A federal court jury found that furniture retailer Bassett should pay more than $1.4 million for using unfair and deceptive trade practices to bully a vendor out of the supply chain.
Colonial Trading LLC, based in Iredell County, had been in business for 25 years as a middle-man supplier for retail furniture companies, including giant Bassett, placing orders with manufacturers and working in design, testing and production of furniture.
In 2009, Colonial filed claims for breach of contract, wrongful interference and unfair and deceptive trade practices against Bassett. Colonial alleged that Bassett bribed its suppliers to cut the company out of the loop, placed product orders it did not intend to pay for and charged the company for recalls of products that were not actually defective.
After an eight-day trial this summer that included a hearing of Bassett’s counterclaims, a jury awarded Colonial $1.3 million for the breach of contract claim, finding that Bassett failed to pay invoices, and $41,472, finding that Bassett bribed Colonial’s suppliers. Judge Richard Voorhees trebled the bribery award.
Plaintiff’s attorney June Allison said it was clear the jury believed Bassett used dirty tricks in its dealings with Colonial, which has since gone out of business. The jurors’ decision on the breach of contract claim was definitive.
“They essentially gave us the number we said was owed with interest,” she said. “They gave us every penny of that.”
The jury also found against Bassett on a number of other claims, all of which came with an award of $1. Those included taking unjustified charge backs, canceling previous orders, wrongfully interfering with a contract held between Colonial and a third-party manufacturer, and charging Colonial for non-defective goods. Regarding Bassett’s counterclaim, the jury found for Colonial on all claims except breach of express warranty, for which it awarded Bassett $1.
Allison said the plaintiff’s case connected the dots between Bassett’s various acts to show a calculated misuse of financial power.
“It was part of a bigger plan to get rid of the middleman to save money,” Allison said. “They’re entitled to cut out the middleman but they’re not entitled to do it using unfair and deceptive trade practices.”
By placing orders it didn’t intend to pay for, taking unjustified charge backs, canceling orders and failing to pay invoices, Bassett cut off Colonial’s cash flow. Allison said Bassett then went to Colonial’s suppliers and tried to persuade them to bypass Colonial and take orders directly from Bassett. If suppliers were reluctant to work with Bassett directly, she said, the company offered them bribes.
The trouble began after the Consumer Products Safety Commission decided that cribs Bassett had acquired through Colonial were defective. Colonial asserts that Bassett used the recalls as an excuse to charge Colonial for expenses related to the recall that Colonial was not responsible for.
Allison said the plaintiff’s challenge was to illustrate to the jury that Bassett had accepted the defective cribs and that any problems with the cribs were not manufacturing defects but design flaws or other irregularities that Bassett had accepted as up-to-standard.
“It came down to simplify, simplify, simplify,” she said. “I will say that it took us a long time to get all the discovery in and to get a handle on what the process had involved and what the real story was. Once we had a handle on that, we knew where we wanted to go.”
Colonial, which was a small, family-owned company, had good relationships with its manufacturers. Allison said that helped in making the case that Bassett had accepted the recalled cribs. A fired Bassett quality control manager was among the most helpful plaintiff witnesses.
“He was able really to talk about the goods and how they were produced and the acceptance process on Bassett’s part, their responsibility for quality control,” Allison said. “He was really good at saying ‘No, that’s not how that worked’.”
She said Bassett presented the jury with exaggerated descriptions of the product defects that differed from what the company reported to the Consumer Products Safety Commission. In the first recall, Bassett reported that consumers’ over-tightening of a bolt was the cause of the problem with the cribs, but the company told the jury the cause was a misplaced boring.
“Another thing that was impressive to the jury, was with the second recall, they were only 17 of the cribs ever sold,” she said. “We think that’s why they had the recall — they just weren’t selling.”
She said Colonial took back every crib Bassett sent back in the recalls and gave Bassett credit. Bassett filed claims regarding the recalls cribs in its countersuit, which the jury probably viewed as an overreach, Allison said.
Defendant’s attorney Bob Ekstrand declined to comment.
Bassett has filed an appeal with the U.S. Fourth Circuit Court of Appeals.
UNFAIR TRADE PRACTICES
Injuries alleged: Unpaid invoices, cancelled orders, unfair chargebacks, unfair and deceptive trade practices
Case name: Colonial Trading LLC v. Bassett Furniture Industries, Inc.
Case number: 5:09-cv-00043
Court: U.S. District Court, Western North Carolina
Name of judge: Richard L. Voorhees
Date of verdict: Oct. 5, 2012
Attorneys for plaintiff: Robert J. Wishart and June K. Allison of Wishart, Norris, Henninger & Pittman Charlotte
Attorneys for defendant: Robert C. Ekstrand and Stefanie Smith of Ekstrand & Ekstrand, Durham
Has the plaintiff been successful in collecting the judgment? No