FDD Items 3 & 4 · 2024 filing

Coverall litigation history

What Coverall 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: 18; Item 3, as counted in the filing

Largest settlement, franchisor's own cases: $5.5M; As stated in Item 3

Bankruptcy (Item 4): Disclosed · an officer; Franchisor, parent, predecessor or officer

Filing year: 2024; Disclosures cover the prior ten years

Extracted from the 2024 Franchise Disclosure Document

Item 3: litigation

Extensive litigation history primarily involving franchisee misclassification as independent contractors under various state wage laws (California, Massachusetts, New Jersey). Key settled matters include Awuah/Cooks/AAA Massachusetts settlement ($5.5M). Pending matters include Rivas (California PAGA) and Gonzalez (California). FTC consent decree in 1994 ($100K penalty for disclosure violations.

Item 3 (litigation) · 18 matters disclosed · 4 pending listed

Litigation cases

The franchisor

Pending (4)

Keon Reny Cleaning Service vs. Coverall North America, Inc.
pending
Brought by a franchisee · filed 2023-08-03 · Court of Common Pleas of Allegheny County, Pennsylvania- Civil Division · GD23-9413
“… (Court of Common Pleas of Allegheny County, Pennsylvania- Civil Division, Case No. GD23-9413) filed August 3, 2023. Plaintiff, a former franchisee of Coverall, seeks a declaration and finding that Coverall breached the franchise agreement with Keon Reny Cleaning Services.”Page 18 of the 2024 FDD, Item 3
Outcome: “The court sustained Coverall’s motion and stayed the dispute to allow Plaintiff to file arbitration.” (page 19)
Caribe Billie and Quincy Reeves vs. Coverall North America, Inc.
pending
Brought by a franchisee · filed 2019-01-17 · United States District Court, District of Connecticut · 3:19-cv-00092-JCH
“… (United States District Court, District of Connecticut, Case No. 3:19-cv-00092-JCH) filed January 17, 2019. Plaintiffs, franchisees of R & B Services, Inc. d/b/a Coverall of Connecticut & Westchester (“RB”), Coverall’s former master franchisee, filed this putative class action”Page 17 of the 2024 FDD, Item 3
Outcome: “Coverall subsequently settled its disputes with both Reeves (in November 2023 for the amount of $20,000) and Flores (in or around April of 2023 for the amount of $15,000).”
Carlos Rivas vs. Coverall North America, Inc.
pending
Brought by a franchisee · filed 2018-06-07 · United States District Court Central District of California · 8:18-cv-01007-JGB-KK
“… (United States District Court Central District of California Case No. 8:18-cv-01007-JGB-KK). On June 7, 2018, Plaintiff, a then-current franchisee, filed a complaint under the Private Attorney General Act of 2004 (“PAGA”) seeking a declaration and finding that Coverall violated the California Labor Code”Page 18 of the 2024 FDD, Item 3
Outcome: “On December 18, 2022, Rivas appealed that decision to the 9th Circuit. That appeal remains pending.”
Sergio Gonzalez v. Coverall North America, Inc.
pending
Brought by a franchisee · filed 2016-11-02 · United States District Court, Central District of California · 5:16-CV-02287-JGB-KK
“… (United States District Court, Central District of California, Civil Action No. 5:16-CV-02287-JGB-KK) filed November 2, 2016. Plaintiff, a current franchisee, filed this putative class action claiming Coverall violated various sections of the California Labor Code by misclassifying its franchisees as independent contractors,”Page 18 of the 2024 FDD, Item 3
Outcome: “On December 18, 2022, Gonzalez appealed that decision to the 9th Circuit. That appeal remains pending.”

