A Summerville manufacturer hit with a six-figure legal judgment over its tankless water heaters filed for bankruptcy protection Friday, just as lawyers were preparing to appoint a receiver to take over the company.
In a court document filed in Columbia, Eccotemp Systems LLC identified the $757,000 jury award as its only debt.
An Upstate plumbing company, Amo, sued after installing 75 Eccotemp-made tankless units in new homes in Richland and Lexington counties.
Eric Bland, an attorney representing Amo, said that around 2008 the water heaters began failing once the outside temperatures dropped. About 70 percent of the purchased units froze, causing pipes to burst in some of the homes, he said.
A Dorchester County jury sided with Amo on a breach of warranty claim and awarded the plumbing company $125,000 on March 1. The jurors also agreed with Amo on a breach of contract claim, awarding $158,000 and $158,000 under the S.C. Unfair Trade Practice Act.
The jury then determined that Eccotemp’s actions were willful, tripling the Unfair Trade Practice Act damages, according to the verdict.
Mike Elrod, the founder and owner of Eccotemp, told The Post and Courier this month that he didn’t think his Industrial Road company was at fault.
Elrod did not respond to telephone and email messages left at Eccotemp on Friday.
Amo attorney Bland said he was preparing to ask a judge Friday to approve attorney’s fees and to appoint a receiver to run the company. Eccotemp’s filing thwarted that plan.
“We tried to settle it over the last three weeks, but we just didn’t get close enough,” he said. “They think they’re better off in bankruptcy.”
The filing essentially freezes all efforts by creditors to collect money from the company. The case is classified as a reorganization, not a liquidation. Day-to-day operations typically are not affected in those type of business bankruptcies.
On its website, Eccotemp’s said its products are sold at more than 2,000 retailers in North America, Europe and the Middle East.
Bland questioned the wisdom of putting a financially sound company with no other debt into bankruptcy.
“It’s going to hurt their brand once it goes out over the web,” he said.
Bland also said he plans to ask that Eccotemp’s filing be dismissed.
“I don’t think the Bankruptcy Court is going to allow them to stay in bankruptcy,” he said.
The first hearing is scheduled for April 26 in Charleston.