March 30, 2022
Force Partners vs. KSA: It's about to get Really Interesting
Fierce competitors are about to open their books to one another. Local distributors will likely get involved.
In late 2019, Chicago lighting agent Force Partners filed a remarkable lawsuit against rivals KSA Lighting & Controls and Acuity Brands, alleging a conspiracy among the defendants that forced Chicago-area lighting and controls distributors to boycott Force Partners.
Last month, defendants KSA and Acuity Brands achieved a small legal victory by having some of the counts dismissed. Recent filings have revealed more information about the case – indicating that the parties are seemingly nowhere close to discussing a settlement and are about to embark on what could be an arduous, prolonged and compelling discovery phase of the case. Here are some of the takeaways pulled from the filings in recent weeks:
Settlement Discussions:
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No settlement discussions have occurred.
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Force Partners does not believe that settlement discussions can commence before responses to written discovery are completed in this case. Given the nature of the accusations, it seems that Force Partners is first seeking to obtain hard evidence relating to KSA and Acuity Brands' interactions with distributors, including what Force Partners describes as "secret 2019 PowerPoint presentations to distributors."
KSA’s notable response:
The distributor loyalty program at issue in this case is described as a “conspiracy” and “a scheme” by Force Partners. KSA describes it as a “quasi-exclusive-dealing program.” One of the interesting revelations from KSA’s recent filings is that KSA claims the program was proposed but never implemented. They also claim that Force Partners’ business has appeared to have grown since filing the case in 2019, thus causing their claims of boycotts by distributors to be without merit.
A long road ahead:
Each party submitted a proposed discovery plan to the court. The discovery process would involve several steps including fact discovery, expert disclosures, expert depositions and rebuttal experts.
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Force Partners proposed a schedule that would end in September 2023.
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KSA and Acuity Brands proposed a schedule that would end in July 2024.
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Disputes relating to discovery cooperation could possibly prolong the process with motion(s) to compel being addressed by the court along the way.
Discovery: It's about to get Really Interesting
Some of Force Partners’ claims include:
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“Force Partners has suffered over $2 million in lost sales.”
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“Distributors are steering projects to KSA alone where specifications would otherwise permit Force Partners to submit ‘or equal’ bid quotes.”
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“Sales of Force Partners-represented brands’ products have ‘fallen off a cliff’ with some of the identified ‘stock and flow’ distributors.”
Opening the books to a competitor:
Based on the nature of the claims, it is expected that an abundant number of financial disclosures will be demanded by each party. Even if no wrongdoing is revealed, it’s compelling to imagine two fierce agent competitors sharing details about private customer communication, projects, quotes, orders and revenues with one another.
Electrical Distributor Depositions:
Force Partners repeatedly accuses KSA and Acuity Brands of making demands to 23 or more distributors. Force Partners expects to depose potentially 20 or more third-party fact witnesses – which makes us wonder how eager and cooperative local distributors will be if they are compelled to provide testimony.
The lawsuit does not mention distributors by name. Some of the larger distributors in Chicagoland include Steiner Electric, Gexpro, WESCO, Viking (Brook) Electric Supply, Connexion and Crescent. Will some of them be asked – or compelled – to provide testimony in this Agent vs. Agent legal dispute? Will distributors take a “don’t get me involved” approach? Will depositions involving distributors potentially disrupt future business relationships?
Looking ahead:
With a long road still ahead, we likely won’t have much visibility to the private discovery exchanges among the parties. As this case evolves, we look forward to seeing how Force Partners will legally prove its bold claims and if there will be a lasting impact of Judge Valderrama’s statements in a February ruling that cited "Unlike horizontal agreements between competitors, vertical exclusive distributorships ... are presumptively legal."
