Mattress Firm, Former Colliers Broker Finally Settle Dispute Over Alleged Bribery, Kickback Scheme

One of the world's largest mattress retailers has put to bed its lawsuit against two former executives and a former Colliers Atlanta retail broker after a six-year legal battle. 

Mattress Firm settled its legal saga against its former real estate heads Bruce Levy and Ryan Vinson, as well as its former retail broker Alex Deitch, after filing a lawsuit against the trio in 2017, claiming they steered the company toward high-priced real estate in exchange for developer kickbacks and other incentives during its explosive real estate growth phase across the U.S. last decade.

Deitch countersued, claiming the mattress dealer was fully aware of and endorsed his activities and that its claims amounted to interference with his other clients. 

The parties reached a “binding settlement agreement” with Mattress Firm in December, ending the lawsuit originally filed in Texas' Harris County District Court in 2017, according to a press release issued last month by Deitch’s attorney, Schulten Ward Turner & Weiss partner Kevin Ward.

“This has been a ‘David versus Goliath’ fight, and I am pleased to announce after fact-based discovery and legal proceedings highlighting the truth, I have finally been vindicated. I am very happy with the outcome,” Deitch said in a statement. “We always felt that Mattress Firm’s claims lacked merit, and my goal has been to return to focusing on real estate development.”

Levy and Vinson also agreed to settlements with their former employer, according to court documents. Colliers Atlanta was also named as a defendant in the suit but was dismissed from the case in September 2022.

Details of the settlement weren't disclosed, but Ward said in the press release that Deitch “did not make any concession of wrongdoing” in ending the dispute. Attorneys for Levy and Vinson didn't return messages seeking comment. Mattress Firm and Colliers also didn't respond to Bisnow as of press time. 

Deitch had been a top retail broker in Atlanta over his tenure at Colliers, which fired him shortly after Mattress Firm's suit was made public. He has since founded Atlanta-based retail development firm Falcon Realty Partners, according to the release. Deitch deferred comment to Ward. 

When reached by phone, Ward declined to comment on details of the settlement.

“Suffice it to say, we were happy to get it resolved,” Ward said. 

The legal tussle began in 2017 when Mattress Firm, at the time led by CEO Steve Stagner, alleged that Deitch, Levy and Vinson orchestrated a multiyear scheme that involved inflating store rents, bribes, high-priced gifts and kickbacks from developers, affecting more than 800 of its store locations. Mattress Firm alleged in the lawsuit that the trio was responsible for some 1,500 new stores during their time leading Mattress Firm's real estate efforts, as well as hundreds more lease renewals.

Mattress Firm claimed many of those properties were owned by an inner circle of developers that provided kickbacks and gifts to Deitch, Levy and Vinson in return for favorable Mattress Firm deals. 

Soon after, Deitch filed a countersuit, claiming Mattress Firm’s aggressive growth strategy and desire to corner the mattress retail market was to blame for agreeing to leases with rents that were above market rates.

Deitch also accused Mattress Firm executives of tortious interference in his contract with Colliers and of spreading what he called false information to potential clients. Colliers fired Deitch in 2017, a year after Mattress Firm severed its contract with the brokerage.

“Mattress Firm essentially weaponized the real estate department and its brokers to advance the larger agenda of removing all competition it could,” Deitch's attorneys wrote in the counterclaim. “Mattress Firm’s aggressive roll-up was reckless, resulting in massive clustering of stores, assumption of bad locations which needed to be propped up, and astounding redundancies in certain markets.”

The court battle dragged on for years, involving allegations that Stagner and other former Mattress Firm executives permitted a culture of accepting vendor gifts. Mattress Firm accused the trio of benefiting from gifts from developers, such as tickets to sporting events, investments in two luxury houses in the Florida Keys, a fishing yacht, exotic trips, luxury hotel stays and access to investments with a company that sold Taylor Swift-branded apparel in China.

Since then, Mattress Firm has backtracked on its rampant expansion that at times saw it operate multiple stores literally across the street from one another, which led in 2020 to a popular online conspiracy theory that the retailer was a front to launder money. Deitch's suit claimed the company's store count went from 729 to over 2,000 between 2011 and 2015. 

The retailer today operates more than 2,300 stores across the U.S., down from its peak of more than 3,500 stores in 2017. It filed for bankruptcy in 2021, which allowed it to reduce its store count and renegotiate leases with landlords. Stagner resigned from Mattress Firm in 2019.

Mattress Firm was acquired by Steinhoff International in 2016, which itself became embroiled in an accounting scandal in South Africa and is now going through its own bankruptcy. 

In a motion filed last year, Levy's attorney argued that the original lawsuit was filed to "scapegoat" the three co-defendants as Steinhoff was being investigated for fraud. Auditors for Steinhoff refused to sign off on Mattress Firm's financial statements, Levy claimed, forcing the company to scramble for financing. 

"The company's massive growth had backfired," the motion stated. "Multiple Mattress Firms across the street from each other, cannibalizing each other's sales; and acquisitions of other mattress companies, hurting the company's overall economics. As a result, the business was not meeting its sales or earnings expectations. Mattress Firm had grown too big too fast."

In May, mattress-maker Tempur Sealy agreed to acquire Mattress Firm for $4B in a transaction that is expected to close during the first half of 2024. No reason was given for Mattress Firm’s move to settle. Up until last October, the parties were preparing for a jury trial, according to court documents. 

"It became very clear that a trial was not going to be a good business decision for Mattress Firm," Ward and partner Andrea Pawlak said in a joint statement. "We were looking forward to putting Mr. Deitch’s counterclaims before a jury, but we are all very satisfied with the result reached outside of court."