Facts

In January 2004, defendants Georgina 712 Inc., a Delaware corporation known at the time as Intervisual Communications Inc. (Intervisual) solicited plaintiff Cheedad Adhesive Trade Marks Printing Co. Ltd. (Cheedad), a Hong Kong company, to bid for a project which required the production of "scratch n' sniff" stickers for a cookie promotion for the film, "Shrek II."

On Feb. 17, Cheedad provided Intervisual with 20 scent samples. However, Cheedad did not notify Intervisual that these were stock scents and not productions scents. Intervisual later alleged that Cheedad did not have sufficient experience to produce the necessary scents with the required strength. Intervisual claimed it was forced to seek outside assistance in order to obtain the proper scents. Ultimately, Intervisual made arrangements with Arcade to obtain those scents. The problems in selecting scents caused substantial delay in production. As a result, the production samples were not approved until May 2004.

On May 12, 2004, Intervisual made a written order for the production of 62 million stickers, containing 20 different scents, for $522,554. Delivery was to occur in installments through June 2004. Cheedad delivered the stickers in time and issued Intervisual an invoice. Intervisual paid $258,297. The balance remaining was $292,554.

In 2005, Cheedad and Intervisual discussed and reached a $200,851 settlement for monies owed to Cheedad on the account. The settlement had five payment provisions under which Intervisual had to pay Cheedad. First, $28,297 was due from a "Blaster" project to be paid on March 15, 2005. Secondly, $50,000 was due if and when the next purchase order was issued from Intervisual to Cheedad. This was to be paid in recognition of the Shrek settlement and the new project would be under a letter of credit. Thirdly, $50,000 was to be paid if and when a second purchase order was issued from Intervisual to Cheedad, also for the Shrek settlement, and also under a letter of credit. Fourthly, $50,000 was to be paid if and when a third purchase order was issued from Intervisual to Cheedad, again for the Shrek settlement and under a letter of credit. Finally, $22,554 was to be paid if and when a fourth purchase order was issued from Intervisual to Cheedad, for the Shrek settlement, under a letter of credit.

Only one installment payment was made by Intervisual. Cheedad filed suit against Intervisual and defendant James Richwine, president of Intervisual. Intervisual counterclaimed for breach of contract.

PLAINTIFF'S CONTENTIONS:
Cheedad claimed that the 2005 settlement agreement was based on Intervisual's inability to pay for the stickers. Cheedad contended that the settlement was a failed accord and satisfaction, rather than a novation, waiver, or release, because the only terms that changed in the settlement was the money due to Cheedad. Cheedad further contended that Intervisual took delivery of the goods and never complained about the quality. Cheedad asserted that the goods were delivered on time. Cheedad further contended that Richwine was liable for the debts of Intervisual as its alter egoFinally, Cheeded contended that Intervisual's counterclaim was barred by the statute of limitations.

DEFENDANTS' CONTENTIONS:
Intervisual contended that Cheedad was inexperienced with "scratch n' sniff" stickers and the scents produced were not strong enough for the project. Intervisual further contended that Cheedad could not manufacture enough stickers for the project and that the products it did manufacture were sub-par in quality. In helping Cheedad complete the project, the defense claimed, it incurred a substantial cost. Intervisual claimed that Cheedad was not able to produce the goods in the necessary time frame. Richwine denied that he was the alter ego of Intervisual.

Damages

Cheedad claimed $292,554 in owed payments under the settlement.

Result

At the conclusion of Richwine's testimony, the court granted Richwine's motion for judgment on special findings, concluding that Cheedad had not satisfied its burden of proving that Richwine was the alter ego of Intervisual and was entitled to judgment in his favor. The court found that the substantial delay in production was not Cheedad's fault and ruled in favor of Cheedad on its claim against Intervisual. The court also found in favor of Cheedad on Intervisual's counterclaim. The court awarded Cheedad damages.

Other Information

FILING DATE: June 19, 2008.