Planet Ballroom v Matthews Ballroom Lawsuit

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SETTING THE RECORD STRAIGHT

Charlotte, N.C. (Planet Ballroom International, Inc.) October 15, 2019 

Planet Ballroom Int’l, Inc. announces a victory in its legal efforts against franchisee Matthews Ballroom Dance Company, Inc. (aka Matthews Ballroom or Matthews Ballroom + Events) owned and managed by Jerilyn Hoskins McDonald, Bradley Joseph Claxton and Heyward Todd Liddell IV. 

The lawsuit was filed against Matthews Ballroom in April 2018 for breach of contract and in June 2018 Planet Ballroom Int’l (PBI) terminated franchise agreements with Matthews Ballroom for their franchise locations in Matthews, NC and Asheville, NC, with Burke Schnedl an additional owner of the Asheville franchise. Matthews Ballroom also operated a franchise location in Concord, NC which was improperly closed in March 2019. Janine DiPierro was a partner in the Concord location.

Planet Ballroom franchisees were licensees of the Planet Ballroom trademark and business model. They were independent business owners operating their own company, collecting their own revenues, hiring and managing their own employees, making their own business decisions, and cultivating their own company culture within the Planet Ballroom brand. Planet Ballroom provided:

• an established brand and positive company culture;
• a call center to ensure professional handling of prospect communications;
• custom business and sales management software;
• extensive dance training including over 500 dance videos;
• highly effective instructor training courses;
• and a decade of experience operating successful dance businesses.

During the years PBI licensed its brand to franchisees, data was gathered as to the levels of success of each franchise. The issues experienced by this group of franchisees, and others who struggled, can be directly correlated to them ignoring key pieces of the business model. The narrative with a franchisee who ignored the directions outlined in detail in our Franchise Agreement and Operations Manual tended to play out as follows:

• Franchise model says to do ABC
• Franchisee decides to do XYZ
• Franchisor (us) tells franchisee XYZ doesn’t work and to please follow the directions and do ABC
• Franchisee ignores Franchisor and continues to do XYZ
• Franchisee’s business loses money and ultimately fails
• Franchisee blames Franchisor saying the model didn’t work
• Franchisor reminds franchisee they didn’t follow the model and sues franchisee for damages
• Franchisee cries foul and defames Franchisor

The owners of the three franchises related to this lawsuit are as follows:

Matthews Franchise

• Matthews Ballroom Dance Company, Inc with owners Jerilyn McDonald, Bradley Claxton and Todd Liddell

Concord Franchise

• Matthews Ballroom Dance Company, Inc with owners Jerilyn McDonald, Bradley Claxton and Todd Liddell
• Janine DiPierro

Asheville Franchise

• Matthews Ballroom Dance Company, Inc with owners Jerilyn McDonald, Bradley Claxton and Todd Liddell
• Richard Burke Schnedl 

Matthews Ballroom Dance Company c/o Jerilyn McDonald, Bradley Claxton and Todd Liddell purchased licensing rights for multiple territories. They then sold shares to additional partners.

• Janine DiPierro paid Matthews Ballroom $40,000 for a third share of the Concord franchise.
• Burke Schnedl paid Matthews Ballroom $35,000 for a third share of the Asheville franchise.
• Janine DiPierro paid Matthews Ballroom $20,000 for a franchise in Charlotte that Matthews Ballroom never opened.

The two day long trial occurred approximately one year later in March 2019. The verdict arrived declaring a victory for PBI with accompanying financial damages awarded, plus an order for Matthews Ballroom to cease using Planet Ballroom intellectual property. In a related matter, Todd Liddell signed a consent of judgement. 

A writ of execution has been filed against Matthews Ballroom and a Mecklenburg County sheriff has been assigned to the matter for forced collections. A related lawsuit has been filed and is active in Mecklenburg County Court to enforce personal guarantees of Matthews Ballroom owners Jerilyn McDonald and Bradley Claxton as well as to seek an injunction to force Matthews Ballroom to cease using Planet Ballroom intellectual property, including continued use of our confidential client list; continued use of our proprietary brand designs, color palettes, and interior design themes; and continued use of our promotional and sales processes.

