Huntington Learning Center Lawsuit: Fraud, SBA, and Class Actions

Huntington Learning Center has been sued repeatedly over the past fifteen years, most often by franchisees who claim the company sold them into the system using inflated revenue projections and misleading financial disclosures. A Huntington Learning Center lawsuit has also come from a parent dissatisfied with tutoring services, and from a would-be franchisee challenging the company’s spousal guarantee requirement as credit discrimination. Huntington has generally prevailed, often on contract language or standing rather than on the merits of the underlying allegations.

What Franchisees Keep Alleging

The same complaints surface across multiple cases. Franchisees say Huntington gave them revenue figures that reflected a handful of unusually strong locations, not the system as a whole. They say marketing fees went somewhere other than promised. They say territory promises were undermined shortly after they signed. And they say the financial picture Huntington showed them looked different once royalty, call center, and advertising fees were subtracted from the numbers.

One recurring data point in the filings: roughly half of Huntington franchisees generated less than $300,000 in annual sales, a figure well below what several plaintiffs say they were led to expect.¹

Prometheus Innovation v. Huntington Learning Centers

The most fully litigated franchisee case is Prometheus Innovation Corporation v. Huntington Learning Centers, Inc., decided by the Superior Court of New Jersey, Bergen County, in November 2022. Prometheus, owned by Jelani Ellington, paid $1,620,000 in August 2019 to buy a Huntington center in Ridgewood, New Jersey, financed with an $1,800,000 loan.²

Prometheus sued for fraud, fraud by omission, negligent misrepresentation, unjust enrichment, and tortious interference. It argued that Huntington’s financial records for the Ridgewood location were misleading because they reflected the economics of a corporate-owned center, ignoring the royalty, call center, and advertising fees a franchisee would owe. It also alleged that two days after the sale closed, Huntington announced a new location in Ramsey, roughly 5.5 miles away. The franchise agreement’s exclusive zone was three miles. Prometheus claimed more than $2 million in damages tied to a 25% revenue drop.²

The court granted Huntington summary judgment on every claim. Three reasons carried the ruling. A General Release Prometheus signed in October 2019, when it bought a second center in Westwood, waived claims tied to prior agreements. The Franchise Disclosure Document and the contract’s integration clause made reliance on any representation outside the written agreement unreasonable as a matter of law. And on the Ramsey opening, the court found Huntington was “well within its rights” to open a location outside the three-mile exclusive zone. Ellington’s individual claims were dismissed for lack of standing, since the corporation, not the shareholder, held the agreements.²

The Tozzo and Lieberman Fraud Claims

Christopher Tozzo and his company Glenchrist Educational filed a federal lawsuit in June 2011 against Huntington, Vice President of Business Development Russell Miller, and co-founders Raymond and Eileen Huntington. Tozzo alleged the company made “deceptive, incomplete statements and outright misrepresentations” about the health of the franchise system, and that nearly all Arizona franchises were in severe financial distress when he bought in. He said the $2,000 he paid monthly to an advertising cooperative was used to pay off old advertising debts rather than fund new marketing. He also claimed Huntington’s proprietary software was “rigged” to inflate tutoring needs regardless of a student’s actual performance, pushing him into deceptive sales conversations with parents. He sought rescission, restitution, and damages.³

Seven years later, in October 2018, Huntington sued former franchisee Joe Lieberman in New Jersey state court for more than $20,000 in damages and fees after his franchise closed. Lieberman countersued, naming the company and top executives including Dr. Ray Huntington, Eileen C. Huntington, Anne Huntington, and CFO Jim Emmerson. He alleged Huntington used “fraud, misrepresentation and deception” to sell franchises, citing inflated gross sales numbers drawn from a single location with government contracts unavailable to ordinary franchisees, undisclosed information that half of franchisees earned under $300,000 annually, and a prior failed franchise in the same territory that Huntington did not reveal. He said he was directed to spend $5,000 a month on marketing that produced “no material benefit,” including tactics illegal in his market. He reported losses exceeding $280,000.¹

The Dhade Spousal Guarantee Class Action

A different kind of case came from Herman Dhade, a Michigan resident who filed a proposed class action in December 2017 in the U.S. District Court for the District of Delaware. Dhade alleged Huntington violated the Equal Credit Opportunity Act by requiring franchise applicants’ spouses to sign personal guarantees for franchise financing regardless of whether the spouse had any ownership stake or role in the business. Huntington’s Franchise Disclosure Document stated in boldface that the franchisee’s spouse “MUST SIGN A PERSONAL GUARANTEE.”⁴

