MEMORANDUM DECISION
                                                                        FILED
Pursuant to Ind. Appellate Rule 65(D),
                                                                    Jun 21 2016, 8:42 am
this Memorandum Decision shall not be
regarded as precedent or cited before any                               CLERK
                                                                    Indiana Supreme Court
court except for the purpose of establishing                           Court of Appeals
                                                                         and Tax Court

the defense of res judicata, collateral
estoppel, or the law of the case.


ATTORNEYS FOR APPELLANTS                                 ATTORNEY FOR APPELLEE
Kathrine D. Jack                                         STRATUS FRANCHISING, LLC
Paul B. Overhauser                                       John F. McCauley
Overhauser Law Offices, LLC                              Bingham Greenebaum Doll LLP
Greenfield, Indiana                                      Indianapolis, Indiana


                                           IN THE
    COURT OF APPEALS OF INDIANA

Nidia Martinez, et al.,                                  June 21, 2016
on Behalf of Herself and Others                          Court of Appeals Case No.
Similarly Situated                                       49A02-1509-PL-1317
Appellants-Plaintiffs,                                   Appeal from the Marion County
                                                         Superior Court, Civil Division 2
        v.                                               The Honorable Timothy W.
                                                         Oakes, Judge
Stratus Franchising, LLC, et al.,                        Trial Court Cause No.
Appellees-Defendants                                     49D02-1206-PL-23299




Bailey, Judge.




Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016        Page 1 of 23
                                          Case Summary
[1]   Between 2009 and 2012, plaintiffs Nidia Martinez, Maria Manriquez, Elsa de la

      Cruz, Eni Cruz Rodriguez, Victor Garcia, Laura Andolon, Ronny Funes,

      Theresa Escobedo, Lorenzo Rodriguez, Faustina Negrete, Yolanda Alvarez,

      and Jose Leon performed commercial cleaning services as “franchisees” of

      Shamrock Building Services, Inc. d/b/a Stratus Building Solutions of

      Indianapolis (“Shamrock”), an Indiana commercial cleaning company

      operating as a regional “master franchise” of Missouri-based Stratus

      Franchising, L.L.C. (“Stratus”). In June 2012, the plaintiffs brought this class

      action on behalf of themselves and others similarly situated (“the Class”),

      alleging, among various claims against several parties, that Stratus aided and

      abetted franchise fraud and committed civil deception. Following a three-day

      bench trial, the trial court entered judgment in favor of Stratus. The Class now

      appeals. We affirm.



                                                     Issue
[2]   The Class presents four issues for our review, which we consolidate and restate

      as: whether the trial court’s findings of fact and conclusion that Stratus did not

      aid and abet franchise fraud were clearly erroneous.



                            Facts and Procedural History
[3]   Stratus is a Missouri company that delivers commercial cleaning and janitorial

      services through a multi-tiered franchise model. Stratus sells “master
      Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 2 of 23
      franchises” to individuals and businesses (“master franchisors”) that receive

      exclusive rights to operate a Stratus franchise in a specific territory. Master

      franchisors then contract directly with customers in their region in need of

      commercial cleaning services. To deliver these services, master franchisors sell

      “unit franchises” to individuals (“franchisees”) who clean the customers’ sites.


[4]   Under the Stratus system, the master franchisor offers unit franchises for sale at

      sixteen different price points. Depending on the initial franchise fee paid, the

      master franchisor agrees to provide the franchisee with customer accounts

      generating a certain level of revenue. The following table, a partial

      reproduction of a chart used during franchise sales presentations (“Exhibit 104”

      or “the franchise chart”), illustrates three “basic” franchise plans offered:


         Plan       Total Income          Down            Financed @             Total       Full Cash
          #                              Payment           15 Percent          Investment    Payment
       SBS-6        $6,000/Year           $1,000            $2,000               $3,000       $2,700
                   ($500/Month)                        ($69.33/Month)
       SBS-9        $9,000/Year           $3,200            $2,000               $5,200       $4,160
                   ($750/Month)                        ($69.33/Month)
        SBS-       $12,000/Year           $4,000            $2,000               $6,000       $4,800
         12       ($1,000/Month)                       ($69.33/Month)

      (Exhibit 104.) Thus, under the “SBS-6” plan, the master franchisor agrees to

      provide the franchisee with customer accounts generating $6,000 per year (or

      $500 per month) in “total income” for a “total investment” of $3000 (or $2700

      if paid in cash). As the table shows, a franchisee could finance the purchase by

      making a partial cash down payment ($1000) and financing the balance ($2000)

      at a 15% interest rate (over 36 months). Stratus advertises its system as

      providing franchisees with the opportunity to “own and operate your own

      Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016    Page 3 of 23
      successful business” with “guaranteed customers” and “guaranteed financing”

      for “as low as $1000 down.” (Exhibit 65, p. 7.)


