IN THE COMMON PLEAS COURT OF MONTGOMERY COUNTY, OHIO

CIVIL DIVISION

RLFSHOP, LLC :

6530 Poe Avenue

Vandalia, OH 45414 :

and : CASE NO.:

Robert L. Folkerth :

6530 Poe Avenue

Vandalia, OH 45414 :

vs. :

AMERICAN EXPRESS COMPANY :

c/o CT Corp.

1300 E 9th Street :

 Cleveland, Ohio 44114

: Judge:

and

:

PAYPAL, INC. : COMPLAINT

c/o CT Corporation System

4400 Easton Commons Way :

Suite 125

Columbus, Ohio 43219 :

and :

WESLEY POWELL : JURY DEMAND ENDORSED

6871 Rockview Ct. HEREON

Huber Heights, Ohio 45424 :

and :

DORTHY C. POWELL :

aka DOROTHY C. POWELL

1769 Rustic Woods Drive :

Huber Heights, Ohio 45424

:

Defendants.

______________________________________________________________________________

ELECTRONICALLY FILED

COURT OF COMMON PLEAS

Monday, October 30, 2017 8:15:32 PM

CASE NUMBER: 2017 CV 05095 Docket ID: 31503519

GREGORY A BRUSH

CLERK OF COURTS MONTGOMERY COUNTY OHIO

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NOW COME the plaintiffs, RLFShop, LLC d/b/a Shopsmith (“Shopsmith”) and Robert L.

Folkerth, and for their Complaint against the Defendants Wesley Powell, Dorthy C. Powell aka

Dorothy C. Powell, PayPal, Inc. (“PayPal”) and American Express Company (“AMEX”), set forth

the following averments and allegations, to-wit:

PARTIES, JURISDICTION & VENUE

1. Shopsmith is a for profit Ohio limited liability company with its principal place of business

in Montgomery County, Ohio. Shopsmith is engaged in the business of manufacturing and selling

certain woodworking tools and accessories, including the famous Shopsmith Mark V multipurpose

woodworking system.

2. Mr. Folkerth is the principal owner and the manager of Shopsmith, is responsible for the dayto-day operations of the company, and is the holder of the credit card account subject of this dispute.

3. Mr. Powell is a former employee of Shopsmith and a principal instigator of the fraudulent

activities subject of this Complaint. At all times relevant hereto, Mr. Powell is a resident of

Montgomery County, Ohio.

4. Ms. Powell is Mr. Powell’s mother, and a co-conspirator with Mr. Powell in connection with

the fraudulent activities subject of this Complaint, as well as a beneficiaryof Mr. Powell’s fraudulent

activities. At all times relevant hereto, Ms. Powell is a resident of Montgomery County, Ohio.

5. Upon information and belief, PayPal is corporation organized under the laws of Delaware,

and is licensed to transact business in Ohio as a foreign for profit corporation. PayPal is in the

business of providing on-line business services and related activities.

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6. Upon information and belief, AMEX is a corporation organized under the laws of New York,

and is licensed to transact business in Ohio as a foreign for profit corporation. AMEX is in the

business of providing credit card services and related activities.

7. This action arises under the laws of the United States, including 15 U.S.C. § 1643, and the

state of Ohio with respect to common law claims asserted herein. Jurisdiction of this Court is

predicated on R.C. §§ 2305.01 and 2307.382. Venue is proper in this Court pursuant to Civil Rules

3(B)(3) and 3(B)(6), as activities conducted by the Defendants that gave rise to this action occurred

in Montgomery County, Ohio, and claims for relief against Defendants arose in Montgomery

County, Ohio.

BASIS OF DISPUTE

8. Shopsmith was formed in 2009 for the purpose of acquiring the assets of Shopsmith, Inc.

including the right to use the “Shopsmith” tradename. At the time of the asset acquisition,

Shopsmith hired Mr. Powell, and other former employees of Shopsmith, Inc. to work at Shopsmith. 

Mr. Powell was primarily assigned IT department responsibilities, providing computer maintenance

and support and related services. Mr. Powell was a highly trusted employee, having previously

worked at Shopsmith, Inc. for many years.

9. Mr. Powell’s duties included providing technical support, maintenance and administration

for Shopsmith’s computer software, hardware, and Internet operations, such as the purchase and

maintenance of domain names supporting Shopsmith’s web-based marketing activities. Over the

years, Mr. Powell was assigned additional duties, including responsibilities for the purchase of

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certain materials and supplies in connection with Shopsmith’s manufacturing and distribution

operations, in addition to purchases involving the IT department.

