Bruce Hudson

Court rules Laser Performance and Quarter Moon in breach of contract

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Judge Meyer rules that Farzard Rastegar's companies acted "improperly", "the Builder Agreements are enforceable".

Rastegar's win is that because there is a lack of evidence that his companies sold Lasers, Judge Meyer could not award royalties. Meyer says:

Quote

 

To the extent that remaining sales records indicate the existence of an entity titled “LaserPerformance NA,” no evidence shows that entity to be the same as defendant 19 LaserPerformance (Europe), or that LaserPerformance NA made any individual Laser sales.

 

He also ruled:

  • Quarter Moon improperly challenged the design rights to the Laser after July 13, 2011
  • LaserPerformance improperly challenged the design rights to the Laser after July 13, 2015
  • LaserPerformance failed to attempt negotiate a sale of the Laser plugs, moulds, and tooling after July 13, 2015

Ruling against Rastegar 9 August 2019.pdf

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It is unclear to me, having read the ruling if Laser Performance is now required to sell the Laser plugs, moulds and other tooling?

Anyone had any conversations with any of the players that shed light on this?

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Laser Performance Europe doesn't seem to be an active company now. I strongly suspect they have sold all the plugs moulds and tooling.  To other companies under substantially the same ownership, but sold never the less. 

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After reading a bit I personally would not do any business with FR. Funny that it stayed unclear if Laserperformance NA or QM did make any Lasers sales since 2015.... Curious how european courts  will see this, now the case is clear. Ahh Laserperformance Europe does not exist anymore? Wait and see.

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We've covered this.
Laser Performance Europe still exists, but according to their last financial report had no fixed assets, no stock, no employees,  and owed about 20 times as much money as it had in the bank, all, if I understand it correctly, to other companies in the same group.
And we've also covered that the builder code on the boats has changed to one associated with QuarterMoon, so it appears LPE have indeed stopped building Lasers. 
My ill educated impression is that none of these things are especially unusual in the world of multinational conglomerates.

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It was just a summary judgment motion; there is still evidence to be had and possibly a trial.  Pretty crazy that Farzad might end this whole decade long drama with a huge royalty judgment against him and a trademark that has no value anymore. 

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3 hours ago, MR.CLEAN said:

It was just a summary judgment motion; there is still evidence to be had and possibly a trial.  Pretty crazy that Farzad might end this whole decade long drama with a huge royalty judgment against him and a trademark that has no value anymore. 

And the inability to even build Lasers if forced to sell the molds and plugs?

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14 hours ago, greenwhiteblack said:

And the inability to even build Lasers if forced to sell the molds and plugs?

Agreed.

It seems that has pretty much as good as happened - unless Rastegar can pull a rabbit out of a hat.

---

Another consequence is that the use of the Laser trademark is looking even less likely to be licensed by Velum (Rastegar).

---

This now places an urgency on ensuring supply to Europe via the new system.

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15 hours ago, greenwhiteblack said:

And the inability to even build Lasers if forced to sell the molds and plugs?

I think you boys are getting over excited. The court has found that Laser Performance *Europe* failed to attempt to negotiate a sale of the tooling back to Global Sailing or another licensee. I think its probably a safe bet that instead the tooling has been sold to another company who are not a party to this case; after all in their 2017 financial report LPE had no assets. @MR.CLEANwill know more about this than me but my quite ill informed suspicion is that *IF* this judgement still holds up when the dust settles (another ten years or so?) the result would be that LPE would have to pay damages to GS for not negotiating the sale.  And by then LPE, if not wound up completely, surely won't have any more assets that it had last year - ie none. So unless there is something in US law about this sort of deal I imagine the presumed current owner of the kit gets to keep it.

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Is this kind of business allowed in the USA?

FR has known for a long time the termination clauses of the builder contract. To close the company and sell the plugs and molds to an other of one of his companies to avoid that he has to sell them back to the designer would propably fulfill several causes for criminal and civil cases in my country. We have a "Durchgriffshaftung" in special cases. This seems to be called "Piercing the Corporate Veil" in the US...

What do you think, MrClean ?

 

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19 minutes ago, JimC said:

I think you boys are getting over excited. The court has found that Laser Performance *Europe* failed to attempt to negotiate a sale of the tooling back to Global Sailing or another licensee. I think its probably a safe bet that instead the tooling has been sold to another company who are not a party to this case; after all in their 2017 financial report LPE had no assets. @MR.CLEANwill know more about this than me but my quite ill informed suspicion is that *IF* this judgement still holds up when the dust settles (another ten years or so?) the result would be that LPE would have to pay damages to GS for not negotiating the sale.  And by then LPE, if not wound up completely, surely won't have any more assets that it had last year - ie none. So unless there is something in US law about this sort of deal I imagine the presumed current owner of the kit gets to keep it.

