About Pallotta Teamworks: Decision (2005)
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In July of 2005, three years after the suit was filed, and after sixty-six full days of hearing and testimony that lasted over two years and generated a 22,000-page record, an independent arbitrator ruled in Pallotta TeamWorks' favor on the breach of contract claim.
He acknowledged that Avon "entered into multiple contracts containing idea protection provisions over the course of four years..." He stated that the contract on which we sued "precludes Avon's unauthorized use of the 3Day event and/or event concept and certain fundraising and marketing tools." He further stated that, "PTW has shown by a preponderance of the evidence that the two events are the same in material respects [...] The nature of the events is the same [...] The structure of the events is the same in material respects [...] In addition, certain other important features are the same..." He also stated that, "The Arbitrator finds that the Avon Walk is the same as the 3Day in material respects and, therefore, that Avon has made an unauthorized use of a protected idea." He found that an Avon consultant's (who was a former Pallotta TeamWorks' senior executive) memo stating that the "2-Day walk concept" is "basically the 3-Day concept shortened to 2 days", "supports the PTW contention that Avon appropriated the 3Day event." He also found that, "PTW has proven with the requisite certainty that Avon's breach of Section IB.7.2 is the actual and direct cause of PTW's loss of the [charity] opportunity" referring to the loss of the new charitable partner Pallotta TeamWorks was hoping to do the events with in 2003, and that, "Absent the breach, [charity] would have entered into a contract with PTW and the contract would have become effective."
As for Avon's $20 million counter-claim, after an exhaustive review, the arbitrator denied all but $474,361 of it, about half of which related to a dispute over which entity owned the giant dining tents used for the events. With respect to Avon's $8.4 million claim related to the method by which Pallotta TeamWorks allocated costs to its events, the arbitrator found that, "PTW did not violate the contract" and that, "PTW did not violate its fiduciary duty to Avon" and that, "Avon has not shown that PTW violated the Contract with respect to any of the charges allocated to Avon in 2002." With respect to Pallotta TeamWorks' cost allocations, he further stated that: "PTW sent to Avon very detailed invoices and other documentation that reflected the precise percentages charged to Avon for a particular cost under the fairness split. As a sophisticated entity, Avon had the capacity to understand what it was being charged [...] PTW fulfilled whatever fiduciary obligation may have existed to make full disclosure of the relevant facts. He also stated that, "PTW did not act improperly." Avon also claimed it was owed $9.3 million related to invoices, expense documentation, and final reports Pallotta TeamWorks never provided to them. Pallotta TeamWorks argued that it could not provide the invoices in large part because of the disruption Avon had caused in its business.The arbitrator found that the "documents Avon sought should have been provided." And that, "The Arbitrator further finds that PTW's explanations may excuse a late provision of the invoices and reports, but cannot excuse a total failure to provide documentation." However, the Arbitrator concluded that, "while Avon was entitled to an accounting of the $9,310,923 for which no invoices had been filed, PTW provided such an accounting at the Arbitration Hearing. Avon is not entitled to any further relief with respect to this claim."
