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Law360 (June 29, 2020, 4:23 PM EDT) -- A Texas distribution company that primarily serves the food and sanitation industries is seeking more than $29 million for supplying 10 million KN95 masks to a third party who later distributed them to the state's emergency management department.
SWS Re-Distribution Co. Inc., headquartered in a Dallas suburb, filed suit in Dallas County district court on Friday against Hardaway Partners LLC, claiming that it hasn't paid for the 10 million masks despite already delivering them to the Texas Department of Emergency Management.
Tennessee-based Pinnacle Bank is also accused in the suit of wrongly refusing to honor SWS's $10 million letter of credit associated with the deal, which the distributor sought to demand after Hardaway didn't respond to payment demands, according to the petition.
"There is no dispute that SWS performed under the purchase agreement," the distribution company said. "Indeed, in a June 8, 2020 letter to the Texas Department of Emergency Management, Hardaway admitted that SWS had fully performed and delivered the 10,000,000 masks as required by the purchase agreement."
SWS claims it demanded payment from Hardaway on June 17, but has yet to receive it.
According to the petition, SWS and Hardaway entered into the purchase agreement in early April, as "the COVID-19 pandemic began to wreak havoc in the United States." SWS said the companies agreed that Hardaway would pay $2.32 per mask, for a total payment of about $23.2 million.
After the agreement was signed, Pinnacle issued the letter of credit on April 16 with an expiration date of July 15, SWS said.
On April 25, SWS said Hardaway agreed to a price increase of 60 cents per mask, increasing the payment amount to about $29.2 million, according to the petition.
SWS doesn't state in its petition when it delivered the masks to Hardaway, but the distribution company said Hardaway sent a notice to the emergency management department acknowledging that SWS had held up its end of the agreement on June 8. SWS made a payment demand to Hardaway on June 17, according to the petition.
When SWS didn't hear from Hardaway, the company claims it presented the letter of credit to Pinnacle along with the required documentation, but Pinnacle refused to honor it. SWS didn't state whether Pinnacle provided a reason for the refusal in its petition.
The lawsuit lodges a breach-of-contract claim against Hardaway and a claim of wrongful dishonor of letter of credit/breach of contract against Pinnacle. Along with the $29.2 million in damages, SWS has requested pre- and post-judgment interest and attorney fees and court costs, according to the petition.
SWS is a Native American-owned business that was founded in 1952, according to the company's website. It conducts distribution, re-distribution, sourcing, manufacturing and logistics for companies in the food services and janitorial and sanitation industries. SWS has worked with Subway, Hardee's and Chili's, according to the website.
Hardaway couldn't be reached, and counsel for SWS didn't immediately respond to requests for comment.
SWS is represented by Jamie R. Welton and Lucas C. Wohlford of Barnes & Thornburg LLP.
Counsel information for Hardaway and Pinnacle wasn't immediately available.
The case is SWS Re-Distribution Co. Inc. v. Hardaway Partners LLC et al., case number DC-20-08785, in the 160th District Court in Dallas County, Texas.