Idaho Supreme Court Affirms Two Judgments Against Safeguard Totaling Over $12.6 Million In Favor Of Distributors
By Mulcahy LLP on February 21, 2019
BOISE, IDAHO – On February 19 and 21, 2019, the Idaho Supreme Court unanimously affirmed two judgments totaling over $12.6 million including interest in favor of two Idaho distributors and against Safeguard Business Systems, Inc.
Roger Thurston and Dawn Teply (via their corporations) originally filed suit in August 2014 against Safeguard for breach of the account protection rights in their distributor agreements.
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 all sales to that customer (“Protected Customer”) for the 36-month period following that sale. And, the 36-month account protection rights would restart each time Thurston and Teply made a new sale to that customer.
Instead of working with them to develop their Protected Customers, Safeguard acquired two independent distributors and allowed them to solicit and make sales to Thurston’s and Teply’s Protected Customers. Safeguard actively concealed its involvement and misrepresented which customers were affected. The new distributors were even given more favorable pricing on Safeguard products than the prices offered to Thurston and Teply.
Teply’s suit went to an arbitration. A panel of three arbitrators 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.” The arbitrators awarded Teply $4,362,041.95 including attorneys’ fees and costs.
Thurston’s suit went to a jury trial. The Idaho jury found Safeguard liable on all claims. 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 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 hired Weil, Gotshal & Manges LLP to appeal both cases to the Supreme Court of Idaho, raising a plethora of reasons for reversal. The Supreme Court rejected all of Safeguard’s arguments and affirmed Teply’s and Thurston’s judgments. And, it ordered Safeguard to pay Thurston’s attorneys’ fees and costs on appeal.
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.