HONGDA CHEM USA, LLC et al v. SHANGYU SUNFIT CHEMICAL COMPANY, LTD.
Filing
209
MEMORANDUM OPINION AND ORDER signed by JUDGE N. C. TILLEY, JR on 09/26/2018 adopting the Magistrate Judge's Memorandum Opinion and Recommendation except as set out, ORDERED THAT YMS Agriculture International Cor p.'s Motion for Summary Judgment [Doc. # 129 ] is DENIED; Kadi Resources, LLC's Motion for Summary Judgment [Doc. # 131 ] is GRANTED; Vasto Chemical Company, Inc.'s Motion for Summary Judgment [Doc. # 133 ] is DENIED; Eco Agro Resource s LLC's Motion for Summary Judgment [Doc. # 135 ] is GRANTED; Gary David McKnight's Motion for Summary Judgment [Doc. # 137 ] is DENIED; Raymond P. Perkins' Motion for Summary Judgment [Doc. # 139 ] is DENIED; Wei Xu's Motion for Summary Judgment [Doc. # 141 ] is DENIED; Hongda Chem USA, LLC's and Hongda Group Limited, LLC's Motion for Partial Summary Judgment [Doc. # 143 ] is DENIED; Hongda Chem USA, LLC's and Hongda Group Limited, LLC's Motion for Partial Summary Judgment [Doc. # 145 ] is DENIED; Shangyu Sunfit Chemical Company, Ltd.'s Motion for Summary Judgment [Doc. # 149 ] is GRANTED IN PART as to Hongda's request for a declaratory judgment and claims of intentional interfere nce with contractual relations and fraud and as to liability on Sunfit's counterclaim against Hongda for breach of contract AND DENIED IN PART as to Hongda's claims of breach of contract and unfair and deceptive trade practices. (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
HONGDA CHEM USA, LLC, and
HONGDA GROUP LIMITED, LLC,
Plaintiffs,
v.
SHANGYU SUNFIT CHEMICAL
COMPANY, LTD. and YMS
AGRICULTURE INTERNATIONAL
CORP.,
Defendants.
and
SHANGYU SUNFIT CHEMICAL
COMPANY, LTD.,
Third-Party Plaintiff,
v.
GARY DAVID MCKNIGHT;
RAYMOND P. PERKINS; WEI XU;
ECO AGRO RESOURCES LLC;
VASTO CHEMICAL COMPANY,
INC.; and KADI RESOURCES LLC,
Third-Party Defendants.
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1:12CV1146
MEMORANDUM OPINION AND ORDER
Pending before the Court are numerous motions for summary judgment, all
of which have been addressed in the Memorandum Opinion and Recommendation
of the United States Magistrate Judge (“Recommendation”) [Doc. #201] that was
filed with the Court in accordance with 28 U.S.C. § 636(b) and, on March 15,
2018, mailed to the parties [Doc. #202].
Plaintiffs Hongda Chem USA, LLC and Hongda Group Limited, LLC
(collectively “Hongda”) have moved for partial summary judgment on their breach
of contract claim against Defendant and Third-Party Plaintiff Shangyu Sunfit
Chemical Company, Ltd. (“Sunfit”). [Doc. #145.] The Magistrate Judge
recommended denying Hongda’s motion to which Hongda objects, [Doc. #205].
Sunfit has also moved for summary judgment on Hongda’s breach of
contract claim, as well as Hongda’s claims seeking a declaratory judgment and
alleging intentional interference with contract, fraud, and unfair and deceptive
trade practices. [Doc. #149.] The Magistrate Judge recommended denying
Sunfit’s motion as to Hongda’s breach of contract claim, to which Sunfit objects,
[Doc. #204]. The Magistrate Judge recommended granting Sunfit’s motion as to
Hongda’s claims of intentional interference with contract and unfair and deceptive
trade practices, to which Hongda objects, [Doc. #205]. No objection has been
made to the recommendation to grant Sunfit’s motion as to Hongda’s claims
seeking a declaratory judgment and alleging fraud, [see Doc. #205].
Sunfit has also moved for partial summary judgment on its counterclaim
against Hongda for breach of contract. [Doc. #149.] The Magistrate Judge
recommended granting this motion, and Hongda has not objected, [see Doc.
#205].
2
Defendant YMS Agriculture International Corp. (“YMS”) and Hongda have
each moved for summary judgment on Hongda’s claims of intentional interference
with contract and unfair and deceptive trade practices against YMS. [Docs. #129,
143.] The Magistrate Judge recommended denying both motions. Only YMS
objects to the recommended denial of its motion for summary judgment. [Doc.
#203.]
Each third-party defendant has moved for summary judgment on the unfair
and deceptive trade practices claim alleged by Sunfit. [Docs. #131, 133, 135,
137, 139, 141.] The Magistrate Judge recommended granting Kadi Resources,
LLC’s motion and denying Vasto Chemical Company, Inc’s motion, and no
objection has been made to either recommendation, [see Docs. #204, #2051].
However, Sunfit objects to the recommendation to grant Eco Agro Resources
LLC’s motion, [Doc. #204], and Gary David McKnight, Raymond P. Perkins, and
Wei Xu each object to the recommendation to deny their motions, [Doc. #205].
Pursuant to 28 U.S.C. § 636(b)(1), the Court has appropriately reviewed the
portions of the Recommendation to which objections have been made and has
made a de novo determination to adopt the Recommendation except for that
relating to Sunfit’s motion for summary judgment on Hongda’s claim of unfair and
1
Hongda and Third-Party Defendants filed their objections together, and Vasto
Chemical Company, Inc. is listed among the objecting Third-Party Defendants in
the introductory paragraph. (See Pl.’s & Third-Pty. Defs.’ Obj. at 1 [Doc. #205].)
However, it is not listed among the parties actually objecting, (see id. at 3, 5), and
no objection is ever made to the recommendation to deny its motion.
3
deceptive trade practices. Specifically, the following parties’ motions for summary
judgment are granted: Kadi Resources, LLC and Eco Agro Resources LLC. The
following parties’ motions for summary judgment are denied: YMS, Vasto
Chemical Company, Inc., McKnight, Perkins, Xu, and Hongda. Sunfit’s motion is
granted in part as to Hongda’s request for a declaratory judgment and claims of
intentional interference with contractual relations and fraud and as to liability on
Sunfit’s counterclaim against Hongda for breach of contract and denied in part as
to Hongda’s claims of breach of contract and unfair and deceptive trade practices.
I.2
A.
This case stems from a mutually exclusive sales contract between Hongda
and Sunfit. Hongda Chem USA, LLC and Hongda Group Limited, LLC, owned by
McKnight, Perkins, and Xu, were3 North Carolina companies that manufactured and
distributed chemical products to a worldwide market. (Am. Compl. ¶ 8 [Doc. #37];
Dep. of Wei Xu 9:2-11 (Oct. 14, 2016) [Doc. #150-10].) Sunfit is a Chinese
company formed by Weihang Wang (“W. Wang”) and Ju Jin Wang (“J. Wang”)
2
The parties have each submitted exhibits in support of and opposition to the
various motions. Often, the same deposition testimony was filed more than once
or small portions of a particular deposition were filed piecemeal across multiple
exhibits. For ease of reference, with few exceptions, each citation to record
evidence notes the specific docket entry where that exhibit can be found.
However, although multiple parties may have used the very same document in
support of or in opposition to a motion and, hence, that document is found in
multiple docket entries, only one of the docket entries is cited.
3
Hongda Chem USA, LLC was administratively dissolved on February 5, 2015 by
the North Carolina Secretary of State. (Ex. 1 to Doc. #130.)
4
that manufactures various chemical products, including N-(n-Butyl) thiophosphoric
Triamide (“NBPT”), a chemical that is used as an ingredient in fertilizers to improve
their performance. (Id. ¶¶ 4, 9; Answer to Am. Compl. ¶¶ 4, 9 [Doc. #38]; Decl.
of Weihang Wang ¶¶ 1-3 (May 10, 2017) [Doc. #150-1].) In October 2010,
Hongda and Sunfit entered into a one-year contract according to which Sunfit
agreed to produce NBPT exclusively for sale in North American by Hongda for
purchase by Albemarle, Hongda’s customer that was itself a manufacturer of NBPT
in Pennsylvania but sometimes required additional sourcing of the product. (Sales
Contract [Doc. #150-2]; Xu Dep. 145:18 [Doc. #150-10]; W. Wang Decl. ¶ 12.)
Although any NBPT sales that Sunfit made to North America had to go through
Hongda, Hongda was not required to purchase Chinese-manufactured NBPT from
Sunfit. (See Sales Contract.)
From at least January 2011 through September 2011, McKnight, Perkins,
and Xu were either trying to develop a new source of NBPT or identify an
alternative source. To do so, they worked with Dr. Zehui Yang in China, requiring
that his research “be the property of Hongda Group”, and communicated with
Chinese associates. (Emails between Perkins, McKnight, & Xu (Jan. 6-16, 2011)
(discussing keeping the project “under the radar”) [Doc. #165-4]; Email from Xu to
JIping (Mar. 29, 2011) (hoping to have “production line ready” when the contract
with Sunfit is set to renew) [Doc. #165-5]; Email from McKnight to Yang (July 8,
2011) (sending “the procedure used by Albemarle for analysis of NBPT” and
hoping to send sample soon) [Doc. #165-7]; Email from Yang to McKnight,
5
Perkins, & Xu (July 16, 2011) (updating McKnight, Perkins, & Xu on his progress
with “the NBPT coating project”) [Doc. #165-9]; Email from Yang to McKnight,
Perkins, & Xu (July 28, 2011) (reporting on work done with NBPT sample); Email
from McKnight to Yang (Sept. 6, 2011) (requesting non-disclosure of Yang
because the research is Hongda Group’s property) [Doc. #165-15].)
