Clarcor Inc. announced today that its wholly-owned subsidiary, Total Filtration Services, Inc., has initiated legal proceedings against Electronic Data Systems Corporation (EDS) and related defendants for approximately U.S. $3.6 million in payments for filtration products that were supplied by TFS under a supply agreement between TFS and EDS’s former subsidiary, AT Kearney.
The products in question were destined for a major automotive OEM under a Materials Replacement Organization (MRO) program administered by EDS/ATK.
The lawsuit, filed in Tennessee state court, seeks recovery of these amounts plus associated costs and expenses and the award of punitive damages.
In referring to the lawsuit, Norm Johnson, Clarcor’s chairman and chief executive officer, said: “We are greatly disappointed in EDS/ATK’s refusal to pay for products which EDS/ATK had ordered, received and used. We believe such refusal contradicts the terms of our agreement, the well-established practice of the parties and common sense. We have concluded that EDS/ATK has acted in bad faith, and while we never favour litigation as a means of resolving our disputes, they have left us no meaningful alternative.”
Annual sales under the terminated EDS/ATK contract amounted to approximately $10 million, but generated almost no profit to Clarcor.
Mr. Johnson noted that even in the face of EDS’s withholding of payments, TFS continued to supply products to the automotive OEM during a changeover period to support a smooth transition of the supply agreement that TFS terminated.
Mr. Johnson stated: “The OEM in question has been a valued customer of TFS for years, and our decision to terminate our supply agreement was based solely on the fact that we could not earn the kind of return that our shareholders expect while supplying products through EDS/ATK.”
Clarcor is based in Franklin, Tennessee, and is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products and consumer and industrial packaging products sold in domestic and international markets.
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