10. For convenience and to provide direct financial support for Shopsmith’s business operations,

Mr. Folkerth permitted Mr. Powell and other Shopsmith employees with purchasing responsibilities

to use AMEX credit cards issued under his AMEX credit card account (hereinafter, the “AMEX

credit card”). Employees were authorized to use the AMEX credit card for the limited purpose of

purchasing services, materials and supplies for Shopsmith. Per Shopsmith policy, Mr. Powell was

prohibited from using the AMEX credit card for personal use.

11. In order to monitor employee use of the AMEX credit card, Shopsmith maintained certain

financial controls and procedures. Shopsmith primarily relied upon the AMEX billing statements,

which were carefully scrutinized to confirm that the credit card purchases were made on behalf of

Shopsmith for approved services, materials and products from companies having an established

business relationship with Shopsmith. Depending upon the type and amount of the purchase

transaction, financial controls could also include requiring purchase orders, invoices or receipts in

support of the transactions, which were reconciled by the accounting department with the AMEX

billing statement.

12. Unbeknown to Shopsmith, sometime after Mr. Powell started using the AMEX credit card

he began making fictitious purchases for his personal benefit. After making the fictitious purchases,

Mr. Powell then converted the proceeds of those purchases to his personal use. Mr. Powell was only

able to make the fictitious AMEX credit card purchases and then convert the proceeds to himself by

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engaging in a scheme of fraud and misrepresentation in partnership with Ms. Powell, and aided and

abetted with the knowledge, cooperation and support of AMEX and PayPal, all for their mutual

benefit and profit.

13. Mr. Powell initiated the fraudulent scheme by opening PayPal accounts in his name and in

Ms. Powell’s name. Mr. Powell then used the AMEX credit card to make fictitious purchases from

Ms. Powell’s PayPal account. When Mr. Powell made the fictitious purchases, PayPal and AMEX

permitted Mr. Powell to falsely record the seller (“Merchant”) under the name of an established

Shopsmith vender, instead of requiring him to correctly identify Ms. Powell as the Merchant. 

Although AMEX and PayPal reported sales of the products purchased with the AMEX credit card

as being made from Ms. Powell’s PayPal account, no goods or services were actually purchased or

delivered. After the proceeds of the fictitious sales were paid into Ms. Powell’s PayPal account, Mr.

Powell was then able to transfer the proceeds to his own PayPal account for distribution to himself

and Ms. Powell.

14. Despite that no actual sales took place, PayPal and AMEX processed Mr. Powell’s fictitious

AMEX credit card purchases, issuing transaction reports and billing statements for the fictitious

purchases. However, instead of recording Ms. Powell as the actual Merchant, PayPal and AMEX

reported the established Shopsmith venders listed by Mr. Powell as the Merchants for transactions

that never actually occurred. Accordingly, AMEX sent billing statements to Mr. Folkerth and

Shopsmith showing the date of purported AMEX credit card purchases, naming an established

Shopsmith vender as the Merchant, identifying a product suitable for use by Shopsmith that as the

product purportedlypurchased, and stating the charge for the purchase, therebydeceivingShopsmith

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and Mr. Folkerth into believing that a legitimate credit card transaction with an established

Shopsmith vender had taken place, as had been recorded on the AMEX billing statement.

15. At all times relevant hereto, AMEX and PayPal have purposefullyand intentionallypermitted

AMEX account holders such as Mr. Powell to falselyidentify the Merchants and products purchased

through PayPal accounts. AMEX and PayPal have engaged in this practice, fully aware and knowing

or with reckless disregard of the facts, that transaction reports and billing statements recording such

purchases and sales effectively conceal the true identity of the Merchants and products purchased

using PayPal accounts.

16. AMEX and PayPal have engaged in this practice, knowing or with reckless disregard to the

fact that businesses and individuals paying for said credit card transactions, such as Shopsmith and

Mr. Folkerth, rely upon the accuracy of AMEX billing statements when making credit card

payments, and would be deceived by billing statements that falsely record the identity of the parties

to transactions and the products purchased, thereby approving payment for such purchases under the

belief that the purchases were authorized and made for a legitimate business purpose.

