Feroce’s BENRUS in Legal Brawl Over Millions
Friday, December 30, 2016
READ THE LAWSUIT BELOW
The lawsuit involving the purchase of BENRUS is not the company’s only legal battle. Others lawsuits are tied to claims by former employees, including one by one of the region’s largest real estate companies.
The lawsuit filed today by Feroce’s BENRUS in a Delaware court alleges that Bernie Mermelstein and two New York companies tied to Mermelstein defrauded Feroce, breached contracts, delivered defective goods, made misrepresentation, and breached the contract, among the many claims filed.
Feroce told GoLocal in an exclusive interview on the lawsuit that the failure of the previous owner to deliver on the most basic elements of the agreement triggered the legal action. “There were four basic elements to our agreement - transfer the trademarks; supply goods at costs plus 15%; provide a standard line of credit; and transition the sales team to us,” said Feroce. “They were 0 for four.”
In part, the suit alleges that “defendants (Mermelstein and the others) also completely failed to uphold their obligations by keeping profits, taking and fulfilling orders past September 1, 2015 (in violation of the exclusivity provision of the license grant), failing to file required trademark registrations, and continually providing defective products directly to customers and retailers.”
“They simply kept millions of dollars of sales,” said Feroce.
BENRUS Plan Delayed
For Feroce, who helped Carolyn Rafaelian drive sales at Alex and Ani from $1 million to more than $300 million in four years, BENRUS was to be his second act. His goal was to take an old World War II watch company and transform it into a mega-lifestyle brand. Since Feroce left Alex and Ani, the company's growth has slowed, it has closed many of its retail stores and changes out top management multiple times.
However, things have not gone quite as planned at BENRUS and Feroce has had to pour more than $7 million of his own money into the company, lay-off much of his work force, and close most of his retail locations - for now. He blames Mermelstein for the bulk of the issues. “It is disappointing that we have to take the litigation route,” said Feroce.
Feroce if nothing else is resilient. He grew up in West Warwick on Providence Street, served in the United States Army and reached the rank of Major, and has seen huge success and failures in business. Now, he is faced with yet another challenge. Recently, he told GoLocal he may look at a run for Governor in 2018.
At BENRUS, of the remaining team, Feroce said they work practically 24/7 and are 100% committed. "The team wants to pursue the the lawsuit against Bernie aggressively. They are all shareholders," said Feroce.
Another portion of the suit claims that Mermelstein delivered faulty product to retailers. After the sale of the company, resolving the product issues would be Feroce’s problems and not theirs, but they would have realized the windfall of revenue.
“Defendants’ failures caused BENRUS LLC to lose profits from existing and potential retailers and customers, and worse, Defendants’ delivery of defective merchandise directly to retailers and customers has and continues to inflict irreparable harm on the BENRUS brand,” said Feroce’s suit.
“At the beginning of the relationship, we were delivered the first shipment of BENRUS watches and there was a quality issue. We sent 700 back for quality control review and they were never checked, corrected or even acknowledged. We are about delivering a quality product. I knew we were in trouble right then,” said Feroce.
The company then went on to completely redesign and engineer the watch line using an Austrian firm.
“It pushed us back more than a year —18 to 24 months,” said Feroce.
While BENRUS is the plaintiff in the above litigation, there are other lawsuits in which Feroce’s company is playing defense.
Two former employees of the company have filed lawsuits this month and a subsidiary of New England Development has a judgment against the company for $50,789 for non-payment of rent tied to BENRUS closing a retail location on Nantucket.
Rachael Kashgagian has filed a lawsuit in Rhode Island Superior Court alleging that BENRUS failed to make payments and she is owned tens of thousands in back pay. Kashgagian served as head of sales for the company. Feroce said that she signed an agreement in which she would forgo salary for equity in the company.
Another lawsuit filed by Emily Shaw, a former designer for the company, claims similarly that BENRUS owes back pay as well. Feroce tells GoLocal that she is owed some payment, but that they cannot agree on the actual amount owed.
Both Shaw and Kashgagian are represented by attorney Julie Dascoli and she did not return GoLocal’s call for comment.
For Feroce, who owns a mega-mansion in Newport that faces an Internal Revenue Service lien and drives a BMW i8 which retails for $140,000, the BENRUS bumps have been a roller coaster.
“Our plan for building the company has been delayed. It is disappointing, but we will get past these obstacles and continue to build a great company in Rhode Island,” said Feroce.
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