The Main Line, an online chat room for model train collectors, is not known for hosting emotional debates. Discussions typically revolve around the aesthetic merits of this die-cast diesel engine or the functionality of that passenger coach.
Until now, that is.
On Monday, a federal jury in Michigan ordered the nation's No. 1 model train manufacturer, Lionel LLC, and its subcontractor to pay MTH Electric Trains, the No. 2 manufacturer, $40.8 million for misappropriating designs for toy locomotives. MTH accused Lionel and Korea Brass, a South Korean subcontractor, of using stolen drawings and production schedules from one of MTH's subcontractors.
The case has roiled the model train collecting world, polarizing a community of thousands of mostly middle-aged men that prides itself on the kind civility required to sit in the quiet car. On the Main Line this week, one poster accused MTH of "playing train god." Another compared Lionel to Enron Corp.
The case has thrown a spotlight on MTH, a Columbia model train manufacturer that operates as Mike's Train House, and its owner, Mike Wolf, whom some collectors credit with reinvigorating a once-tired industry. The privately held company, which has about 57 employees, had revenue of about $40 million in 2003, Wolf said.
Wolf began selling model trains from the basement of his parents' Laurel home when he was 12, eventually opening a company of his own called Mike's Train House. By 1993, the homespun operation evolved into MTH.
Today, MTH sells trains, tracks and entire model towns to more than 800 hobby stores. There is the PCC Electric Street Car, with lighted interior, for $229.95. There is the R-26 Four-Car Subway Set, modeled after the New York City version, for $399.95. There is even a 12-piece passenger set, with some characters standing, others sitting, for $29.95.
The Train Collectors Association, a hobby group, has 32,000 members. The typical model train collector, a male in his early fifties, spends $4,200 a year, though there are plenty of amateurs who settle for the $259 starting sets, Wolf said. "These are people who remember these trains from their childhood," Wolf said. "They could not afford them back then, but now they can."
For much of the past century, Lionel has dominated the model train market. The privately held Chesterfield, Mich., company was started in 1900 and is all but synonymous with the image of an electric train circling the family Christmas tree.
"There is an emotional attachment to the brand," said Neil Besougloff, editor of Classic Toy Trains Magazine, a trade publication based in Waukesha, Wis. "None of these adult hobbyists had MTH trains as a kid."
But the market began to dramatically change in the mid-1990s with the introduction of MTH's O Gauge trains. The O Gauge, which refers to the train's size, matches the scale of a real train at a ratio of a quarter-inch to a foot and is one of the most popular lines for collectors, Wolf said.
MTH die-cast designs began to look more lifelike. It introduced digital sound technology into its cars. And it created a more powerful transformer, allowing collectors to run more cars on the rails. "MTH really began to lead the industry," said Sam Geiser, a Beltsville model train collector and the past president of the local chapter of the Train Collectors Association.
Soon, MTH began closing in on Lionel, Besougloff said. "They were pretty much neck and neck," he said. He estimated that in 2000 Lionel had sales of $50 million. Lionel, as a private company, does not release financial results.
It was around this time, MTH alleges, that an employee at one of its Korean subcontractors, Samhongsa, began stealing train designs. The employee then sold the information to Korea Brass, the Lionel subcontractor, Wolf said in an interview. By 1999, Wolf said, Lionel began manufacturing trains that looked suspiciously like those under development at MTH. "I bought it, I looked at it," Wolf said. "It was just too good, too fast."
Wolf demanded an investigation, but the damage, he said, was already done. Between 2000 and 2003, he said, sales fell by $20 million, triggering the layoff of about 50 MTH employees. "We could not pay our bills," Wolf said.
Four people in South Korea were jailed in the case and Korea Brass was found liable to Samhongsa in a civil lawsuit, according to Jeffrey D. Bukowski, Wolf's attorney.
Bukowski said that on Monday the jury award included $12 million in past lost profit and $13.8 million in future lost profit. In addition, Lionel was ordered to pay MTH $12.8 million for unjust enrichment. Korea Brass and Yoo Chan Yang, its U.S. representative, were ordered to pay $2.2 million.
Lionel declined to comment on the allegations. In a statement, spokeswoman Cara Orchard said the company would appeal the verdict. "Lionel remains confident that it will prevail," she said.
Meanwhile, the debate over the verdict rages on.
"People are very upset about this," Wolf said. When it comes to Lionel and MTH, he said, "it's like Democrats and Republicans. People stand by their manufacturer."
Fred Hamilton, executive director of the Model Railroad Industry Association, a Seattle-area trade group, said collectors are worried about what the verdict may mean for the financial health of Lionel.
"It's a hobby, so everyone thinks this should be fun and that all the players should get along," he said. "Train collectors don't want to see a fight."