17. Mr. Folkerth entered into a contract with AMEX for the use of the AMEX credit card,

whereby AMEX made certain representations and warranties with respect to the processing and

reporting of credit card transactions. Mr. Folkerth and Shopsmith relied upon AMEX to use

reasonable care to prevent fraud and to assure that credit card purchases were accurately recorded,

and that billing statements reporting credit card purchases correctly reflected the identity of the

parties to the credit card purchases and the products subject of the credit card purchases. Pursuant

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to the contract with AMEX, Mr. Folkerth and Shopsmith entered into a special relationship with

AMEX and those doing business with AMEX, surrendering substantial control over the processing

and reporting of credit card purchases, relying upon AMEX to use reasonable care to assure that

credit card purchases are properly conducted and accurately recorded.

18. Upon information and belief, AMEX has a contractual relationship with PayPal authorizing

PayPal to process and report AMEX credit card payments for purchases made through PayPal

accounts. AMEX entered into the contract knowing or with reckless disregard to the fact that PayPal

permits PayPal account holders to falsely identify the parties to transactions and products purchased

through PayPal accounts, so as to deceive the credit card account holders as to the substance of the

actual transaction reported. AMEX requires credit cardholders such as Mr. Folkerth and Shopsmith

to pay for credit card purchases made through PayPal accounts, knowing that PayPal permits

transaction reports recording purchases made through PayPal accounts to be manipulated so as to

effectivelyconceal the true identity of the Merchants and products purchased using PayPal accounts,

thereby enabling fraudulent credit card transactions.

19. AMEX and PayPal know that credit cardholders paying for credit card purchases made

through PayPal accounts, such as Shopsmith and Mr. Folkerth, rely upon the accuracyof transaction

reports and billing statements recording said credit card purchases, and would be deceived by billing

statements that falsely record the identity of the parties to transactions and the products purchased. 

AMEX and PayPal know that credit cardholders, such as Shopsmith and Mr. Folkerth, authorize and

approve the use of credit cards and pay for credit card purchases under the belief and in reliance that

the AMEX and PayPal transaction reports and billing statements accurately identify the Merchants

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and products purchased as listed therein, so as to determine that the credit card purchases are

authorized and were made for a legitimate business purpose.

20. AMEX and PayPal receive fees for credit card credit card transactions made by their account

holders and have a pecuniary interest in facilitating credit card purchases. By permitting Mr. Powell

and Ms. Powell to falsely identify Merchants and products subject of fictitious credit card

transactions, PayPal and AMEX enabled Mr. Powell and Ms. Powell to defraud Mr. Folkerth and

Shopsmith, deceivingMr. Folkerth and Shopsmith into believing that credit card purchases had been

made from legitimate, established Shopsmith vendors in payment for products routinely purchased

by Shopsmith. PayPal and AMEX have the means and knew or should have known that Mr. Powell

and Ms. Powell were engaging in fictitious credit card transactions, that no actual purchases had

been made, and that the true recipients of the credit card payments for the credit card purchases listed

on the PayPal and AMEX statements were Mr. Powell and Ms. Powell.

21. In accordance with Shopsmith financial control procedures, AMEX credit card purchases

were reconciled with AMEX billing statements and invoices or other internal documents (laterfound

to have been forged by Mr. Powell) recording the purchases. Relying upon the accuracy of the

AMEX billing statements, Mr. Folkerth and Shopsmith paid for Mr. Powell’s fictitious credit card

transactions, though no goods or services were ever delivered as a result, and Mr. Folkerth and

Shopsmith received no benefit therefrom.

22. Based upon the false information provided in theAMEXbilling statements, Mr. Folkerth and

Shopsmith approved the payment of the fraudulent credit card transactions that had been made by

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Mr. Powell. Mr. Folkerth and Shopsmith continued to authorize and permit Mr. Powell to use the

AMEX credit card to make purchases on behalf of Shopsmith, under the belief that he was making

legitimate credit card purchases on behalf of Shopsmith. During the years Mr. Powell used the

AMEX credit card to make fictitious purchases, Mr. Folkerth and Shopsmith paid in excess of

$400,000.00 in fraudulent credit card charges.

FIRST CLAIM FOR RELIEF

(Breach of Contract)

23. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 23 of this Complaint as if fully set forth herein, and further state that:

24. AMEX entered into a certain contract with Mr. Folkerth to issue the AMEX credit card and

provide certain credit card services. To induce Mr. Folkerth to enter into the contract and to continue

to use the credit card and authorize Shopsmith employees to use the credit card, AMEX warranted

and Mr. Folkerth relied upon AMEX to use reasonable care to prevent fraud. Additional AMEX

contractual obligations and warranties include but are not limited to taking reasonable precautions

to assure that credit card transactions reported byAMEX actuallytook place, and that AMEX billing

statements reporting credit card purchases accurately reflected the identity of bona fide Merchants

involved in the credit card purchases and the products purchased with AMEX the credit card.

