A Call for Legal Help

[Jo Anne Schnepp]

Hello,

I am a new poster and I am NOT an attorney either. I have been a dealer since 1998, and just looking at my situation alone, I would think fraud had been committed. My last order for a bridal gown was placed in mid APRIL!! The bride paid me in cash, I paid DBS in cash. I applied for my commission the end of APRIL or first part of May. I got my sales tax rebate check and both were mailed at the same time. I have not received the commission check for April yet.

I just learned this morning that Demetrios is sitting on my bride's gown...WAITING FOR PAYMENT!! The gown is due to be delivered August 15th and it is sitting there ready! The bride's wedding is September 9th!! So....even though we all paid for this gown back in APRIL....we still have to pay for it again, plus rush shipping too, in order to get it by August 15th!! This IS unbelievable to me.....that they didn't pay for that gown soon after I paid them for that gown! I understand doing books and paying bills the end of the month and stuff....but this is the middle of JULY now. The bill should have been paid by sometime in MAY. And then, if they knew in early June they were going to close, but still took money until the middle of June....and never told any of US...well what is that if it isn't fraud and down right stealing????

There must be someone among us who is married to an attorney or has one in the family? I read a couple posts of dealers who had already contacted attorneys...so maybe they will respond to this also.

JoAnne
[email protected]

[Randy]

I am an attorney and married to a relatively new DBS dealer. I am licensed to practice in Louisiana, not Maryland (where I understand DBS is located). Therefore, I cannot give legal advice for claims that will probably have to be brought in Maryland, where I understand DBS will file for Bankruptcy. However, I will attempt to give a few general principles that apply to Bankruptcy.

We do not know all the facts yet. However, you all raise several good points. It does appear that DBS acted in bad faith, and possibly fraudently, by keeping funds that were knowingly due manufacturers long ago. I am informed that DBS kept funds for up to 3 months after receipt, and they do not plan to refund any payments, including sales taxes. DBS took new orders (one submitted by my wife in March) and conveninently kept all of the funds, without any payment of commissions, manufacurers bills or sales taxes. They failed to notify dealers, brides or anyone else of any financial problems, and finally went on vacation for two weeks, without a word to anyone (except their bankruptcy attorney)to plan the demise of the company. This would all appear to be part of a fraudlent scheme for the owners of DBS to pocket as much of your and the brides funds as possible, before the whole mess came to the surface.

Now, what can you do about it. If possible, collectively hire a Bankruptcy Attorney to help investigate the matter, file a claim in bankruptcy (called a Proof of Claim) and advise you in this matter. If you all group together, this may be cost effective. However, it would probably not be cost effective for each of you to hire an attorney. You should note that usually a bankrupt company has little assets and only a few cents on the dollar are collected by creditors, if anything. A Bankruptcy Attorney will not be able to change those facts. However, as discussed below, an attorney may help you prove that a "fraudlent conveyances" or "preferential payment" was made, and those amounts would be returned to the estate of the debtor, to be split up between the creditors.

What is a fraudlent conveyance or preferential payment and how do you prove such things? First, you must gather as many facts as possible. I know emotions are running high about this, but you must keep a cool head and gather information. If you are going to prove that fraud was committed, you will need facts to back it up. Those facts will likely have to come from people that worked for DBS, who know the prior standard practice, and how it may have varied in the last year or so.

Based on the facts gathered, you will have to prove what happend with all this money that DBS received in the past year. Did they pay themselves or a related person or company (a "fraudlent conveyance") or possibly pick a supplier or creditor that was paid in preference to all other creditors (a "preferential payment"). If you can prove these things, the Bankruptcy Court can require that the money be returned to the estate of DBS and refunded to its just creditors (brides who paid DBS, Manufacturers, brokers, taxes, etc...).

There may also be criminal charges that can be brought against DBS, if the facts show intent to defraud. It would be great to get Fox News (someone like Bill O'Relly) to investigate the matter. However, for any criminal charge to be brought, you would need to convince a District Attorney that a State or possibly Federal crime had been commmitted. This again takes facts to back up the charge, and the people inside DBS (including their employees and officers)have most of that information.

I hope this helps a little. The bottom line is that someone needs to take the lead in gathering facts. If you know a prior employee at DBS or other person with facts, get them to provide you with as much information as possible.

Good luck to you all. I know first hand that this is a terrible situation. I hope that justice will prevail in the end.

