those stores, were they in 

financial difficulty? 

13:28:51 

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relevance. 

MR. WIRKEN: 

Objection, lack of foundation and 

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THE COURT: Lay some foundation. I'll sustain the 

objection on relevance. 



Q. Okay. You considered to have lost money in this ordeal 

with the franchise agreements? 

THE COURT: Rephrase your question. Let's proceed. 


Q. Have you lost any money in having exercised these franchise 

agreements? 

13:29:04 

13:29:16 

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MR. WIRKEN: 


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THE COURT: 

Overruled. 

13:29:25 

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THE WITNESS: 

Yes. 

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Q. How much? 

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A. $250,000. 

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THE COURT: 

Is there a counterclaim in this case? 

13:29:32 




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THE COURT: All right. Then let's proceed. 


Q. To your knowledge do the registers -- the cash registers 

record sales figures accurately? 

A. To my knowledge they do, just going based on what I know. 

I mean, I don't know. 

Q. Do you know how the data is retrieved? 

A. No. You plug it in and you pull up the sales reports. No, 

I don't really know how the technical part of it works. 

Q. You plug into what? You plug into the wall or into Baskin 

Robbins? 

A. No, you pull the sales report from the cash register and it 

tells you the sales report. 

Q. Have you given Baskin-Robbins an opportunity to inspect 

those cash registers? 

A. I believe I have. 

Q. Have they been inspected? 

A. Not to my knowledge. I mean, other than Jerry coming and 

looking at the cash registers. 

Q. Are you willing to allow the inspection of those registers? 

A. Yes, sir. 

Q. I want to address an issue that -- that we had talked about 

13:29:45 


13:30:18 

13:30:37 

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previously about reporting taxes on these franchises. 

Was 

25 

there any report made for taxes for the franchises? 

13:31:07 



CROSS-EXAMINATION - CHAD CONDIT 

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A. There were several extensions made. 

Q. You had requested extensions or they gave them 

automatically? 

A. I had requested them. 

Q. And they were granted? 

A. To my knowledge. 

13:31:22 

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THE COURT: 

Who were the requests made to? 

8 

THE WITNESS: 

I don't know. 

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MR. HOLLAND: 

No further questions, Your Honor. 


THE COURT: 

Thank you. 

13:31:41 

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Mr. Wirken. 

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Q. Good afternoon, Mr. Condit. 

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As you know, my name is Charles Wirken. 

I represent 

13:32:20 

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THE COURT: 

Let's proceed now. 

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Q. Mr. Condit, you are a shareholder in Acorn Lane Arizona, 

Inc.; correct? 

A. I was, yes. 

Q. You were. 

And your parents, Gary and Carolyn, and your sister 

Cadee were also shareholders; correct? 

A. Yes. 

13:32:32 

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Q. And your mother Carolyn, your dad Gary, and your sister 

Cadee were also officers of the corporation? 

A. Yes, sir. 

Q. And you were a director of the corporation? 

A. Chairman or director, yeah. 

Q. Were they directors as well? 

A. I don't recall their titles. 

Q. Okay. And all of you signed -- when you signed the 

franchise agreement, you all signed personal guarantees of the 

obligations under the franchise agreement, didn't you? 

A. We signed the franchise agreement. 

Q. And you signed the separate guarantee attached to the 

franchise agreement; correct? 

A. Yes. We signed what needed to be signed to buy the stores. 

Q. And that included personal guarantees; correct? 

13:33:00 

13:33:14 

13:33:29 

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THE COURT: 

show it to him. 

If necessary we can get the document and 

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Now, let's answer the question if you can, and we'll 

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go on. 

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THE WITNESS: 

I'm answering it to the best -- if I 

13:33:40 

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signed it, I signed it. 

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Q. You don't dispute signing a personal guarantee? 

A. I don't dispute it. I signed a bunch of documents that 

day. 

13:33:51 




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Q. Do you recall signing an affidavit under oath earlier in 

this case? 

A. Yes, I think -- I believe I do. 

Q. Filed herein as document number 35 on November the 9th of 

2006. If you said in that affidavit that you and your family 

in your capacity as shareholders of Acorn Lane personally 

guarantee the franchise agreement, that was a true statement? 

