Legal Explanation of Latest Coil Couplers Posts
Over the last two days, there have been a few posts on the Coil Couplers of America website stating that MTH has cut off Lionel’s supply of locomotives, including some of the new Legacy models, from its supplier Model Korea Trading Company (aka MKT, the company named in the Coil Couplers post of the last two days) due to the court ordered stoppage of payments by Lionel.
Click on the link below to read on
The latest Coil Couplers post dated December 15 and entitled “World Awaits Loco-Lawyer” requested that I clarify what is going on. It also referred to me as “…the esteemed attorney who is known in the community for his direct and succinct reporting…” I certainly will not argue with part Lionel owner Neil Young’s favorable assessment. Ironically, however, a little over a year ago, in November 2006, the Coil couplers website called me a “hog faced caboose chaser.” Situations change when past critics need one’s help in the future.
By way of background, on January 27, 2006, MTH sued Korea Brass, alleging it fraudulently transferred its assets to an entity named Hagye Trading aka Model Korea Trading Company (MKT). Korea Brass was a co-defendant in MTH’s trade secrets case against Lionel, the one that is currently tentatively settled.
The lawsuit was brought and is still currently pending in the Federal District for the Eastern District of Michigan, the same court where a jury awarded MTH $40.8 million dollars against Lionel and Korea Brass on June 7, 2004 in the trade secrets case. As most of you know, one year ago, on December 14, 2006, an appeals court vacated the entire monetary award in favor of MTH and sent the case back to court for a new trial. Lionel is not a defendant in the transfer of assets case. Korea Brass did not participate in Lionel’s appeal.
The basis of the current lawsuit is that beginning on June 22, 2004, (just two weeks after the jury’s decision in the trade secrets case), Korea Brass began a scheme to fraudulently transfer its assets, namely train products, machinery, tools etc. to Hagye aka MKT, to prevent MTH from being able to attach them, so they could not execute on the judgment against Korea Brass in the trade secrets case. The lawsuit alleged that Korea Brass and Hagye aka MKT are actually one and the same, operating at the same addresses in both the United States and in South Korea, and with the same principal executives. Allegedly, both were/are in the model train business and sell to Lionel. The purpose of the scheme was to defraud MTH and prevent it from $27 million owed to it. That monetary amount is for the past and future lost profits from the trade secrets case. However, as of December 14, 2006, that amount and more was vacated by the appeals court in the trade secrets case.
Here’s what the current Coil Couplers posts have been referring to. On November 20, 2007, Judge John Corbett O’Meara issued a temporary restraining order (TRO) and entered an order stating that Hagye Trading and Model Korea Trading, are about to receive approximately $1 million or more from Lionel pursuant to invoices that are for projects (trains) in which the purchase orders originated in Michigan. As a result, it ordered that Korea Brass, Hagye Trading and Korea Model Trading, and any affiliated companies immediately communicate through their attorney, “stating that if and when Lionel pays any amount to these entities, that said amounts be paid to the court in escrow.” The judge also ordered that the court hold these funds in an interest bearing escrow account until a further order is issued by the court. Lastly, the court ordered that during the duration of the TRO (which is still in effect), defendants shall not circumvent the court’s order by changing its name, transferring its assets, or by billing through other entities. Thus, the statement by Coil Couplers in its December 14 post, that “… MTH has cut off all the money to MKT, the supplier of all yer major Lionel steamers and held it in an escrow account” is true, to the extent it involves Lionel. However, Clyde Coil’s reasoning for MTH’s actions, namely that it can not compete in the market place, is of course debatable.
On November 29, Korea Brass filed a notice of appeal concerning the courts order directing the payment of any money by Lionel into escrow.
On December 14, 2007, MKT’s attorneys filed a motion (for summary judgment) to dismiss the MTH lawsuit. Their position is that since the entire monetary judgment in the trade secrets case was vacated on appeal, and the fraudulent transfer of assets case is based on it, there is no legal foundation for preliminary or permanent injunction or the current case. Moreover, they have argued Hagye/MKT are wholly and separate legal entities from the now defunct Korea Brass. Their cross-motion, and MTH’s motion for summary judgment are currently scheduled to be argued in court on January 10, 2008.
Stay tuned.
Erol Gurcan a.k.a. Loco-Lawyer
PS-I will be sending Coil Couplers, aka Neil Young a bill for services rendered since they requested I clarify the matter. He can afford it. I am willing to be paid in trains or cash. Hey a lawyers got to make a living too. Hopefully, Clyde will be out of the hospital soon to make payment.
Erol B. Gurcan, an O Gauge industry legal expert, is a regular contributor to OGaugeWatch.com
Related posts:
- MTH Settles Lawsuit with Korea Brass
- Court Approves Lionel’s Bankruptcy Plan and Settlement with MTH by Erol Gurcan
- Bankruptcy Court Grants Lionel 7th Extension: MTH Motion to Extend TRO Granted by Erol Gurcan
- MTH Attempts To Collect $$$ From Korea Brass by Erol Gurcan
- Current Status Of MTH, Lionel Lawsuits Settlement By Erol Gurcan
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