Doc 6 CDMO CDET Craig and Carl Bahr v Comfort Dental-Crag Bahr Declaration 04-04-2014

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

CDMO, INC. AND CDET, INC.

Plaintiffs,

v.

COMFORT DENTAL GROUP, INC.,

Defendant.

CASE NO. 1:14-cv-00871-RPM-MJW

DECLARATION OF CRAIG BAHR IN SUPPORT OF PLAINTIFFS’ MOTION

FOR PRELIMINARY INJUNCTION

DECLARATION OF CRAIG BAHR IN SUPPORT OF PLAINTIFFS’MOTION FOR PRELIMINARY INJUNCTION

I, Craig Bahr, hereby state and affirm as follows:

1. I am the President and Chief Executive Officer of Plaintiff CDMO, Inc.

(“CDMO”). I am also one of the principal shareholders of Plaintiff CDET, Inc. (“CDET”). I am

responsible for the overall performance of the Subfranchisor Agreements with Comfort Dental,

including all operations. As such, I have personal knowledge of the facts stated herein, and

submit this Declaration in support of Plaintiffs’ Motion for Preliminary Injunction against

Defendant Comfort Dental Group, Inc. (“Comfort Dental”).

2. Plaintiff CDMO is a Missouri corporation with its principal place of business in

Kansas.

3. Plaintiff CDET is a Wyoming corporation also with its principal place of business

in Kansas.

4. My brother Dr. Carl Bahr and I are licensed orthodontists.

5. Dr. Carl Bahr, through his controlled entity, B. Bros., Inc., is the principal

shareholder of FY & KMA, Inc., which in turn owns a majority of the shares in Plaintiff CDMO.

Case 1:14-cv-00871-RPM Document 6 Filed 04/04/14 USDC Colorado Page 1 of 9

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EXHIBIT 1

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6. Dr. Carl Bahr and I are the principal shareholders of Plaintiff CDET.

7. To my knowledge, Defendant Comfort Dental is a Colorado corporation with its

principal place of business in Lakewood, Colorado.

8. The relationship between us and Dr. Rick Kushner, the founder and CEO of

Comfort Dental, began in 2000 while we were dental students.

9. On December 9, 2003, Dr. Carl Bahr and I entered into our first business

arrangement with Dr. Kushner when we signed a Franchise Agreement with Comfort Smile,

which we believed to be a sister corporation of Comfort Dental. The December 9, 2003

Franchise Agreement entered into with Comfort Smile gave us the right to operate three Comfort

Smile franchises in the Denver metropolitan area.

10. In 2008, after discussions with Dr. Kushner, Dr. Carl Bahr and I, through CDMO,

entered into an initial franchisor agreement with Comfort Dental to open Comfort Dental

franchises in Missouri. This represented Comfort Dental’s first franchise in Missouri, and,

pursuant to the parties’ agreement, I moved with my family to Missouri to lead the development

of Comfort Dental franchise expansion into Missouri.

11. CDMO entered into a new Master Franchise Agreement with Comfort Dental (the

“CDMO Agreement”) in February 2011. A true and correct copy of the Master Franchise

Agreement CDMO entered into with Comfort Dental in February 2011, was filed as part of the

Complaint [Dkt.# 1] and is referenced in this Declaration as “Exhibit A.” Section 1.3 and

Exhibit I to the CDMO Agreement grants CDMO a franchise to offer Comfort Dental

subfranchises in Missouri.

12. CDET entered into a Master Franchise Agreement with Comfort Dental (the

“CDET Agreement”) in July 2011. A true and correct copy of the Master Franchise Agreement


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CDET entered into with Comfort Dental in July 2011, was filed as part of the Complaint

[Dkt.# 1] and is referenced in this Declaration as “Exhibit B.” Section 1.3 and Exhibit I to the

CDET Agreement grants CDET a franchise to offer Comfort Dental subfranchises in Kentucky

and Indiana.

13. CDMO and CDET began offering subfranchises to various subfranchisees in their

respective geographical areas per the terms of the Subfranchisor Agreements.

14. CDMO’s first subfranchisee in Missouri opened in February 2009.

15. CDET’s first subfranchisees in Kentucky and Indiana opened in May 2011.

16. CDMO has entered into five (5) subfranchise agreements in the State of Missouri.

17. CDET has entered into one (1) subfranchise agreement in the State of Kentucky

and one (1) subfranchise agreement in the State of Indiana.

