DMB&B SUES FORMER CLIENT GATEWAY FOR $9 MIL: AGENCY CONTENDS PC MARKETER OWES PAYMENTS ON LONG-TERM PACT

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In an unusually aggressive move for an ad agency, D'Arcy Masius Benton & Bowles, New York, last week filed a $9 million breach-of-contract lawsuit against former client Gateway.

"Agencies are very reluctant to do this," conceded DMB&B Chairman-CEO Arthur Selkowitz, adding, "In the final analysis, we believed it would be unfair to our employees and current clients to not receive the payments [Gateway] owed us."

The lawsuit filed in U.S. District Court in Manhattan alleges Gateway and DMB&B had agreed to a long-term contract to work together throughout 1998. The agreement came about as a result of the agency's fears of Gateway being taken over by Compaq Computer Corp. or another rival.

The agreement was never signed, but the agency claims in the suit at no time did "Gateway indicate to DMB&B that it did not agree with, or had not adopted, the Agency/Client Agreement."

Gateway declined comment.

DMB&B also alleges Gateway's hiring of a new president, Jeffrey Weitzen, led to the agency's termination just one year after its Los Angeles office won what DMB&B says was an estimated $90 million account. Soon after Mr. Weitzen was brought on, the account moved to McCann-Erickson Worldwide, New York, an agency with which he had previously worked.

`UNRELATED TO PERFORMANCE'

Mr. Selkowitz said the termination "was unrelated to performance" and was "related to the new president of Gateway's desire to work with an agency he has worked with before."

In the lawsuit, DMB&B said the agency was slated to receive "base group fees" of $628,000 per month in addition to media costs of 1.25% to 4% of media placements and other reimbursable costs.

For the nine-month period ended in December, DMB&B's suit said, fees and estimated media commissions would be about $6 million, plus interest. In addition, the agency said it made about $3 million in investments -- such as recruitment, relocation and technology upgrates -- "in reliance on Gateway's assurances that the parties would enjoy a long-term relationship."

OTHER CLIENTS SUPPORTIVE

Mr. Selkowitz said he doesn't believe other marketers would be wary of working with the agency as a result of the filing.

"We gave a heads-up to our key clients and their reaction was `You have to do what you have to do,' " he said, adding the clients have been supportive.

Other agencies contacted applauded DMB&B for putting up a fight.

DMB&B's roster includes General Motors Corp., Mars, Procter & Gamble Co. and Coca-Cola Co.

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