25. As credit card providers and processors of credit card transactions, AMEX and PayPal have

entered into contractual relationships between themselves and others with respect to the use of

AMEX credit cards, with the intention that AMEX credit card account holders benefit from the terms

of these contracts. These terms include requirements that PayPal take reasonable precautions to

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avoid credit card fraud, assure the identity of the parties to credit card transactions, complywith laws

pertaining to credit card use, and provide protections to credit card account holders as required by

law. AMEX imposes these requirements for the specific benefit and protection of AMEX credit card

account holders such as Mr. Folkerth, who rely and depend upon the protections provided to them

by these agreements and warranties.

26. At all relevant times hereto, Mr. Folkerth and Shopsmith fully and faithfully performed all

conditions precedent in accordance with the terms and conditions of the contract. Upon learning of

the fraudulent credit charges, Mr. Folkerth reported the fraudulent credit card transactions to AMEX,

requesting reimbursement for payments made as a result of the fraudulent credit card charges. In

breach of contract and the warranties AMEX made in conjunction with the contract, AMEX

knowingly and intentionally processed fraudulent credit charges, failed to provide accurate billing

statements, misrepresented the identity of the Merchants and products sold in connection with the

fraudulent credit card charges, and thereafter failed to reimburse Mr. Folkerth and Shopsmith for the

fraudulent credit charges.

27. As a direct and proximate result of AMEX’s breach of contract and warranties, Mr. Folkerth

and Shopsmith have paid AMEX in excess of $400,000.00 in fraudulent credit card charges. 

Accordingly, Mr. Folkerth and Shopsmith have been damaged in an amount not yet ascertained but

in excess of $400,000.00, and are entitled to recovery thereof from AMEX, plus prejudgment and

post judgment interest, expenses and costs herein expended, and reimbursement for reasonable

attorney fees incurred.

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28. In breach of the contracts between AMEX and PayPal and PayPal’s warranties thereunder,

PayPal failed to take reasonable precautions to avoid credit card fraud, correctly identify the

Merchants and confirm the existence and legitimacy of credit card transactions processed through

its accounts. In breach of contract and the warranties with AMEX, PayPal knowingly and recklessly

processed fraudulent credit charges,failed to provide accurate transaction statements, misrepresented

the identity of the Merchants and products sold in connection with the fraudulent credit card charges,

knowing that AMEX credit card holders such as Mr. Folkerth were relying upon PayPal to comply

with its contractual obligations and warranties.

29. Mr. Folkerth and Shopsmith are the intended and direct beneficiaries of the contract between

AMEX and PayPal, and are entitled to recover for the breach of said contract. As a direct and

proximate result of PayPal’s breach of contract and warranties, Mr. Folkerth and Shopsmith have

paid in excess of $400,000.00 in fraudulent credit card charges. Accordingly, Mr. Folkerth and

Shopsmith are entitled to reimbursement and payment of the credit charges from AMEX and PayPal

in an amount not yet fully ascertained but in excess of $400,000.00, g costs and expenses, plus

prejudgment and post judgment interest and reimbursement for reasonable attorney fees incurred.

SECOND CLAIM FOR RELIEF

(Negligence)

30. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 29 of this Complaint as if fully set forth herein, and further state that:

31. As credit card providers and processors of credit card transactions, AMEX and PayPal

exercise substantial control over the means and manner by which purchases and sales involving the

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use of credit cards are conducted and recorded. AMEX and PayPal have entered into contractual

relationships between themselves and others, including Mr. Folkerth and Shopsmith, requiring that

Mr. Folkerth and Shopsmith to surrender direct examination of credit card transactions and relyupon

information provided by AMEX and PayPal to ascertain the legitimacy of credit card transactions.

32. In addition to contractual obligations, AMEX and PayPal are bound to comply with the laws

pertaining to credit card use, and provide protections to credit card account holders as required by

law. These legal obligations and the substantial control exercised by AMEX and PayPal over the

means and manner of credit card transactions create a special relationship between AMEX, PayPal,

and credit card account holders such as Mr. Folkerth and Shopsmith, imposing duties upon AMEX

and PayPal to exercise reasonable care for the benefit of Mr. Folkerth and Shopsmith.

