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Dealer group launches $1m court battle
Troubled
is.group has launched a legal action against “delinquent dealers” it
claims owes a seven-figure sum. The move follows months of wrangling
which began with the launch of the independent network’s contentious
RDC programme.The ongoing feuding at is.group is set to reach the
courtrooms after the independent dealer network launched a series of
legal actions against 62 former members last month.The dispute centres
around an undisclosed seven-figure sum is.group claims it is owed for
merchandise the former dealers purchased and past due fees it is argued
remain unpaid.Some fear the dramatic escalation in the stand-off could
cause severe damage to the network although group chairman Jordan
Kudler told OPI he still hoped an amicable settlement could be agreed
and many of the dealers would return.”I understand that this will more
than likely force a strained relationship between dealers and that
upsets me,” he added. “But we have an obligation to do what is in the
best interest of our group.”The frustrating part is that they’re not
hurting is.group, they’re hurting their fellow dealers and I don’t
think the independent dealer channel can afford to do that any
longer.”The dispute among the US dealer community was sparked after
is.group introduced its controversial regional distribution centre
(RDC) programme in 2004.The scheme was created by the is.group board
and was designed to offer dealers a more efficient way to buy direct.
The RDC programme allows the independent dealer to purchase from
multiple manufacturers in a mixed pallet. Through is.group’s programme,
which operates through three warehouses, dealers can buy from 23
manufacturers and 2,300 SKUs in one order, rather than having to raise
23 different purchase orders and pay a pre-paid minimum that drains
dealers’ cash.But despite the apparent advantages, 182 dealers walked
from is.group, many of which were stockless, because they were not
prepared to pay the required fee for a programme that they claimed
didn’t work for their business model. The loss accounted for 11.4 per
cent of the group’s direct buy.Speaking to OPI, chairman Jordan Kudler
added: “I believe that some dealers who felt they were due rebates held
back paying for merchandise and/or fees as a means of offsetting what
they felt they were owed. Nevertheless they purchased merchandise and
didn’t pay for it and now those costs are being absorbed and incurred
by other dealers in the group.”After exhausting every attempt to
resolve the issue, the Board of Directors decided to offer the
delinquent dealers a settlement for a lesser amount than what was owed.
Many of the dealers turned the offer down. At the last AGM we explained
the situation and it was actually the overall membership that truly
endorsed this action. There wasn’t a single member that I can recall
who didn’t want us to collect the monies – they were extremely upset
and disappointed.”Kudler maintained that had the group not faced the
debts from the situation, is.group would have been “significantly”
closer to breaking even in 2005, and would have been able to begin the
process of paying members back for the investment that they made.He
said: “We really must begin working together to find solutions to
enable us to increase market share. Taking money out of the pocket of
fellow dealers by not paying for product or membership fees isn’t the
solution. It’s unfortunate that this has occurred, but their legal
obligations must be met.”It is our hope that those who have received
their suits will not want to take this any further so that we can put
this all behind us and move forward.”Kudler said some dealers have
already settled their cases, and added: “I don’t want to see any dealer
have to incur legal expenses that would be necessitated by this. Nobody
likes to initiate a law suit. And it certainly doesn’t lend to a
positive relationship. This is money owed to is.group members, it’s
money that is.group needs to be able to operate.”As time goes on, some
dealers may realise that they made some decisions that were
understandably emotional but not necessarily well thought-out at the
time. And some of them made decisions that perhaps were thought-out but
the model didn’t work well for them. We lost many dealers in the last
year but we only have 62 law suits pending at this point, which
indicates that many dealers who left understood what their obligations
and responsibilities were and they honoured them. For the remaining 62
dealers to take a position that it’s acceptable to walk away from their
financial and legal obligations simply because they have a
philosophical disagreement isn’t necessarily the right choice.”And to
make your fellow dealers, who you have been co-members with for many
years, incur those expenses is even more frustrating and
irresponsible.”Many of the dealers did not fully understand the RDC
programme when it was launched – they did not understand the mechanics
of how the expenses of the programme were to be covered.We would very
much like to have this resolved. This is not an act of retribution.”
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