Royal Pacific Limited v. Faith Electric Manufacture Company, Ltd.

Filing 111

ORDER by District Judge Margaret I. Strickland denying 99 Motion to Strike. The Court will construe Royal Pacific's Motion to Strike as objections under Rule 56(c)(2) and will consider them, along with Faith Electric's response, when resolving Royal Pacific's Motion for Summary Judgment. See Order for details. (tms)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
ROYAL PACIFIC LIMITED,
Plaintiff/Counter-Defendant,
vs.

Civ. No. 17-357 MIS/JFR

FAITH ELECTRIC MANUFACTURE
COMPANY, LTD.,
Defendant/Counter-Plaintiff
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on Plaintiff/Counter-Defendant Royal Pacific
Limited’s (“Royal Pacific”) Motion to Strike or Exclude Material Supporting Faith Electric
Manufacture Company, Ltd.’s Response to Motion for Summary Judgment (“Motion to Strike”),
filed February 24, 2021. Doc. 99. Defendant/Counter-Claimant Faith Electric Manufacture
Company, Ltd. (“Faith Electric”), filed a Response on March 31, 2021. Doc. 103. Royal Pacific
filed a Reply on April 14, 2021. Doc. 104. On December 21, 2021, Faith Electric sought leave
to file a surreply. Doc. 107. There being no objections, Faith Electric filed a Surreply on
January 21, 2022. Doc. 109. Having reviewed the parties’ submissions and the relevant law,
and for the reasons set forth herein, the Court finds that Royal Pacific’s Motion to Strike is not
well taken and is DENIED.
PROCEDURAL BACKGROUND
On March 21, 2017, Royal Pacific filed its Complaint for Declaratory Judgment and
Other Relief against Faith Electric (“Complaint”). Doc. 1. Royal Pacific’s Complaint includes
claims for Breach of Contract (Count I) and Breach of Implied Warranty of Merchantability

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Under the New Mexico Uniform Commercial Code (Count II), and seeks Declaratory Judgment
(Count III) as to the terms of the Distribution Agreement and the rights contained therein to
obtain cover and terminate. Id. at 5-8. In its Complaint, Royal Pacific asserts that on or about
July 14, 2015, Royal Pacific and Faith Electric entered into a Distribution Agreement in which
Faith Electric appointed Royal Pacific as the exclusive distributor within North America for
products manufactured by Faith Electric that were supplied to a list of certain specific
companies. Id. at 2, ¶ 7. One of the specific companies listed was Menards, an American big
box home improvement store. Id. The manufactured products Faith Electric supplied included
USB receptacles, self-testing ground fault circuit interrupter (“GFCI”) receptacles, electrical wall
plates, occupancy sensors, and arc fault circuit interrupter receptacles. Id. at ¶ 8.
Royal Pacific alleges that quality problems with Faith Electric’s products it supplied to
Menards began to arise in early 2016 and continued throughout the year. Id. at ¶ 12. For
example, Royal Pacific cites a full recall by Menards of Faith Electric’s USB Power Outlets in
February 2016 due to a design flaw. Id. at 3, ¶ 13. Royal Pacific also cites over sixty customer
complaints related to Faith Electric’s GFCI receptacles involving a premature “End of Life”
failure that prompted Menards to request written re-affirmation that the GFCI receptacles were
safe and met UL1 listing requirements. Id. at ¶¶ 15-21. Royal Pacific alleges it alerted Faith
Electric to the concerns over the GFCI receptacles and that Faith Electric made certain changes
in an attempt to cure the problems. Id. at 4, ¶ 24. When the GFCI receptacles continued to fail,
Royal Pacific states it sought testing in or about July 2016 from a third-party laboratory Intertek,
which confirmed that Faith Electric’s attempts to cure the problems with the GFCI receptacles
had failed and that the GFCI receptacles were flawed. Id. at ¶¶ 25-28, Doc. 80 at 13, ¶¶ 39, 43.

