Subway founder, company must pay franchise owners $300,000

HARTFORD, Conn. -- The founder of the Subway sandwich chain and its parent company must pay two franchise owners $150,000 each because Connecticut doesn't have a well-defined law against excessive punitive damage awards, the state Supreme Court ruled.

A three-person arbitration panel awarded the money four years ago to franchise owners Dennis Rottinghaus of Kansas and Bob Dowell of Iowa.

We're delighted," said Raymond Garcia, the attorney for Rottinghaus and Dowell. "It's been a long time coming."

In 1997, the two ran for the board of directors of the Subway Franchise Advertising Fund, which distributes advertising money to Subway stores across the country.

All franchise owners pay a percentage of their sales to the trust, and associates make voluntary contributions.

The lawsuit against Fred DeLuca, founder of Milford-based Subway, claims he was worried about Rottinghaus and Dowell running for the board. The suit also names Doctor's Associates, Subway's parent company.

In a videotape shown at a meeting of franchise owners, DeLuca advised incumbent board members to change the election laws and threatened to end voluntary contributions to the fund if the changes were not made, according to the lawsuit.

The board canceled the election and instituted new rules that prevented Rottinghaus and Dowell from running.

The arbitration panel determined that DeLuca had improperly interfered with the election and violated the Connecticut Unfair Trade Practices Act.

The panel awarded no compensatory damages, but did grant the plaintiffs $150,000 each in punitive damages. DeLuca appealed after a court affirmed the award. Tuesday's unanimous ruling by the state Supreme Court upheld the lower court's affirmation of the award.

DeLuca's attorney, Aaron Bayer, said he had not spoken with his client about the ruling and could not comment Tuesday.

Subway, a privately-held company that operates more than 23,000 restaurants in 82 countries, had sales in 2003 of $6.8 billion.

Source: Newsday

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Subway founder, company must pay franchise owners $300,000

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