A. Yes. 

Q. And you also knew that in February of 2006 when you 

received the last of the notices to cure that you, in fact, 

were behind in your payment -- you and your family and your 

corporation, were behind in the payment of royalties and 

advertising fees, weren't you? 

A. When I made the $6,000 payment I did know that I was 

behind. 

Q. And you were still behind even after making that payment, 

weren't you? 

A. I believe so. 

Q. You never reported any sales for the year 2006, did you? 

A. To? 

Q. From January 1st of 2006 to the time you closed the stores, 

whenever that was, you never reported any sales to 

Baskin-Robbins for any of those weeks, did you? 

A. No, I didn't. 

Q. And you never paid any fees for any of those weeks, did 

13:34:35 

13:35:02 

13:35:19 

13:35:43 

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you? 

A. I didn't know if the $6,000 covered those fees or not. 

Q. Well, sir, if you made a payment of $6,000 in say February, 

that wouldn't cover any fees that accrued in March or April or 

May or June or July or August, would it? 

A. No, sir. 

Q. Okay. And you never paid any fees for any of those months 

after you paid the $6,000, whenever that was, did you? 

A. No, sir. 

Q. Isn't it a fact that you didn't close the stores until 

September of '06? 

A. No. You mean as far as Baskin-Robbins goes? As far as 

Peoria goes? 

Q. Both of the stores, Peoria and Thunderbird. Isn't it true 

that you operated both of them as Baskin stores until sometime 

in September of '06? 

A. That's not my recollection, but you may be right. 

Q. Okay. Your recollection, I'm certain, was fresh when you 

made your affidavit in November of last year, would you agree? 

A. What's the affidavit say? 

Q. Well, it says in paragraph 9, in September 2006, in 

response to being served with this action, Acorn Lane ceased 

doing business at both of its stores. 

That was a correct statement? 

A. I recall it as August, but it could have been September. 

13:36:13 


13:36:44 

13:37:05 





124 

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4 

5 

6 

7 

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Q. And the pictures that you identified, if you still have 

before you Exhibit 26, that's a picture of the exterior of the 

Thunderbird store; correct? 

A. Yes. 

Q. Okay. And you never operated the store when it looked like 

that, did you? 

A. No, they operated it, yeah. 

Q. Now that store, look at the signs in the window, it says 

13:37:47 

9 

grand opening soon. 

Correct? 


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A. Right. 

Q. You were in the process of converting the Baskin-Robbins 

store at Thunderbird to an independent ice cream shop after you 

ceased doing business with Baskin-Robbins; correct? 

A. Right. 

Q. But you never actually opened this location at Thunderbird 

as an independent, did you? 

A. We tried, we just -- it didn't work. 

Q. And this -- this view of Thunderbird that we see was taken 

after you stopped doing business as a Baskin store, after you 

learned of the lawsuit; correct? 

A. Right. 

Q. And you said in your affidavit that you were continuing to 

operate until September of '06, therefore this picture was 

taken sometime after that; correct? 

A. I don't know when the picture was taken. 

13:38:03 

13:38:19 

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Q. All right. Well, I'll ask Mr. Tilson that. 

You went to the training with Baskin-Robbins in 

California and Massachusetts and at a store in Chandler, and 

you were accompanied by two of your employees, weren't you? 

A. Yes. 

Q. And they were aunts of yours, I understand. 

A. Yeah. They didn't go to Massachusetts. They went to 

Chandler and the Burbank, I believe. 

Q. Okay. So they were trained right alongside of you in the 

operation of the store; correct? 

A. Pretty much. 

Q. Each of the notices to cure that you received, and you were 

asked about Exhibit 3 as an example, each of those warn that if 

you didn't make the payments to bring -- to cure the default, 

each of those warned that your franchise might be terminated; 

correct? 

A. They -- yeah, they could have. 

Q. So it comes as no surprise to you that when you don't cure 

the defaults, and the notices warn that termination may follow 

if you don't cure, and you didn't cure, it comes as no surprise 

to you that you'd be terminated; correct? 

