LG Files Counterclaim vs. Promotions Firm That Sued It for Breach of Contract

LG filed a counterclaim and third-party complaint Dec. 22 against a Florida marketing and promotions company that sued it in October in a breach of contract suit claiming the electronics company owed it “millions of dollars” for unpaid invoices (see 2310270007). LG’s counterclaim was attached to its motion to dismiss with prejudice (docket 2:23-cv-21528) GS Line’s (GSL) fraud suit against LG and its Mobilecomm subsidiary, and for an award of attorneys’ fees costs and other relief in U.S. District Court for New Jersey in Newark.

LG retained plaintiff GSL, based in Altamonte Springs, Florida, on multiple occasions from 2015 to 2020 to provide marketing and promotion services, said GSL’s October complaint. The company regularly invoiced LG for its services and “several layers of LG personnel,” including directors and vice presidents, reviewed contracts, it said. LG personnel also conducted several audits of GSL’s invoices and services, the complaint said. From 2015 to 2020, LG “voiced no objection to any GSL invoice or service,” it said.

Under terms of the contracts, GSL was to have been paid for its services within 60 days of LG’s receipt of its invoice, but LG “routinely failed to pay” the invoices within the required period, the complaint said. The complaint listed some invoice numbers for unpaid bills with amounts of $145,114.07; $353,700; $188,882.71; $400,000; $24,500; and $20,515.27.

When GSL pressed LG for payment of the overdue invoices in June or July 2020, “LG repeatedly demanded that GSL provide it with documents and other information,” the complaint said. “As GSL responded to one request, LG made another request, demanding still more documents and information,” it said. LG also questioned current and former employees about their business and professional relationships with GSL and its owners, the complaint said.

In its counterclaim and third-party complaint, LG alleges GSL and defendants GSL' owners Anthony Rossi and Deborah Rossi, along with Brian Normann, Justin Bliss, Adam Garcia and Hurley Marketing Group, were involved in an “overbilling scheme” for over four years that included “embezzling LG’s marketing and programming funds for themselves.”

As part of LG’s customer contracts with cellular carriers such as AT&T, T-Mobile and Verizon, LG set aside funds for marketing and promotional expenses, said the complaint. Typically, the carrier spends those marketing development funds (MDF) to promote LG’s products, but occasionally its carrier customers designate vendors to run the programs; in those cases, the vendor contracts directly with LG, it said.

In 2015, LG designated GSL to run promotional activities associated with its MDF to encourage T-Mobile employees to market LG’s products to T-Mobile customers to boost sales, the complaint said. Upon information and belief, T-Mobile employed defendant Bliss at the time, and he and defendant Normann were involved with registering GSL as a vendor with LG. From 2015 to 2020, LG contracted with GSL via individual requests for support (RFS) for each program; it paid GSL over $34 million in MDF for promotional programs over that span, it said.

LG said its longest and most expensive project with GSL was a showroom program involving outfitting leased cars in branded wrapping, then parking them outside T-Mobile stores to drive customer engagement. In March 2020, LG terminated the program; it had paid GSL about $20 million for the promotion, said the filing. LG alleges documentation suggests GSL “fabricated the proof of performance to cover for the fact that it did not actually perform the volume of Mobile Showrooms it was contracted to perform.”

An LG audit in 2020 revealed that GSL, through the Rossi owners, “regularly and intentionally billed LG for services not performed and overbilled LG for programs that GSL was contracted to run,” alleges the complaint. LG believes it was overbilled by “at least $5 million,” but it expects that number to grow when it's able to access GSL’s books and records, it said.

The audit also revealed that GSL and the Rossis “conspired with former LG employees to commit their wrongdoing,” including Normann and Bliss, who were responsible at different times for managing the T-Mobile account for LG, and defendant Garcia, who worked closely with Normann and Bliss, it said.

GSL and the Rossis “appear to have kept detailed records of the amounts that they had billed LG in excess of the actual cost of the promotional programs it undertook and at times referred to those funds as being “escrow” or "breakage,” the complaint said, but those records were never uploaded to LG’s systems. The audit discovered references to the funds by searching in emails that were sent just to Normann and Bliss, it said.

The audit also uncovered “concerning interrelationships between the Rossis and Normann as well as unexplained wealth that Normann displayed,” the complaint said. Normann and the Rossis each set up a family foundation on the same date in 2019, which was “four years and tens of millions of dollars into GSL’s relationship with LG,” the complaint said. Anthony Rossi was named a trustee of Normann’s family foundation, and Normann was named as a trustee of the Rossi family foundation, it said.

The complaint called out a separate company, Hurley Marketing -- which Normann’s father-in-law purportedly owned -- that GSL paid “significant sums” while it was working with LG. Hurley Marketing “dissolved immediately after Normann resigned from LG in August 2020,” it said. GSL counsel William Weatherford was legal registered agent for Hurley Marketing and both the Normann and Rossi family foundations, the complaint said.

LG planned to fire Bliss in December 2020 based on information from the audit, said the complaint, but he resigned, effective immediately, the day before he was scheduled to be terminated, the complaint said. Bliss had an attorney contact LG to discuss the firing, who “represented that Bliss knew that his and Normann’s conduct was problematic and that he had been asked to ‘do things that made him uncomfortable,’” it said.

Since LG’s audit began in 2020, the company has tried to obtain, directly and through counsel, information from GSL “to better understand the overbilling scheme and uncover how much money was improperly diverted by GSL, the Rossis, Normann, Bliss and Garcia,” the complaint said. GSL “failed and refused to provide sufficient information and documentation to support its improper charges or to acknowledge its wrongdoing,” it said.

Instead, said the complaint, GSL “has sued LG to recover payment for invoices they claim were unpaid by LG.” GSL’s claims “are without basis,” LG said. “Instead, it is LG who has been harmed by GSL" and the third-party defendants' "wrongful conduct,” it said.