May 20, 2021

Sports Lighting Company Sues Hubbell for over $50M

2021 05 21 m3 vs hubbell.jpg

Accusations include breach of contract and unfair dealing

NOTE: A May 21 report of this lawsuit by another media site has created confusion by inaccurately stating that the lawsuit amount is over $81M. When a plaintiff asks for the same $15.5M three times, we count it as $15.5M, not as $46.5M.

M3 Innovation, an Upstate New York sports lighting startup, has filed a lawsuit in U.S. District Court for the Northern District of New York against Hubbell Lighting on nine counts including breach of contract, breach of good faith and breach of fair dealing.

M3 alleges that the two companies were involved in many months of negotiations that would have given Hubbell exclusive rights to M3's products. After many rounds of negotiations and prolonged due diligence the companies came to an agreement, that according to M3, Hubbell eventually did not honor.

Joe Casper and Chris Nolan, co-Founders of M3 Innovation have a history of developing products in the sports lighting industry before. In 2010 Casper founded Ephesus, a company credited for developing the first LED sports light, and eventually sold the company to Eaton’s Cooper Lighting business. Chris Nolan was part of the Ephesus team, serving in engineering and product development capacities.

In 2019, Casper and Nolan founded M3 Innovation, on the very date that Caspar’s non-compete agreement expired with Eaton.

In the complaint, M3 alleges the following:

Hubbell exploited M3’s vulnerabilities as a small startup company to enrich itself through misappropriation of trade secrets and eliminate competition from the market.

Hubbell successfully induced M3 to terminate advanced negotiations with Hubbell’s competitors; Hubbell acquired M3’s designs, 3-D models, electrical schematics, product and system schematics, electrical analysis, mechanical analysis, optical designs, photometrics, bill of materials, supplier quotes, cost analysis, technology roadmap, RF and gateway communication, IoT system platform, sales model, employment contracts, and intellectual property portfolio—all of which constituted valuable trade secrets.

Several years after Casper and Nolan released the first LED stadium light, Hubbell released a product in a failed attempt to compete. M3 claims that a Hubbell executive admitted that the Hubbell engineering team dissected and tried to replicate Casper/Nolan’s fixture design. Given the expertise of Casper and Nolan, "Hubbell identified M3 as the key to disrupting the market and increasing its market share."

In November 2020, Hubbell presented M3 with a term sheet that included the following provisions, among others:

M3 would transfer the rights of 10 specific lighting and controls products to Hubbell.
In exchange for the intellectual property, Hubbell promised to pay M3 an “upfront fee” of $2,500,000.
Hubbell would pay M3 a 10% royalty on net sales of M3’s products.
Hubbell would pay M3 $350,000 per year, and a two-percent sales commission
Hubbell would pay M3 a base services fee of $1,200,000 per year, beginning in 2022
Hubbell would pay to M3 an additional 10-percent commission on sales, up to $1,300,000 per year
M3 promised to provide services exclusively to Hubbell, and to no other entity, for at least five years;
M3 promised to negotiate exclusively with Hubbell, and Hubbell required M3 to terminate any and all existing discussions or negotiations with any entity other than Hubbell.

M3 claims that Hubbell caused M3 to terminate relationships with other companies in order for the deal to be consummated. Hubbell unilaterally abandoned the deal after agreement on all necessary terms. M3 also claims that Hubbell directed them to incur costs related to tooling, prototypes, power supply units, marketing and legal expenses, and procurement of production materials.

M3 calculates some of the claimed damages as follows:

Contract damages of at least $15,450,000: upfront fee, the sales support payment, the base services fee, and the development commission.
Contract damages of $4,700,000 for costs incurred at Hubbell’s direction to further develop and refine products for Hubbell’s advantage.
Damages consisting of the value of M3’s business expectancies with three of Hubbell’s competitors, which Hubbell intentionally disrupted and destroyed through its bad-faith negotiation, for at least $30,000,000.

As of this writing, the court docket shows that Hubbell Lighting has not yet been served with this lawsuit. We shared the written complaint with company executives and they politely declined to comment at this time.