Postal Buddy no longer Postal Service's buddy.

$1.3 billion claim filed charging contract breach

Postal Buddy Corp. has filed a $1.3 billion claim against the U.S. Postal Service, contending that it was forced out of business last September when the Postal Service canceled its multi-year contract without notice.

"We expect there will be negotiations before we ask for their final offer," said Sid Goodman, Postal Buddy president. "Hopefully, we can negotiate a reasonable settlement."

In 1992, the company signed an exclusive, 8 1/2-year agreement with the Postal Service to put multimedia kiosks in post offices in the San Diego and Washington, D.C., areas.

The electronic machines, placed in the post offices early last year, allowed customers to change addresses, buy postage stamps, and print address labels, business cards and stationery.

But, on Sept. 16, Goodman was notified that his licensing agreement had been terminated due to "less-than-projected revenues and customer usage."

Goodman claims his kiosks were never given a fair trial run, that the termination was not authorized by appropriate Postal Service officials, and that he, therefore, is due compensation.

The amount of the claim is based not only on the costs Postal Buddy incurred and the reasonable profits it could have realized from the Postal Service contract, but on the loss of business beyond the contract, Goodman said.

Goodman, who raised $25 million through private investment to bring the devices to market, spent four years developing the product.

He hoped ultimately to have 10,000 of the machines operating throughout the nation, generating annual revenues approaching $500 million.

The Postal Service estimated that Postal Buddy would save it millions a year in processing address changes alone.

Sandra Harding, spokeswoman for the Postal Service, acknowledged that "the claim filed alleges that, by termination, the Postal Service breached the contract."

"However, termination, under appropriate conditions, is provided for in most Postal Service contracts, including the one with Postal Buddy."

Though the Postal Service pulled the plug on Postal Buddy last September, Goodman didn't file the claim until June 15. It took that much time to prepare the claim and have it reviewed by an accounting firm to ensure that he could not be charged with filing a false claim, he explained.

The Postal Service is auditing Goodman's claim, which could take "some months," Harding said.

When it is completed, the Postal Service will respond to Postal Buddy. It can agree to pay the claim, which is unlikely, it can reject the claim, or it can negotiate a settlement, she said.

If Goodman is dissatisfied with the Postal Service's response, he can have it reviewed by the Board of Contract Appeals. That decision could be appealed to the U.S. Court of Federal Claims. Ultimately, the case could go to the federal Court of Appeals.

"The process could take five years," Goodman said.

Meanwhile, Goodman is pursuing other business opportunities related to the Postal Buddy concept.

"We'll make an announcement in the fall," Goodman said.