In one of the more bizarre lawsuits in the trading card industry, on August 4, 2011, Upper Deck International (UD International) brought suit against Upper Deck Company (UD California). No, you are not seeing things—Upper Deck sued Upper Deck. And, although the complaint focuses on the Upper Deck family of companies, it reads like a Jerry Springer family dispute.
This complaint has got a little for everyone—a family member accused of breaking the law, the family initially rallying to support that family member, everyone getting hauled into court, the troubled family member getting lent money and not paying it back and then the troubled family member bailing, leaving the rest of the family in court, by themselves.
What turned the seemingly happy Upper Deck family dysfunctional?
No, it wasn't an addiction to alcohol, or gambling. It was “Yu-Gi-Oh!"
In 2006, Konami and yet another Upper Deck company called Upper Deck Panoceanic, C.V. entered into an agreement that made UD Panoceanic the exclusive distributor for the “Yu-Gi-Oh!" Trading Card Game in Europe and South Africa. UD International, the plaintiff in this lawsuit, was appointed by UD Panoceanic to be the exclusive sub-distributor for the contract. In other words, UD International would perform all of the work required by the European contract. At the same time, the UD California became the exclusive distributor of the same product in the Americas.
Importantly, both Konami/Upper Deck contracts contained a “Domino Clause," where if, say the American contract was breached and terminated by Konami, the European contract also could be terminated.
Can you guess where this is going?
Yes, you can. According to UD International, UD California ruined the Upper Deck/Konami relationship for the entire Upper Deck family.
Allegedly, UD California was caught making and selling counterfeit “Yu-Gi-Oh!" cards. D'oh! (Or should I say, Oh!) This resulted in Konami suing UD California and executing the Domino Clause, thereby ending both the American and European contracts.
After both contracts were terminated, the Upper Deck companies sat down (figuratively of course) and had an emergency family meeting. UD California assured the rest of the family that there was no wrong doing, so, UD International - wanting to support their American cousin - brought suit against Konami in Europe to stop the European contract from being terminated. A long, drawn out court battle ensued on both continents and it did not go well for UD California.
According to a Konami Press Release:
Discovery in the lawsuit revealed that Upper Deck had counterfeited Yu-Gi-Oh! TCG cards, and that it took extensive steps to cover-up that activity. The cover-up included a meeting in the office of Upper Deck's chairman, in which he and at least one other Upper Deck employee compared samples of authentic Yu-Gi-Oh! TCG cards against fakes made by Upper Deck, and shredded the samples in the chairman's office, as well as an e-mail from an employee of Upper Deck to other employees asking to provide her information on how to obtain Yu-Gi-Oh! TCG security foils "in secrecy."
With all of this bad evidence piling up, UD California confessed it counterfeited the cards and began working on a settlement with Konami. As part of the settlement, UD California borrowed $1,000,000 from UD International to pay Konami. UD International, apparently still being the agreeable family member, despite UD California's less-than-truthful behavior, lent its sister company the million dollars to help end the case. In doing so, UD International apparently expected to be included in any settlement UD California reached with Konami (why else would it lend the million dollars? Right?).
Well, it appears from the complaint that UD California was a bad family member (again) and settled its case and its case only in January 2010. To make matters worse, in the process, UD California allegedly told Konami that UD International did not want to settle. Konami then continued its suit against UD International in Europe, and also refused to fulfill millions of dollars in orders placed by UD International or to return the funds advanced by UD International to secure those orders. While it looks like the European lawsuit settled in August 2010, it became so expensive for UD International that it fired 100 of its employees and closed its offices in the United Kingdom, France, Spain, Italy and Australia.
To add insult to injury, UD California apparently never repaid the $1 million loan to UD International either, even though it promised it would repay it by April 2010.
And you thought it was just your family that was dysfunctional, right?
In the current family lawsuit, UD International is now seeking reimbursement from its California sister for the losses it incurred from its litigation with Konami. UD International is also seeking additional damages due to the tarnishment and negative impact the entire situation has had on its reputation…and basically for ever knowing UD California.
I'm surprised they also haven't moved the court to kick UD California out of the family.
UD California's answer to the complaint is not due for nearly a month, but it should be exciting to hear the other Jerry Springer guest's view on the Upper Deck family situation. Maybe a drunken uncle will show up, or a pregnant cousin, who knows! Or maybe, better yet, UD California will provide us an organizational flow chart listing all of the Upper Deck family members so we can see who's related to who (who's the mother company, the brother and daughter companies…the long, lost cousins…whether a paternity test is required…).
The complaint tells a good story and after a first read, how could you not side with UD International? Heck…it lent UD California money to settle a case, got screwed over and then got stiffed! Now, before you jump to sentence UD California, there's a saying in the legal world, “Your lawsuit is strongest when you file the complaint. It only falls apart from there." There are very few cases in the real world, especially the business world, that are so one-sided. I have a feeling once we get UD California's side of the story, the case will even out. Who knows, maybe there's a plausible excuse, like UD International gave UD California the million dollars as a gift? Okay, that's a reach, but I fully expect a countersuit from UD California for some unexpected reason and maybe even a surprise guest!
And keeping with the Jerry Springer theme, it would be nice to see these two sister companies pull each other's hair for a little bit longer before Steve breaks the fight up, sending the Upper Deck family members back to their chairs.
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