Wooster Products v. Magna-Tek

2 Ohio App. Unrep. 501
CourtOhio Court of Appeals
DecidedApril 25, 1990
DocketCase No. 2462
StatusPublished

This text of 2 Ohio App. Unrep. 501 (Wooster Products v. Magna-Tek) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wooster Products v. Magna-Tek, 2 Ohio App. Unrep. 501 (Ohio Ct. App. 1990).

Opinion

BAIRD, J.

This cause came before the court upon the appeal of Wooster Products, Inc., from an award of $100,000 for the appellees, Magna-Tek, Inc., Magna-Tek Components, Inc., and the corporations' founders and officers, Robert F. Baker, Robert C. Lovatt, and Robert Possehl, on their counterclaim for breach of contract.1

Wooster Products, an Ohio corporation, filed a complaint against Magna-Tek, Inc., a New Jersey corporation, claiming that Magna-Tek breached a contract to develop a videotape manufacturing plant in India when it entered into a collaboration agreement with an Indian company in violation of the exclusivity clause of the contract. Wooster Products further alleged that Magna-Tek fraudulently represented that it had adhered to the terms of the contract, thus inducing the plaintiff to continue its plans for the installation of the plant in India. Magna-Tek counterclaimed that Wooster Products breached the agreement by failing to carry out its contractual obligations.

A ten-day jury trial resulted in a defense verdict for Magna-Tek on both counts of the complaint and a verdict for Magna-Tek on its counterclaim. The following facts developed at trial.

In 1980, Jim Arora, a resident alien who immigrated from India, purchased Wooster Products, a corporation specializing in the manufacturing of stair treads, anti-slip coating, and safety steps. Soon after purchasing the company, Arorabecame interested in developing a business in India with an American collaborator. In the spring of 1984, Arora began negotiating with Robert Baker, president of Magna-Tek, a manufacturer of videotape, for the installation of a videotape manufacturing plant in India. During these negotiations, Arora learned that Magna-Tek had commercial dealings with a Hong Kong businessman, David Chan, who headed a conglomerate in the British colony called the Acme Group of companies. The nature and extent of Chan's association with Magna-Tek remained a point of contention among the parties throughout the trial. Wooster Products contended that not only was Chan a fifty-percent owner of Magna-Tek, but that he also had the authority to enter into contractual arrangements on behalf of the corporation. Magna-Tek, in contrast, claimed that Chan merely provided the financial backing that enabled Magna-Tek to operate.

In his initial talks with Magna-Tek, Arora also learned that in 1982 Magna-Tek had been talking to an Indian company, Garware Plastics & Polyester Ltd. (Garware), for the installation of a videotape plant in India. According to Magna-Tek's testimony, the business deal with Garware went no further than the execution of a memorandum of understanding; no formal commitment was reached.

On May 1, 1984, Wooster Products and Magna-Tek came to an agreement in which Magna-Tek promised to furnish Wooster Products with the necessary technology and equipment to establish a videotape manufacturing business in India. Further, Magna-Tek granted Wooster Products the exclusive right to use its technology and to sell 1/2-inch videotape throughout the subcontinent of India. In return, Wooster Products promised to pay $2.1 million in various installments.

In February of 1985, Magna-Tek sent to Wooster Products a breakdown of the costs associated with the contract. The cost of equipment was listed at $1.6 million and the cost to transfer the technology was listed at $500,000. Magna-Tek informed Wooster Products that updated equipment would cost an additional $150,000. The sending of this letter seemed to mark the beginning of the disintegration of the companies' business relationship.

During the months of February and March, Magna-Tek unsuccessfully attempted to modify the contract by offering to forego charging for the updated equipment, if Wooster Products would delete the exclusivity clause in the contract. During the same time period, Magna-Tek notified Wooster Products that it had [503]*503received a "telex" from Garware to the effect that it was ready to do business with Magna-Tek. Magna-Tek, however, assured Wooster Products that it was not interested in dealing with Garware.

In June of 1986, while he was in India, Arora acquired a private debenture offer by Garware advertising that Garware would by the first company in India to manufacture videotape, "in collaboration with Magna-Tek, an acknowledged world leader in the field of magnetic media." When shown the offer, Possehl and Baker denied that Magna-Tek was involved with Garware. Baker told Arora that the name "Magna-Tek" appearing in the debenture offer was a different company than Magna-Tek, Inc., and that perhaps Chan had been using the name. Baker testified that Arora seemed satisfied with this explanation.

Arora flew to India in September to notify the government that Wooster Products intended to open a letter of credit for Magna-Tek so that equipment could be shipped. Arora testified that during this trip he discovered that David Chan, allegedly on behalf of Magna-Tek, signed a collaboration agreement with Garware to sell its technology and equipment. The agreement was executed in July of 1985 and admitted at trial as Exhibit EE. Arora also learned that Possehl on behalf of Magna-Tek had signed a document that was labeled "contract"on May 1,1985. The document purported to sell to a company owned by David Chan, "the technical know how (sic) for manufacturing audio, video, computer and floppy disk media" for five million dollars.

In October of 1986, Arora confronted Possehl and Lovatt about these matters. Lovatt denied having any knowledge of the document Chan and Possehl had signed. At trial, Possehl admitted that he signed the document, but testified that it constituted a proposal rather than a contract and that the deal with Chan was never consummated. Both Possehl and Lovatt claimed that they were unfamiliar with the collaboration agreement between Garware and Chan. Baker testified that, as president of Magna-Tek, he never authorized Chan to enter into any agreements on Magna-Tek's behalf in regard to any business transaction occurring in India.

In late October, Baker attempted to contact Arora to discuss with him the strained relationship that had developed between the two companies. Arora refused to talk to him unless Lovatt and Possehl were also present. Baker testified that he informed Arora that such a request was impossible because Possehl was in Hong Kong. Shortly thereafter, Wooster Products filed its breach of contract action. At the time of the suit, Wooster Products had paid $630,000 of the $2.1 million contract price. While the operating license from the government of India had not been issued, the plant facility was in its final stage of completion. Magna-Tek was ready to ship the equipment but was waiting for Wooster Products to open the letter of credit.

Keeping the above factual scenario in mind, this court now turns to reviewing Wooster Product's assignments of error.

ASSIGNMENT OF ERROR I

"The trial court erred in denying Wooster Products'motion for letters rogatory or letters of request for use in obtaining depositions in Hong Kong."

In its first assignment of error, Wooster Products complains that the trial court abused its discretion by denying its pre-trial motion for letters rogatory. Wooster Products moved the court to issue letters rogatory to the judicial authorities in Hong Kong, based upon its belief that agents of the Acme Group of Companies had information relevant to the issues in the case.

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2 Ohio App. Unrep. 501, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wooster-products-v-magna-tek-ohioctapp-1990.