Horizon, Linglong suing each other over breach of contract

Chinese tire maker Shandong Linglong Tire Co. Ltd. and U.S. importer/distributor Horizon Tire Inc. — business partners for much of the past decade — are suing each other in federal court over breach of contract issues involving orders of Linglong- and Crosswind-brand tires from both China and Thailand, and other issues.

Horizon, which distributed Linglong brands for the past decade, initiated the legal battle June 5 with a suit in the U.S. District Court, Central District of California, Western Division, against Shandong Linglong, Linglong Americas, LLIT (Thailand) Co. Ltd. and Feng Wang, identified by Horizon as a Chinese citizen who owns and controls the entities identified.

In its suit, Houston-based Horizon claims the defendants committed fraud against it by making a series of demands to Horizon in order to secure what it believed to be an extension of an exclusive distribution agreement covering the Crosswind brand, while at the same time making plans to set up its own subsidiary in the U.S. to coordinate distribution of the company’s brands.

The demands by Linglong included accepting a “substantial quantity of excess inventory” of tires built in China on credit as well as placing an order for 600,000 Crosswind tires to be built at the new LLIT plant in Chonburi, Thailand, according to Horizon’s suit.

The defendants, Horizon claims, agreed to pay the elevated import duties on China tires that were being formulated at the time of the discussions in late 2014.

Horizon also claims that Linglong principals requested a loan from Horizon of between $3 million and $5 million, with a promise of repayment with interest. Horizon states that it wired $3.61 million to Linglong on Dec. 16, but that later Linglong “repudiated the terms of the loan agreement,” insisting instead it was a payment for goods.

Linglong, in turn, has countersued in the U.S. District Court for the Northern District of Ohio, claiming:

• Horizon signed contracts in November 2014 to purchase 588,500 Crosswind tires for roughly $24.5 million, F.O.B. Thailand, but failed to pay the entire agreed-upon price;
• “Set its sights on disrupting and destroying the fledgling business” of Linglong Americas;
• Horizon told customers—falsely—it was Linglong’s exclusive distributor;
• Horizon is a distributor “that has never performed well” and now is conducting itself in bad faith, interfering with Linglong’s business relationships with customers and potential customers.
• Horizon owes it more than $6 million.

Linglong contends in its suit that it is entitled to damages, compensatory damages, interest and costs totaling more than $10 million.

Separately Linglong filed two motions in the California court to have Horizon’s suit dismissed and/or transferred to the Ohio court. Linglong Americas is based in Medina, Ohio.

The court set Oct. 8 as the date the parties should reconvene for rulings on Linglong’s motions. Judge George Wu issued opinions on both motions, indicating the court likely would deny Linglong’s motion to move the case but at the same time was likely to grant the motion to consolidate the separate cases.

Shandong Linglong established Linglong Americas late last year, setting up an office in Medina. In March the company hired John Hagan, a 20-plus-year industry veteran with experience at Kumho Tires U.S.A. Inc., Toyo Tires U.S.A. Inc. and Pirelli Tire North America Inc., to be the COO of its liaison office.

Zhaoyuan City, China-based Shandong Linglong is among the 20 largest tire companies worldwide, with 2013 sales of $1.88 billion. Established in 1975, it has plants in Zhaoyuan City and Chonburi, Thailand, with combined annual capacity of 20 million car, light truck and medium truck tires.