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Upper Deck Sues Own Subsidiary Over Yu-Gi-Oh! Counterfeit Cards (Updated)

The Dutch trading card company Upper Deck International filed a lawsuit against its own Upper Deck Co. subsidiary in California on Thursday — claiming that the subsidiary counterfeited the Yu-Gi-Oh! card game and cost its parent company millions of dollars in legal fees, lost sales, and damaged reputation.

Upper Deck International (UDI) asserted that it signed an agreement with Konami Digital Entertainment to be the exclusive distributor of the Yu-Gi-Oh! card game in Europe and South Africa in September of 2006. About the same time, its San Diego-based subsidiary (called the Upper Deck Co, or UDC), agreed to be exclusive distributor of the game in the United States and Canada, as well as Central and South America. UDI claimed that it asked its subsidiary to serve as its subcontractor in Europe.

UDI claimed that, subsequently, "In or about the first half of 2008, defendants orchestrated a scheme to produce and distribute counterfeit Yu-Gi-Oh! trading cards that UDC was not authorized to produce or distribute under the Yu-Gi-Oh! America contract. […] Upon discovery of defendants' counterfeiting scheme, Konami promptly terminated the Yu-Gi-Oh! America contract."

Konami also attempted to terminate UDI's Yu-Gi-Oh! contract for Europe, UDI said. UDI claimed that Richard McWilliams, head of the subsidiary firm UDC, denied wrongdoing and only confessed after UDI had spent millions in legal fees to frestall the termination of the European contract and place further orders with Konami. Following McWilliams' confession, UDI said, Konami refused to fulfil the orders or return the funds that UDI had advanced to secure the European orders.

Furthermore, UDI claimed that McWilliam and UDC "disregarded and misrepresented UDI's interests in negotiating settlement of the legal action." On UDI's account, it lent UDC a sum of US$1 million to settle the case with Konami, believing the settlement would also resolve the dispute over the European contract. Instead, UDI claims that UDC negotiated with Konami and said falsely that UDI was not interested in resolving the European question. Then (UDI claims), UDC told UDI that Konami "was not interested in a worldwide settlement."

Consequently, after the settlement with UDC in America, Konami was still free to take action against UDI in Europe, including a claim for US$64 million in damages. UDC has also failed to repay the US$1 milllion loan to UDI.

UDI seeks punitive damages for breach of contact, intentional interference with contractual relations, intentional and negligent interference with prospective economic advantage, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.

[Via Courthouse News Service]

Update: Added more detail on UDI's claims.