33. In accordance with the legal and contractual relationships between the parties, AMEX and

PayPal entered into a special relationship with Mr. Folkerth and Shopsmith as to the means and

manner of AMEX credit card transactions and how those transactions are reported. Mr. Folkerth and

Shopsmith surrendered to AMEX and PayPal substantial control over the processing and reporting

of AMEX credit card transactions, relying upon AMEX and PayPal to use reasonable care to assure

that credit card purchases are properly conducted and accurately reported. The special relationship

between AMEX, PayPal and AMEX credit card holders such as Mr. Folkerth imposes a duty upon

AMEX and PayPal to use reasonable care with respect to AMEX credit card transactions.

34. AMEX and PayPal’s duty of reasonable care includes but is not limited to the duty to assure

that the credit card transactions reported by AMEX and PayPal actually took place. Furthermore,

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the duty of reasonable care imposes upon AMEX and PayPal the obligation to assure that transaction

reports and credit card statements issued by AMEX and PayPal accurately identify the Merchant of

the product involved in credit card purchases, correctly identify the products purchased by credit

card, and that the credit card purchases reflect actual transactions between the purchaser and bona

fide Merchants of goods and services.

35. In breach of the duty to exercise reasonable care, AMEX and PayPal permitted Mr. Powell

to make fictitious credit card purchases using the AMEX credit card, and to misrepresent the identify

Merchants and products subject of fictitious credit card transactions. By failing to exercise

reasonable care, PayPal and AMEX enabled Mr. Powell and Ms. Powell defraud Mr. Folkerth and

Shopsmith, deceivingMr. Folkerth and Shopsmith into believing that credit card purchases had been

made from legitimate, established Shopsmith vendors in payment for products routinely purchased

by Shopsmith. PayPal and AMEX have the means and knew or should have known that Mr. Powell

and Ms. Powell were engaging in fictitious credit card transactions, that no such products had been

sold, and that the true recipients of the credit card payments for the credit card purchases listed on

the PayPal and AMEX statements were Mr. Powell and Ms. Powell.

36. Shopsmith and Mr. Folkerth carefully scrutinized the AMEX billing statements to confirm

the credit card transactions reported therein were authorized and made for the benefit of Shopsmith. 

Mr.Folkerth and Shopsmith relied upon the AMEX billing statements to accuratelyreport said credit

card transactions, and were deceived by AMEX billing statements that falsely recorded the identity

of the Merchants and the products purchased. Shopsmith’s and Mr. Folkerth’s reliance upon the

AMEX billing statements was reasonable and foreseeable. AMEX and PayPal know that credit

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cardholders, such as Shopsmith and Mr. Folkerth, authorize and approve of the use of credit cards

and pay for credit card purchases under the belief and in reliance that the AMEX and PayPal

transaction reports and billing statements accurately identify the Merchants and products purchased

as listed therein, so as to determine that the credit card purchases recorded on the billing statements

are authorized and were made for a legitimate business purpose.

37. AMEX and PayPal have a duty to accurately report credit card transactions, correctly

identifying the Merchants and products sold on the transaction reports and the billing statements

provided to credit card account holders such as Mr. Folkerth and Shopsmith. With malice,

knowledge and reckless disregard of the known facts, AMEX and PayPal intentionally breached that

dutybyproviding inaccurate transaction reports and billing statements, listingnonexistentMerchants

and products for the credit card transactions reported therein for their own financial benefit. 

Shopsmith’s and Mr. Folkerth’s reliance upon the AMEX billing statements was reasonable and

foreseeable.

38. As a direct and proximate result of AMEX’ s and PayPal’s negligence, Mr. Folkerth and

Shopsmith have paid in excess of $400,000.00 in fraudulent AMEX credit card charges. 

Accordingly, Mr. Folkerth and Shopsmith are entitled to recovery of compensatory and punitive

damages from AMEX and PayPal in an amount not yet fully ascertained but in excess of

$400,000.00, plus prejudgment and post judgment interest and costs herein expended, and payment

for reasonable attorney fees incurred.

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THIRD CLAIM FOR RELIEF

(Fraud)

39. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 38 of this Complaint as if fully set forth herein, and further state that:

40. As credit card providers and processors of credit card transactions, AMEX and PayPal

exercise substantial control over the means and manner by which purchases and sales involving the

use of credit cards are conducted and recorded. AMEX and PayPal issue transaction reports and

billing statements recording credit card transactions, representing that the transaction reports

correctly identify the Merchants and products involved in the credit card transactions. AMEX and

PayPal know and intend that the credit card account holders such as Mr. Folkerth and Shopsmith rely

upon the accuracy of the information provided by AMEX and PayPal to detect fraud, verify that the

use of the credit card was authorized and that payment should be approved.