A. It was a surprise to -- since I had been trying to make 

payments, it did -- I thought the franchise agreement was more 

of a partnership. 

Q. Each party is supposed to do their part; correct? 

13:39:12 

13:39:28 

13:40:03 

13:40:20 

13:40:35 




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A. Yes, sir. 

Q. And one of your parts to be done is to report your sales 

every week; correct? 

A. Right. 

Q. And one of your parts to be done is to pay the fees every 

week; correct? 

A. Right. 

Q. And you weren't doing that, were you? 

A. No, I wasn't really trained to do that. That was their 

13:40:44 


agreement to train me to do that. 

And they hadn't done that. 

13:40:56 

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Q. But you nevertheless -- you knew you were bringing in money 

from customers that bought ice cream; correct? 

A. We tried our best. 

Q. All right. And the total that you brought in, that would 

be your gross sales; correct? 

A. I believe so. 

Q. And you understood you were supposed to pay a percentage of 

your gross sales for the privilege of operating as a 

Baskin-Robbins store, and also for the advertising that was 

supporting you and helping customers come into your store; 

correct? 

A. Right. I knew we were supposed to pay Baskin-Robbins 

royalties and fees, yeah. 

Q. And so every week as customers came into the store, out of 

every dollar you received, you knew that almost 11 cents of 

13:41:29 

13:41:42 

13:41:54 




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3 

that was supposed to go to Baskin-Robbins the following week; 

correct? 

A. Yeah, I knew a percentage was supposed to go to 

4 


My method of payment to them was via check, 

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6 

7 

8 

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so -- I understood that I was supposed to do FAST, but I didn't 

know how to do FAST. 

Q. And so did you attempt to send a check every week for 10.9 

percent of the prior week's sales? 

A. Not every week, no. 

Q. In fact, you didn't send a check for any of the weeks in 

2006, did you? 

A. No, other than the February check, no. 

Q. So then after February you didn't make any payments by 

check for any of the sales that had occurred before that; 

13:42:14 

13:42:30 

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correct? 

Or -- I may have misspoke. 

13:42:54 

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After you made the February payment, whenever that was 

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in February, you didn't submit any further weekly payments to 


A. No, sir, not unless Jerry came in and did it. 

Q. And he didn't, did he? 

A. Not to my knowledge. Not if you don't have a record of it, 

I guess he didn't. 

Q. Okay. And you were there continuing to operate under the 

Baskin name; correct? 

A. From -- 

13:43:12 





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Q. After this $6,000 payment was made. 

A. Right. 

Q. You continued to take advantage of that name; correct? 

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THE COURT: 

That's been asked and answered also, 

5 

Mr. Wirken. 

13:43:36 

6 

7 


MR. WIRKEN: 

Okay. 

8 

9 


Q. Now to try to figure out the amount of your gross sales in 

2005 and 2006, we subpoenaed records from the Arizona 

Department of Revenue and the City of Glendale to see what 

13:43:54 

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gross sales you were reporting and paying sales taxes on. 

And 

12 

we found that you didn't do that. 

Isn't that true? 

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A. I think we did it for a while and we just got behind and I 

asked for an extension. 

Q. You did it for the first three months with the State of 

Arizona; correct? 

A. I don't know. I believe that to be the case, but I'm not 

sure on that. 

Q. And you only submitted one month, the first month of your 

operation to the City of Glendale; correct? 


Q. If those were the records that were produced to us by those 

government bodies and they said that that's all that they had, 

you wouldn't disagree that that's all that you reported and 

paid? 

13:44:11 


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A. I would not disagree with the Government, no, I guess I 

wouldn't. 

Q. And you don't have any sort of document here in this case 

or in this courtroom evidencing that you requested an extension 

or you got an extension, do you? 

A. No, sir. 

Q. And I believe you said earlier in answer to the Judge's 

question, you don't even know of whom you requested an 

extension? 

A. I went to an accountant -- to a bookkeeper and had them 

send an extension in. 

Q. But the bottom line is, you weren't reporting your sales 

after April of 2005 to the Government, were you? 

