JUDGMENT for Plaintiff MTH- what this really means to us

[Anonymous]

First LIONEL will either appeal or offer a settlement not to appeal or the judge will reduce the award OR they will pay! LIONEL will obtain a loan and pay MTH off.

SECOND, Train prices from LIONEL will not skyrocket because other manufacturers will not be raising their prices like MTH, KLINE, etc. To be competitive LIONEL can not raise prices, however LIONEL will be seeing less future profits.

THIRD because we dont put officers in jail for making stupid decisions instead we do what MTH did we suit and then make them pay for their bad acts thru lawsuits resulting in less profits.

Fourth, with less profits the stockholders will get less dividends so they will be less happy. Less happy stockholders usual vote to fire members of the Board, who in turn fire the officers. (Trump would be so happy to hear his tag line.)

The decisions made at LIONEL will change for the better with a whole new board and officers.

At that point, we will benefit from a LIONEL that is run far better than with the old officers.


Alan

[ChiefEagles]

Wise sayings LEGAL EAGLE. It will work out for us in the longrun. Bad management and judgements usually end up hurting the consumer with higher prices. Fresh management will work to restore reputation and consumer confidence.

[Anonymous]

I visited that other forum today and some guys have really gotten their Jockys in a snit over this MTH vs. Lionel thing. Responses ran the gamut from pompous to the asinine to paranoia.

Now, I know emotions run high when concerning our hobby, but, gee, guys let's slow down. The world is full of s**t-house lawyers, we don't need any more.

What ever will be will be; and will have almost no effect on the hobby at all. If Lionel looses, who cares? If MTH receives a lesser award, who cares? If MTH eventually buys Lionel, who cares? It will make very little difference to most of us.

Trying to put all of this into some sort of perspective, I took a a loose inventory of my train stuff today and this is what the percentages of each manufacturer equate to: The percentage of my Lionel pre-war tinplate, including Standard Gauge amounts to 15% of my collection. Lionel postwar amounts to about 50%. My Lionel modern era stuff is about 10% of my collection. The remainder, about 25-percent is made up of MTH, Weaver, K-Line and Williams

I'm 61 now, so if Lionel or any other company were to shutter their doors tomorrow I'll still have enough 3-rail electric trains to keep me busy until the Grim Reaper comes calling.

Bill
www.modeltrainjournal.com

[Anonymous]

Yeah, Allan Miller must have just passed his bar exam. He's over on OGR and elsewhere offering his usual "holier than thou" BS opinions. I don't know why Lionel didn't hire him as their lawyer. All of those other jailhouse lawyers over there are too much.[D)]

[Anonymous]

The reason why Lionel didn't hire him is because they already have too many 'pointy-headed' men on their payroll.
Bill
www.modeltrainjournal.com

[Big_Boy_4005]

The really nice part of all this is, this verdict means NOTHING to me!!! I'm not interested in buying steam engines, or any new trains from either manufacturer involved in this case. These two can beat each other to death, and my apathy will remain the same.[swg]

[Anonymous]

When McDonald's was sued for making hot coffee really hot coffee ( don’t get me started on this one; if you only knew the real facts and not the MickyD media hype you would be eating hot dogs!) McD could not raise the price of coffee to cover the actual award (which despite the media hype it was not $4 mill but rather $400K to account for her actual medical costs for plastic surgery for her 3rd degree burns in her crotch area) .

McD can’t raise coffee prices because Wendy's did not raise the price of its coffee; the end result was that McD made less profit for about a 1/2 day to offset the award.

Likewise the inventor of the intermittent windshield wiper was awarded several hundred million by jury against Ford but the judge reduced the award to 10 million saying that was enough for any inventor (he really did say this!) and Ford's checkbook was out the moment the words left the judge's lips.

So these large awards make a point and then get reduced as I said. Wolfe made a good point. LIONEL looked the other way as K Brass used designs copied on a CD. Korea like China are places where intellectual property and trade secrets are not held in high esteem. I think that Korea was watching the outcome of this because they wanted to see if an American Jury would allow an American firm to clobber another American firm ; not just pay lip service to the IP laws.
And to the credit of our legal system the jury did what it should; a Mich. Jury clobbered a Mich Firm for a Mass firm; You can't claim regional bias so How much fairer can it get.

Alan

[okiechoochoo]

You all are right, the other forum is going nuts. It will all come out in the wash. Unless they all start making postwar again, I really don't care one way or the other

[Anonymous]

If MTH was going after $33 mil and ultimately was awarded $41Mil there was something there that the jury saw to boost the award above the original claim.

So you ask why didn't Lionel try to settle this early on for say $15 mil; Ok maybe MTH would not settle or Lionel did not offer .

However, there are no surprises in civil lawsuits, not like TV where someone testifies and admits guilt under heavy cross at the last minute. It doesn't happen that way. After all the discovery and the depositions that must have been damning against Lionel, Lionel was advised as to the merits of the case; It could not have been welcomed advice. But still....

At that point again you try to offer a settlement. Once again, MTH could have refused to settle so you up the offer. A trial is a gamble, you never know what the jury will do.

