Confidential
Settlement – $45,000,000Judge
Court
Orange Superior
Attorneys
Plaintiff
Defendant
Julia B. Strickland
(Steptoe LLP)
Mark D. Erickson
(Haynes & Boone LLP)
Facts
The plaintiffs contended that the defendants defrauded thousands of small businesses out of monies paid in advance to have the defendants sell their businesses. The plaintiffs alleged that the defendants, which consisted of several interrrelated and affiliated companies, purportedly together marketed themselves as, and acted as, a business opportunity broker. The plaintiffs alleged that the defendants promoted themselves as the "nation's leading mergers and acquisitions company for small and medium-sized businesses" and provided seminars throughout the United States. The plaintiffs contended that at the seminars, the defendants claimed that they had a success rate of over 80 percent and that they only represented certain select customers. The plaintiffs alleged that the defendants also claimed that they could sell the businesses for more than their actual value and provided anecdotal examples of past success. The goal of the defendants, the plaintiff maintained, at these seminars was to steer the customers toward high-pressure "closers" who would attempt to sign up the customers to pay an evaluation fee of approximately $35,000. The plaintiffs contended that the customers were willing to do so because the evaluation fee would be refunded to the customer off the "success fee" when the business was finally sold. However, the plaintiffs contended that neither the defendants nor their closers ever admitted that, from all the businesses that signed up and paid the evaluation fee, less than 10 percent of the businesses were actually sold. The plaintiffs brought the action against the defendants under section 17200 of the California Business & Professions Code for unlawful, unfair, misleading and deceptive business practices. Contrary to plaintiffs' allegations, the defendants contended that the valuable services that they provided to middle-marker business owners were not misleading, deceptive or in violation of any laws.
Settlement Discussions
Without admitting any liability, the defendants agreed to settle the action on nationwide class basis for business purposes. The settlement contemplated potential monetary relief in the following amounts: $30.25 million in restitution; $1 million in class administration expenses and $13.75 million in attorneys' fees.
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