A key aspect to the legal battle between Sears, Roebuck & Co. and Focus Media is the issue of who a client's cash belongs to once it is turned over to a media company.
Sears, Hoffman Estates, Ill., filed a lawsuit alleging at least $3.5 million in media payments had not been paid by the Santa Monica, Calif. company on the retailer's behalf. "It is Sears' practice to pay Focus within 30 days of receiving an invoice," according to the lawsuit. "Once Sears pays Focus, it is Focus' responsibility to pay the media outlets."
In a counterclaim filed last week, Focus argued the money belonged to the agency and also alleges "an attempt by Sears, a massive international corporation widely known for its rough, predatory and fraudulent practices, to drive a small California firm out of business." The suit also names Sears marketing executives Perianne Grignon and David Selby as defendants.
Focus also claims that its conflict with Sears derailed a potential merger with a larger organization, identified by sources as what is now Initiative Media.
Sears was expected to file a response in California Superior Court late Friday. "Sears views the allegations as completely unfounded and will respond promptly to them," a representative said.
The court is expected to rule early this week on whether to lift a temporary restraining order freezing the money or to issue a preliminary injunction. The court is also expected to rule on Sears' request for an immediate accounting of all Focus' assets.
The battle could have implications for the media world, even though legal precedent and industry rulings make the media agency responsible for media payments.
"Wherever there's aberrant behavior, all advertisers raise an eyebrow and start wondering how their billing process is going, even if there are no mistakes and nothing needs fixing," one media executive said. K