A California jury has awarded $9.397 million in economic damages to medical supply distributor Ashtel Studios Inc. after finding Wyoming-based Oak Sourcing & Logistics LLC and its managing member, Matthew John Sandvig, liable for intentional misrepresentation in a dispute involving a $9.5 million shipment of medical examination gloves.
The verdict, delivered on October 9 by a jury at Los Angeles County Superior Court, follows a commercial dispute over the broker’s financial capacity, customer contracts and ability to purchase large quantities of nitrile examination gloves during the COVID-19 pandemic.
The award includes $6.43 million in out-of-pocket expenses and approximately $2.97 million in other economic losses. The case highlights the financial exposure that can arise when companies enter major supply chain transactions based on representations about purchasing commitments, financing and end customers.
According to Ashtel’s original complaint, Sandvig told company executives in March 2021 that Oak Sourcing had an $800 million personal protective equipment contract, long-term supply commitments with hospitals and access to substantial financing.
Those claims helped convince Ashtel to enter into two transactions involving a combined $14.7 million in medical gloves, the complaint stated.
Two transactions of 1.5 million boxes of gloves
The first purchase order, dated July 2, 2021, was for 500,000 boxes of nitrile examination gloves worth $5.2 million.
The merchandise was imported from China through the Port of Long Beach, California, Ashtel said. The shipment arrived in 14 ocean-going containers and was trucked to the company’s warehouse in Ontario, Calif.
The first shipment was paid for by Oak Sourcing in August 2021, around three weeks after the goods arrived. But Ashtel alleged some transportation and warehousing costs related to the transaction were still not paid.
Another purchase order was received on July 7, 2021. It included 1 million boxes of nitrile examination gloves of $9.50 each box for a total value of $9.5 million.
The second batch arrived in 27 shipping containers but Oak Sourcing did not pay or collect the goods, it is alleged.
Ashtel said the broker kept postponing inspections, asking for more shipping documents and saying payment would be made after it received money from its own downstream customer.
Ashtel later discovered in the complaint that the supposed end customer was another intermediary, not a hospital or other direct purchaser.
The unfinished transaction left Ashtel with additional drayage, warehousing and storage costs as it sought to resolve the dispute. Eventually the distributor resold the gloves to recoup its financial losses.
The transactions across both purchase orders involved 1.5 million boxes of gloves transported in a total of 41 ocean shipping containers.
Jury Concludes Representations Were Fraudulent
The jury found that Oak Sourcing and Sandvig made false representations, knew the statements were false or made them in reckless disregard of their truth, and intended Ashtel to rely on them.
Jurors also found Ashtel justifiably relied on those representations and suffered financial injury.
The jury also found that Oak Sourcing owed Ashtel $4,272,252 on an open book account claim, separate from the $9.397 million fraud award.
That sum is attributable to a different legal claim and is not to be added automatically to the fraud damages. The court’s final decision will determine how any overlapping amounts are handled.
The jury also ruled in favor of Ashtel on counterclaims by Oak Sourcing. Those claims were for intentional and negligent misrepresentation, concealment, and breach of the covenant of good faith and fair dealing.
The jurors also found that Sandvig acted with malice, oppression or fraud, findings that could support a claim for punitive damages.
But Ashtel agreed to waive punitive damages in exchange for the defendants waiving their rights to post-trial motions, appeals or other proceedings challenging the judgment.
The agreement was not an additional monetary settlement, said Eugene Rome, founding partner of Rome LLP, the law firm representing Ashtel.
Rome insisted in a statement released on October 13 that the judgment was not merely a finding that a commercial deal had gone wrong.
“A fraud verdict means that the statements made about the company and the amount of business it was doing were knowingly false when they were made,” Rome said. “That’s more than a breach of contract.
Rome LLP published the statement after the jury’s decision.
Earlier federal lawsuit ended without a ruling on the merits
The litigation dates back to March 2022, when Ashtel filed a federal lawsuit against Sandvig, Oak Sourcing and Oak Insurance Group LLC in the U.S. District Court for the Central District of California.
The defendants sought dismissal, arguing that the court lacked jurisdiction. Ashtel subsequently voluntarily dismissed the action without prejudice, and a federal judge closed the case in May 2022 without deciding the underlying merits.
The dispute then continued in Los Angeles County Superior Court, where Judge Nicole M. Heeseman presided over the jury trial that produced the October verdict.
Despite the jury’s findings, additional judicial proceedings remain necessary before all aspects of the dispute are resolved.
Rome told FreightWaves that Ashtel plans to submit a proposed judgment for the court’s approval.
A separate bench trial will also address alter ego allegations involving Oak Insurance Group, he said.
These allegations concern whether related companies should be treated as legally separate entities or whether their relationship justifies attributing liability across corporate boundaries. The jury’s verdict does not establish a finding of liability against Oak Insurance Group.
Case highlights the risks of assessing commercial counterparties
Rome said the dispute illustrates the importance of scrutinizing a counterparty’s representations before committing to high-value commercial transactions.
“While large transactions create the prospects of substantial profits, they equally entail traps for the unwary,” he told FreightWaves.
Oak Sourcing & Logistics was identified in the litigation as a Wyoming-based intermediary involved in medical supply transactions. The available court records do not establish that the company operated as a federally licensed freight broker.
FreightWaves reported seeking comment from attorneys representing Oak Sourcing & Logistics, but no responses had been received as of publication.
The case underscores the potential consequences for suppliers and logistics intermediaries when substantial transactions depend on claims about customer contracts, financing and purchasing capacity. For businesses handling high-value shipments, verifying counterparties and their ability to fulfill contractual obligations can be critical to limiting financial exposure.
As the court moves toward a final judgment and the separate proceedings involving Oak Insurance Group remain outstanding, the $9.397 million verdict marks a significant development in Ashtel’s efforts to recover losses associated with the unpaid medical glove shipment.
