East Hartford-based Oakleaf Waste Management is facing two separate lawsuits stemming from a 2006 acquisition that landed the contractor of trash hauling services a deal with a Fortune 100 company.
The deal, in which Oakleaf acquired interests in New Haven-based TrashBeeGone, gave Oakleaf an exclusive contract to provide dumpster rental services to Home Depot customers.
Home Depot has since terminated the agreement, and is itself suing Oakleaf for trademark infringement and false advertising. In its complaint, Home Depot says Oakleaf is continuing to use, without permission, its name and other trademarks to promote Oakleaf’s own dumpster rental business.
That includes Oakleaf using orange Home Depot dumpsters, according to the complaint.
And now, the former owners of TrashBeeGone — Paul Dispazio and Peter Loomis — and its parent company, Central Dispatch Solutions, have filed suit against Oakleaf in New Haven Superior Court, alleging that the company engaged in “unfair and deceptive,” practices during their 2006 negotiations.
Dispazio and Loomis say they were shortchanged by the deal because its value relied in part on future income generated by the now canceled Home Depot contract.
New Haven lawyer John Acampora, whose firm is representing Loomis, Dispazio and Central Dispatch Solutions, said his clients are seeking “substantial” damages, but declined to give a specific amount. It could be in the multimillion-dollar range. Some observers expect the claim to approach $50 million.
In a statement, Oakleaf said the TrashBeeGone lawsuit “is without merit and we expect to resolve this matter favorably.”
In addition, the company said it anticipates the Home Depot lawsuit will “be resolved in the very near future to the satisfaction of all parties.”
A spokesman for Home Depot declined to comment on the case because it is still pending.
Oakleaf contracts with thousands of waste haulers across the country to serve residential, retail, commercial and industrial customers, including Wal-Mart stores.
According to the suit, Dispazio and Loomis sold their interest in TrashBeeGone, a subsidiary of Central Dispatch Solutions, to Oakleaf in November 2006. A big part of the business was an exclusive contract the company had with Home Depot, which allowed TrashBeeGone to provide dumpster rental services to Home Depot customers.
TrashBeeGone sold the company to Oakleaf at an undisclosed “below market value price,” and relied on an earnout provision to make the deal work, court papers said. The earnout provision required that Oakleaf pay Dispazio and Loomis 25 percent of the operating income from the acquired business, documents show.
Throughout the negotiations, Oakleaf prepared information showing how it would expand the operations of the rental program, and detailed scenarios showing future profit projections and earnout calculations, the complaint said.
Prior to finalizing the agreement, Oakleaf also negotiated a revised contract with Home Depot.
But in February 2010, Oakleaf notified Dispazio and Loomis that there would be no earnout payments for 2008 or 2009, and that the Home Depot Rental Program contract had been terminated, the suit said.
Dispazio and Loomis say they were shortchanged in the deal and that the promises and representations made by Oakleaf during the sales negotiations were “fraudulent in nature and designed to induce [them] into the sale of the company for a below market value.”
“The earnout provision was the central provision of the agreement and the primary incentive for the plaintiffs to enter into the agreement,” the suit said. As a result Oakleaf “had a continuing fiduciary duty to the plaintiffs to operate the company in a proper business-like manner.”
Dispazio and Loomis allege that Oakleaf engaged in “grossly negligent conduct in the management and operation of the Home Depot program,” which led to the termination of the contract with the retailer.
Specifically, they allege that Oakleaf failed to market the company effectively by excluding, as part of the newly negotiated contract, the “TrashBeeGone” brand name throughout Home Depot stores, and failing to include a signage plan for the program, the complaint said.
Additionally, Loomis and Dispazio say another business they shared — New Haven-based The Bullbag — was also severely harmed by the deal.
The Bullbag, which provides small-sized (less than 7 cubic yards) non-metal dumpsters for trash removal was not part of the TrashBeeGone deal. It also had an exclusive agreement to sell its services to Home Depot customers. But that agreement was omitted, however, when Oakleaf renegotiated its deal with Home Depot in 2006. That allowed Bullbag’s direct competitor to negotiate with Home Depot for that exclusive relationship, harming Bullbag, the suit claims.
Dispazio and Loomis said Oakleaf has violated the Connecticut Unfair Trade Practices Act, with its actions.
Meanwhile, in its lawsuit, which has been filed in an Atlanta, Ga. Superior Court, Home Depot is seeking a permanent injunction and monetary damages, including profits Oakleaf made while using Home Depot trademarks.
Oakleaf made headlines recently when Gov. M. Jodi Rell announced that the state would be providing the company $3 million to move its home base from East Hartford to bigger quarters in Windsor, where it will add 40 jobs.
Oakleaf told the state it was considering out-of-state locations for its headquarters, including Georgia, Florida and Arizona.
The state’s $3 million grant, which Oakleaf won’t have to repay, received approval last week from the state Bond Commission.
Oakleaf was founded in 1995 by East Hartford entrepreneur Jim Barnes, the former CEO who built the business into a $700 million enterprise. Barnes stepped down in 2009, passing the reins to Steven Preston, a former administrator of the U.S. Small Business Administration under former President George W. Bush.
