FDD Items 3 & 4 · 2026 filing
Cornwell Quality Tools litigation history
What Cornwell Quality Tools disclosed about lawsuits, arbitrations and bankruptcy in the 2026 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
- 30
- Item 3, as counted in the filing
- Largest disclosed settlement
- $5.5M
- As stated in Item 3
- Bankruptcy (Item 4)
- None
- Franchisor, parent, predecessor or officer
- Filing year
- 2026
- Disclosures cover the prior ten years
Extracted from the 2026 Franchise Disclosure Document
Item 3: litigation
Two regulatory consent orders (Maryland 2010, Minnesota 2014) for franchising with expired registrations. Salinas class action settled $5.5M (California employee misclassification, concluded 2024). Felger and Hudson data breach cases pending (settlement in principle January 2025). Karrip counterclaim dismissed. Cornwell filed approximately 24 collection suit matters against former franchisees for unpaid inventory.
Disclosure signals that moved the score
How this shows up in the verdict
- Multiple class action lawsuits regarding dealer misclassification under labor laws create legal exposure and suggest franchisor control disputes
- Data breach litigation indicates inadequate cybersecurity and potential customer/franchisee exposure
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?