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Underwriters Laboratories.

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In December 2016, Royal Pacific advised representatives from Menards of Intertek’s test results
and sought and received approval from Menards to replace Faith Electric’s GFCI receptacles
with a competing product. Doc. 80 at 15, ¶ 51. On March 20, 2017, Royal Pacific sent Faith
Electric a written notification that it was terminating the Distribution Agreement. Id. at ¶ 52.
Royal Pacific concedes that the Distribution Agreement contains a termination provision
but argues that it is nonsensical and, therefore, unenforceable. Id. at 4-5, ¶¶ 30-33. The
Distribution Agreement provides
9. DEFAULTS. If either Party (herein “Defaulting Party”) fails to abide by the
obligations of this Agreement, the other Party shall have the option to terminate
this Agreement by providing a 30-day written notice to the Defaulting Party. The
Defaulting Party shall have the option of preventing the termination of this
Agreement by taking corrective action that cures the default, if such corrective
action is taken within 60 days after receiving the notice, and if there are no other
defaults during such time period.
Doc. 1-1 at 3. Royal Pacific asserts that “[b]y providing a 60-day cure period that is longer than
the 30-day period after which the Distribution Agreement is actually terminated, the Termination
Provision makes no sense and cannot be performed.” Doc. 1 at 5, ¶ 33. As such, Royal Pacific
alleges that either party had the right to terminate the Distribution Agreement without notice. Id.
Royal Pacific further alleges that under the New Mexico Uniform Commercial Code a buyer is
permitted to reject acceptance of defective goods and to obtain “cover” by contracting in good
faith to purchase goods in substitution. Id. at 5, ¶¶ 34-35. Royal Pacific asserts that “[b]ecause
of Faith Electric’s continual performance problems, which breached the Distribution Agreement
and the warranty of merchantability that is implied within the Distribution Agreement, Royal
Pacific emailed Faith Electric a letter on March 20, 2017, and notified Faith Electric it was
terminating the Distribution Agreement.” Id. at ¶ 36.

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On October 19, 2017, Faith Electric filed its Answer, Affirmative Defenses and
Counterclaim. Doc. 10. Faith Electric’s Counterclaim included claims for Breach of Written
Contract (Count I), Defamation (Count II), Statutory Unfair Trade Practices (Count III),
Interference With Prospective Business Advantage (Count IV), and Prima Facie Tort (Count V).
Doc. 10 at 12-15. Faith Electric asserts that in 2008, its predecessor company, Fujian Hongan
Electric Co., Ltd. (“Hongan”), began and developed a longstanding commercial relationship with
Menards. Id. at 9, ¶ 2. Initially Hongan sold Menards a variety of its electrical system
components through a distribution company called ReSource, LLC. Id. Faith Electric states that
when ReSource began experiencing financial difficulties in 2011, Hongan turned to Royal
Pacific to serve as its North American representative. Id. at ¶ 3. Around mid-2013, Faith
Electric became Hongan’s successor company and initiated discussions with Royal Pacific to
remain as its North American representative. Id. at 10, ¶ 4. In or around the third quarter of
2013, Faith Electric appointed Royal Pacific as its North American representative “with
responsibility for servicing the Faith-Menard relationship pursuant to a verbal/implied-in-fact
contract.” Id. at ¶ 5. Faith Electric states that on or about July 1, 2015, Faith Electric and Royal
Pacific decided to memorialize their relationship and entered into the Distribution Agreement.
Id. at 11, ¶ 8. Faith Electric alleges that by its terms, the Distribution Agreement had a 5-year
term as to Menards. Id. at ¶ 9. Faith Electric alleges that from the time the parties entered into
the Distribution Agreement on July 1, 2015, and the time Royal Pacific purportedly terminated it
on March 20, 2017, Menards purchased $6,448,175.22 of Faith Electric’s products, which
included over a million GFCI receptacles. Id. at ¶ 15, Doc. 89 at 2. Faith Electric alleges that
“[t]he true facts were that Faith’s products were not defective and they did not pose a safety
hazard.” Doc. 10 at 11, ¶ 14. Faith Electric alleges that Royal Pacific’s purported termination of

