Andrettis sue Power Sports Factory

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Famed racers Mario, John and Jeff Andretti and the company they formed as a vehicle for endorsements are suing Power Sports Factory and its former CEO and president, claiming the company hasn’t paid them for their endorsements of Chinese Benelli and Yamati motorcycles and scooters.

The complaint, filed in the Philadelphia Court of Common Pleas, alleges breach of two contracts, fraud, fraudulent inducement and violation of the Andrettis’ right to publicity – the unlawful use of their names and likenesses – against Pennsauken, N.J.-based Power Sports Factory, CEO Shawn Landgraf and president Steve Rubakh.

The Andrettis – Formula One and Indianapolis 500 champion Mario, his youngest son Jeff and nephew John – say they weren’t paid for their endorsements and that Power Sports Factory continued to use them after the Andrettis terminated the contracts under which they were licensed.

The Andrettis’ company. Andretti IV, signed contracts to endorse the bikes in 2007, letting Power Sports Factory use their “name, image, likeness, audio, audio visual recordings, logos, photographs, signatures, initials, endorsements and biographical information” to promote the branding and sale of Andretti lines.

The contracts called for Andretti IV to receive $60 per Andretti Benelli and $30 for each Andretti Yamati vehicle that Power Sports Factory sold, with minimum payments of $500,000 a year for Benelli contract and $300,000 for the Yamati contract, starting in the second calendar year of the deals, according to the lawsuit.

Power Sports Factory had the right to terminate either 10-year deal after the third contract year if it didn’t sell at least 8,334 Andretti Benellis and 10,000 Andretti Yamatis in each contract year.

Andretti IV terminated both contracts Feb. 1, 2010, for nonpayment, and alleges Power Sports Factory continued to use the endorsements, pictures and Andretti name in magazine, catalog and online ads after that.

Andretti IV claims the defendants ignored demands for payment and never intended to pay them for the use of their family brand. They’re seeking unspecified damages in excess of $25,000 on each of seven claims in the case.

Efforts to reach Landgraf and Rubakh for comment were unsuccessful.

According to filings with the U.S. Securities and Exchange Commission (SEC), Purchase Point Media, a provider of a shopping cart advertising systems, saw Power Sports Factory as a potential revenue generator and bought the company in April 2007 in a stock swap. Such transactions are a common tactic to shore up an existing company’s balance sheet and give new companies quicker access to equity markets. Rubakh got 60 million shares – 60 percent of the company – in the deal; the other shareholders were all Canadian interests.

The company claimed three non-director employees and relationships with “over 100 dealers.” It recorded an operating loss of $2,253,049 for 2007.

Starting in November 2008 the company was late with its quarterly financial reports to the SEC nearly every quarter, always citing the same reason: documents under Landgraf’s signature gave the explanation that “Management is in the process of finalizing the operating results of the [period]. The information could not be assembled and analyzed without unreasonable effort and expense to the Registrant. The Form 10-Q will be filed as soon as practicable and within the 5 day extension period.”

PSF got a boost from a $1 million revolving line of credit from Crossroads Debt LLC in early 2009 but was in trouble again soon after.

In December 2009, the company reported $1.46 million in assets against $6.4 million in liabilities.

By last April CEO Landgraf told the SEC that he was quitting the failing company at the end of June, but said he would continue to “work with the board in the transition period.”

Then in a final status report filed with the SEC last Oct. 22, Landgraf gave notice that Power Sports Factory was done:

“The company is by letter advising its vendors, suppliers and shareholders that the company has closed its business due to financial difficulties,” the statement reads. “The company has sold the balance of its inventory and has distributed the proceeds to its secured lender. At this time, the company does not anticipate that there will be any funds available to pay the company’s unsecured creditors.”

The case is Andretti IV v. Power Sports Factory, No. 110103276.