Frosch Travel last week
filed a motion to add Tzell Travel Group and its CEO, Barry Liben, as
defendants in a lawsuit against Your Travel Center Inc. (YTC) and its CEO,
Colin Weatherhead, over YTC’s alleged breach of contract with Frosch.
Among other things, the
suit alleges that Liben bullied Weatherhead after learning of YTC’s intention
to stop reporting ARC airline sales through Tzell and instead enter into a
binding agreement with Frosch.
Tzell dismissed those
claims Monday in a statement, declaring: “We believe those allegations are
completely without merit and have no further comment.”
said, “No merit, no comment.”
The initial lawsuit, filed
in U.S. District Court in California in February, alleges a breach of contract
between Frosch, a Delaware limited liability corporation (LLC) headquartered in
New York City and Houston with 2014 annual sales of $1.2 billion, and YTC, a
California corporation based in Santa Barbara. YTC’s website bills it as a host
agency with more than $100 million in sales.
The contract between YTC
and Frosch would have resulted in YTC reporting its airline sales to ARC
through Frosch. It also would have stipulated Frosch as the eventual buyer of
YTC, according to the lawsuit. At the time the contract was signed, YTC was
operating under an agreement with Tzell, a Travel Leaders Group brand whose
website states it had annual sales of $2 billion in 2013, to report airline
sales through Tzell.
According to the lawsuit,
YTC breached its contract with Frosch after Liben “engaged in a campaign to
pressure, bully, and intimidate Mr. Weatherhead by threatening to take all of
his travel agents, and warned that he would destroy Mr. Weatherhead personally
and professionally if he joined Frosch.”
The lawsuit claims that
Frosch’s president and CEO, Bryan Leibman, met Weatherhead in 2009, whereupon
the two developed a relationship and had discussed business for the past five
years. Those discussions included the possibility of a “contractual
arrangement” for YTC to report its airline sales through a Frosch ARC branch
office until such time as Weatherhead should decide that he wanted to leave the
business, at which time Frosch would acquire YTC.
The lawsuit states that
YTC would get access to Frosch’s preferred suppliers and network of service
providers, as well as to commissions and overrides from airlines, as a result
of reporting sales through Frosch.
“The parties were very
close to entering an agreement on these terms,” the lawsuit states.
However, YTC entered into
an agreement with Tzell Travel in August 2009, under which Tzell established a
joint branch ARC office of YTC, through which YTC would report its airline and
other sales, according to the lawsuit.
The lawsuit claims that
Liebman and Weatherhead resumed discussions about YTC transferring its business
to a Frosch ARC branch office in November 2014, and it was again made clear
that Frosch would acquire YTC whenever Weatherhead decided to sell it. The
lawsuit asserts that the two men entered into a “valid, binding, and fully
enforceable agreement” in late November 2014 that stipulated a succession plan,
with Frosch ultimately acquiring YTC.
According to the lawsuit,
the agreement could be terminated “only upon the occurrence of a specifically
defined event” — i.e., if Leibman were no longer Frosch’s CEO and president, or
if Frosch were to change ownership, “YTC will have an option to continue with
this agreement or to terminate at any time thereafter merely by providing 30
days written notice.” The lawsuit states that was “the only termination
provision in the Frosch agreement, which the parties specifically negotiated.”
The day after the
agreement with Frosch was signed, YTC notified Tzell that it was terminating
its 2009 agreement with the company, according to the lawsuit. That was
acknowledged by Tzell, but “soon thereafter,” Liben allegedly “bullied"
Weatherhead into remaining with Tzell.
According to the motion
filed this week, “as a direct result of Mr. Liben’s threats, YTC refused to
move forward with its agreement with Frosch, leading to this action.”
After his alleged
interaction with Liben, Weatherhead attempted to terminate the Frosch agreement
via an email to Leibman in which he “admitted signing the agreement, but cited
‘certain issues from both a legal and business perspective which have come to
light over the past 48 hours’ as the reason for his unilateral termination,”
the lawsuit states. The lawsuit asserts that the unilateral termination
constituted a breach of Frosch's and YTC’s agreement.
The lawsuit seeks YTC’s
compliance with its agreement with Frosch plus damages. It also seeks a ruling
that Weatherhead is personally liable for failing to execute the Frosch agreement
and seeks damages from him, including all costs associated with the litigation.
While the lawsuit names
“Your Travel Center Inc.” and Weatherhead as defendants, it also names “YTC
Travel LLC.” According to the lawsuit, YTC was assisted in developing its
agreement with Frosch by YTC COO Robin Sanchez, who, it asserts, “made an
error” in the document and filled in the space for Frosch’s counterparty as
“YTC Travel LLC.”
While the address of YTC
Travel LLC is listed as the same Tempe, Ariz., address that YTC uses, there is
no entity called YTC Travel LLC referenced on YTC’s website, nor is it listed
as a business on the Arizona secretary of state's website, which lists the
state’s businesses (that website does list Your Travel Center Inc.).
The lawsuit claims
Weatherhead “fraudulently induced” Frosch to enter into the agreement that had
the incorrect legal name for YTC listed as a counterparty, and said he “knew —
or should have known — that the incorrect YTC-related entity’s name was
included in the agreement.”
The lawsuit seeks to have
the agreement reformed to reflect the correct business name for YTC if the
court finds that YTC Travel LLC is not a legal entity. Or, if the court rules
that YTC Travel LLC is a legal entity, that it be named liable for breaching
the agreement with Frosch. It also seeks to have Weatherhead ruled personally
liable for the breach of contract if YTC Travel LLC is found to be a legal
In its motion to add Liben
and Tzell as defendants, Frosch said it has “since obtained additional
evidence” backing up the allegations against Liben and Tzell. The motion also
states that “Tzell and Mr. Liben cannot claim any surprise, as they have
actively participated in this litigation to date and were fully aware of the
likelihood that they would be named as additional defendants.”
It charges that Liben is
personally liable for interfering with the agreement between Frosch and YTC.
A hearing is scheduled for
Feb. 22 in Los Angeles.