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Call my lawyer: when Little Rock advertising agencies split, the attorneys often profit.

In the beginning there was S.M. Brooks.

At least that's the way Little Rock's veteran advertising executives tell it.

S.M. Brooks was the advertising agency that spawned other agencies. Those agencies spawned firms of their own, eventually leading to a highly competitive market.

If you're a principal in a Little Rock agency, you're the exception if you haven't worked with several competitors.

Steve Mangan and Craig Rains once were employed by what has become Cranford Johnson Robinson Woods. They left to form their own agency.

Larry Stone was a partner and Millie Ward was on her way to becoming one when they departed Ben Combs' agency to begin their own shop.

It's how the advertising community grew.

It was the norm, and it was accepted.

But something changed in 1984.

When Myron Resneck left Combs Resneck Stone & Associates to form an agency with Stone and Ward, a highly publicized lawsuit evolved.

Combs sued Resneck for violating an agreement, which stated Resneck was to give 90 days notice in writing before leaving the agency. Resneck eventually had to forfeit the first 90 days of profits from the accounts he took with him.

Seven years later, it was Resneck Stone Ward & Associates that faced a split.

Next came a split at the Little Rock agency Mangan Rains Ginnaven Holcomb.

Restraining orders and lawsuits weren't far behind.

Litigation isn't a means to an end for all agencies, though, and it's not necessarily an industry trend.

"Litigation is costly and perhaps ultimately unproductive," Combs says.

Combs, now president of the Little Rock agency Combs & Heathcott Inc., says attorneys usually decide if a lawsuit is necessary.

And it's generally the attorneys who win financially.

Advertising agencies are in the public eye. Litigation that becomes messy isn't attractive to clients.

Combs says Little Rock law firms have undergone more name changes than the city's advertising agencies. Yet the agency changes seem to attract the most media attention.

Always Amicable?

Harry Paster, executive vice president of consulting for the American Association of Advertising Agencies in New York, laughs when asked if legal action is the norm when agencies split.

He says that of the 10,000 U.S. advertising agencies, only a small percentage split each year. An even smaller number file lawsuits when it happens.

"Most of the splits are amicable," Paster says.

So is Little Rock an anomaly?

Or do people simply not pay attention to the friendly splits?

Some members of the Little Rock advertising community point to the breakup of Frazer Irby Snyder Inc. as an amicable split.

Parts of the split were friendly. But other parts weren't.

"We didn't feel it was necessary to have a non-compete clause," Bernard Frazer says.

When Frazer left the agency 15 years ago, he took with him three accounts he had established and developed.

But when Tim Irby left in 1988, he considered filing a lawsuit over what he received for his stock in the agency.

"I didn't want to be in court for the next year even though I had grounds to win that lawsuit," Irby says.

When Bud Lowry and Alan Rothman parted ways in 1988, they simply kept the accounts each had been servicing. Then, they divided up the other accounts with few problems.

In 1986, though, Rothman & Lowry Inc. had sued former partner Gary Heathcott after Heathcott left the agency. There eventually was an out-of-court settlement.

Most advertising executives are as anxious to keep their problems out of the press as they are to keep their troubles out of court.

The Puppy Farm

"I would love to comment on that, but I'm afraid I had better not," says Carrick Patterson when asked about the lawsuit the two remaining principals at MRGH filed against him and Bob Ginnaven when they left to form Ginnaven Patterson & Associates in late 1991.

When Craig Rains left the agency in late 1990, he took with him the accounts he had cultivated. No lawsuit ensued.

"There was no flagrant violation of trust," Mangan says.

When asked about the suit against Ginnaven and Patterson, however, Mangan declines comment.

The original suit, filed in November, alleges that Ginnaven and Patterson solicited MRGH clients for their new agency while they were employed by MRGH.

MRGH is seeking an unspecified amount of damages.

Ginnaven filed a countersuit based on his claim of stock redemption rights after leaving the company.

The litigation is still in the discovery stage. No court date has been set.

Michael Smith, a partner at the Little Rock law firm Giroir & Gregory, represents MRGH. Smith says the parties are hopeful a settlement can be reached before the case goes to court.

Patterson says ad agencies don't automatically file lawsuits following splits, even in the volatile Little Rock market.

But he adds, "The advertising industry is depressed right now. Obviously, there's some shakeup. That happens whenever an industry is depressed."

Independence has its price, Stone says.

Stone and Ward negotiated with Resneck for months to buy the agency's Little Rock office. Resneck spent most of his time in the Memphis, Tenn., office.

When negotiations broke down, Resneck filed an injunction to keep Stone and Ward from competing against him.

The paralysis caused by the injunction facilitated an agreement.

Advertising executives, of course, are known more for their creativity than their legal skills.

What makes it tougher is that many former partners started out as best friends. Most say they left to pursue dreams of independence and greater success.

Mangan and Rains say they never wanted huge agencies. When they left Cranford Johnson, Mangan says they considered calling their shop The Daisy Hill Puppy Farm after the cartoon character Snoopy's home.

Instead, Mangan ended up with civil suit 91-6767.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Rengers, Carrie
Publication:Arkansas Business
Article Type:Industry Overview
Date:Apr 6, 1992
Previous Article:The American dream: competition doesn't keep Arkansas' advertising entrepreneurs from starting their own shops.
Next Article:A rocky year: breakups and stiff competition highlighted advertising industry in 1991.

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