[5]   In 2008, Kevin Spellacy (“Spellacy”), owner and chief executive officer of

      Shamrock, purchased a master franchise from Stratus for the Indiana region.

      Stratus provided Shamrock with a template franchise registration document1

      and $500 to pay the Indiana franchise registration fee. Spellacy filled out the

      registration at Stratus’s corporate offices in Missouri, then submitted the

      registration to the Indiana Secretary of State. The registration included a

      Franchise Disclosure Document (“FDD”), an eighty-one page document

      prepared by Stratus disclosing the details of the Stratus system. The FDD

      contained a template unit franchise sales contract, the Unit Franchise

      Agreement (“UFA”), as Exhibit A.


[6]   Shamrock soon began acquiring customer accounts in central Indiana and

      recruiting franchisees to clean the sites.2 To help sell unit franchises, Stratus

      provided Shamrock with sales and marketing tools. A Stratus franchise sales

      manual included sales tips, advertisement templates touting “guaranteed

      customers” (Exhibit 65, p. 7-9), and a complete PowerPoint sales presentation




      1
       Generally, a person may not offer or sell a franchise in Indiana unless the franchise is registered with the
      Indiana securities commissioner. See I.C. §§ 23-2-2.5-9 & -10.5.
      2
        Spellacy described the start-up as: “[Y]ou kind of work both ends against the middle. You’re trying to find
      franchises at the same time you’re finding accounts, and you’re always doing both with equal vigor.” (Tr.
      256.)

      Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016                Page 4 of 23
      with accompanying script. Stratus also provided Shamrock with franchisee

      referrals via the corporate website.


[7]   In Indiana, Shamrock targeted its advertisements to Hispanic residents by

      taking out ads in La Voz de Indiana, a bilingual (Spanish-English) newspaper,

      and on Radio Latina, an Indianapolis-based Spanish-language radio station.3

      These advertisements also promoted the Stratus system as providing “clientes

      garantizados” or “guaranteed customers.” (Exhibit 56; Tr. 125.) Shamrock

      hired bilingual employees to give sales presentations in Spanish at Shamrock’s

      corporate offices. Eight-five percent of Shamrock’s franchisees spoke primarily

      Spanish or had limited proficiency with English.


[8]   During the sales presentations, Shamrock employees used the Stratus sales

      presentation and the franchise chart. When discussing the “Total Income”

      column, the manual instructed users to describe the franchise plans as providing

      “guaranteed gross revenue.” (Exhibit 65, p. 53.) The manual also directed

      master franchisors to inform prospective franchises about additional fees that

      would be assessed on monthly gross revenue. These fees included mandatory

      5% royalty and 10% administration fees, and an optional (but customary) 5%

      insurance fee.4 Franchisees also were required to purchase an initial equipment




      3
        In the “Ethnic Groups” chapter of the sales manual, Stratus urged master franchisors to target franchise
      sales to “the ethnic communities” using “‘guerilla’ marketing efforts.” (Exhibit 65, p. 11-12.)
      4
        Although franchisees had the option of purchasing their own insurance, “of the 103 owner-operators that
      [Shamrock] had . . . there [were] no more than two, maybe three of them, that had their own insurance.”
      (Tr. 328.)

      Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016              Page 5 of 23
       and supply package from the master franchisor. If a franchisee wanted to

       increase his gross monthly revenue beyond his initial plan level, the manual

       explained that Shamrock would sell him additional customer accounts for an

       “account acquisition fee” assessed on the additional gross monthly billing.5

       (Exhibit 65, p. 49.) At Stratus’s instruction, Shamrock provided prospective

       franchisees with an FDD and UFA at the close of the sales presentation.


[9]    Shamrock billed customers directly and paid franchisees monthly. After a

       franchisee accepted and began servicing accounts, Shamrock would calculate

       the franchisee’s total gross monthly revenue from the accounts, deduct all

       applicable monthly fees and installment payments owed to Shamrock, and issue

       the franchisee a statement and payment for the balance within thirty days.

