Cisco Agrees To Pay VAR $5.45 Million Settlement

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Cisco has agreed to settle with a small solution provider who successfully sued the networking giant over breaches in its reseller agreement and deal registration program.

Cisco signed the document on Tuesday, promising to pay $5.45 million to the VAR, Infra-Comm, said Brian Daucher, attorney for the VAR.

Infra-Comm, a San Juan Capistrano, Calif.-based solution provider, alleged Cisco breached its Indirect Channel Partner Agreement (ICPA) and the terms of its deal registration program by passing a potentially large deal with the Irvine Company, a property development company, to AT&T.

The jury in the lawsuit, which concluded October 27 at the Superior Court of Orange County in Santa Ana, Calif., awarded Infra-Comm damages of over $6.4 million after only three hours of deliberations.

For now, all that's left to do is for Cisco to actually wire the money, after which both sides will file for a dismissal, Daucher said.

During the trial, the Superior Court Judge in the case ruled three clauses in Cisco's ICPA "unconscionable," or unenforceable because they are unfair to one party, which in this case is Infra-Comm.

The three clauses are the non-negotiable term of the contract, the right of a vendor to terminate the contract with an established reseller without cause, and damage limitations.

Daucher said he does not know whether Cisco will rewrite those clauses or not. "They might leave those provisions in, but not enforce them," he said. "There are other ways to terminate reseller agreements, such as death by 1,000 cuts."

However, Daucher said, he does not expect Cisco to do anything to impact its large solution provider base, and may actually take the lawsuit as an opportunity to look at how it deals with the channel internally.

"Cisco's primary asset is their resellers," he said. "If they were to lose their resellers, their business would be hurt. This case probably gives Cisco a better argument within the company to look at how to work with resellers to drive this asset."

Solution providers having issues with vendors is fairly common, and the best way to handle them is to settle as quickly as possible long before going to court becomes an option, Daucher said.

"Trying to settle is always option one, two and three," he said.

One solution provider, who requested anonymity, called the settlement good news.

"It's fairly clear that this is a wake-up call," the solution provider said. "It alerts large dominant vendors like that that they need to pay attention to their smaller resellers."

A second solution provider, who also requested anonymity, agreed.

"It's a wake-up call, if people pay attention to it," the solution provider said. "Not that I'm cynical. But the [amount of the] settlement was just a rounding error for Cisco."

Cisco issued a statement on the settlement. "Cisco has reached a settlement with Infra-Comm, and we look forward to putting this matter behind us," Cisco said. "As always, we remain committed to the success of our channel partners and are proud of our award-winning channel programs."

Infra-Comm could not be reached for comment.

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