Lionel statement to dealers 6/22

[Anonymous]

I was struck that MTH in their statement claimed lost profits of $12.0 million and lost future profits of $13.8 million -- considering the small runs on these locos, MTH must be making 500 or 1000% profit and gouging the collecting public. Maybe they should reduce the prices on their Asian made products 50 to 75% or move manufacturing to the US!! At their admitted profits, they could manufacture here in the US and still make money!

[3railguy]

I am pretty convinced now that Lionel was framed by the Korean maffia. The discs and blueprints were planted in Lionel's offices by the night janitor. According to RM, the MTH schedule was not authentic.

[garyseven]

Tony
That was great! LOL I think they get 'em free in every box of detergent.

[Anonymous]

QUOTE: Originally posted by garyseven

AlanHN ponders:
"(I'm not up on Michigan Law so I don't know if Michigan has a long-arm."

Michigan has a "laundry-list" type of long-arm statute.

A laundry list & a long arm? Must make reaching for the bleach easier...[:D][:D][:D]

Tony

[garyseven]

AlanHN ponders:
"(I'm not up on Michigan Law so I don't know if Michigan has a long-arm."

Michigan has a "laundry-list" type of long-arm statute.

[Anonymous]

A directed verdict is automatically made by the defense to give the judge an opportunity to review the jury not-with-standing their verdict. As the jury is the tryer of fact, in most cases it is unlikely that the judge will over-rule the jury verdict UNLESS he feels that they have based their verdict on no real facts but emotion. In complex litigation such as this, it can happen that the judge will overrule the jury. It is less rare in IP or complex cases, but still rare.

SURVEY SAYS: actual surveys of jury verdicts compared to how the bench would rule are very close, except in complex litigation. But don't count on that swaying a judge.

JURISDICTION: Well KS does have a point here, unless the judge is convinced that they made use and had some contacts with the forum state and/or Michigan has a long-arm statute. IF a defendant takes advantage of the forum to make money, let's say, then you are subject to jurisdiction of that state because you had some contact with its residents ; EXAMPLE: insurance companies may have their office and are operating in one state, but are subject to all states that they have their salesman call to sell insurance to the residents of.

Assuming that KB's contract with LIONEL doesn't have a jurisdiction clause, then KB may be just indirectly having contacts in Michigan thru Lionel and therefore have no actual contacts with the residents of the forum state; Michigan. However, then Michigan's long-arm statute would kick in. The long-arm statutes common in most states creates super-jurisdiction over ANY contacts with its residents not just significant contacts. (I'm not up on Michigan Law so I don't know if Michigan has a long-arm.)

TRADE SECRETS require adaqute protection of information to be considered trade secrets. Supposedly only three people in Atlanta know the Coke recipe that if varied slightly changes the taste. Ok so what did MTH do to protect the designs. This should have been presented in court. But remember FRAUD is harder to catch than Thievery. You can lock up a design and put it in a vault, but you can’t prevent someone from taking it beforehand or by slipping it into his underwear or shoes to foil a search or emailing it in an innocent email to a competitor. The depositions of KB’s employees indicated that they just made copies on their computers and carried the CDs out the door. Doesn’t seem like much security was in place or that MTH took steps to lock up the designs.

TRADE SECRETS or in the public domain?? Well here MTH has no problem. Even though anyone could have obtained an old engine blueprint or pictures and/or read the measurements and then scaled them down and then decided which pieces would be brass, plastic or steel and what size screws to use, weld or rivet and which parts to press-fit and which to cast and the size to make them so that they shrunk after cooling to fit, and the colors to use and you see the point. It takes a lot of work to design miniature complex parts even when you have complete blueprints of the original. That is what MTH owns and the final parts design and production was clearly not in the public domain.

TAKEN or did Lionel look the other way. I have answered this on other threads. Lionel knows production schedules. It must in order to effectively plan the marketing and to put the item in the catalogue or a flyer. So when instead of 8 months of R&D, KB comes up with a design in 2 weeks, ( I'm just making these times up) LIONEL has to be suspicious of the originality of the work. It has an obligation to ASK. It didn’t ask, so Lionel’s guilt is just presumed.

In so far as the effect on MTH’s production schedules, well here again MTH provided forensic accounting witnesses to show what was lost. That may have been taken by the jury in many ways because accounting is complicated, so the judge may have a lot of elbow room here to reduce the amount.


Alan

[Kooljock1]

M.DONALDSON,

You're slipping...your caps-lock key actually got turned off on your last post! Looks good. You should do that more often....

And while this is a very nominally censored forum, we still try to avoid bomb-throwing. Welcome.

