Dialight Loses Suit, Ordered to Pay Sanmina $8.7 Million; Stock Drops
Dialight has been dealt a significant financial blow in its ongoing legal dispute with its former manufacturing partner, Sanmina Corporation. After a lengthy trial, a jury in New York ruled against Dialight, awarding Sanmina approximately $8.7 million in damages for claims relating to accounts receivable (AR) and ‘excess and obsolete’ (E&O) materials. This ruling leaves Dialight facing a substantial net liability despite a partial victory.
The case, centered on a Manufacturing Services Agreement (MSA) between the two companies, saw both parties accuse each other of breaching the contract. Dialight had initially sought $220 million in damages, alleging that Sanmina engaged in fraudulent inducement, gross negligence, and contractual breaches that harmed Dialight’s business. However, the jury rejected these claims, leaving Dialight with a limited victory of $0.9 million for Sanmina’s breach of contract.
Key Jury Decisions
While Dialight’s allegations of fraudulent inducement and willful misconduct were dismissed, the jury did find that Sanmina breached the MSA. However, it also upheld Sanmina’s counterclaims, awarding the company $5.3 million for AR claims and $3.4 million for E&O materials.
Legal Aftermath and Potential Appeal
In light of the jury’s decision, Dialight is now reviewing its options for post-trial motions. The company has indicated that it may challenge the awarded damages, interest, and legal costs. Dialight is also contemplating an appeal, signaling that the legal battle may be far from over.
Background on the Dispute
The litigation traces back to Dialight’s termination of the MSA in September 2018, effective January 2019, citing poor performance by Sanmina. Dialight claimed that Sanmina had misrepresented its expertise in high-mix/low-volume manufacturing and failed to meet production and quality targets. In response, Sanmina countered with claims for unpaid AR and compensation for E&O materials.
After years of legal wrangling, both parties finally faced off in court in 2024. The trial, which began in July, was rescheduled to September following a mistrial due to juror issues. The highly anticipated trial culminated in a mixed verdict that leaves Dialight financially liable for millions in damages to Sanmina.
Also, a significant portion of this issue has to go to the revolving door of leadership at Dialight. We count six CEO’s since 2015:
- Roy Burton
- Richard Stuckes
- Michael Sutsko
- Martin Rapp
- Fariyal Khanbabi
- Steve Blair
Moving Forward
The outcome of this case is critical for Dialight, as it continues to navigate the legal and financial repercussions of the verdict. While the company secured a partial victory, the significant damages awarded to Sanmina underscore the challenges Dialight faces in its legal strategy. Stakeholders will be closely watching as Dialight explores its options, including a potential appeal, in the coming months.
The Dialight stock price dropped 28% yesterday
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