To advance development of a new source of NBPT, in July 2011, Xu
traveled to Jiangxi Province and visited the Jixiang Chemical Plant whose largest
customer, Long Ji, expressed an interest in financing the business. (See Email from
Xu to Perkins (July 12, 2011) [Doc. #165-8]; Email from Xu to McKnight & Perkins
(July 16, 2011) [Doc. #165-10].) Long had a company registered in the Virgin
Islands, and, according to Xu,
In the future, we can place order with that company. In the same
time, we can state in the contract with Sunfit that we can not [sic]
buy from other Chinese companies except Sunfit. This way, we can
bypass the contract by doing business with [a] company in [the]
Virgin Island [sic], which is not a Chinese company.
(Email from Xu to McKnight & Perkins (July 16, 2011) [Doc. #165-10].) Xu could
have been referring to POP Holding Company, which is also Long’s company and
has an address in the British Virgin Islands. (See Xu Dep. 166:21-167-1 (describing
POP Holding as Long’s company) [Doc. #163-55]; Purchase Order (listing POP
Holding Company’s address) [Doc. #165-60].)
Throughout the summer of 2011, McKnight, Perkins, Xu, Yang, and Long
sent samples of NBPT to each other. (Email from Xu to McKnight (July 28, 2011)
(requesting McKnight “send the sample from Sunfit NBPT” to Long in Shanghai,
6
China) [Doc. #165-11]; Emails between Xu & Perkins (Sept. 1, 2011) (confirming
that Yang’s sample had arrived) [Doc. #165-14].) By early August, they were
promoting this “second Chinese source” of NBPT, also described as a “’developing’
source”, that “has the capability of far out producing the Sunfit facility” and that
Hongda “will market”. (Email from Perkins to Witte (Aug. 16, 2011) [Doc. #16319].)
As the 2010 sales contract between Hongda and Sunfit was set to expire,
they were renegotiating its terms. McKnight and Xu informed Sunfit that they
wanted a longer term exclusive agreement and proposed five years. (W. Wang
Decl. ¶ 15.) In exchange for extending the agreement to three years, Sunfit
requested “a reciprocal exclusivity provision whereby Hongda could only purchase
NBPT in China from Sunfit”. (Id.; see also Email from Xu to McKnight & Perkins
(Sept. 20, 2011) [Doc. #165-17].) Internally, Perkins questioned the catalyst for
such a request and expressed concern that “someone is talking”. (Email from Xu to
McKnight & Perkins (Sept. 20, 2011) [Doc. #165-17]; see also Email from Perkins
to McKnight & Xu (Sept. 21, 2011) [Doc. #165-18].) Xu apparently made the
requested changes4, which McKnight approved, but Xu anticipated being able to
“get around the purchase clause.” (Emails between Xu & McKnight (Sept. 20-21,
2011) [Doc. #165-18].)
4
Although paragraph 13 of the second sales contract (“Agreement”) does include
a three-year term and reciprocal exclusivity, paragraph 1 still provides for the
proposed five-year term. (Agreement [Doc. #150-3].)
7
Over the course of the next week, in late September 2011, Sunfit and
Hongda executed a second sales contract (the “Agreement“) that is the subject of
this litigation. (Agreement [Doc. #150-3].) For purposes of sales in North America,
Sunfit agreed to produce NBPT exclusively for Hongda, and Hongda agreed to
purchase Chinese-manufactured NBPT exclusively from Sunfit, at the time one of
three Chinese manufacturers of NBPT. (Id. ¶¶ 1, 4; Xu Dep. 145:4-10 [Doc. #15010].) Among the other terms was a minimum production requirement for
Albemarle and a payment term of 90 days from the date of shipment. (Agreement
¶¶ 5, 11.)
Soon afterwards, in October 2011, Xu and McKnight made plans for a
November visit to the Jiangxi plant with Agrium Advanced Technologies
(“Agrium”) of Loveland, Colorado. (Email from Xu to McKnight (Oct. 18, 2011)
[Doc. #165-2]; Emails among Bob Xing, McKnight, & Xu (Oct. 20-21 2011) [Doc.
#165-21]; Emails among Xing, McKnight, & Xu (Oct. 25, 28, 29, 2011) [Doc.
#165-24].) They also evaluated Long’s request for an exclusivity contract to
which McKnight responded, “We can agree to market and sale [sic] only his
product excluding our current supplier and customer?” (Emails between Xu &
McKnight (Oct. 26, 2011) [Doc. #165-23].)
Not long after the Agreement was executed, in November 2011, Hongda
allegedly began having issues paying Sunfit on time, and Sunfit made repeated
demands for payment. (W. Wang Decl. ¶ 19; Xu Dep. 79:12-23 (testifying about a
November 2011 request for past due payment), 80:2-12 (testifying that he would
8
receive a phone call or email requesting a payment) [Doc. #150-10].) However,
according to Perkins, W. Wang’s statement that “Hongda began breaching the
[Agreement] shortly after it was entered into” is “factually incorrect”. (Aff. of
Raymond P. Perkins ¶ 14 (June 9, 2016) [Doc. #166-2].). Perkins relies on a
summary report he prepared showing, among other things, the dates of shipment,
Albemarle’s payments to Hongda, and Hongda’s payments to Sunfit. (Id. ¶¶ 1416, 18 (citing spreadsheet (July 29, 2012) [Doc. #166-3]).) From the information
in the spreadsheet, it is unclear what shipment under the Agreement would have
been due, much less past due, as early as November when the first shipment
recorded on the spreadsheet was not until October 13, 2011. (Spreadsheet.)
Nevertheless, as early as December 20115, W. Wang expressed to McKnight
his desire to bill Albemarle directly, rather than go through Hongda, to improve
Sunfit’s cash flow, but McKnight believed this was “not viable”. (Email from
McKnight to McKnight (Dec. 22, 2011) [Doc. #165-26].)
At this time, W. Wang was also curious if Hongda were “sourcing
elsewhere” because “import records show another supplier shipping to USA”. (Id.)
McKnight noted to himself, “we are walking a thin line!” (Id.) McKnight was
planning to visit the Jiangxi plant in mid-February “to confirm [its] completion”,
5
Sunfit asserted in its brief in opposition to Hongda’s motion for partial summary
judgment that Exhibit AR to its brief further evidences Hongda’s past-due
payments as of December 2011. (See Doc. #161 at 20.) However, Exhibit AR
was supposed to be filed under seal, (see Doc. #163-33), but it is not among
Sunfit’s related sealed documents, (see generally Decl. #165).
9
and McKnight, Perkins, and Xu were hoping to “get their product qualify in [sic]
Ambermarle asap” and arranging for samples to ship. (Email from McKnight to Xu
(Dec. 30, 2011) [Doc. #165-27]; Emails among McKnight, Perkins, & Xu (Jan. 56, 2012) [Doc. #165-28]; Email from Xu to McKnight & Perkins (Jan. 13, 2012)
[Doc. #165-29]; Emails among Amber Bowman, Perkins, Xu, & McKnight (Jan. 19,
2012) [Doc. #165-30].)
In early March 20126, McKnight and Xu suspected Sunfit had shipped NBPT
to Gavilon Fertilizer, LLC in the United States in violation of the Agreement. (See
Email from McKnight to Xu (Mar. 5, 2012) [Doc. #165-33]; Dep. of David
McKnight 57:18-19 (Aug. 5, 2016) [Doc. #144-5]; Xu Dep. 118:2-119:12 [Doc.
#165-55]; Perkins Dep. 314:2-22 [Doc. #163-56].) McKnight “confronted them . .
. face to face in China” and asked if “they were using a company out of Canada to
represent their product” which Sunfit denied. (McKnight Dep. 205:5-15 [Doc.
#163-907].) The following week, McKnight proposed emailing J. Wang about,
among other things, W. Wang’s concern about “another source of product coming
from China into the US” and telling her that, “We are in [sic] working on
6
In its brief in opposition to Hongda’s motion for partial summary judgment, Sunfit
contends that Hongda sent a sample from the Jiangxi plant, but the exhibit in
support of that assertion does not provide the support Sunfit claims. (See Doc.
#161 at 22 (citing Ex. BA for Mar. 11, 2011 event).) Exhibit BA is a certificate of
analysis for NBPT on Hongda Group Limited LLC letterhead dated March 11, 2011.
(See Doc. #163-42.)
7
In its brief in opposition to Hongda’s motion for partial summary judgment, Sunfit
cites this exhibit as including pages 177-78 of McKnight’s deposition, (see Doc.
#161 at 33), but the exhibit only contains pages 204-05 of his testimony.
10
confirming the manufacturer and control [sic] the product flow into the US.” (Email
from McKnight to Perkins & Xu (Mar. 12, 2012 [Doc. #165-34].) Xu responded
and suggested that they “not disturb” Sunfit, “[p]ush for shipment as much as
possible now”, and, when Hongda owes Sunfit “about 6 million dollars” by the end
of June, “we can confront her [J. Wang] in China and ask for compensation of
damages.” (Email from Xu to Perkins & McKnight (Mar. 13, 2012) [Doc. #16534].) “With 6 million dollars in our hand, it will be only one option for her.” (Id.)
