Judge rules in Mercury/Yamaha dispute

CYPRESS, Calif. – Each side seemed pleased with a ruling Friday from a Wisconsin district court judge in the breach of contract lawsuit between Brunswick Corp. subsidiary Mercury Marine and Yamaha Motor Corp. Ltd., according to statements from both companies this morning.

Mercury said the ruling – issued by U.S. District Court Judge William Griesbach – was an outright rejection of Yamaha’s attempt to increase the price of the powerheads it sells to Mercury while the court-ordered process of arbitration in the lawsuit is ongoing.

“Essentially the ruling has done two things,” Mercury Marine’s Director of Communications Steve Fleming said in a telephone interview this morning. “It completely denied Yamaha’s request to not comply with the existing supply agreement. That was the largest and most important thing that happened.

“The judge also raised our bond from $8 million to $9.8 million per month. The whole point of this was that Yamaha was seeking to set aside the specifications of the existing supply agreement while arbitration went on, and the judge has said, ‘No, the contract will remain in effect throughout arbitration.’”

However, Yamaha said the ruling would unseal many of Brunswick’s filings in the case, enabling the International Trade Commission – which is investigating engine-dumping allegations against Japanese engine manufacturers – to review the pleadings.

“Yamaha is pleased with the court’s decision to modify the protective order because it has opposed Brunswick’s efforts to keep this litigation secret from the public and the International Trade Commission,” said Russell D. Jura, general counsel of Yamaha Motor Corporation, U.S.A. “Now that these filings are open, it is rapidly becoming clear to us that Brunswick has taken one position in front of the U.S. Federal Court which is contrary to its stated position before the ITC.

“We believe that this inconsistency and these statements will be important in convincing the ITC that there is no injury in this case and that the Brunswick dumping petition should be dismissed.”

Background
Mercury helped initiate the anti-dumping investigation of Japanese outboard engine manufacturers undertaken by the ITC earlier this year.

Yamaha subsequently informed Brunswick Corp. that it would cease delivery of the 80 – 115 HP powerheads it sold to Brunswick, unless the company agreed to a 91.6-percent price increase.

Brunswick responded by filing a lawsuit in the U.S. District Court, Eastern Court of Wisconsin, against Yamaha Motor Co. Ltd., attempting to stop the increase and force Yamaha to continue selling the powerheads at current prices.

The court recently ordered the parties to settle the dispute through a process of arbitration.

Dispute could have been avoided?
Yamaha said in its release today that current the dispute could have been avoided if Brunswick had offered it adequate protections at the outset.

“Although the court has ordered Yamaha to continue to produce and sell powerheads to Brunswick under the terms of the agreement, the court has also found that Brunswick has agreed to pay the higher price requested by Yamaha if the arbitration panel rules in Yamaha’s favor,” Jura said. “The court has increased the bond to $9.8 million per month for which Yamaha sells powerheads to Brunswick in order to protect Yamaha financially from any default of this payment by Brunswick.

“The history of this dispute is that Yamaha repeatedly offered to continue to produce these powerheads for Brunswick if Brunswick offered adequate protections to Yamaha. Brunswick refused to offer these protections until after it initiated this litigation and made its presentation to the court. If Brunswick had made these offers back in the summer, this dispute could have been avoided.”

But, in a press release this morning, Mercury cited two statements from the ruling that it believes show it will win the dispute in arbitration. Mercury quoted the judge as saying:

– “[Mercury Marine] is likely to prevail on its claim that Yamaha’s refusal to render continued performance…is a breach of the Agreement.”
– “[Mercury Marine] is likely to succeed on this issue [that Yamaha was required to continue delivering powerheads on the contract’s explicit terms pending dispute resolution], no matter what the merits of the dispute they agreed to submit to arbitration.”

While not commenting specifically, Yamaha said it did disagree with certain aspects of Griesbach ruling and would appeal.

“While we feel that the court order is correct in some elements, we strongly feel that the order is erroneous with regards to other matters,” Jura said. “We expect that Yamaha will shortly file an appeal of those erroneous decisions. We are not certain if Brunswick intends to file an appeal of any rulings by the court in this matter. In the meantime, as we have stated above, Yamaha will proceed to arbitration in this matter.”

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