       Shamrock advertised the centralized billing and collection service as its “cash

       flow protection” program. (Exhibit 65, p. 46.)


[10]   On April 16, 2012, Spellacy sent a letter to Stratus executives stating:

               I am well aware of the grievances that have been filed against
               you. Without getting into too much detail I believe that they
               have merit. I can potentially overlook some of the sales practices
               that were employed in order to sell me a Master Franchise.
               What I can’t overlook is the fundamental flaw in the system that
               overpays corporate for their contribution while underpaying the



       5
         Franchisees were not prevented from soliciting their own business. However, according to the FDD,
       Shamrock reserved the right to charge account acquisition fees if involved in the bidding and negotiation
       process, and any gross revenue generated by a franchisee was to be included for the purpose of calculating
       monthly royalty, administration, insurance, and other fees. Although several of the named plaintiffs signed
       account acquisition agreements and paid account acquisition fees, the record is silent as to whether any
       franchisees solicited their own business.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016            Page 6 of 23
                Masters and ultimately the Unit Franchises. A system that relies
                on customer and unit franchise turnover in order to generate
                Franchise sales and account acceptance fees to keep the business
                open is inherently flawed. It is unsustainable. It’s bad for
                customers and it’s bad for the owner/operators. I did not get
                into this business to take advantage of other people in order to
                survive. We are fortunate that we have not been subject to this
                situation.


       (Exhibit 22.)


[11]   Shortly after, in June 2012, the Class filed a complaint against Stratus,

       Shamrock, Spellacy, Shamrock operations director Jerry Wenger (“Wenger”),

       and Shamrock employee Pamella Martins.6 In the complaint, the Class

       members alleged that they failed to receive customer accounts generating the

       total income Shamrock had guaranteed in its advertisements and sales

       presentations, instead often realizing net income far below the hourly minimum

       wage.7 The Class also alleged that Shamrock engaged in a practice called

       “churning,” in which a franchisee’s customer accounts are reassigned without

       cause to new or existing franchisees, thus generating more initial franchise and

       account acquisition fees, and enabling the master franchisor to cover its

       obligations to franchisees without acquiring new customer accounts. The



       6
        The Class consists of two sub-classes: all franchisees who performed cleaning work, and those franchisees
       who purchased a franchise after April 16, 2012.
       7
         For example, Class member Victor Garcia (“Garcia”) paid $4160 cash for an SBS-9 plan ($9000/year or
       $750/month gross revenue) in October 2010. (Exhibit 46.) He accepted and cleaned an account, with $195
       gross monthly revenue, in May 2011 and received a statement and check from Shamrock in June 2011.
       (Exhibit 47.) After deducting the royalty ($9.75), administration ($19.50), and insurance ($9.75) fees and the
       first of six installment payments for his supply starter kit ($145.83), Garcia netted $10.17.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016              Page 7 of 23
       complaint stated claims of franchise fraud and civil deception and alleged

       violations of the Indiana Deceptive Consumer Sales Statute (I.C. § 24-5-0.5),

       Indiana Wage Payment Statute (I.C. § 22-2-5), Indiana Wage Deductions

       Statute (I.C. § 22-2-6), and the Truth in Lending Act (15 U.S.C.A. § 1601 et

       seq.).


[12]   Spellacy filed for Chapter 7 bankruptcy protection in December 2012, and

       Shamrock followed suit in July 2013. The Class eventually reached a

       settlement with Spellacy and Wenger, and default judgments were entered

       against Shamrock and Martins.


[13]   A bench trial was held on June 1, 2, and 3, 2015 on the remaining claims that

       Stratus aided and abetted franchise fraud and committed civil deception. The

       Class sought a refund of over $800,000 in franchise fees paid, plus interest and

       attorney fees. On August 26, 2015, the trial court issued findings of fact and

       conclusions of law and entered judgment in favor of Stratus on both claims.


[14]   The Class now appeals, challenging only the trial court’s judgment with respect

       to aiding and abetting franchise fraud.



