Multi-Million Dollar Punitive Damages Judgement

Multi-Million Dollar Punitive Damages Judgement Awarded To Mulcahy LLP Client

By Mulcahy LLP on January 17, 2017

BOISE, IDAHO -- The folks at Safeguard Business Systems won’t easily forget Mulcahy LLP.

On Friday, an Idaho court entered judgment of more than $6 million – including punitive damages of $4.4 million – against Safeguard and in favor of Mulcahy’s client, a Safeguard distributor. This victory follows Mulcahy’s August 2016 arbitration win over Safeguard in the amount of $4.3 million – totaling more than $10.3 million with additional attorneys’ fees and costs still to come.

The underlying cases involved Safeguard’s repeated violations of the distributors’ account protection rights under their distributor agreements and the subsequent, outrageous conduct by Safeguard in an attempt to cover up those violations.

Account protection rights are the cornerstone of the Safeguard distributors’ contractual rights. If a distributor solicits an order from a customer for any Safeguard product, then that distributor is entitled to all commissions generated from any and all sales to that customer.

In these cases, Safeguard, represented by the Idaho firm of Hawley Troxell, sought to push Mulcahy’s clients, Roger Thurston and Dawn Teply (via their corporations), out of the Safeguard distributor network by purchasing two large non-Safeguard distributorships and using these newly acquired distributorships to sell to Thurston and Teply’s protected customers.

After learning of this intra-brand competition, Thurston and Teply contacted Safeguard in an attempt to stop the sales to their protected customers. When confronted, Safeguard concealed the sales and lied about its knowledge of the violations. Safeguard’s obstructive conduct continued through trial, eventually forcing Mulcahy to obtain multiple court orders – and with the assistance of accountants and a forensic IT expert – to extract the sales information that Safeguard was withholding. It was because of this behavior that the court allowed Mulcahy to pursue punitive damages at trial.

The $6 million jury verdict followed a four week trial. The 12 jurors unanimously found that Safeguard’s conduct was so egregious that punitive damages of more than $4 million were merited.

The fees and costs incurred by the parties are substantial. Mulcahy LLP already has been awarded fees and costs in the amount of $2.8 million for the arbitration, and will be filing a petition to recover additional fees and costs in connection with the court’s new $6 million judgment.

Safeguard’s legal bills – whatever they are – are only going to get bigger. Just prior to the start of trial, Safeguard brought on Weil, Gotshal & Manges LLP to monitor the trial and handle the post-trial motions and possible appeal. Mulcahy will seek an additional award of fees and costs for any appeal.

Mulcahy’s trial team of James Mulcahy and Douglas Luther were assisted by local counsel Clayton Gill of Moffat Thomas. Partner Kevin Adams additionally played a key role in securing the victory.

For more information, contact James Mulcahy at 949-252-9377 or 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.

Disclaimer: While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal advice as individual situations will differ and should be discussed with an experienced franchise lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.




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