NUKOTE FILES $ 100Million LAWSUIT AGAINST CLOVER GROUP

[Anonymous]

http://www.opi.net/executive_briefing/nukote_and_clover_prepare_for_battle?SQ_ACTION=login&
NUKOTE FILES $ 100Million  LAWSUIT
AGAIN CLOVER GROUP
Nukote
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 opi.net.Feelings 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:

a.
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
business”.

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
opi.net’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 opi.net 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”.

Responding
to some of the specific allegations, Cerkleski denied that his company
had tried to muscle in on Nukote’s contract with Office Depot, telling
opi.net 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 opi.net 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.

Nukote’s
accusations
“The actual words in our lawsuit tell the story more
clearly than anything I can add here,” Nukote spokesman Russell Mack
told opi.net.Here 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.

[Author]

March 8, 2010 at 2:15 PM