Colt named in $500K breach of contract suit after reducing production

A lawsuit over a contract agreement says Colt’s Manufacturing owes a New Jersey financial firm half a million dollars after the gun maker gave too short a notice to reduce a production run.

Prestige Capital contends the Connecticut gun maker paid some $600,000 after adjusting an agreed upon minimum purchase order, but failed to make the final payment of $500,001.35, according to the complaint filed in a Connecticut federal court last month.

Court documents show Colt contracted out manufacturing for rifles and gun parts to Bold Ideas, through Texas manufacturer Chazkat, in November 2015. Yet, Bold Ideas sold all accounts — that would later include Colt — to Prestige the year before for an advanced payment.

The agreement required Bold Ideas to manufacture at least 6,000 rifles per quarter unless Colt requested fewer, but Colt had to submit the request at least 60 days ahead of the adjustment.

In a letter submitted as evidence, Colt requested Bold Ideas adjust production “immediately” in March. “As previously discussed, due to severe contraction in market demand for Expanse rifles, effective immediately, Colt hereby reduces its purchase order to 800 units per month, or a new quarterly rate of 2,400 units,” a Colt executive said.

Colt released an economical, no-frills AR rifle variant last year. Many gun companies prepared for an increase in demand ahead of November’s election in anticipation of a Hillary Clinton victory, but demand dropped when Donald Trump won the White House and Republicans took control of both chambers of Congress.

Although gun sales nationwide have only fallen about 7.6 percent from last year, many gun companies have launched promotions to move inventory. Colt, for example, launched a summer promotion last month for Expanse rifles.

It’s unclear how many rifles Bold Ideas has produced under contract, but federal data shows that Chazkat manufactured 1,205 rifles in 2015.

Given that the request would take effect “immediately” rather than 60 days later, Prestige says Colt violated the contract agreement.

“Colt’s bad faith campaign began by first wrongfully reducing its minimum purchase orders from Bold Ideas in violation of the (Manufacturing and Sales Agreement),” the lawsuit says, adding the company continued when failed to pay the outstanding balance after multiple requests.

Prestige has requested damages plus interest, and attorneys’ fees and costs.