FDD Items 3 & 4 · 2026 filing

Scout & Molly’s litigation history

What Scout & Molly’s 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 (litigation) & 4 (bankruptcy) at a glance

What the filing discloses

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

Largest settlement, franchisor's own cases: $313K; 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

Three disclosed cases: (1) Scott Holdings, Inc. v. FranLogic Scout Development, LLC et al. (2016) - California Franchise Investment Law violations, rescission/damages claim, settled with $240,000 stipulated judgment (2018); (2) PeopleShare, LLC v. Scout and Molly's Boutique (2018) - wage/breach of oral contract claim, arbitrator awarded $48,112.90, settled via installment payments (2022); (3) Lisa Kornstein Kaufman et al. v. Edward Samane et al. (2018) - breach of fiduciary duty, fraud, and related claims by former owner, settled 2022 with $312,500 payment plus $200,000 release and equity transfer.

Item 3 (litigation) · 3 matters disclosed

Litigation cases

The franchisor

Concluded (3)

Lisa Kornstein Kaufman, et al. v. Edward Samane, et al.
settled
filed 2018-12-13 · Court of Common Pleas of Montgomery County, Pennsylvania · 2018-28243
“… (Court of Common Pleas of Montgomery County, Pennsylvania, Case No. 2018-28243).”Page 9 of the 2026 FDD, Item 3
Outcome: “On June 14, 2022, the parties agreed to settle the claims, which included a payment of $312,500 to Kornstein by the defendants, a release of $200,000 that was previously owed by FranLogic Corporation to Kornstein, and Samane acquiring Kornstein’s outstanding equity shares in FranLogic Scout Development, LLC as part of the settlement.”
PeopleShare, LLC v. Scout and Molly’s Boutique
settled
Brought by a third party · filed 2018 · Court of Common Pleas of Montgomery County, Pennsylvania; arbitration · 2018-06889
“… (Court of Common Pleas of Montgomery County, Pennsylvania, No. 2018-06889.”Page 9 of the 2026 FDD, Item 3
Outcome: “On July 28, 2022, the parties entered into a settlement agreement whereby FSD agreed to pay the amount of the arbitration award in installment payments in lieu of PeopleShare taking any collection action on the judgment.”
Scott Holdings, Inc. v. FranLogic Scout Development, LLC, et.al.
judgment
Brought by a franchisee · filed 2016 · U.S. District Court, Northern District of California · 3:16-CV-5317-JCS
“… (U.S. District Court, Northern District of California, 3:16-CV-5317-JCS).”Page 9 of the 2026 FDD, Item 3
Outcome: “entered a stipulated judgment wherein Franchisor agreed to pay to the plaintiff a principal sum of $240,000, with interest, and the parties entered into a general release.”

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.

Disclosure signals that moved the score

How this shows up in the verdict

3 litigation matters including $240K CA franchise-law settlement, on only 20 units

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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