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 user 2010-03-08 at 2:15:16 pm Views: 389
  • #23654
    NUKOTE FILES $ 100Million  LAWSUIT

    and Clover prepare for battle

    Nukote has
    filed a $100 million lawsuit against rival cartridge manufacturer Clover
    Technologies. The gloves are off as both parties provided exclusive
    comment to are obviously running high in the dispute
    between aftermarket cartridge competitors Nukote and Clover after Nukote
    filed a lawsuit against Clover last Friday in Texas seeking $100
    million in damages.Nukote’s filing comes as part of a dispute after
    Office Depot ended its 20-year supply relationship with Nukote last May,
    leading the vendor to file for Chapter 11 bankruptcy protection a month
    later (it came out of Chapter 11 in December).

    In a separate
    lawsuit filed in September 2009 against Office Depot, Nukote is seeking
    $217 million in damages for what it calls “intentional and malicious
    acts” by Office Depot that breached a binding contract between the two
    companies and forced Nukote to file for Chapter 11.In that lawsuit,
    Nukote refers to Depot “secretly negotiating” with Nukote’s main
    competitor (Clover).Now Nukote has filed a second lawsuit, this time
    against Clover itself for its alleged role in attempting to put Nukote
    out of business by, among other things, getting Office Depot to switch
    suppliers.The lawsuit seeks damages on seven counts, including: civil
    conspiracy; tortious interference with contracts; unfair competition by
    misappropriation; and employee raiding.

    In brief, here are
    Nukote’s allegations against Clover:

    1. Clover had a co-ordinated
    plan dating back several years to monopolise the supply of aftermarket
    cartridges and collection of empties in the US. This involved:

    Making illegal proposals to Nukote to fix product prices and thereby
    increase profits.
    b. Attempting to merge with Nukote once the above
    had failed.
    c. A further co-ordinated and deliberate attack to end
    Nukote’s relationship with Office Depot which would “drive Nukote out of

    2. Clover induced Office Depot and other companies to
    breach their agreements with Nukote.

    3. Clover misappropriated
    Nukote’s trade secrets by the “targeting and raiding of key employees
    with secrets” and knowingly caused former Nukote employees to breach
    their fiduciary relationships with Nukote.

    4. Colluded to exclude
    Nukote from the empties market.

    The wording of the actual
    complaint is far more colourful and, in parts, reads more like a
    sensationalist blog than a legal document. (See extracts at the end of
    this article).To their credit, both parties were willing to respond to’s questions, though they are limited in what they are able to
    say because of the legal nature of the dispute.

    Neither side,
    though, was mincing its words.

    In an initial press release issued
    a few days after the filing of the lawsuit, Clover accused Nukote of
    “abusing the court system in a transparent and desperate effort to raise
    capital for a business that is on the verge of collapse”, adding that
    Clover has been receiving “daily letters, e-mails, and phone calls from
    Nukote customers looking to secure a new supplier and Nukote employees
    desperately seeking job opportunities”.

    Not so, retorted
    Nukote spokesman, Russell Mack.

    “I think that Clover’s rantings
    in the press release that they put out Monday are perfectly consistent
    with their behaviour that led to the lawsuit against them in the first
    place,” he told in an email.“Nukote is alive and well [and] is
    conducting business normally – we’re manufacturing and shipping
    products, and we’re selling and serving our customers,” he
    continued.“During the reorganisation last year, we were thrilled and
    grateful at how loyal our customers were. Virtually every one of them
    stood by us during that time. It was really gratifying to see that kind
    of loyalty. It meant a lot to us and we are working every day to repay
    our customers’ loyalty.“I think everyone knows that a healthy Nukote is
    good for this industry. The reaction we got from our customers showed
    how much this industry respects Nukote and values our place in the
    industry. We’ve got the newest factory in the industry, in Monterrey,
    Mexico, with plenty of expansion capacity. We’ve restructured our
    finances and reorganised our team. We feel great about the future of our
    company.”With regards to the allegations themselves, Jim Cerkleski, CEO
    of Clover Holdings, maintained that all Nukote’s claims “have no
    connection to actual facts”, adding that their “sweeping allegations
    have literally no grounding in fact” and that it seemed “Nukote is
    proceeding with the notion that evidence is optional”.

