A distributor has sued the U.S. division of Kenda Rubber Industrial Co. Ltd., its president and Cooper Tire & Rubber Co. over distribution rights for Kenda-brand tires sold in the western U.S.
International Tire Warehouse Inc. has charged America Kenda Rubber Co. Ltd. broke an agreement that gave ITW the primary rights to sell and distribute Kenda products in 10 western states. The suit against the Taiwanese-owned company was filed Dec. 15 in California Superior Court, Los Angeles County.
ITW claims Reynoldsburg, Ohio-based American Kenda and its owners ``agreed to refrain from offering and entering into any exclusive sales or distribution rights to their tire products to any third party'' in the 10-state territory. Rancho Cucamonga, Calif.-based ITW alleges Kenda breached that agreement by entering an exclusive sales or distribution pact with Cooper.
However, the lawsuit has its share of twists, as it was filed by Tim Phillips, ITW CEO and president and minority shareholder, against Jimmy Yang, who is ITW's chairman and majority shareholder.
Since 2002, Phillips and Yang have operated ITW as a joint venture they both formed and agreed that Kenda would supply. Americana Development Inc., another company in Reynoldsburg owned by Yang-and the majority shareholder in ITW-also is named as a defendant.
ITW also alleges:
* Kenda prohibited it from continuing to sell Kenda tire products to ITW customers in the western territory;
* Kenda revoked all of the ITW territory from the company;
* Kenda ``failed and refused'' to supply its products to ITW; and
* Cooper knew of the agreement between the two companies and ``induced'' Kenda to breach it by signing an agreement with Cooper that gave the Findlay, Ohio, tire maker ``exclusive sales or distribution rights'' in ITW's territory.
Literature published by both Kenda and Cooper seems to imply Cooper has exclusive distribution rights for Kenda tires in ITW's territory, according to Tom Lallas, an attorney representing ITW. Kenda is ITW's sole tire supplier yet hasn't provided all necessary products to ITW because Kenda's agreement with Cooper has restricted ITW's supply and distribution, Lallas claims.
``It's a difficult situation for ITW that threatens its existence,'' he said.
Yang disputed ITW's allegations and said ITW and Cooper both can sell Kenda tires in the western territory since neither has exclusive rights in the disputed states.
He said Phillips raised this suit on behalf of ITW without Yang's approval.
``My own company is telling me that I don't supply them enough tires. That's not the case,'' Yang said. He claims ITW is behind on its payments to Kenda and he has extended additional credit to it.
``I am the chairman of (ITW) and majority shareholder. Why would I want to harm my own company?'' Yang said.
ITW is seeking damages to be determined by the court, attorney's fees, punitive damages according to proof and restitution, also in an amount to be determined.
In addition, the distributor wants an injunction that restrains Kenda from offering its products for sale and distribution by any third party in the ITW territory and that also requires Kenda to supply its products to ITW at a ``fair market price'' and in sufficient quantities.
ITW also wants the court to restrain the defendants from interfering with its right to sell Kenda products in its territory. Lallas said he expects the discovery process to begin within the next 30 days.
A Cooper spokeswoman said that while Cooper is interested in the lawsuit, the case is primarily an issue involving Yang, Kenda and ITW.
She said Cooper will continue to sell Kenda products ``in the states not affected by this lawsuit. This doesn't affect our agreement to sell Kenda products other than the states involved in this dispute.''
She declined to comment further on specific allegations.