Moissanite money inspires dueling lawsuits

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Moissanite money inspires dueling lawsuits

July 17, 2008

Charlotte, N.C.—Moissanite maker Charles and Colvard and manufacturer K and G Creations are locked in a head-to-head battle in a North Carolina court, over which one owes the other money.

Morrisville, N.C.-based Charles and Colvard fired the first shot on June 16, when it filed a complaint against K and G Creations in U.S. District Court for the Eastern District of North Carolina, Western Division.

The complaint alleges that K and G Creations, also referenced in court documents as Jewelnet Corp. and Jewelnet Acquisition Corp., owes Charles and Colvard $2.83 million plus interest for moissanite jewels that it delivered and sold to K and G Creations.

In the lawsuit, Charles and Colvard alleges that the non-payment was a breach of the manufacturing contract it signed with K and G on April 2, 2002, in which Charles and Colvard agreed to supply Jewelnet with moissanite "for the purpose of designing, manufacturing and distributing jewelry incorporating moissanite jewels for sale."

In its counterclaim, filed on July 14, Boca Raton, Fla.-based K and G claims that Charles and Colvard didn't uphold its end of the contract and therefore is not entitled to any money. In fact, the countersuit claims, Charles and Colvard should pay K and G monetary damages.

Court documents filed by Charles and Colvard state that the agreement was set to expire on Dec. 31, 2007, and that Charles and Colvard was willing to enter into a new manufacturing agreement. But, according to court documents, K and G owner Neil Koppel told Charles and Colvard that month that his company no longer wanted to sell moissanite jewelry and "intended to sell products other than moissanite in the jewelry market."

Charles and Colvard claims that despite these stated intentions, K and G represented "to certain persons that they were authorized to distribute moissanite jewelers after the agreement expired on Dec. 31, 2007, even though the agreement expressly forbid them from making such representations," court documents state.

Charles and Colvard is seeking a settlement in the amount of $2.83 million plus interest, as well as legal costs and damages.

The counterclaim filed by K and G states that prior to the signed agreement between K and G and Charles and Colvard, Charles and Colvard "represented to K and G that [Charles and Colvard] would offer K and G the lowest prices and the best terms for moissanite jewels worldwide, as compared to the prices and terms [Charles and Colvard] offered to its other distributors."

When the two parties signed an official agreement in April 2002, it included a provision that Charles and Colvard would sell K and G moissanite "according to the lowest-tier pricing policy of Charles and Colvard in effect for customers of like circumstance and volume."

K and G claims, though, as its sales grew to the point where the sales represented more than 50 percent of Charles and Colvard's gross moissanite sales, Charles and Colvard became scared of the competition.

In 2002, top Charles and Colvard executives "began a pattern of improper conduct...intended to erode K and G's business and reputation and ultimately force it out of the moissanite business," court documents state.

K and G claims that Charles and Colvard began undercutting its business by selling goods to other vendors at lower prices—overcharging K and G an estimated total of $10 million—interfering with K and G existing business relationships and engaging in unfair competition, which K and G claims locked the company out of the moissanite marketplace and eventually forced them out of business.

K and G is demanding a jury trial in the case and seeks to recoup $40 million in damages and an official accounting of how much it was overcharged, plus court costs and "other and further relief that the court may deem just and proper," court documents state.

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