18. Pursuant to the terms of the CDMO and CDET Agreements, CDMO and CDET

are required to use a Subfranchisee Agreement approved by Comfort Dental. See Exhibit A, §§

2.5, 4.2 Exhibit B, §§ 2.5, 4.2. A true and correct copy of an approved Subfranchisee

Agreement provided to CDMO and CDET for use in establishing subfranchises, was filed as part

of the Complaint [Dkt.# 1] and is referenced in this Declaration as “Exhibit C.”

19. Pursuant to the terms of the CDMO and CDET Subfranchisor Agreements,

CDMO and CDET are required to use affiliated labs that are approved by Comfort Dental. A true

and correct copy of an approved vendors, or, affiliated labs, was filed as part of the Complaint

[Dkt.# 1] and is referenced in this Declaration as “Exhibit D.”

20. Through a written operational manual, and other continual written and oral

directives and written and verbal training programs, Comfort Dental attempts to direct the

activities of CDMO, CDET and their dentists, including through the “Lean and Mean”


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instructions and testing, which all dentists must review and obey. The “Lean and Mean” system

consists of a number of publicly available lectures given by Dr. Kushner over the past 15 to 20

years about how he thinks a dental office should be run. A true and correct copy of a screenshot

of the Comfort Dental website detailing the tenets of the “Lean and Mean” program, was filed as

part of the Complaint [Dkt.# 1] and is referenced in this Declaration as “Exhibit E.”

21. Based on my experience as a dentist, I know that dental laboratories, such as the

Comfort Dental Labs, manufacture or customize various products relating to the treatment of

dental patients, including dentures, bridges, crowns and related devices. Dental laboratories play

an integral part in the provision of dental care, and are important to patients’ oral health, physical

comfort and appearance. Problems with the quality, appearance, fit and timeliness of dental

devices prepared by these laboratories adversely affects patients’ dental health and damages

dentists’ relationships with their patients.

22. In my experience as a practicing Comfort Dental dentist, and as a Subfranchisor, I

have personal knowledge of numerous problems with and complaints about the Comfort Dental

Labs. These problems and complaints include problems with the quality, appearance and

suitability of various dental devices, as well as significant delays in delivering them to and from

the Colorado-based Comfort Dental Labs. I have observed such problems personally and have

received numerous complaints from patients and fellow dentists concerning the dental devices

provided by Comfort Dental Labs. I personally have researched and am familiar with dental labs

which are superior to Comfort Dental Labs in terms of quality, convenience, timeliness and cost.

23. Comfort Dental has repeatedly emphasized that mandated lab referrals and

revenues from the Comfort Dental Labs are critical to the Comfort Dental business, and that

Comfort Dental “does not survive without the lab[s].” Dr. Kushner has made numerous public


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and intimidating threats to Comfort Dental dentists, warning that no one may refer lab work to

any lab other than the Comfort Dental Lab, and that violators risk termination of their franchises.

Dr. Kushner has a forceful and intimidating manner of publicly communicating these threats—

verbally and in writing.

24. On multiple occasions, Comfort Dental has sent written directives and warnings

to CDMO and CDET demanding exclusive referrals of dental work to Comfort Dental Labs,

including threats that franchises will be terminated for failure to exclusively use Comfort Dental

Labs.

25. An example of such threats related to the mandatory referral of lab work is an

electronic mail message sent by Dr. Kushner on July 31, 2012, to multiple Comfort Dental

dentists, stating he has become aware of a “franchise violation regarding sending unapproved lab

work out of the organization.” Dr. Kushner additionally informed the recipients that “[i]n

addition to the legal penalties for your violation, I feel an obligation to show this example to all

of our partners for their edification. Additionally, your partnership will be scrutinized going

forward for additional franchise violations.” A true and correct copy of this July 31, 2012

electronic mail message from Dr. Kushner was filed as part of the Complaint [Dkt.# 1] and is

referenced in this Declaration as “Exhibit E-1.”

26. A further example is an electronic mail message sent by Graig Bears, corporate

counsel for Comfort Dental, on August 30, 2012, in which “severe” punishment was threatened

for franchises “using an outside lab.” A true and correct copy of this August 30, 2012 electronic

mail message from Graig Bears was filed as part of the Complaint [Dkt.# 1] and is referenced in

this Declaration as “Exhibit F.”


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27. More recently, on February 21, 2014, Comfort Dental CEO Dr. Kushner sent an

electronic mail message to CDMO, CDET and affiliated dentists stating that use of the Comfort

Dental labs and marketing of the Gold Plan were required “[i]n order to avoid violating your

franchise agreement and the enforcement that would have to follow.” A true and correct copy of

this February 21, 2014 electronic mail message from Dr. Kushner was filed as part of the

Complaint [Dkt.# 1] and is referenced in this Declaration as “Exhibit G.”