                                  Discussion and Decision
                                          Standard of Review
[15]   When matters are tried before the court without a jury, Indiana Trial Rule 52

       provides that a court, either sua sponte or upon a party’s written request filed

       prior to the admission of evidence, “shall find the facts specially and state its

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 8 of 23
       conclusions thereon.” T.R. 52(A). Pursuant to Trial Rule 52, the Class filed a

       written request for special findings and conclusions. The purpose of making

       special findings is to provide the parties and reviewing court with the trial

       court’s theory of the judgment. Indianapolis Ind. AAMCO Dealers Advert. Pool v.

       Anderson, 746 N.E.2d 383, 386 (Ind. Ct. App. 2001).


[16]   Our standard of review for findings and conclusions is two-tiered: we first

       determine whether the evidence supports the court’s findings, and then whether

       the findings support the judgment. Id. On appeal, we shall not set aside the

       findings unless clearly erroneous. Id. “Findings of fact are clearly erroneous

       when the record lacks any reasonable inferences from the evidence to support

       them.” Id. Similarly, a judgment will only be reversed if it is clearly erroneous.

       Id. Because the Class is appealing from a negative judgment, “we will reverse

       only if the evidence is without conflict, and all reasonable inferences to be

       drawn from the evidence lead to a conclusion other than that reached by the

       trial court.” Id. (citing Lee’s Ready Mix & Trucking, Inc. v. Creech, 660 N.E.2d

       1033, 1037 (Ind. Ct. App. 1996)). On appeal, we will not reweigh the evidence

       nor judge witness credibility. Id. Moreover, “where a trial court has made

       special findings pursuant to a party’s request under Trial Rule 52(A), the

       reviewing court may affirm the judgment on any legal theory supported by the

       findings.” Mitchell v. Mitchell, 695 N.E.2d 920, 923 (Ind. 1998).




       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 9 of 23
                                             Franchise Fraud
[17]   The Class’s complaint alleged that Stratus aided and abetted Shamrock in the

       commission of franchise fraud. Indiana Code chapter 23-2-2.5 (“the Franchise

       Act” or “the Act”) governs franchise sales in Indiana. Section 23-2-2.5-27 of

       the Act provides:

               It is unlawful for any person in connection with the offer, sale or
               purchase of any franchise, or in any filing made with the
               commissioner, directly or indirectly:


               (1) to employ any device, scheme or artifice to defraud;


               (2) to make any untrue statements of a material fact or to omit to
                   state a material fact necessary in order to make the statements
                   made, in the light of circumstances under which they are
                   made, not misleading; or


               (3) to engage in any act which operates or would operate as a
                   fraud or deceit upon any person.


[18]   To establish a violation of section 27(2) by false statement or omission, “one

       must prove the alleged violator, in connection with the offer, sale, or purchase

       of a franchise or in a filing with the [Indiana Securities] Commissioner, made a

       false statement of material fact or omitted to state a material fact necessary in

       order to make statements made not misleading.” Enservco, Inc. v. Ind. Sec. Div.,

       623 N.E.2d 416, 422 (Ind. 1993). Information is material if there is a

       substantial likelihood that a reasonable investor would have viewed the

       information as having significantly altered the total mix of available

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 10 of 23
       information. Id. at 423 (citation and quotation marks omitted). In sum, when

       the alleged fraud under Section 27(2) is based on false statements or omissions,

       the elements are “a false statement or omission, materiality, and harm caused

       by reliance on the statement or omission.” Id. at 425. As to aiding and

       abetting, the Act provides:

                Every person who materially aids or abets in an act or transaction
                constituting a violation of this chapter is also liable jointly and
                severally to the same extent as the person whom he aided and
                abetted, unless the person who aided and abetted had no
                knowledge of or reasonable grounds to believe in the existence of
                the facts by reason of which the liability is alleged to exist.


       I.C. § 23-2-2.5-29.


                                  Federal Trade Commission Regulations

[19]   Before reviewing the trial court’s findings and conclusions, we first must

       address the Class’s argument that the Act “incorporates by reference” Federal

       Trade Commission (“FTC”) regulations governing franchises, particularly those

       concerning “financial performance representations” in a franchise disclosure

       statement.8 (Appellant’s Br. 31.)