Concluded (11)

Cinthia Yarleque vs. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2020-10-30 · American Arbitration Association · 01-20-0015-5079
“… (American Arbitration Association, Case No. 01-20- 0015- 5079) filed October 30, 2020. Claimant, a former franchised business filed a Demand for Arbitration with the American Arbitration Association. Claimant alleged that Coverall had misclassified her as an independent contractor”Page 19 of the 2024 FDD, Item 3
Outcome: “This matter settled in December 2021 for $25,000, with no admission of liability by Coverall.”
Ivett Alcazar vs. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2020-10-30 · American Arbitration Association · 01-20-0015-5052
“… (American Arbitration Association, Case No. 01-20-0015- 5052) filed October 30, 2020. Claimant, a former franchised business, filed a Demand for Arbitration with the American Arbitration Association. Claimant alleged that Coverall had misclassified him as an independent contractor”Page 19 of the 2024 FDD, Item 3
Outcome: “This matter settled in January 2022 for $32,000, with no admission of liability by Coverall.”
Jose Munoz vs. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2020-10-30 · American Arbitration Association · 01-20-0015-5028
“… (American Arbitration Association, Case No. 01-20-0015- 5028) filed October 30, 2020. Claimant, a former franchised business, filed a Demand for Arbitration with the”Page 19 of the 2024 FDD, Item 3
Outcome: “This matter settled in February 2022 for $40,000, with no admission of liability by Coverall.” (page 20)
Pacific Commercial Services, LLC vs. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2020-01-24 · American Arbitration Association · 02-19-0003-0718
“… (American Arbitration Association, Case No. 02-19-0003-0718) filed January 24, 2020. Plaintiff, a current Coverall Service Franchisee filed a Breach of Agreement and Lack of Good Faith and Fair Dealings Demand for Arbitration with the American Arbitration Association.”Page 20 of the 2024 FDD, Item 3
Outcome: “This matter settled in August 2021 for by mutual agreement of the parties, with a waiver by Coverall of certain alleged debt and no admission of liability by Coverall.”
Erika Richardson and Luis Silva vs. Coverall North America, Inc.; Sujol, LLC d/b/a Coverall of Southern NJ
settled
Brought by a franchisee · filed 2017-12-08 · Superior Court of New Jersey, Middlesex County, Law Division (removed to U.S. District Court, District of New Jersey, 3:18-cv-00532-MAS-TJB) · MID-L-007250-17
“… (Superior Court of New Jersey, Middlesex County, Law Division, Docket No. MID-L-007250-17) filed December 8, 2017. Plaintiffs, current franchisees of Sujol, LLC d/b/a Coverall of Southern NJ (“Sujol”), Coverall’s Master Franchisee, filed this putative class action”Page 19 of the 2024 FDD, Item 3
Outcome: “This matter settled in May 2022 with a $22,000 payment to Silva and a $17,500 payment to Richardson with no admission of liability by Coverall.”
Randall Richardson and Janitorial Tech, LLC v. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2017-06-27 · United States District Court for the Northern District of Georgia, Atlanta Division · 1:17-mi-2405-UNA
“… (United States District Court for the Northern District of Georgia, Atlanta Division, Case No. 1:17-mi-2405-UNA) filed June 27, 2017. Plaintiff, a current franchisee, filed this putative class action claiming Coverall has violated various sections of the Fair Labor Standards Act,”Page 20 of the 2024 FDD, Item 3
Outcome: “The material terms of the Settlement were that Coverall: i) paid to Franchisee $27,325.00, which included the purchase price for the assets of Franchisee’s business and customers; and ii) cancelled all remaining balances due Coverall on Franchisee’s Promissory Notes.” (page 21)
Maria Mora v. Coverall North America, Inc., et al.
settled
Brought by a franchisee · filed 2014-01-23 · Circuit Court County of Washington, Oregon · C140316 CV
“… (Circuit Court County of Washington, Oregon Case No. C140316 CV), filed January 23, 2014. Plaintiff is a franchisee of Cavalier Services, Inc. (“Cavalier”). Cavalier is an independently owned and operated Master Franchisee of Coverall.”Page 24 of the 2024 FDD, Item 3
Outcome: “On April 10, 2014 a Settlement Agreement was entered into between all the parties by which Cavalier repurchased Plaintiff’s Coverall Franchise for $8,500.00, forgave her obligations to Cavalier for the balance of her promissory note and terminated her Coverall Franchise, effective April 10, 2014.”
Cooks v. Coverall North America, Inc. and Coverall of Boston, Inc.
settled
Brought by a franchisee · filed 2013-07-01 · Superior Court, Suffolk County, Massachusetts (removed to the United States District Court for the District of Massachusetts, 13-cv-11802-WGY) · SUCV2013-02373
“… (Superior Court, Suffolk County, Massachusetts, Civil Action No. SUCV2013-02373) filed July 1, 2013. Plaintiff, a current franchisee, filed this purported class action claiming that CBI and Coverall knowingly and willingly i) misclassified its franchisees as independent contractors”Page 21 of the 2024 FDD, Item 3
Outcome: “The matter was settled as part of the settlement described below.”
Sabrina Laguna v. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2008-08-08 · Superior Court of California County of San Diego (removed to the United States District Court for the Southern District of California, 3:09-cv-02131-JM-RBB) · 37-2008-00089347-CU-OE-CTL
“… (Superior Court of California County of San Diego, Civil Action No. 37-2008-00089347-CU-OE-CTL) filed August 8, 2008. Plaintiff, a then-current franchisee, filed this purported class action variously claiming that Coverall negligently or intentionally misrepresented that it had sufficient business to satisfy its contractual obligations;”Page 23 of the 2024 FDD, Item 3
Outcome: “The settlement became effective December 15, 2014.” (page 24)
Pius Awuah, et al v. Coverall North America, Inc.
settled
Brought by a franchisee · filed 2007-02-15 · U.S. District Court, District of Massachusetts · Civil Action No. 07-10287
“… (U.S. District Court, District of Massachusetts, Civil Action No. 07-10287) filed February 15, 2007;”Page 21 of the 2024 FDD, Item 3
Outcome: “2) Coverall paid $5.5 Million to the Class; 3) all franchise agreements of the Class were terminated; 4) Customers were transitioned to servicing Class members; and 5) Coverall withdrew from Massachusetts.” (page 23)
United States of America v. Coverall North America, Inc.
concluded
Government or regulatory action · United States District Court for the Northern District of Illinois · Civil Action No. 94 C 1178
“… (Civil Action No. 94 C 1178). On March 18, 1994, a Consent Decree was entered in the United States District Court for the Northern District of Illinois in United States of America v. Coverall North America, Inc. (Civil Action No. 94 C 1178).”Page 24 of the 2024 FDD, Item 3
Outcome: “Without admitting liability, we agreed to pay a civil penalty of $100,000 and to be enjoined from not complying with the FTC’s franchise disclosure rule.”

