MADISON, WI (BRAIN)—Trek Bicycle Corporation is suing the former owner of an Illinois concept store alleging he failed to pay $380,000 in bills and inappropriately siphoned money from the business to pay personal expenses.
Trek filed the breach of contract and breach of personal guaranty suit against TBS of Highland Park, LLC, Rodney A. Riley and Stacy M. Riley on Feb. 18 in Wisconsin District Court.
According to the suit, Trek entered a dealer agreement with TBS, and its manager Rodney A. Riley, on Jan. 21, 2008 to open and operate Trek Bicycle Store in Highland Park, Illinois. Riley was responsible for the day to day operations of the store including hiring employees, placing orders, tracking inventory and paying bills.
The shop opened in spring 2008, and TBS began regular purchases from Trek.
By early 2009, TBS had fallen behind on its payments and was not providing complete or accurate financial statements to Trek as the dealer agreement required.
During the spring and summer of 2009, Trek repeatedly requested TBS pay its past due account. TBS failed to bring the account current and asked for several extensions to satisfy its debt. TBS also assured Trek that the shop had sufficient inventory to pay its debt.
In August, Trek agreed to provide TBS with a time extension in exchange for an updated inventory list and a personal guaranty of payment by Riley and his wife, Stacy.
After the personal guaranty was signed, Trek provided TBS with an extension through the summer and into the fall. In November, Trek audited the store and found that TBS’s inventory was approximately $200,000 short of securing the debt to Trek, which at that time was $439,609.70. More than half of that was past due.
Trek alleges that Riley had for a number of months been inappropriately taking money from TBS to pay for his personal expenses and expenses of his other business ventures, in an amount in excess of $150,000.
On Nov. 18, Trek notified TBS that it was terminating the dealer agreement and demanded repayment of the debt. Since then, the Rileys have not made any payments to Trek, the suit says. As of Feb. 9, they owed $380,000 with interest accruing at a rate of 1.25 percent a month.
Trek is asking for a judgment against TBS and the Rileys of no less than $75,000 plus interest and attorneys fees and other legal expenses.
As of Wednesday, the Rileys had not responded to the suit, but have until March 12 to do so. A phone number listed for Rodney A. Riley in Park City, Utah, where the couple lives, was out of date.
Trek Bicycle Store of Highland Park remains open as a concept store under new ownership. The current owner has signed a new dealer agreement with Trek and has established new credit relationships with all other suppliers of product sold through the store.
In other legal news, a separate case involving Trek was closed this week when a district judge in Wisconsin dismissed a trademark infringement suit leveled by Trek last fall against Trek Winery, LLC. The judge ruled that Trek did not prove that the California winery’s owners have sufficient contacts in Trek’s home of Wisconsin to satisfy personal jurisdiction requirements necessary for the case to proceed.