Sega sues Kmart over Dreamcast orders

Sega is suing Kmart for allegedly failing to pay $2.2 million of a $25.9 million order for Dreamcast game consoles, according to a lawsuit filed in California Superior Court.

"Kmart's account became severely delinquent, and Kmart asserted numerous credits and deductions, which were not authorized," according to the complaint filed Thursday in Superior Court in San Francisco.

Sega (segny) alleges that in August 1999 Kmart agreed to purchase Dreamcast systems. In September 1999, Sega launched the Dreamcast system and began shipping the units to Kmart stores nationwide. In June 2000, Sega asserts, it placed a hold on shipments because of delinquent payments.

Sega alleges that Kmart has only paid $23.7 million of the $25.9 million bill. "We've been working with Kmart since June to work this out, but they've applied bogus deductions and they're maliciously trying to underpay Sega," said Charles Bellfield, a Sega spokesman. "They left us with no other option."

Representatives from Troy, Mich.-based Kmart would not comment on the case. -- Richard Shim, ZDNet News