A dispute over who has distribution rights for Kenda brand tires in the western U.S. has led International Tire Warehouse Inc. (ITW) to sue American Kenda Rubber Ind. Co. Ltd. and its president, Jimmy Yang, for breach of contract.
The suit, filed Dec. 15 in California Superior Court, Los Angeles county, alleges Kenda broke an agreement with ITW in which ITW was to have primary rights to sell and distribute Kenda products in 10 western states-Arizona, California, Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah and Washington.
The suit claims Reynoldsburg, Ohio-based 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'' within the aforementioned western territory. However, Rancho Cucamonga, Calif.-based ITW alleges Kenda breached that agreement when it ``entered into an exclusive sales or distribution agreement'' with Cooper Tire & Rubber Co., which also is named as a defendant.
However, the lawsuit has its share of twists, as it was filed by Tim Phillips, ITW CEO and president and minority shareholder, against Mr. Yang, who is ITW's chairman and majority shareholder. Since 2002, Messrs. 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 Mr. Yang-and the majority shareholder in ITW-also is named as a defendant.
Other allegations by ITW state that:
* Kenda prohibited ITW from continuing to sell Kenda tire products to ITW's 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.
Attorney Tom Lallas, who is representing ITW, said literature published by both Kenda and Cooper seems to imply that Cooper has exclusive distribution rights for Kenda tires in ITW's territory. 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, Mr. Lallas claimed.
``It's a difficult situation for ITW that threatens its existence,'' he told Tire Business.
Mr. Yang refuted ITW's allegations and said that ITW and Cooper both can sell Kenda tires in the western territory as neither one has exclusive rights in the disputed states. He said Mr. Phillips raised this suit on behalf of ITW without Mr. Yang's approval.
``My own company is telling me that I don't supply them enough tires. That's not the case,'' Mr. Yang said. He noted that ITW is behind on its payments to Kenda and that 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?'' Mr. 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. The distributor also wants an injunction that restrains Kenda from offering its products for sale and distribution by any third party in the ITW territory and that requires Kenda to supply its products to ITW at a ``fair market price'' and in sufficient quantities.
ITW is seeking additional injunctive relief that restrains the defendants from interfering with its right to sell Kenda products in its territory. Mr. 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 Mr. 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.