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the Distribution Agreement based on Royal Pacific’s false assertion that Faith Electric’s products
were defective and/or posed a safety hazard was a breach of contract. Id. at 12, ¶ 19.
On November 15, 2017, Royal Pacific moved to dismiss Faith Electric’s counterclaims.
Doc. 13. After being fully briefed, now retired District Judge M. Christina Armijo entered a
Memorandum Opinion Order on June 13, 2018, in which she dismissed without prejudice Faith
Electric’s Counts II and IV, and found moot Royal Pacific’s motion as to Counts III and V
because Faith Electric did not oppose dismissal as to those counts. Doc. 36. Judge Armijo
granted Faith Electric leave to amend its counterclaim in light of her rulings. Id. To date,
however, Faith Electric has not done so. As such, Faith Electric’s sole remaining counterclaim is
Count I – Breach of Written Contract.
In the meantime, case management deadlines were set and extended multiple times, the
parties engaged in an unsuccessful settlement conference before Magistrate Judge John F.
Robbenhaar, and the case was recently reassigned to the undersigned presiding judge. Docs. 17,
25, 41, 45, 46, 49, 52, 58, 65, 66, 68, 71, 73, 75, 77, 79, 105. Pending before the Court is Royal
Pacific’s Motion for Summary Judgment, filed September 30, 2020. Doc. 80. Faith Electric
filed its Response on December 30, 2020. Doc. 89. Royal Pacific filed a Reply on February 24,
2021. Doc. 98. The Motion to Strike being addressed herein directly relates to the pending
Motion for Summary Judgment.
MOTION TO STRIKE
Royal Pacific moves to strike three declarations Faith Electric attached in support of its
Response to Royal Pacific’s Motion for Summary Judgment, i.e., the Declaration of Chen “Zigg”
Ze, the Declaration of Eric Chan, and the Declaration of Gary Frush. Doc. 99 at 2. Royal
Pacific argues that “[t]hese declarations contain inadmissible testimony, including that which is

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not relevant, not based on personal knowledge, hearsay, improper lay opinion, and w[ere] not
disclosed prior to summary judgment.” Id. Royal Pacific further argues that exhibits included
with the declarations were not produced in discovery or are otherwise inadmissible. Id.
Faith Electric opposes the Motion to Strike. Doc. 103. It argues that the declarations and
exhibits provide admissible evidence that is material to the issues raised in Royal Pacific’s
Motion for Summary Judgment. Id. at 4. Faith Electric argues that Royal Pacific’s argument
that the respective declarations amount to undisclosed witness testimony is meritless because
Royal Pacific had both the opportunity and/or intent to depose all three of the declarants during
the course of discovery yet elected not to do so. Id. at 4-5. Further, Faith Electric represents that
all three declarants remain willing to appear for depositions. As for the various exhibit
attachments to the declarations to which Royal Pacific objects as untimely and/or inadmissible
evidence, Faith Electric contends that (1) many of the exhibit documents were in fact disclosed at
the outset of the case and/or in subsequent document productions; (2) certain of the documents
that were not previously produced were not identified or located by Faith Electric prior to
preparing its opposition to Royal Pacific’s Motion for Summary Judgment thereby precluding
earlier production; (3) the declaration testimony establishes the admissibility of Faith Electric’s
business records pursuant to Federal Rule of Evidence 803(6); and (4) Royal Pacific has failed to
make any cognizable arguments demonstrating prejudice as to the documents that were not
produced during discovery. Id. at 16-19.
In its Reply, Royal Pacific reasserts that Faith Electric’s proffered evidence does not raise
any disputes of facts material to Royal Pacific’s Motion for Summary Judgment, i.e., it does not
dispute (1) the fact that Faith Electric manufactured a defective or otherwise unmerchantable
product; (2) the fact that Menards told Royal Pacific it would terminate its agreement with Royal

