State Appeals Court Reverses $13-Million Daewoo Judgment

A state appeals court has reversed a $13.4-million verdict against a Daewoo Corp. affiliate, finding little evidence to support allegations that the South Korean-based giant defrauded piano retailer Vernon Schafer Jr.

In an unusual move, the 4th District Court of Appeal ruled that Schafer failed to prove that Daewoo International (America) Corp. broke oral promises in an intentional scheme to destroy Schafer’s Colton Piano and Organ Co., as the Anaheim resident had contended.

Lower court verdicts usually are overturned because of legal gaffes.

“It is a rare case in which we overturn a judgment for insufficient evidence. This is such a case,” appeals Judge Sheila Sonenshine wrote.

She said her three-judge panel had appraised the entire 5,000-page transcript of the Orange County Superior Court trial.

Schafer, who lives in Anaheim, was once California’s biggest piano retailer, selling pianos under the Schafer & Sons name since 1995. In 1989, Daewoo America contracted to provide the instruments.

As severe recession gripped California in late 1991, his firm, Colton Piano, filed for bankruptcy, its liabilities exceeding its assets by $4.5 million.

Schafer accused Daewoo America of wrongly drawing down his line of credit, suppling pianos of inferior quality, refusing to service the pianos and continuing to use the Schafer & Sons name without his consent for two years after the bankruptcy.

Witnesses testified that Daewoo wanted to use the Schafer name to grab a bigger portion of the U.S. piano market.

But the appeals court ruled the case turned on the narrow issue of whether fraudulent oral promises made by Daewoo had caused Schafer’s downfall. It said it found no such evidence.

Ronald Rus, Schafer’s lawyer, called the ruling “very unusual,” saying: “We are shocked and disappointed that the appellate court, based on a cold record, would substitute its judgment of the facts for that of the jury and the trial judge.”

He said he hadn’t decided whether to appeal the ruling.

Ellis J. Horvitz, Daewoo’s lawyer, said he was gratified with the ruling.

Schafer, said Horvitz, was “an economic basket case because of the recession,” not because of anything Daewoo did. “Their business was headed straight downhill.”