Could LIONEL have so underestimated the merits of MTH 's position with all the facts in?

Very strange.

Alan

[spodwo]

Lionel says that are going to appeal but also in the same breath they are "reviewing their appellateoptions."

Choke up the cash up front for that - hardly what Wellspring would like to do...

[FJ and G]

Bill writes:

"What ever will be will be; and will have almost no effect on the hobby at all. If Lionel looses, who cares? If MTH receives a lesser award, who cares? If MTH eventually buys Lionel, who cares? It will make very little difference to most of us."

--------------------------------------------

I wholeheartedly agree with everything Bill says with one possible exception: to many, it WILL make a difference because they are brand loyal sychophants. Mike Wolf himself admitted in the front page of today's Washington Post business section that it is like a Republican/Democrat partisan battle out there with red states and blue states.

But for the rest of us, myself included, this has no real meaning for us because we buy the best train value that fits our needs regardless of brand name.

dav

[wallyworld]

While it is an interesting topic to discuss, in terms of what it really means to me personally is, in reality, nothing.

[Anonymous]

I just wonder what the tone of everyone would be if the tides were turned, i.e. MTH misappropriating designs that were property of Lionel (and subsequently found guilty)

[Big_Boy_4005]

QUOTE: Originally posted by Rod M.

I just wonder what the tone of everyone would be if the tides were turned, i.e. MTH misappropriating designs that were property of Lionel (and subsequently found guilty)

This case was only interesting because the big guy was caught stealing from the little guy. Had the tables been turned, I would have thought oh well, that figures.

It does prove that MTH is inovative, and aggressive in trying to capture market share. It doesn't make me want to buy any of the trains in question though. In that regard they are both losers. Frankly, unless the engines are diesels, under $300, and have TMCC I have no use for them on my layout. And don't laugh, because I can find all the engies I want on eBay.[;)]

[okiechoochoo]

Big Boy
There is one condition where all this might make a difference to you. Say Lionel goes under and MTH acquires them. After he has the Lionel name he sells his trains and DCS under the Lionel name which has more brand name recognition. At the same time he ceases to produce or allow anyone else to produce TMCC. What happens to your control system when it needs repair.

[Anonymous]

In the event Mike succeeds in acquiring Lionel and tries to kill off TMCC, I will convert my engines to DCC.

Daniel Lang

[nblum]

If Wellsprings decides to liquidate Lionel to satisfy the judgement, should it withstand appeal and motions to vacate/reduce the award, there are a number of strategies they could use to raise cash and keep the Lionel name out of the hands of their arch enemy, MTH. First they could sell the rights to TMCC to some combination of K-Line, Atlas, Weaver, 3rd Rail and Broadway Limited. Secondly, they could sell the right to manufacture three rail trains with the name Lionel to that same consortium or one of those companies. At the very least they could force MTH to bid for those rights. Alternatively or in addition they could sell the right to use the Lionel name on other items like watches, models, clocks, other chotchkas to Hallmark, Franklin Mint or some such company. This combined strategy would satisfy the goal of keeping the Lionel name out of the hands of MTH and raising money to meet the settlement. Not the happiest scenario, but much better than some others.

[Anonymous]

Hey guys. There's one other, very simple thing that Lionel can do to pay off the judgement: Get a loan.

The company's got to be worth more than $50 million, since they took out a loan for $50 million a few years ago. I used to work for a bank (the old Chase Manhattan). I don't believe any bank officer would lend a company an amount that equaled or exceeded the company's assets. Companies can get in trouble if the total value of their debt exceeds a certain ratio of assets to liabilities, including loans & others. Your bank won't let you borrow money for a mortgage unless the monthly payment is less than 28% - 33% of your monthly income.

They probably have insurance to help pay for this kind of judgement, too. Bet their premiums go up if they file a claim.

Tony

[Anonymous]

Tony

I doubt very much that LIONEL has a "stupid" policy. How rich you could be by selling "stupid business decisions" polices to every company in America.

I have no knowledge of the actual trial transcripts or depositions that MTH took from Lionel's Executives. But I'm betting that it went like this in the court testimony with questions from MTH's lawyers and the answers from the LNL executive:

MTH: How long does it take to generated the parts, mold and casting drawings for a steam engine?

LNL: Well, I can't say because it varies with the complexity of each engine.

MTH: Ok , how long did it take the previous fabricator to do these drawings for the M1A?

LNL: About 4 months.

MTH: how long to do the drawings for the 2-8-4 Berkshires?

LNL That was much more complicated it took about 5 1/2 months

MTH : So how long for the SP AC-9?

LNL: This was a complicated variation too, so it was about 5 months

MTH : So on average for the three engines we discussed , how long did it take to generate the drawings ? What about 5 months on average correct?

LNL: Yes, it was on average about 5 months.

MTH: Alright, will then how long did it take Korea Brass to produce the drawings for the Alleghany that's in question here?

LNL: Well ... ah.. way over 3 weeks. But that's because the engineers at KB are very very talented!

MTH: Right!

