Some of the biggest names in the direct marketing agency world have launched a High Court claim against Publicis Group which could have major implications for earn-out deals across the industry.
The case has been brought by the founders and major shareholders of Kitcatt Nohr, who are suing the French group for up to £8.5m – including £4.9m in unpaid earn-outs and £3.6m in damages for breach of contract – amid claims that Publicis misled them about an existing relationship with client Procter & Gamble.
Eight members of Kitcatt Nohr management team, including agency backer Clive Mishon, planning chief Richard Madden and creative director Phil Keevill are joint claimants in the case, alongside co-founders Paul Kitcatt, Marc Nohr, Vonnie Alexander and the estate of Jeremy Shaw, who passed away last year.
Publicis bought Kitcatt Nohr in 2011 – for an undisclosed sum – to merge it with Digitas. However, before they signed the deal the agency’s bosses sought reassurances about the strength of the relationship with P&G, having discovered that the client accounted for 52.7% of Digitas UK’s 2010 revenues.
It is alleged that Joseph Tomasulo, then global chief financial officer of Digitas, told them by email that the agency had “the confidence of a retainer” despite being a “project based relationship”.
They duly signed on the dotted line and their earn-out was then tied to the performance of the merged agency in the years after the deal.
However, the claimants’ QC Andrew Sutcliffe told the court – which is being presided over by Mr Justice Males – that the “impending loss of Digitas UK’s P&G business had in fact been widely anticipated within Publicis and Digitas UK since as early as July 2010”.
Sutcliffe alleges that “just a few weeks” after the acquisition was completed the claimants discovered that a major slice of the business that Digitas UK had generated from P&G had already been lost or would soon be lost to other advertising agencies within the Publicis group.
He insisted said these ad agencies were implementing a “deliberate strategic pivot” to “cut Digitas UK out of the picture”.
The second part of the case concerns a “binding agreement” in 2012 that Publicis Group would make adjustments so that the claimants’ entitlement was not prejudiced by the loss of P&G work.
In 2014, when the earn-out period had expired Publicis Group denied any agreement had been reached concerning adjustments and refused to cough up.
All the claimants – which also include Steven Ireland, Annette Blunden (now Male), Lazar Dzamic, Simon Robinson and Jamie Tierney – have since left the agency, although embarrassingly for Publicis, Madden and Blunden still work within the network.
Publicis has refused to comment on the case, but said it is “vigorously defending” itself against the claims.
The case continues.
Industry pays tribute to agency chief Jeremy Shaw
Top duo call it a day at Kitcatt Nohr
Kitcatt steps down but brand lives on
Marc Nohr joins ad agency Fold7
Kitcatt Nohr axes Digitas brand
Kitcatt Nohr survives LBi merger
Kitcatt Nohr grabs Publicis cash