A company that provided administrative and payroll services was acquired by a bank under a stock purchase agreement. The agreement provided for the escrow of $2 million dollars, that was to be released to the sellers after a period of time had passed after the sale. Several months after the sale, a former employee came forward to reveal potentially fraudulent practices on the part of the administrative company. After an investigation by an outside law firm, the bank demanded indemnification from the sellers, but the sellers refused. The bank then sued in an attempt to recover money it had paid out to settle claims with the company’s clients. The district court determined that the indemnification claim was made too long after the bank first learned about the potential issues, but the appellate court found that undisputed facts did not show this to be the case and determined that the district court erred in granting summary judgment.
The Damian Services Corporation provides various administrative and payroll services to independent temporary staffing companies. The baseline level of service that Damian provides is short-term payroll funding to pay the temp agencies’ employees. Damian also offers other services to clients who pay more. Although Damian contracted with its temp agency clients, it invoiced the end-user companies that hired the temporary workers. The end-user employers would then pay Damian, which would, in turn, send the payments to the temp agencies after taking its cut as a fee for its services.
Damian encouraged its client staffing agencies to obtain prompt payment by providing discounts or levying fees depending on how long it took for the end-user employers to pay. These discounts and fees were negotiated independently with each staffing firm. In 2009, Damian changed its invoicing practices in such a way that made it much more difficult for staffing firms to receive discounts for prompt payment and more likely to be levied with fines. Continue reading ›