Wal-Mart Vendor Fails To Nix $24M Offset Over Venture
By Samuel Howard
Law360, New York (March 29, 2010) — A Wal-Mart Stores Inc. vendor has failed to overturn a trial court’s decision to offset a $12.8 million judgment against Pou Chen Corp. with $24 million in damages still owed to Pou Chen in connection with a soured joint venture agreement.
In an opinion published Friday the California Court of Appeals, Second District, Division Two, rejected vendor MTS Products’ bid to scrap the offset order and give contractual liens held on MTS’ $12 million judgment priority over the $24 million awarded to Pou Chen.
The appeals court determined that roughly $3.3 million in liens on MTS’ judgment do not trump Pou Chen’s offset rights because the competing judgments arise from the “same action based upon the same transaction.”
Louis Miller, an attorney for Pou Chen and partner with Miller Barondess LLP, said he was pleased with the appeals court’s conclusion, adding that “it is the correct decision and establishes the law in California on this issue of law.”
The dispute arises from a 2004 joint venture between MTS and Global Brands Manufacture Ltd., an electronics manufacturer in China, creating BHE Group Inc.to sell electronic products to Wal-Mart. Pou Chen contributed $10 million to the joint venture, in exchange for a 70 percent stake in the company, according to the opinion.
Grievances gave way to litigation, and in 2005 BHE and Global Brands filed suit against MTS to recover money the vendor withheld because BHE had allegedly overcharged MTS and supplied defective products, according to the opinion. MTS responded with counterclaims against Pou Chen for breach of contract and fiduciary duty.