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EmbroidMe Franchise Files Lawsuit Against California
Volume 632
August 4, 2009

Seeking class-action status, Nancy Baird, the owner of an EmbroidMe (asi/384000) shop in Paso Robles, CA, has brought a lawsuit against state officials after she was recently paid with an IOU. Baird said she was unable to redeem the IOU, worth $28,000, because she had not been a customer at her bank long enough. "I sat in my car and I cried," Baird told the Associated Press. "This is the money I need to keep me going for the next couple of months."

Baird received the IOU on July 23 after producing 1,200 embroidered polo shirts and uniforms for a youth camp run by the California National Guard. Her lawsuit alleges that IOUs are unconstitutional and violate contract laws. The Templeton, CA, resident is suing state Controller John Chiang and Treasurer Bill Lockyer in U.S. District Court in San Francisco.

Tom Dresslar, a spokesman for Lockyer, said the treasurer understands why the public is frustrated. "He feels bad about the hardship they've endured and that's one of the reasons he tried so hard to convince the banks to continue accepting IOUs from their customers," Dresslar said.

Plagued with a $26 billion budget deficit, California began issuing thousands of IOUs to vendors in July. While Governor Arnold Schwarzenegger recently signed a revised budget, officials continue to issue IOUs while they determine the state's cash flow. To date, California has given out more than 200,000 IOUs worth more than $1 billion.

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