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BellSouth has been ordered to pay $16.5 million to two small West Palm Beach, Fla.-based telemarketing firms for hiring them to increase its small-business clientele then improperly firing the firms after copying their marketing techniques. On March 29, a Palm Beach County Circuit Court jury awarded Tel Choice LLC $7 million in compensatory damages and $2.5 million in punitive damages. Its sister company, Small Business Owners Association of America Inc., was awarded another $7 million in compensatory damages. The suit alleged fraudulent inducement, negligent representation, breach of contract and tortious interference with a business relationship. The plaintiffs’ lead lawyer was G. Joseph Curley, a partner at Gunster Yoakley & Stewart in West Palm Beach. His co-counsel were Gunster Yoakley shareholder Meenu T. Sasser and associate Joseph G. Santoro. “They made a promise to our clients that if they delivered for BellSouth — if they honored their commitment, if they met their quotas — BellSouth would give them an extension for six months that would make them a lot of money,” Curley said. “After making BellSouth $72 million, BellSouth fired them. They did it for the sake of saving a million bucks and launching their own program.” Atlanta-based BellSouth was represented by William F. Hamilton of Holland & Knight’s West Palm Beach office. He did not return a call for comment by deadline. A BellSouth spokeswoman, Marta Casas-Celaga, said, “BellSouth acted properly and lawfully. We believe the jury’s determination was wrong and the amount awarded violates Florida law.” She said the company would appeal the verdict. BellSouth, a publicly traded company with 76,000 employees, had revenues of $20.9 billion last year, according to its annual report. The two telemarketing firms are owned by brothers Todd and Jason Eisenberg. The Small Business Owners Association of America was founded in 1995. Tel Choice was founded in 2000 specifically to serve BellSouth. When they began doing business with the telecommunications giant, the two firms had a combined staff of about 85. In September 2000, BellSouth hired the companies to sell BellSouth local phone services to small businesses. At the time, BellSouth was competing with 227 competitive local exchange carriers (CLEFs) that had been given the right under deregulation several years earlier to use BellSouth lines to deliver services that BellSouth previously delivered exclusively. The CLEFs were underpricing BellSouth and taking away its small-business customers. Between March 1999 and March 2000, a BellSouth division, Small Business Systems, lost $559 million and 730,000 local commercial telephone lines. In 2001, Curley said, the company expected those losses to increase by 20 percent. “They were going into a crisis mode,” Curley said, “They had to stop the bleeding.” BellSouth hired the telemarketing companies for a three-month period to sell a program to existing small business customers that would reduce the customers’ bills by 18 percent if they would sign with BellSouth for three years. The telemarketing firms told BellSouth that they would have to hire staff and turn down other work to take the three-month contract and that they needed a longer contractual commitment. According to testimony in the trial, BellSouth responded that if the telemarketers sold 4,300 contracts, their contract would be extended by six months. The telemarketers sold 6,700 contracts, Curley said. But they were fired on Jan. 4, 2001, only a few days after BellSouth granted the extension. The firing came after BellSouth sent an employee to the offices of the telemarketing companies to observe their sales and business techniques, Curley said. Armed with such information, he said, BellSouth decided to handle future telemarketing operations with existing BellSouth sales staff. Meanwhile, the two telemarketing firms had turned down other business so they could devote their resources to BellSouth, Curley said. Before going to work for BellSouth, Curley said, the two companies were generating annual revenues “in excess of $5 million.” He said after they lost the BellSouth contract, they had to close their doors. The companies filed suit in May 2001. The trial last month lasted 3 1/2 weeks. BellSouth argued that the company’s contract with the telemarketing firm permitted BellSouth to cancel the deal on 30 days’ notice. “That’s not the way the jury read it, though,” Curley said. A key component of the case, Curley said, was demonstrating to the jury that during the period BellSouth was assuring the telemarketers that their contract would be extended, BellSouth had not budgeted to pay the telemarketers the following two quarters. Santoro said the defense “engaged in an extremely vigorous motion tactic during the trial — things that were designed to tax our clients’ resources. They were simply trying to exhaust our clients into going away.” “BellSouth played hardball,” Curley agreed. “They were going to make these guys work for it.”

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