Facts

Plaintiff Accuride International Inc., dba Accuride is an industry leader in the manufacture of precision ball bearing slides. Accuride had a longstanding business relationship with Matco Tools, providing Matco with high-quality precision ball bearing slides manufactured to Matco's specifications for installation into high-end toolboxes.

In December 2004, Accuride and Matco entered into a Supply Agreement, which required Matco to purchase from Accuride all its requirements for ball bearing slides for existing toolbox applications. The initial term of the Supply Agreement was two years, renewable in December 2006, for an additional two-year term unless either party gave 90 days notice of its intent not to renew. The Supply Agreement also specified that Matco could cancel the Supply Agreement on 30 days notice in the event of "product requirement changes."

During the initial term of the Supply Agreement, Matco sought to negotiate lower prices from Accuride, however, it did not give notice of an intent not to renew the Supply Agreement, which then self-renewed for an additional two-year term commencing in December 2006 and running through December 2008.

Thereafter, in March 2007, Matco terminated the Supply Agreement with approximately 21 months left in the extended term, stating that there had been product requirement changes in connection with Matco's launch of a new line of toolboxes. Accuride then brought suit for damages and lost profits for the balance of the term of the Supply Agreement.

PLAINTIFF'S CONTENTIONS:
Accuride contended that when it entered into the Supply Agreement, Matco had already embarked upon a plan to have a Taiwanese manufacturer replace Accuride product with reverse engineered slides "equal to or better than" the Accuride slides. Accuride contended that Matco committed promissory fraud in entering into the Supply Agreement. In addition, Accuride contended that the purported product requirement changes never occurred, and that Matco breached the Supply Agreement solely to obtain a better price, which legally constitutes bad faith in the termination of a requirements contract.

DEFENDANT'S CONTENTIONS:
Matco contended that it had long-standing warranty problems with the Accuride slides, and that the new slides obtained from the Taiwanese manufacturer was a better product. Matco further contended that it was entitled to institute product requirement changes at its discretion at any time during the term of the Supply Agreement, and that it in good faith required changes in the composition and features of the slides, which Accuride did not offer.

Result

The case was settled for $1,508,000. Of the settlement amount, $308,000 was allocated to product which Accuride had manufactured for Matco, and which will be delivered to Matco. The balance of the settlement, $1.2 million, is payable quarterly over a one-year period, without interest.

Other Information

FILING DATE: July 16, 2007.