    to some of the specific allegations, Cerkleski denied that his company
    had tried to muscle in on Nukote’s contract with Office Depot, telling that is was the office supplier which first contacted Clover
    about supplying them after Depot experienced supply issues with
    Nukote.“Office Depot conducted an open and fair selection process to
    satisfy their product needs,” he stated.Cerkleski also denied that
    Clover “relentlessly pursued” Nukote seeking a merger or buyout, though
    he admits that the issue had been discussed.“We have never had
    meaningful discussions that ever became serious”, he affirmed. “However,
    we certainly talked about the benefits of coming together. I have only
    met Mr Rochon [Nukote’s Chairman] a handful of times in my life, of
    which one was at Office Depot when I told him we had decided to leave
    the line review in February [2009] after the first day.”The Clover
    Holdings CEO also said that only a handful of former Nukote employees
    are currently employed at Clover out of a total workforce of 3,700 and
    that they contacted Clover, not the other way round as alleged in
    Nukote’s complaint.When asked by how many former Nukote
    employees Nukote alleges that Clover lured into moving over to them,
    Nukote spokesman, Russell Mack, responded: “These are facts that I would
    expect will come out at trial.”

    Mack was also unable to comment
    on whether Nukote had taken any legal action against individual former
    employees who may have breached confidentiality agreements or stolen
    confidential corporate documents.Whatever happens, it is clear that
    Nukote has got its work cut out on the legal front, with two major
    lawsuits that could well drag on.The lawsuit with Office Depot,
    originally filed in a Tennessee bankruptcy court, is now in Federal
    District Court in Florida, Depot’s home state. A fact that “should make
    no difference”, according to Mack.“Our case stands on its merits,
    regardless of the jurisdiction,” he stated.

    Giving an update on
    the Depot lawsuit, Mack said: “There have been some procedural motions
    back and forth. We are leading up to the point where testimony will be
    taken in the form of depositions by both parties. I can’t predict how
    long the trial will last, but it is my understanding that a trial date
    of 10 January 2011 has been set by the court.”Mack showed no signs that
    the long time frame would deter Nukote.“We’re going to get justice for
    those who Clover has damaged,” he warned. “It will be a long case, but
    we’ll pursue it all the way to the end, no matter how long it
    takes.”With Clover stating that it is “prepared to root out the source
    of any attack on our company and aggressively defend the integrity of
    our brand,” it looks like being a hard fought battle.


    “The actual words in our lawsuit tell the story more
    clearly than anything I can add here,” Nukote spokesman Russell Mack
    told are some of the allegations quoted from the complaint
    document (editor’s additions indicated by,[Clover had a] coordinated
    plan to interfere with, dismantle and cripple [Nukote’s] business in an
    effort to personally enrich themselves and their owners.After several
    failed attempts to merge with Nukote and persuade its management to
    agree to illegal contracts in violation of Texas Law, [Clover] went
    about a coordinated plan to drive Nukote out of business so it could
    control a monopoly in the market.

    Illegal acts included, but are
    not limited to, stealing trade secrets and confidential information,
    targeting and raiding Nukote’s key employees, and tortiously interfering
    with Nukote’s contracts.Deep in the boardroom, Clover’s management
    envisioned a new world order, in which Clover had the exclusive ability
    to control cartridge prices and the market for empty cartridges needed
    by both parties. In fact, this plot became an integral part of Clover’s
    long-term business plan.Rebuffed in their attempts to have Nukote join
    their conspiracy, Clover turned to Plan B.Unable to corrupt or merge
    with Nukote, Clover concocted a new – and unlawful – scheme. The plot
    had one goal: remove Nukote from the market.

    Clover needed to
    negate that contract [Nukote’s contract with Office Depot] at any cost
    in order to obtain the monopoly power that they so desperately
    coveted.Armed with the employees it raided from Nukote, Clover had a
    series of contacts with Office Depot in which it indicated its desire to
    replace Nukote as its supplier.Clover’s plot was successful. […]
    Exactly as Clover had planned, Nukote’s business was instantly
    devastated.Even today, as Nukote works diligently to regain its place in
    the market, Clover continues to grind down Nukote under the heel of its
    market power.

    Clover has been telling third parties that it must
    maintain lower prices for a limited time in an effort to shut down
    Nukote once and for all. And, once Nukote has been totally destroyed –
    ending any possible competition – Clover intends to use its market power
    to significantly raise prices and increase its profitability.