February 8, 2006-As was posted on the OGR forum last week, MTH has sued Korea Brass, alleging it fraudulently transferred its assets to an entity named Hagye Trading a/k/a Model Korea Trading Company. The lawsuit was filed in the United States District Court, Eastern District of Michigan on January 27, 2006. This is the same court that adjudicated MTH's trade secrets case against Lionel and Korea Brass. In fact, the new lawsuit arises from the judgment MTH obtained in the previous trade secrets case against Korea Brass and Lionel. However, Lionel is NOT a named defendant in the new lawsuit.
As some of you will recall, on June 7, 2004, a jury awarded MTH a $40.8 million judgment against Lionel and Korea Brass concerning the misappropriation of MTH trade secrets involving articulated zinc diecast locomotives. $25.7 million of that amount for lost past and future profits, was entered "jointly and severally" against both Lionel and Korea Brass, meaning that if one could not pay part of the judgment, the other would be responsible for the full amount. The jury also found that Korea Brass separately unjustly benefited from the misappropriation in the amount of $2.1 million. The current lawsuit alleges that the total money judgment in favor of MTH against Korea Brass is $27.9 million.
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 fraudulently transferring its assets, namely train products, machinery, tools etc. to Hagye, 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 plaintiff's complaint repeatedly states that Korea Brass and Hagye and/or Model Korea Trading Company 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. The suit alleges Both Korea Brass and Hagye were/are in the model train business and have sold/sell to Lionel. In effect, the complaint alleges the transfer of assets was fraudulent and designed to be an "active and continuing scheme to defraud" MTH and prevent it from recovering the $27 million owed to it. Alternatively, the complaint seeks an order setting aside certain transfers of Korea Brass's assets to Hagye, which were allegedly done to defraud MTH.
As an update on Lionel's appeal in the MTH lawsuit, there is still no oral argument date when it is scheduled to be argued before the Sixth Circuit Court of Appeals in Cincinnati, Ohio. The clerk of the court still expects it to occur in the spring or early summer of this year.
***The opinions/summary expressed in this article are strictly those of the author and are not necessarily those of the Officers and Directors of LOTS, nor of the LOTS organization as a whole. | 
