Internet Jewelry Firm Files $14 million Suit Against USWeb

USWeb Corp. and one of its affiliates are the targets of a $14 million lawsuit alleging breach of contract and fraud filed by anOrange County, CA corporation in Los Angeles Superior Court.

The charges also include negligent misrepresentation, unfair competition and false advertising on the Internet.

The lawsuit was filed by Larmark Inc., a Huntington Beach, CA-based marketing company, against USWeb; its affiliate SystemLogic Inc.; based in Santa Monica, CA; USWeb SystemLogic LLC., a subsidiary of SystemLogic; and Kumar Rajha, owner of SystemLogic and USWeb SystemLogic.

According to Michael J. Emling of Emling & Associates, the law firm that filed suit on behalf of Larmark, the lawsuit seeks $257,785 for fees paid by Larmark to the defendants for services not provided; $300,000 for lost business expenditures; $13 million for future loss of revenue; and legal fees and court costs. The suit alleges misrepresentation and fraud, as well as breach of contract.

Larmark was founded in 1997 to establish an Internet site that would be dedicated to the jewelry trade. By purchasing memberships from Larmark, jewelry retailers and wholesalers would be able to display and sell their merchandise in a Web store. Larmark had secured the domain name, “JewelryChannel.com.”

Based on its advertising and promotional materials on the Internet, Larmark selected USWeb and contacted its office in Santa Monica.

The lawsuit says that Larmark entered into a $277,055 contract with USWeb SystemLogic and, subsequently, on Dec. 12, 1997 received a “project plan” that set out “milestones” for the work to be done and included completion time deadlines. The plan called for a “functional working model” to be completed by Feb. 2, 1998, and the entire project by April 6.

By the time the project was to be completed, Larmark reportedly paid 93% of the contract. When the due date arrived, Larmark allegedly was informed by USWeb SystemLogic that the work was not done because of the quantity and quality of the personnel assigned to the project. In early May, Larmark contacted USWeb at its corporate headquarters in Santa Clara, and requested it complete the project. When USWeb failed to act, the lawsuit was filed, Emling said.

Due to the alleged failure of USWeb and its affiliate to complete the project, Larmark said it has lost the opportunity to participate in two of the three most important annual national jewelry trade shows, which were held in Las Vegas. The third critical trade show will be held July 18 in New York.

“These lost opportunities undercut Larmark’s ability to meaningfully conduct business for one year,” Emling said.

There was no immediate response fromUSWeb.

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