Hoffman Estates-based Sears Holdings Corp. filed a lawsuit Monday accusing the manufacturer of its Craftsmen tools of attempting to break their supply agreement.
The suit, filed in Cook County circuit court, said its agreement was signed in 2013 and remains in effect through 2018. But China-based One World, which has operations in South Carolina, has been attempting to break the contract and reduce Sears' supply because it said it has "inadequate assurance" that Sears will continue to pay for the products, the suit claimed.
"These terms are unwarranted and amount to a transparent attempt to renegotiate the parties' contract on innuendo, rumor and unfounded inferences that have no place in the parties' commercial relationship," the court document said.
Shareholders appeared upset about the threat to the Craftsman brand, sending Sears stocks down about 14 percent when Nasdaq closed Monday.
China-based One World, a subsidiary of Techtronic Industries, makes power tools and accessories for Sears under the Craftsman brand. Sears said it has paid One World more than $868 million since 2007.
Sears Holdings, parent company of Sears and Kmart stores, has been closing stores, selling assets and laying off workers in order to stem losses. Lampert said last week during the company's annual shareholders meeting that negative headlines have exacerbated its troubles by allowing vendors to try to take advantage of the retailer. Lampert said One World is an example of this troubling trend.
"One World has informed us of their intention to take the very aggressive step of filing a lawsuit against us as they seek to embarrass us in the media to force us to let them out of their contract," Lampert wrote in a blog Monday. "But Sears has nothing to be embarrassed about -- we have lived up to our word under our contract, and we will take the appropriate legal action to protect our rights and ensure that One World honors their contract."
Sears has paid and continues to make all payments to One World as they come due, and it is capable of continuing to meet its obligations under the supply agreement, Lampert said.
Monday's lawsuit is seeking a court judgment that One World does not have grounds to suspend its work and should continue to accept payment from Sears as per their agreement.
"If we allowed One World to break their agreement, it would effectively reduce the flow of products they are required to deliver to Sears, harming our ability to sell tools, supply parts and provide goods to Sears' members and customers," Lampert said. "We won't allow that to happen. We are generally not a litigious company, but we will fight back to protect our legal rights, hold One World to its contractual agreements and ensure that our customers are not affected by this business dispute."