Yea the in writing would be nice but the fact that they knew he has the website and business should be he is fine. Of course, who wins a pissing match like that when you are fighting with your vendor.

I would work out a deal whereby he gets paid on natural traffic to the old site and then let him start a new one. Because if they try to get their domain "back" and lose, how long do you think he will remain a distributor?

Just a thought.