       8
         Under the FTC Franchise Rule, 16 C.F.R. § 436, a franchisor must state in a disclosure document whether
       he or she is making a financial performance representation. 16 C.F.R. § 436.5(s). Financial performance
       representation means “any representation, including any oral, written, or visual representation, to a
       prospective franchisee, including a representation in the general media, that states, expressly or by
       implication, a specific level or range of actual or potential sales, income, gross profits, or net profits. The
       term includes a chart, table, or mathematical calculation that shows possible results based on a combination
       of variables.” 16 C.F.R. § 436.1(e). A franchisor is not prohibited from making a financial performance
       representation; however, if one is made, “the franchisor must have a reasonable basis and written

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016              Page 11 of 23
[20]   Generally, no person may offer or sell any franchise in Indiana without first

       providing to the prospective franchisee a disclosure statement and a copy of all

       proposed contracts relating to the franchise sale. I.C. § 23-2-2.5-9(2). The Act

       further provides that “[t]he disclosure statement shall be in a form prescribed by

       the [Indiana securities] commissioner or in a form permitted under 16 CFR

       436, as amended.” I.C. § 23-2-2.5-13. As to the form, the commissioner has

       ordered that “[a]ll disclosure statements . . . shall comply with the Uniform

       Franchise Offering Circular (UFOC) Guidelines established by the North

       American Securities Administrators Association (NASAA) and the [FTC]

       Franchise Rule . . . found at 16 C.F.R. § 436, as amended.” Order Regarding

       Franchise Registrations by Notification, No. 01-0109 AO (June 4, 2001), available at

       https://secure.in.gov/sos/securities/2568.htm (last visited April 28, 2016).


[21]   The Class argues that because Section 23-2-2.5-13 refers to the FTC Franchise

       Rule, any deceptive act in violation of the FTC Franchise Rule necessarily

       constitutes franchise fraud under Indiana law. We disagree. In Section 23-2-

       2.5-13, our legislature vested the Indiana securities commissioner with the

       power to prescribe the form of the franchise disclosure statement, and the




       substantiation for the representation at the time the representation is made and must state the representation
       in the Item 19 disclosure.” 16 C.F.R. § 436.5(s)(3). Under federal law, it is an unfair or deceptive act or
       practice to fail to follow the instructions for preparing disclosure documents. See 16 C.F.R. § 436.6(a).
       In the FDD, Stratus and Shamrock represented under Item 19 that they “do not make any representations
       about a franchisee’s future financial performance . . . .” (FDD 30.) The Class argues that Stratus and
       Shamrock repeatedly made financial performance representations without the required disclosures whenever
       it promised franchisees a certain amount of total income or gross revenue in exchange for a franchise fee. In
       its findings and conclusions, the trial court cited the definition of financial performance representations and
       concluded that Stratus and Shamrock did not make them.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016              Page 12 of 23
       commissioner has ordered that the statement comply with the UFCO

       Guidelines. However, this requirement for the form of the franchise disclosure

       statement does not establish the FTC Franchise Rule as the standard by which a

       claim of franchise fraud is evaluated under Indiana law. See Enservco, 623

       N.E.2d at 422 (in interpreting Indiana Code section 23-2-2.5-27, observing that

       “[w]e look to persuasive federal court authority interpreting parallel securities

       provisions only to the extent we cannot discern the meaning of our statute from

       its text and apparent purpose”).


[22]   Further, to the extent the Class seeks to recover damages arising from alleged

       violations of the disclosure requirements in Section 23-2-2.5-13, our supreme

       court has long held that the Franchise Act does not provide a private right of

       action for violations of its disclosure provisions. Continental Basketball Ass’n, Inc.

       v. Ellenstein Enters., Inc. 669 N.E.2d 134, 137 (Ind. 1996). While the statute

       confers broad enforcement authority for its provisions on the Indiana securities

       commissioner and the prosecutor, the enforcement authority of private parties

       is limited to combating violations of the anti-fraud provision. Id. Thus, “[a]

       private right of action ‘arises for failure to comply with the [Act] only upon

       allegations of facts which would support an inference of fraud, deceit, or

       misrepresentation.’” Id. (quoting Moll v. South Cen. Solar Sys., Inc., 419 N.E.2d

       154, 162 (Ind. Ct. App. 1981), disapproved in part on other grounds, Enservco, 623

       N.E.2d at 425).




       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 13 of 23
[23]   Accordingly, we turn our attention back to the court’s findings and conclusions

       with respect to aiding and abetting franchise fraud under Indiana Code section

       23-2-2.5-27.


