Tough guys don't quit

Rent A Wreck legal dispute is like Demolition Derby

November 16, 2007|By JAY HANCOCK

Soon after Bethesda car dealer Jack Fitzgerald bought what was left of Rent A Wreck of America, he kicked its founding franchisee off the company's Web site, just to "see how high he jumps."

"Mr. Fitzgerald is a very charming guy and he's a great salesman, but he's a very, very competitive person - beyond competitive," says founder David Schwartz, who has sued the company and Fitzgerald to get reinstated. "Me, I'm a win-win guy. I'm not trying to beat up on anyone."

"He's got more bull---- in him than an Irishman who's kissed the Blarney Stone," responds Fitzgerald. "His name may be Schwartz, but he's got an O'Reilly somewhere in his background."

Sometimes business disputes are about the money. Sometimes they're about the anger. And sometimes they seem to be about the sheer joy of litigation and the thrill of being a pill.

Rent A Wreck may have started out as a punch line for countless jokes, but there's still a real discount-car-rental company there, waiting to be jump-started - if only it can get out of the businesses of generating legal work and free entertainment.

Schwartz, who is 71, works out regularly in a California boxing ring and twice a year fights matches against opponents in their 30s. But he saves most of his jabs for Fitzgerald, 72, known for his ubiquitous Fitzgerald Auto Malls TV ads and his lobbying on Capitol Hill for repeal of the federal estate tax.

Schwartz founded Rent A Wreck in Los Angeles in 1970. The company went national, sold stock to the public and moved its headquarters to Owings Mills in 1993 under the management of Kenneth L. Blum, who had previously run an eye-care company. Initially it did well, expanding to as many as 600 outlets, but it ran into problems and now has about half as many stores.

Fitzgerald blames the terrorist attacks of 2001 and the subsequent slump in the travel business.

Schwartz, in a 2006 lawsuit filed in U.S. District Court in Baltimore, blamed "misconduct" involving Blum and his son, including Rent A Wreck's purchase of a software system from the son's company; headquarters rental in a Blum-owned building, and $15,000 in undocumented expenses on company credit cards.

The firm's sale to Fitzgerald (for less than $3 million, Fitzgerald says) was a sweetheart deal to conceal the alleged misconduct, says Schwartz, who owned 400,000 shares. He wants at least $10 million.

"There's nothing there," in the allegations, says Fitzgerald, whose lawyer is defending the Blums as well as Rent A Wreck. Reached at his Florida home, Kenneth Blum declined to comment. His son, Kenneth Blum II, did not respond to messages and their attorney also declined to comment.

In court filings the Blums denied any misconduct and called Schwartz's allegations defamatory. Rent A Wreck's audit committee found that "in no instance did management act out of venality or out of an attempt to gain an improper financial advantage," according to a company report.

Schwartz calls the report a whitewash. He has spent "way over" six figures on Rent A Wreck litigation, he says, adding that Fitzgerald told him he had spent close to $1 million.

"I don't think it's cost us quite that much," says Fitzgerald. But even six figures seems disproportionate for a company that cost less than $3 million.

The Schwartz suits are only part of the litigation fest. Fitzgerald sued another California guy who had agreed to buy Rent A Wreck before Fitzgerald but didn't. Fitzgerald won a judgment and issued a press release trumpeting "a victory against deceit and sharp business practices." Schwartz had filed his own lawsuit over the balking buyer, but you don't really need the details.

A judge recently dismissed Schwartz's suit against the Blums and a former Rent A Wreck shareholder, ruling that too much time had elapsed since the alleged misdeeds. But Schwartz promises to appeal. Meanwhile he's back on Rent A Wreck's Web site, under a judge's temporary order.

"It took them nine weeks to put it back. They tried everything imaginable. It was unbelievable," Schwartz says. "Then we couldn't serve a subpoena on Jack. He's impossible to serve."

Fitzgerald says Schwartz's process servers pretended not to be able to find him so they could harass his first wife by serving her.

"We were divorced in the early '80s. There's no way that's where they thought I was. I'm on television every day, you know. There isn't anybody who doesn't know where I am. I wear a name tag."

He wants to revive Rent A Wreck, which he has moved to Laurel, by showing franchisees how to better market and manage their fleets. But "it's difficult to run a company when it's under siege by lawyers," he says. "They figure if they bury me in litigation they're going to get the company. We'll I'm not going to let that happen."

This week Fitzgerald was in Los Angeles and stopped at Schwartz's Rent A Wreck store. Schwartz gave him bottled water and introduced him to his wife.

"I'm kind of fond of him," says Fitzgerald. "But I don't understand why he has annoyed the hell out of me and cost me a lot of money."

Maybe because, for both men, money isn't the point.

jay.hancock@baltsun.com

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