Dhade said he asked for his wife to be exempted. Huntington’s Director of Franchise Development reportedly replied, “Yes she will need to sign absolutely.” The company later offered a “Limited Guarantee” capping the spouse’s liability at $35,000, but Dhade withdrew his application.⁵ He sought injunctive relief, attorneys’ fees, and statutory punitive damages of up to $500,000 or one percent of Huntington’s net worth.⁶

Judge Colm F. Connolly dismissed the case with prejudice in October 2019. The ECOA’s private right of action, he ruled, is limited to “applicants” who actually request credit, not “prospective applicants” discouraged from applying. Because Dhade withdrew his application and never formally submitted a financing request, he and the proposed class lacked standing.⁴

SBA Audit and Loan Failure Rates

Federal oversight added weight to the fraud allegations. In July 2011, the SBA Office of Inspector General published a report titled “Banco Popular Did Not Adequately Assess Borrower Repayment Ability When Originating Huntington Learning Center Franchise Loans.” The audit examined loans originated between March 2010 and April 2011 and was prompted by a complaint that lenders had approved SBA-guaranteed loans based on inflated gross revenue projections. The OIG found the lender used inflated revenue figures to obtain SBA guarantees, and recommended the agency seek recovery on 10 defaulted loans that had cost the SBA more than $2 million.⁷⁸

The broader portfolio numbers are unusually stark. Over fiscal years 2000 through 2020, the SBA guaranteed 177 Huntington franchise loans. Sixty-four were charged off, a 36% failure rate. The $26.96 million in guaranteed loan amounts produced $12.10 million in charge-offs, meaning 45% of the guaranteed dollars were lost.⁸

A former franchisee who bought a location in 2006 and closed by October 2008 later filed a detailed FTC complaint alleging that Huntington and a recommended loan consultant provided “fraudulently inflated” revenue projections. The complaint said the franchisee was told to expect $500,000 in first-year gross revenue. The actual average, confirmed by the SBA OIG, was $249,000 in 2006 and $262,000 in 2007. Between 2008 and 2011, the number of Huntington franchise locations fell from 342 to 250, a 27% drop, during a period when the SBA loan failure rate for Huntington franchisees stood at 49%.⁹

The One Consumer Case: Introna

Most Huntington litigation is franchisee litigation, but one notable case came from a parent. Mario Introna paid at least $25,000 in 2007 for 274 hours of instruction for his son, then sued Huntington Learning Centers and a franchisee, Huntington Learning Corporation, alleging fraud, breach of contract, and negligent infliction of mental distress. A Richmond County, New York trial court denied Huntington’s motion to dismiss the fraud and emotional distress claims. In November 2010, the Appellate Division, Second Department, affirmed the fraud cause of action but dismissed the negligent infliction of mental distress claim.¹⁰

Why Franchisees Have Struggled to Win

Two legal features have repeatedly cut against franchisee plaintiffs. The first is the integration clause. Franchisees describe verbal promises and pre-sale figures that were later contradicted by their actual results, but Huntington’s written franchise agreements say no representation outside the contract is binding. The Prometheus court held this made reliance on any oral representation unreasonable as a matter of law.²

The second is standing. Dhade lost because he never formally applied for the credit he said Huntington’s spousal-guarantee policy would have tainted. Ellington individually lost because the franchise agreements ran to his corporation, not to him. Both rulings ended the cases without reaching whether the underlying practices were unlawful.

Huntington’s most recent Franchise Disclosure Document disclosed two ongoing lawsuits, though the specific details of those pending matters were not publicly available.¹¹

1
Unhappy Franchisee. Joe Lieberman Sues Huntington Franchise
2
New Jersey Courts. Prometheus Innovation Corporation v. Huntington Learning Centers, Inc., BER-L-2025-20
3
Courthouse News Service. Learning Centers Accused of Fraud
4
U.S. District Court for the District of Delaware. Dhade v. Huntington Learning Centers, Inc., Civil Action No. 17-1834-CFC
5
ClassAction.org. ECOA Class Action Centers on Huntington Learning Centers Spousal Guaranty in Franchise Agreements
6
ClassAction.org. Dhade v. Huntington Learning Centers, Inc., Complaint
7
U.S. Small Business Administration. Report 11-16
8
U.S. Senate, Office of Senator Cortez Masto. Franchise Report From the Office of Senator Cortez Masto
9
Federal Trade Commission. FTC Public Comment, FTC-2020-0064-0003
10
vLex. Introna v. Huntington Learning Centers, Inc., 78 A.D.3d 896 (N.Y. App. Div. 2010)
11
FranChimp. Huntington Learning Centers, Inc.