A case filed against national chain Ace Hardware in Springfield, Virginia could be the trigger for a class-action business law violation lawsuit. The case in question was filed by a family-owned business called Fischer Hardware.
The owners, Roy and Pattie Ewers, filed suit in a federal court alleging that Ace Hardware used fraud and deceit in a deliberate bid to bring down Fischer Hardware, a 60-year old independent small business.
The Ewers bought the Fischer store three years ago after being convinced by Ace executives that turning the store into an Ace franchise would boost sales. The court documents allege that Ace falsified financial documents and inflated revenue projections to get approval from a bank in Arlington for a $1.8 million loan and a loan guarantee by the U.S. Small Business Administration (SBA).
The Ewers say an Ace manager admitted as much and said that he had been ordered to do whatever it takes to get the franchise up and going. After the store reopened as a franchise, it immediately started losing money. The Ewers claim this is because of a faulty inventory system used by Ace that lets customers underpay for products.
Fischer Hardware was forced to seek bankruptcy protection and has laid off more than 70 percent of its staff.
Similar complaints have been alleged in a class action suit against Ace Hardware filed last year in the U.S. District Court for the Northern District of Illinois. The class action alleges that plaintiffs became franchise owners of the Ace Hardware "Vision 21" stores after being provided with falsified financial information about the success of new or converted Vision 21 stores.
Ace Hardware allegedly provided them with average numbers that did not include failed stores, and other data was falsified to support the artificially boosted success rate and sales figures.