Facts

Plaintiffs allege that in July 2004, plaintiff Segue Electronics Inc. (Segue), an electronics distribution company, and its subsidiary, plaintiff Shine Capacitors LLC (Shine) entered into a five year exclusive distribution contract with defendants Anhui Juan Kuang Electric Co. Ltd. (Anhui) and Fujian Juan Kuang Yaming Electric Limited (Fujian). Defendants Anhui and Fujian are subsidiaries of Singapore-based defendant JK Yaming International Holdings Ltd. (JK), and manufacture and distribute electronic capacitors and other lighting products. Defendant Phihong Technology is a publicly traded Taiwan-based corporation with a 19% interest in JK. Defendant Phihong USA is a subsidiary of Phihong Technology. Plaintiffs allege that under the contract, Anhui and Fujian were to use Shine as their exclusive North American distributor for capacitors manufactured by Anhui.

According to plaintiffs, in Dec. 2004, Shine and Anhui entered into a second contract, which confirmed the exclusive distribution agreement and also contained provisions relating to technical consulting services that Shine was to provide to Anhui.

According to the defense, after Phihong Technology was informed of the draft English version of the second contract, Phihong Technology became dissatisfied because it believed that the contract would have required Phihong Technology and its related companies to buy all Anhui capacitors through Shine. The three sides (Shine, Anhui, and Phihong) met in Jan. 2005 to further discuss the agreement. The three agreed that Shine would be the sole distributor of Anhui's stand alone capacitors but that Phihong could sell capacitors packaged with other items through its own means.

After a series of disputes, Fujian and Anhui terminated the exclusive distribution agreement in mid-2005. Segue and Shine sued Anhui, Fujian, JK, and Phihong Technology and Phihong USA for breach of contract. Plaintiffs also sued Phihong Technology and Phihong USA for tortious interference with contract contending that Phihong had induced Fujian and Anhui to abandon their relationship with Segue and Shine in favor of a relationship with Phihong. Anhui counterclaimed against Shine for fraud in connection with the consulting services covered by the second contract, and also claimed that Shine failed to pay Anhui for some of the Anhui capacitors.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that Anhui and Fujian breached the exclusive distribution agreement by failing to use Segue and Shine as their exclusive distributors for the agreed-upon five year term, by failing to transfer existing customers to Segue and Shine, and by failing to pay for the technical services covered by the second contract. Plaintiffs further contended that Phihong had tortiously interfered with and induced the breach of the second contract by encouraging Anhui and Fujian to abandon their relationship with Segue and Shine and to instead distribute their capacitors through Phihong, and that Phihong's conduct was a material cause in Anhui and Fujian's breach of the exclusive distribution agreement.

DEFENDANTS' CONTENTIONS:
Phihong Technology contended that it did not know the existence of the alleged first contract or the execution of the second contract, that the draft English version of the second contract was intentionally and materially mistranslated by Segue and Shine causing Phihong Technology to misunderstand the terms and request for the negotiation and compromise in the Jan. 2005 meeting. At the Jan. 2005 meeting, plaintiffs had agreed that Phihong Technology and its related companies would be allowed to sell Anhui capacitors without Shine. Anhui counterclaimed arguing it was fraudulently induced into the second contract with Shine, and that it was Shine that breached the contract by failing to provide a technical expert.

Damages

Segue sought $15.64 million in lost profits. Defendants argued that plaintiff's figures were unduly speculative and that lost profits could be no more than $25,371. Anhui sought $40,000 in its counterclaim.

Result

The jury returned a verdict awarding plaintiffs $3.9 million against Anhui. The jury also found in favor of Anhui on its affirmative defense and counterclaim of fraudulent inducement relating to the second contract, and awarded it $40,000.

Other Information

After all parties rested the case, the judge granted Phihong Technology and Phihong USA's motion for directed verdict and entered a judgment in favor of Phihong Technology and Phihong USA. The court granted JK's motion for summary judgment that it was not bound by the first contract. All causes of action, except for the claim of intentional interference with contractual relationship, were dismissed against Phihong Technology and Phihong USA by demurrers and motion for summary adjudication. Plaintiffs have appealed the summary judgment in favor of JK and the directed verdict in favor of Phihong Technology and Phihong USA.