A. No, I guess not. 

Q. So we can't look at those reports either to figure out what 

your sales were, can we? 

13:44:47 

13:45:02 

13:45:25 

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THE COURT: 

As I understand it again, Mr. Wirken, 

18 

19 

based upon what I heard here, that Baskin-Robbins has had and 

did, in fact, access the cash registers and determined the 

20 

amount of the sales. 

Now, am I wrong in that? 

13:45:46 

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22 

a point. 

MR. WIRKEN: You're mistaken, sir. You're correct to 

And that would be at about the end of December of 


24 

'05, that when Mr. Tilson was last in the store, he was able to 

bring up some weeks of sales on the register and reported 

25 

those. 

There are other weeks in '05 that were not accessed and 

13:46:08 




130 

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reported at that time. 

There were no weeks in '06 that were 

2 

3 

4 

5 

reported, either by Mr. Tilson or by the Condits. 

And we asked, Your Honor, in the course of discovery 

in this case, by way of a formal request for production of 

documents, that was later the subject of a motion to compel, we 

13:46:26 

6 

asked them to give us that documentation. 

And it wasn't until 

7 

8 

9 


after discovery had closed that they said, oh, come look at our 

cash registers. 

No documents were produced in response to the request, 

I should add. 

13:46:48 

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Your Honor. 

Let me look at my notes. 

I may be finished, 

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THE COURT: All right. Thank you. Take your time. 

MR. WIRKEN: I am indeed. Thank you. 

THE COURT: All right. Thank you very much. 


BY THE COURT: 

Q. As a matter of information, how old are you? 

A. Forty. 

Q. And how far did you go in school? 

A. I have a bachelor's in human resources. 

Q. From what college? 

A. St. Leo College in Florida. 

Q. At the Peoria store was there a J. Anderson employed by 

your organization? 


13:47:30 

13:48:02 




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A. Not to my recollection, Your Honor. 

Q. Exhibit 20, in the case I'm told, is a notice of 

termination at the Peoria store, was acknowledged or signed for 

4 

by J. Anderson March 15th, 2006. 

Do you know anything about 

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that? 

A. No, sir. 

Q. You don't -- you never heard of a J. Anderson? 

A. No, not that worked for us. That doesn't mean -- 

Q. Somebody just came in and maybe signed for it? 

A. Maybe. But I don't recall a J. Anderson. 

Q. I see. 

Do you know whether or not on March 15th, 2006, a 

notice of termination was allegedly sent to the Thunderbird 

store? 

A. No, sir. 

Q. Were you there daily? 

A. Not after January. 

Q. January of what year? 

A. 2006. 

Q. Where is your father today? 

A. I don't know. I believe he's out of town. I don't know 

where exactly he's at. 

I thought -- may I? 

Q. Sure. 

A. I thought removing myself on a day-to-day basis would 

13:48:22 

13:48:39 

13:49:00 

13:49:09 

13:49:27 




132 

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improve the stores. 

I felt like a failure because they weren't 

2 

doing well. 

And that's why I wasn't there on a day-to-day 

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basis after January, because I felt so bad about what had 

happened. 

Q. Well, who was running the stores? 

A. Helen, my wife, started running the day-to-day operations. 

Q. Are -- did you sell the stores? 

A. No, they went out of business. 

Q. Well, you own them, you bought them. 

A. Right. They're no -- no longer -- we wanted to sell them. 

When Jerry made his offer, we wanted to do that. 

Q. Well, who owns the stores? 

A. They don't exist anymore. 

13:49:47 

13:50:17 

14 

MR. HOLLAND: 

Your Honor, I believe we differentiate 

15 

between the franchise and the stores, the physical location. 

13:50:34 

16 

THE COURT: 

I'm talking about the physical location 

17 

and the buildings that were there. 

As I understood it at 

18 

19 

sometime they paid $130,000, I took it, to buy the buildings 

and the land. 

20 

THE WITNESS: 

No, just to buy the franchise. 

13:50:51 

21 

MR. WIRKEN: 

Your Honor, the stores are owned by third 

22 


parties who are landlords who lease the space to the 

franchisees. 

