Hearthlist Digest #428 - Wednesday, March 15, 2000
 
Terminating distributors and retailers without just cause
  by "Karen Fenton" <[email protected]>
 

(back)
Subject: Terminating distributors and retailers without just cause
From: "Karen Fenton" <[email protected]>
Date: Wed, 15 Mar 2000 11:25:33 -0500 (EST)
 
For Immediate Release March 14, 2000
For more information contact:
Jay R. Fenton, Energy Works, (510) 233-2166
 
 
California Superior Court Finds Regency Fireplace Products Liable for
Breach of Contract and Business Interference
 
Martinez, California - On March 8, 2000 a California superior court held
that International Fireplace Products (IFP), formerly known as Regency
Fireplace Products, wrongfully terminated its distribution agreement
with Energy Works Wholesale without notice or good cause.
 
BACKGROUND
In August 1984 Energy Works Wholesale, led by Jay Fenton, became the
first U.S. distributor for Regency Fireplace Products. A written
agreement was never formalized, a practice not uncommon in the hearth
products industry. The two companies maintained a strong business
relationship for 12 years.
 
Without notice on April 15, 1996 Tony Woodruff, Regency=92s vice president
of sales, terminated the distribution contract, citing =93diverging
business interests.=94 On the same day IFP contacted all of Energy =
Works=92
retail dealers and announced that it would sell products directly to
them.
 
Energy Works refused to sign a termination agreement, in which IFP
offered to pay Energy Works 25% above cost for returning newly packaged
product. IFP sued Energy Works for nonpayment. After clearing its
remaining Regency inventory and outstanding debt to the manufacturer,
Energy Works filed suit against IFP for breach of the oral distribution
agreement and for interfering in Energy Works=92 relationship with its
retail dealers.
 
TRIAL and VERDICT
The jury trial, which began February 22, lasted two and a half weeks.
Energy Works argued that IFP was required to give reasonable notice
prior to termination. The manufacturer countered that it had the right
to terminate the distribution at any time.
 
The jury found that Regency had wrongfully terminated the agreement and,
by selling direct, had interfered with Energy Works=92 business
relationship with its retail dealers. The jury awarded Energy Works
$500,000 damages.
 
The second phase of the trial before the judge alone to consider the
charge of unfair business practices is expected in April.
 
IFP is also being sued by Home Alternatives, the former Arizona
distributor of Regency Products. No trial date has been set.