Nukote and Clover prepare for battle
Nukote has filed a $100 million lawsuit against rival cartridge manufacturer Clover Technologies
Feelings are obviously running high in the dispute between aftermarket cartridge competitors Nukote and Clover after Nukote filed a lawsuit against Clover at the end of February 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 in order to "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".
To their credit, both parties were willing to respond to OPI‘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 are perfectly consistent with their behaviour that led to the lawsuit against them in the first place," he told OPI 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.
"I think everyone knows that a healthy Nukote is good for this 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 that is was the plaintiff 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  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.
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 Russell Mack.
"Our case stands on its merits, regardless of the jurisdiction," he stated.
"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.