A big lawsuit about little cars
(Los Angeles, CA) A $10M lawsuit brought by a competitor against our client Sunrich Hobby & Toy Company, which makes scale models of race cars under license from manufacturers of the real things, got the black flag in U.S. District Court for the Central District of California. Exoto Inc. brought the lawsuit. The judge had already dismissed the company’s 9 other claims during a bench trial in December 2023. In January, she completed her clean sweep and tossed the two remaining claims. Before we take too long of a victory lap, let’s back up and look at the case and explain why it was outrageous from the starting line.
An outrageous lawsuit
Exoto, like our client Sunrich, produces scale models of race cars. It accused Sunrich and its co-owners of unlawfully acquiring Exoto’s tooling for its cars and counterfeiting them. We should mention that these are not just model cars or Matchbox toys. They are exact replicas engineered to a 1/18 scale of the original vehicle. Creating the molds and tooling for one car takes months and can cost well north of $100,000. Exoto sells its models for hundreds to thousands of dollars–these are “collectables,” not toys.
Why did Exoto think Sunrich took its tools?
In 2012, Sunrich produced a model of the 1977 Porsche 936 that won LeMans. Exoto also created a Porsche 936 model, in 2010. The tooling for Exoto’s model was stored with a manufacturer in Hong Kong, along with dozens of other Exoto tooling sets. But Exoto discovered the 936 tooling sets were missing in 2015. Since Sunrich made a 936 model, Exoto reasoned our clients “must have” done so from their missing tooling and alleged that Sunrich stole it. Big mistake.
Sunrich’s production process documented
In court, Sunrich’s pit crew (Steve Young and Duane Mathiowetz) documented Sunrich’s process for creating the Porsche 936 model. We presented invoices showing Sunrich contracted with a supplier in China for design and development, paying more than $107K. When that contractor went out of business after producing prototypes, Sunrich moved their tooling to another company that finished tooling adjustments and manufactured the 936 model.
Exoto … crickets chirped
Exoto produced no evidence that Sunrich used its tooling – inadvertently or otherwise, or that it even knew Exoto’s tooling was missing. It based much of its case on conversations Exoto’s owner purportedly had with his manufacturer but failed to prove at trial. Additionally, using expert testimony, Sunrich’s pit crew showed that Sunrich’s Porsche 936 significantly differs from Exoto’s model, and that Sunrich would have had to majorly alter Exoto’s tooling to create its version of the 936. Doing so would have cost tens of thousands of dollars, been extremely difficult, and made no economic sense.
Judge dismissed all claims
We moved for and were granted Judgment as a Matter of Law on trade-dress and business interference claims at the close of Exoto’s case. With respect to the remaining claims for conversion and unjust enrichment, the judge agreed with us and found that Exoto did not prove ownership or wrongful acquisition of the tooling by Sunrich, nor did it establish damages beyond speculative amounts. That’s what we call blowing an engine and getting four flat tires.
Talk to a lawyer even if you think a claim made against you is dumb
This case demonstrates that even the most outrageous lawsuits have the potential to knock you out of the fast lane and disrupt your life. Exoto provided no evidence of its claims, but it still forced our clients into a legal dog fight that cost Sunrich in excess of $500K to defend over the course of more than 3 years. (Sunrich’s team is seeking to recover legal fees and expenses). Let’s wave the yellow flag here. Don’t underestimate what appears to be a legal nuisance. Get legal advice sooner rather than later. The best way to avoid litigation is to bring your problems to a litigator.
Yellow flag for litigators too
This case is a healthy reminder for lawyers too. As officers of the court, we are obliged to protect the administration of justice and to honestly and meticulously evaluate the claims of our clients. Shirking these responsibilities and bringing baseless lawsuits pollutes the system and undermines the public’s faith in the Rule of Law and lawyers. And from a practical standpoint – it’ll cost your clients. As I mentioned, Team Sunrich has every intention of recovering the hundreds of thousands of dollars it cost to defend our clients against these nonsense claims.
Now to the winner’s circle
Glen and Cindy Chou are co-owners of Sunrich and had this comment from the winner’s circle, “Heartfelt thanks to our incredible legal team, Steve and Duane, and to our expert witness Rob, for their expertise, dedication, and unwavering support in helping us win the case. They were most patient and thorough in making sure we understood the legal steps as the case wound through the court system. Together we were able to push our advantages and convince the judge of our merits. Their efforts have been truly outstanding and deeply appreciated!”
Post race analysis: The Case for Practus
Working with Team Practus means clients gain access to attorneys all over the United States who have honed their skills at Am Law 100 law firms and Fortune 500 companies. Practus has no geographical constraints so our litigators can tap the best attorney to handle each case. Our model is also a fiscally smart solution for clients. We don’t use clients’ money to fund palatial office space and libraries of leather-bound volumes. Clients pay for legal representation not the rent. And because Practus doesn’t impose minimum billable hours on its attorneys, the goals of our attorneys align with the goals of our clients. That’s what we call a win-win.