                                                Findings of Fact

[24]   On appeal, the Class first contends that nine of the trial court’s factual findings

       were unsupported by the evidence presented at trial. The Class points to the

       trial court’s citations to documents not admitted into evidence – such as Exhibit

       34 and Wenger’s deposition testimony – reasoning that the “court was

       apparently misled into including these findings” by Stratus’s proposed findings

       and conclusions. (Appellant’s Br. 37.)


[25]   Trial Rule 52(C) encourages trial courts to request that parties submit proposed

       findings of fact and conclusions of law, and it is not uncommon or per se

       improper for a trial court to enter findings that are reproductions of the

       prevailing party’s submissions. In re Marriage of Nickels, 834 N.E.2d 1091, 1095

       (Ind. Ct. App. 2005). When preparing proposed findings, a party should take

       great care to insure the findings are sufficient to form a proper factual basis for

       the ultimate conclusions of the trial court. Id. Moreover, the trial court should

       remember that when it signs one party’s findings, the court is ultimately

       responsible for their correctness. Id. at 1096. Therefore, we urge trial courts to

       scrutinize parties’ submissions for mischaracterized testimony and legal

       argument rather than the findings of fact and conclusions of law contemplated

       by the rule. Id. While we by no means encourage the wholesale adoption of a

       party’s proposed findings and conclusions, the practice of adopting a party’s
       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 14 of 23
       proposed findings is not prohibited. Id. The critical inquiry is whether such

       findings, as adopted by the court, are clearly erroneous. Id.


[26]   The Class first challenges the court’s findings concerning the income

       representations Shamrock made to prospective franchisees. As the trial court

       found:

               36. In the documents provided by Stratus to Shamrock were
               various “Franchise Plans,” which described potential options for
               Unit Franchisees. The chart categorized a plan by “Total
               Income” and various amounts which could be used to finance
               that plan. [. . . .]


       (App. 221.) This finding is supported by Exhibit 104, the franchise chart

       Shamrock used during sales presentations and that also appears in the Stratus

       franchise sales manual. The trial court also found that Stratus advised

       Shamrock to explain the “Total Income” column as “gross revenue”:


               70. . . . Additionally, the scripts provided by Stratus repeatedly
               informed Shamrock to describe the money under “Total Income”
               as “gross revenue” and to never make future financial
               guarantees. (Exhibit A ¶ 265, Record at 169-70, 273, 278, 363.)


               77. . . . Stratus advised Shamrock to not make statements
               regarding future income potential . . . .


       (App. 228-29.) The franchise sales manual (admitted as Exhibit 65, not Exhibit

       A) instructs master franchisors to explain the “Total Income” column by

       saying: “With this plan, you are guaranteed gross revenue of $3,000 a month or

       $36,000 a year.” (Exhibit 65, p. 53.) The manual also advises master
       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 15 of 23
       franchisors that they “cannot tell a Candidate how much money they will

       make. Every Franchisee will run their business differently, therefore, each will

       have a different profit margin.” (Exhibit 65, p. 63.) Thus, there is support in

       the record for the court’s findings concerning Stratus’s advice to Shamrock

       about income representations.


[27]   The Class also challenges the trial court’s findings concerning the written terms

       and conditions of documents given to franchisees. At trial, the Class attempted

       to introduce into evidence Exhibit 34, a collection of documents that apparently

       included incomplete UFAs (consisting only of four or five signed pages)9 and

       receipts for training materials. However, Stratus objected to their admission

       due to their incompleteness, and Exhibit 34 was not admitted into evidence.

       Nevertheless, the trial court made the following specific findings as to the UFAs

       and the training materials, citing Exhibits 34, A, and G:10


                  38. Shamrock utilized incomplete Unit Franchise Agreement
                  templates, provided by Stratus, to create and execute Unit
                  Franchise Agreements which [sic] each member of the individual
                  class. (Exhibit A ¶ 52, Exhibit G, 82.)


                  41. The signature page read in relevant part, “I, the undersigned,
                  do acknowledge that I received on the date written the following




       9
           Wegner testified that at Stratus’s direction, Shamrock used only four or five pages of the UFA at closing.
       10
          Exhibit A is a record of payments made by Shamrock to franchisee Jaime Alonso between August 2010
       and October 2012. Exhibit G contains select pages of unit franchisee Lorenzo Rodriguez’s deposition
       testimony.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016               Page 16 of 23
        Stratus Building Solutions training manuals.” (Record at 82;
        Exhibit 34).


