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Press Release

Nation's Largest Appliance Parts Distributor Wins Key Legal Victories in Corporate Espionage Case in New York State

Marcone Supply claims loss of over $12 million in lost sales due to client poaching by competitor 1st Source Servall

PR Newswire

BUFFALO, N.Y., March 21, 2011 /PRNewswire/ -- New York Supreme Court Justice John Michalek has unsealed a decision barring Michigan-based 1st Source Servall from soliciting business from some 640 customers of Marcone Supply, headquartered in St. Louis, MO., throughout New York State and the Northeast Region.

A New York appeals court panel has refused to stay the lower Court's preliminary injunction which bans solicitation of sales from customers whose identities and financial histories Servall's managers admittedly stole.

"We believe in fair and open competition. We have never seen acts of dishonesty, theft, and corruption like this in our industry," said Dave Cook, Marcone Senior Vice President, a 35-year veteran of the appliance parts industry.

Attorney James D. Donathen, a partner with Buffalo-based Phillips Lytle LLP, one of the region's top law firms, is representing Marcone and called this a "classic case of corporate espionage."

"This is the tale of two appliance parts distributors who moved to expand in the Northeast.  The first was Marcone who expanded the old fashioned way, it purchased an existing Company – AP Wagner – for a substantial sum.  The other, Servall, took an easier and cheaper route, it hired away several of Marcone's employees and connived with them to steal virtually all of Marcone's customer information and plug it into Servall's system," Mr. Donathen said.

The misappropriated information included not only a list of 3,300 AP Wagner customers, but also all of the confidential and proprietary records concerning sales to date information, receivables and account aging, pricing, credit limits, account numbers and margin (profit) information on each customer, according to Marcone's attorney.

"The undisputed evidence shows that Servall then used this information to set up its business virtually overnight, and began to solicit sales from Marcone's customer base in New York and elsewhere throughout the Northeast," Mr. Donathen said.

The stolen customer list includes appliance retailers and repair firms located in Western New York, Pennsylvania and the Eastern U.S., who became Marcone clients in January 2010 when the Missouri company acquired Buffalo-based AP Wagner.

Marcone filed a civil lawsuit against Servall in July 2010 after it discovered the pattern of illegal activities affecting thousands of customers and resulting in the loss of at least $12 million in sales in 2010.

In his ruling, Justice Michalek found that Servall Executives Mark Creighton and Karl Rosenhahn – both based in Buffalo, intentionally destroyed evidence of their theft of proprietary information in an attempt to cover up their unlawful activities.

The Court also found that Creighton, Rosenhahn, and Servall Chief Operating Officer Kevin Sullivan repeatedly gave false or misleading testimony to the Court in an effort to conceal and deny their misconduct.

In his ruling, Judge Michalek found that Marcone established by uncontested evidence the likelihood that it would prevail in its claims for theft of corporate property and unfair competition.

The Court's decision allows Marcone to build business relationships with the accounts covered by the Court's ruling and to pursue recovery of its losses from Servall, Creighton, and Rosenhahn in further proceedings before Court.

Servall is appealing the State Supreme Court ruling, but lost an important opening round when an Appellate Division panel denied Servall's motion to stay the ban on customer solicitation while the appeal is being heard.  Marcone is confident that the Court ruling will be upheld.

Founded as the Buffalo Washing Machine Repair Co., in 1928, AP Wagner was owned and operated by three generations of the Jarmusz family. Over the years, AP Wagner grew into one of the nation's largest appliance part distributors.

Marcone has built on AP Wagner's success by establishing Buffalo as its Northeast Regional Headquarters, at a newly-opened facility at 307 Cayuga Road, in Cheektowaga.  The company operates retail and warehouse facilities that include a regional call center, as well as IT, marketing and training programs.

Established in 1932 by Harry Markow, Marcone (www.marcone.com) was founded as a door-to-door seller of rebuilt vacuum cleaners.  The family-controlled company is now the nation's leading distributor of appliance parts and accessories, and a rapidly growing player in the heating, air conditioning and property management sectors. Marcone is known as the No. 1 product support company in the U.S. with world-class service.

Marcone operates 60 locations, in the U.S. and Canada, with a workforce of nearly 800.  The foundation of Marcone's success remains the belief that "Good people make a Great Company."

Contact: David Ganz
Marcone Supply
314.817.1451
dave.ganz@marcone.com

SOURCE Marcone Supply