The source of this dispute can be traced back to the management of the Asheville and Concord franchise locations. Planet Ballroom franchise documents (FDD, Franchise Agreement and Operations Manual) clearly state that a franchise is required to spend $5,000 to $10,000 within the first sixty days of operations on grand opening advertising, plus the greater of $500 or 6% per month for ongoing advertising. These requirements ensure a Planet Ballroom franchise experiences proper growth.

According to the Asheville franchise tax returns, which were validated as true and accurate by Matthews Ballroom‘s CPA during the trial, the owners spent less than $1,300 on advertising for the entire first calendar year (about 10 months) in operation. Subsequently, this franchise location never got off the ground.

Similarly, the Concord location was starved of advertising funding. According to the financial statements submitted by Matthews Ballroom during the discovery phase of the trial, only about $99 per month was spent on advertising of the Concord franchise.

In February 2017, PBI sent the owners of the Asheville franchise formal notice of their continued advertising oversight emphasizing their need to change course as their ignoring of this vital component to the business model would have detrimental consequences. Despite the notice, plus repeated verbal conversations, the owners refused to advertise their business as agreed. The lack of growth with this franchise was a direct result of the owners‘ actions in ignoring their agreement and ignoring this key component of the Planet Ballroom business model.

Three of the four owners of the Asheville franchise lived in Charlotte, while one owner, Burke Schnedl, lived locally in the Asheville area. To make matters worse, it was later discovered that Burke Schnedl moved to Orlando to pursue another career. The Planet Ballroom franchise agreement requires a local owner/operator/manager to be present. For obvious reasons it does not make sense for a business owner to buy a business in Asheville, NC and then proceed to move to Orlando, FL. This action was not conveyed to PBI, it was discovered via social media, and shows further mismanagement of this franchise location.

Data collected by PBI shows a direct correlation between a Planet Ballroom franchise‘s success and the owners commitment to adhering to Planet Ballroom advertising mandates. Ironically, Matthews Ballroom owned the Matthews location which produced +/- $400,000 per year in revenues and, for the most part, followed the Planet Ballroom business model with respect to advertising mandates. It is unclear as to why the Matthews Ballroom owners operated one of their franchises properly (seeing high revenue as a result) and their other franchises - the ones with extra partners - improperly (seeing sluggish growth and continued financial difficulties).

Another example of this concept relates to the franchise in Johns Creek, GA which initially did not advertise as agreed, but then changed its ways and began to adhere to the Planet Ballroom model. Once on track with the Planet Ballroom marketing plan, the Johns Creek franchise jumped from a multi-year-long stagnation to nearly doubling its monthly revenues. The change for the Johns Creek franchise came quickly, over the course of only a few months. These examples as well as other related data show that advertising was a key factor for success in the Planet Ballroom model, which is why it was strongly emphasized multiple times in our franchise documents. Ignoring this key component had fatal consequence.

The model was not followed for the Concord and Asheville franchise locations which ultimately lead to a breach of contract. In an effort to appease mounting tensions, PBI offered these franchisees what we considered a fair and reasonable settlement which allowed both parties to move on in a civil manner. The offer was declined. PBI filed its first lawsuit soon thereafter. It should be noted that the original settlement offered was less than the legal judgment award that now burdens this group of business owners.

In early 2017, it came to our attention that Matthews Ballroom Dance Company was not in compliance with NC GS 66 due to their failure to maintain a surety bond. In addition to being a state law, our franchise agreement required franchisees to comply with local laws, specifically including surety bonds. PBI sent notice to Matthews Ballroom owners regarding this oversight. It is unknown if the issue was remedied as they often withheld company information from us.

According to NC GS 66-125c the penalty for a dance studio not having a surety bond constitutes unfair trade practices. Given Matthews Ballroom closed their Concord studio and their Asheville studio, and still operates their Matthews studio, any student who paid for services not utilized within 30 days of payment (such as dance event payments) or any student who is due a refund from a closed studio should consult with an attorney regarding possible damages from Matthews Ballroom. Unfair trade practices warrants treble damages plus reasonable legal fees.