24 

MR. HOLLAND: 

The physical premises are owned by 

25 

someone else. 

13:51:05 



RECROSS-EXAMINATION - CHAD CONDIT 

133 

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THE COURT: 

MR. WIRKEN: 

Okay. 

I think we can stipulate that what he 

3 

4 

purchased was a purchase of assets, but those assets didn't 

include land or building. 

5 

THE COURT: 

Okay. 

13:51:13 

6 

MR. HOLLAND: 

It was the purchase of the franchise. 

7 

8 

THE COURT: Okay. All right. Anything else? 

If not, thank you very much. 

9 

MR. WIRKEN: 

May I follow up in light of your 


question, Your Honor? 

13:51:22 

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THE COURT: 

MR. WIRKEN: 

About what? 

About his knowledge of these employees 

13 

and receiving the notice of termination. 

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THE COURT: 

All right. 

RECROSS-EXAMINATION 

17 

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19 

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24 

25 

Q. Mr. Condit, did your -- did you receive mail at these two 

stores? 

A. Yeah, the mail ran to both stores. 

Q. Okay. You had regular U.S. mail delivered to each of the 

stores? 

A. Yes. 

MR. WIRKEN: Okay. Thank you, sir. That's all I 

have. 


13:51:43 

13:51:50 




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THE WITNESS: 

THE COURT: 

May I say one more thing? 

Maybe you want to ask your lawyer first. 

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4 

5 

6 

7 

THE WITNESS: Well, no, I just wanted -- 

MR. WIRKEN: I object, Your Honor. There's no 

question before him. 

THE COURT: Right. No, talk to your lawyer, and if he 

wants something else of you he can. 

13:51:59 

8 

MR. HOLLAND: 

May I approach the witness, Your Honor? 

9 

THE COURT: 

Yeah. 


THE WITNESS: 

It wasn't that important. 

13:52:12 

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12 

13 

14 

(Discussion off the record between Mr. Holland and 

the witness) 

THE COURT: All right. Thank you very much, sir. 

Any other witnesses, Mr. Holland? 

15 

MR. HOLLAND: 


13:52:32 

16 

THE COURT: 

Any other witnesses, Mr. Wirken? 

17 

MR. WIRKEN: 

Your Honor, I'd like to recall Mr. Tilson 

18 

briefly on rebuttal. 

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THE COURT: 

All right. 

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13:52:56 

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25 

Q. Adjust the mic there. 

A. Yeah. 

Q. Thank you. 

And of course you're still under oath. 





135 

1 

Mr. Condit made some statement about the cash 

2 

registers and his ability to read the sales on them. 

Can the 

3 

sales on the cash register be read independently? 

In other 

4 

5 

6 

7 

8 

9 


words, without benefit of any connection to Baskin-Robbins or 

any application of Baskin-Robbins' software or anything of that 

sort? 

A. As long as they're plugged in and you can turn them on. 

It's a computer -- it's a CPU inside there, so, yes, it holds 

the data within the register. 

Q. Okay. 

13:53:30 

13:53:45 

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THE COURT: 

MR. WIRKEN: 

I think we had that before. 

All right. 

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25 

And finally, Mr. Tilson, with regard to the 

photographs, if we could -- 

If the clerk could put the photographs, Exhibits 24, 

5, 6 and 7 before the witness, please. 

Thank you. 


Q. Mr. Tilson, did you take the photographs that make up those 

Exhibits 24, 25, 26 and 27? 

A. Yes, I took them. 

Q. Were they taken after the termination of the franchises? 

A. Yes. 

Q. The exterior photo in Exhibit 26, which Mr. Condit has 

identified as the Thunderbird store, you agree that it's 

13:53:55 


13:55:01 




136 

1 

2 

3 

4 

Thunderbird? 

A. Yes, I do. 

Q. Do you recall when you took that? 

A. That would have been sometime in late September, early 

5 

October. 

I don't know the exact date. 


6 

7 

8 

9 

Q. Were you taking that in preparation for the hearing on the 

application for preliminary injunction? 

