Myles M. Mattenson
ATTORNEY AT LAW
5550 Topanga Canyon Blvd.
Suite 200
Woodland Hills, California 91367
Telephone (818) 313-9060
Facsimile (818) 313-9260
Email: MMM@MattensonLaw.com
Web: http://www.MattensonLaw.com
My Newly Acquired Laundromat
Is An Economic Disaster!
Who Can I Blame?

      Myles M. Mattenson engages in a general civil and trial practice including litigation and transactional services relating to the coin laundry and dry cleaning industries, franchising, business, purchase and sale of real estate, easements, landlord-tenant, partnership, corporate, insurance bad faith, personal injury, and probate legal matters.

      In providing services to the coin laundry and dry cleaning industries, Mr. Mattenson has represented equipment distributors, coin laundry and dry cleaning business owners confronted with landlord-tenant issues, lease negotiations, sale documentation including agreements, escrow instructions, and security instruments, as well as fraud or misrepresentation controversies between buyers and sellers of such businesses.

      Mr. Mattenson serves as an Arbitrator for the Los Angeles County Superior Court. He is also past chair of the Law Office Management Section of the Los Angeles County Bar Association. Mr. Mattenson received his Bachelor of Science degree (Accounting) in 1964 and his Juris Doctorate degree from Loyola University School of Law in 1967.

      Bi-monthly articles by Mr. Mattenson on legal matters of interest to the business community appear in alternate months in The Journal, a leading coin laundry industry publication of the Coin Laundry Association, and Fabricare, a leading dry cleaning industry publication of the International Fabricare Institute. During the period of May 1995 through September 2002, Mr. Mattenson contributed similar articles to New Era Magazine, a coin laundry and dry cleaning industry publication which ceased publication with the September 2002 issue.

      This website contains copies of Mr. Mattenson's New Era Magazine articles which can be retrieved through a subject or chronological index. The website also contains copies of Mr. Mattenson's Journal and Fabricare articles, which can be retrieved through a chronological index.

      In addition to Mr. Mattenson's trial practice, he has successfully prosecuted and defended appeals on behalf of his clients in various areas of the law. Some of these appellate decisions are contained within his website.


My Newly Acquired Laundromat
Is An Economic Disaster!
Who Can I Blame?

So  you bought a laundromat and you're unhappy!  You thought  you
would  be  dining nightly at the finest restaurants in town,  but
instead,  you've become more knowledgeable than  most  about  the
fast  food  outlets in your neighborhood.  Your bank  balance  is
sinking faster than the last moments of the Titanic!

When  economic expectations are not met in the acquisition  of  a
business,  one frequently wonders who is to blame.   Many  buyers
instinctively believe that it is not themselves, but rather,  the
seller, or the seller's broker, or both, who are responsible  for
the economic disaster being confronted.  As Sporting Life sang in
the musical, "Porgy and Bess", "it ain't necessarily so!"

A  buyer  should  first  ask whether the same  quality  level  of
service, advertising and cleanliness has been maintained as  that
provided by the seller.  A buyer should also consider whether any
pricing changes have caused the decrease in business.

Buyers,  however, are occasionally confronted with early  warning
signs  of  danger  during negotiations,  but,  because  of  their
emotional  eagerness to acquire the business, they elect  to  put
their  concerns  aside.  I call these early warning  signs  "pink
flags".   After  the closing, these "pink flags" frequently  turn
out to be colored "fire engine red"!  If the seller can point  to
correspondence  or  documents reflecting  the  information  about
which  there  is concern, it becomes difficult for the  buyer  to
later claim that the buyer would not have acquired the laundromat
if the buyer had known the true facts.

