Boston Window & Door Accuses Pella of Trying to Put It Out of Business

November 30th, 2023 by Drew Vass, Executive Editor

When door and window companies invest in brand-based dealerships, the decision is akin to a legally binding marriage. For one Massachusetts-based Pella dealership, that marriage has soured and is now heading to court.

In a legal complaint filed with the U.S. District Court for the District of Massachusetts, Boston Window & Door LLC alleges Pella Corp. improperly assessed its sales performance, placing the company on an “escalation plan” for improvement. When that plan graduated to a Conditional Termination Notice, the dealer filed suit, alleging Pella’s actions are part of a scheme designed to retake one of its most profitable territories. As a result, Boston Window & Door is “being deprived of a period of orderly transition to force [the company] out of business without an opportunity to recover its investment,” the dealer alleges.

For two years, officials at Boston Window & Door were told the goal was “to improve sales and to drive market share growth,” the company’s complaint says. Now the dealer alleges that was just part of a false scheme.

“Upon information and belief, Pella seeks to terminate its relationship and the agreements with Boston Window to allow Pella to take over the Eastern Massachusetts territory for itself as a corporate opportunity or to assign the territory to a pre-determined entity,” the company alleges. The manufacturer aims to do so by “misusing and abusing the Escalation Plan, [cash on delivery] terms, and Conditional Termination provisions,” the complaint says.

Boston Window is now at risk of losing its entire business, company officials say.

According to court documents, the company’s agreements with Pella provide the right to have a court determine whether Pella’s performance metrics are reasonable or a pretext.

Pella has an established sales network, including independent sales branches, which are authorized to market and sell its products within exclusive territories. Meanwhile, “Certain territories within the Pella network, such as the Eastern Massachusetts territory, have become very valuable and unique assets that are marketed and sold with Pella’s consent and approval,” the company’s complaint says. The value of the more profitable sales territories is further extended by guaranteed financing by Pella, officials suggest. According to court documents, Pella approved the sale of its Eastern Massachusetts territory, including the Boston Metropolitan area, to Boston Window for $21 million, with financing guarantees from Pella. Wells Fargo Bank, through a cooperative program organized by Pella, financed approximately $10 million of Boston Window’s purchase for a three-year term, with Pella’s guaranty. The remainder of the purchase was seller-financed in the amount of $7 million over a period of 10 years. Following the purchase, Boston Window was required to invest in infrastructure and sales, to meet sales metrics set by the manufacturer.

According to the general factual allegations stated in the company’s complaint, since January of 2019, Boston Window has been engaged as a Pella dealer and distributor, promoting, selling, assembling, warehousing, delivering, installing, finishing and servicing the manufacturer’s products.

On or about September 3, 2020, Pella delivered a “PDSN Escalation Plan Objectives Notice” to the company, providing an opportunity to improve its performance against specific metrics. Over a two-year period, company officials say its territory grew from $18.7 million in purchases to $30.1 million in 2022. “Over that same time, Boston Window increased market share from 4.7% in 2020 to 7.0% in 2022. This represents a 49% increase in market share over two years,” the complaint says, adding, “Boston Window grew faster than 62 of the 88 (70.5%) branches comprising the Pella network in 2020.”

Despite those metrics, on or about October 16, 2023, Pella delivered a notice to Boston Window titled “Notice of Conditional Termination,” the company’s legal complaint says.

According to court documents, if a sales branch subject to an Escalation Plan cannot meet reasonably based metrics, Pella must provide for an orderly end to the relationship, including adequate time for transitioning ownership of the territory and recouping investments. Agreements also allow a sales branch to challenge the performance metrics provided by Pella through alternate dispute resolution and to have a court determine whether the metrics imposed have a reasonable basis or are a pretext.

“Pella’s issuance of the Escalation Notice was based on metrics that were inaccurate and inappropriately used to measure Boston Window’s performance,” the company alleges. “Boston Window should never have been placed into the Escalation Plan, because it was the result of Pella’s negligent and careless collection and computation of performance data, demonstrating a reckless and callous indifference toward Boston Window and the obligations set forth under the agreements.”

Boston Window filed a mediation demand with Judicial Arbitration and Mediation Services Inc., reserving its right to have a court review the performance metrics provided by Pella. The company is requesting temporary and preliminary injunctive relief, prohibiting Pella from terminating the Commercial and Retail Agreements, pending ADR and, depending on the outcome, to allow the court to review Pella’s performance standards.

When [DWM] reached out to Pella, the company declined to comment on the case.

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  1. Good for Boston to challenge the Pella Corp’s constant unrealistic growth goals. They took Pella NW out in 2010 after we grew from $5mm in sales in 1996 to $33mm in 2010. I got Pella windows offered through Costco..,they said they can do a better job of growing sales than Costco. The management at Pella Corp have a long track record of stabbing their dealers in the back. For BS legal reasons they say we are not dealers.

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