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Pacific if the issue with Faith Electric’s products was not remedied; or (3) that Royal Pacific was
entitled to cover under New Mexico law and obtain another supplier. Doc. 104 at 2. Royal
Pacific contends that matters pre-dating the Distribution Agreement are not relevant and are
otherwise inadmissible; that Faith Electric should not be permitted to use undisclosed testimony
to explain documents not previously disclosed; that previously undisclosed documents should be
stricken; that Faith Electric’s characterization of the declaration testimony does not save the
inadmissible statements contained therein; and that the declarants do not establish that certain
exhibits are admissible business records. Id. at 2-8.
Finally, in Faith Electric’s Surreply, it states that it is undisputed that Menards never
stopped selling Faith Electric’s GFCI receptacles at any point during its contract with Royal
Pacific. Doc. 109 at 2. Faith Electric states that it is undisputed that Menards continued to sell
Faith Electric’s GFCI receptacles after Royal Pacific terminated the Distribution Agreement on
March 20, 2017. Id. Faith Electric states that is undisputed that its GFCI receptacles generated
the highest profit margins for Menards among its GFCI offerings. Id. And it states it is
undisputed that Menards never demanded that Royal Pacific find another manufacturer for
Menards’ house-brand “Smart Electrician” GFCIs. Id. With this in mind, Faith Electric asserts
that the evidence it attached to its Response is necessary to show the longstanding relationship it
had with Menards, which was established long before Royal Pacific was brought into the
relationship, and is key to understanding why Menards never stopped its purchases of Faith
Electric’s GFCI receptacles in 2016-2017. Id.
Faith Electric argues that the declarant testimony it attached to its Response provides
admissible evidence demonstrating triable issues of material fact. Doc. 109 at 3-5. It reasserts
that the declarants remain available for depositions subject to leave from the Court. Id. Lastly,

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Faith Electrics contends that the documents addressed in Royal Pacific’s Motion to Strike were
produced by Faith Electric either through initial disclosures, during discovery, by Intertek in
response to Royal Pacific’s subpoena, or are otherwise admissible. Id. at 7-10.
STANDARD OF REVIEW
An affidavit used to oppose a motion for summary judgment “must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters stated.” Fed. R. Civ. P. 56(c)(4). In accordance
with this rule, courts must generally disregard inadmissible statements contained in a summary
judgment affidavit, for example hearsay statements, as such “statements could not be presented
at trial in any form.” Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th
Cir. 2006); see also Hansen v. PT Bank Negara Indonesia (Persero), 706 F.3d 1244, 1250 (10th
Cir. 2013) (noting that “[a]lthough affidavits are entirely proper on summary judgment, the
content or substance of the evidence contained therein must be admissible.”).
“To determine whether genuine issues of material fact make a jury trial necessary, a court
necessarily may consider only the evidence that would be available to the jury.” Brown v. Perez,
835 F.3d 1223, 1232 (10th Cir. 2016) (quoting Argo, 452 F.3d at 1199). While this does not
require that the evidence submitted at summary judgment be “in a form that would be admissible
at trial,” it does require that “the content or substance of the evidence [submitted at summary
judgment] must be admissible.” Id. (quoting Trevizo v. Adams, 455 F.3d 1155, 1160 (10th Cir.
2006)). And, where the evidence offered at summary judgment is not admissible in its submitted
form, it is incumbent on the proponent of the evidence to demonstrate how the proponent will
present the evidence so that it is admissible at trial. Id.