        43. Section thirteen (13) of the Unit Franchise Agreement is titled
        “Business Risk” and provides, in part:


        Franchisee, as an independent business person, recognizes that there are
        economic hazards in connection with the operation of any business,
        including the type contemplated pursuant to this Agreement. Success,
        whether financial or otherwise, is not guaranteed by Franchisor . . .
        Franchisee acknowledges that it has not received from the Franchisor or
        Stratus, and is not relying upon, any representations or guarantees, express
        or implied, as to the potential volume, sales, income or profits of a
        Franchised Business.


        (emphasis applied) Exhibit G, 95-96.


        46. The income levels listed on the financial performance
        representations, state that the income levels are “measured in
        gross annual billing.”


        70. . . . the chart was contextualized in the contract; it was
        explained that the income levels were measured in gross annual
        billing. . . . .


        73. . . . it is clear from the plain language of the instrument that
        “Total Income” was understood as “Gross Revenue.”


        76. . . . the signature pages indicated that the Unit Franchisees
        received the training materials which contained further
        information concerning the fees and expenses associated with the
        business. [. . . .]




Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 17 of 23
               83. . . . the contract defined the figures of the estimated value of
               the accounts as “gross,” or the value before expenses and
               deductions are taken out of something.


       (App. 221-23, 227-29, 232.)


[28]   Shamrock’s 2008 franchise registration included an FDD and template UFA

       provided by Stratus. Both Spellacy and Wenger testified that, at Stratus’s

       instruction, Shamrock provided prospective franchisees with copies of the

       FDD, UFA, and training materials after the franchisees attended a sales

       presentation. Spellacy also testified that prospective franchisees had to sign and

       date a receipt acknowledging they received the documents.


[29]   The FDD contained a franchise chart that used the heading “Customer

       Accounts (measured in gross annual billing),” rather than “Total Income.”

       (FDD 8).11 The UFA described the master franchisor’s obligation as to provide

       franchisees customer accounts with the agreed level of “projected gross revenue

       per year . . . .” (FDD 36.) The UFA also included the “business risk”

       provision quoted in finding forty-three. (FDD 49.) One Class member, Victor

       Garcia, acknowledged signing a receipt for training materials that contained the

       language quoted in finding forty-one. Therefore, the record supports the court’s




       11
         In citations, “FDD” refers to the FDD that begins on page forty of Exhibit 8. Page numbers correspond to
       the FDD’s internal pagination.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016         Page 18 of 23
       findings concerning the written terms of the documents Stratus instructed

       Shamrock to present to prospective franchisees.


[30]   The Class also challenges the court’s finding about Shamrock’s ability to meet

       its contract obligations. The trial court found:


               47. Many, though not all, Class members have reached the
               income projection for their corresponding amount of investment.
               (Record at 316; Wenger Dep. 134:16-22, 135: 1-2). [. . . .]


       (App. 223.) As noted above, Wenger’s deposition testimony was not admitted

       into evidence. However, Spellacy testified at trial that, until Shamrock declared

       bankruptcy, Shamrock was able to provide franchisees the level of business for

       which the franchisees contracted. Spellacy testified that “we had never not

       fulfilled a Franchise Agreement until the lawsuit happened[.]” (Tr. 258.) He

       further testified that “we always had the accounts” and “[w]e made every

       agreement.” (Tr. 235.) On the other hand, all testifying Class members

       explained that they did not receive adequate customer accounts to achieve the

       “total income” they were guaranteed. To the extent the trial court credited

       Spellacy’s testimony over that of the Class, we will not reweigh the evidence or

       judge witness credibility on appeal. Anderson, 746 N.E.2d at 386.


[31]   In sum, the trial court’s findings are supported by the evidence.


                                             Conclusions Thereon

[32]   At trial, the Class argued that Stratus aided and abetted fraud by providing

       Shamrock with sales materials advertising “guaranteed customers” and

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 19 of 23
       promising certain income levels in exchange for a franchise fee. The Class

       members testified that they relied on these representations, which were material

       to their decisions to purchase the franchises, but that these statements and

       guarantees were false or misleading.


