FW: We lost a battle, not the war, argues former BikeE boss

http://www.bikebiz.co.uk/daily-news/article.php?id=5373

Thursday 17th March 2005

We lost a battle, not the war, argues former BikeE boss

Bigha's John Acres speaks to BikeBiz.com about Giant's $252k court win.
Giant had sued two of the former investors of the BikeE recumbent
company, including Acres. Giant won the breach-of-contract trial in
late February. Here Acres speaks for the first time in public about the
lost case. He also talks about a second lawsuit, a multi-million dollar
claim for compensation against Giant. The first case was heard in front
of a federal judge, the second suit will be placed before a jury.

In a late-February bench trial, US federal judge Thomas Coffin ordered
the former BikeE bosses to pay Giant $252 000 plus court costs.

See the links below for the full background to BikeE v Giant and Giant
v BikeE.

"BikeE's sale of bicycles to Bigha with the specific purpose of
transferring the proceeds to [John] Acres and [Richard] Carone...was
wholly inequitable and inappropriate," ruled the judge.

BikeBiz.com talked to Acres. He said:

"As you know, Giant made three claims in its lawsuit against BikeE
which was filed in the fall of 2002

1. BikeE received bicycles that it did not pay for approximately
$374,000.

2. Bigha Inc. is a successor corporation to BikeE and should be
responsible for BikeE's debts

3. BikeE investors (including myself) fraudulently converted a stock
investment into a loan to unfairly recover money from BikeE. Giant
asked the court to cause that money to be repaid to BikeE and used for
settling the Giant debt.

4. Giant also claimed interest on the $374,000 (at a rate exceeding 42%
annually) and legal fees totaling in excess of $400,000.

"BikeE counterclaimed that Giant owed it money for warranty claims
totaling approximately $500,000

"Further, Bigha claimed it was not a successor corporation and the
investors claimed the stock offering was never concluded and therefore
there was no liability.

"BikeE filed a separate lawsuit in the summer of 2004 against Giant
claiming that Giant had purposely and unfairly caused BikeE to go out
of business in order to introduce its Revive bicycle to an
non-competitive marketplace.

"Also in the summer of 2004, the court made a summary judgment that
BikeE had not paid for bicycles it had received from Giant-a fact
that BikeE never disputed. The court also lowered the interest rate
from the 42% claimed by Giant to 9%. The court decided that all the
other matters of successor liability, stock purchase conversion and
BikeE's warranty claims should go to trial and a date of January of
2005 was set.

"Just before the trial began, it was decided that the warranty claims
that BikeE made against Giant would fit better with the separate
lawsuit that BikeE had filed against Giant in 2004.

"The trial that occurred in January 2005 was a bench trial, that is, it
was heard and decided by a judge and not a jury. In the ruling just
issued the judge affirmed that Bigha is not a successor corporation to
BikeE and is not responsible for its debts. He also ruled that the
stock sale was never completed and the investors were not required to
put money into BikeE.

"The judge considered the case from two points of view: equity and law.
The idea of equity is about deciding what is fair.

"The judge decided that money BikeE had raised by selling some of its
inventory should have been paid to Giant. Instead, that money was used
by BikeE to partially repay debts BikeE had owed to persons that were
also shareholders. I was one of these. The judge ruled that the lenders
(including myself) should repay this $252,000 and that BikeE should
cause that money to be repaid to Giant.

"The judge also awarded Giant an undetermined amount of attorney fees.
This amount will be only a small fraction of what Giant claimed since
they cannot charge for any of the unsuccessful efforts regarding
successor liability or stock conveyance. BikeE's attorneys are of the
opinion that Giant cannot recover any fees for work occurring after the
summary judgment in 2004.

"Either side can appeal the ruling and motions will be filed regarding
attorney fees, etc. We have not decided if we should appeal the
judge's ruling. While as a matter of law, BikeE was correct in paying
its debts based upon the "first in time" concept (oldest secured
debts are paid first) the judge felt that, as a matter of equity, Giant
should have received the funds from the sale of $252,000 of bicycles.

"BikeE has to weigh its chances of success in an appeal against the
cost.

"BikeE is anxious to proceed with its second lawsuit which involves
several million dollars of claims against Giant.

"I am pleased that the court agreed that Bigha is not a successor
corporation and that there was no obligation on the part of investors
to buy additional BikeE stock. I am troubled by the judge's decision
on the $252,000. That was not an argument that Giant made in court and
was entirely of the judge's creation. Nevertheless, I am certain the
judge was fair and impartial in his assessment and I do believe BikeE
'had its day in court.'

"I look forward to seeing the new trial - this one in front of a jury -
that will hear the facts regarding BikeE's claims against Giant. I
believe there is compelling evidence to consider but that will have to
wait for another day."

No Giant executives wished to discuss the case because it is "pending
litigation."




RELATED ARTICLES:

Friday 19th November 2004 - BikeE sues Giant for stealing trade secrets
The US recumbent supplier ceased trading in 2002 but a long-running
dispute with Giant of Taiwan rumbles on. Giant made BikeE recumbents
when the Oregon company started to outsource production. BikeE and two
of its former investors claim Giant based its semi-recumbent on the
BikeE design: a claim for $2m has been lodged. For its part, Giant said
it had to sue BikeE in 2002 to claim $370k owed for producing BikeE's
bikes.

Thursday 2nd December 2004 - Giant is not "ugly and mean" to sue BikeE,
says exec
"The main reason why Giant sues BikeE is to remind the industry that
people cannot just walk away and start again with a different name
without paying for the products," says Bonnie Tu, executive vice
president of Giant Global Group, Taiwan. BiGHA of Oregon rose from the
ashes of BikeE and the investor common to both has reportedly spent $5m
on launching BiGHA...

Tuesday 7th December 2004 - Acres of BiGHA contests Giant's claims
On December 2nd, BikeBiz.com carried a follow-up news story to an
earlier one relating to an ongoing court battle between Giant of Taiwan
and BikeE of Oregon (RIP). BiGHA's boss here responds to the claims of
Giant Global Group's executive vice president, Bonnie Tu. "BikeE
alleges the defective components Giant supplied are part of a larger
pattern of conduct to destroy BikeE and eliminate yet one more obstacle
in Giant's goal of dominating the bicycle market with its own brand,"
claims John Acres, the millionaire president of BiGHA.


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