Chinese toy manufacturer Sales Chief Ent. (Hong Kong) Co. LTD has filed a countersuit claiming two Rogers businessmen committed fraud and defamation.
Sales Chief asked for more than $6 million in compensatory damages and $20 million in punitive damages from Mel Redman, CEO of Redman & Associates, and his son, Rodney, who is the company’s president and COO. Sales Chief also filed a $7.2 million breach of contract suit against Redman & Associates.
Redman & Associates had operated as Sales Chief’s vendor with Wal-Mart Stores Inc. to place battery-operated ride-on toy cars in Walmart stores. The dissolution of that partnership resulted in R&A filing a $40 million lawsuit against Sales Chief last September.
U.S. District Judge Timothy Brooks denied Sales Chief’s motion to dismiss four of the counts in that suit and scheduled a trial date in May 2016. Mel Redman said Sales Chief used an “underhanded strategy” to undermine R&A’s $70 million, three-year contract with Wal-Mart as part of the retailer’s Made in USA initiative.
Wal-Mart later canceled the contract with R&A.
In its countersuit, Sales Chief again blamed Mel Redman for causing the dissolution of the partnership, saying Redman “has a particularly impressive record as a failed businessman.” Sales Chief said it demanded payment from R&A for past unpaid-for orders, but R&A was unable to deliver the promised funds because it had used money to start its own manufacturing facility.
In the lawsuit, Sales Chief said R&A owes the company $7.26 million for about 39 orders. Sales Chief alleged that Mel and Rodney Redman and R&A, which was named in the fraud and defamation suit, conspired in October 2013 to use financial and logistical information from Sales Chief to open its own factory for the 6-volt toy car.
Sales Chief said Wyatt Watkins, R&A’s CFO, admitted in an email in July 2014 that the company had used funds intended to pay Sales Chief to open its factory. Watkins told Sales Chief that 29 lenders had turned R&A down because they didn’t believe Wal-Mart’s re-shoring initiative would succeed.
“Mr. Redman has launched a bogus – and defamatory – public relations campaign to blame Sale Chief [sic] for his failure, while wrapping himself in the American flag and appealing to the worst jingoistic instincts of people,” Sales Chief said in its lawsuit.
Sales Chief said Mel Redman defamed Sales Chief Executive Director Ellen Liu with the “underhanded strategy” comment that appeared in a press statement R&A issued when it filed its original suit in September. It has been quoted in several subsequent Arkansas Business stories, which were cited by Sales Chief in its suit.
R&A executives have declined comment since that released statement.
Mark Henry, R&A’s attorney, filed to dismiss Sales Chief’s defamation countersuit, saying Redman could not be punished for comments that mirrored what had been alleged in the company’s lawsuit. R&A compared Redman’s “underhanded” comment to Sales Chief’s repeated use of “failed businessman” to describe Redman, which R&A called “untrue and malicious.”
R&A said such comments fall under the “absolute privilege” of Arkansas law that gives immunity for statements made during proceedings.
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