Jon [8D]

[nblum]

I posted this on the OGRR Forum, but for those who don't follow that forum, and in the hopes of getting some legally cogent comments:

The judge currently has before him motions from defendants Lionel and Korea Brass/Mr. Yang. Lionel's motion of June 10th was, primarily, to dismiss the case or direct a verdict for the defendants, on grounds outlined in their brief. Korea Brass and Mr. Yang made similar motions on June 17th, in particular on the grounds that the court lacks jurisdiction to enforce Michigan state law on a Korean company such as Korea Brass. They also argued that the designs and drawings in question were "readily ascertainable from public information," that the "plaintiff failed to institute adequate security measures.." and thus the materials "do not constitute trade secrets." They further argued that "plaintiff failed to present evidence that defendants..knew or had reason to know that designs and drawings were taken or used.." and that "plaintiff failed to provide evidence that "MTH 2000 Production Schedule" was an an MTH production schedule having any value.."
Perhaps the legal eagles can comment on whether there are what the likely chain of events will be from here.

[Anonymous]

From now on, I'll get my O gauge information from CTT. People are much more rational here than at OGR.

M. DONALDSON

[garyseven]

I wish I had more time to spend on both forums - I like them both.
I wish I had more money to spend on both Lionel and MTH - I like them both too.

Gee, where did I put that magic lamp???

[Anonymous]

M. DONALDSON

Gary's right on point. We are obligated to repeat the things said in OGRR’s Forum because we know that the only really free thinking going on, takes place on that RICH-censored forum;

So just call us peat and repeat, but not late for Dinner!


Alan

[garyseven]

Yes M. DONALDSON, you are correct! I have been asked to repeat things I write there, here. I really don't understand the motivation, I guess some just like it that way so they don't feel like they are "missing out" and I never asked. That is in the specific, in the general we are discussing the same stuff here others discuss over at OGR. I guess the discussions are becoming old and tired. Old and tired, just like me! Oh well.

[Anonymous]

Nothing new here. You're all repeating the same stuff found on the OGR forum.

[garyseven]

AlanHN opines:
"Crisis management and PR are fine when you have a crisis, but they don't try cases and hopefully don't give legal advice."
Yes AlanHN, you are correct! Judges try cases and lawyers give legal advice. There are two courts. Crisis management and PR are for the "court of public opinion."
"By waiting like they did, the impression is that they are not afraid and just jumping in with a response and instead LIONEL was very circumspect about a response and that there is no crisis. No worries. A genuine thoughtful look at the results of the judgment and that they disagree and are reviewing options."
I do consider a judge upholding potential 40 million the slings and arrows of a crisis!
Wellspring needs to bring in a wartime consigliere. We will see if current leadership will step up, is up to the task or if Wellspring will make the change in the future.
Perhaps waiting two weeks before this "boilerplate" statement signified nothing, or speaks volumes. My bet is on the latter.

[Anonymous]

G7

Are you saying I'm indecent?

Crisis management and PR are fine when you have a crisis, but they don't try cases and hopefully don't give legal advice. The crisis was when there was Lionel's perceived viability to continue to function under the threat of a judgment. Lionel's PR worked very well over the past four years. Many continued to buy trains. Once the judgment was read, that crisis ended.

Now during the appeal process, they need to continue the status quo without letting MTH smell any fear. By waiting like they did, the impression is that they are not afraid and just jumping in with a response and instead LIONEL was very circumspect about a response and that there is no crisis. No worries. A genuine thoughtful look at the results of the judgment and that they disagree and are reviewing options. No crisis that needs managing!

Alan

[Anonymous]

Alan:

More than half my post was intended to be tongue-in-cheek, but I do see your point. You bring up some very good points.

In any event, the judge still hasn't ruled, so we still have to wait.

Tony

[nblum]

The bottom line at present is that the events of the last month will probably not result in any more or less sales to customers or orders from dealers for either MTH or Lionel . This hobby is so polarized both at the trade and consumer levels that nothing short of someone going out of business will alter the sales dynamics in the short run, in my opinion. That's why I say a few weeks one way or the other makes little difference in the announcement. Public relations to the dealers, distributors and consumers consists not of damage control but in passing on information in this particular slow moving crisis. Sure there are a few Lionel customers who will stop buying Lionel because they think Lionel did something wrong, but there are also some folks who will stop buying MTH because they disapprove of what MTH has been doing. At the consumer level, right now, except for sound and fury, it all signifies very little at this point.

[garyseven]

AlanHN
Decent crisis management and public relation firms deal with giving the right crisis response. Wellspring/Lionel needs such representation.

[Anonymous]

Guys I would never advise a client to prepare two statements on a possible outcome; both could be mis-used and would be discoverable at an appeal.

Second, you've just been hit with a $40 mil judgment; you dont want to just react to this; and say something like I'm going to DisneyWorld, you need time to prepare a response that is not going to bite you later on.

Finally, you dont want to give anything away that will give comfort to the enemy and have him thinking you are weaker and in an even a poorer negotiating stance.

Alan

[Anonymous]

For what it's worth, I think it would have been better if Lionel had prepared & released a short statement. They should have prepared two statements before the verdict came in, one for each possible outcome. You know, if they won, "We were vindicated and we told you so", and if they lost, "We are saddened with the jury's verdict. Rest assured, we have begun to explore our options ...."

At the least, we could have avoided this whole argument if that had happened [:D]

Just kidding with ya, guys.

