Kyocera Corp. v. Prudential-Bache Trade Services, Inc.
Opinion
Lead Opinion
Reinhardt, J.
Opinion by Judge REINHARDT. Separate Statement by Judge RYMER.
I. BACKGROUND
In 1984, Kyocera Corporation (“Kyoc-era”), Prudential-Bache Trade Corporation (“Prudential”), and the newly formed LaPine Technology Corporation (“La-Pine”) began a venture to produce and market computer disk drives. LaPine licensed its proprietary drive design to Kyocera, which manufactured the drives. Prudential’s role was generally to stabilize the cash flow of the enterprise: in addition to financing LaPine’s inventory and accounts receivable, Prudential purchased, through a subsidiary, the LaPine drives from Kyocera and resold the drives on credit to LaPine, which in turn marketed the drives to its customers.
By the summer of 1986, LaPine — which had never earned a profit — had fallen into serious managerial and financial difficulties. On August 13 and 21, 1986, Kyocera gave written notice that it considered La-Pine and Prudential in default due to the failure to pay for delivered drives. Shortly thereafter, Kyocera, Prudential, and La- *990 Pine began discussions regarding LaPine’s reorganization and a restructuring of the relationship among the three companies.