United Marketing Group LLC, et al Plaintiff vs. Legal Club Financial Corporation, et al Defendant

1 This is an action seeking damages for breach of contract, fraudulent

misrepresentation, and for an accounting,

The Parties

Plaintiff, UNITED MARKETING GROUP, LLC (“Plaintiff’ or “UMG”), is a

corporation duly formed under the laws of the State of Hlinois, with its principal address in

Oakbrook Terrace, Illinois.

Defendant, LEGAL CLUB FINANCIAL CORPORATION, (“Defendant” or

“LEGAL CLUB”), upon information and belief, is a corporation duly formed under the laws of

the State of Florida, with its principal place of business in Sunrise, Florida.

*** FILED: BROWARD COUNTY, FL BRENDA D. FORMAN, CLERK 1/16/2018 3:50:42 PM.****United Marketing Group, LLC v. Legal Club Financial Corp.

Complaint

Jurisdiction and Venue

4, The Court has jurisdiction over this dispute for the amount in controversy is in

excess of $15,000.00, exclusive of interest, costs and attorney’s fees.

Broward County, Florida is the appropriate venue for this action inasmuch as the

causes of action alleged herein accrued in whole or in part in Broward County, Florida.

This Court has personal jurisdiction over LEGAL CLUB inasmuch as it is

organized and existing under the laws of the State of Florida.

General Allegations

UMG operates membership programs which provide a variety of benefits,

including discounts on software, computer technical support, teleconferencing services, and a

teview and assessment of businesses e-mail systems, data security systems and network

infrastructure (the “Membership Programs”).

UMG enters into agreements with marketing partners who offer products and

services to the public, and when a consumer makes a purchase from the marketing partner, UMG

is authorized to promote, market, advertise, offer and/or sell its Membership Programs to

consumers.

Defendant, LEGAL CLUB, offers benefits to consumers including, legal, tax and

identity theft solutions. ,

Defendant had a contractual relationship with Discover Financial Services

(“Discover”) pursuant to which Defendant offered its various benefit programs to businesses

with Discover merchant accounts (“Merchant Accounts”), with the charges for the benefit

programs billed by Discover directly to the merchant accounts who enrolled (the “Discover

Contracts”).

Page 2 of 12United Marketing Group, LLC y. Legal Club Financial Corp.

Complaint

il. On or about October 1, 2006, UMG and Defendant entered into an Agreement

pursuant to which, LEGAL CLUB, upon the request of UMG, obtain from Discover and provide

to UMG merchant information for use by UMG in marketing its Membership Programs (the

“Agreement”). A true and correct copy of the Agreement is attached hereto as Exhibit “A.”

12, Pursuant to the Agreement, on a monthly basis, UMG shall provide Defendant an

electronic file identifying all Merchant Accounts who accepted, canceled or received a refund of

the Membership Programs. Defendant is required to then provide the information to Discover,

which would invoice and collect funds from the Merchant Accounts for the Membership

Programs.

The Agreement also provides that the funds collected by Discover in connection

with the Membership Programs, net of a refunds credited to the Merchant’s Account (the

“Gross Revenues”) are to be distributed as follows: Discover shall retain thirty percent (30%) of

the Gross Revenue, with the balance (the “Net Revenue”) to be provided to Defendant, and

LEGAL CLUB was required to forward the Net Revenue to UMG. Thereafter, UMG was

required to pay Defendant a commission equal to two and one-half percent (2.5%) of the Gross

Revenues on a monthly basis.

The Agreement permits UMG to arrange call centers to engage in outbound

telemarketing solicitations for the Membership Programs to the Merchant Accounts.

The Agreement also provides that the initial term of the Agreement is for two

years, with each party having a right to terminate the Agreement for any reason upon thirty (30)

days written notice to the other party.

Page 3 of 12United Marketing Group, LLC v. Legal Club Financial Corp.

Complaint

Pursuant to Section 5.4, “[nJotwithstanding any conflicting or inconsistent

provisions hereof, this Agreement shall terminate immediately upon the termination of the

Discover Contracts.”

17, Inasmuch as UMG did not have a direct contractual relationship with Discover,

Section 1.3 of the Agreement provides, inter alia, that LEGAL CLUB “shall promptly notify

UMG of any amendment, modification or other material change to the Discover Contracts.”

On or about March 1, 2008 (the “Effective Date”), UMG and the Defendant

entered into that certain Amended and Restated Agreement which amended and restated the

Agreement. A true and correct copy of the Amended Agreement is attached hereto as Exhibit

«B”

The Amended Agreement provides that the terms and provisions of the

Agreement shall remain in force and effect and apply to Merchant Accounts that enrolled prior to

the Effective Date (“Old Enrollments”) and all Merchant Accounts that enroll on or after the

Effective Date (“New Enrollments”) shall be subject to the terms and provisions of the Amended

Agreement.

