Business

Boise franchisees say franchiser double-crossed them. What Idaho’s Supreme Court ruled

How 2 Boise distributors won $10 million in judgments

Attorney James Mulcahy tells how two Boise distributors of Safeguard Business Systems sued after the company cheated them.
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Attorney James Mulcahy tells how two Boise distributors of Safeguard Business Systems sued after the company cheated them.

This story has been revised with a correction and an update. Safeguard Business Systems did appeal the $4.4 million arbitration award to franchise distributor Dawn Teply. An earlier version of this story erred on that point. In a ruling Thursday, Feb. 21, the Idaho Supreme Court upheld that award.

The Idaho Supreme Court has upheld a $6 million judgment awarded to a Boise business owner who claimed he was wronged by the national franchiser from whom he obtained business forms and other office supplies.

Roger Thurston, a distributor with Safeguard Business Systems since 1987, sued the company in 2014 after it began poaching business from several of Thurston’s customers. In 2016, an Ada County jury found that Safeguard had violated its franchise agreement and harmed Thurston’s business, a conclusion also reached by the Supreme Court.

“This is an unqualified victory for Roger Thurston,” attorney James Mulcahy wrote in an email to the Idaho Statesman.

Paul Genender, an attorney who represented Safeguard, could not be reached immediately Wednesday.

The problems for Thurston began after Safeguard in 2013 bought two of Thurston’s Treasure Valley competitors, DocuSource and Idaho Business Forms. They became Safeguard distributors.

Under Thurston’s contract with Safeguard, Docusource and IBF should have stopped doing business with customers who bought from Thurston. Safeguard was required to disclose information about any common customers but hid that data.

Safeguard — owned by Deluxe Corp., one of the nation’s largest sellers of banking checks — supplied products to DocuSource and Idaho Business Forms at prices that were 40 percent less than the wholesale prices offered to Thurston. That put him at a competitive disadvantage and angered customers who felt Thurston had overcharged them.

An Ada County jury found in favor of Thurston after a trial in November and December 2016. It awarded Thurston $1.6 million in damages and $4.75 million in punitive damages. Ada County District Judge Steven Hippler later reduced the punitive award to $4.4 million to comply with Idaho’s cap on punitive damages.

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Ada County District Judge Steven Hippler presided over the jury trial in which Boise businessman Roger Thurston was awarded $6 million from Safeguard Business Systems. Katherine Jones kjones@idahostatesman.com

In 2017, Safeguard asked Hippler to strike $1.4 million from the damage award, saying Thurston had not proved he was damaged. The company also asked the judge to throw out the punitive award, claiming there was no evidence Safeguard had “an extremely harmful state of mind” toward Thurston. Hippler upheld the full award.

In its 24-page decision, the Supreme Court on Tuesday rejected Safeguard’s contentions, ruling that the jury’s conclusions were “supported by substantial evidence.” The court also found that punitive damages were appropriate.

“Punitive damages are reserved for cases that involve ‘oppressive, fraudulent, malicious or outrageous conduct,’” Justice Richard Bevan wrote. “Safeguard Business Systems’ active concealment of Idaho Business Forms and DocuSource sales to Thurston’s protected customers supported the jury’s award of punitive damages.”

A second Safeguard distributor in Boise, Dawn Teply, also accused Safeguard of poaching her customers. She was initially a plaintiff in Thurston’s lawsuit, but a clause in her distributor agreement called for her dispute to be taken to arbitration. A three-member arbitration panel later awarded her $4.4 million. The Idaho Supreme Court upheld that award on Thursday, Feb. 21.

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Reporter John Sowell has worked for the Statesman since 2013. He covers business and growth issues. He grew up in Emmett and graduated from the University of Oregon.

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