COMPLAINT (Jury Trial Demanded)

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 1 of 11 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA CIVIL ACTION NO. 1:08CV684 STATIC CONTROL ) COMPONENTS, INC., ) ) Plaintiff, ) ) v. ) ) RICOH ELECTRONICS, INC. ) ) Defendant. ) COMPLAINT (Jury Trial Demanded) Plaintiff, STATIC CONTROL COMPONENTS, INC. ( Plaintiff or Static Control ), sues the Defendant, RICOH ELECTRONICS, INC. ( Defendant or Ricoh ), and says: THE PARTIES 1. Plaintiff Static Control Components, Inc. ( Static Control ) is a North Carolina corporation with its principal place of business in Sanford, Lee County, North Carolina. 2. Upon information and belief, defendant Ricoh Electronics, Inc. ( Ricoh ), is a corporation organized under the laws of California, with its principal place of business in California, and which does business in the State of North Carolina.

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 2 of 11 JURISDICTION AND VENUE 3. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1332(a)(1). 4. This Court has personal jurisdiction over Ricoh which has sufficient minimum contacts with the State of North Carolina. 5. Venue is proper in this judicial district pursuant to pursuant to 28 U.S.C. 1391, because the transactions which furnish the basis of this complaint occurred in Lee County, N.C. STATEMENT OF FACTS 6. Plaintiff re-alleges each and every allegation set forth in Paragraphs 1 through 5 above and incorporates them herein by reference. 7. Ricoh has manufactured and sold toner to Static Control for many years. Static Control takes this toner and resells it to Static Control s customers. 8. Static Control s customers are remanufacturers. Remanufacturers take used toner cartridges, clean them, replace worn out components, add new toner and sell the resulting remanufactured cartridge at a discount to the price of a new cartridge. 9. Static Control sells toners made by a number of different manufacturers. Before it sells toners it qualifies these toners by performing vigorous series of tests to determine that the toner will produce good prints when used in a particular type of toner cartridge with either new aftermarket components or used original equipment manufacturer components. The same toner may be qualified in more than one type of toner cartridge. 2

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 3 of 11 10. Some of Static Control s customers perform qualification tests of their own on Static Control s toners to ensure that these toners will work in that particular remanufacturer s process. These customers require Static Control to notify them before making any change to the toners. 11. After qualifying a particular toner, Static Control requests that its vendors notify Static Control of any changes made in either the process or ingredients used in the toner. Static Control then performs quality control tests on the toner which are less extensive than the product qualification tests. 12. For several years, Static Control has qualified a Ricoh toner called NB-04 for use in a variety of different types of toner cartridges. Ricoh assured Static Control that it would not change the way it made the NB-04 toner in any way without first notifying Static Control and giving Static Control an opportunity to qualify the altered toner. 13. Ricoh shipped NB-04 toner to Static Control in response to purchase orders sent to Ricoh by Static Control. Each such purchase order was subject to terms and conditions substantially similar to the terms contained on the attached Exhibit 1. Ricoh accepted these purchase orders and the attached terms and conditions. 14. In the spring of 2008 Ricoh changed the way it made NB-04. Ricoh failed to notify Static Control of these changes. These changes caused the toner to print poorly. 15. As a result of these changes, Static Control lost toner sales, and incurred returns of the toner from its customers. These returns are continuing through today. 3

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 4 of 11 16. Static Control notified Ricoh that the NB-04 toner printed poorly, and failed Static Control s testing. On or about July 18, 2008 Ricoh confirmed that the NB- 04 toner sold to Static Control had agglomeration issues which would affect print performance. Ricoh was unable explain the reasons behind these changes. 17. At a teleconference held on August 5, 2008 Static Control informed Ricoh that Static Control s customers were returning product for defects and that Static Control had products on hand which would be returned to Ricoh because of the observed defects. Static Control requested that Ricoh provide additional NB-04 toner that was equivalent to the NB-04 toner originally qualified by Static Control. 18. Ricoh agreed to accept return of the defective toner and to work with Static Control to resolve the ongoing issues. 19. Ricoh informed Static Control that it would have samples of a new toner, NB-20 for Static Control to examine. Ricoh represented to Static Control that the NB-20 was an equivalent toner to the good NB-04 toner originally qualified by Static Control. Ricoh refused to answer Static Control questions about why Ricoh could not provide the original NB-04 toner ordered by Static Control, and refused to explain why Ricoh had changed that toner without notice to Static Control. 20. A subsequent meeting was held at Static Control on August 11, 2008. At this meeting Static Control accused Ricoh of changing the formula for the NB-04 toner without telling Static Control about the change. Ricoh did not deny the accusation. Ricoh again reiterated that it could only provide the NB-20 toner, a toner that was inferior to the original NB-04 toner. Furthermore, Ricoh informed Static Control that it would no 4

