Court Sides With Toyo, Orders GTY to Deliver Tires - Tire Review Magazine

Court Sides With Toyo, Orders GTY to Deliver Tires

Toyo won a big court victory yesterday when the District Court for the Central District of California granted it a preliminary injunction against Yokohama Corp. of America and Continental Tire the Americas, giving Toyo Tire Holdings access to its allocation of medium truck tires from the joint venture GTY Tire Co.

YCA and CTA have been enjoined from terminating Toyo as a partner in GTY Tire, and must now give Toyo its allocation of truck tires from the Mt. Vernon, Ill., plant.

The injunction arose from Toyo’s suit against its GTY Tire partners earlier this year. Initially denied, on June 17, the U.S. Ninth Circuit Court of Appeals ruled that the U.S. District Court incorrectly denied Toyo’s request for an injunction to prevent YCA and CTA from cutting Toyo’s supply of medium truck tires and dissolution of the GTY Tire partnership.The case was remanded back to the district court to reconsider Toyo’s injunction request, which it sought pending a ruling from an arbitrator, per the GTY Tire partnership agreement between Toyo, YCA and CTA. An arbitration panel has been assembled to hear the case. YCA and CTA appealed that decision, which was denied by the U.S. Court of Appeals on July 14.

The District Court injunction requires CTA and YCA to submit a plan for fulfilling Toyo’s backordered allocation of 290,000 truck tires, which Toyo estimates to be 60% of its need for the U.S. and Canada markets. The injunction will remain in force until the arbitration panel rules on Toyo’s plea.

As was first reported by Tire Review, Toyo claims that back in December 2009 its GTY Tire partners YCA and CTA cut off Toyo’s allocation of 290,000 medium truck radials it had requested for 2010, and voted to dissolve the GTY partnership, citing Toyo’s “business and capital alliance” partnership with Bridgestone Corp.

GTY Tire was formed by the then General Tire & Rubber Co., Yokohama and Toyo to pool their technical and production resources to produce medium truck tires for the U.S. market. In the partnership, CTA holds a 51% share, YCA a 33% share, and Toyo the remaining 16% share.

Under the partnership agreement, signed in November 1988, each partner would receive an allocation of tires, which would be produced at General’s Mt. Vernon, Ill., tire plant under the name GTY Tire Co.According to Toyo’s lawsuit, there were a limited number of ways the partnership could be dissolved, and even then the remaining partners “were obligated to continue the partnership.”

Further, if one of the partners were removed, the partnership agreement gave that partner the “’right and obligation’ to purchase its allocation of truck and bus radial tires for the remainder of the current fiscal year and for the two fiscal years thereafter.”

Toyo claims it is being denied that right under the agreement.In its lawsuit, Toyo claims that CTA and YCA sent it a letter on Dec. 22, 2009, “purporting to expel Toyo from the partnership and to dissolve the partnership agreement."“The joint letter claimed that the partnership dissolved because ‘Toyo had entered into an agreement with Bridgestone Corp. pursuant to which (Toyo and Bridgestone) had been promoting closer collaboration on tire technology,’” which was expressly forbidden under terms of the partnership agreement. That partnership agreement was announced in May 2008.

According to the Toyo lawsuit, the GTY partnership agreement could be dissolved “If any partner should hereafter enter into a technology exchange or collaboration agreement regarding tire technology with a major competitor of the other partners in the tire business, upon joint written notice from two of the other partners. A major competitor shall be deemed to be any manufacturing company whose tire sales are ranked among the top six in the world.”

Toyo refuted CTA and YCA’s claims regarding the Bridgestone partnership, stating that, “neither the May 16, 2008, press release nor any business and capital alliance agreement between Toyo-Japan and Bridgestone-Japan amounts to a ‘technology exchange or collaboration agreement.’” Similarly, Toyo claimed in its suit, both Continental AG and Yokohama Rubber Corp. had previously entered into “similar technology agreements with Bridgestone, and Continental AG also has entered into a technology agreement with Pirelli.”

The Dec. 22 letter further stated, according to Toyo, that CTA and YCA would “automatically ‘confiscate’ Toyo’s partnership interest,” “acquired the right to purchase Toyo’s full allotment of truck and bus radials from GTY,” and “intended to dissolve the (GTY) partnership on Dec. 31, 2009.”In its suit, Toyo said the three partners met on Jan. 8 at Toyo’s request to discuss the matter, but the result was that CTA and YCA only pushed the meeting back to Jan. 13, 2010, the date they then said the pair would end production for Toyo and dissolve the partnership.

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