Sunfit’s requests for payments from Hongda continued through March. (See
Email from Xu to McKnight (Mar. 27, 2012) [Doc. #165-35].) Xu recommended
paying Sunfit for “2 containers” at that time, warned that Hongda did not want the
reputation in China for making slow payments, and recommended that they “not
use a lot of this money to finance the other business.” (Id.)
On March 28, 2012, Sheldon Witte of Agrium again met representatives
from Hongda at the Jiangxi plant in China.8 (Email from Witte to Jeff Novak (Mar.
29, 2012) [Doc. #165-36].) His understanding was that “[t]hey should be
producing in April” and that Agrium would “soon be signing a supply agreement”.
(Id.) Apparently, during this same March trip to China, Perkins attempted to
8
In its brief in opposition to Hongda’s motion for partial summary judgment, Sunfit
asserts that its Exhibit BC is an email from Perkins confirming “the second Agrium
tour of Plant J”, but Exhibit BC does no such thing. (See Doc. #165-34.)
Furthermore, Sunfit cites this as bates stamped Hongda 14905, but Exhibit BC
only contains Hongda 14903-04. However, Exhibit BF contains Hongda 1490506, which is an email from Perkins confirming his arrival in China on March 27 and
a “meeting” on March 29; it does not mention or allude to Agrium. (See Doc.
#165-37].)
11
arrange a visit by Agrium to Sunfit in March, but “Sunfit did not permit” the visit.
(Perkins Aff. ¶ 22.) Perkins himself attempted to meet with W. Wang and J.
Wang at the Sunfit plant, but W. Wang told him that he “could not come to the
plant on that date” and “insisted on meeting me at a hotel . . . about twenty
minutes from Sunfit’s plant.” (Id. ¶ 24; see also W. Wang Dep. 98:18-99:22
(testifying about having met Perkins at a hotel) [Doc. #144-7].)
Over the next month, McKnight and Xu discussed and made provisions for
protecting the intellectual property of their new NBPT. (See Emails between Xu &
McKnight (regarding trademark) (Apr. 8-9, 2012) [Doc. #165-38]; Emails among
McKnight, Xu, & Yang (regarding patent application) (Apr. 25-29, 2012) [Doc.
#165-40]; Email from McKnight to Perkins & Xu (May 11, 2012) [Doc. #165-41].)
Throughout this time, Hongda’s payment issues had occurred
“occasionally”, but after May 2012, even Xu admitted they happened “a lot”. (Xu
Dep. 80:17-22 [Doc. #150-10]; see also Email from Xu to McKnight (Apr. 10,
2012) (asking McKnight to pay Sunfit “something” [Doc. #165-39].)
The cause of Hongda’s late payments is debated. McKnight told Xu to
“[s]tress to Mrs. Wang that we need time . . . since Albemarle is paying us late so
we are delayed in our payment.” (Emails between Xu and McKnight (May 8-9,
2012 [Doc. #165-42]; Xu Dep. 113:6-114:3 [Doc. #150-10]; see also Dep. of
Weihang Wang 98:1-4 (Apr. 19, 2016) (testifying that Hongda said its failure to
pay was caused by Albemarle’s failure to pay or failure to pay timely) [Doc. #1447].) Perkins’ spreadsheet reflects that Albemarle paid Hongda for shipments from
12
December 2011 through May 2012 anywhere from 63 to 154 days after Sunfit
shipped the NBPT. (Spreadsheet at 1 [Doc. #166-3].) Consequently, Hongda’s
payments to Sunfit were often well after the contractual deadline. (Id. at 2.) After
Xu told W. Wang that the cause of Hongda’s late payments was Albemarle’s late
payments to Hongda, (Xu Dep. 113:6-114:5 [Doc. #150-10]; W. Wang Decl. ¶¶
20, 21), Wang contacted Albemarle and learned that it had been paying Hongda on
time. (W. Wang Decl. ¶¶ 22, 47.)
Apparently, around the same time, representatives from Albemarle visited
Sunfit’s plant in China. (See Albemarle Notes from China Visit (May 14, 2012)
[Doc. #138-7].) As a result of the visit, Albemarle had the impression that if it
were “willing to work with Sunfit directly, Sunfit [would] find a way to terminate
the relationship with Hongda” yet “pay Hongda a commission in the future
business.” (Id.) Albemarle understood that Sunfit wanted “to negotiate a 5yr
agreement with Alb[emarle] directly as soon as possible.” (Id.) Ultimately, on May
18, 2012, Sunfit informed Hongda that it did not have the funds to continue
production unless Hongda paid on time.9 (Email from Sunfit to McKnight (May 18,
2012) [Doc. #165-43].)
9
In its brief in opposition to Hongda’s motion for partial summary judgment, Sunfit
cites Exhibit BP as related support for the May 2012 communications between
Sunfit and Hongda about Hongda’s late payments. (See Doc. #161 at 24.)
However, Exhibit BP is entirely in Chinese, and the Court has not located any
English translation provided by any party. (See Doc. #163-57].)
13
The following month, June 2012, McKnight, Perkins, and Xu moved closer
to having a second source of NBPT in China. (See Email from Xu to McKnight &
Perkins (June 4, 2012) (discussing purchases from the Jiangxi plant) [Doc. #16545]; Email from McKnight to Xu (June 7, 2012) (discussing purchase through
Vasto) [Doc. #165-47]10; Vasto Entity Details (evidencing that Vasto was
incorporated in Delaware in January 2012) [Doc. #163-39]; Email from Xu to
McKnight (purportedly11 attaching Vasto purchase order) (June 12, 2012) [Doc.
#165-49].) They also corresponded about “push[ing] Jiangxi plant asap” out of
concern for Sunfit’s potential difficulties in fulfilling Albemarle’s latest purchase
orders due to Sunfit’s “shortage of electronicity”. (Emails among Xu, Perkins, &
McKnight (June 22, 2012) [Doc. #168-5].) In addition to Sunfit’s alleged shortage
of electronicity, there were other delays in shipments either resulting from customs
or refrigeration that encouraged a push for “the second source for the whole
operation”. (See Emails among McKnight, Perkins, & Xu (Mar. 12, 2012) [Doc.
#168-6], Email from Xu to Perkins & McKnight (Nov. 25, 2011) [Doc. #168-7].)
By July 2012, McKnight and Perkins were organizing a sale to Helena
Chemical for delivery to West Helena, Arkansas, which would “’in all probability’
10
In its brief in opposition to Hongda’s motion for partial summary judgment,
Sunfit cites Exhibit BV bates stamped Hongda 15655 in support of an assertion
related to Vasto. (See Doc. #161 at 25.) However, Exhibit BV is not as Sunfit
claims and is bates stamped Hongda 15665. (See Doc. #165-48.)
11
The actual purchase order is purportedly attached to this email, but only the onepage email is included in Exhibit BW, despite Sunfit’s citation of BW as including
Hongda 15645-46. (See Docs. #161 at 26, #165-49.)
14
. . . be purchasing a load for Des Moines, Iowa in July also”. (Email from Perkins to
McKnight (July 3, 2012) [Doc. #165-51]; see also Purchase Order from Helena
Chemical to Hongda Group Ltd LLC (July 10, 2012) [Doc. #165-53].) To facilitate
the sale, McKnight agreed that “we buy as Vasto and Hongda buys from Vasto
and sells to Helena, noone should be able to track a domestic order.” (Email from
McKnight to Perkins (July 3, 2012) [Doc. #165-51]; see also Bill of Lading for
NBPT from POP Holding Co., Ltd. as shipper to Vasto as consignee (Aug. 16,
2012) [Doc. #165-56].)
Perkins explained to Helena Chemical Hongda’s existing contractual
obligations, including its “supply side agreement” with Sunfit. (Email from Perkins
to Raymond (Dan) Dancy (July 10, 2012) [Doc. #165-55].) Perkins explained that
the Sunfit agreement “is specific in its definitions and has ‘teeth.’” (Id.) So, “[t]he
material we will supply Helena from the ‘new’ facility[] is material from a totally
separate facility [that] has no connection to Sunfit and is not bound contractually
to . . . supply lines.” (Id.) “The ‘new’ plant we are supplying material to Helena
from, is in a far more remote part of China (Jiangxi Province)” than is Sunfit and is
much better situated for expansion. (Id.)
Throughout late summer and early fall, the Jiangxi plant was shipping and
preparing to ship NBPT, while POP Holding Company served as the vendor and
Vasto was designated as the consignee. (See Emails between Xu & Perkins (Aug.
20, 2012) (discussing Long’s notification of an additional container ready for
shipment) [Doc. #165-57]; Emails among Xu, McKnight, & Perkins (Aug. 22-23,
15
2012) (discussing a “3d NBPT”) [Doc. #165-59]; Purchase Order (Aug. 25, 2012)
(evidencing a purchase order from Vasto to POP Holding Company with a delivery
address in South Carolina) [Doc. 165-60]; Email from Xu to McKnight & Perkins
(Sept. 9, 2012) (reporting on telephone call with Long about production) [Doc.
#165-63]; Emails among Perkins, Allen Sutton, & Amber Bowman (Sept. 27-28,
2012) (discussing the quality of the NBPT from the Jiangxi plant that was sent to
Koch) [Doc. #165-66]; Emails from Xu to McKnight (reporting on production and
price of the NBPT) [Doc. #165-67].) When Helena Chemical was ready for more
NBPT from Hongda, Perkins and Amber Bowman discussed the appropriate
procedure for the sale, with Perkins believing that “Hongda should purchase
product from Vasto and ship to Helena” to which Bowman responded, “Aren’t we
in contract that we will only buy from Sunfit or only sell to Albemarle [sic] isn’t
that the point of Vasto?” (Emails between Perkins and Bowman (Oct. 19, 2012)
[Doc. #165-69].)
