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Exporting - Maneuvering To Reduce Litigation Risk

Our Los Angeles client, who exports food worldwide, received photos of high quality frozen Pacific squid from a fishing company. This squid is highly prized in China and our client has an important Chinese customer who will take all he can get. The fishing company also sent our client a sample box of frozen squid. The Chinese customer was given the photos and samples and ordered 100 twelve pound boxes. It was a big hit in China. The Chinese customer immediately ordered 3 seagoing containers (96,000 pounds) worth $180,425. The fishing company shipped the goods to the Chinese customer and was paid by our client.

Four weeks later when the squid reached China, the Chinese customer reported the 96,000 pounds of squid were of poor quality and he didn't want them. The fishing company was informed and replied the 96,000 pounds were the same as the shipment of 100 twelve pound boxes and our Chinese customer was a thief who wanted a price break. The Chinese customer was very important to our client and The Food Lawyers® was asked what should be done.

We obtained photos of the problem squid showing it was obvious the 96,000 pounds of squid were junk compared to the first shipment of 100 twelve pound boxes. The fishing company had pulled the good old "bait and switch." We sent the 36 photos to the fishing company who was "sticking to their story," and told us they would not refund a dime. So, we started maneuvering.

Under the law, we have the right to dispose of the goods in a reasonable manner and sue the fishing company for any losses. First and very important: We told the fishing company we were selling the goods in China to cut our losses and gave them 2 weeks to inspect the goods. Their refusal to inspect eliminated their subsequently objecting to what we had planned. At the end of the two weeks, we asked the Chinese customer to sell the squid for us in China for the best price he could and send us the proceeds. He sold the squid for $150,000. So we'd disposed of the goods in a reasonable manner, cut our exposure from $180,425 to $30,425 and didn't pay to ship the squid back to California. So far, so good.

We demanded $30,425 from the fishing company, were ignored, and filed a lawsuit. We figured this would be a ½ day trial with no jury. Our key witness (the Chinese customer) was in China. There is no California procedure for taking a deposition in China to obtain testimony for trial unless all parties agree to it. The fishing company's attorney refused to cooperate. No problem. The Chinese customer comes to California once per year with his wife to go shopping in Beverly Hills. We'd take his deposition then and have it available for trial. He said that was fine with him. The fishing company realized the jig was up and wrote us a check for $27,500.

We'd reduced an exposure of $130,425 to a $2,500 expense (the client gets a tax write-off). Good result in a messy multi-national case.




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