41. In accordance with the legal and contractual relationships between the parties, AMEX and

PayPal entered into a special relationship with Mr. Folkerth as to the means and manner of AMEX

credit card transactions and how those transactions are reported. Mr. Folkerth and Shopsmith

surrendered to AMEX and PayPal substantial control over the processing and reporting of AMEX

credit card transactions, relying upon AMEX and PayPal to use reasonable care to assure that credit

card purchases are properly conducted and accurately reported. The special relationship between

AMEX, PayPal and AMEX credit card holders such as Mr. Folkerth imposes a duty upon AMEX

and PayPal to accurately disclose information regarding AMEX credit card transactions.

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42. AMEX and Paypal made representations in transaction reports and billing statements as to

the identityof Merchants and products involved in AMEX credit card transactions, with the intention

that Mr. Folkerth and Shopsmith would rely on the information provided to detect fraud, verify that

the use of the credit card was authorized and issue payment for the credit card purchases. With

malice, knowledge and intentional, reckless disregard of the truth or falsity of the known facts,

AMEX and PayPal misrepresented the identity of Merchants and products purchased using the

AMEX credit card for their own financial benefit, knowing the information was material, and that

Mr. Folkerth and Shopsmith would rely upon said misrepresentations to their detriment and to the

benefit of AMEX and PayPal, thereby deceiving Mr. Folkerth and Shopsmith into believing that

credit card purchases had been made from legitimate, established Shopsmith vendors in payment for

products routinely purchased by Shopsmith.

43. Mr. Powell, aided and abetted by Ms. Powell, AMEX and PayPal, engaged in a series of

fictitious credit card purchases, falsely representing to Mr. Folkerth and Shopsmith that the AMEX

credit card was used to make purchases of actual products sold by established Shopsmith venders

for legitimate business reasons. Said representations were made intentionally,maliciously, and with

reckless disregard of the known facts, for the financial benefit of all the Defendants. In reliance upon

said representations, Shopsmith and Mr. Folkerth paid for the credit card transactions and continued

to authorize Mr. Powell’s use of the AMEX credit card. At all times relevant hereto, Shopsmith’s

and Mr. Folkerth’s reliance upon said representations was reasonable and foreseeable.

44. With malice, knowledge, and reckless disregard of the truth or falsity of the known facts, the

Defendants intentionally provided inaccurate transaction reports and billing statements, falsely

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representing the identity of the Merchants and products involved in the AMEX credit card

transactions reported therein. Mr. Powell furthered the fraud by submitting to Shopsmith fictitious

invoices and documents in support of the AMEX credit card transactions. As a direct and proximate

result of Defendants fraudulent conduct, Mr. Folkerth and Shopsmith have paid in excess of

$400,000.00 in fraudulent credit card charges. Accordingly, Shopsmith and Mr. Folkerth are entitled

to recovery of compensatory and punitive damages from the Defendants in an amount not yet

determined but in excess of $400,000.00, prejudgment and post judgment interest and costs herein

expended, and reimbursement for reasonable attorney fees.

FOURTH CLAIM FOR RELIEF

(Negligent Misrepresentation)

45. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 44 of this Complaint as if fully set forth herein, and further state that:

46. As credit card providers and processors of credit card transactions, AMEX and PayPal are

in the business of processing AMEX credit card purchases, sales and payments, and reporting these

transactions to AMEX credit card account holders. AMEX and PayPal derive a pecuniary interest

in each AMEX credit card transaction processed through PayPal accounts, receiving fees for each

such transaction. AMEX and PayPal have entered into contractual relationships between themselves

and others, including Mr. Folkerth and Shopsmith, requiring Mr. Folkerth and Shopsmith to

surrender direct examination of the identity of Merchants involved in credit card transactions and

rely upon the representations made by AMEX and PayPal to ascertain the Merchants from whom

purchases are made and the legitimacy of credit card transactions.

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47. AMEX and PayPal issued certain transaction reports and billing statements representing that

established Shopsmith venders were the Merchants for the sale of products purchased with the

AMEX credit card. AMEX and PayPal knew, or in the exercise of reasonable care should have

known that the information they provided to Mr. Folkerth and Shopsmith was false, and the credit

card transactions reported by AMEX and PayPal were fictitious. AMEX and PayPal failed to use

reasonable care to assure that transaction reports and credit card statements issued by AMEX and

PayPal accurately identified the Merchant selling the product involved in credit card purchases,

correctly identify the products purchased with the credit card, and that the credit card purchases

reflect actual transactions between the purchaser and bona fide Merchants.