28. In addition to threatening punishment for failure to use Comfort Dental labs,

Comfort Dental also penalizes or threatens to penalize CDMO, CDET and affiliated dentists that

request remakes of defective work performed by the Comfort Dental Labs. Comfort Dental fines

dentists for ordering too many remakes and refers to this penalty as a “remake fine” or “lab

penalty.” A true and correct copy of an electronic mail message sent by Dr. Kushner on

October 6, 2010, providing notice of a ten percent (10%) penalty for exceeding Comfort Dental’s

remake quota was filed as part of the Complaint [Dkt.# 1] and is referenced in this Declaration as

“Exhibit H.”

29. Comfort Dental again warned of the remake penalty in an electronic mail message

sent December 2, 2013 by Roy Martin, Comfort Dental’s Executive Vice President, stating that

“[y]ou are all flirting with FIRE . . . If you don’t take action, PENALTIES will ensue, and your

life will continue to be frustrating.” A true and correct copy of this December 2, 2013 electronic

mail message from Roy Martin was filed as part of the Complaint [Dkt.# 1] and is referenced in

this Declaration as “Exhibit I.”

30. The Gold Plan, as set forth on Comfort Dental’s website and in a form Gold

Member Agreement is described as “reduced fee dental membership plans that allow individuals

and groups to receive quality dental care at reduced prices.” A true and correct copy of a


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screenshot of Comfort Dental’s publicly available website was filed as part of the Complaint

[Dkt.# 1] and is referenced in this Declaration as “Exhibit K.”

31. Under the Gold Plan, members pay a monthly fee in exchange for free dental

examinations, the provider’s lowest fee rate, and a capitation.

32. Comfort Dental directs CDMO, CDET and Comfort Dental dentists to sell the

Gold Plan by various written and oral demands, which come in the form of direct e-mail or other

written communications, through office visits, and through demands that Gold Plan materials be

included in all advertising copy. A true and correct copy of recent advertising copy is attached

as “Exhibit K-1.”

33. Starting in November 2013, CDMO and CDET began making inquiries with

Comfort Dental about the legality of the Gold Plan. On November 13, 2013, Dr. Kushner sent

an email to our counsel replying to our counsel’s inquiry to Comfort Dental’s lawyer, Graig

Bears, about the Gold Plan. Dr. Kushner’s email, among other things, directed our counsel not

to speak with Comfort Dental’s counsel. A true and correct copy of Dr. Kushner’s email is

attached as “Exhibit L.”

34. In December 2013, I spoke with Comfort Dental’s lawyer, Brent Hadon,

regarding the Gold Plan. At that time, he advised that the Gold Plan was not registered in

Missouri.

35. In December 2013, CDMO and CDET asked Comfort Dental’s general counsel,

Graig Bears, to provide assurances that Comfort Dental’s Gold Plan could be sold and marketed

in compliance with Missouri law. A true and correct copy of an electronic mail message sent

from the Affiant to Rick Kushner, with attached correspondence, on December 13, 2013, was

filed as part of the Complaint [Dkt.# 1] and is referenced in this Declaration as “Exhibit J.”


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36. On February 21, 2014, Comfort Dental sent to CDMO, CDET and other Comfort

Dental dentists a letter reviewing the Gold Plan which had been prepared by its legal counsel,

Brent Haden (“Haden Letter”). See, Exhibit G.

37. On February 21, 2014, Dr. Kushner sent an email to CDMO, CDET and other

Comfort Dental dentists demanding that they continue selling the Gold Plan “to avoid violating

your franchise agreement.” See, Exhibit G.

38. On February 24, 2014, I responded to Dr. Kushner’s February 21, 2014 electronic

mail message and the attached Haden Letter requesting confirmation as to whether and when the

Gold Plan would be registered in any state. As of April 4, 2014, no response has been received

to my February 24, 2014 inquiry. As a result, it is my understanding and belief that the Gold

Plan remains unregistered as a discount medical plan in Missouri, Kentucky or Indiana.

39. I declare under penalty of perjury, pursuant to 28 U.S.C. § 1746, that the

foregoing statements are true and correct to my personal knowledge.

Dated this 4th day of April, 2014.

s/Craig A. BahrCraig A. Bahr


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CERTIFICATE OF SERVICE

I hereby certify that on April 4, 2014 I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system and served such filing to the following email addresses:

William F. Jones, Esq,MOYE WHITE LLP16 Market Square 6th Floor1400 16th StreetDenver CO 80202-1486EMAIL: [email protected]

Attorney for Defendant

s/ Edna Slagle


mailto:[email protected]

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Doc 6 CDMO CDET Craig and Carl Bahr v Comfort Dental-Crag Bahr Declaration 04-04-2014