[33]   The trial court concluded, however, that Shamrock did not engage in franchise

       fraud and, absent any fraud on Shamrock’s part, entered judgment in favor of

       Stratus on the aiding and abetting claim. The court’s order reveals three

       rationales for the court’s conclusion: (1) the FDD, UFA, and sales presentation

       “contextualized” (App. 227) any misleading statements or omissions made in

       the franchise chart and advertisements; (2) there was insufficient evidence that

       Stratus and Shamrock failed to act in good faith;12 and (3) the Class was not

       justified in relying on Shamrock’s statements where the UFA contained a

       provision disclaiming reliance on any express or implied representations or

       guarantees.


[34]   As to the court’s first articulated theory – that Shamrock did not make material

       false statements concerning income guarantees – we cannot say that the court’s

       conclusion was clearly erroneous. Although the franchise chart uses the term




       12
          As the Class contends and Stratus concedes, the trial court made an error of law in finding that “Plaintiffs
       have the burden of demonstrating that the violations . . . were not made in good faith or honest dealing.”
       (App. 229.) Section 27(2) and (3) do not include a scienter requirement when an alleged violation involves
       false statements or omissions, and in this way “operate as strict liability provisions[.]” Enservco, 623 N.E.2d
       at 423. Only when an alleged fraud under Sections 27(2) and 27(3) is committed by future promise or
       representation or prediction did the legislature explicitly incorporate the mental state of “not made honestly
       or in good faith.” Id. at 423 n.11.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016              Page 20 of 23
       “Total Income,” the franchise sales manual, FDD, and UFA refer to “gross

       revenue” (Exhibit 65, p. 53), “gross annual billing” (FDD 8), or “projected

       gross revenue per year” (FDD 36), respectively. The FDD also discloses the

       Stratus fee structure, including royalty, administration, insurance, and account

       acquisition fees deducted from gross revenue.


[35]   The Class argues, however, that Shamrock made material omissions when it

       failed to tell franchisees that Shamrock believed that its obligation to franchisees

       was not to guarantee accounts, but to offer the franchisee customer accounts to

       service within a certain time frame. According to the UFA, the master

       franchisor had 120 days to offer customer accounts to franchisees (plus

       additional time if the franchisee purchased a plan offering over $36,000 in gross

       revenue). The UFA also provided that “[i]n the event that Franchisee rejects

       any customer accounts which are provided as part of this Franchise Plan or

       subsequently discontinues servicing such accounts, then Franchisor shall be

       deemed to have fulfilled its obligations hereunder.” (FDD 36-37.) The UFA

       thus disclosed the time frame under which Shamrock was required to offer

       accounts and placed the burden on franchisees to accept offered accounts.


[36]   The Class also argues that Shamrock made material omissions when it failed to

       inform Class members purchasing accounts after April 16, 2012 that Spellacy

       believed the Stratus system was “inherently flawed” and “unsustainable”

       because it “relie[d] on customer and unit franchise turnover in order to generate

       Franchise sales and account acceptance fees to keep the business open . . . .”

       (Exhibit 22.) However, the trial court apparently accepted Spellacy’s trial

       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 21 of 23
       testimony that the statements in his April 16, 2012 letter to Stratus executives

       were made in an attempt “to negotiate a lower royalty fee” (Tr. 238) and that in

       practice he did not have to engage in unscrupulous tactics to keep the business

       afloat.


[37]   Moreover, the evidence is clear that Stratus provided Shamrock with the FDD

       and UFA and instructed Shamrock to provide them to prospective franchisees.

       Thus, even if Shamrock ignored Stratus’s instruction, the court’s finding that

       these documents, prepared by Stratus, disclosed the scheme in sufficient detail

       to allow prospective franchisees the opportunity to exercise independent

       judgment before purchasing a franchise supports the court’s conclusion that

       Stratus did not aid and abet Shamrock in making material false representations

       or omissions.


[38]   As our supreme court has recently observed, “sometimes standards of review

       decide cases.” Robinson v. State, 5 N.E.3d 362, 363 (Ind. 2014). The Class

       carries a heavy burden on appeal from a negative judgment. In this case, the

       Class has not shown that the evidence is without conflict and that all reasonable

       inferences lead to a conclusion other than that reached by the trial court.




       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 22 of 23
                                               Conclusion
[39]   The trial court’s finding that Stratus did not aid and abet Shamrock in the

       commission of franchise fraud was not clearly erroneous.


[40]   Affirmed.


       Vaidik, C.J., and Crone, J., concur.




       Court of Appeals of Indiana | Memorandum Decision 49A02-1509-PL-1317 | June 21, 2016   Page 23 of 23