During this time, Hongda’s payment issues with Sunfit continued. In August
2012, Sunfit “basically” stopped shipping NBPT to Hongda until Hongda “pa[id] on
term”. (Xu Dep. 130:17-131:1, 131:15-18 [Doc. #150-10]12.) Xu reached out to
his former employer, Sinochem Ningbo, to obtain a credit line to purchase NBPT to
12
In his brief in support of his motion for summary judgment, McKnight cites to his
deposition at Exhibit 9 to Doc. #138 as additional evidence. (See Doc. #138 at 8.)
Exhibit 9 to Doc. #138 is blank and apparently was supposed to have been filed
under seal with Doc. #153, but it is not among those exhibits. (See Doc. #138-10;
see generally Exs. to Doc. #153.)
16
fulfill Albemarle’s orders. (Xu Dep. 130:6-131:8, 132:2-4 [Doc. #150-10].) Yet,
even Xu testified that at that time, Hongda was holding millions of dollars of
Sunfit’s money. (Xu Dep. 131:9-14 [Doc. #150-10].) In September, Wang
informed Hongda that Sunfit would make no further NBPT shipments unless
Hongda agreed that Sunfit would receive payment directly from Albemarle, less the
commission that Albemarle would pay directly to Hongda. (Wang Decl. ¶ 24; Xu
Dep. 146:11-25 [Doc. #150-10]; Email from W. Wang to Xu & McKnight (Sept.
25-26, 2012) [Doc. #165-65].) Xu told W. Wang that Albemarle would not agree,
but Albemarle told him that Hongda would not agree. (W. Wang Decl. ¶¶ 25, 26,
47; Xu Dep. 147:4-15.) In the early fourth quarter of 2012, Albemarle notified
Hongda that it was “not going to exercise the 2013 contract”. (Dep. of Raymond
Patrick Perkins as 30(b)(6) Hongda Witness 400:3-15 (Apr. 26, 2013) [Doc. #1508].) Indeed, Albemarle informed Hongda in an October 15, 2012 letter that it was
revoking its earlier June 21, 2012 letter of intent to renew and that it intended to
cancel the agreement with Hongda. (Letter from Phillip DeVrou to Perkins (Oct. 15,
2012 [Doc. #166-9].)
In mid-October, McKnight told Xu about an idea to form Eco Agro, because,
according to Xu, they were “desperate”, having “suddenly [gone] from $10 million
business [to] zero dollars business”, and “need[ed] [to] find a way to survive.” (Xu
Dep. 175:15-176:12 [Doc. #138-15].)
Finally, on October 22, 2012, Sunfit informed Hongda that if it did not pay
approximately $5.4 million by October 26, 2012 that Sunfit would consider the
17
Agreement terminated without prejudice to its right to pursue legal action. (W.
Wang Decl. ¶ 27; Letter from Lee A. Albanese to Peter Santos (Oct. 22, 2012)
[Doc. #150-4].) Before Sunfit took further action, Hongda filed this action against
Sunfit on October 26, 2012.
In December 2012, Eco Agro was incorporated. (Articles of Inc. [Doc. #1384].) Soon after May 2013, production of Eco Agro’s proprietary product, N-Yield,
began, and the finished, formulated product was available for sale in the fall.
(James Bolding Dep. 29:7-10 (Dec. 1, 2016) [Doc. #138-20]; Perkins Dep. 275:923.13) However, according to Perkins, Eco Agro’s N-Yield is completely unrelated
to and “is not in the same chemical class as” the coated NBPT about which
McKnight and Xu were emailing Yang in September 2011. (Aff. Raymond P.
Perkins ¶ 4.c. (June 23, 2017) [Doc. #168-13].)
B.
YMS is a Canadian company established by Jianheng Matt Chen in March
2011 for the purpose of selling NBPT manufactured by Jiujiang Wo Xin Chemical
Company, which belonged to Chen’s former university classmate. (Dep. of
Jianheng Chen 16:10-17:5 [Doc. #163-1], 29:14-25 [Doc. #155-1], 38:4-16
13
In his brief in support of his motion for summary judgment, McKnight cites to
Chen’s deposition as further evidence of the product Eco Agro produced. (Doc.
#138 at 26.) However, the exhibit and its deposition pages do not include the
information for which McKnight cites them. (See Doc. #138-25.) McKnight also
takes liberties with the contents of other exhibits cited as evidence of the
distinction between NBPT and Eco Agro’s product. (Compare Doc. #138 at 25
(explanations of purported contents of Exs. 20-22) with Docs. #138-21 (Ex. 20),
#153-3 (Ex. 21), #138-23 (Ex. 22).)
18
[Doc. #144-2] (Nov. 21-22, 2016); YMS Corporate Filings Report [Doc. #153-4].)
In 2011, YMS made its first sale of NBPT produced at Jiujiang Wo Xin to an Italian
customer. (Chen Dep. 48:5-16 [Doc. #163-1].)
Then, in approximately January 2012, Chen contacted Sunfit to purchase a
small amount of NBPT for one of its customers in Germany. (W. Wang Decl. ¶ 41;
see also Chen Dep. 66:19-20 (referring to sale to German company) [Doc. #15011.) This was Sunfit’s first sale of NBPT to YMS. (Chen Dep. 57:2-6 [Doc. #1553].) The sale occurred to the satisfaction of the parties, and Sunfit was willing to
continue to do business with YMS. (W. Wang Decl. ¶ 41.)
During this same time period, Chen was in discussions with representatives
from Agrium about meeting in March in China at “our plant” and providing a “1Kg
sample of NBPT and DMPP, so [Agrium] may firstly get a ‘taste’ of our products”.
(Email from Chen to Witte (Jan. 31, 2012) [Doc. #155-8].) Chen then contacted
Sunfit to request to bring a customer to tour the Sunfit plant, but, according to the
Wangs, did not identify the potential customer because it was the practice of sales
agents to protect their potential customer’s identification as proprietary. (W. Wang.
Decl. ¶¶ 39, 42; Dep. of Ju Jin Wang Dep. 112:4-16 (Mar. 29-30, 2017) [Doc.
#144-6].)
On March 30, 2012, Chen brought three individuals from Agrium to the
Sunfit plant, but according to the Wangs and Chen, even then Chen never
19
identified Agrium to Sunfit.14 (W. Wang Decl. ¶ 39; Chen Dep. 67:8-9 [Doc. #15011]; J. Wang Dep. 111:15-24 [Doc. #144-6]; but see W. Wang. Decl. ¶ 42 (noting
that W. Wang was not present at the plant on March 30, 2012).) While Chen and
Agrium were visiting the plant, J. Wang met with them to say hello while they
were having lunch. (J. Wang Dep. 111:21-22 [Doc. #144-6.) When the interpreter
was making introductions, J. Wang learned that the prospective customer was a
“US company.” (Id. 112:13-23, 113:2-5.) J. Wang testified, “He [Chen] thought I
did not know, and I didn’t say it either.” (Id. 112:24-25.)
Witte described the meeting with YMS as “strange” with “lots of
inconsistencies” and “[n]o mention of Hongda”. (Email from Witte to Novak (Mar.
20, 2012) [Doc. #165-36].) He testified that “when [he] saw the front of that
facility”, his “main focus” was whether YMS could “supply the product” like Chen
said he could. (Dep. of Sheldon Witte 66:3-5 (Feb. 24, 2017) [Doc. #167-4].)
Witte remembered one of Sunfit’s owners being present even at a meeting during
which Witte questioned Chen “numerous times whether he was able to sell
product out of that plant”, because Witte understood from Perkins that “Hongda
had an exclusive with Sunfit.” (Id. at 56:11-57:14 (describing his questioning of
Chen as “the key thing” about the meeting).) Chen told Witte “he could supply
14
In its brief in opposition to Hongda’s motion for partial summary judgment,
Sunfit contends that Exhibit BF, containing bates stamped AAT 98, supports its
description of events on March 30, 2012. (See Doc. #161 at 23.) However,
Exhibit BF is bates stamped Hongda 14905-06 and does not relate in any way to
the proposition for which Sunfit uses it as support. (See Doc. #165-37.)
20
[Agrium] inhibitors out of that plant”, statements with which Witte remembered
Sunfit’s owner being “in agreement”. (Id. at 58:5-11.) Witte found Chen’s
answers unsatisfactory. (Id. at 57:5-6.)
On April 1, 2012, Chen emailed representatives from Agrium to answer
further their questions and address their concerns after their visit to Sunfit’s plant
and, in so doing, represented himself as an employee and shareholder of Sunfit.
(Email from Chen to Witte & Ben Nelson (Apr. 1, 2012) [Doc. #144-8]; see also
Shareholders’ Meeting Resolution [Doc. #144-12].) He went on to explain that
“we do sell our NBPT to one customer in North American now” who “make[s] and
sell[s] agriculture grade NBPT” and “buys from us when they have a gap between
demand and supply”. (Email from Chen to Witte & Nelson (emphasis added); see
also Chen Dep. 137:22-138:5 [Doc. #144-25].) Chen told Agrium that “[i]n China,
besides us, there are two manufacturer [sic] who can product NBPT”. (Email from
Chen to Witte & Nelson (emphasis added).)
However, at his deposition, Chen disavowed the truth of any information
contained in the email to Agrium or the attached Resolution and admitted that he
created the Shareholders’ Meeting Resolution. (Chen Dep. 128:10-21 [Doc. #1631], 145:10-146:23 [Doc. #144-2615], 204:4-23 [Doc. #144-24]; see also J. Wang
Dep. 130:10-132:5 (testifying that Chen should not have access to the company
15
Hongda filed an index of its exhibits submitted in support of its brief for
summary judgment on its claims against YMS. (See Index for Exs. [Doc. #144-1].)
