Postal Service Franchiser, Encino Firm Being Sued
A fledgling Encino company is embroiled in a $4-million legal fight among the original stockholders of Mail Boxes Etc., a fast-growing franchiser of postal-service stores.
Mail Boxes Coast to Coast (MBCC), a separate company based in Encino that is the exclusive Los Angeles area franchisee for Mail Boxes Etc., and MBCC Chairman Herbert Goffstein are among the defendants in a lawsuit filed by Nancy Tash.
MBCC owns the rights to sell individual Mail Boxes Etc. franchises within its geographic area. As of June 30, MBCC had sold 27 franchises in the Los Angeles area and another three in parts of New York City. MBCC also operates two Mail Boxes Etc. stores itself, one in Encino and one in Manhattan.
Tash, who lives in St. Louis, is the daughter of the late Gerald Aul, who in 1980 helped organize the predecessor company to Mail Boxes Etc. She was one of the predecessor company’s stockholders.
The other defendants in the suit are Mail Boxes Etc., based in San Diego, and its president, Anthony DeSio.
The suit, filed Sept. 11 in federal court in San Diego, alleged that DeSio and Goffstein tricked Tash into selling her 700,000 shares of the predecessor company to DeSio for 50 cents a share in 1983 when, the suit contends, the stock actually was worth at least $3 a share.
Mail Boxes Etc. later went public in June, 1986, by selling 750,000 common shares for $11 each. Since then the stock has climbed as high as $19.75 a share, but closed Monday at $12 in over-the-counter trading.
Tash’s suit seeks compensatory and punitive damages totaling at least $4 million. But it also wants Mail Boxes Etc. to set up a trust for the benefit of Tash, her two brothers and their mother. The trust amount would be decided in court.
Termed ‘a Fair Price’
DeSio was traveling and was unavailable for comment last week. But Michael C. Hill, Mail Boxes Etc.’s corporate counsel, said Tash “got a fair price for her stock.” He added: “We didn’t do anything wrong and don’t believe there is any merit to the lawsuit.”
Goffstein said he had no comment because he had not yet been served with the suit.
Mail Boxes Etc.’s franchised outlets bill themselves as alternatives to the U.S. Postal Service. They rent mailboxes, ship parcels, sell mailing and office supplies and provide a variety of communications services such as wire transfers of money and document facsimile.
Similar stores have sprung up around the country in recent years, including The Postal Box, Pak Mail and The Mail Shoppe in the San Fernando Valley. But Mail Boxes Etc. is among the most successful. Its sales for the fiscal year ended April 30 were $8.7 million, contrasted with $2.2 million three years earlier.
Area franchises, such as MBCC, help sell the individual operating franchises--the actual stores--within their areas of the country and then provide them with support services. As of June 30, there were 93 firms that had the rights to sell Mail Boxes Etc. franchises within their areas of the country, with a total of 430 stores up and running.
Mail Boxes Etc. makes most of its money from franchise fees and from selling supplies to the stores. An area franchise like MBCC, meanwhile, earns a fee from Mail Boxes Etc. for selling the individual franchises in its area, and it can make additional money if it operates its own stores.
MBCC also is publicly held, after selling 300,000 units for $6 apiece in June. Each unit included five common shares and five warrants. The stock is trading at about 87.5 cents a share, and the warrants are quoted at about 25 cents apiece.
As with many start-ups, MBCC is not yet profitable. In the first half of 1987, it lost $156,119 on revenue of $503,324.
But the company’s balance sheet is strong. As of June 30, MBCC had three times as much equity as debt. And it had the rights to sell Mail Boxes Etc. franchises in the two biggest cities in the United States.
Source of Dispute
The current lawsuit stems from when DeSio and another stockholder, Janie D’Addio, who together owned 27% of the stock of Mail Boxes Etc. USA, bought out the other stockholders--including Tash and Goffstein--in 1983 and formed what is now Mail Boxes Etc.
Tash’s suit alleged that DeSio and Goffstein defrauded Tash by “deceitfully inducing her to sell” her stock with suggestions that the company was in financial trouble and that she might face “dire economic loss” unless she sold her shares to DeSio. In fact, the suit claimed, Mail Boxes Etc. USA was a robust, rapidly growing enterprise.
(D’Addio was not named in the lawsuit. She also sold her stock in the company in 1985.)
The suit also said Tash agreed to sell her shares only on the condition that all the selling stockholders be treated equally. The suit alleged that DeSio “promised that everyone would be treated exactly alike,” but that Goffstein later received “special benefits”--valued by Tash at more than $1.5 million--from Mail Boxes Etc. for his shares.
Among the benefits cited by Tash were transactions that also were disclosed in documents that Mail Boxes Etc. and MBCC filed with the Securities and Exchange Commission. They included a five-year agreement for Goffstein to be a consultant to Mail Boxes Etc., under which Goffstein was given a company-paid car and insurance.
In addition, Mail Boxes Etc. gave Goffstein the option to acquire its Los Angeles area franchise, excluding the Valley. He exercised the option in early 1984 and bought the area franchise with no money down and a $250,000 promissory note.
After buying the Los Angeles area franchise, Goffstein joined with Gary Williams, who owned the Valley area franchise, and they formed MBCC. Then last year they acquired the franchise rights for the three boroughs in New York City.
