Commercial: $720,000 jury verdict stands

Where a Turkish defense company challenged an adverse jury verdict on multiple grounds, but the verdict was supported by the evidence, it was affirmed.

Background

Makina ve Kimya Endustrisi A.S., or MKE, is a Turkish defense company. In 2013, MKE began a relationship with Zenith Quest International Inc. to distribute MKE products in the United States. Zenith Quest International was run by Kutlay Kaya and his wife Hanri. The Kayas later formed Zenith Quest Corporation and Zenith Firearms Inc., which they also used to do business with MKE.

Between 2013 and 2019, MKE and Zenith entered a series of distributorship agreements. Central to this case is the 2019 agreement, which established a delivery schedule for four shipments of firearms and a repayment plan for a $5 million debt owed by Zenith for earlier unpaid invoices.

MKE made the first two shipments in March and May 2019 but informed Zenith that the June and July shipments would be delayed because MKE had not received the down payments required by the contract. Zenith maintained that the initial two shipments were defective and requested a refund of money paid toward the June shipment. In August 2019, MKE notified Zenith that it was terminating the agreement.

MKE sued Zenith for breach of contract. It also brought claims for trademark infringement relating to Zenith’s use of MKE’s logo at a trade show and on its website and for false advertising based on Zenith’s marketing of a competing firearm. The jury found for Zenith on all claims and awarded $720,000 in counterclaim damages for MKE’s breach of the 2019 agreement. After the trial, MKE filed a renewed motion for judgment as a matter of law and, alternatively, for a new trial. The district court denied both motions.

Breach of contract

MKE argues that Zenith materially breached the 2019 agreement first by failing to make timely down payments for the June and July shipments and by missing a July debt payment. But this overlooks evidence that the March and May shipments were defective, that MKE failed to make the June shipment as scheduled and that these antecedent delays required an adjustment in the debt repayment schedule under the agreement’s terms. It was thus not unreasonable for the jury to find for Zenith on the party’s competing breach of contract claims.

Jury instructions

MKE argues that the district court erred by stating that “failure to act in good faith constitutes a breach of contract.” MKE characterizes this statement as incomplete given that the breach claims here are premised on the exercise of specific contractual rights. But the district court made clear to the jury in the same instruction that the obligation of good faith cannot “vary or contradict an express contractual right or obligation.” Nor did the court err in giving instructions on prevention and course of performance.

Damages

MKE’s objection to the jury’s damages award is likewise unpersuasive. This court agrees with the district court that there was “sufficient evidence to support the damage award” given the categories of damages Zenith requested. These categories included lost profits as well as the cost of warranty work and the payment made toward the June shipment, all of which were substantiated by documents and witness testimony at trial.

Infringement

MKE contends that the evidence compels a conclusion that Zenith infringed MKE’s trademark by using it at a trade show and in online advertisements after termination of the 2019 Agreement. But the jury heard testimony showing that MKE knew about the use of its trademark at the show and failed to lodge an appropriate objection, as well as evidence that the token references to MKE on Zenith’s website and Facebook page were permissible fair use.

False advertising

Finally, MKE contends that the evidence establishes that the ZF-5 firearm produced by Zenith and advertised as “Made in USA” did not meet Federal Trade Commission standards for “Made in USA” labeling. This contention is defeated by the jury’s finding to the contrary, based on witness testimony and a stipulation from Zenith’s supplier showing that the ZF-5’s final assembly and significant processing took place in the United States and that the overwhelming majority of manufacturing costs were attributable to domestic sources.

Affirmed.

Makina ve Kimya Endustrisi A.S. v. Kaya, Case No. 24-1823, June 10, 2025. 4th Cir. (Wilkinson), from WDVA at Charlottesville (Ballou). John T. Ruskusky for Appellant. Evan Davis Mayo for Appellees. VLW 025-2-213. 5 pp.