Saturday, 30 November 2002 09:00

CR chain is sued by DuPont for reneging on paint deal

Holmes Body Shop, the largest independent chain of collision repair shops in Southern California, has settled confidentially the lawsuit brought against it by DuPont for breaching a contract to buy its paint from DuPont. 

Holmes Body Shop, headquartered in Pasadena, had filed a cross-complaint against DuPont for fraud, negligent misrepresentation, breach of contract, breach of warranty and unfair business practices. "My lawyer suggested we do that after they first sued us," explained company president Tom Holmes. "I'm not looking to go around making enemies out of paint companies."

Both the complaint and the cross-complaint were resolved when Tom Holmes met with DuPont executives in Delaware the week of November 25. "I'm glad it's over and I can get on with my business," said Holmes.
The Holmes Body Shop chain includes nine shops plus a drop-off location in Los Angeles County, and a tenth shop in Riverside. The business was started by Tom Holmes in the early 1970's and now has gross sales of $32 million annually.

Incentives for long-term contracts

In the late 90's Holmes, like many other shops across the country, took advantage of cash incentives - a "prebate" as Homes referred to it - which were offered in lieu of ongoing deep discounts by several of the major paint companies.

According to a knowledgeable industry source, such agreements typically provided the body shop owner with cash to use for the purchase of equipment or to otherwise expand the business in return for a long-term commitment to purchase paint. The amount of the cash incentive was based on anticipated volume of paint orders. And while the contracts did not fix the price of the paint, they often guaranteed that the body shop would earn a certain level of gross profit based on the difference between the cost of the paint and the prevailing market price charged for paint work.

In the Holmes case, the company signed a contact with DuPont in 1999, under which DuPont was to provide paint as well as business consulting services to Holmes.

DuPont, which had in its lawsuit asked for over $900,000 in damages, alleged that Holmes breached his contract by starting to purchase paint other than DuPont.

Holmes says that it switched to a different paint because the grade of paint DuPont was providing at certain Holmes locations made it difficult for Holmes painters to achieve a satisfactory paint match on some European cars, a problem that Holmes says resulted in customer complaints. Holmes then started buying Sikkens brand paint manufactured by Akzo Nobel, prompting DuPont to file suit.

DuPont, like most paint companies, sells different grades of automotive refinish paint under different brand names and at different prices. "DuPont makes paints that will match any finish in the world," said Holmes after returning from Delaware, "but they were not available to all of our shops."

Aside from the paint match issue, Holmes further alleges in its cross-complaint that DuPont did not provide Holmes with the business development tools it promised.

"It's behind us now, and I can't say anymore about it," said Holmes. "There's no ill will. This came about because of a lack of communication. Neither side was blameless. We may well do business again some day."