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A good year for BBB, except for 2 lawsuits

A good year for BBB, except for 2 lawsuits

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This year, the St. Louis Better Business Bureau was honored for its consumer advocacy work with awards from the Missouri attorney general's office and the BBB's national council.

But those attaboys aren't the only feedback that the watchdog group received in 2010. The BBB here has been sued twice this year by companies accusing it of unfairly tarnishing their reputations.

On Dec. 8, St. Louis County Circuit Judge Tom DePriest Jr. dismissed one of those cases. The suit, by Overland-based Castle Rock Remodeling, accused the BBB of libel and tortious interference.

Castle Rock once had a good relationship with the BBB; and the company's president, Jamie Hart, had served on the group's dispute-resolution committee. In an Aug. 18 story about the suit, Hart said BBB officials developed a grudge against him and targeted his business after he complained that other remodeling companies were getting better treatment.

Days later, he said, the BBB asked Hart to voluntarily surrender his company's accreditation. One month after he did so, the company's BBB grade was lowered to a D-plus because of BBB concerns about Castle Rock's advertising.

The BBB maintained that it followed proper procedures.

St. Louis BBB President Michelle Corey said DePriest's decision to dismiss the case shows the group did nothing wrong.

One week after the dismissal, a company that puts on talent competitions for children sued the St. Louis BBB for $75 million.

The federal suit, filed by three related companies involved in the for-profit competitions, alleges defamation and tortious interference. The companies allege that the St. Louis BBB knowingly spread false information about the contests which led to consumers canceling contracts and at least two convention centers refusing to book future events.

The talent competitions are put on by an outfit called "The," which is supposed to be pronounced "tay." According to the suit, The is a venture of three Delaware companies — New York Studio, Atlas Intellectual Properties and Rise of the Phoenix — and each are owned by a man named Michael Palance.

The phone number listed on the The website was not answered, and an automatic response to an e-mail sent to the company said its offices would be closed from Dec. 15 through Dec. 27. David Wasinger, a St. Louis lawyer who filed the suit here, would not comment on the case. He referred me to David Ludwig, a lawyer based in the Washington suburbs. Ludwig could not be reached for comment.

The suit deals with the St. Louis BBB's effort to warn parents about a The competition on Aug. 14 in Chesterfield.

The day before that event, the BBB put out a press release. It described the busineses as "a sometimes-controversial Arizona company" and said that, in May 2009, it settled a legal fight with Connecticut Attorney General Richard Blumenthal by agreeing to give consumers refunds and pay $25,000 to the state.

"The company has an "F" grade with the Phoenix BBB, the lowest grade possible," the press release said.

In an Aug. 14 Post-Dispatch story, the BBB warned parents to think twice before taking their kids to competition in Chesterfield. Bill Smith, a BBB investigator, said in that story that the purpose of the free event is to sign up kids at other events that do cost money.

(When reporting on that story, the Post-Dispatch called the toll-free number for The. The operator who answered said she didn't know anything about the event and hung up.)

The problem, according to the suit, is the BBB based its criticism of The on outdated and false information.

In August 2009, one of Palance's companies bought the The trade name from a Nevada company called NedGam Productions.

Under NedGam, The had racked up BBB complaints and was investigated by Blumenthal's office. Additionally, the suits says, the BBB classified some consumer complaints involving an Arizona-based NedGam affiliate as being against The.

But, by August of this year, NedGam was out and The was a completely different operation, according to the suit. It noted that one of Palance's companies had "invested significant resources in improving The's reputation," but did not offer details.

Interestingly, the suit doesn't seem to challenge the BBB's main beef with the free competitions — that they are, in effect, marketing events designed to convince parents to enroll their kids on out-of-town events that do cost money.

According to the The website, prices for those competitions start at $1,950.

Corey, of the BBB, would not discuss the suit's allegations. "Our position is we stand by our warnings," she said.

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