Marcone Supply, the Nation's Largest Distributor of Appliance Parts, Achieves Major Legal Victory in Corporate Espionage Case

ROCHESTER, N.Y., June 21, 2011 /PRNewswire/ -- The Supreme Court of the State of New York, Appellate Division, Fourth Department has unanimously affirmed a lower court ruling barring 1st Source Servall from soliciting or making sales to hundreds of customers in New York State and the Northeast region.

Marcone Supply, based in St. Louis, MO, accuses Michigan-based Servall of engaging in corporate espionage to gain confidential customer information and other financial records. The stolen customer list includes appliance retailers and repair firms located in Western New York, Pennsylvania and the Eastern U.S. who became Marcone clients when the Missouri company acquired Buffalo-based AP Wagner in January 2010.

In its June 17, 2011 ruling, the Appellate Court affirmed a March ruling by State Supreme Court Justice John Michalek, writing "The record is replete with evidence that the individual defendants stole and/or improperly retained thousands of documents belonging to plaintiff and thereafter used that information to compete against their former employer."

Misappropriation of client information and other proprietary data resulted in the loss of at least $12 million in sales in 2010, according to Attorney James D. Donathen, of Buffalo-based Phillips Lytle LLP, who is representing Marcone.

"The unanimous ruling by the Appellate Court panel once again supports Marcone's contention that it was the victim of a classic corporate espionage scheme.  We are extremely pleased with the outcome and what it means to Marcone's employees and customers," Mr. Donathen added.

Dave Cook, Marcone Senior Vice President, said the appellate ruling will go a long way to help the company maintain and grow its customer base across the Northeastern U.S.  Cook also noted that the Court ruling underscored Marcone's strong belief in fair competition.

"Servall did significant damage to our business with its dishonest and unethical scheme, but our family-built company is weathering the storm and will continue to employ the fair business practices that have served us well for the past 79 years," Mr. Cook said.

The court ruling bars Servall from any email, mail, fax, phone or in-person solicitation of Marcone's core group of 640 Northeastern clients.  The ruling also bars sales outright to a group of approximately 200 customers unless Servall could establish that the accounts were opened without use of Marcone's information.

According to court papers filed by Servall, this ruling creates uncertainly for its business.  In a 2011 affidavit submitted with its court documents, Servall stated it would face major financial consequences if Servall lost the appeal.  Servall stated that complying with the Court's injunction would result in the shutdown of its Northeast operations and "almost certainly" force Servall to close its doors nationwide.  The Court, on the other hand, questioned this representation, noting that 90 percent of Servall's business is outside of the Northeast Region.

The Appellate panel noted the importance of a positive reputation and customer goodwill in the appliance parts industry.

"The core of [Marcone's] business is comprised of sales to small businesses such as appliance installers and repair persons, and these loyal customers take a great deal of time to develop.  Indeed, [Servall's] own expert opined that the "real value" to the business is the relationship of a distributor with its customer, not a list of names," the justices wrote in their decision.

In its lawsuit, Marcone charges competitor Servall with a scheme to set up a Northeast distribution network virtually overnight by hiring away several Marcone employees who left the company armed with critical customer and financial data.

The misappropriated information included not only a list of 3,300 AP Wagner customers, but also all of the confidential and proprietary records concerning sales to date information, receivables and account aging, pricing, credit limits, account numbers and margin (profit) information on each customer.

Established in 1932 by Harry Markow, Marcone (www.marcone.com) was founded as a door-to-door seller of rebuilt vacuum cleaners.  The family-controlled company is now the nation's leading distributor of appliance parts and accessories, and a rapidly growing player in the heating, air conditioning and property management sectors. Marcone is known as the No. 1 product support company in the U.S. with world-class service.

Marcone operates 60 locations, in the U.S. and Canada, with a workforce of nearly 800.  The foundation of Marcone's success remains the belief that "Good people make a Great Company."

Contact: David Ganz
Marcone Supply
314.817.1451
[email protected]

SOURCE Marcone Supply