FDD Items 3 & 4 · 2024 filing

CBD American Shaman litigation history

What CBD American Shaman disclosed about lawsuits, arbitrations and bankruptcy in the 2024 Franchise Disclosure Document. Item 3 lists the material legal actions a franchisor must report; Item 4 covers bankruptcy. This is the franchisor's own disclosure, not a court record, and not legal advice.

Items 3 (litigation) & 4 (bankruptcy) at a glance

What the filing discloses

Cases disclosed: 5; Item 3, as counted in the filing

Largest settlement, franchisor's own cases: None stated

Bankruptcy (Item 4): None; Franchisor, parent, predecessor or officer

Filing year: 2024; Disclosures cover the prior ten years

Extracted from the 2024 Franchise Disclosure Document

Item 3: litigation

1 pending AAA arbitration by former franchisee Vitality/Johancsik seeking $500K-$1M claiming FTC Rule violations, fraud, and various contract/statutory claims. 3 government actions: Wisconsin Consent Order (May 2021) for selling franchise after expired registration and failing to disclose officer bankruptcy; Washington State charges (June 2021) for same; California Consent Desist and Refrain Order (February 2022) for same. FDA Warning Letter to affiliate CBDAS (November 2022) for CBD-infused edible marketing.

Item 3 (litigation) · 5 matters disclosed · 3 pending listed

Litigation cases

The franchisor

Pending (2)

Dawn Johancsik and Tracy Johancsik v. American Shaman Franchise System, Inc.
pending
Brought by a franchisee · filed 2022-02-08 · American Arbitration Association (Kansas City, Missouri) · 01-22-0000-5650
“… AAA Case Number 01-22-0000-5650 (Kansas City, Missouri).”Page 12 of the 2024 FDD, Item 3
In the Matter of Determining Whether there has been a violation of the Franchise Investment Protection Act of Washington by: American Shaman Franchise Systems, Inc. d.b.a. CBD American Shaman, et al.
pending
Government or regulatory action · filed 2021-06-15 · Washington Department of Financial Institutions, Securities Division · S-19-2786-21-SC01
“Statement of Charges and Notice of Intent to Enter Order to Cease and Desist in the Matter of Determining Whether there has been a violation of the Franchise Investment Protection Act of Washington by: American Shaman Franchise Systems, Inc. d.b.a.”Page 13 of the 2024 FDD, Item 3

Concluded (2)

In the Matter of: The Commissioner of Financial Protection and Innovation v. American Shaman Franchise System, Inc., dba CBD American Shaman
concluded
Government or regulatory action · filed 2022-02-11 · California Department of Financial Protection and Innovation
“… (the “California Action”).”Page 13 of the 2024 FDD, Item 3
In the Matter of American Shaman Franchise System, LLC (Wisconsin DFI)
concluded
Government or regulatory action · filed 2021-05-05 · Wisconsin Department of Financial Institutions · S-242323 (FX)
“In the Matter of American Shaman Franchise System, LLC, DFI Case No. S-242323 (FX) (the “Wisconsin Action”). On May 5, 2021, the Wisconsin Department of Financial Institutions issued a Consent Order to Cease and Desist in the Wisconsin Action.”Page 13 of the 2024 FDD, Item 3

Parent, affiliates, master franchisor and subfranchisor

Pending (1)

FDA Warning Letter to CBD American Shaman, LLC (MARCS-CMS 628753)
pending
Government or regulatory action · CBD American Shaman, LLC (CBDAS, affiliate) · filed 2022-11-16 · U.S. Food and Drug Administration · MARCS-CMS 628753
“On November 16, 2022, the FDA issued a Warning Letter to CBDAS objecting to the marketing and sale of CBD-infused human and animal edibles and a topical sunscreen and noting that an FDA analysis performed on a cookie product claiming to contain 10mg of CBD per serving found 19.3mg per serving and 17.6mg per serving in their original and check analyses, respectively.”Page 12 of the 2024 FDD, Item 3

Item 3 lists the litigation the franchisor must disclose; a matter against a parent, an affiliate or a named officer is not a matter against the franchisor, and pending claims are allegations, not findings.

Before you weigh a lawsuit

How to read Item 3

A franchisor must disclose pending actions and any material civil action involving the franchise relationship, plus convictions or civil judgments for fraud, unfair or deceptive practices, or franchise-law violations, going back ten years. A case the franchisor brought against a franchisee counts too. Item 3 does not include every dispute: settled claims below the materiality line and matters resolved in private arbitration can be absent.

Questions worth asking current and former franchisees, using the contact list in Item 20:

Were you, or anyone you know in the system, party to a dispute with the franchisor?
Was it resolved by settlement, arbitration or a court, and on what terms?
Has the number of disputes gone up or down since you signed?

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