Dinesh J. Sheth, Individually, & Grinders Int'l, Inc. v. Sab Tool Supply Co.
| Decision Date | 10 April 2013 |
| Docket Number | Docket Nos. 1–11–0156,1–11–0213 cons. |
| Citation | 371 Ill.Dec. 550,990 N.E.2d 738,2013 IL App (1st) 110156 |
| Parties | Dinesh J. SHETH, Individually, and Grinders International, Inc., an Illinois Corporation, Plaintiffs and Counterdefendants–Appellants and Cross–Appellees, v. SAB TOOL SUPPLY COMPANY, an Illinois Corporation, d/b/a Y.G. Tool (USA) Company; Y.G.–1 Company, Ltd., a Korean Company; Y.G.–1 Industries India Private, Ltd., an Indian Company; Regal Cutting Tools, Inc., an Illinois Corporation; and Hokeun Song, Individually, Defendants and Counterplaintiffs–Appellees and Cross–Appellants. |
| Court | United States Appellate Court of Illinois |
OPINION TEXT STARTS HERE
Mark D. Belongia, Michael D. McCormick, and Harry O. Channon, all of Belongia, Shapiro & Franklin, LLP, of Chicago, for appellants.
Barry Levenstam, R. Douglas Rees, and Irina Y. Dmitrieva, all of Jenner & Block LLP, of Chicago, for appellees.
[371 Ill.Dec. 554]¶ 1 The parties to this appeal were involved in the trade of used manufacturing machines and, before their relationship fell apart, they did about $30 million in business and described each other as brothers. The plaintiffs are Grinders International, Inc., and its principal Dinesh Sheth. Defendants are a group of related companies, Y.G.–1 Company, Ltd., SAB Tool Supply Co., Y.G.–1 Industries India Private Ltd., and Regal Cutting Tools, Inc., and an individual, Hokeun Song (Song). Y.G.–1 Company (YG–1 Korea) is a Korean company and is the sole shareholder of Y.G.–1 Industries India Private Ltd. (YG–1 India), an Indian corporation. Super Tools Company, Ltd. (Super Tools) is a Korean companyand a shareholder of Regal Cutting Tools, Inc. (RCT), an Illinois corporation. SAB Tool Supply Co. (SAB Tool) is an Illinois corporation owned entirely by defendant Song.
¶ 2 Plaintiffs appeal (i) the dismissal of count I of their second amended complaint, and (ii) the results of a joint bench and jury trial. Defendants cross-appeal (i) the trial results, (ii) the admissibility of plaintiffs' expert's testimony, (iii) the order denying their motion for prejudgment interest and additur, and (iv) the order granting plaintiffs leave to file a fourth amended complaint at the conclusion of the trial testimony but before the final arguments.
¶ 3 For the reasons stated below, we largely affirm and reverse only as to the trial court's denial of prejudgment interest.
¶ 5 The facts, as developed at trial, are as follows. Grinders' president, Sheth, an engineer by training, began dealing in used manufacturing machinery in 1980, and started Grinders in 1992. Song started YG–1 Korea in 1981. He currently owns 44% of the company, and is its chief executive officer. Sheth and Song met in 1999 and started doing business together. Grinders and YG–1 Korea and its subsidiaries conducted between 200 and 250 transactions between 2000 and 2006. Sheth testified that his commission on sales to defendants ranged from 0% to 10%. Song testified that Sheth's commission ranged from 3% to 10%, depending on the size of the deal. In December 2002, YG–1 Korea formed a subsidiary company in China called New Century Tool.
¶ 7 Narendra Mittal began working for defendant YG–1 India in 2002 as a promoter-director, building YG–1 India from the ground up. He later became managing director and then executive director. YG–1 India was almost entirely owned by YG–1 Korea, and began operating as a manufacturing company in November 2003.
¶ 8 Grinders began selling manufacturing machines to YG–1 India in late 2003, and Sheth joined YG–1 India as a director. Also at this time, Jayesh Joshi started working as an accounts manager at the company, and within three months he became a director. Joshi's responsibilities included verifying incoming shipments of machinery against invoices and issuing payments for those machines.
