For many years, Zap! and DaimlerChrysler have been in and out of court over a large order of Smart cars (see this USA Today article from March 2006 for a bit of history). Basically, in 2005, Zap ordered a $1 billion batch of Smart cars but ran into trouble when it actually tried to get their hands on them and sell them. This week, that court battle continued when the Court of Appeal for the State of California heard oral arguments in a lawsuit brought by Zap! against DaimlerChrysler, Smart GMBH and Smart Chairman Ulrich Walker. As our tipster Domenick says, "This could get interesting." Zap! has issued a press release about the court proceedings, and says we should have a decision in the case, which revolves around which jurisdiction should actually hear Zap!'s case, in the next 90 days. Smart itself will begin selling the Smart ForTwo in the U.S. in January.

Here's how Zap! describes the current legal situation:

In the preceding year and a half, the defendants have engaged in activity that inadvertently proves the truth of those initial allegations made against them by ZAP. ZAP's initial complaint alleged that the defendants engaged in unlawful actions in order to eliminate ZAP as a competitor in the California market. Since the trial court dismissal on jurisdictional grounds, defendants have proven their true intentions to bring the Smart ForTwo to California and to eliminate any competition standing in its way. (there's more after the break)

Read more about Zap!'s Americanized Smart car here. We'll keep an eye out for the court's decision when it comes down. Alternately, we'll wait for Domenick to tip us. :)

[Source: Zap!, USA Today, h/t to Domenick]


More from Zap!'s press release:

The lawsuit cites eight different counts, including intentional interference with prospective economic relations, negligent interference, trade libel, defamation, breach of contract to negotiate in good faith, breach of implied covenant of good faith and fair dealing, common law unfair competition, and statutory unfair competition. ZAP is seeking damages in excess of $500 million.

As the Smart Car prepares to launch in 2008, ZAP CEO Steve Schneider noted that DaimlerChrysler and the Smart division, at the expense of ZAP, have parlayed their struggling business unit into what they say could be its best-selling vehicle. Smart Car sought to introduce the car into the United States, but reversed the decision on the grounds that there was not enough demand. They subsequently made the decision to introduce an SUV called the ForFour, which was also reversed and the business unit for Smart in the USA was shut down in 2004.

When ZAP started selling its first units of the Smart Car Americanized by ZAP in 2005, DaimlerChrysler cited record losses in excess of $5 billion on the Smart Car while closing down plants and laying off employees. ZAP had collected signed purchase orders totaling $2.2 billion, representing 156,000 cars and opened discussions with DaimlerChrysler in the hopes of expanding on its business plans by ordering the vehicles directly from the manufacturer. ZAP secured a $425 million revolving credit facility to assist with the purchase of the Smart Cars.