There  is  simply  no  substitute for a thorough  review  of  all
financial information and documents pertaining to the transaction
(premises  lease,  equipment purchase  agreement,  etc.),  by  an
accountant  and  an attorney, preferably selected  by  the  buyer
prior to undertaking any negotiations.  Such advance consultation
will  allow the buyer to make best use of the accountant and  the
attorney   during  the  course  of  negotiations.   Many   buyers
unfortunately  negotiate  and  conclude  the  acquisition  of   a
laundromat,   a  major  transaction  for  most  people,   without
professional  advice.   Later, if the buyer  is  confronted  with
economic  difficulty,  a  buyer  will  finally  consult  with  an
attorney  who  will invariably wish that he could turn  back  the
clock  and  participate in the negotiations  to  best  serve  his
client's interest.

On  the other hand, the seller, or the seller's broker, may  have
made  statements during the course of negotiations which  deserve
close  scrutiny  and may be actionable.  One must  ask,  however,
whether such statements rose to the level of actionable negligent
or  intentional misrepresentation of a material fact, or  whether
they were merely "puffing"?

As  noted in an early California case, "the law [recognizes] that
sellers of property in their zeal to consummate sales [are] prone
to  'puff their wares' and exaggerated statements as to the value
of property offered for sale [are] held to be mere expressions of
opinion rather than material representations as to existing facts
where  the parties dealt at arm's length." How does one draw  the
line    between   "expressions   of   opinion"   and    "material
representations  as  to existing facts"?  A prediction  as  to  a
future  event is frequently deemed to be an opinion,  whereas  an
actionable representation ordinarily pertains to past or existing
facts.

The   determination   of  what  type  of  statement   constitutes
actionable  misrepresentation  or concealment  is  difficult  and
subject  to  a  variety of considerations  not  covered  in  this
article.  Illustrations, however, will help to understand some of
the issues involved.

In  a  Los  Angeles  County  Superior  Court  action,  plaintiffs
exchanged  160  acres of land in Tulare County for  certain  Long
Beach  property and some money.  The defendants represented  that
"the  store in question was a first-class structure equal to  the
best building of that type in Long Beach, and that it would stand
shocks  of  earthquake . . . ."  The walls of the  building  were
subsequently cracked and shattered by an earthquake.   The  court
noted  that  "Fraud  may  not ordinarily be  predicated  on  mere
statements  of opinion regarding the value, general character  or
stability of a building, even though such assertions are  greatly
exaggerated."

The  court stated further, confirming what we all know, that  "it
is   difficult  to  distinguish  between  expressions  of  honest
convictions  respecting the stability, value or  adaptability  of
property,  and  the false representations of an  owner  regarding
those matters . . . ."

The  court further observed that "Usually a purchaser is  charged
with knowledge of such excess enthusiasm and human frailty on the
part of a vendor for which he must make due allowance, and he  is
deemed to accept as true such representations, amounting to  mere
judgment  or opinion, at his own peril."  The court continued  to
note  that "The mere statement that the building in question  was
constructed  earthquake proof is a matter of pure speculation  or
prophecy.   Every  person  of common understanding  knows  it  is
impossible   to  estimate  the  destructive  forces   of   nature
accompanying  earthquakes  . . . .  No  human  being  could  have
prophesied  the  serious  damages which resulted  to  first-class
buildings in San Francisco . . . from the earthquake of 1906."

The  court  held,  however, that since the defendants  were  also
alleged  to  have specifically and falsely represented  that  the
building  was  constructed  in  accordance  with  city  ordinance
specifications, the plaintiffs were entitled to proceed to  trial
upon their claim of fraud.

In a 1983 Alameda case, the court held that "the description of a
business as a 'success' or a 'failure' was highly subjective  and
did not amount to an actionable representation of fact."

It has been held, however, that "when a positive statement of the
value  of  property  is  made by the owner,  coupled  with  other
asserted  facts . . . like a false representation of past  income
therefrom,  it may constitute competent evidence .  .  .  of  the
alleged  fraudulent  representations upon which  a  judgment  for
damages may be supported." (Emphasis added)

If  you would like to minimize the risk of having a judge or jury
determine   whether   your  seller  engaged   in   a   fraudulent
misrepresentation or concealment or was merely puffing, retain  a
competent  accountant  and  attorney  at  the  outset   of   your
negotiations to help you.

[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson  1995-2002