From here the questioning just goes downhill for LIONEL...


Alan

[Big_Boy_4005]

QUOTE: Originally posted by Daniel Lang

In the event Mike succeeds in acquiring Lionel and tries to kill off TMCC, I will convert my engines to DCC.

Daniel Lang

Fortunately, that is a very unlikely scenario that Lionel would cease to exist even after all of this, but I'm with Daniel here. Either that, or there is a lot of used TMCC stuff out there already. There are also other companies that produce TMCC boards, like Train America Studios, so there are options beyond MTH and DCS.

[nblum]

Alan, maybe so. So a few engines that appeared six months earlier were worth $40 million? What was the jury smoking? :)

[Anonymous]

Alan:

When did I say that Lionel had a "stupid policy?" I remember using the word in a posting in some other thread, with the intended meaning that they'd have to be stupid to think that things might not go their way.

In fact, the only times the word "stupid" appears in this thread, outside of the post I'm typing now, is in your own postings. Did I miss something?

My only point is that Lionel has to be worth a lot more than $50 million, and while a $40 million judgement is probably no small potatoes to them, they can probably survive it. Of course, I'm not privy to their financial reports and have no idea if the comany is at all shaky financially.

But the contention that people are making that Lionel will end up ceasing to exist as we know it as a result of this case is based solely in fear and not on the fact. Nobody here has any facts that didn't appear in a newspaper article.

Tony

[wallyworld]

If Lionel should go out of business one could imagine the value of collections being enhanced and yet I am sure most Lionel products already lanquishing in inventories would be sold off at fire sale prices. If MTH bought Lionel, well...that solves that compatibility issue sooner than later. Frankly, I have burned by quality issues with both Lionel and MTH products more than once and I no longer purchase either one's products. K-Line, Williams, etc get my vote in hard currency. Quality and service have been great. A duel to death between Dumb and Dumber was inevitable should it come to that. You look at some of the escalating costs of buying an engine with all the bells and whistles attached and size of the award to MTH, what percentage of mark up on these products represents a net profit? Pretty hefty? .

[Anonymous]

TONY

Maybe I WAS unclear an "error and omissions policy" that I though you were referring to would not cover LIONEL when they are found guilty of participating in an illegal act; That would be a "stupid business decisions"" policy and insurance companies dont write those.

Insurers insure insureds to cover accidentally actions of a business that are un predictable and unforseeable. Being found guilty of a criminal act or violating a federal statute is not considered unforseeable that you would not get caught.

Alan

[Anonymous]

Alan:

Ahhhhh, OK, now I get it. Though I work for a major reinsurance company, I support the HR department & don't know much about the types of policies that get written.

OK, they can't use insurance to pay the damages, but, providing their financial situation isn't too precarious and the total of their debt isn't too high, they can still borrow money.

Tony

[Anonymous]

Absolutely; a business loan makes sense if the award isn't reduced.

but likely the actual award will be reduced by the judge on appeal

It is sad to say that in today's corp world $41 mil isn't a lot; not that I'm writng Lionel a check
But the Marshall Fields Chain in Chicago was just purchased for $3.4 Billion.. $41 mill doesn't seem so large.

Alan

[okiechoochoo]

I would think that compared to Marshall Fields, Lionel is a drop in the bucket and $41M would be a considerable amount

[Anonymous]

How big $41 million is to Lionel depends on how big Lionel itself is. And it has to be bigger, a lot bigger, than $50 million, since they took out a $50 million loan a couple of years ago. As I said, no bank is going to lend you an amount equal to the value of your company or greater.

I can't tell you how big they are, but I know it's gotta be over $50 million. Maybe $250 million, maybe less, maybe more. But that's just a WAG (wild a**ed guess).

Tony

[Anonymous]

"Yeah, Allan Miller must have just passed his bar exam. He's over on OGR and elsewhere offering his usual "holier than thou" BS opinions. I don't know why Lionel didn't hire him as their lawyer."
-----------------------

Hi, guys! Nice to be recognized over here!

But to answer your question: Lionel couldn't hire me as their lawyer; I was giving advice to MTH. :-)

Happy railroading, folks! My best to Roger, ***, Neil, and the rest of the CTT/Kalmbach crew!

[Anonymous]

As for the comment about lionel have a stupidity policy. They'll have a policy that covers them against litigation in general. Be it someone that sued because a lionel product malfunctioned, causing their house to burn down, or being sued by a competitor. Most likely, the award will be revisited, with MTH having to prove their direct losses, not counting punative damages. And despite the huge settlement, I don't recall in recent history any company getting sued, losing, and having to pay out full award. The tobacco companies ended up paying maybe 10% or so of the huge award against them, McD's payed around 10%, etc. Juries seem to initially award huge sums of money (especially in little guy vs corporate america cases) and in the end, the award is nearly always significantly less. That said, Mike will be lucky to see around 40% of whatever he ends up with. I happen to have a corporate lawyer in the family (cousin's wife) and for a fact, they get between 40 and 60% of the clients award as fees. That's STANDARD in any civil case.
Tim