Chinese manufacturers intentionally held back shipments to force bankruptcy, Frictionless World claims

WESTMINSTER — A Westminster holding company of outdoor tool brands is suing a consortium of Chinese companies and investors, claiming it was defrauded after years of partnership.

According to an adversary suit filed in the U.S. Bankruptcy Court of Colorado Thursday, Westminster-based Frictionless World LLC accused Changzhou Inter Universal Machine and Equipment Co. Ltd. (CIU) , Zhong Lian Investment Co. Ltd (ZL) and their associated executives of intentionally failing to fulfill production orders to cause Frictionless to fail, and to take its intellectual property to start a competing service.

Frictionless is a holding company for several brands in the outdoor market, including power toolmaker Dirty Hand Tools, lawn-care equipment maker Redback, ranching tool maker RanchEx, logging equipment manufacturer Vinsetta Tools and ice fishing equipment maker Trophy Strike. It has about 20 employees.

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The company declared bankruptcy last week, saying that all but $1 million of its $17.36 million in liabilities are owned by Chinese entities. About $12.6 million are claimed by the defendants.

Frictionless and CIU formed a partnership in 2013 to sell products in China, and was projecting up to $50 million in sales between 2019 and 2020 due to steady increases in sales.

In the suit, Frictionless claims CIU said it was running low on operating funds late last year and needed a cash infusion to stay running. Frictionless gave it a $6.6 million loan, of which $4.46 million was repaid, plus a $1.5 million bank loan.

CIU and ZL then filed an arbitration demand against Frictionless in April and said it would stop shipment on more than $20.8 million worth of product right before the summer shopping season. That caused several major home goods retailers such as Home Depot, Lowe’s, Menards and others to drop Frictionless from its offerings due to a breach in contract.

The lawsuit also claims from secondhand sources that CIU is using Frictionless’ patent information to make and sell its own unlicensed copies.

Frictionless is asking the court to order CIU and the other defendants to return all of the inventory and intellectual property that it received from Frictionless via the partnership, cancel any of their creditor claims against Frictionless and impose several financial penalties.

No attorneys were listed for the defendants as of Thursday afternoon.