The index lists as Exhibit 25 pages 125-27 of Chen’s deposition, but Exhibit 25 is
actually pages 145-47 of Chen’s deposition.
21
seal, that the Resolution has a contract seal rather than a requisite company seal,
that the signature is not hers, and that shareholder meeting resolutions are in
Chinese, not English like the purported Resolution) [Doc. #144-2816].) Chen did
so, at least in part, because after Agrium visited Sunfit’s plant, it “question[ed]
[him] badly”, doubt[ed] [his] relationship with Sunfit”, and believed “there’s no
way for [him] to represent Sunfit and sale [sic] NBPT to them.” (Chen Dep. at
204:14-19 [Doc. #144-24].)
A few days after the plant tour, according to W. Wang, Chen asked for a
formal agreement to act as an exclusive sales representative for Sunfit. (W. Wang
Decl. ¶ 43; see also J. Wang Dep. 70:4-11 (testifying that Sunfit agreed to Chen’s
request to be a sales agent by signing an “MOU” “for the EU market” [Doc. #14612]17.) According to W. Wang, Sunfit agreed that Chen could sell NBPT on behalf
of Sunfit, but specifically told him that he could not sell NBPT to anyone in North
American due to Sunfit’s agreement with Hongda. (W. Wang Decl. ¶ 43.) J. Wang
remembers that in April 2012, Sunfit and YMS signed an “agency agreement” that
16
In Hongda’s index of exhibits [Doc. #144-1], it identifies pages 130-32 of J.
Wang’s deposition as Exhibit 26. However, those pages are Exhibit 27. This
error, among others, continues with the remainder of Hongda’s exhibits filed in
support of its brief at Docket Entry 144. What is listed as Exhibit 27 (page 207 of
Chen’s deposition) is actually Exhibit 28 (which also includes page 208 of Chen’s
deposition); Exhibit 28 (pages 178-79 of Chen’s deposition) is actually Exhibit 29;
Exhibit 29 (pages 182-183 of Chen’s deposition) is actually Exhibit 30 (and only
includes page 182); Exhibit 31 (pages 3-7 of Grant Thornton’s expert report) is
actually Exhibit 32 (and is pages 3-7 of Erik C. Lioy’s expert report).
17
It is unclear whether J. Wang is testifying about the agency agreement or the
Cooperation Agreement. (See J. Wang Dep. 70:12-24 [Doc. #146-12].)
22
was in English which caused her to “really worr[y] about it, because [Sunfit had
an] agreement with Hongda for the North American market.” (J. Wang Dep. at
113:14-18 [Doc. #144-6].) She also knew that the company Chen had brought to
Sunfit’s plant was a U.S. company. (Id. at 113:21-24.) “So [she] stressed two
points”, one of which was that Sunfit could not sell products in North America
because it already had Hongda as its agent.18 (Id. at 113:19-21 [Doc. #144-6]; id.
at 118:14-16, 118:25-119:4 [Doc. #146-9]; see also Chen Dep. 133:4-19,
134:19-135:3 (testifying that J. Wang told him YMS could not sell “to North
America because [Sunfit] already [had] a contract with Hongda”) [Doc. #144-19].)
In April 2012, YMS and Sunfit formalized this understanding in a
Cooperation Agreement which purportedly19 gave YMS the exclusive right to sell to
a list of customers in Europe, but expressly forbade it from making sales in North
America. (W. Wang Decl. ¶ 43; Cooperation Agreement [Doc. #150-5]; Chen Dep.
113:4-14 [Doc. #153-15], 154:4-8 [Doc. #163-1].20) Chen acknowledged that,
even after learning that Sunfit had an agreement with Hongda that precluded
YMS’s sale of Sunfit NBPT in North America, YMS did not stop trying to sell NBPT
18
The excerpt of J. Wang’s deposition stops at the end of page 113, as she leads
into her second point, but before she testifies as to that point.
19
Although a true and correct copy of the Cooperation Agreement is attached as
Exhibit D to W. Wang’s Declaration, (W. Wang Decl. ¶ 44), it is in Chinese, (id.
¶ 43), and no translation other than the limited ones provided by W. Wang in
paragraph 43 of his Declaration and by Chen in his deposition has been provided.
20
In its brief in opposition to YMS’s motion for summary judgment, Hongda cites
Exhibit 22 of Doc. #144 to support Chen’s understanding at the time. (Doc. #156
at 4.) However, Exhibit 22 of Doc. #144, filed under seal as Doc. #153-23, is on
a different topic entirely.
23
there. (Chen Dep. 135:4-7 [Doc. #144-19].) It was “a young company”, and Chen
felt that he needed to “push . . . very hard to make sales” and described himself as
“desperate to earn any money”. (Id. at 99:12-25 [Doc. #163-1], 135:8-10 [Doc.
#144-19].)
In July 2012, YMS sold one metric ton to Agrium, by way of Shanghai
Yuman International Trading Company, also known as YMS International Trading
Company, which Chen “us[ed]” “to export” this “order to Agrium” because,
according to Chen, as a Canadian company, YMS cannot export from China but
had to use a “trading company in China” to do so. (Chen Dep. 108:5-110:24 [Doc.
#163-1].) According to Chen’s wife and majority owner of YMS, Anita Huabing
Shao, YMS “asked Shanghai Yuman to purchase that [NBPT] on its behalf, on
YMS’s behalf.” (Dep. of Anita Huabing Shao (Apr. 7, 2017) [Doc. #166-8]; (Chen
Dep. 38:4-16 [Doc. #144-2].) W. Wang also averred that the sale was to a
Chinese entity and YMS did not inform Sunfit that the ultimate customer was
Agrium. (W. Wang Decl. ¶ 40.) The purchase order, invoice, and bill of lading for
this sale identified YMS Shanghai International Trading Co. as the supplier.
(Purchase order [Doc. #144-10]; Invoice & Bill of Lading [Doc. #144-11].) Not
surprisingly, then, J. Wang testified that Sunfit did not sell NBPT to YMS, much
less to Agrium. (J. Wang Dep. 116:4-8 [Doc. #144-9].) And, W. Wang maintains
that while the Agreement between Hongda and Sunfit was in effect, Sunfit did not
“make a sale of NBPT in North America” and “that Sunfit had no knowledge of this
sale [by YMS to Agrium in July 2012] until long after this lawsuit was filed.” (W.
24
Wang Decl. ¶¶ 37, 45.) Sunfit claims that from late 2010 until October 26, 2012,
its only sales of NBPT in North America were through Hongda to its only customer
Albemarle. (W. Wang Decl. ¶ 33.)
Yet, at his deposition, Chen testified, “I purchase [sic] one metric ton from
Sunfit”, and communications for this July purchase were between Chen and
Agrium. (Chen Dep. 66:22-23 [Doc. #150-11] (emphasis added); Email from
Krishna Maruvada to Chen (July 12, 2012) [Doc. #144-10].) And, Chen and YMS
proceeded with Agrium as its apparent “long term NBPT supplier”, a choice that
Chen believed would prove “absolutely right” for Agrium. (Email from Chen to
Witte (July 23, 2012) [Doc. #144-11].)
According to Agrium’s notes from a July 23, 2012 meeting with YMS, it
understood that Sunfit operated two plants. (Email from Maruvada to Witte,
Novak, & Ben Cicora (July 24, 2012) [Doc. #144-15].) The old plant supplied
Hongda, which in turn supplied Albemarle. (Id.) “Per YMS: Hongdachem has
exclusivity for the material produced in this plant. Exclusivity is limited to sales to
Albemarle.” (Id. (emphasis in original).) Agrium believed YMS could sell product
from the old plant, as long as the end customer was not Albemarle. (Id.) On the
other hand, Agrium understood that Hongda’s exclusivity did not apply to the new
plant and that YMS was “set up to create a new channel [to] market the product []
that is outside the scope of Hongda[‘s] exclusivity.” (Id.) Agrium also noted that
there were a lot of payment issues between Hongda and Sunfit, but that, although
the Agreement was to “sunset[] in 2014”, YMS believed it would be extended
25
“due to growing business.” (Id.) According to Maruvada of Agrium, it appeared
“that YMS [was] set up to circumvent Hongda[‘s] exclusivity and to capture new
growth beyond Albemarle.” (Id.)
After the Agreement was terminated October 26, 2012, evidence shows
that YMS and Sunfit continued their relationship.21 YMS and Gavilon entered into
a sales contract for NBPT.22 (Sales Contract (Nov. 28, 2011) [Doc. #153-17]; see
also Shao Dep. 38:20-23 [Doc. #166-8].) In April 2014, Chen and J. Wang
offered a letter contract to Koch Agronomic Services, LLC on joint-YMS/Sunfit
letterhead explaining that “YMS is the marketer of NBPT-based products” for
Sunfit. (Letter from Chen and J. Wang to Koch (Apr. 11, 2014) [Doc. #153-9].)
According to J. Wang, YMS is currently selling NBPT for Sunfit in the United
States. (J. Wang Dep. at 156:4-9 (Doc. #144-18].)
II.
“Summary judgment is appropriate when, viewing the facts in the light most
favorable to the nonmoving party, ‘there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law,’ Fed. R. Civ. P.
56(a).” Groves v. Commc’n Workers of Am., 815 F.3d 177, 181 (4th Cir. 2016).
