A group of unhappy Badcock Furniture dealers has filed suit in Pasco County against the furniture chain, alleging the Mulberry-based company engaged in fraudulent and deceptive business practices that cut into the dealers' sales commissions with a variety of excessive and illegal fees. But first the dealers have to overcome a significant hurdle: A contract provision that requires most of them to resolve disputes with Badcock through mediation and arbitration.
New contracts sent to dealers in 1995 had them choose, in the event of a future dispute, mediation/arbitration or litigation before a judge in Polk County where Badcock is based. Most chose the former. But P. Hutchinson Brock, a Dade City lawyer representing the 14 dealers, has asked a judge to toss the arbitration clause, on grounds the dealers were coerced into agreeing to it.
According to Brock, the new contracts were preceded by a letter from the company that described them as containing no new provisions, and dealers believed that if they objected to the new contract, they would be forced out of the 350-store furniture chain under unfavorable terms, including a "somewhat subjective" determination of a dealer's claim to his commission on accounts receivable. "They're really at the whim of Badcock," says Brock.
Earlier this year, a Panama City dealer who had served as president of an association formed to address dealers' complaints was forced out after 37 years with the chain. Badcock cited a contract provision that allowed either side to terminate the agreement with 30 days' notice. The dealer, Eddie Hart, who is also one of the plaintiffs, cannot conceal his sense of betrayal over his termination. Hart joined the company when it was run by its founder, and he opened 13 stores. He says he never thought to question the company's policies until recently. "I trusted the Badcocks with my life," he says. According to Hart, membership in the dealers' association dropped from 110 to 19 "overnight" following his termination.
Badcock President Donald Marks defends the termination, however, saying that although Hart's dealership was profitable for the company, the relationship could not survive Hart's fight with the company. "It had to do with actively soliciting other dealers to become opponents of the organization," Marks says. "I don't think you can work that way. Like a marriage, there comes a time when you have to ask, 'Do we get along?'" Marks also disputes characterizations that dealers were pressured to sign the new contracts. "At least my investigation shows that under no circumstances did anyone call and twist anybody's arm," he says. But Hart says dealers were told explicitly: "If you wanted to be a Badcock dealer, you had to sign the contract."
The dealers, from Florida, Georgia, South Carolina, Mississippi and Alabama, operate under a contract that pays them a 25% commission on revenue they collect from selling furniture and electronics supplied by the parent corporation. Dealers supply their own location and employees, but they do not own their inventory. Their lawsuit alleges that W.S. Badcock Corp. routinely deducted excessive charges for things like insurance, advertising and factory labor costs from their commissions. They claim the new contract was designed to prevent them from effectively challenging such policies in court. "We believe there was intent to coerce them into giving up their rights," Brock says.
Marks, a former executive with McDonald's and PepsiCo brought in last September as the family-owned Badcock's first outside president, says that's not true, but acknowledges that "We have not been as good as we should have been at communicating" what some of the charges were about. He believes the dispute could and should be resolved outside of the courtroom. "I'd rather just sit down across the table," he says.
He could get his wish. Jeffrey Grebe, who teaches contract law at the Stetson University College of Law in St. Petersburg, says the courts in general are less likely to accept the coercion argument when the parties to a contract are both businesses, presumed to have had access to legal advice and the opportunity to negotiate terms. "Duress is a very difficult (argument) to prove in a business context," he says.
New contracts sent to dealers in 1995 had them choose, in the event of a future dispute, mediation/arbitration or litigation before a judge in Polk County where Badcock is based. Most chose the former. But P. Hutchinson Brock, a Dade City lawyer representing the 14 dealers, has asked a judge to toss the arbitration clause, on grounds the dealers were coerced into agreeing to it.
According to Brock, the new contracts were preceded by a letter from the company that described them as containing no new provisions, and dealers believed that if they objected to the new contract, they would be forced out of the 350-store furniture chain under unfavorable terms, including a "somewhat subjective" determination of a dealer's claim to his commission on accounts receivable. "They're really at the whim of Badcock," says Brock.
Earlier this year, a Panama City dealer who had served as president of an association formed to address dealers' complaints was forced out after 37 years with the chain. Badcock cited a contract provision that allowed either side to terminate the agreement with 30 days' notice. The dealer, Eddie Hart, who is also one of the plaintiffs, cannot conceal his sense of betrayal over his termination. Hart joined the company when it was run by its founder, and he opened 13 stores. He says he never thought to question the company's policies until recently. "I trusted the Badcocks with my life," he says. According to Hart, membership in the dealers' association dropped from 110 to 19 "overnight" following his termination.
Badcock President Donald Marks defends the termination, however, saying that although Hart's dealership was profitable for the company, the relationship could not survive Hart's fight with the company. "It had to do with actively soliciting other dealers to become opponents of the organization," Marks says. "I don't think you can work that way. Like a marriage, there comes a time when you have to ask, 'Do we get along?'" Marks also disputes characterizations that dealers were pressured to sign the new contracts. "At least my investigation shows that under no circumstances did anyone call and twist anybody's arm," he says. But Hart says dealers were told explicitly: "If you wanted to be a Badcock dealer, you had to sign the contract."
The dealers, from Florida, Georgia, South Carolina, Mississippi and Alabama, operate under a contract that pays them a 25% commission on revenue they collect from selling furniture and electronics supplied by the parent corporation. Dealers supply their own location and employees, but they do not own their inventory. Their lawsuit alleges that W.S. Badcock Corp. routinely deducted excessive charges for things like insurance, advertising and factory labor costs from their commissions. They claim the new contract was designed to prevent them from effectively challenging such policies in court. "We believe there was intent to coerce them into giving up their rights," Brock says.
Marks, a former executive with McDonald's and PepsiCo brought in last September as the family-owned Badcock's first outside president, says that's not true, but acknowledges that "We have not been as good as we should have been at communicating" what some of the charges were about. He believes the dispute could and should be resolved outside of the courtroom. "I'd rather just sit down across the table," he says.
He could get his wish. Jeffrey Grebe, who teaches contract law at the Stetson University College of Law in St. Petersburg, says the courts in general are less likely to accept the coercion argument when the parties to a contract are both businesses, presumed to have had access to legal advice and the opportunity to negotiate terms. "Duress is a very difficult (argument) to prove in a business context," he says.