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Ruling awards toy maker Mega Brands $1.3 million in dispute with Chinese supplier

In a ruling handed down late Friday afternoon, Quebec Superior Court judge Claudine Roy awarded St. Laurent, Que.-based toy maker Mega Brands $1.3 million from a dispute with Blue Box International, one of the several Chinese factories the company uses to manufacture its branded toys. In 2004, Blue Box only manufactured 272,000 of the 368,000 units of “Pirate Ship” toy that it was contractually obligated to supply. As a result, Mega Brands suffered $1.34 million in lost profits on more than 95,000 units of the toys Blue Box failed to deliver the following year.

Due to an increase in the popularity of the toy, Blue Box was unable to fill orders in their entirety and deliver the products on time. The supplier blamed the production problems on power outages and labour shortages, in spite of having owning generators. (Winnipeg Free Press) Mega Brands argued that its toys were being pushed aside in favour of other products.

The embattled toy maker recently agreed to a recapitalization plan that eliminates about US$300-million in debt through new financing and share offerings. (The Financial Post). It has struggled since a 2006 product recall of the Magnetix toy brand imported by its U.S. subsidiary Rose Art Industries. The defective toys which included the X-treme Combo, Micro, and Extreme brands, caused the death of one U.S. toddler and injured dozens of others who ingested magnets that detached from the toys. Friday trading of Mega Brands stock on the TSE (Toronto Stock Exchange) closed at $ 0.66 down $0.02.
 

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