21
In support of this, Hongda asserts that in 2014, Sunfit filed “a corporate
document in China listing Mr. Chen as a Sunfit shareholder.” (See Doc. #174 at 6.)
However, the document that Hongda submitted is in Chinese and no apparent
English translation has been provided. (See Doc. #157-5.)
22
Hongda asserts that this NBPT was manufactured by Sunfit, (see Doc. #174 at
6) (citing Doc. #144-17), but that assertion is not supported by the cited exhibit,
(see Doc. #153-10), which is the YMS-Gavilon contract.
26
The moving party bears the initial burden of establishing “the basis for its motion[]
and identifying those portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,’ which
it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986) (citing Fed. R. Civ. P. 56(c)23). The
“mere existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247-48 (1986). A dispute is genuine if a reasonable
jury, based on the evidence, could find in favor of the non-moving party. Id. at
248. The materiality of a fact depends on whether the existence of the fact could
cause a jury to reach different outcomes. Id. The court cannot weigh the
evidence, by failing to credit contradictory evidence, or make credibility
determinations. Variety Stores, Inc. v. Wal-Mart Stores, Inc., 888 F.3d 651 (4th
Cir. 2018). “When faced with cross-motions for summary judgment, the court
must review each motion separately on its own merits.” Rossignol v. Voorhaar,
316 F.3d 516 (4th Cir. 2003).
III.
Hongda has moved for partial summary judgment as to liability on its claim
against Sunfit for breach of contract. [Doc. #145.] It alleged that the Agreement
23
Rule 56(c) was amended effective December 1, 2010, but the substance of the
rule did not change.
27
was a valid, enforceable contract according to which it performed all of its material
obligations, but that Sunfit breached the contract when it sold NBPT in North
America to third parties other than Hongda and proximately caused Hongda harm.
(Am. Compl. ¶¶ 47-50 [Doc. #37].) In support of its motion for partial summary
judgment, Hongda argues that it is undisputed that Sunfit sold NBPT to a North
American customer in violation of the Agreement. (Hongda’s Br. in Supp. at 7
[Doc. #146].) More specifically, Hongda argues that Sunfit “us[ed] YMS to sell
NBPT to U.S. based customer Agrium.” (Id. at 10.) In opposition, Sunfit contends
that it did not breach the Agreement; instead, Hongda did when it failed to pay
invoices timely which then excused Sunfit from further obligations under the
Agreement. (Sunfit’s Br. in Opp’n at 32-36 [Doc. #161].) Hongda responds that
the parties’ course of performance modified the payment term and any failure to
pay was Hongda’s effort towards an offset remedy for Sunfit’s breach. (Hongda’s
Reply Br. at 10-1124, 13-14 [Doc. #174].)
The Magistrate Judge recommended denying Hongda’s motion because a
genuine dispute of material fact exists “as to whether the sale of NBPT to Agrium
was a breach of the Agreement.” (Recommendation at 14.) Ultimately, “[w]hether
Sunfit sold the NBPT to YMS, or whether YMS was used as the vehicle to sell this
NBPT to Agrium – both of which would have been a violation of the Agreement –
24
Hongda cites Exhibit 1 for evidence of payments it made to Sunfit, but Exhibit 1
to Doc. #174 is deliberately blank, likely because it was supposed to be separately
filed under seal. (See Doc. #174-2.) However, the sealed version of this exhibit
does not appear to have been filed.
28
is a question of fact for the jury.” (Id.) Hongda objects to the Recommendation
because, “although there may be a question as to who the sale was made to, there
is no material question of fact that a breach occurred.” (Hongda’s Obj. at 7 [Doc.
#205].)
In response to Hongda’s objection, Sunfit cites to the recommendation that
it should prevail on its counterclaim against Hongda for breach of contract, to
which Hongda does not object, in support of its position that it “cannot be liable to
Hongda for an alleged breach of the same contract which Hongda concedes would
have occurred, if at all, after Hongda had already breached.” (Sunfit’s Resp. to Obj.
at 2 [Doc. #208].)
To understand Sunfit’s argument, it is necessary to review its counterclaim
and the associated recommendation. In its counterclaim against Hongda for breach
of contract, Sunfit alleged “[s]ince August of 2012, Hongda has defaulted in the
payment of material sums due under the [Agreement].” (Second Am. Counter-Cl.
¶ 4 [Doc. #51].) More specifically, although “[t]he relationship between Sunfit and
Hongda followed its intended contractual course from September 2011 until
August 2012,” Sunfit had received no payment from Hongda since August 2012
even though Albemarle had paid Hongda and that past due payments had
“accumulated to an aggregate in the principal sum of $5,770,050, plus interest”.
(Id. ¶ 5.) The Magistrate Judge found that the parties did not contest the
Agreement’s validity and that even “Hongda admitted that it did not remit monies
owed to Sunfit.” (Recommendation at 26.) Any anticipatory breach argued by
29
Hongda “did not affect [its] obligations under the Agreement to pay for NBPT that
has already been shipped, invoiced and received as of the date when Hongda
treated Sunfit’s alleged failure to provide adequate assurance as repudiation of the
contract.” (Id.) Therefore, “[b]ecause there is no genuine issue of material fact as
to whether Hongda failed to remit payment for NBPT shipments received from
Sunfit,” it was recommended that Sunfit’s motion as to Hongda’s contractual
liability to Sunfit be granted, (id. at 26-27), and Hongda does not object.
Therefore, Hongda is liable to Sunfit for an amount to be determined by a jury.
As for Hongda’s breach of contract claim against Sunfit, because the parties
agree that the Agreement is a valid contract, the only issue is whether Sunfit
breached its terms. See Poor v. Hill, 530 S.E.2d 838, 843 (N.C. Ct. App. 2000)
(providing the elements for a breach of contract claim). The relevant terms are:
1. Sunfit agrees to produce product NBPT exclusively for sale by Hongda
Chem USA for purchase in North America (USA and Canada), for the
period of five years from contract date. Hongda Chem USA agrees to
buy and sell NBPT only from Sunfit in China.
...
4. No material shall be sold in North America (USA and Canada) by
Sunfit directly or other representatives than Hongda Chem USA during
the time frame this agreement is in effect.
...
11. Terms of payment will be 90 days from the date of shipment.
...
13. Sunfit agrees to use Hongda Chem USA as the sole representative for
NBPT for a period of 3 years after which we can renew upon mutual
agreement. Hongda Chem USA agrees that Sunfit is the sole supplier
of NBPT in China.
...
(Agreement.)
30
It is undisputed that Agrium of Loveland, Colorado purchased NBPT
manufactured by Sunfit in July 2012 and that it did not purchase that product
from Hongda. It is also undisputed that Sunfit knew that YMS’s potential
customer touring Sunfit’s plant in March 2012 was a “US company”, whether or
not Sunfit actually knew the “US company” was Agrium. However, there are
genuine disputes of material facts including, but not limited to, to whom Sunfit
sold the NBPT in July 2012 and whether that sale violated the terms of the
Agreement in paragraphs 1, 4, and 13. The Magistrate Judge correctly determined
that genuine disputes of material fact preclude awarding Hongda summary
judgment on its breach of contract claim against Sunfit. The Recommendation as
to this motion is adopted, and Hongda’s motion for summary judgment on this
claim is denied.
IV.
A.
Sunfit has also moved for summary judgment on Hongda’s claim against it
for breach of contract. [Doc. #149.] Sunfit argues that “it is uncontroverted that
[it] had no knowledge” of the July 2012 sale to Agrium and that it was Hongda,
not Sunfit, that breached the Agreement “from its inception.” (Sunfit’s Br. in Supp.
at 17 [Doc. #150].) Sunfit further contends that its alleged breach “was not the
sale of a material amount of NBPT.” (Sunfit’s Reply Br. at 3 n.2 [Doc. #170].)
Ultimately, Sunfit argues that “Hongda has not supplied any such evidence” “that
Sunfit, as opposed to YMS, was responsible” for the sale. (Id. at 4.) Hongda
31
responds that, although knowledge is not an element of a breach of contract claim,
“key evidence from multiple sources suggests that Sunfit knew of YMS’s efforts to
market and sell Sunfit NBPT to U.S. based customers”. (Hongda’s Br. in Opp’n at
12-13 [Doc. #166].) Hongda also argues that genuine disputes of material fact
exist as to Sunfit’s true motive for terminating the Agreement. (Id. at 14-15.)
The Magistrate Judge recommended denying Sunfit’s motion for the same
reasons as he recommended denying Hongda’s motion on this same claim. Sunfit
objects on the bases that Hongda’s earlier breach “excused any potential breach by
Sunfit” and that the alleged breach “cannot be construed as ‘material.’” (Sunfit’s
Obj. at 3 [Doc. #204].)
“As a general rule, if either party to a bilateral contract commits a material
breach of the contract, the non-breaching party is excused from the obligation to
perform further.” McClure Lumber Co. v. Helmsman Const., Inc., 585 S.E.2d 234,
239 (N.C. Ct. App. 2003). Although it is recommended that Sunfit’s breach of
contract counterclaim against Hongda be granted, it cannot be determined as a
matter of law that Hongda’s breach of the Agreement excused Sunfit’s
performance as of the July 2012 sale of NBPT. Per the language of Sunfit’s
breach of contract counterclaim, Hongda’s liability did not arise until August 2012,
one month after the sale. To the extent that evidence otherwise supports an
earlier breach by Hongda that would somehow excuse Sunfit’s performance by the
time of the July 2012 sale, there is a genuine dispute of material fact as to
whether the parties’ course of performance altered the payment term. See N.C.