[Left Holding the Bag]

Randy, thanks for the excellent, informed response. I also hope that justice will prevail.

[JoAnne Schnepp]

RAndy,


I took your advice and sent a long email plus the links to various parts of this web site to Bill O'Reilly just a little while ago.
Hope it sparks someone's interest there at Fox News.


JoAnne

[Erica Teach]

Hi,This is Erica a bride in Virginia. My wedding is in 2 weeks
(July 30th)!!!!!!!!! and my bridesmaid dresses have not been shipped
yet. Luckily Dessy has my dresses in the sizes that I need
and they are going to mail them tomorrow.
It looks like I (my parents) may have to front the money and
then try to battle it out though a claim with DBS. I feel
like Dessy needs to send me my dresses for no charge and then
they can go to court with DBS. It isn't my fault DBS did not
pay Dessy. Each of my attendants wrote separate checks and
they were cashed 3 months ago in April. So, you can imagine
if I had to try to track down each of thier individual bank
account information regarding those checks and then trying to
get the money to give to my parents who are going to pay for
the dresses. I have cried more than once today. Great time
for DBS to go out of business, huh? In the height of the
wedding season. Dessy has been very helpful and it looks like they do have my order with correct sizes. THANK YOU so much for your helpful information Randy. I will possibly try to post again after my wedding and try to figure out everything!

[concerned dealer]

I am (was, I guess) a DBS dealer and definitely not a lawyer either, but I think it would be difficult to prove fraud against DBS. We can only hope that the bankruptcy judge will require a good forensic accountant to look over their books for the last year and maybe beyond, to determine if the "owners" were funnelling any money out by ways of large bonuses, raises, large payments to some creditors but not others, etc. If that's the case, there should be enough evidence to convict and go after the personal funds that were earned (or stolen from) DBS.

I don't think their dealings with the limited manufacturers could be called fraud. I do believe in America that if you pay for something, it is yours to sell as you please. If DBS never signed any agreements with the limited manufacturers, then it's not fraud because they never agreed to anything. All they did was pay someone else for property, which they are then free to sell. If anyone committed fraud in this case it is the authorized dealers who did sign a contract with the limited manufacturers and sold the gowns to DBS anyway. And DBS did have many authorized dealer relationships with many manufacturers. I have called multiple manufacturers for my stranded brides and they are fully aware that the order was placed by DBS.

Unfortunately, there probably isn't any fraud with taking orders recently, unless of course it can be proven that DBS intended to declare bankrupty and still continued to take funds from brides and dealers. This would be really hard to prove (unless money was being funnelled out), as changing one's operating procedures does not necessarily mean that you intend to declare bankruptcy. Sometimes it just means that things have to change to prevent bankruptcy. I do find it very suspicious though that DBS never changed some obvious operating procedures that anyone would change if faced with a financial crisis. Why didn't they raise the prices on the gowns significantly? Why didn't they institute some sort of order fee? Why didn't they cut the number of lines they carried to reduce the seasonal expenditures, and just keep the high volume manufacturers? Why didn't they institute a dealer annual renewal fee?

But all these things don't necessarily constitute fraud - being bad at business doesn't mean you actually tried to fail. I see bridal shops in my area go out of business (and mind you, these are the brick-and-mortar authroized retailers) every month, leaving dozens of brides stranded. DBS just seems so much more catasrophic because it was so large and had so many orders. I actually find it hilarious that these authorized retailer hypocrites that say the brides deserved that are posting such comments. They are just as, if not more, likely to declare bankruptcy at any time without warning. Criticizing someone else's business practices does not make yours successful. If you can't handle a free market, then stop complaining and get out.

DBS was a great company while it lasted and took care of its brides. And we dealers are still taking care of our brides. I have personally put up thousands of dollars to have gowns released, even though I will probably never see that money again. But that's what we DBS dealers do, take care of our brides in any way that we can. Try to find a brick-and-mortar authorized retailer that will do that.

[fussenk]

On June 10, 2005, they accepted my application and my dealer fees to become an authorized dealer. The "training seminiar" was cancelled and my money was supposed to be refunded because the reps "mother was sick" Fraud? Oh, yes, I think so. I found out they were bankrupt when the rep told me the best way to recoop my money was to file a dispute with the bank. When I asked why, she gave me the bankruptcy attorneys' information - that's how I found out. Isn't that nice?

