FINDINGS OF FACT AND CONCLUSIONS OF LAW AFTER COURT TRIAL
This matter was tried by the Court, sitting without a jury, on July 28 and 29, 2009. Having heard the admissible evidence presented by the parties, and having considered the exhibits, the proposed findings of fact and conclusions of law, including admissions in the responses to the proposed findings of fact and conclusions of law and the Pretrial Order, the Court issues the following findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.
1. Plaintiff and Counter-Defendant Cheedad Adhesive Trade Marks Printing Co. Ltd. ("Cheedad") is a corporation organized under the laws of Hong Kong, the People's Republic of China, which does not maintain an office or business in the State of California.
2. Defendant and Counterclaimant Georgina 712, Inc. is a corporation organized and existing under the laws of the State of Delaware which was known as Intervisual Communications, Inc. at the time of acts at issue in this litigation. The company is referred to as "Intervisual" in these Findings of Fact and Conclusions of Law.
3. Defendant James D. Richwine ("Richwine") is an individual residing in Santa Monica, California.
4. Intervisual was engaged in the business of marketing and promotion.
5. Cheedad is a commercial printer.
6. Bimbo ("Bimbo"), a worldwide baking conglomerate, was one of Intervisual's largest customers.
7. In 2004 Bimbo asked Intervisual to bid on a project requiring that scratch 'n' sniff stickers be placed in cookie boxes used in a promotion for the movie Shrek 2 ("the Shrek project"). The promotion was to be carefully orchestrated with an advertising campaign associated with the release of Shrek 2 in June of 2004. The promotion required that the scratch 'n' sniff stickers ultimately arrive at the plant of Bimbo's subsidiary, Marinela, in Mexico sufficiently in advance of the movie's release date so the stickers could then be placed in the cookie boxes and brought to the market while the television advertising campaign was on the air in Mexico.
8. Intervisual had hired Cheedad previously. On each of these prior occasions, Cheedad had prepared samples that it sent to Intervisual for the purpose of having Intervisual sell the job to its customer. Intervisual then presented the samples to its customer, obtained the customer's approval, and placed an order with Cheedad. In these instances Cheedad was able to produce a final product that was of the same quality as the samples.
9. Cheedad, through its representative, Grace Cheng ("Cheng"), advised Intervisual that Cheedad had the experience and expertise to produce scratch 'n' sniff stickers and agreed to prepare production samples for review by Intervisual and Bimbo. Cheedad knew that Intervisual was going to submit samples to Bimbo as a representation of the quality of the ultimate scratch 'n' sniff stickers Cheedad could produce in production.
10. On or about February 17, 2004, Intervisual received samples from Cheedad.
11. The samples that Cheedad initially sent to Intervisual were stock samples, as opposed to production samples.
12. When it submitted the samples to Intervisual, Cheedad did not tell Intervisual (a) that the samples were handmade and were not production samples;
(b) that Cheedad did not have substantial experience in producing scratch 'n' sniff stickers; (c) that Cheedad had only performed one prior job involving scratch 'n' sniff stickers; (d) that Cheedad did not have experience producing other products with scents; (e) that Cheedad did not have a sufficient supply of scents available for the needs of the job; and (f) that the available scents were not of sufficient strength for the job.
13. Intervisual submitted Cheedad's samples to Bimbo, selected Cheedad for the job, devoted time, energy, and resources to the Shrek project, and made financial arrangements with Bimbo for the Shrek project that were premised on a budget that assumed that Cheedad had the experience and expertise to timely produce the stickers in a manner acceptable to Bimbo.
14. The initial wrappings ordered by Intervisual were not odor resistant, and therefore were not suitable for placing in packages of cookies. In addition, Cheedad did not initially procure scents that were sufficiently strong to be utilized in the Shrek project.
15. Intervisual decided to find on its own satisfactory scents that could be utilized to satisfy Bimbo's requirements for the Shrek project. Intervisual air shipped the scents to Cheedad. Because these substitute scents had to be purchased, shipped, tested in production and approved by Bimbo, the problems in selecting the scents caused substantial delays in the project.
16. These delays were not the fault of Cheedad.
17. The ultimate production samples were not approved until May 2004. The defense makes much of the alleged conduct or omissions, and alleged representations, of Cheedad before May 12. The Court, however, finds the essential (and undisputed) fact to be that a pro forma invoice was signed by both parties on May 12 specifying that Cheedad would deliver approximately 62 million Shrek scratch 'n' sniff prizes in twenty different versions in partial shipments until June 10, 2004 for $522,564.00. Intervisual's implication that it signed the invoice "under duress" has no support in fact or law.
18. Cheedad produced and delivered in Hong Kong (pursuant to the invoice) approximately 62 million prizes in twenty ...