Idaho Supreme Court Affirms Over $7.6 Million Judgment Against Safeguard In Favor Of Distributor
By Mulcahy LLP on February 21, 2019
BOISE, IDAHO – On February 19, 2019, the Idaho Supreme Court unanimously affirmed a judgment of now over $7.6 million including interest that Mulcahy LLP obtained in favor of Idaho distributor Roger Thurston and against Safeguard Business Systems, Inc. The Supreme Court also ordered Safeguard to pay Thurston’s attorneys’ fees and costs on appeal.
Thurston (via his corporation) originally filed suit in August 2014 against Safeguard in Boise, Idaho for breach of the account protection rights in his distributor agreement and the ensuing actions by Safeguard to cover up the violations.
Safeguard contractually promised that, if a distributor solicited an order from a customer for any Safeguard product, then they were entitled to the exclusive rights to – and would receive – all commissions generated from any and all sales to that customer (“Protected Customers”) for the 36-month period following that sale. And, that the 36-month account protection rights would restart each time Thurston made a new sale to that customer. As the principal source of business value, the account protection rights are the keystone of Safeguard distributor agreements.
Thurston devoted his career to developing the Safeguard brand in Idaho by, among other things, growing his list of Protected Customers. Instead of working with him to develop his Protected Customers, Safeguard and its parent company Deluxe Corp. acquired two large independent distributors. After the acquisitions, Safeguard allowed and assisted the new distributors to solicit and make sales to Thurston’s Protected Customers. The new distributors were even given more favorable pricing on Safeguard products than the prices offered to Thurston.
Thurston reached out to Safeguard after hearing about some of these sales. Instead of guarding his account protection rights and rotating the commissions to Thurston, Safeguard actively concealed its involvement and misrepresented what customers were affected. And, Safeguard continued to brazenly violate the account protection rights even through trial.
The litigation was arduous and the discovery process was unnaturally contentious. Mulcahy LLP was forced to take Safeguard to court to obtain relevant documents and to have Safeguard remove improper redactions. The Firm was even forced to obtain a court order allowing it to inspect Safeguard’s computer records and enlist a computer forensics expert to conduct the inspection.
After a three and a half week trial, the Idaho jury found Safeguard liable on all claims. Following the parties’ post-trial motions, the district court entered post-trial motions, the district court entered judgment in favor of Thurston and against Safeguard in the amount of $6,792,649, including an award for attorneys’ fees and costs. The award also included $4,408,071 in punitive damages after the jury found that Safeguard had engaged in oppressive, fraudulent, malicious and outrageous conduct directed at Thurston.
Safeguard appealed the case to the Supreme Court of Idaho, raising several grounds for reversal of the decisions by the jury and district court. It brought on Weil, Gotshal & Manges LLP to handle its appeal. The Supreme Court rejected all of Safeguard’s arguments and affirmed the jury’s verdict and district court decision.
James M. Mulcahy of Mulcahy LLP acted as lead trial attorney and argued the appeal.
Mulcahy LLP is a boutique litigation firm that provides legal services to franchisors, manufacturers and other companies in the areas of antitrust, trademark, copyright, trade secret, unfair competition, franchise, and distribution laws.