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Victor company files $3.2M breach of contract lawsuit

Plaintiff seeks more than $3.2 million in damages

One Victor electronics company is suing another for more than $3.2 million for allegedly failing to fulfill the terms of a contract to supply parts.

The plaintiff company, Teknic Inc., is suing the defendant company, Redcom Laboratories Inc.

The lawsuit was filed Monday in state Supreme Court in Ontario County. Jerauld E. Brydges, a partner at Harter Secrest & Emery LLP, is representing Teknic.

Teknic designs and sells machine automation products. Redcom provides contract manufacturing services.

Teknic is seeking damages suffered because Redcom allegedly failed to live up to its end of a contract to manufacture circuit board assemblies for Teknic.

The contract started on Oct. 16, 2017. Until about January 2021, Redcom performed adequately under the contract, according to the complaint.

But, as Teknic’s manufacturing needs increased, Redcom failed to allocate sufficient personnel, equipment, and other resources to deliver assemblies on the promised schedule, the suit claims.

Between January 2021 and March 2023, Redcom “repeatedly and severely failed to meet the agreed upon delivery schedule,” according to the complaint.

The lawsuit asks for about $3.2 million in damages —liquidated damages of $2,533,900, plus $106,759 in lost inventory and undelivered products and other damages of $563,728.

On June 3, 2022, Redcom gave notice that it was immediately ending the contract “for cause,” according to the suit.

“The notice was a ruse on its face: Redcom relied on a provision of the contract that permits one party to terminate if the other party suffers a change or effect that is materially adverse to its business, financial condition, assets or operations and that will prevent it from performing,” according to the complaint.

“But Redcom cited no such change or effect as to Teknic, nor could it: Teknic consistently fulfilled all of its obligations, reliably paid Redcom’s invoices, and in fact increased its orders to Redcom over the course of the contract,” according to the suit.

Redcom decided the contract was not “sufficiently profitable and was likely to compromise its ability to fulfill an anticipated military contract,” the suit alleges.

“Neither the contract nor New York law permits a party to walk away from its unambiguous contractual obligations because it unilaterally determines the contract is no longer profitable or presents business inconveniences,” according to the suit.

Since January 2021, Redcom had a supply failure on almost every order and product in the contract, according to the complaint.

Teknic reluctantly agreed to take over all manufacturing by the end of the year, which would require construction of a facility and new equipment, according to the lawsuit.

Teknic offered to take “all actions necessary to develop the capability of competently manufacturing all the products at a volume consistent with its customer orders in as short a time as is commercially reasonable.”

But Redcom did not hire any additional labor and took no steps to increase production output. In July 2022, Redcom agreed to continue to manufacture Teknic products until Dec. 31, 2022, and even then only if Teknic would also release Redcom from all present and future liability related to the agreement.

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