Hypertherm claims ‘extort’ threat by supplier
Hypertherm Inc. has charged a sole supplier of a crucial circuit board with trying to “extort” a quarter of a million dollars by withholding equipment for which the Hanover, N.H.-based manufacturer says it has already paid and desperately needs.
As a result, the company has been forced to shut down one of its product lines, and could soon shut down another, costing the company at least $47,000 a day, the company said.
Hypertherm, which manufactures plasma cutting systems and torches, filed the suit Monday in U.S. District court against ACT Electronics Inc. of Hudson, N.H. It also is seeking a preliminary injunction.
According to both filings, ACT originally agreed to supply the custom circuit boards for two metal-cutting torches – the Powermax30 and Powermax45 – in a master supply agreement reached in December 2007 that covered purchases until Jan. 1, 2009. Under the agreement, Hypertherm wouldn’t have to pay for the circuit boards until 30 days after receipt of the product. Hypertherm says it purchased some $60,000 to $70,000 worth of product a week from ACT during the year.
But on Sept. 18, 2008, ACT said it was experiencing “financial difficulties and had brought in a restructuring agent” and “unilaterally” demanded that Hypertherm pay upfront. Hypertherm says it paid the money because without the control boards, the torches couldn’t work, and it would take at least four weeks to find another supplier.
But on Oct. 2, after Hypertherm prepaid for $44,000 worth of product in advance, ACT informed it that it wouldn’t release the product unless Hypertherm wired an additional $250,000 as payment for raw material for future boards.
Hypertherm refused to pay. Instead, it demanded that ACT send what the Hanover company had already paid for, as well as various stencils, test platforms fixtures and tooling supplied by Hypertherm for ACT to make the custom boards, so that Hypertherm could give them to another supplier.
Those assets are worth $100,000, according to Hypertherm.
ACT refused until it paid them the disputed $250,000, the filing alleges.
“ACT is holding Hypertherm’s product and fixed assets as ransom until Hypertherm meets its outrageous financial demands,” according to the filing for a preliminary injunction. “ACT’s outrageous conduct in attempting to extort money from Hypertherm apparently stems from its recent financial difficulties.”
Those difficulty indicate that there is a “strong possibility” that ACT could file for bankruptcy, necessitating a preliminary injunction to turn over the product before then, says Hypertherm.