Milwaukee-based manufacturer
Sellars Absorbent Materials has filed a federal lawsuit against one of its suppliers, alleging the company has attempted to demand extra-contractual pricing and refused to return Sellars’ intellectual property.
A federal lawsuit filed in U.S. District Court for the Eastern District of Wisconsin accuses Brazilian company
Fitesa of breach of contract and trade secret theft.
Fitesa is a manufacturer of nonwoven fabrics that are used in the hygiene, medical, and industrial markets. The company has an office located in Green Bay.
Sellars makes shop towels, wet wipes, disposable wipers and sorbents made with recycled fibers. The company’s products are made with a paper processing machine that was created using proprietary technology.
Sellars estimates it has suffered $4.5 million in losses so far stemming from the company’s contract dispute with Fitesa.
“Fitesa’s misappropriation has effectively allowed Fitesa to set itself up as a competitor to Sellars,” according to the lawsuit.
In 2020, both companies entered into an agreement through which Fitesa would supply Sellars with card and bond nonwoven goods.
Fitesa “insisted during negotiations” that Sellars shut down its card and bond products manufacturing facility in Atglen, Pennsylvania, and rely on Fitesa as its sole supplier, according to the complaint.
As part of the companies’ strategic relationship agreement, which contained a three-year term, there was an agreed upon price model for the nonwoven goods.
Sellars also made sure the agreement protected its intellectual property. Sellars transferred some of its proprietary customer data and manufacturing knowledge to Fitesa.
Despite both parties agreeing to a price model, Fitesa later allegedly attempted to change the initial pricing plan through use of a gross margin calculation.
"Fitesa never indicated that a gross margin calculation should or could be used to adjust the initial agreed upon product prices when a product is made part of the agreement, which were only to be adjusted for raw material cost changes per the terms of the agreement," according to the lawsuit.
In what Sellars describes as “an attempt to pressure the company” into accepting higher prices, Fitesa terminated the agreement in May of 2024.
However, the agreement stipulates that Fitesa must continue to supply Sellars for one year after termination and provide two years’ notice. This means Fitesa could not stop supplying Sellars until 2027.
In November 2024, Fitesa allegedly demanded a separate 25% price increase, which was “far beyond” what was allowed by the agreement. Sellars responded by notifying Fitesa the demand for a price increase was a breach of contract.
“After Fitesa issued the price-increase notice in violation of the agreement to Sellars, Fitesa constantly threatened not to supply Sellars, next only supplied Sellars intermittently for a short time, and then finally stopped supplying Sellars, all of which caused Sellars to lose orders and forced Sellars to search for alternative suppliers,” according to the lawsuit.
Sellars further alleges Fitesa has yet to return the company’s intellectual property.
“Sellars is still in the process of ascertaining the exact amount of its trade-secret damages, but Fitesa’s unjust enrichment alone amounts to millions of dollars” according to the lawsuit.
Both Sellars and Fitesa declined to comment on the lawsuit this week.
