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UNYTITE, INC. v. LOHR STRUCTURAL FASTENERS

August 1, 1991

UNYTITE, INC. and UNYTITE FASTENER MANUFACTURING CO., LTD., Plaintiffs,
v.
LOHR STRUCTURAL FASTENERS, INC. and KENNETH B. LOHR, Defendants



The opinion of the court was delivered by: BUA

 NICHOLAS J. BUA, UNITED STATES DISTRICT JUDGE

 Pursuant to 28 U.S.C. § 1404(a), defendants have moved to transfer this contract action to the United States District Court for the Southern District of Texas, where a related case between the same parties is currently pending. For the reasons stated herein, defendants' motion to transfer is denied.

 I. FACTS

 Defendant Kenneth Lohr, a Texas resident, is the founder of Lohr Structural Fasteners, Inc. ("LSF"). LSF, a Texas corporation, distributes structural metal fasteners for use in the construction industry.

 In 1985, Lohr developed a unique metal fastener, which he marketed under the trade name "Lohr Fastener." LSF produced this product exclusively until 1987, when Lohr extended production rights to a Japanese corporation, plaintiff Unytite Fastener Manufacturing Co., Ltd. ("Unytite Japan"). The parties entered into a contract allowing Unytite Japan to manufacture the Lohr Fastener in Japan. LSF continued to market the products manufactured by Unytite Japan.

 The following year, Unytite Japan looked to expand the market for its industrial products in the United States. Seeking to strengthen its distribution network, Unytite Japan acquired a substantial block of LSF stock. Unytite Japan became the majority shareholder of LSF, having purchased 60% of LSF's outstanding stock. The stock purchase agreement took effect on November 1, 1988.

 When Lohr discovered that Unytite Japan was not using LSF's exclusive services, he threatened to initiate legal action. According to Lohr, Unytite Japan had violated the terms of two distributorship agreements executed contemporaneously with the stock purchase agreement. Specifically, Lohr contends that the parties executed a sales/distribution agreement and a marketing agreement which made LSF the exclusive distributor of all metal fasteners manufactured by Unytite Illinois. (The documents relied upon by Lohr were attached to the stock purchase agreement as exhibits.) Denying that the parties ever agreed to such an arrangement, Unytite Japan claims that the alleged agreements were nothing more than business proposals to be used as a basis for future negotiations.

 In an attempt to resolve their dispute, the parties engaged in settlement discussions. Negotiations reached an impasse, and Lohr began to question Unytite Japan's good faith in trying to reach a settlement. He subsequently forwarded a letter to Unytite Japan, to which a draft of a complaint was attached. Lohr informed Unytite Japan that he would file suit in federal court if Unytite Japan did not come forward with a good faith settlement proposal.

 Unytite Japan beat Lohr to the courthouse. On April 22, 1991 (before Lohr filed his complaint), Unytite Japan and Unytite Illinois filed a declaratory judgment action in the Circuit Court of Cook County against Lohr and LSF. Taking the position that no exclusive distributorship agreement exists, Unytite Japan and Unytite Illinois seek a declaration allowing them to freely sell their products to distributors other than LSF.

 Just one day after that complaint was filed in state court, Lohr filed suit against Unytite Japan, Unytite Illinois, and Hisashi Hashimoto (Unytite Japan's president), in the United States District Court for the Southern District of Texas. On behalf of himself and LSF shareholders, Lohr asserts numerous claims under state law and federal securities law. *fn1"

 With two related lawsuits pending in separate fora, the parties jockeyed for position in the forum of their choice. On May 10, 1991, Lohr removed the Illinois state court action to this court based on diversity jurisdiction. Ten days later, Unytite Illinois moved to transfer the Texas federal action to the Northern District of Illinois. Meanwhile, Lohr has moved to transfer this ...


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