And the Battle Continues - Nu-Kote & Office Depot

Nukote International, Inc. filed a lawsuit against Office Depot in Nashville’s U.S. Bankruptcy Court to tune of $217 million stating “egregious fraudulent misrepresentations and breaches of contract” in which Nukote lays the blame of their second Chapter 11 filing in the company’s history squarely on the shoulders of Office Depot.

This past May Nukote and Office Depot severed their 20 year vendor/retailer relationship despite consistent assurances from senior representatives at Office Depot that the relationship with Nukote was secure. The vendor/retailer contract was not due for renewal until July 2010. Nukote had once provided Office Depot with an estimated $85 million in product annually. In the lawsuit Nukote claims Office Depot had not paid them as consistently as they had in the past, then forced Nukote into a bidding war to keep Office Depot’s business. The delay of payments, time and money spent on the bidding war that ultimate resulted in the loss of Office Depot’s business “brought the Debtor (Nukote) to its knees” financially.

Office Depot responded to the filing in a statement which said "Nukote was significantly past due on amounts owed to Office Depot and, in fact, Office Depot still holds a significant receivable balance for Nukote. Indeed, it is not Office Depot that is indebted to Nukote, but it is Nukote that is indebted to Office Depot."

The statement further says that Office Depot did not breach any contracts with Nukote by changing suppliers. Office Depot claims Nukote stopped shipping product and "This interruption in service caused Office Depot to experience low inventory and out-of-stocks, and ultimately required Office Depot to quickly ramp up inventory with alternate suppliers". The response goes on to say "Office Depot intends to vigorously defend against Nukote's allegations and monetary demands. Further, Office Depot fully intends to seek reimbursement for the amounts Nukote owes to Office Depot."

So I say lean back, kick your feet up and watch the battle rage on in what is sure to be a lengthy fist fight in which no winner may ultimately claim victory. At least it makes for juicy office products industry gossip!


This is our opinion of what actually is happened.

Many years ago in a land far, far away Office Depot investigated their viability in the compatible toner and inkjet cartridge business. NuKote proved they were Office Depot's solution to this notion and won the business with set contract-pricing, rebate dollars and co-op dollars. The years go by and Office Depot's employee turn over, increasing pressure to source lower priced product coupled with shrinking margins squeeze Nukote into a no-win situation.

Fast forward to early this year: Office Depot wants their rebate dollars but NuKote doesn't want to pay because they've discounted their product so far below contract prices it makes them ineligible for rebate dollars (unless they give it away for free). Office Depot says "No...!" we want our rebate dollars or we'll take the money from our payables to you. Now Nukote is being short paid on outstanding invoices. Subsequentially Nukote starts to see the writing on the wall with their bank and the serious decline in A/R from Office Depot. Pushed to the brink, Nukote files for protection in bankruptcy court. And inside bankruptcy, Nukote files claim against Office Depot for $217 million in damages putting the blame for their second Chapter 11 filing in the history of the company squarely on the shoulders of Office Depot.

Heavens, how'd we get here! Pause and take a breath! Imagine if the top dogs of both companies sat down face to face, human being to human being and talked it out. Could things have been salvaged? Would both companies have to be in such horrendous situations today? Who knows because obviously egos got in the way. So where are we in present day? Well, there's a full fledged dog fight happening to determine who's responsible for who did what to who and how much its all worth. More to come as it unfolds.

So who did wrong, Office Depot or Nukote?