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 5 of 11 longer meet the market price for these toners. Some of Ricoh s competitors were now offering toner for some of the same toner cartridges at a lower price than Ricoh was willing to sell their NB-20 toner. 21. Ricoh provided Static Control with a small amount of NB-20 toner. Because most of the toner for use in certain toner cartridges was the unacceptable NB-04 toner Static Control was forced to ration the NB-20 toner. At the same time Static Control worked with customers who had a qualification process in order to facilitate their customers in qualifying the new toner. In addition, Static Control incurred additional cost air freighting the new toner to its customers to replace the defective NB-04 toner. 22. Static Control placed orders for additional NB-20 even at the higher than market price, in order to have a product that Static Control could sell to its customers. 23. On Wednesday September 17, 2008 at about 9:14 o clock p.m., Dilip Potnis an employee of Ricoh, wrote Bill Swartz, president of the imaging division of Static Control. See email attached as Exhibit 2. 24. Mr. Potnis, in his email, demanded payment of all outstanding invoices, including those for the defective product before Ricoh would ship any additional NB-20 toner. Mr. Potnis also indicated Ricoh would not accept any returned toner. 25. Upon receipt of this email on September 18 th, Bill Swartz responded to Mr. Potnis, expressing shock that Ricoh would change from promising to work with Static Control to demanding full payment for past shipments, including the defective toner. Mr. Swartz reminded Mr. Potnis that the defective toner had yet to be returned, that Static Control s costs and liabilities for this defective toner had yet to be calculated. The 5

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 6 of 11 amount of the defective toner on hand and expected to be returned to Static Control from its customers exceeded the amounts of any overdue invoices. Mr. Swartz requested that Mr. Potnis ship Static Control the toner it had ordered in order to prevent disruption to Static Control s business. Mr. Swartz requested a response by the next day at noon. See email attached as Exhibit 3. 26. Mr. Potnis did not respond. 27. On September 19, Mr. Swartz wrote Mr. Potnis a second email, again requesting that Ricoh ship the ordered toner, and that Ricoh accept the returned defective toner. See email attached as Exhibit 4. 28. Mr. Potnis did not respond. FIRST CLAIM FOR RELIEF BREACH OF CONTRACT-CHANGE IN FORMULA 29. Plaintiff re-alleges each and every allegation set forth in Paragraphs 1 through 28 above and incorporates them herein by reference. 30. The terms on the purchase orders, which were accepted by Ricoh, constitute a contract between the parties. 31. By changing the formulation of the toner Ricoh breached the contract. 32. The contract provides that Static Control may terminate the contract upon a default by Ricoh and that Ricoh would indemnify and hold Static Control harmless from any damages occasioned by Ricoh s breach. 33. As a direct and proximate result of this breach of the contract by Ricoh, Static Control lost customers, has lost profits on sales to such customers, including sales 6

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 7 of 11 of other associated products other than toner. Static Control has further incurred cost in removing defective toner from its inventory, cost in bottling the defective toner which bottles can now not be used, and costs in addressing customer issues caused by the change in toner formulation. Static Control has further incurred attorney s fees and litigation cost associated with the filing of this suit for which sums Ricoh is obligated to indemnify Static Control from. 34. As a direct and proximate result of this breach of the contract by Ricoh, Static Control has suffered monetary damages in excess of $75,000 exclusive of costs, interest and attorney s fees. SECOND CLAIM FOR RELIEF BREACH OF CONTRACT-REFUSAL TO ACCEPT RETURN OF DEFECTIVE PRODUCT 35. Plaintiff re-alleges each and every allegation set forth in Paragraphs 1 through 34 above and incorporates them herein by reference. 36. The contract provides that Static Control may reject and return at Ricoh s expense any item that contains defective material or workmanship. Static Control has tendered the return of more than 107,000 kilograms of toner which Ricoh has refused to accept. 37. By refusing, without just cause, to accept the return of defective toner, Ricoh breached the contract. Static Control may terminate the contract upon a default by Ricoh and Ricoh is required by the contract to hold Static Control harmless from any damages occasioned by Ricoh s breach. 7