What 'over excites me' is that you are not only possibly correct, but that scenario means it is extremely unlikely that LPE will ever make plaque bearing Kirby sailboats ever again. At least while Rastegar owns it.

It is a summary judgment, and the findings are pretty significant. The actual recovery of the molds is one matter. What changes includes the likelihood of Rastegar selling Lasers in North America ever again has in my view reduced. Maybe it is my perception that has changed. The summary judgment may be overturned during a trial (anything can happen - right?) however that doesn't sound like it will be the case here. Judge Meyer seemed to be pretty solid in his rulings.

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 The judge ruled that the termination of the contracts and the contracts itself were valid. This in turn means  FR may not build class legal boats anymore? No matter if somebody would sell him plaques? No matter if he sells the molds and plugs back or not? 

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1 hour ago, jgh66 said:

We have a "Durchgriffshaftung" in special cases. This seems to be called "Piercing the Corporate Veil" in the US...

What do you think, MrClean ?

 

Similar concepts here, though unlikely criminal no matter how egregious - the US hates to charge businessmen with crimes for doing business no matter how sketchy it may be.  Those are the kind of things that are argued over at trial and the pleadings, and I only get paid to review my clients' pleadings these days - forgive my not giving it the kind of time I would back in the day. 

My basic look at the judgment reveals that the case seems more about Farzad's 'anticipatory repudiation' of the contract with Kirby. Farzad argued (and lost) that Kirby/GS's breach of the contract gave him the right to terminate.  The SJ motion showed that the judge didn't buy his argument, at least on that issue.  My guess is he appeals, but he likely won't be able to until there is a final judgment.

If there was fraud involved in Farzad's conduct under the contract, and he tries to avoid a judgment (if one is obtained) by allowing the defendant entity to go bankrupt, the court has the ability to set that aside and possibly pierce the veil of an affiliated entity. 

This is not based on a complete review of any document in the case so apologies for whatever nuance I'm sure I missed.

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Thanks for your comments. 

Don't know if this is correct english, but I would call this "commercial suicide" 

Don't know who would like to grant a license for whatsorever to a guy like him, as you know for sure he will break all agreements....

I believe he disqualifies himself to become a legal builder again

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51 minutes ago, Bruce Hudson said:

What 'over excites me' is that you are not only possibly correct, but that scenario means it is extremely unlikely that LPE will ever make plaque bearing Kirby sailboats ever again.

LPE are never going to make Lasers or whatever again anyway.They stopped some years ago. I don't suppose Laser Performance LLC / Quartermoon have ever signed contracts with Global sailing or Kirby anyway to be broken. The fundamental rule change  removed the requirement for Global Sailing to authorise new builders.  So it seems possible that if WS/ILCA decide to license Laser Performance LLC or Quartermoon to build Lasers then the court case will have little relevance.

 

46 minutes ago, jgh66 said:

 The judge ruled that the termination of the contracts and the contracts itself were valid. This in turn means  FR may not build class legal boats anymore? No matter if somebody would sell him plaques? No matter if he sells the molds and plugs back or not? 

Don't think so, no. I doubt FR ever signed any contracts in his own name. Contracts would have been signed by LPE executives in the name of LPE. *If* I understand this stuff they are binding on LPE and LPE only. And while we might think all this juggling between companies sharp practice,  there's a big wide gap between that and definitively illegal. People break contracts all the time, it gets fought out in the courts, the loser pays. Crime doesn't come into it AIUI.  I imagine Mr Rastegar and his lawyers aim to have a sensibly safe margin between them and anything that is criminal. 

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From what I've understood from the court documents, it seems that if you buy a company in the USA you also buy the contracts with all rights (building rights) and obligations ( royalties)  That's different in europe, at least for contracts with designers. 

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39 minutes ago, jgh66 said:

Thanks for your comments. 

Don't know if this is correct english, but I would call this "commercial suicide" 

Don't know who would like to grant a license for whatsorever to a guy like him, as you know for sure he will break all agreements....

I believe he disqualifies himself to become a legal builder again

at least in this country there is almost no limit to how many chances a rich businessman gets, and Farzad will always have a lot of money

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4 minutes ago, jgh66 said:

From what I've understood from the court documents, it seems that if you buy a company in the USA you also buy the contracts with all rights (building rights) and obligations ( royalties)  That's different in europe, at least for contracts with designers. 

If you buy the company and the sale agreement is silent, you buy the assets and liabilities.  If you leave the agreement silent (and you are the purchaser), you have bad fucking lawyers!

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