A federal district court jury in Virginia has given Entre Computer Centers Inc. a critical victory in the McLean-based computer retailer's long legal battle with disgruntled former franchise owners.
The jury awarded Entre $116,000 in lost royalties in a counterclaim against two groups of former New England franchisees of the company's stores. The franchisees had sued Entre for breach of contract in 1986 after breaking away from the company to join another retailing chain. The franchisees had contended that they left because Entre failed to live up to the terms of its contract with them. In ruling in favor of Entre, the jury rejected the franchisees' claims.
The award to the company is in addition to $257,000 that the court ordered the franchisees to repay to Entre last month to cover debts owed Entre by the franchisees when they left the chain.
Attorneys for the franchisees could not be reached for comment yesterday.
The company still faces 10 other lawsuits, most dating from the period two years ago when, in the midst of an industrywide sales slump and mounting losses, Entre pared its retail network from more than 250 franchises to just over 200.
But the company's president, Bert Helfinstein, said Wednesday's decision -- in combination with a key appeals court ruling last August that reversed much of an earlier $4.9 million judgment against the firm -- will create "winning precedents" that will make settlement of the remaining claims much easier.
In addition, Helfinstein said Wednesday's decision may enable Entre to cut its legal costs, which had soared to $8.4 million in 1986 -- more than 12 percent of company's $66.9 million in revenue that year -- ran in excess of $3 million last year, and continued at a similar level during the first quarter of this year.
The legal expenses have depressed Entre's earnings over the past two years, despite the company's recovery from 1986 losses of $8 million.
For the three months ending Nov. 30, Entre had net earnings of $1.2 million (12 cents per share) on revenue of $29.1 million, compared with earnings of $579,000 (6 cents) on revenue of $16.4 million for the same period last year.
According to Michael Mead, an analyst who follows Entre for Scott and Stringfellow Inc. in Richmond, "The business is growing, and by the time they reduce their legal expenses later this year, they'll be earning much more."
"We had a good strong quarter," Helfinstein said. "And when we're not so bound up with dealing with litigation, I'm sure we'll do even better."