It is unknown if Matthews Ballroom maintains a surety bond today. According the GS, a dance studio is required to present their bond information upon customer request. It is unknown if Janine DiPierro adhered to this NC GS provision for her Cornelius studio.

Matthews Ballroom attorney: Cameron Caudle with Caudle & Spears in Charlotte

Janine DiPierro attorney: Weaver & Budd in Matthews

The blame game and lack of self-awareness continued after the trial when on August 12, 2019 Julie Schnedl posted on social media “don’t get involved with the [PBI Officers] they are con artist”. They continue to cast blame on others. A summary of the Schnedl‘s involvement with Planet Ballroom:

• Schnedl’s paid $35,000 to Matthews Ballroom c/o Jerilyn McDonald, Bradley Claxton and Todd Liddell to buy a share of the Asheville franchise; no money was ever paid to PBI;
• this group of franchises did not follow the directions in regards to advertising their business as agreed which caused the business to grow at very slow rate or not at all;
• this group of franchisees refused to get their business on track after receiving formal notice in writing from PBI;
• Burke Schnedl moved from Asheville, NC to Orlando, FL further ignoring his commitment to his business;
• the franchise agreement for Asheville was terminated by PBI due to repeated breaches of contract;
• Burke Schnedl has a court order to pay PBI;
• and yet, Julie Schnedl accuses PBI officers of being “con artist”.

During the discovery phase of the trial PBI pulled emails from its servers relating to internal interacts between this group of owners. Relevant email communications are recorded below and demonstrate what we would consider internal issues and lack of taking responsibility for their actions. 

A few months after the lawsuit against Matthews Ballroom was filed, former franchisee Kristin Grasso Heck began posting what we believed to be defamatory comments about PBI and its officers online. The posts have since been deleted by the Heck’s, but not before screenshots and video were collected by us.

The remarks we believe to be defamatory continued throughout the legal dispute with Matthews Ballroom and escalated in January 2019 when Kristin Grasso Heck’s husband Brandon Heck joined in on the attacks. In May 2019, a joint lawsuit was filed against the Heck’s for defamation of character. The matter is an active case in Mecklenburg County. The lawsuit against Matthews Ballroom did not involve the Grasso/Hecks in any way. Grasso sold her franchise in mid-2016 for $90,000. It is unclear why she decided to get involved.

PBI filed a lawsuit against Lake Norman Ballroom, owned by Todd Liddell and Janine DiPierro, for breach of contract. DiPierro and Liddell purchased the franchise rights for the Cornelius/Lake Norman region on December 3, 2016. They assumed control of the facility already in existence in Cornelius.

• The Cornelius franchise had produced an average of $196,556 annually for years 2014, 2015 and 2016.
• Under the ownership of DiPierro and Liddell, the Cornelius franchise produced $59,597 in 2017.
• According to her Linkedin profile, Janine DiPierro is a “business systems consultant manager” at a prominent bank.
• In late 2017, PBI received notice that Lake Norman Ballroom was terminating its contract and closing the Cornelius franchise, which constituted a breach of contract.
• Janine DiPierro was a franchisee of the Concord location for approximately one year prior to purchasing the Cornelius territory.

Liquidated damages for the improper closures of the Cornelius and Concord locations, responsibilities of DiPierro and Liddell, exceeded one hundred thousand dollars. In 2018, Janine DiPierro filed for bankruptcy.

In January 2019, Janine DiPierro joined in the on comments made by Kristin Heck, opening herself up to additional lawsuits for defamation of character. This is yet another example of this group of franchisee business owner partners refusing to take responsibility for their own actions.

PBI dismissed the case due to Janine DiPierro‘s bankruptcy. Public record of DiPierro‘s bankruptcy can be found below.

Playing the victim is a form of manipulation. Creating a narrative of victimization can help an individual or group gain public support, rally employees and keep customers (i.e. money).