A. Yes, I was taking the picture for that. 

Q. Okay. That hearing was going to happen in about mid 


December. 

Might the photo have been taken closer in time to 


11 

12 

the hearing date? 

A. It's possible. I really don't -- I really don't recall. 

13 

MR. HOLLAND: 

Objection, foundation. 

14 

MR. WIRKEN: Very good. Thank you, sir. That's all I 

15 

have. 

13:55:38 

16 


17 

MR. HOLLAND: 

I have one, Your Honor. 

18 

THE COURT: No, he's done. Let's step down. 

19 

MR. WIRKEN: 

Your Honor asked for a summary of the 

20 

fees. 

We prepared a single page to summarize that. 

13:55:49 

21 

THE COURT: All right. Well, show a copy to 

22 

Mr. Holland. 

If there's some questions about that. 


MR. WIRKEN: 

And I have a cover sheet here to have it 

24 

marked as Exhibit 50. 

25 

THE COURT: 

And I'm also interested in knowing when, 

13:56:04 



137 

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3 

in fact, the sign came down at Peoria and Thunderbird, the 

Baskin-Robbins sign. 

MR. WIRKEN: I believe -- 

4 

THE COURT: 

If anybody knows. 

5 

MR. HOLLAND: 

Your Honor, I think we can probably 

13:56:20 

6 

7 

stipulate Peoria it's still up. 

them to take the sign down. 

The landlord would not allow 

8 

THE COURT: 

It's not operating as a restaurant? 

9 


MR. HOLLAND: It's not operating. It's been closed by 

the Condits for some time. 

13:56:32 

11 

MR. WIRKEN: 

Your Honor, I believe that Miss Becker 

12 

and I stipulated that the stores closed on September 19, 2006, 

13 

14 

and that the signs were still up at that time. 

as Baskin stores until that date. 

They operated 

15 

16 

Afterwards, and even after Your Honor's injunction in 

December, my client was able, at its expense, to remove the 

13:56:45 

17 

signs from Peoria. 

The signs from Thunderbird had been removed 

18 

between September and December. 

19 

THE COURT: 

So they're down? 

20 

MR. WIRKEN: 

They are now down. 

13:56:59 

21 

MR. HOLLAND: 

The Peoria was not being operated during 

22 

the time -- 


THE COURT: 

Well, and one of the things I want to at 

24 

25 

least just raise as an issue with you, Mr. Wirken, and that is 

a claim about the Lanham Act. 

13:57:09 



138 

1 

MR. WIRKEN: 

Yes, sir. 

2 

3 

4 

5 

6 

THE COURT: And using the signs and so forth. And I 

suggest to you that that's going to be a difficult task, given 

the fact that you continued -- you, Baskin-Robbins, continued 

to sell ice cream there or to that organization through these 

arrangements until at or about that time. 


7 

So that's something for you to think about. 

All 

8 

right? 

9 

MR. WIRKEN: 

Fine, Your Honor. 


11 

12 

13 

14 

THE COURT: All right. And if there's nothing 

further, I don't know that we're going to benefit from any 

arguments about it, final argument. 

But I would encourage you both as well, before I 

decide what I have to do, and that is try to settle the case 

13:57:36 

15 

yourself. 

Because there all the problems that exist here. 

13:57:56 

16 

Acorn and the Condits were operating the businesses. 

They 

17 

18 

19 

weren't paying what they should have paid, and they were aware 

of that, and didn't do it. 

Apparently also, although it's not my concern, they 

20 

didn't pay the State about that, their money. 

And that's an 

13:58:17 

21 

22 


24 

obligation that they're going to have, and they will very 

likely have in this court if they don't take some action to 

move forward. 

The other thing that's going to happen in this case is 

25 

somebody is going to pay enormous attorneys fees. 

And if you 

13:58:34 



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think Baskin-Robbins have expensive prices for their ice cream, 

you wait until you start paying somebody else's attorney fees, 

Mr. Condit. And you're going to find out what it is. And I've 

no idea about Mr. Wirken or what his fees might be otherwise, 

but they're going to be six figures at a minimum, and more. 

