Exposed: Dangers of the Gray Market

NEXT: Suit/Countersuit

The ugliness between Gulfcoast Workstation and American Data and Computer Products has escalated from a typical deal between two longtime partners to allegations of breach of contract and fraud.

Currently, the two companies are preparing to battle in court to determine who's accountable for the sale of Cisco switches with duplicate serial numbers. American Data is being sued for not paying the balance of its contract with Gulfcoast. In turn, Gulfcoast is being sued for not reimbursing American Data for payment made for merchandise that didn't meet contractual requirements.

Prior to any court filings, both companies attempted to settle the disagreement. The first attempt was made by John Bobcock, general manager of Relational Technology Services. He sent a settlement agreement to American Data president Robert Castro that required payment for the remaining balance of the order--$523,520--as well as additional purchase orders totaling at least $500,000. American Data refused the terms and responded with a settlement agreement of its own that called for Gulfcoast to reimburse American Data $216,634 for the return of the disputed switches and incurred legal costs.

When settlement talks failed in September 2005, Gulfcoast filed a lawsuit against American Data in the Florida circuit court for breach of contract, demanding the balance of payment owed.

In response, American Data filed a counterclaim the next month, stating that Gulfcoast delivered nonconforming goods, and that the expectation for Cisco-authorized goods was indeed communicated and confirmed by Gulfcoast. That counterclaim was amended soon after, incorporating a third-party complaint against Relational, the parent company of Gulfcoast, as well as two Gulfcoast employees that played key roles in the situation, Drew Warner and William Allison. Relational and Gulfcoast unsuccessfully tried to have the counterclaim dismissed.

The cases are slowly winding their way through the court system, and many of the major players have been deposed, including representatives from Relational, Gulfcoast, American Data, Lockheed Martin, Cisco and the two California equipment suppliers, Epoch Sales and VOIP.

Assuming no settlement is reached, the cases will go to trial; dates have not yet been determined.