48. In breach of the duty to exercise reasonable care, AMEX and PayPal negligently

misrepresented to Mr. Folkerth and Shopsmith the identify of Merchants and products subject of the

fictitious credit card transactions. PayPal and AMEX have the means and knew or should have

known the correct identity of the Merchant subject of the AMEX credit card transactions and the

fictitious nature of the credit card transactions. Mr. Folkerth and Shopsmith justifiably relied upon

AMEX and PayPal’s misrepresentations as set forth in AMEX’s billing statements, and were thereby

deceived into believing that AMEX credit card purchases had beenmade fromlegitimate, established

Shopsmith vendors in payment for products routinely purchased by Shopsmith.

49. AMEX and PayPal have a duty to accurately report credit card transactions, correctly

identifying the Merchants and products sold on the transaction reports and billing statements

provided to credit card account holders such as Mr. Folkerth and Shopsmith. With malice,

knowledge and reckless disregard, AMEX and PayPal negligently misrepresented credit card

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transactions to Shopsmith and Mr. Folkerth, listing non existent Merchants and products for the

credit card transactions reported therein for their own financial benefit. As a direct and proximate

result of the negligent misrepresentations made by AMEX and PayPal, Mr. Folkerth and Shopsmith

have paid in excess of $400,000.00 in fraudulent credit card charges. Accordingly, Mr. Folkerth and

Shopsmith are entitled to recovery of compensatory and punitive damages from AMEX and PayPal

in an amount not yet determined but in excess of $400,000.00, plus prejudgment and post judgment

interest and costs herein expended, and reimbursement for reasonable attorney fees incurred.

FIFTH CLAIM FOR RELIEF

(Violation of the Truth In Lending Act)

50. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 49 of this Complaint as if fully set forth herein, and further state that:

51. Pursuant to the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., the AMEX credit

card is an accepted credit card, and Mr. Folkerth is not liable for the unauthorized use of the AMEX

credit card in excess of $50.00. At all times relevant hereto, Mr. Powell’s use of the AMEX credit

card to make fictitious credit card transactions was not authorized by Mr. Folkerth and Shopsmith. 

Mr. Powell’s unauthorized use of the AMEX credit card occurred prior to when Mr. Folkerth and

Shopsmith discovered that Mr. Powell’s unauthorized use of the credit card had taken place and had

notified AMEX that the unauthorized use had taken place.

52. After Mr. Folkerth and Shopsmith discovered Mr. Powell’s unauthorized use of the AMEX

credit card, Mr. Folkerth notified AMEX and requested reimbursement of the unauthorized credit

card charges. Initially, AMEX credited Mr. Folkerth’s AMEX account for the unauthorized credit

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card charges reported by Mr. Folkerth. However, AMEX subsequently reinstated the unauthorized

credit charges in violation of the TILA and has refused to reimburse Mr. Folkerth and Shopsmith for

AMEX credit payments made by Mr. Folkerth and Shopsmith as a result of Mr. Powell’s

unauthorized use of the AMEX credit card.

53. Pursuant to the TILA, AMEX is obligated to reimburse Mr. Folkerth and Shopsmith for

payments made by Mr. Folkerth and Shopsmith as a result of Mr. Powell’s unauthorized use of the

AMEX credit card, in accordance with the terms of the TILA. Mr. Folkerth and Shopsmith have

paid in excess of $400,000.00 in fraudulent credit card charges. In violation of the TILA, AMEX

has refused to reimburse Mr. Folkerth and Shopsmith for those payments. As the direct and

proximate cause of AMES’s violation of the TILA, Mr. Folkerth and Shopsmith have incurred

damages and are entitled to recovery from AMEX an amount not yet fully determined but in excess

of $400,000.00, plus prejudgment and post judgment interest and costs herein expended, and for

reasonable attorney fees hereby incurred.

