But the Gunns and ICBIY still have a host of legal battles that are far from settled.
The company is suing both brothers for back royalties it says it is owed. In addition, it is suing Doug Gunn for continuing to operate a frozen yogurt store in violation of a clause in the franchise agreement that prevents him from competing with ICBIY (although there is not an ICBIY store in Boulder with which Doug can compete).
Earlier this year, Mark Gunn got fed up with ICBIY's legal tactics. He took his vacation time, he says, and came down to Dallas to picket ICBIY headquarters and some of the company's Dallas locations. Gunn became a self-appointed watchdog, trying to sound the alarm among other ICBIY franchise owners and customers that ICBIY is not the warm and fuzzy company depicted in its carefully cultivated public image.
The company responded by suing Gunn in Dallas, obtaining a temporary restraining order to keep him from standing outside the ICBIY stores with his protest signs.
By the time he came to Dallas, Mark Gunn had found out about ICBIY's amnesty program afforded to other store owners who had sold counterfeit products. Gunn mailed a letter in October 1994 to other franchise owners, pointing out that he and his brothers were the only ones who lost their franchises during the counterfeit scandal. He accused ICBIY of being singularly concerned about its bottom line while store owners were being "eaten alive" by the high cost of the company's yogurt.
It was no wonder, Gunn wrote, that counterfeit yogurt was "prevalent" in the ICBIY chain.
James Amos, the company's chief executive officer, responded with a letter of his own on November 4, 1994, which has been entered as an exhibit in the court case. This letter, addressed to "Our Franchise Family and Associates," accused the Gunns of being deadbeats and counterfeiters, and urged other store owners not to give their protests much credence.
Amos particularly took issue with Gunn's contention that counterfeiting was "prevalent in the ICBIY family."
"That statement is patently false," Amos wrote. "There are approximately 15 franchisees and 40 nontraditional sites that have used counterfeit product. This accounts for 150-200,000 gallons of product."
Amos went on to pledge that ICBIY "stands on the fundamental values of Trust, Respect, Accountability, Integrity, Commitment and Caring. We have and will, in every endeavor, attempt to do the right thing for the greater good."
The Gunns read the letter, and in February sued ICBIY for defamation. It was in the course of that lawsuit that Steve Khoury, the Gunns' Dallas attorney, happened upon the revelations about powdered milk.
While deposing the company's head of manufacturing, Khoury says, he learned of the switch from fresh milk to powdered milk in the manufacturing process.
Shortly thereafter, Khoury amended the Gunns' lawsuit, claiming fraud, conspiracy, deceptive trade practices, and breach of fiduciary trust on the part of ICBIY.
For several years, the suit now charges, ICBIY continued to claim that its yogurt was made from only the finest ingredients, and kept raising the prices it charged store owners for the product.
But, the suit claims, "since 1990 [ICBIY and Brice Foods] have continued to change their manufacturing ingredients from the freshest, highest quality standard to other cheaper, inferior components."
What's worse, the suit alleges, is that ICBIY never told store owners or customers that it was changing the frozen yogurt. "[They] have incessantly represented and communicated to franchisees, consumers...and the public generally that their yogurt was made with milk fresh from the farm, and that as a result their product was of the highest quality and was equivalent to 'food of the Gods.'"
Mark and Frank Gunn, the original plaintiffs in the suit, have now been joined in the legal action by their brother Doug, father Marvin, and Joyce Ann Bromley, a friend and former ICBIY franchise owner.
They hope to show that ICBIY defrauded them with its claims about the quality of its yogurt, and collect damages.
ICBIY officials downplay the significance of the company's increased use of powdered milk. But the controversy comes at a bad time for the company.
From its peak of 400 stores, ICBIY now has only 220 left in the United States, including the franchise at The Ballpark in Arlington. In September, the company announced that beginning next year it will stop charging franchise owners royalties on the yogurt they sell.
The company hopes the move will bolster the bottom line of marginal stores and keep ICBIY's network of outlets from growing even smaller, Herskowitz says. "The system has been losing money, the individual stores," he adds.
ICBIY officials call the lawsuit an effort by the Gunns to escape accountability for their own behavior in Colorado. They steadfastly insist that the powdered milk has not changed their product, and that no one has been misled.
Still, not long after the fraud charges were raised in public court documents, ICBIY sent special packages to its franchise owners.
The packages contained new nutritional brochures, the ones meant to be set out on counters for customers to peruse. An accompanying letter instructed store owners to "destroy all of your current stock" of old brochures.
The new brochures included "updated copy," the letter noted. Among the updates was one significant deletion. The brochures now on the counters of ICBIY stores make no mention of the company operating its own dairy.
