Idaho Supreme Court Affirms Second Multi-Million Dollar Judgment Against Safeguard In Favor Of Distributor
By Mulcahy LLP on February 21, 2019
BOISE, IDAHO – On February 21, 2019, the Idaho Supreme Court unanimously affirmed a judgment of $5 million including interest that Mulcahy LLP obtained in favor of Idaho distributor Dawn Teply and against Safeguard Business Systems, Inc. This opinion came down only two days after the Idaho Supreme Court affirmed an over $7.6 million judgment in favor of distributor Roger Thurston against Safeguard.
Teply, through her corporation T3 Enterprises, Inc., filed her lawsuit in August 2014 against Safeguard in Boise, Idaho. Her claims were predicated upon Safeguard’s breach of the account protection rights in her distributor agreement and the actions taken by Safeguard to cover up the violations.
In her distributor agreement Safeguard promised Teply that, if she solicited an order from a customer for any Safeguard product, then she was entitled to the exclusive rights to – and would receive – all commissions generated from any and all sales to that customer (“Protected Customer”). The account protection lasted for the 36-month period following that sale and restarted each time she made a new sale to that customer.
Teply spent years building relationships as a Safeguard distributor by growing and servicing her Protected Customers. Her incentive to invest her time into building these relationships was that Safeguard had contractually granted her the exclusive right to all commissions generated from sales to her Protected Customers. Instead of helping her maintain these relationships, Safeguard and its parent company Deluxe Corp. acquired two large independent distributors that were Teply’s competition. Safeguard then allowed and assisted the new distributors to solicit and make sales to her Protected Customers. What is more, the new distributors were given more favorable pricing on Safeguard products than the prices offered to Teply.
Teply and Thurston confronted Safeguard after hearing about the competing sales. Safeguard chose to actively conceal its involvement and misrepresented the list of affected customers. Adding insult to injury, Safeguard continued the violation of Teply’s and Thurston’s account protection rights.
After a two-week final arbitration hearing, a three-arbitrator panel found in favor of Teply. They found that Safeguard took advantage of Teply to a “grossly unfair degree” by refusing to enforce her account protection rights and “actively participating in the violation of those rights.” Teply was awarded $4,362,041.95 including attorneys’ fees and costs.
Thurston’s lawsuit went before an Idaho jury. After a three and a half week trial, the jury found Safeguard liable on all claims, and awarded Thurston $4,408,071 in punitive damages after it found that Safeguard had engaged in oppressive, fraudulent, malicious and outrageous conduct directed at Thurston. Following the parties’ 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.
Safeguard brought on Weil, Gotshal & Manges LLP to appeal Teply’s and Thurston’s cases to the Supreme Court of Idaho, raising multiple grounds for reversal of the decisions by the jury and district court. The Supreme Court rejected all of Safeguard’s arguments and affirmed Teply’s and Thurston’s judgments totaling more than $12.6 million against Safeguard.
James M. Mulcahy of Mulcahy LLP was the lead trial lawyer for Teply and Thurston, and argued the appeals to the Idaho Supreme Court.
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.