A District Court judge in Collin County, Texas, ruled in favor of Ericsson Inc. at an Aug. 1 hearing for injunctive relief against distributor MarketShare Telecom, according to Ericsson. The case is set to go to trial May 15, 2006. Meanwhile, MST said it is counter-suing Ericsson.
At issue are MST’s distribution rights in the United States and Canada. MST alleges that in June, Ericsson cited financial reasons as the impetus for refusing to fill orders unless cash was wired in advance. On July 8, Ericsson issued a notice to MST, immediately terminating its distribution rights, yet MST said Ericsson extended MST’s exclusivity for 30 days.
“To say we were shocked was an understatement,” said Jay Lanners, chief executive of MST. “In April, after a detailed audit of our operations, Ericsson had awarded us with the prestigious Advanced Partner designation. In May, we had a record recruiting month signing new value-added resellers. Then, in July, the wheels came off, and we were without a business.”
Prior to Ericsson terminating its distribution agreement, MST was part of Ericsson’s two-tier distribution system, whereby MST recruited value-added resellers to sell Ericsson’s enterprise communications systems. MST then provided training, marketing, lead generation and technical support.
“My greatest regret is the impact on Ericsson end users and VARs. We literally have a full pipeline of orders from our VARs-who have in turn received contracts from end users for these products. Ericsson will not accept these orders from us,” said Michael LeBrun, president and general counsel for MST.
MST stated other allegations, including that prior to entering into the distribution contract, Ericsson fraudulently represented the level of recurring business; that Ericsson raised wholesale prices beyond the contract limitations; and that Ericsson practiced predatory poaching sales from end users and VARs under contract with MST, withholding license codes required to activate products held in inventory by MST, refusing technical support, and usury-charging 19.46 percent monthly interest.
For its part, Ericsson said it terminated its PBX reselling and distribution agreement with MST in July because MST failed to pay overdue balances and was unable to agree to an acceptable payment plan. Furthermore, Ericsson sought a restraining order in Collin County District Court to prohibit MST from distributing the products and is seeking to collect money that MST owes Ericsson.
Now that Ericsson has been granted an injunction prohibiting MST from distributing Ericsson’s products, the company said it will work directly with resellers.
“My client is prepared to take this case all the way. MST tried to mediate with Ericsson in good faith so that we could get back to the business of serving our customers, Ericsson’s customers, but they didn’t seem interested in mediation. We lost at the hearing, but we will win this case, we have no doubt,” said Clark Will, attorney for MST.
