HONG KONG-Goodyear says a $1 billion lawsuit against it by China Tire Holdings Ltd. (CTH) and two affiliates is ``entirely without merit.'' The suit is a response to Goodyear's establishment of a joint venture in Dalian, China, that allegedly circumvented a previously existing joint-venture agreement between CTH and Dalian General Rubber Factory.
China Tire Holdings and China Strategic Holdings Ltd. of Hong Kong, along with their U.S. distributor, Orion Tire Corp. of San Clemente, Calif., filed suit March 14 in U.S. District Court in Los Angeles. CTH claims to be China's largest tire maker, with five factories under its control and at least three more ventures being negotiated.
The lawsuit, which seeks economic and punitive damages that could amount to $3 billion, follows by about six months a ruling by a Chinese arbitration board that Goodyear's joint venture with Dalian General Rubber Factory constituted a ``breach of contract'' by Dalian.
At that time, Goodyear said the judgment affected neither the legal status of the Goodyear Dalian venture nor Goodyear's plans to invest $30 million there. Dalian General was ordered at that time to repay $13.5 million it had received from Goodyear to CTH.
CTH accuses Goodyear of deception, claiming Goodyear chose to negotiate separately with Dalian General Rubber executives after being unable to persuade CTH to relinquish its rights to the Dalian factory; these talks also addressed the possibility of Goodyear becoming a technical partner to CTH.
The dispute centers on a radial passenger tire factory set up in 1991 in the Dalian metropolitan area with engineering support from Orion Tire. The factory, operating then as Dalian International Nordic Tire Co. Ltd., was essentially the transplanted Nordic Tire factory from Boras, Sweden.
Dalian General had purchased Nordic's assets and had them moved to Dalian.
The lawsuit charges Goodyear, four Goodyear executives and an independent attorney working for Goodyear with tortious (wrongful) interference with prospective economic advantage; tortious interference with contractural relationships; civil conspiracy to induce breach of contract; violation of the California Cartwright Act/Unfair Practices Act; trade libel/defamation; and civil racketeering.
``There is no difference between Goodyear's actions and piracy on the high seas, except these pirates used a corporate jet,'' said Peter J. McNulty, attorney for the plaintiffs.
A Goodyear spokeswoman said the company had not yet seen the particulars of the suit and therefore couldn't comment.
However, based on the charges detailed in the plaintiff's press release, Goodyear considered the suit ``entirely without merit.'' The Akron-based tire maker said it would ``vigorously defend itself against these allegations.''
The same spokeswoman said Goodyear was not surprised by the suit, inasmuch as China Tire earlier had been unsuccessful in attempting similar legal action in China.