32
Gen. Stat. § 25-1-303 (defining course of performance). In addition, as the
Magistrate Judge found, under these circumstances, the materiality of the July
2012 NBPT sale is a jury question. See McClure Lumber Co., 585 S.E.2d at 239
(“Whether a breach is material or immaterial is ordinarily a question of fact.”).
Therefore, the Recommendation to deny Sunfit’s motion for summary judgment is
adopted.
B.
In addition, Sunfit has moved for summary judgment on Hongda’s claim that
it intentionally interfered with Hongda’s contract with Albemarle. [Doc. #149.]
Hongda alleged that Sunfit knew about its valid contract with Albemarle, yet
intentionally and without justification induced Albemarle not to perform,
proximately causing harm to Hongda. (Am. Compl. ¶¶ 53-58.) Sunfit argues that
Albemarle performed its obligations under its agreement with Hongda and decided
not to exercise its right to renew the agreement for 2013, and there is no evidence
that Albemarle breached its agreement by doing so. (Sunfit’s Br. in Supp. at 18
[Doc. #150].) Sunfit further argues that, even had Albemarle breached, Sunfit had
a legitimate business reason for interfering. (Sunfit’s Reply Br. at 6-7 [Doc. #170].)
On the other hand, Hongda points to the substance of the May 2012 meeting
between Albemarle and Sunfit as evidence that Sunfit intentionally interfered with
the contract between Albemarle and Hongda. (Hongda’s Br. in Opp’n at 16 [Doc.
#166].) Hongda also believes that the evidence shows Sunfit’s actions to be
unjustified and the proximate cause of Hongda’s harm. (Id. at 17.)
33
The Magistrate Judge recommended granting Sunfit’s motion because
“Hongda cannot show that Sunfit had ‘no legitimate business justification for the
interference’”. (Recommendation at 17.) Hongda objects to the
Recommendation’s purported reliance on disputed evidence and hearsay to
conclude that Sunfit had a legitimate business purpose when it interfered with
Hongda’s agreement with Albemarle. (Hongda’s Ojb. at 9-10 [Doc. #205].)
A plaintiff alleging intentional interference with contract must show (a) “a
valid contract existed between the plaintiff and a third person, conferring upon the
plaintiff some contractual right against the third person”, (b) that the defendant
“had knowledge of the plaintiff’s contract with the third person”, (c) that the
defendant intentionally induced the third person not to perform his contract with
the plaintiff”, (d) “that in so doing the [defendant] acted without justification”, and
(e) “that the [defendant’s] act caused the plaintiff actual damages.” Childress v.
Abeles, 84 S.E.2d 176, 181-82 (N.C. 1954). A defendant’s actions are justified
when it acts for a legitimate business purpose, such as when it acts in business
competition with the plaintiff, so long as its competitive actions are carried on in
furtherance of its own interests and by lawful means. Peoples Sec. Life Ins. Co. v.
Hooks, 367 S.E.2d 647, 650 (N.C. 1988); see also id. at 652 (recognizing
prohibited competitive means as those including fraud and misrepresentation,
among others). Thus, “[t]he privilege (to interfere) is conditional or qualified; that
is, it is lost if exercised for a wrong purpose” which, “[i]n general, . . . exists
where the act is done other than as a reasonable and [b]ona fide attempt to
34
protect the interest of the defendant which is involved.” Smith v. Ford Motor Co.,
221 S.E.2d 282, 294 (N.C. 1976).
Here, there appears to be no dispute that a valid contract existed between
Hongda and Albemarle of which Sunfit was aware. However, other than the
reference by Albemarle’s attorney to a term permitting it to cancel the contract
with Hongda, the terms of that contract are not among the evidence the parties
presented. Thus, there is no evidence that Albemarle breached the contract when
it rescinded its intent-to-renew letter and expressed its intent to cancel the
contract.
Furthermore, to the extent that Sunfit’s efforts to work directly with
Albemarle show an intent to induce Albemarle to breach its contract with Hongda
and if there were evidence to support such a breach, Sunfit’s actions served a
legitimate business purpose. Sunfit was not being paid timely by Hongda, and, to
the extent its payments were delayed by Albemarle’s payments to Hongda, it
sought to work directly with Albemarle to rectify that situation while ensuring
Hongda was paid its commissions. Sunfit did not do so with a wrongful purpose,
but, instead, acted lawfully. Therefore, the Recommendation to grant Sunfit’s
motion for summary judgment on Hongda’s claim of intentional interference with
contract is adopted.
C.
Sunfit has also moved for summary judgment on Hongda’s claim of unfair
and deceptive trade practices. [Doc. #149.] Hongda alleged that “Sunfit and YMS
35
engaged in a pattern of deception designed to deceive Hongda, misappropriate
Hongda’s efforts to develop the NBPT market in North America, and deprive
Hongda of the benefits of the [Agreement].” (Am. Compl. ¶ 78.) Further, Hongda
alleged that “Sunfit created YMS as a vehicle to sell NBPT in North America and
circumvent Hongda’s exclusivity” and “misrepresented to Hongda its sales
activities in North America and . . . its intentions to use Hongda as its exclusive
distributor of NBPT”. (Id. ¶¶ 79, 80.) Hongda also alleged that Sunfit and YMS
“solicited customers through deceptive and misleading statements”, “concealed
from Hongda their sales in North America”, used “a shell company to circumvent
the clear language of a contract”, and made “false and misleading statements to
customers so they could distort the market and deprive Hongda of substantial
revenue”. (Id. ¶¶ 79-84.)
Sunfit argues that this claim is no different than Hongda’s breach of contract
claim and there is no evidence of substantial aggravating circumstances. (Sunfit’s
Br. in Supp. at 23 [Doc. #150].) Hongda relies on the evidence of Chen’s
deceptive acts and Sunfit’s inability to explain how he was able to use Sunfit
letterhead and the company seal. (Hongda’s Br. in Opp’n at 20 [Doc. #166].)
Hongda also contends that a reasonable fact-finder could conclude that, in March
2012, when Agrium was touring Sunfit’s plant, W. Wang selected an off-site
location to meet with Perkins “in a deliberate attempt to conceal the fact that
Sunfit was, at that very moment, violating the [Agreement].” (Id.)
36
The Magistrate Judge recommended granting Sunfit’s motion because “this
is a simple breach of contract action and the evidence is insufficient to show
substantial aggravating circumstances.” (Recommendation at 24.) The Magistrate
Judge found that a jury question existed “as to whether Chen’s conduct, at the
time of the sale to Agrium, is attributable to Sunfit”. (Id. at 23.) However,
because “the evidence is clear that any misrepresented or deceptive acts . . .
would have been directed toward Agrium”, “there is no evidence that Hongda
relied upon statements or conduct that Mr. Chen displayed towards Agrium or any
other customers.” (Id. at 23-24.) Hongda objects, contending that the
“Recommendation erroneously imposes a reliance requirement” and “minimiz[es]
the fraudulent nature of Sunfit’s own conduct” and that “[m]aterial questions of
fact exist with respect to Sunfit’s sanctioning and/or rewarding YMS’s deceptive
acts.” (Hongda’s Obj. at 12, 15, 17 [Doc. #205].)
“To prevail on a claim of unfair and deceptive trade practices, a plaintiff
must show: (1) defendants committed an unfair or deceptive act or practice; (2) in
or affecting commerce; and (3) that plaintiff was injured thereby.” Carcano v.
JBSS, LLC, 684 S.E.2d 41, 49 (N.C. Ct. App. 2009). “The determination of
whether an act or practice is an unfair or deceptive practice that violations
N.C.G.S. § 75-1.1 is a question of law for the court.” Gray v. N.C. Ins.
Underwriting Ass’n, 529 S.E.2d 676, 681 (N.C. 2000). A plaintiff may not simply
allege a breach of contract, even if intentional, to support a claim of unfair and
deceptive trade practices, but instead “must show substantial aggravating
37
circumstances attending the breach to recover”. BB&T Co. v. Thompson, 418
S.E.2d 694, 700 (N.C. Ct. App. 1992).
Here, despite Sunfit’s argument and the Recommendation’s conclusion
otherwise, the evidence of Sunfit’s conduct shows substantial aggravating
circumstances to distinguish this claim from Hongda’s breach of contract claim. A
reasonable jury could find that Chen’s alleged and admitted conduct – which
would be unfair and deceptive as a matter of law – occurred and could find that
Sunfit participated in that conduct. The evidence in support of such involvement is
substantially aggravating to distinguish this claim from a breach of contract.
The Magistrate Judge also concluded that Hongda’s claim failed because
there was no evidence that it relied on Sunfit’s alleged misrepresentations to
Agrium. When a plaintiff alleges that the unfair or deceptive act or practice is the
defendant’s misrepresentation to the plaintiff, the plaintiff must “demonstrate
reliance on the misrepresentation in order to show the necessary proximate cause.”
Bumpers v. Cmty. Bank of N. Va., 747 S.E.2d 220, 226 (N.C. 2013). However,
detrimental reliance is not required in all circumstances. What is required, though,
is a showing that the defendant’s conduct proximately caused injury to the
plaintiff. Nixon v. Alan Vester Auto Grp., Inc., No. 1:07CV839, 2009 WL 382743,
at *2, *2 n.3 (M.D.N.C. Feb. 12, 2009).
