Yonex Rackets to Pay $425,000 to Settle Suit

Three investors in a Tustin sporting goods distributorship will collect $425,000 from Yonex Trading Ltd. in an out-of-court settlement of their claims that the Japanese tennis racket maker tried to drive them out of business through predatory pricing and industrial spying.

U.S. Sports Equipment Inc. alleged that Tokyo-based Yonex engaged in a conspiracy to take over the American firm’s distribution network for Yonex-built racquetball, squash and tennis rackets.

U.S. Sports was founded in 1980 at the request of Yonex, which was seeking distribution channels for its rackets. The American company was named exclusive dealer of Yonex products in the United States and the Caribbean, according to papers filed in the case.

But Yonex placed a spy within the company--the son of Yonex’s president--to collect data on sales and agents, the American firm alleged.

Takeover Plan Alleged

The suit, filed by Roger Magenau, president of U.S. Sports, and two other investors in the company, David. V. Ringler and Cecil Matthews, charged that while U.S. Sports was building a sales force of 38 and a network of buyers, Yonex’s spy was studying the operation and laying plans to take it over.

Yonex, a major manufacturer whose tennis rackets currently are endorsed by Martina Navratilova, admitted no wrongdoing or liability in settling the 3-year-old case, according to Robert McIlroy, lawyer for the firm.

“Yonex was totally justified in what they did,” McIlroy said. “They engaged in no unfair business practices or unethical conduct.

“With the (high) jury verdicts coming in the way they are, and with a lineup of a large Japanese corporation versus a small Orange County company, we felt that a jury would do anything they could to find for the plaintiffs in this case.”

Negotiations that led to the settlement were conducted by Superior Court Judge John L. Flynn Jr. U.S. Sports argued that at first, even though Yonex sales in the United States doubled in 1981 and increased by 50% in 1982, the Japanese company kept insisting on more rapid increases and threatened to end the distributorship deal unless U.S. Sports agreed to “unreasonable” minimum purchase demands.

At the same time, the suit alleged, Yonex slipped a spy into the U.S. Sports operation to begin “setting up an organization to replace U.S. Sports” as the official Yonex distributor.

American Sales Techniques

In a sworn statement, Magenau said Yonex President Minioru Yoneyama asked that the American firm teach his son about North American sales techniques.

But the son, Ben Yoneyama, left U.S. Sports without notice in May, 1983, the same month that Yonex unilaterally terminated U.S. Sports’ distribution rights “without any explanations,” the lawsuit said.

Scott A. Martin, lawyer for U.S. Sports, said the company had not wanted to hire Ben Yoneyama but was told it “had no choice in the matter. His function was to learn our method of operation and become familiar with our sales organization and personnel.”

McIlroy, however, said U.S. Sports had requested that Ben Yoneyama act as liaison with the Tokyo firm. Yonex is an “old-line Japanese company that deals in old-time ethics” but was not knowledgeable about current U.S. practices, he said.

U.S. Sports alleged that Yonex engaged in a number of practices designed to destroy “fair and honest competition,” including raiding the Tustin company’s network of sales agents and customers, and selling rackets through a new wholly owned distributor at prices 5% to 10% below those offered by U.S. Sports.