Active Network, LLC (Active) recently filed papers to add RunSignUp (actually we are Bickel Advisory Services, LLC dba RunSignUp) and myself (Bob Bickel) to a lawsuit they brought against TMT Productions, LLC (TMT) and owners Frank Brown and Brian Graham. We want to explain what is happening.
Active sued TMT (operators of a large race series) along with TMT owners Brown and Graham in April, 2015 for opening new events on RunSignUp and for allegedly misappropriating Active proprietary information. TMT had originally been a customer of Active, and Frank and Brian had previously worked for Active. Frank and Brian joined RunSignUp as employees in November 2014. TMT, Brown and Graham filed an answer denying all of the allegations and a cross complaint claiming, among other things, that Active failed to provide adequate products and services, failed to pay amounts it owed TMT, and failed to pay commissions owed Frank and Brian.
Active is now attempting to add RunSignUp and Bob Bickel as additional defendants to this suit.
In near parallel another Active customer, 1N3 (owner of the Blacklight Run and other race series), made a decision to move their new races to RunSignUp from Active in early 2015. Active has brought similar allegations against 1N3, and 1N3 has brought similar claims against Active. RunSignUp and Bob Bickel have not been added to that lawsuit, so it will not be covered in this blog.
RunSignUp has given both customers (TMT and 1N3) special pricing consideration based on their volume of business with RunSignUp. They are our two largest customers. The special pricing includes discounts from our normal pricing to offset legal fees they incur in defending the legal complaint by Active. TMT and 1N3 may not otherwise be able to afford to run their business and defend the suit without this special pricing consideration from RunSignUp. When Active brought suit against TMT, Frank Brown, Brian Graham and 1N3, we made a decision to support our employees and customers. We agreed to provide pricing discounts that offset legal fees, although TMT and 1N3 would continue to bear the financial risk of losing their suits..
RunSignUp and I disagree with the allegations in the complaint and intend to vigorously defend ourselves. The TMT trial is scheduled for March, 2017 and there will be a lot of legal wrangling between now and then. As stated in other blogs, RunSignUp is in solid financial shape with very positive cash flow. There are no near term financial concerns for current and prospective RunSignUp customers
Brown and Graham Join RunSignUp
RunSignUp hired Frank Brown and Brian Graham in November 2014. They were two of Active’s top sales people. They had also started a side business called TMT which put on a new race series that has continued to grow. Today they are only part time employees of RunSignUp with few accounts and dedicating most of their time to their race series.
When Brian and Frank joined us we were very cautious about agreeing they would take no proprietary Active information such as customer lists or contacts. In addition, we also were clear we did not want any proprietary Active information and have made sure they never disclosed any of that information to us.
TMT Moves to RunSignUp
TMT decided to open new events on RunSignUp in January, 2015 while leaving existing events on Active. Active and TMT disagreed on the meaning of their contract, however, with Active believing TMT must list all events through Active, and TMT interpreting the contract to mean they could list new events on other platforms as long as existing events remained on Active. In addition, TMT felt that Active was not fulfilling their contractual obligations and in fact was damaging the reputation of TMT by not fulfilling their contractual obligations.
In February 2015 Active sent a letter to TMT stating they should put all events on Active. The TMT lawyer told them that was not the terms in the contract.
Active Turns Off Access to TMT
In early March 2015, Active turned off access to TMT for the races that were open on the Active system. This meant that TMT was not able to serve their customers. TMT thus believed Active had breached its contract with TMT by providing substandard products and services, and by locking TMT out of its own account. TMT thus moved all of its events to RunSignUp.
Active Sues TMT
In Active’s Complaint they state among other things: “Put simply, TMT needed to list its Events though Plaintiff’s (Active’s) Software in order for Plaintiff to generate revenue under the Software Agreement. ”
In addition, Active is alleging: “By utilizing Plaintiff’s (Active’s) Proprietary Information for their own benefit and the benefit of their new employer, disclosing such Proprietary Information to persons outside of Plaintiff’s company, and failing to return such Proprietary Information to Plaintiff, Brown and Graham breached the term of the Employee Agreement.”
In addition, Active is alleging: “Brown, Graham and DOES 1-10 (soon to be RunSignUp and Bob Bickel) conspired to interfere with and induce TMT’s breach of the Software Agreement.”
In addition, Active is alleging: “Brown and Graham erased all data from their company-issued laptops before returning them to Plaintiff, destroying records that belonged to Plaintiff, and retained for their own use certain Plaintiff’s Proprietary Information.”
The full Complaint can be seen here. The full case can be viewed on the San Diego Court website here and here where you will need to enter the year (2015) and Case # – 00011435 for access to all of the documents associated with the case.
TMT Responds to Active Lawsuit
TMT, Brown, and Graham responded by the filing of a Cross-Complaint. There, they allege the following:
- “Active’s effort to misconstrue TMT’s Exclusivity Obligation.” – “This provision does not even purport to require TMT to use Active’s product or services for every event. At most, this term purports to require TMT to use Active’s products and services exclusively for those events for which TMT was currently use Active.”
