Valley companies in legal battle over false advertising allegations

By Steve Green (contact)

Tuesday, July 21, 2009 | 1:50 a.m.

A legal fight has broken out among two of the companies that handle incorporations and other regulatory paperwork for thousands of companies and partnerships in Nevada.

Incorp Services Inc. of Henderson on Friday filed a lawsuit alleging defamation and false advertising against Nevada Corporate Services Inc. (NCS) of Las Vegas.

The suit, filed in U.S. District Court in Las Vegas, alleges Nevada Corporate Services sent false and defamatory letters about Incorp to Incorp's clients claiming Incorp may be discontinuing its registered agent services, leaving its clients "vulnerable and at risk."

NCS, however, said Monday it didn't intend to target or offend any particular company with a recent letter.

The letter leveled criticisms about registered agent services and insinuated those criticisms were about Incorp, the Incorp suit charged.

The lawsuit, filed by attorneys with the firm Gordon Silver, seeks unspecified general and punitive damages to cover what Incorp calls "significant harm" to Incorp from the letter.

"As a result of Incorp's history of providing excellent registered agent services, Incorp enjoys a competitive advantage over other registered agent services and is able to demand a premium for its services," the lawsuit says. "NCS is a direct competitor of Incorp, offering various company formation and registration services, including registered agent services.

"NCS struggles to compete with Incorp regarding client satisfaction in the provision of registered agent services," the suit charges.

Asked about the lawsuit, NCS responded Monday with this statement:

"For over 20 years Nevada Corporate Services has always accepted and allowed other businesses to compete and even contact our clients directly, knowing that our quality of service was the key to our continued success; Nevada Corporate Services has never resorted to bullying or heavy-handed legal wrangling to damage or injure our competitors, it would appear that others cannot be as confident of their quality of service. Anyone wanting to see the full text of the letter we are sending can contact our office or send an email to NevadaCo@nevadacorporateservices.com. It has never been the intent of Nevada Corporate Services to target or offend any particular company. Out of respect for the concerns of other businesses, any registered agent (not just the plaintiff) that feels one or more of their clients were misinformed, we would be happy to send at our cost, a personalized apology letter to their client."

Friday's lawsuit was the fourth filed in Nevada's federal court since 2007 by Incorp alleging defamatory statements by competitors.

In a 2007 case, Incorp and Incorp official Doug Ansell filed a racketeering suit against another competitor, Nevada State Corporate Network Inc., claiming officials there created a front group called "Victims United Against Abuse" and used that group to spread word among Incorp customers and public officials that Ansell had been convicted of producing child pornography. The lawsuit says the child pornography allegation is false and defamatory.

In its response, Nevada State Corporate Network said that at the time: "Ansell is Incorp's director and president. On July 24, 1998, Ansell entered into an Alford plea and was convicted of possession of visual presentation depicting sexual conduct of a person under sixteen years of age, a felony."

Nevada State Corporate Network called the mailing of the letters an isolated event involving only the defendants -- meaning there was no pattern of racketeering.

Clark County District Court records attached to the Nevada State Corporate Network response in federal court show Ansell was sentenced to 16 months to 40 months in confinement for the "possession of material depicting sexual conduct of a minor" conviction, but that the sentence was suspended and Ansell was placed on probation.

U.S. District Judge Kent Dawson dismissed the racketeering case, saying there was no evidence the mailing of the letters was an attempt to steer business to Nevada State Corporate Network.

Incorp and Ansell, however, filed similar defamation or unfair trade practice lawsuits against Nevada State Corporate Network and former Incorp employee Sari Brooks in state court, along with a federal complaint against Brooks.

Those suits are pending and Brooks now works for Nevada State Corporate Network.

Brooks' attorney, Thea Sankiewicz, on Monday said her client has denied any wrongdoing.

"She has not created any of the letters" about Ansell, Sankiewicz said.

Nor did she have anything to do with the creation of the Victims United Against Abuse group, Sankiewicz said.

In the state case alleging unfair competition, Nevada State Corporate Network has also denied wrongdoing. In that suit, Ansell was described as an officer and director of Incorp through April 2008.

Another lawsuit was filed this year by Incorp against competitor LegalZoom.com Inc. of Los Angeles alleging libel, defamation and deceptive trade practices. Incorp claimed LegalZoom representatives had been telling potential registered agent customers that Incorp was not in good standing in Delaware, Texas, New York and other states.

Incorp said that in fact it was in good standing with all 50 states and the District of Columbia. Court records show the dispute was resolved and both companies agreed to drop the litigation in May.

An attorney representing Incorp and Ansell declined comment on the various suits Monday, and Ansell couldn't be reached for comment.

The lawsuits involve a busy industry with dozens of competitors statewide.

With laws that are considered to be business friendly, Nevada is a popular place for businesses to incorporate -- even businesses that are physically headquartered in other states.

Companies operating from out of state typically still have a Nevada phone number and address -- usually provided by resident agents such as Incorp, Nevada Corporate Services and Nevada State Corporate Network. The agents also regularly update their clients' incorporation information and other paperwork with the state Secretary of State's office.

The Secretary of State's office Commercial Recordings division maintains records of corporations and says that as of May 31, 153,447 companies were incorporated in Nevada along with 138,942 limited liability companies, 17,373 limited partnerships and 825 business trust/limited liability companies.