FDD Items 3 & 4 · 2025 filing
Closets By Design litigation history
What Closets By Design disclosed about lawsuits, arbitrations and bankruptcy in the 2025 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 & 4 at a glance
What the filing discloses
- Cases disclosed
- 5
- Item 3, as counted in the filing
- Largest disclosed settlement
- $320K
- As stated in Item 3
- Bankruptcy (Item 4)
- None
- Franchisor, parent, predecessor or officer
- Filing year
- 2025
- Disclosures cover the prior ten years
Extracted from the 2025 Franchise Disclosure Document
Item 3: litigation
3 pending: (1) customer class action (Vernon v CBD); (2) competitor false advertising (Casablanca v CBD); (3) CBDF appeal against former franchisee/competitor (CBD v Central Jersey/One Day). 2 concluded: CBD v Van Alstyne (breach/bankruptcy, recovered $127K); CBD v Frank Dres (settled $320K).
Disclosure signals that moved the score
How this shows up in the verdict
- Going Concern designation indicates franchisor financial distress and potential inability to support franchisees
- Multiple active litigations including consumer class action, RICO allegations, and non-compete disputes signal systemic operational/compliance issues
- History of concluded litigation over unpaid royalties and abandonment indicates franchisor-franchisee relationship breakdown
The verdict grade is FranchiseVerdict's editorial assessment across SBA loan performance, unit growth, revenue and disclosure signals. It is not investment advice.
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?