MONTREAL—Tire recycling firm Tirex Corp. "adamantly denies" the charges of fraud and breach of contract brought by a former business partner, and Tirex's former president says he will countersue. IM2 Merchandising and Manufacturing of Montreal and its president, David Sinclair, filed suit against Tirex and Terence C. Byrne March 16 in the Wilmington, Del., federal district court. Tirex's operations are in Montreal but it is incorporated in Delaware.
The lawsuit stems from a five-year agreement Tirex and IM2 signed in December 1998 to manufacture molded rubber mats together at Tirex's facility, using IM2's technology and rubber produced from Tirex's patented TCS-1 cryogenic scrap tire recycling system.
At the time, the two companies said they expected to sell 1 million mats at total sales of $19.8 million over the life of the pact.
In September 1999, however, Tirex decided to exit the floor mat business.
Mr. Byrne—who soon would leave Tirex, with Vice President John L. Threshie Jr. succeeding him as president—said the company preferred to complete "needed improvements" on the TCS-1 system and continue development of its RuCuTherm rubber-thermoplastic compounds.
A Tirex release said IM2 would sublet 40,000 square feet of Tirex's facility to produce the mats, using a minimum 8 million pounds of Tirex's crumb rubber over the next two years. This plan, however, fell through.
In their lawsuit, IM2 and Mr. Sinclair, a Tirex shareholder, claim Tirex never had any intention of fulfilling its part of the contract.
"From the outset of negotiations...Tirex (was) fully aware that the TCS-1 Plant was a total failure," the lawsuit states. On the other hand, Tirex's "vigorous promotion" of its contract with IM2 caused its stock to climb from a low of 3 cents per share in 1998 to as high as $1.41 in 1999. Tirex stock traded at $1.06 per share on March 17 of this year.
IM2 and Mr. Sinclair claim that Mr. Byrne, four other Tirex officers and a company director—all of whom have left the company—"sold large blocks of shares after the stock price had dramatically risen."
IM2 seeks unspecified compensatory and punitive damages, as well as court injunctions barring Tirex from promoting the TCS-1 system or its connection with IM2.
In a statement issued by Tirex, Mr. Byrne said he was "shocked, dismayed and enraged" at the "spurious and untrue claims" made by IM2 and Mr. Sinclair. He added he will seek "full redress" for these claims by filing a countersuit.
Tirex has not yet decided whether it will file a countersuit, Mr. Threshie said, but it will fight IM2's suit vigorously.
"It's a nuisance suit—spurious, just ridiculous," he said. "In my opinion, we'll come out stronger when people find out the truth."
It was IM2, not Tirex, that defaulted on the agreement, Mr. Threshie added, but declined to give details because of the status of the litigation. "It's in the lawyers' hands," he said.
Meanwhile, Tirex continues to forge ahead promoting the TCS-1 system, Mr. Threshie said. The company has just closed on another contract, he added, and will release details shortly.
An IM2 official in Montreal declined all comment on the case.