CHARLESTON - A Huntington company has filed a federal suit against a Maine corporation, alleging it lost hundreds of thousands of dollars after the Maine company, which it claims never existed, failed to stick to its end of an agreement.
Rubberlite, the West Virginia company, has paid Baychar, the alleged Maine company, more than $300,000 as part of a license agreement it entered in January 2007, according to a complaint filed Sept. 18 in federal court.
In addition, Rubberlite claims it spent "much more" to develop, manufacture and sell marketable products incorporating the licensed material, but says it cannot sell the products because of Baychar's actions.
Furthermore, Baychar was declared administratively dissolved Sept. 10 by the Maine Secretary of State, according to the complaint.
But Rubberlite knew none of this when it entered into the January agreement and consented to pay a license fee and royalties to Baychar in exchange for the right to manufacture and sell products using patented combinations of modified foams and fabrics, the suit states.
Rubberlite claims it also agreed to pay $225,000 per year with an additional royalty of $50,000 per year, and Baychar agreed to provide technical assistance in the design, manufacture, marketing and sales of the licensed products.
"This 'technical assistance' was critical because without proper guidance, instruction and product sources the entire arrangement was valueless to Rubberlite," the suit states.
Rubberlite signed the agreement because Baychar told it much of its product development work was on the verge of completion, according to the complaint.
Instead, these products were nowhere near final completion and, in some cases, were only in their initial stages, the suit states.
Baychar lied about many things to induce Rubberlite into the agreement, according to the suit.
For example, the company promised to provide Rubberlite with usable customer and industry contacts that would help boost the company's sales, Rubberlite claims.
"In fact, Baychar had engaged in and was engaging in bizarre, inappropriate and alienating conduct that had caused and would cause those potential customers and contacts to refuse to do business with the Baychar Defendants and Rubberlite," the suit states.
Baychar also billed Rubberlite for technical assistance and services it never provided and for product development it was supposed to complete, but did not, according to the complaint.
In addition, Rubberlite claims Baychar harassed Rubberlite's employees, customers and vendors.
"These false and misleading representations and omissions of material fact fraudulently induced Rubberlite to enter into the Agreement and, during the on-going business relationship, caused Rubberlite to pay the Baychar Defendants more than $300,000, for which they have never received value in return," the suit states.
Because Baychar failed to perform a number of obligations in the agreement, Rubberlite sent it a notice of its termination of licensing agreement on Jan. 17. Rubberlite also received one from Baychar on Feb. 8, according to the suit.
Then, on July 15, Baychar demanded Rubberlite pay $1,174,400 under the agreement and an additional $2.5 million under a separate putative joint license agreement of which Rubberlite is not a party, it claims.
Baychar threatened litigation if Rubberlite refused to pay the money, so Rubberlite filed a declaratory judgment asking the court to declare that Rubberlite does not have to pay Baychar any additional money and is terminated from the agreement.
As a result of Baychar's actions, Rubberlite claims it lost the money it paid to Baychar, plus money it invested to buy equipment to complete the business venture.
Rubberlite also claims it lost business expectancy, opportunity costs and company goodwill.
In addition to the money it lost, Rubberlite is seeking actual damages in excess of $150,000, unspecified punitive and expectancy damages, rescission, restitution and costs of the suit.
Daniel J. Konrad of Huntington and Robert P. Berry of Berry & Maxson in Chesterfield will be representing Rubberlite.
U.S. District Court case number: 3:08-1106