Emirat Ag v. High Point Printing LLC

Facts

P is a foreign corporation registered in Germany, with its principal place of business in Munich. P's business is risk management and related promotional aspects, which include commercial promotions and sweepstakes. D is an Ohio limited liability company with its principal place of business in Aurora, Ohio. D's two members were citizens of Ohio and Pennsylvania. D has not appeared in this action and has filed a Certificate of Dissolution with the Ohio Secretary of State on April 19, 2013. D was a commercial printer and print broker. WS Packaging Group, Inc., (D) is a Wisconsin corporation with its principal place of business in Green Bay, Wisconsin. It manufactures printing and packaging products, including labels, tags, coupons, decals and game and sweepstakes printed products. P made a contract with Sabafon for the printing of 25 million scratch-off phone cards. The scratch-off phone cards were intended to be purchased by consumers so they could get a prepaid activation code (PIN) for their telephones. The PIN on each card was to be covered by an opaque scratch-off coating. The scratch-offs would also include a promotional scratch-and-win game, which consisted of twenty-four boxes with a range of prizes also covered by scratch-off coating. If a player scratched six boxes that revealed the same prize, the player would win that prize. If the six boxes scratched off showed more than one prize or more than six boxes were scratched off, the player would get nothing. Every card had six boxes containing the same prize, and the remaining boxes had various other prizes; thus, each card was a potential winner. P issued a quote to Sabafon for '25,000,000 high-level EMIRAT Security Cards.' The name 'high-level EMIRAT Security Cards' was a marketing term and the quote provided no further description of the level of security necessary for the cards. The contract between P and Sabafon detailed what percentage of cards would have the possibility of winning each level of prizes. There were to be ten 'guaranteed' grand prize winners on which all twenty-four boxes had the same prize of a car-thus a guaranteed win. P is not a printing company, and it contacted High Point (D) regarding obtaining the scratch-off cards. P and High Point (D) visited WS Packaging's (D) plant and discussed printing the cards. A WS Packaging (D) employee represented that it could print the cards securely. The High Point (D) quote as accepted by P contained no reference to card security or 'high-level EMIRAT Security Cards.' Nothing in the quote or acceptance of the quote referenced WS Packaging (D) in any way. High Point (D) and WS Packaging (D)entered a Letter of Indemnification agreement, stating among other things, that WS Packaging (D) 'assumes responsibility only for the accuracy of the printing' and states that WS Packaging (D) does not 'guarantee that a game construction cannot be tampered with, counterfeited or foiled.' WS Packaging's (D) Paula Hagen defined 'candling' as 'show-through of game data.' She agreed that a card is considered candled if someone 'is able to read a significant portion of either the game data or the phone charge code.' A few weeks after the initial run P contacted High Point (D) to report that Sabafon had complained that 'the pin numbers are readable with a light behind the card.' Although WS Packaging agreed to reprint the cards at no charge, P communicated to High Point (D) a number of changes to the cards' configuration. WS Packaging (D) issued a new quote to High Point (D) for the reprinting of the cards with the requested changes. Ds agreed to a second Letter of Indemnification containing nearly identical terms to the May 2008 Letter of Indemnification. High Point (D) issued a new purchase order for 25 million scratch-n-reveal cards for a total remaining cost of over $700,000. High Point (D) ceased operations. Representatives of P were present at WS Packaging's (D) plant to inspect the next shipment of cards and arrange for their shipment to Dubai. The shipment of cards reached Dubai, and a representative of Sabafon used a flashlight to candle a game card and successfully scratch off six matching symbols out of twenty-four. P sued WS Packing (D) for breach of contract claiming that P was a third party beneficiary of the WS Packing (D) and High Point (D) contract. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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