Edison, New Jersey-based Innovative Technology Distributors (IDT) filed a lawsuit in U.S. District Court for the District of New Jersey on March 10th against the new owner of their highest value-client. The suit alleges that the new parent company employed cut-throat business tactics that effectively eliminated IDT’s ability to continue operating as a business, thus constituting a variety of violations including breach of contract, tortuous interference and violations of New Jersey state franchising law.
The defendant company in this lawsuit is Oracle, who acquired IDT’s business partner, Sun Microsystems in 2010. IDT has been a major reseller of Sun technology products since 2005. Since the acquisition last year, IDT claims Oracle had been purposefully delaying the creation of a new contract to replace the one they had prior with Sun.
When Oracle finally did draw up an amendment to IDT’s contract, it was delivered on December 29th with a deadline of December 30th and contained terms too onerous to allow them to continue operations for any substantial amount of time. IDT alleges the amendment removed previously offered product discounts necessary to maintain their business model, that it only extended the contract for six months and that it substantially limited the scope of products available to IDT for distribution and resale. IDT claims in the suit that they signed this contractual amendment under duress, as Oracle refused to continue processing crucial orders absent a signed amendment.
This is not to say that the contractual amendment was the first sign of trouble in the relationship between the two companies. IDT also alleges that additional procedural steps Oracle put in place after the acquisition slowed the distribution process substantially. Specifically, the suit mentions that a potential $80 million per year integration business deal in which IDT had already invested $1 million in infrastructure costs was lost due to lack of support from Oracle. To add insult to injury, IDT claims Oracle took their integration business model and applied it themselves, essentially cutting IDT out of the business venture.
Oracle has filed its own lawsuit against IDT to recover $19 million for products it claims to have delivered to IDT last year. The defendant’s initial response to the filing was that such a number is quite an exaggeration and continues to refuse payment.
IDT is demanding compensatory damages for breach of contract, tortuous interference and New Jersey franchise law violations, while Oracle’s suit is attempting to collect the $19 million they believe they are owed based on products delivered last year. An initial attempt at negotiations in the Oracle suit last month proved fruitless. As of March 21st, Oracle had yet to file an official response to IDT’s lawsuit in New Jersey.
Source: PCWorld Business Center “Strong-arm Tactics Alleged in Oracle, Reseller Dispute” by Chris Kanaracus, IDG News 3/21/11