This list shows 15 of the 18 matters Item 3 discloses; the rest are in the filing.

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.

Disclosed in the 2024 Franchise Disclosure Document

Item 4: bankruptcy

On October 21, 2011, James F. Bellante, Jr., General Manager of our Pittsburgh Support Center, filed for relief under Chapter 13 of the U.S. Bankruptcy Code (United States Bankruptcy Court Western District of Pennsylvania, Pittsburgh), Case No: 11-26498-CMB, and a discharge was granted on November 15, 2016. ... On December 20, 2012, Nicole Ivey, our Vice President of Marketing, filed for relief under Chapter 13 of the U.S. Bankruptcy Code (United States Bankruptcy Court Northern District of Illinois, Chicago), Case No. 12-49720, and a discharge was granted on October 2, 2013. On May 9, 2014, the case was closed. ... On July 1, 2015, Chris Taylor, our General Manager, filed for relief under Chapter 13 of the U.S. Bankruptcy Code (United States Bankruptcy Court Southern District of Ohio), Case No. 1:15bk12594, and a discharge was granted on July 15, 2020. On September 15, 2020, the case was closed.

Disclosure signals that moved the score

How this shows up in the verdict

Multiple active class action lawsuits regarding worker misclassification and wage/hour violations create significant legal and operational risk

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?

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