- “The Failures of Active Products and Services”
- “Active erroneously double registered participants causing them to be charged twice”
- “Active’s system could not process coupon codes from Groupon and Living Social, resulting in participants being overcharged when registering”
- “Active failed to send confirmation e-mails to participants registered for events causing confusion, and in some cases re-registration”
- “Active’s website was down and participants could not register for events”
- “Active’s registration software enrolled numerous unknowing race participants in Active’s separate membership program, Active Advantage. As a result, numerous race participants were unknowingly charged hidden or additional fees while trying to sign up for TMT’s events”
- “Active’s registration software subscribed numerous unknowing race participants for magazine subscriptions”
- “Active’s registration website froze at the final screen before checkout when participants tried to register”
- “Active sent automated “drop out” e-mails to participants fully registered for event – erroneously informing them that they had not completed registration”
- “Active’s system failed to accept valid credit cards”
- “Active’s system did not allow participants to update participant information after registering”
- “Active’s system did not allow participants to delete a ‘race team’ once registered”
- “Active’s system failed to display that participant had successfully registered”
- “Active’s system prompted participant to register children aged eight and younger even though children aged eight and under were granted free admission”
- “Active’s system registered as the participant the wrong individual (the individual being billed as opposed to the participant)”
- “Active failed to answer the ‘ActiveWorks Participant Support” customer support phone line for multiple days”
- “From March 10, 2015 to March 14, 2015, TMT was locked out and denied access to its account in Active’s system while Active continued to sell registrations to events in TMT’s trade names”
- “Active Locked TMT out of Its Account”
- “TMT used Active’s products and services exclusively for all events for which TMT was currently using Active as stipulated in the Software Agreement, not withstanding Active’s breach of its obligation relieved TMT from having to do so”
- “Active’s lock-out of TMT interfered with TMT’s ability to respond to inquiries and concerns raised by TMT customers”
- “State Sanctions of Active’s Inappropriate Business Conduct”
- “Active agreed to pay $237,167.42 to the Iowa Attorney General to reimburse consumers of Active’s ActiveAdvantage membership program”
- “Active agreed to pay $25,000 to the State of Vermont and more than $160,000 to consumers who knowingly or unknowingly signed up for ActiveAdvantage”
- “…made it more difficult for TMT to sign up race participants for its events using the Active platform.”
- “Active’s Failure to Pay TMT”
- “On September 24, 2014, Active recited payment over fifty days late for the Q2 2014 registration revenue rebate to TMT in breach of the Software Agreement”
- “Active refused to remit payments of $19,473.75 to TMT for the Q3 and Q4 2014 registration rebate.
- “From July 7, 2014 to November 6, 2014, Active remitted seven payments late for weekly registration revenues to TMT in breach of the Software Agreement”
- “Facts Common to Active, Brown and Graham”
- “A significant portion of Brown’s and Graham’s compensation was based on the commissions for selling Active’s products and services”
- “It was anticipated that active’s products and services would perform well”
- “From 2012 to 2014, Brown and Graham were both honored as members of the President’s Club – a group designating the top sales performers at Active”
- “Graham received consistent promotions throughout his tenure at Active, including as recently as two months prior to resigning in 2014.”
- “Brown was Active’s Salesperson of the Year in 2013, and he was one of the top sales performer prior to resigning in 2014.”
- “Brown and Graham encountered problems with Active’s products and services that affected their ability to make sales”
- “Brown and Graham encountered several potential customers who would not buy Active’s product after they had heard about Active’s hidden fees and auto-enrollment registration process for ActiveAdvantage, magazine and newsletter subscriptions”
- “Brown and Graham were entitled to a greater commission payment. Active’s system was unable to distinguish adequately between new clients and races for existing clients”
- “Active never provided a means for its employees to track commissions on registration and sales”
- “Active did not pay Brown or Graham their commission owed from their last six weeks of employment at Active.”
- “Breach of Contract – TMT Against Active”
- “Active has breached the Software agreement by among other things, failing to provide adequate support, services, and access to its software and internet platform”
- “Prior to Active’s breach, TMT performed all of its obligations under the Software Agreement”
- “Breach of Contract – Brown & Graham against Active”
- “Active did not pay Brown and Graham their commission owed from their last six weeks of employment at Active”
- “The Employment Agreements and the understandings of the parties … required that Active provide adequate products and services for Brown and Graham to sell to customers”
- “Negligent Misrepresentation”
- “Active made representations to the effect it was able to provide effective and efficient support, services and access to its software and internet platform”
- “Intentional Interference with Prospective Economic Advantage”
- “Active intended to disrupt the relationships (between TMT and its event participants)”
- “Lanham Act”
- “Between March 10, 2015 and March 14, 2015 Active infringed on TMT’s trade names”
- “Unfair Competition”
- “The conduct of Active, as described above, constitutes unfair, unlawful, and fraudulent business practices”
Why Customers Should Stick with RunSignUp
Customers should stick with RunSignUp mostly because we offer technology and services that meet your needs with great customer support and at a very fair price. We think there is little risk that the cost of defending this suit would interrupt the operation of the company, but you should take comfort that our open platform and non-exclusive contracts would ease your transition to another registration platform in the unlikely event that ever became necessary.
RunSignUp believes we have done nothing wrong and have acted within legal and generally accepted moral codes of conduct. We disagree with the allegations in the complaint and will vigorously defend ourselves.