Sega Lawsuit Accuses Kmart of Failing to Pay

Video game maker Sega of America on Thursday sued Kmart Corp. for allegedly refusing to pay a $2.2-million tab.

The lawsuit, filed in Superior Court in San Francisco, claims Kmart failed to remit $2.2 million of a $25.9-million bill for Dreamcast video game consoles shipped since September 1999, when Sega launched the machine in North America.

Sega stunned the game industry in January when it revealed plans to bow out of the hardware business on March 31, the end of its fiscal year, and focus solely on producing games.

Reports at that time suggested that Kmart had dropped Sega’s console in August. The lawsuit, however, claims it was Sega that halted shipments to Kmart last July for being in arrears.

“This ongoing, malicious lack of payment by Kmart does not produce a working environment for companies to trade with one another,” said Charles Bellfield, a Sega spokesman in San Francisco.

Bellfield said Kmart accounted for less than 5% of Sega’s North American sales and that Kmart had no effect on Sega’s decision to leave the hardware business. Worldwide, Sega sold more than 6.5 million Dreamcasts, about half in the United States.

Kmart, based in Troy, Mich., had no comment Thursday.