Tony

[nblum]

Scott, I couldn't agree more that leadership is important in this situation. No organization is ever any better than the leadership at the top.

I think we are disagreeing as to whether the two week +/- delay in Lionel's public response (1) makes a difference and (2) reflects subpar leadership. The jury (so to speak) is still out on number 2 since we don't have an outcome yet, but I'll stick to my contention that the answer to to number 1 is "probably not."

[garyseven]

Neil
Thanks for your reply. I do have some education and experience in business crisis management and disagree that "Timing means virtually nothing in this instance." From what I know, time, and lack of proactive, strong, direct and honest leadership can, and will, turn a crisis into a catastrophe. I none-the-less appreciate your opinion.

[Anonymous]

gary7

I thought YOU were implying that!??

No! Okay then no hidden agenda by Lionel

Alan

[garyseven]

AlanHN states:
"don't agree that the timing of the message is critical
and that there is a "hidden agenda" in the message because it did not occur one day after the verdict but instead a few weeks later. That in itself doesn't alter Lionel's message.]"

I missed the part about "hidden agenda." How was that somehow implied or content relevant to anything posted? The agenda of the letter was to - as they say - "Rally the Troops." Nothing hidden about that. AlanHN did I miss state something?

[Anonymous]

I don't agree that the timing of the message is critical
and that there is a "hidden agenda" in the message because it did not occur one day after the verdict but instead a few weeks later. That in itself doesn't alter Lionel's message.

Defendants need time to reflect and consider after a $40 mill verdict is sent against them . As Budda said,
"Don't just do something....stand there!"

Ok so we now know that Lionel intends to fight. Overturning a jury verdict is usually difficult because they are the tryer of fact. To do so you must show on appeal that the judge erred on his instructions to the jury or that evidence presented was faulty based on lies. (see Martha Stewart trial appeal)

And, if the judge agrees, the amount will be lowered in any event.


Alan

[nblum]

I think that many, including myself, upon the shocking revelation of the jury's bizarre decision, wondered about Lionel's future. People are still wondering about Lionel's future. There is little Bill Bracy or anyone else can do about that, as events in the future will determine whether this decision injures Lionel or not, and how severely. I don't see how any of that speculation would have been altered by this letter appearing the same day as the jury verdict. It may, of course, be mildly reassuring to read this letter, and nice to know that an appeal is planned. But the letter would have provided no more or less reassurance two weeks ago than it does today. The appeal had not been decided upon two weeks back and its announcement had to wait until now. Words don't matter much here is what I'm saying, although some comment was obviously necessary. Timing means virtually nothing in this instance, in my opinion. The speculation Bill Bracy refers to would have occurred one way or the other, and will continue until resolution or weariness and time intervene.

As for Willpick's comments, they don't merit any attempt at intelligent comments, except for the obvious one that they represent ad hominem arguments of no merit and without content relevant to the discussion. I'd venture it is of little to no interest to anyone here who he has and has not filtered on AOL. I certainly find it irrelevant to the discussion and life in general :).

[willpick]

Garyseven, Neil sees things differently[:)], due to the fact that he only sees in two colors: Orange & Blue. Having read his postings on AOL (where I finally filtered him) and on other forums, I tend to ignore him as much as possible, as the content never varies much[:p]. He has his opinions, i've got mine, and that's that.

[garyseven]

Neil opines:
"I don't think the difference of a few days versus a few weeks makes any difference in how consumers or dealers now view Lionel or their future."

Then why send the letter now, if at all?!? ?!?

In the letter, Lionel states:
“The recent events have sparked too much disturbing speculation regarding the future of Lionel.”

IMHO - Obviously, Lionel is trying to change consumers or dealers view about Lionel, or Lionel’s future that have been alowed to propagate do to "recent events."
Neil, help me to understand that the “disturbing speculation” would not have been, at least lessened by any sort of positive release by Lionel soon after the verdict. After all Lionel had 4+ years to think proactively.

I just don’t see it.

[nblum]

I'd venture a guess that in the days after the verdict, the small number of Lionel managers involved in these leadership decisions were meeting with, and without legal counsel, and with Wellspring representatives to plan strategy, examine options and continue to do their day to day jobs. I don't think the difference of a few days versus a few weeks makes any difference in how consumers or dealers now view Lionel or their future. Some uncertainty is now in the mix whatever Lionel says or doesn't say, until a final verdict is announced and the appeal commenced.

Indeed, I was assuming there wouldn't be a public statement until their strategy was determined, having been a bystander to similar legal matters. In fact, usually what you get is a terse statement to the effect that "the jury/judge made a mistake" and "we will be victorious upon appeal," full stop. This statement by Bill Bracy represents not only that content, but a low key declaration of defiance and resolution. And a subtle knock on MTH as a copier and purveyor of subtle disinformation.

The people at Lionel, understandably, believe they were screwed by a jury that didn't fully understand the issues and the law, and plan to soldier on and hopefully reverse the decision or reduce it. Nothing shocking or surprising to those of us who have followed the case for 4+ years.