A Pennsylvania tax consulting business is suing New York-based Wegmans
Food Markets Inc. over allegations that the retailer reneged on its promise to pay contingency fees in connection with the plaintiff helping to save Wegmans tax liabilities to the State of Maryland.
Tax Matrix Technologies, which is based in Paoli, Chester County, filed a breach of contract against Wegmans in federal court in Philadelphia on Oct. 24 over claims that the defendant owes Tax Matrix more than $1 million connection with consulting work provided by the plaintiff.
The parties, which have been doing business together for the past 12 years, entered into an agreement in the spring of 2009 by which Wegmans agreed to pay Tax Matrix a 25 percent fee in connection with all refunds secured with the plaintiff’s help, the complaint states.
The contingent fee, the suit says, represents a “significant discount” below the rate Tax Matrix generally charges other clients, and was half the rate Wegmans compensated its prior sales and use tax vendor, which was 50 percent.
The complaint says that the agreement governed more than 18 different projects during the course of the parties’ business relationship without incident.
In the fall of 2011, Wegmans received an audit notice from Maryland, and in the winter of 2012 the company received a “deficiency notice” from the state’s comptroller in the amount of $4,639,411.87, after which the plaintiff stepped in and defended Wegmans against the audit assessment.
By March 2013, the complaint states, Tax Matrix successfully reduced the “deficiency” from the $4.6 million figure to about $1,050,000, but the plaintiff eventually succeeded in getting that number down to $255,542.82.
Including savings from imputed interest and penalties, Wegmans ultimately realized audit reduction savings of about $5.9 million, the suit says.
Tax Matrix, however, alleges that Wegmans subsequently failed to pay the $1,370,079.25 contingent fee as per the terms of the contract.
A Wegmans representative named Laurie Phelps, who took over for Chuck Henderson after Henderson retired from Wegmans after 30 years with the company, and who now handled issues relating to sales and use tax for the defendant, ended up explaining to the plaintiff that she had a general “dislike for contingency fee arrangements,” and requested that Tax Matrix lower the fee after the fact, according to the lawsuit.
Phelps also asked whether the plaintiff would accept a cap on its fee, but the plaintiff declined the offer.
The suit says that Wegmans’ reluctance soon turned to “outright defiance,” with Wegmans threatening to cut off its business relationship with Tax Matrix if the matter wasn’t resolved in a “reasonable way.”
To date, the complaint alleges, Wegmans has failed to pay Tax Matrix one cent of the $1,370,079.25 the plaintiff claims it is owed for its services.
The lawsuit contains counts of breach of contract and unjust enrichment.
The suit was filed by Exton, Pa. attorney Stuart D. Lurie.
The federal case number is 2:13-cv-06223-ER.