In a franchise system, it can be common for franchisees to rally against the franchisor as a common enemy. The structure in franchising is that there is always one franchisor and many franchisees. Villianizing the franchisor can be a strategy used by franchisees to get out of contracts and get out of paying royalty fees. It boils down to money. Franchisees are given knowledge and trade secrets upfront in exchange for the promise to pay royalties to the franchisor. The franchisor is the entrepreneur and their business system is their intellectual property, much like a musician who gets royalties every time someone plays their song or an inventor who gets royalties when their product is purchased.

If the agenda of a group of franchisees is to take the upfront knowledge and trade secrets they received and then try to get out of their obligation to pay royalties, playing the victim could be a key part of their strategy. They have a financially motivated vested interest to turn on the franchisor with the goal of getting out of paying royalties. It’s the part of the deal where they have to pay for what they have already received. When you combine that agenda with franchisees who struggled and desire to preserve their own egos, then add unscrupulous lawyers who encourage victimization verses resolution so as increase the legal fees they collect, you get a year long legal battle.

It‘s an unfortunate side of business and an unfortunate side of the human condition. While this was never the desired outcome, every one of these legal issues has settled in our favor. Given that we are the entrepreneurs in the group, it’s now simply a matter of live, learn and rebuild. 

November 30, 2019 UPDATE! Jerilyn McDonald SECRET emails exposed!

Myth: PBI over-charged for training

Fact: Jerilyn McDonald gave false testimony under oath stating that PBI owed Matthews Ballroom money due to overcharges of training because PBI trainer Karita was a contractor and not an employee. However, according to Karita's W2s and ADP payroll records she was in fact an employee of PBI. Matthews Ballroom signed off on the 2017 training rates, received the training, then made this false claim.

Myth: PBI owed Matthews Ballroom for refunds

Fact: Jerilyn McDonald gave false testimony under oath and submitted falsified documents claiming PBI owed Matthews Ballroom money from royalties collected from revenues that were refunded in the amount of about $14,000 (10% royalties), which equates to about $140,000 of refunds issued to customers between 2014 and 2018. No evidence from Matthews Ballroom merchant TSYS was provided documenting $140,000 of customer refunds ever occurred. Further, Matthews Ballroom tax returns show a total of about $51,000 of refunds, $32,000 of which occured in one month due to a computer error where royalties were not collected. This puts the real number of refunded revenues around $20,000 which equates to PBI owing Matthews Ballroom about $2,000. Refund receipts show PBI refunded or gave credit against other fees due in this amount.

Myth: PBI tried to raise call center fees 600%

Reality: Matthews Ballroom claimed that PBI increased call center fees 600%. The math for the proposed increase was actually 37.5% for franchises who were advertising as agreed and 175% for franchises who were not. The call center collected revenues based on call volume bookings. Franchises not advertising as agreed, such as Concord and Asheville, were not contributing as promised due to lower than expected call volumes, which caused a deficit in the call center budget. PBI proposed changing the collection method to a $275/week flat fee vs the commission based method to ensure the call center was funded as needed.

Typical call center fees for franchises following the directions:

$50 flat fee + ($25 per booking x 6 bookings) = $200 per week

$275 from $200 is a 37.5% increase

Typical call center fees for franchises ignoring the directions:

$50 flat fee + ($25 per booking x 2 bookings) = $100 per week

$275 from $100 is a 175% increase

Myth: PB only cares about money (recently using the term “the almighty dollar”)

Reality: Twenty years in the dance business tells us that when studio owners use this term, it is diversionary. It is another manipulation tactic to draw attention away from their actions. When a studio owner claims that they don‘t care about money because they are taking the higher road and only care about art, it typically means:

• they are convincing their employees to work for pennies, while they make bank;
• they charge customers different rates based on their perception of who can afford what;
• their finances and spending habits are a mess.

This entire statement demonstrates what happens when money is grossly mismanaged. Being a good steward of your responsibilities is never a bad trait.