Cleaners Equipment And Cleaning Solvent Investigation – An Attorney’s Perspective

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It is interesting to note that the defendants’ business had recently changed after buying the Weil clarifiers from Weil & Co. (now Weil & Kea) in 1998. Defendant’s then-chief executive officer, John M. Weil, Jr., had previously worked with Weil & Co. as a marketing consultant. At that time the defendant had approached Weil about producing and marketing its own line of de-mineralized water in a bid to take a greater share of the bottled water market. Weil, in turn, had indicated that they would produce their own de-mineralized water in collaboration with the defendant. At this point, Weil & Co. entered into a sales agreement with the defendant’s competitor, De Lavelle.

During the negotiations between the two companies, it became apparent that the defendant was unwilling to enter into a sales agreement with the plaintiffs’ manufacturer. In early November of the year, Weil & Co. presented its first proposition to the defendant’s President and CFO, Edward C. Zotter. At this meeting, according to Weil, the defendants made the proposal “very cold” and “bargained down on the product of choice.” Weil presented its second proposition to the defendant’s President and CFO at the end of November. According to Weil, the defendant rejected the second proposition out of hand and did not respond.

Cleaners Equipment

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Two weeks later, on December 7th, Weil & Co. presented its third proposal. This time, the defendant responded with three very positive responses: “approval of course,” “no comment,” and “we will consider.” Two days later, according to Weil, Mr. Zotter was in Washington D.C. for meetings with members of the American Cleaning Manufacturers Association (ACM). During these meetings, Mr. Zotter indicated that the failure to negotiate a purchase price with Weil & Co. would be viewed negatively by manufacturers of cleaning equipment.

On January 8th, the defendant finally responded with their fourth response. Their initial response was, “no comment.” A few days later, they indicated that they were open to purchasing the plaintiff’s dry cleaning machines. However, on March 6th, Weil & Co. received an offer from the defendant’s President and CFO to purchase the plaintiff’s entire dry cleaning line at a price that was almost three times the company’s current gross revenue.

On April 3rd, Weil & Co. filed its final reply to the defendant’s first offer. This was the last offer of any type to resolve the impasse. The final offer provided that the defendant would purchase the cleaning equipment and assume all financial responsibility for its continued operation. It also provided that the parties would enter into a binding contract granting the defendant complete ownership and responsibility for the operation of the cleaning facility through the fiscal year 2021. In exchange for its acceptance of the contract terms, the defendant agreed to release all rights to the plaintiff related to the sales of its solvent and non-solvent cleaning equipment and all related liabilities.

The Court Issue Decision

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The Court issued a decision in May of 2021 ordering the defendant to pay damages to the plaintiff. On appeal, the defendant raised the argument that it should not be required to pay damages if the sale of Weil & Co. was motivated by the desire to eliminate the company’s competition. In support of this argument, the defendant failed to submit any evidence that it had a genuine economic interest in purchasing the property, as there had been no public auction to sell Weil’s products. Accordingly, on May 9th, the Court denied the defendant’s motion to dismiss. On appeal, the Fourth Circuit Court of Appeal affirmed the District Court’s order.

Important Consideration

In its third consideration, the defendant contends that it was entitled to negotiate the purchase price of its solvent and non-solvent cleaning equipment based on the volume of sales which is made prior to the date of sale of the property to Weil & Co. If the Court had granted the defendant an allowance, it is likely that the defendant would have negotiated a lower purchase price for its equipment. The fact that the negotiation process failed to result in a reasonable purchase price for the items does not alter the fact that the sale was conducted in good faith. It is irrelevant whether the process resulted in a reasonable purchase price for the goods. This Court, therefore, held that defendants violated the mandate of the Fair Debt Collection Practices Act when they did not seek a competitive advantage in the negotiation of the purchase price of the CECO assets.

Bottom Line

Pursuant to the Fair Debt Collection Practices Act, the Court found that the defendant had a “good cause” to believe that it could purchase the cleaning supplies at its prevailing price if a competitive bidding process was not available. However, the Court found that “a finding that the price at which the CECO sold its products would be unfair or deceptive is a finding of fact.” Therefore, the Court held that a competitor’s attempt to create a competitive bidding process for the purchase of the CECO solvent through improper and misleading advertising unless accompanied by accurate disclosure of all relevant facts was not a “good cause” sufficient to establish a likelihood of prevailing. Accordingly, the defendant violated FDCPA.

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