Facts

According to plaintiffs' counsel, plaintiffs wanted to exclusively sell notebook computers and LCD monitors under their own name brand to Wal-Mart.

The defendants had a relationship with Wal-Mart, but the plaintiffs did not. The plaintiffs and defendants entered into a venture in which defendants would act as an agent to sell electronic products to Wal-Mart on plaintiffs' behalf.

The plaintiffs shipped over $55 million worth of electronics products to the defendants, who in turn sold the products to Wal-Mart. Sales were outstanding.

After several months, defendants stopped forwarding payments that they received from Wal-Mart for plaintiffs' merchandise. They kept approximately $30 million of plaintiffs' money. The plaintiffs sued the defendants seeking the return of the money that they withheld and for lost profits in connection with the venture. The defendants counter-sued claiming that the products that the plaintiffs shipped were defective.

According to defendants' counsel, Pou Chen Corporation ("Pou Chen"), a large, publicly traded, Taiwan-based conglomerate, entered into a joint venture with local/importer distributor MTS Products ("MTS") and its President Ben Hsia ("Hsia") to sell computer electronics to Wal-Mart through the plaintiffs and MTS, an approved Wal-Mart vendor.

Pou Chen and its affiliates manufactured and shipped approximately $55 million dollars worth of products to plaintiffs, which were then sold to Wal-Mart through the plaintiffs and MTS.

Shortly after the joint venture commenced, MTS and Hsia discovered that Pou Chen and its affiliates had deliberately supplied defective products. They later learned that the joint venture was not making any money because profits were secretly being kept offshore and away from them by Pou Chen.

As a result, MTS withheld payments received from Wal-Mart of approximately $30 million, and demanded that the parties work out their disputes regarding defective products and keeping profits offshore before they would turn over the withheld monies. Defendants feared Taiwan-based Pou Chen would otherwise ignore them. Unable to work out their differences, defendants cross-complained against Pou Chen when sued by plaintiffs.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that they entered into an agreement whereby defendants Hsia and his company MTS Products would serve as plaintiffs' agents to sell electronic products to Wal-Mart. The agreement required that defendants promptly forward to plaintiffs any payments that defendants received from Wal-Mart in connection with the sale of plaintiffs' electronic products. In reliance on this agreement, the plaintiffs manufactured and imported electronic products and delivered them to MTS Products for sale to Wal-Mart. After several months of sales to Wal-Mart, the defendants began withholding from plaintiffs the money that defendants received from Wal-Mart for plaintiffs' electronic goods. The defendants absconded with more than $30 million that belonged to plaintiffs.

The plaintiffs further contended that defendants defrauded and breached their fiduciary duties to plaintiffs by, among other things failing to use their best efforts to obtain Wal-Mart approved-vendor status for plaintiffs, by overcharging plaintiffs for various expenses and commissions.

DEFENDANTS' CONTENTIONS:
MTS Products and Ben Hsia contended that they had entered into a joint venture with Pou Chen Corporation to sell electronics products to Wal-Mart. Pou Chen was to supply the products, and MTS and Hsia were to supply their Wal-Mart vendor number, relationships and know-how, warehouse and office facilities, personnel and EDI system. Sales were invoiced through Pou Chen subsidiaries BHE and GBMI, and sold to Wal-Mart by MTS using its approved Wal-Mart vendor number and EDI system.

Defendants contended that Pou Chen and its affiliates breached the joint venture by, among other things, supplying bogus and defective products (including laptops that represented a certain CPU chip inside, but which in actuality had an older, slower CPU chip installed), by inflating costs to keep profits upstream of the joint venture and offshore, and by failing to compensate Hsia per the terms of his employment agreement.

Defendants conceded that the withheld monies were due but brought their own causes of action for breach of contract, fraud, breach of fiduciary duty and interference with contractual relations.

Result

Plaintiffs' verdict for $46,485,578 against defendants MTS and Hsia; defensed as to defendant Poli Hsu; cross-complainants' verdict for $11,945,781 against Pou Chen.

Other Information

FILING DATE: June 27, 2005.

Deliberation

nine days

Length

two months