Complaint Review: Ron Greene - Nationwide

Dear Mr. Greene:

      This firm represents America’s Best Bath AZ, LC (“ABB AZ”) regarding the Dealer Agreement executed between ABB AZ and America’s Best Bath, LLC (“ABB”) on November 18, 2015 (the “Agreement”). It is ABB AZ’s position that it was fraudulently induced to enter the contract, that ABB breached the Agreement in several different ways which will be explained below, and that ABB AZ is entitled to a refund of all monies paid to ABB.

FACTUAL BACKGROUND

      In late 2015, you and other representatives of ABB entered into communications and negotiations with Ray Baxter (member of ABB AZ) about the possibility of becoming a dealer for ABB. Throughout these discussions, ABB presented examples and estimates of dealer revenues, lead conversion rates, anticipated sales, and profit projections with the intention of leading Mr. Baxter to believe that by becoming a dealer for ABB, he could realize hundreds of thousands of dollars in yearly profits.

      Ultimately, Mr. Baxter formed ABB AZ for the express purpose of becoming an ABB dealer, and the Dealer Agreement was signed on or about November 18, 2015. Although the Agreement called for specific payments from ABB AZ at specific times (including a one-time license fee of $62,412.00 to be paid in full within the first month), in practice, both parties largely disregarded the payment schedule, but otherwise acted as if the Agreement were in effect, with ABB AZ making payments towards the license fee and ordering product, and ABB accepting the payments, shipping product, and otherwise working with ABB AZ as a dealer. In the end, ABB AZ paid approximately $20,000 toward the license fees, and also purchased six tubs at a cost of roughly $3,327.00 each.

      ABB AZ also paid other miscellaneous amounts (totaling thousands of dollars) both to ABB and to other vendors, for websites, lead tracking, 800 numbers, and television advertising. Despite all these expenditures, and despite ABB AZ’s diligent efforts to sell, market and promote ABB and its products, the promised revenues never came, the required marketing expenditures including television advertising, were mostly ineffective, and ABB AZ operated at a substantial loss for all the months it was in business.

      In addition, in mid-2016, it came to Mr. Baxter’s attention that ABB had been sold to Premier Care in Bathing (“Premier”), and that ABB is no longer a going concern. Neither ABB AZ nor Mr. Baxter has been contacted by Premier to discuss how this transaction would affect his business expectancies under the Agreement, nor has he been offered a Premier dealership.

      Moreover, ABB AZ and Mr. Baxter have been notified by attorney Joseph M. Windler of the law firm of Winthrop & Weinstine in Minneapolis that ABB and other affiliated parties are currently being sued for breaching their License Agreement with Safe Step Walk-In Tub Company. I understand that the allegations of Safe Step have not been adjudicated yet, but it is clear from the substance of the August 11, 2016 letter from Mr. Windler that ABB may not have even had the legal right to enter into the Agreement with ABB AZ. At the very least, the existence of this litigation, and the fact that the prior agreements and non-compete clauses were not fully disclosed to Mr. Baxter during the negotiations, make it clear that ABB is not in a position to honor its obligations under the Agreement anyway, and may not have ever been in a position to do so.

LEGAL ANALYSIS

1. Fraudulent Inducement/Intentional Misrepresentation

Liability for fraudulent misrepresentation occurs under § 525 of the Restatement (Second) of Torts . . . and lies against “[o]ne who fraudulently makes a misrepresentation of fact . . . for the purpose of inducing another to act or refrain from action.”

            Wells Fargo Bank, N.A. v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 496, 38 P.3d 12, 34 (Ariz.2002).

      The representations made to Mr. Baxter about anticipated sales and profit margins were either believed to be false or known to be false, or you should have known they were false at the time you made them. At the very least, these statements were made with a reckless indifference to whether they were true or not. The goal was to convince Mr. Baxter to become a dealer, and it is clear that false representations were made.

      The fact that the License Agreement with Safe Step which is now the subject of litigation was never mentioned is simply further evidence that material information was withheld from Mr. Baxter, and that material promises were made to him, without regard to their truth or materiality. He relied on these representations and omissions to his detriment, and now finds himself the party to a Dealer Agreement that is worthless at best, and will possibly come with additional expense and hassle for him as the Safe Step litigation continues.

1. Breach of Contract

      Under Arizona law, “The victim of a material or total breach [of contract] is excused from further performance.” Zancanaro v. Cross, 85 Ariz. 394, 400, 339 P.2d 746, 750 (Ariz.1959); Corbin on Contracts § 946; 12 Am.Jur. Contracts § 389. When one party materially breaches a contract, the other party may treat the contract at an end. Coronado Co., Inc. v. Jacome’s Dept. Store, Inc., 129 Ariz. 137 (Ariz. 1981). A material breach occurs when a party fails to do something required by the contract which is so important to the contract that the breach defeats the very purpose of the contract. Rev.Ariz.Jury Instr. (Civil)(Contract 9), at 142 (3d ed.,1997).

      In this case, ABB breached the Agreement failing to provide ABB AZ with qualified leads, and then later by selling to Premier. Even if ABB AZ was inclined to continue with this business relationship, ABB literally cannot fulfill its obligations under the agreement because it is no longer in business.

CONCLUSION

      ABB AZ simply wishes to be put back in the same position it would have been in if it had never entered into the Dealer Agreement with ABB. To this end, demand is hereby made for the refund of $20,000.00 to ABB AZ, which represents the payments made toward the License Fee. ABB AZ also demands that you or your designee repurchase the remaining five tubs held by ABB AZ in its inventory, at a cost of $3,329.00 each, for a total of $16,645.00. Your failure to comply with the demands made herein will leave ABB AZ with no other choice but to resort to the courts to enforce its legal rights.