Lawsuit Update: N-able Seeks MSP on Demand Financial Records

Lawsuit Update: N-able Seeks MSP on Demand Financial Records

As part of N-able Technologies' lawsuit against MSP on Demand, N-able is seeking financial records from the hardware as a service (HaaS) specialist and its founder Ramsey Dellinger. Court documents in the case also reveal a 2008 bankruptcy filing in which Dellinger allegedly owed Tech Data and other creditors a combined $1.3 million. Here's the update.

MSP on Demand is one of the best-known HaaS specialists in the managed services market. As MSPmentor reported May 20, N-able alleges MSP on Demand committed fraud, deceptive trade practices, and breach of contract, among other items. N-able alleges that it has suffered damages in excess of $325,000, according to court filings.

Within court filings reviewed by MSPmentor, N-able seems concerned about XnE Inc.'s apparent buyout of MSP on Demand and Dellinger's financial standing. The N-able court filings state:

"N-able has also learned that Dellinger and his spouse have filed bankruptcy twice since June of 2008...Thus it appears that Dellinger has little or no personal assets from which to satisfy a judgment...A majority share is the only asset he does have, his ownership interest in MSP On Demand, is apparently being transferred out of state to XNE."
Reached by phone, Dellinger declined to comment about his bankruptcies and the lawsuit filed by N-able. Separately, XNE has not returned an MSPmentor email seeking comment.

N-able Makes Its Case

Within a court filing, N-able alleges:
"Some of the managed service providers who purchase N-able’s services elect to finance their purchase through a reseller or broker of N-able. MSP On Demand, owned and run by Dellinger, is one such broker...

...The full purchase price financed through leasing companies are supposed to flow through MSP On Demand to N-able. However, several months ago MSP On Demand ceased sending the payments to N-able. In addition, upon information and belief, MSP On Demand falsified some invoices to overcharge customers and keep the overages itself."
One such case allegedly involves an MSP called Computer Masters. In the court filings N-able alleges:
"For example, a new managed service provider, Computer Masters, purchases services from N-able in March 2010 and arranged financing through MSP On Demand. However, MSP On Demand diverted payment from Computer Masters as well, such that N-able has not received payment from this new customer."

Bankruptcies and Creditors

The court filings also cover some of Dellinger's financial history.

According to 2008 bankruptcy documents submitted in the case, Dellinger and his wife had $233,276.54 in assets and $1.3 million in liabilities. Much of the debt involved LanComm Technologies Inc. (also referred to as Lan-Com Technologies Inc. within the bankruptcy filing), allegedly one of Dellinger's channel-oriented companies.

Key creditors listed in the 2008 bankruptcy filing include Tech Data Corp., (a distributor allegedly owed $434,562.92) and Communications Supply Corp. (a distributor allegedly owed $20,487.71). Neither Tech Data nor Communications Supply replied to MSPmentor's request for comment.

In a separate 2009 bankruptcy filing, the Dellingers listed assets of $229,215.74 and liabilities of $337,561.33.

N-able Seeks Financial Records

According to court filings, N-able is seeking all books and records of MSP on Demand from June 1, 2009 through the present; all audit information for MSP on Demand covering the past 12 months; all invoices sent by MSP on Demand to managed service providers who are customers of N-able; and all information and police reports concerning the alleged embezzlement by an employee of MSP on Demand. Also, N-able is seeking all correspondence between Dellinger and Michael Cummings, CEO of XNE Inc., the company that announced plans to acquire MSP on Demand in early 2010.

Next Steps

Summons have been issued in the case, according to court documents filed and entered on May 17. And the summons have been returned/executed, according to court documents filed and entered on May 21.

MSPmentor will be watching the case for additional developments.

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