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 8 of 11 38. As a direct and proximate result of this breach of the contract by Ricoh, Static Control has suffered monetary damages as a result of Ricoh s failure to accept the proffered toner including but not limited to lost sales, storage and handling cost for the lost toner, and other damages in excess of $75,000 exclusive of costs and interest. THIRD CLAIM FOR RELIEF BREACH OF WARRANTY 39. Static Control re-alleges each and every allegation set forth in Paragraphs 1 through 38 above, and incorporates them herein by reference. 40. The contract between Static Control and Ricoh included a warranty of merchantability and warranty of specific purpose. 41. Pursuant to the contract, Ricoh delivered toner to Static Control after having been informed of the manner in which Static Control intended to use and market the toner. Static Control, after receiving complaints from its customers and upon examining the toner, discovered several substantial defects in the toner which, on information and belief, were known to Ricoh at the time it shipped the toner to Static Control. This constitutes a breach of the warranty of merchantability in the contract as well as a breach of the warranty of specific purpose. 42. The contract provides that Ricoh will indemnify Static Control and hold it harmless from any breach of the warranties. 43. As a direct and proximate result of this breach of warranties by Ricoh, Static Control lost customers, has lost profits on sales to such customers, including sales of other associated products other than toner. Static Control has further incurred cost in 8

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 9 of 11 removing defective toner from its inventory, cost in bottling the defective toner which bottles can now not be used, and costs in addressing customer issues caused by the change in toner formulation. Static Control has further incurred attorney s fees and litigation cost associated with the filing of this suit for which sums Ricoh is obligated to indemnify Static Control from. 44. As a direct and proximate result of this breach of the warranty of merchantability and warranty for specific purpose by Ricoh, Static Control has suffered monetary damages in excess of $75,000 exclusive of costs, interest and attorney s fees. FOURTH CLAIM FOR RELIEF BREACH OF CONTRACT TO PROVIDE REPLACEMENT TONER 45. Plaintiff re-alleges each and every allegation set forth in Paragraphs 1 through 44 above and incorporates them herein by reference. 46. The agreement between Ricoh and Static Control for Ricoh to provide NB- 20 toner to replace the NB-04 toner constitutes a contract between the parties. 47. Static Control placed orders with Ricoh for NB-20 toner. 48. After ordering this toner, Static Control, in reliance on Ricoh s promise to furnish this toner, accepted numerous orders from its customers for this toner and worked with its customers to qualify the new toner. 49. Ricoh s decision on September 17 th to refuse to supply the NB-20 toner that Static Control had ordered was a breach of this contract. 9

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 10 of 11 50. As a direct and proximate result of this breach of the contract by Ricoh, Static Control has suffered monetary damages in excess of $75,000 due to lost sales and profits on the NB-20 toner. 51. As a direct and proximate result of this breach of the contract by Ricoh, Static Control has suffered monetary damages in excess of $75,000 due to lost sales and profits on other Static Control products in addition to the NB-20 toner. 52. Static Control has also suffered indirect harm, as a result of this breach, to its reputation in the industry. In order to be held harmless, Static Control is entitled to monetary damages in the amount of $75,000. JURY DEMAND 53. Plaintiff demands a jury trial of all matters so triable raised in this Complaint. PRAYER FOR RELIEF WHEREFORE, Plaintiff prays the Court to enter a judgment: 1. That Judgment be entered against Ricoh for an amount in excess of $75,000 exclusive of costs and interest. 2. That the Court award Plaintiff its reasonable attorneys fees and costs as permitted by applicable law; 3. That a trial by jury be had on all issues so triable; and 4. For such other and further relief as the Court may deem just, proper and equitable under the circumstances. 10

Case 1:08-cv-00684-NCT -PTS Document 1 Filed 09/23/08 Page 11 of 11 This the 23rd day of September, 2008. /s/ William L. London, III William L. London, III N.C. State Bar No. 13919 3010 Lee Avenue P.O. Box 152 Sanford, NC 27331-0152 Telephone: (919) 774-3808 Facsimile: (919) 776-2333 Email: skipl@scc-inc.com Attorneys for Plaintiff Static Control Components, Inc. CERTIFICATE OF SERVICE The undersigned hereby certifies that on September 23, 2008, the foregoing Complaint was served upon Defendant listed below by depositing a copy thereof in the United States mail, postage prepaid, Certified Mail - Return Receipt Requested, and addressed to: Ricoh Electronics, Inc. C/O C T Corporation System, Registered Agent 818 West Seventh Street Los Angeles, CA 90017 This 23rd day of September, 2008. /s/ William L. London, III William L. London, III Attorneys for Plaintiff Static Control Components, Inc. 11