Not more than $900,000, but they're going to be something. 

And those are all matters that you should take care of 

and be responsible for. 

And also the things that Baskin-Robbins, the problems 

that they had in whatever they were doing or didn't do as well. 

And so as I look out and view everyone here, each side 

13:58:53 

13:59:14 

12 

has got some problems, and you ought to recognize that. 

And 

13 

the matter should have resolved itself sometime before this 

14 

time. 

And that's my thought about that. 

15 

Now, anything else? 

13:59:33 

16 

MR. WIRKEN: 

Your Honor, I would move the admission of 

17 

18 

Exhibit 50 as a summary of the other exhibits that are 

referenced within it. 

19 

THE COURT: 

Well, I'll give you five days, 

20 

21 

22 

Mr. Holland, to file objections to it if you choose to. 

But more particularly also, if you want to file a post 

hearing memorandum, Mr. Wirken, you can do that within ten days 

13:59:48 


of today's date. 

And Mr. Holland would have five days after 

24 

that within which to file a response. 

And no reply. 

25 

MR. WIRKEN: 

I didn't really feel a need to in 

14:00:11 



140 

1 

light -- 

2 

3 

THE COURT: 

MR. WIRKEN: 

That's fine. 

I just wanted to mention that I submitted 

4 

proposed findings of fact and conclusions of law. 

5 

THE COURT: 

You might find it necessary to submit some 

14:00:20 

6 

others after what I've said to you today as well, Mr. Wirken. 

7 

MR. WIRKEN: 


8 

9 


11 

12 

And in light of Exhibit 50 there are a few findings 

regarding the 2005 amounts due that would have to be tweaked. 

If you want me I could in a minute address your 

question about the Lanham Act and not bother you with paper 

later. 

14:00:34 

13 

THE COURT: 

You take the trouble to -- about the 

14 

Lanham Act. 

15 

MR. WIRKEN: 

All right. 

14:00:44 

16 

THE COURT: 

Because as far as I'm concerned those 

17 

signs were up, and Baskin-Robbins was doing business there 

18 

through this arrangement, like it or not. 

And I feel very 

19 

20 

comfortable in saying that you aren't going to get any 

Lanham Act fees under the facts of this case. 

14:01:01 

21 

MR. WIRKEN: 

Okay. 

22 

THE COURT: If they stopped earlier, fine. But they 


didn't. 

24 

MR. WIRKEN: 

Thank you for hearing us, Judge. 

25 

THE COURT: 

Well, that's my job. 




141 

1 

2 

MR. WIRKEN: 

THE COURT: 

Yes. 

Well, it's very interesting and it's very 

3 

complex. 

4 

5 

And I don't want to comment about the Condits either, 

one of the things I was told I would hear is that the Condits 

14:01:18 

6 

never received any notices in this case. 

And the file is 

7 

replete with efforts of the U.S. Marshal to serve the Condits, 

8 

9 

and the difficulties and impossibilities of doing that. 

that's a matter of record, and it's in the docket. 

And 


So wherever that plays out as well. 

All right? 

14:01:42 

11 

So the matter is under advisement. 

12 

13 

14 

MR. WIRKEN: 

MR. HOLLAND: 

THE COURT: 



You bet. 

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25 

(Proceedings concluded at 2:01 p.m.) 

-oOo- 

14:01:52 



142 

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C E R T I F I C A T E 

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I, CANDY L. POTTER, do hereby certify that I am duly 

appointed and qualified to act as Official Court Reporter for 

the United States District Court for the District of Arizona. 

I FURTHER CERTIFY that the foregoing pages constitute 

a full, true, and accurate transcript of all of that portion of 

the proceedings contained herein, had in the above-entitled 

cause on the date specified therein, and that said transcript 

was prepared under my direction and control. 

DATED at Phoenix, Arizona, this 22nd day of 

September, 2008. 

17 

18 

19 

20 

s/Candy L. Potter________ 

Candy L. Potter, RMR, CRR 

21 

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CV 06-854 Baskin-Robbin 10-23-0 - Modesto Bee

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