SIXTH CLAIM FOR RELIEF

(Conversion)

53. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 52 of this Complaint as if fully set forth herein, and further state that:

54. Over a period of years, Mr. Folkerth and Shopsmith paid to AMEX over $400,000.00 in

unauthorized credit card charges. After Mr. Folkerth and Shopsmith discovered Mr. Powell’s

unauthorized use of the AMEX credit card, Mr. Folkerth notified AMEX and requested that AMEX

reimburse him for the unauthorized credit card charges. Initially, AMEX credited Mr. Folkerth’s

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AMEX account for the unauthorized credit card charges reported byMr. Folkerth. However, AMEX

subsequently reinstated the unauthorized credit charges and has refused to reimburse Mr. Folkerth

and Shopsmith for AMEX credit payments made byMr. Folkerth and Shopsmith in connection with

Mr. Powell’s unauthorized use of the AMEX credit card.

55. At all times relevant hereto, Mr. Folkerth and Shopsmith are the rightful owners of the

payments made to AMEX for fraudulent credit card transactions. Mr. Folkerth and Shopsmith have

notified AMEX that the AMEX credit card transactions are fictitious, fraudulent and unauthorized,

have demanded that AMEX return said payments, and AMEX has wrongfully refused, thereby

converting the propertyof Mr. Folkerth and Shopsmith. As a direct and proximate result of AMEX’s

conversion of said credit card payments, Mr. Folkerth and Shopsmith have incurred damages and

are entitled to recovery of compensatory and punitive damages from AMEX in an amount not yet

determined but in excess of $400,000.00, plus prejudgment and post judgment interest and costs

herein expended, and reimbursement for reasonable attorney fees incurred.

SEVENTH CLAIM FOR RELIEF

(Unjust Enrichment)

56. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 55 of this Complaint as if fully set forth herein, and further state that:

57. Over a period of years, Mr. Folkerth and Shopsmith have paid to AMEX and PayPal in

excess of $400,000.00 in unauthorized and fraudulent credit card charges, conferring a benefit upon

AMEX and PayPal. Mr. Powell and Ms. Powell converted the unauthorized and fraudulent credit

card charges to their personal benefit. At all times relevant hereto, AMEX and PayPal knew or

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should have known that said credit charges were unauthorized and fraudulent, and knowingly

accepted the benefit of fees derived from said fraudulent credit card charges.

58. Mr. Folkerth and Shopsmith notified AMEX that the AMEX credit card transactions are

fictitious, fraudulent and unauthorized, have demanded that AMEX return said payments, and

AMEX has wrongfullyrefused said demand, therebyretaining the benefit. As a direct and proximate

result of said credit card payments, AMEX and PayPal have been unjustly enriched. Accordingly,

Mr. Folkerth and Shopsmith have incurred damages and are entitled to recovery of compensatory

and punitive damages from AMEX and PayPal in an amount not yet determined but in excess of

$400,000.00, plus prejudgment and post judgment interest and costs herein expended, and

reimbursement for reasonable attorney fees incurred.

EIGHTH CLAIM FOR RELIEF

(Breach of Fiduciary Duty)

59. Shopsmith and Mr. Folkerth incorporate the facts and allegations contained in paragraphs 1

through 58 of this Complaint as if fully set forth herein, and further state that:

57. As an employee of Shopsmith, Mr. Powell owed Shopsmith a fiduciary duty of trust in his

conduct of business on behalf of Shopsmith. In breach of that fiduciary duty of trust, Mr. Powell

engaged unauthorized and fraudulent credit card transactions using the AMEX credit card for his

personal benefit. As a direct and proximate result of Mr. Powell’s breach of his fiduciary duty of

trust, Mr. Folkerth and Shopsmith have paid in excess of $400,000.00 in fraudulent credit card

charges for nonexistent goods and services. Accordingly, Mr. Folkerth and Shopsmith have incurred

damages and are entitled to the recovery of compensatory and punitive damages from Mr. Powell

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in an amount not yet determined but in excess of $400,000.00, plus prejudgment and post judgment

interest and costs herein expended, and reimbursement for reasonable attorney fees incurred.

Respectfully Submitted,

FOLKERTH + ROUTH LLC

/s/ John R. Folkerth, Jr.

John R. Folkerth, Jr. (0016366)

Trial Attorneys for Plaintiffs

109 North Main Street

500 Performance Place

Dayton, Ohio 45402

(937) 260-4200 (telephone)

(9sy) 260-4201 (facsimile)

jfolkerth@folkerthlaw.com 

JURY DEMAND

Now come the Plaintiffs, Robert L. Folkerth and RLFShop LLC, and pursuant to Civil Rule

38 hereby demand a trial by jury herein.

/s/ John R. Folkerth, Jr. 

John R. Folkerth, Jr. (0016366)

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