HOUSTON (CN) – Houston-based IQ Products claims in Federal Court that WD-40 Co. repudiated its license to make the well-known lubricant, costing IQ $40 million, to retaliate for IQ’s suggesting a safer design.
IQ Products claims it suffered more than $40 million in damages from WD-40’s repudiation of the contract.
WD-40 awarded IQ Products the contract to produce, package and distribute its lubricant on July 9, 2011 under a “Long-Term Agreement,” the complaint states.
“After the parties agreed to the Long-Term Agreement, IQ Products undertook an engineering audit to determine the cause of irregular products coming off the assembly line when packaged to WD-40’s specifications,” according to the complaint. “IQ Products noticed a defect in the product composition design and in the packaging specifications involving the aerosol valve component of the product.
“IQ Products determined that the ‘flat cup’ valves specified by WD-40 for aerosol packaging were unsuitable for the high-pressure CO2-based propellant now used in WD-40’s chemical composition for the product.
“IQ Products relayed its findings to WD-40, advising WD-40 that the use of the ‘flat cup’ valve resulted in deformation during the aerosol filling process of the product, which metallurgically weakened the base of the aerosol valve, thereby increasing the probability of the pressurized can bursting and possibly causing personal injury and property damage.”
IQ Products claims it told WD-40 that the product was not legal for transport under Department of Transportation rules, which could result in civil penalties.
“IQ Products urged WD-40 to adopt a safer alternative design and, as manufacturer, for WD-40 to report these matters to the proper U.S. governmental agencies, including the DOT or the Consumer Product Safety Commission (CPSC),” according to the complaint.
IQ Products claims it urged WD-40 to simply switch to a “safer ‘conical cup’ valve” which already was being made by the company that produces the “flat cup” valve specified by WD-40.
However, “Rather than changing the specifications based on the recommendation of IQ Products, WD-40 retaliated against IQ Products by repudiating the Long-Term Agreement,” the complaint states. “WD-40 also threatened IQ Products in an attempt to stop any public disclosure of the design defect and the dangerous packaging specifications to U.S. government regulatory agencies.”
IQ Products says WD-40’s misconduct cost it $40 million in damages, including “lost profits, unpaid bills for products shipped to WD-40, inventory of finished goods, cost of raw materials purchased by IQ Products on WD-40’s behalf” and “potential retooling costs” of its Houston plant.
IQ Products seeks punitive damages for breach of contract, negligence, breach of an indemnity agreement, fraudulent inducement, negligent misrepresentation, coercion.
It also seeks a declaration that WD-40 is responsible for getting an exception from Department of Transportation regulations for use of its flat cup valve, and that IQ “does not share in this responsibility.”
IQ Products is represented by Thomas Kruse with Baker & Hostetler in Houston.