ComputerLand Settles Suit for $30 Million

A $30-million settlement has been reached in a lawsuit filed by ComputerLand Corp. franchise operators against the company, the nation’s largest franchised retail computer store chain, it was announced on Monday.

The settlement with the 800-store company provides for a permanent contractual reduction in franchisee royalty rates to 5% from 8%, according to attorney Norman Stone, who represented the plaintiffs in the class-action suit.

The company also agreed to forgive $5.2 million in debt from past franchise holders and pay $720,000 to all franchisees.

The reduction in royalty rates “represents a savings of about $23.4 million to member franchisees” over the next three years alone, Stone said.

ComputerLand attorney Edward Keech said that “broadly defined, the class represents all present and former U.S. franchisees.”

List of Grievances

The suit was initially filed in 1984 by Michael Belling and Kenneth Klein, the former operators of ComputerLand stores in Marin County, Calif. They alleged that the company failed to ship them products, leading to lost profits and eventually the failure of their stores.

A class action was filed a year later on behalf of all stores worldwide, said Ralph Miller, a spokesman for the plaintiffs. He said the action was cut to only U.S. store operators, which “meant about 500 people.”

The suit also contended that ComputerLand failed to pass on inventory and supplies at cost, did not obtain the best prices available for the benefit of franchisees, failed to pass on discounts to the stores and did not take favorable trade terms when offered by suppliers, Stone said.

As part of the settlement, Keech said, ComputerLand received a release from the plaintiffs giving up their right to sue the company.

The cash portion of the settlement comes from insurance funds, Keech said.

The lawsuit was one flare-up in several years of stormy relations between ComputerLand Corp. and its franchisees.

In September, 1985, the franchisees demanded and received the resignations of controversial founder and Chief Executive William H. Millard and his daughter, Barbara, as president, after they refused to cut franchise fees in the midst of a computer slump.