The Amended Agreement, inier alia, provides that LEGAL CLUB assume the

responsibility for the outbound telemarketing for the Membership Program and also sets forth a

revised compensation arrangement for New Enrollments.

Specifically, Section 5 of the Amended Agreement provides that funds collected

by Discover in connection with New Enrollments, net of any refunds credited to the Merchant’s

Account are to be distributed as follows: Discover shall retain thirty percent (30%) of the Gross

Revenue, with the Net Revenue provided to Defendant, and LEGAL CLUB was required to

Page 4 of 12United Marketing Group, LLC v. Legal Club Financial Corp.

Complaint

forward the Net Revenue to UMG. Thereafter, UMG was required to pay Defendant a

commission equal to fifty percent (50%) of the Net Revenue.

Pursuant to Section 1.2 of the Amended Agreement, the parties agreed and

acknowledged that with respect to Old Enrollments, the compensation terms set forth under the

Agreement would remain in effect and shall survive the expiration or termination of the

Amended Agreement, so long as the Old Enrollments remained in the Membership Programs

and the Discover Contracts continue to be in effect.

Similar to Section 5.4 of the Agreement, Section 7.3 of the Amended Agreement

provides as follows:

Notwithstanding any conflicting or inconsistent provisions

hereof, this Amended and Restated Agreement shall terminate

immediately upon the termination of the Discover Contracts.

Legal Club shall immediately notify UMG in the event that the

Discover Contracts are terminated or that it receives a notice

of termination from Discover.

For approximately the first five (5) years after the Agreement was executed,

Discover retained its thirty percent (30%) of the Gross Revenue and distributed the Net Revenue

to the Defendant, which then distributed the Net Revenue to UMG, which then provided the

agreed upon compensation back to the Defendant and retained the balance.

In approximately 2011, LEGAL CLUB advised UMG that Discover no longer

desired to handle the fees collected in the same manner and instead UMG began to process the

payments through Automated Clearing House (“ACH”) transfers. UMG would then distribute to

Discover thirty percent (30%) of the Gross Revenue on all enrollments and distribute to LEGAL

CLUB fifty percent (50%) of the Net Revenue of New Enrollments and two and one-half percent

(2.5%) of the Gross Revenue on the Old Enrollments.

Page 5 of 12United Marketing Group, LLC y. Legal Club Financial Corp.

Complaint

26, Thereafter, in approximately the second quarter of 2013, LEGAL CLUB once

again advised UMG of a change in the payment arrangement and requested that UMG no longer

send Discover its payments directly, but advised that Discover requested its payments be sent to

LEGAL CLUB, which would then send payment to Discover.

Inasmuch as UMG did not have a direct contractual relationship with Discover,

communications between the parties went through LEGAL CLUB.

As requested, UMG began providing two monthly checks to LEGAL CLUB, one

for Discover, and the other for LEGAL CLUB and continued to do so.

In late 2017, UMG began seeking confirmation from LEGAL CLUB that they

had in fact been providing Discover with the payments that UMG had been sending LEGAL

CLUB for Discover,

LEGAL CLUB did not provide the requested confirmation, which prompted a

series of phone calls and e-mail correspondence between UMG and the Defendant, and finally

prompted UMG to offer to contact Discover directly to obtain the confirmation.

Finally, on January 9, 2018, Defendant sent an e-mail, which provided “[a]ttached

is the Termination Agreement we have with Discover. If you have any questions please let me

know.”

Attached to the aforementioned e-mail, was a purported letter from Pete Illian,

Vice President of Discover to William Case, Executive Vice President of Defendant, dated

September 16, 2013 (the “Termination Agreement”). A true and correct copy of the Termination

Agreement is attached hereto as Exhibit “C.”

Page 6 of 12United Marketing Group, LLC v. Legal Club Financial Corp.

Complaint

33, Upon receipt of the Termination Agreement, UMG was shocked to learn for the

first time that the Discover Contracts between Discover and LEGAL CLUB expired on May 31,

2013, and that Discover declined to renew the Discover Contracts.

The Termination Agreement provides that Discover would continue to receive its

thirty percent (30%) commission, but that as of January 1, 2014, Discover would discontinue

collection of its thirty percent (30%) commission.

LEGAL CLUB waiting more-than four (4) years before providing or notifying

UMG about the Termination Agreement, and only finally apprised UMG of the situation, after

UMG’s repeated requests for confirmation that the commissions to Discover were being sent by

Causes of Action

COUNT II FRAUDULENT MISREPRESENTATION

COUNT IIL ACCOUNTING