¶ 9 Sheth testified that he informed Song that, due to Indian import regulations, used machines Grinders purchased in the United States would have to be reconditioned and rewired before being shipped to India. Sheth testified that Song agreed to fix reconditioning costs at the price of the machine, so that reconditioning costs would not exceed the machines' base price. Song denied making this agreement. Plaintiffs charged YG–1 India for the reconditioning and YG–1 Korea for the machine itself. On December 19, 2003, Mittal sent Sheth an email asking, “Please do not mention that the reconditioning of the machine has been done in the past else we have to quantify the expenses of reconditioning and work out the depreciated value from the year of reconditioning.” Sheth testified that he did not list any reconditioning costs on most invoices to YG–1 India to avoid additional custom duties at the Indian border. Sheth testified that YG–1 Korea accepted this arrangement at a YG–1 India board meeting. Song denied the arrangement.
¶ 10 From 2003 to 2005, YG–1 India ordered around 160 machines from Grinders for its factories. YG–1 India paid Grinders about $120,000. Mittal testified that, at the direction of YG–1 Korea, other invoices were not paid. In 2005, Yunkyun Yu, an employee of YG–1 Korea, began overseeing YG–1 India, which was operating at a loss. YG–1 India's financial records showed that it owed money to Grinders. After examining YG–1 India's invoices and invoices paid by YG–1 Korea, Yu concluded that all the equipment Grinders sent to YG–1 India had already been paid for by YG–1 Korea, and that some of shipments to YG–1 India were unauthorized. The invoices for the same equipment billed to both YG–1 India and YG–1 Korea did not refer to the cost of reconditioning the equipment. Yu believed that YG–1 India did not owe Grinders any money. On July 14, 2006, Yu sent a letter of confirmation to Sheth, asking Sheth to confirm that YG–1 India owed Grinders $478,113 for six unpaid invoices, and to transfer all rights to payment under those invoices to SAB Tool. Sheth refused to sign the letter of confirmation.
¶ 11 Mittal estimated that, in November 2006, YG–1 India owed Grinders over $1 million for unpaid machinery invoices. Joshi confirmed that amount. Sheth testified that YG–1 India owed Grinders exactly $1,082,039.84 in unpaid invoices. But Grinders' end-of-year balance sheet for 2005 reflected only $394,154 in accounts receivable, and the end-of-year balance sheet for 2006 reflected $15,000 in accounts receivable. Sheth stated that he removed money owed from YG–1 India from his books for tax purposes. After Sheth filed this suit, Grinders' books reflected an account receivable from YG–1 India.
¶ 13 James Deeds served as president and owner of the Besly Products Corporation (Besly), an Illinois company that manufactured cutting tools. In 2004, Deeds decided to sell his company's assets. On August 17, 2005, Sheth informed Song that Besly was interested in selling its cutting tools division. The next day, Sheth informed Song that the asking price for the entire division was $6.7 million, and that the price was $1.2 million more than the cost of the machines alone. Sheth testified that he and Song spoke over the phone on August 17 or 18, and that Song offered to purchase Besly's cutting tools division for $6.5 million. Sheth further testified that Song said, Song denied stating this.
¶ 14 Contrary to Sheth's testimony, he wrote to Song on August 18, 2005, in part, “Mr. Song, I know your goal is to buy for $5.0 million and I will try my best possible to come closer to that figure.” Five days later, Sheth again wrote Song, telling him that Besly's asking price was $5.732 million for the machines, inventory, and trademark, or $4.5 million for the machines alone. The next day, Sheth informed Song that he had further negotiated the price down to $5.1 million and was confident he could reduce it further to $5 million. Sheth added,
“Regarding my commission, please advice [ sic ] on whether it should be billed in the original invoice or sent separately so that we avoid any confusion in accounting at your end.
The entire transaction in USA with seller will be carried out by Grinders International Inc. This will safeguard us in case of any legal disputes if it ever arises.* * *
I have not prepared any invoice since I do not know under what name you wish to purchase. It will be better if an official purchase order is placed with Grinders International, so we can make proper transaction. Kindly furnish the information so that I can send the invoice. I suggest that in order to avoid any complication like we previously had by listing each and every item on the invoice, it would be recommended that we write
‘Complete tape manufacturing plant size range _____ to _____ with all equipment attached to all machines' and the price or $5,000,000[.]
I request you to wire transfer $500,000 at the earliest so that I can sign the papers. I have already given my verbal commitment to the seller.”
¶ 15 On August 25, 2005, Sheth sent YG–1 Korea The invoice attached to the August 25, 2005 correspondence stated, in relevant part, as follows:
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