Civil Case (Petah Tikva) 10269-01-21 Draco Ltd. v. LUSTER TERABAND PHOTONICS CO. LTD

Before                        The Honorable Judge Meirav Kfir

Plaintiff                                             Draco in Tax Appeal

Against

Defendants               1.  LUSTER TERABAND PHOTONICS CO.  LTD

2. Excel Solutions Ltd.
3. Excel Solutions Group Ltd.

Judgment

An accounting claim based on the plaintiff's claim that defendant 1 breached the exclusivity agreement with it by marketing its products to YES by defendants 2-3, as well as on its claim against defendants 2-3 for breach of contract.

The plaintiff wishes to instruct the defendants to produce a certified report in the affidavit, the details of which will be verified by an accountant, and which will detail any income and any profit of any kind in respect of the signing of the agreements with YES in relation to the products that are the subject of the lawsuit.

The claim is dismissed due to the lack of proof of special relationships that justify the provision of bills, as well as the absence of proof that the exclusivity agreement is binding in relation to the products that are the subject of the lawsuit, and since no cause of action has been proven for breach of contract against defendants 2-3.

Background

1. Plaintiff Draco in a Tax Appeal is a company that operates as an authorized distributor of companies in the field of television and telecommunications equipment (hereinafter: "Draco"), in which Draco imports various types of equipment from manufacturers for end consumers, and among its customers are YES (hereinafter: "Yes") and Cellcom.
2. Defendant 1 LUSTER Teraband Photonics Co., Ltd. (hereinafter: "LUSTER") is a company headquartered in China, engaged in the manufacture of communications equipment and Moca products (hereinafter: "Moca"). 
3. Defendant 2 Excel Solutions Ltd. is a company engaged in importing, marketing and distributing communications equipment and also operates, like Draco, inter alia vis-à-vis Yes and Cellcom.  Defendant 3, Excel Solutions Group in a tax appeal, is the parent company of defendant 2.  (Hereinafter they will read together: "Excel").
4. The lawsuit relates to Mocha 2.5 products without hooks.Adapters whose role is to provide communication throughout the home for viewing the broadcasts of the TV set-top boxes (hereinafter: "the products that are the subject of the lawsuit"). which were manufactured by Luster and marketed by Axel, with Draco claiming that she was the one who should have been Luster's distributor in relation to these products and not Axel.
5. It should be noted that the statement of claim referred in general to agreements signed in respect of Mocha adapters, but at the hearing it became clear that the products sold to Lys, at the end of the day, were Mocha 2.5 products without hooks.Pi and the agreements signed and the accounts for which are requested in this proceeding are in relation to these products.
6. At the beginning of the proceeding, the claim was filed with the District Court and included the relief of a temporary injunction and an injunction that would prevent Luster and Axel from entering into agreements with Yes in relation to the products that are the subject of the lawsuit, and in addition, the provision of bills was requested, but later Draco deleted the remedies for an injunction and an injunction and left the relief for the provision of bills only. The District Court ruled that the substantive authority to hear the proceeding was to the Magistrate's Court and the case was transferred to the Magistrate's Court.
7. In accordance with the amended statement of claim, as stated, Draco sought the relief of providing accounts from Excel and Luster in relation to all the agreements signed with Yes in relation to the products that are the subject of the claim.

Proven Facts

8. There was already a business relationship between Excel and Luster in 2018, when on November 16, 2018, a letter of intent was signed between the companies - LOI (Appendix 1 to the affidavit of Ronen Schorr, CEO of Excel), according to which the parties agreed that Excel would try to market Luster's products in Israel and that the parties would negotiate in good faith in order to reach an agreement whereby Excel would become the exclusive distributor of Luster in Israel (the letter includes additional conditions, but its main relevance is the relationship that existed between Excel and Luster as early as 2018).
9. The relationship between Draco and Luster was later formed, in 2019, after Ben Young (hereinafter: "Ben"), Luster's International Sales Manager, met Gilad Nativ (hereinafter: "Gilad"), Draco's CEO, at the conference. After the meeting, Ben Micha Nebuzhini (hereinafter: "Micha"), the manager of the sales department at Draco, was contacted on June 6, 2019 and introduced himself via email.
10. The beginning of business activity between Luster and Draco related to a project with Cellcom. Thus, on July 23, 2019, Micha contacted Lavan and informed him that they intended to promote a Mocha product with Wi-Fi and was interested in whether he had such a product.  It should be noted that at the time, Mocha 2 was being used with Wi-Fi (see p.  60 of Ben's affidavit - Micha's email detailing the product).  The parties continued to correspond with respect to the product and its suitability to the customer's needs, as well as to clarify the feasibility of a transaction between them.
11. On August 4, 2019, Micha sent Ben two documents: one to maintain secrecy and the other a letter that Micha called an "exclusivity letter." THE TITLE OF THE DOCUMENT WAS "AUTHORIZATION LETTER" (HEREINAFTER: "AUTHORIZATION LETTER").

The content of this authorization letter was Luster's statement that Draco is its sole authorized partner in connection with the Cellcom project and that Luster will support Draco during the project and after the sale.