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While the admissibility of evidence is part of the summary judgment analysis, a motion
to strike is not an appropriate vehicle to challenge the opposing party’s submissions. See Smith
v. Aurora Pub. Sch., 318 F.R.D. 429, 431 (D. Colo. 2016) (“[T]he undersigned does not view a
Rule 56(c)(2) objection as an appropriate basis for a separate motion[;] [t]he Motion to Strike is
therefore denied on that basis as to the affidavit.”) (emphasis added); Mobile Shelter Systems
USA, Inc. v. Grate Pallet Solutions, LLC, 845 F. Supp. 2d 1241, 1252-53 (M.D. Fla. 2012) (“The
proper method to object to evidence submitted on summary judgment is for the party opposing
the motion to register its objection to the movant’s affidavits by way of the material submitted in
opposition to the motion.” (internal quotation marks and citation omitted)).
Rule 56(c)(2)’s language and its corresponding advisory committee notes provide
guidance here. Rule 56(c)(2) explains that “[a] party may object that the material
cited to support or dispute a fact cannot be presented in a form that would be
admissible in evidence.” Fed. R. Civ. P. 56(c)(2). Among other changes, Congress
amended Rule 56 in 2010 to include this language. Before this amendment, parties
properly challenged evidence used in a summary judgment motion by filing a
motion to strike. See Rule 56, advisory committee's note to 2010 amendments
(“There is no need to file a separate motion to strike.”). The plain meaning of these
provisions show that objecting to the admissibility of evidence supporting a
summary judgment motion is now a part of summary judgment procedure, rather
than a separate motion to be handled preliminarily. See Cutting Underwater
Technologies USA, Inc. v. Eni U.S. Operating Co., 671 F.3d 512, 515 (5th Cir. 2012)
(“[I]t is no longer necessary for a party to file such a motion; instead, a party may
simply object to the material.”).
TDY Indus., LLC v. BTA Oil Producers, LLC, No. 2:18-CV-0296-SWS/MLC, 2019 WL
12661227, at *1 (D.N.M. June 5, 2019) (quoting Campbell v. Shinseki, 546 F. App’x 874, 879
(11th Cir. 2013) (unpublished)).
ANALYSIS
In light of the foregoing legal standards, the Court finds Royal Pacific’s Motion to Strike
is not well taken and it is DENIED. Nevertheless, the Court will construe Royal Pacific’s
Motion to Strike as objections under Rule 56(c)(2) and will consider them, along with Faith
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Electric’s response, when resolving Royal Pacific’s Motion for Summary Judgment. See
Engineered Arresting Systems Corp., v. Atech, Inc., 356 F. Supp. 3d 1323, 1328 (N.D. Ala.
2018) (objections under Rule 56(c)(2) function like trial objections adjusted for the pretrial
setting, and “[t]he burden is on the proponent to show that the material is admissible as presented
or to explain the admissible form that is anticipated.” Fed. R. Civ. P. 56(c)(2), advisory
committee note (2010 amendments). Rule 56(c)(2) enables a party to submit evidence that
ultimately will be admissible at trial in an inadmissible form at the summary judgment stage.
See Jones v. UPS Ground Freight, 683 F.3d 1283, 1293-94 (11th Cir. 2012). A district court has
broad discretion to determine at the summary judgment stage what evidence it will consider
pursuant to Rule 56(c)(2)). Further, to the extent alleged untimely disclosed material proves
relevant to the Court’s consideration of Royal Pacific’s Motion for Summary Judgment, the
Court will exercise its discretion to determine if a Rule 37(c)(1) violation is substantially
justified or harmless.2 See Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d
985, 993 (10th Cir. 1999) (explaining that in determining whether a Rule 37(c)(1) violation is
substantially justified or harmless, the Court, in exercising its discretion, looks at the following
factors: “(1) the prejudice or surprise to the party against whom the testimony is offered; (2) the
ability of the party to cure the prejudice; (3) the extent to which introducing such testimony
would disrupt the trial; and (4) the moving party’s bad faith or willfulness.”).
IT IS SO ORDERED.

____________________________________
MARGARET I. STRICKLAND
United States District Judge
2

Rule 37(c)(1) states that “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or
(e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a
trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).

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