Pella Slapped With $9 Million Lawsuit Claiming Fraudulent InducementJanuary 28th, 2020 by Kyra Thompson
Pella Corporation, an Iowa-based manufacturer and supplier of doors and windows, was recently pulled into a lawsuit by one of its previous dealers, alleging that Pella “coerced” the company into selling its Maryland stores, resulting in a sale that officials allege was for less than the market value.
The independent Pella dealer and showroom K.C. Company (K.C.) filed the complaint Friday, alleging that the manufacturer had, “decided that it wanted to replace [K.C.]… but rather than leave a highly successful competitor distribution system in place, Pella wanted to coerce [K.C.] to the system.”
The background, as presented by the plaintiff, states that Pella approached them in or around 2016 informing the company it would have to choose between splitting its current operations in the Washington D.C. area, in order to create a new independent dealer under K.C. ownership but with unique management, or sell the location to a qualified recipient. Pella threatened to terminate K.C. if it refused either option, alleges a complaint filed by the plaintiff.
K.C.’s owner, Kevin Cassidy, along with other company officials, decided to settle for sale of the location to prevent termination, they claim. After discussing what Pella’s requirements were for a “qualified purchaser” and several months of seeking a candidate, K.C. submitted its top choice, which was a company offering $29 million, the complaint says. The complaint further alleges that Pella dismissed that candidate within one day of submission, without “any due diligence” or even agreeing to meet with the potential buyer, before refusing the offer. The complaint defines how the plaintiff believed this buyer met every requirement previously laid out in discussions by Pella, but alleges that Pella claimed that the buyer did not “meet [its] fundamental expectation of an owner/operator.”
“[The] plaintiff at all times complied with the terms… and, in good faith, believed Pella would also comply as well, but, with respect to Pella, this was not the case,” argues the complaint.
It goes on to allege that, “from that point forward, Pella only entertained potential buyers that it brought into the discussion…”
Then, in early 2018, Pella presented its own candidate, Pella Mid-Atlantic, which the plaintiff claims was a corporation formed with the specific purpose of purchasing K.C. The selected candidate offered $20 million and was unable to fund the purchase price for K.C. without financial assistance from Pella, alleges the plaintiff.
K.C. further alleges that when officials attempted to negotiate for higher prices among other buyers, Pella, once again, threatened termination.
“In fear of being terminated by Pella if it did not acquiesce to Pella’s demands to accept a handpicked buyer at a below-market price, Plaintiff accepted the Pella Mid-Atlantic offer rather than risk having the value of its business gutted by this bad faith conduct,” states the complaint.
Now, K.C. is suing for $9 million in damages, which officials claim it lost, when Pella allegedly breached its contract with the plaintiff, committing what the plaintiff labels “fraudulent inducement.”
The case has been assigned to a magistrate judge in Maryland District Court and Pella has 60 days from delivery of a summons to respond.
At this time, neither side has responded to [DWM]’s requests for comment.
Stay tuned to dwmmag.com for updates.