[mcb_smith]

One thing to note:

I'm a 3rd year law student, and my emphasis is criminal law, so I don't know anything about bankruptcy law, but I do remember in Contracts that if brides keep the gowns that DBS sent them as a "gift," they are accepting the terms of a modified contract. This means that will have no claim to the money they paid, because they are in effect saying that this gown satisfies the order. If anyone plans to take legal action to recover the money, they will need to return the dress explaining that it is not what they ordered and that they do not accept it as a fair substitution. Again, I'm not a lawyer, but it seems to be that DBS had very good legal advice and sent these gowns to try and block claims by brides.

[yitlan]

>if brides keep the gowns that DBS
>sent them as a "gift," they are accepting the terms of a
>modified contract. This means that will have no claim to the
>money they paid, because they are in effect saying that this
>gown satisfies the order. If anyone plans to take legal action
>to recover the money, they will need to return the dress
>explaining that it is not what they ordered and that they do
>not accept it as a fair substitution.

How should I advise my brides then? If they send the dress back to Baltimore, is there anyone/thing there to accept the delivery? Do they just need to show proof that they returned the dress (UPS tracking or something?) and a copy of a letter stating why if they choose to file a claim?

Anyone have any thoughts?

[concerned dealer]

My brides have had the same problem. I have told them to send the gowns to me, since I guess we dealers are the only DBS "contact" that the brides can get. I am thinking though, that I will have the ones that were charged through DBS and those that paid cash to send theirs to the DBS attorney's office. Let the attorney deal with that, since they were the sneaky ones who probably advised DBS to send unwanted replacements... I would definitely keep proof of delivery for the credit card company/bankruptcy court though.

[mcb_smith]

Yes, any kind of paper trail you can make showing a good faith effort to return it and tell DBS that you do not accept it would be helpful. I forgot to mention in my earlier post that I'm also a bride stuck with a gown I didn't order, and my fiance and I are both law students so we immediately started looking at the legal angle of what to do with the dress. He's the tax/estate/bankruptcy guru, and it was he who realized what they were probably trying to do by sending these substitute gowns.

Sending the gown to the dealer or to the physical address of DBS (even if no one is there to accept it) should work, as well as sending email or letters to the dealer and DBS indicating a rejection of the offer. Even you are not successful in actually returning it, making the best effort to return it and communicate the rejection might preserve the claim.

I'm afraid of stepping over any bounds of the advice I should be giving as a law student, but I want to make sure you all have the information you need to take care of this. But, Disclaimer: I'm not a lawyer yet, and I'm only licensed to practice as a student in Arkansas, so the things I'm telling you are based on general principles of contract law as I understand them.

[Left Holding the Bag]

First, I should point out that I am not an attorney nor in any way an expert on legal matters. So take what I say with a grain of salt. It is my understanding that in most states, bankruptcy only protects the assets of the owner from being part of the settlement where there has not been "fraud or willful criminal activity." Based on some troubling posts on this board, it's not totally clear there has not been some degree of fraud. Here are the questions that have arisen in my mind:
1. At what point did bankruptcy seem imminent, and did DBS continue to accept payment after this point?
2. Did DBS actually have a relationship with the manufacturers, as Dealers and Customers were led to believe? If so, why all the secrecy with the "verbal quotes" and "limited" manufacturers?

I am posting these questions in hopes that someone with a legal background will comment, or someone who understands the workings of DBS can answer my questions above. Again, I am not an attorney nor a legal expert.

[joannes]

So, it looks like to me, we need those couple lawyers who were married to DBS dealers to get in here and back up these two law students. My guess is they are on to something. WHY ELSE would DBS, out of the goodness of Sandy and Lennie's hearts, have cleared out all the inventory in their warehouse or where ever these gowns were....and then send brides gowns that, from what it sounds here, were not really even similar to the ones they ordered for most of the brides responding in here. And if we, as Dealers, are taking these gowns on consignment or whatever, and perhaps putting these brides at risk for having a claim, we need to be sure we are doing the right thing.

Perhaps someone from the Service Center has some knowledge of the whys and wherefores of the decision to mail 'comparable' gowns out to brides. But, then they may not have been made aware of why, if it was on advice of their attorney!

I would certainly be writing the letter of protest right away...even if the gown has gone to your dealer...because you can always protest the receiving of a comparable gown, and then be asking "How do I return it"?? And, yes, probably the answer will be for the dealer to take care of it, since we were the contact between DBS and the Bride, even though the gown had been mailed directly to the bride.

JoAnne