Here, Hongda need not show reliance on Sunfit’s misrepresentations to
Agrium, but must otherwise show that Sunfit’s conduct proximately caused
Hongda’s injury. In addition to Sunfit’s alleged false and misleading statements to
38
Agrium that were purportedly made to “distort the market and deprive Hongda of
substantial revenue”, its alleged unfair and deceptive trade practices involve the
creation of YMS to circumvent the Agreement’s exclusivity requirement, its alleged
misrepresentations to Hongda about its sales in North America, and its
concealment of those sales in North America. Whether or not the evidence
supports a finding that Sunfit did those things and, if so, whether they proximately
caused Hongda injury are questions for a jury. Therefore, the Court declines to
adopt the Recommendation to grant Sunfit’s motion for summary judgment on
Hongda’s claim of unfair and deceptive trade practices, and Sunfit’s motion on this
claim is instead denied.
D.
In opposition to Sunfit’s motion for partial summary judgment, Hongda
argues that Rule 56(d) affords the court discretion to deny Sunfit’s motion because
Sunfit has denied Hongda “the opportunity to conduct meaningful discovery in a
number of highly relevant areas” and “such evidence is ‘essential’ for Hongda fully
to refute the claims made by Sunfit in its motion.” (Hongda’s Br. in Opp’n at 22-30
[Doc. #166] (citing Decl. of Peter A. Santos [Doc. #160-1]).) The Magistrate
Judge, who addressed all of the motions to compel in this matter, found Hongda’s
arguments to be “largely an attempt to reargue discovery issues previously brought
before the Court.” (Recommendation at 28.) In particular, the Magistrate Judge
noted, “it is unclear why Hongda failed to bring forth any new concerns prior to
the filing of dispositive motions” and recommended denying Hongda’s request. (Id.)
39
In its objection, Hongda once again requests that the Court exercises its discretion
to deny Sunfit’s motion for summary judgment. (Pl.’s & Third-Pty. Defs.’ Obj. at
24-25 [Doc. #205].)
Hongda bases its Rule 56(d) argument on Sunfit’s alleged failure to abide by
the Magistrate Judge’s February 10, 2017 order addressing Hongda’s various
motions to compel, which set March 24, 2017 as a deadline for Sunfit’s
compliance, and J. Wang’s refusal to answer certain questions in her March 30,
2017 deposition. (Hongda’s Br. in Opp’n at 22-30.) Despite Sunfit’s purported
failure to comply with discovery or the Court’s order, Hongda did not seek further
assistance from the Court. After the April 10, 2017 discovery deadline passed,
the parties filed their respective motions for summary judgment in May 2017. It
was not until Hongda responded in June 2017 in opposition to Sunfit’s partial
motion for summary judgment did it raise these issues.
The Recommendation to deny Hongda’s request is adopted, and the Court
declines to exercise discretion to deny Sunfit’s motion for partial summary
judgment based on Rule 56(d).
V.
YMS has moved for summary judgment on Hongda’s claim that it
intentionally interfered with Hongda’s contract with Sunfit. [Doc. #129.] Hongda
alleged that YMS knew about its valid Agreement with Sunfit, but intentionally and
without justification induced Sunfit not to perform, proximately causing Hongda
harm. (See Am. Compl. ¶¶ 61-65.) YMS acknowledges, for purposes of its
40
motion, that the Agreement was a valid contract about which it had knowledge,
but argues that its sale to Agrium was not a material breach and that, even if it
were, Sunfit initiated the breach according to Hongda’s allegation that Sunfit
created YMS to sell NBPT to North America. (YMS Br. in Supp. at 6 [Doc. #130].)
YMS also contends that it acted as a competitor without legal malice and that
there is no evidence that its sale to Agrium “caused any pecuniary harm to
Hongda.” (Id. at 7-8.) On the other hand, Hongda argues that YMS’s sale to
Agrium was a material breach and then focuses its arguments on YMS’s conduct
towards Agrium purportedly as further evidence of YMS’s interference. (Hongda’s
Br. in Opp’n at 7-9 [Doc. #156].) It then argues that even if YMS acted with a
legitimate business purpose, such a “concept only applies to prospective business
relations, and not established contracts.” (Id. at 11.) Hongda contends that its
resulting damages “are not limited to the single sale of NBPT to Agrium”, but also
include “all future sales to Agrium; all sales lots when Albemarle terminated the
contract with Hongda because it could no longer supply Sunfit NBPT; and potential
sales to any North American customer through late September 2016”. (Id. at 13
(internal citation omitted).)
The Magistrate Judge recommended denying YMS’s motion, finding genuine
disputes of material fact as to the materiality of Sunfit’s breach of the Agreement,
Sunfit’s awareness of YMS’s sale of NBPT to Agrium, and the effect of YMS’s
forgery and misrepresentation on its privilege to interfere as a competitor.
(Recommendation at 33-34; see also id. at 32 (noting “that Hongda’s application
41
of the law is misplaced” and that “[q]ualified immunity from liability from tortious
interference claims is not limited to prospective contractual relations”).) The
Magistrate Judge also could not conclude that Hongda had failed to show any
damages. (Id. at 34.)
YMS bases its first objection on another recommendation by the Magistrate
Judge – the uncontested recommendation to grant Sunfit’s motion for partial
summary judgment as to liability on its claim against Hongda for breach of the
Agreement. (YMS’s Obj. at 5-6 (referring to pages 24-27 of the Recommendation)
[Doc. #203].) The Magistrate Judge explained that, while the amount of damages
Hongda owes to Sunfit is disputed, “Hongda has admitted that it did not remit
monies owed to Sunfit.” (Recommendation at 26.) According to YMS, “[m]uch, if
not all, of the missed payments were before July 2012” and, “[t]hus, even before
July 2012, Hongda was substantially in breach of the [Agreement].” (YMS’s Obj.
at 5.) As a result, YMS argues, its sale of NBPT in July 2012 to Agrium, “even if
technically in violation of the terms of the [Agreement], could not amount to a
breach of contract by Sunfit because Sunfit was already relieved of its obligation
to perform by Hongda’s earlier failure to pay.” (Id.) YMS also maintains that the
sale to Agrium “is so insignificant that this Court can determine it is not material as
a matter of law” and that there is no evidence of its intent to injure Hongda, that
Hongda was injured, or that, even if it had been, that YMS’s actions caused the
injury. (Id. at 6-8.) Hongda responds that it was not in breach of the Agreement
when YMS intentionally induced Sunfit to breach, because Hongda’s and Sunfit’s
42
course of performance had modified the payment term. (Hongda’s Resp. at 4-5
[Doc. #207].) Hongda further reiterates that YMS’s breach was material and that
YMS acted with legal malice, which at the very least is a jury question, and injured
Hongda. (Id. at 9-14.)
As has previously been discussed, the recommendation to grant Sunfit’s
motion for partial summary judgment as to liability on its claim against Hongda for
breach of contract does not resolve the parties’ other claims against each other.
Despite YMS’s argument otherwise, there are genuine disputes of material facts as
to whether Hongda’s and Sunfit’s course of performance modified the Agreement’s
payment terms and, if not, exactly when Hongda failed to make timely payments
and if those failures constitute a breach that would have relieved Sunfit of its
obligations under the Agreement by the time of the July 2012 sale of NBPT.
These genuine disputes of material facts, along with those the Magistrate Judge
identified, preclude granting summary judgment on this claim. Therefore, the
Recommendation to deny YMS’s motion for summary judgment on Hongda’s claim
of intentional interference with contract is adopted.
VI.
YMS has also moved for summary judgment on Hongda’s unfair and
deceptive trade practices claim. [Doc. #129.] YMS argues that, not only does
Hongda’s claim fail because it is based on the same allegations in support of its
failed intentional interference claim, but that the claim fails on its own because
YMS’s actions were not unfair or deceptive and did not proximately injure Hongda
43
because they were directed at Agrium. (YMS’s Br. in Supp. at 9-13 [Doc. #130].25)
As expected, Hongda responds that YMS’s actions were sufficiently aggravating to
rise above a mere breach of contract and that Hongda need not have relied on
YMS’s actions towards Agrium to have been proximately harmed by them.
(Hongda’s Br. in Opp’n at 16-19 [Doc. #156].) YMS belatedly argues in its Reply
Brief that this claim does not even apply in this case, because of the territorial
limits of North Carolina’s Unfair and Deceptive Trade Practices Act. (YMS’s Reply
Br. at 11-12 [Doc. #167].) However, pursuant to the Local Rules of this Court, “A
reply brief is limited to discussion of matters newly raised in the response”, (L. Civ.
R. 7.3(h)), of which neither the appropriateness of the application nor the territorial
reach of the Act was one, (see generally Doc. #156).
The Magistrate Judge found that Chen’s admitted “conduct was not only
deceptive, but also unfair”, but recommended denying YMS’s motion due to
genuine disputes of material fact “as to causation and damages on this claim.”
(Recommendation at 35-36.) In its objection, YMS maintains that Hongda is
required to prove its reliance on YMS’s actions and that neither Hongda’s
allegations nor evidence show damages resulting from Chen’s misrepresentations
or sale to Agrium. (YMS’s Obj. at 10-13 [Doc. #203].26)
25
YMS also argues that “North Carolina does not recognize an action for civil
conspiracy”, (YMS’s Br. in Supp. at 10), but, as Hongda notes, it has not pled civil
conspiracy, (Hongda’s Br. in Opp’n at 15).
26
YMS also objects to the recommendation that “there is no issue with the
territorial limits” of the UDTPA. (YMS’s Obj. at 13.) However, as noted above,
YMS only belatedly made this argument in its Reply Brief yet it was not in
44
As discussed above, a reasonable jury could find that Chen’s conduct – that
as a matter of law would be unfair and deceptive – occurred. Furthermore, the
Magistrate Judge also correctly observed genuine disputes of material facts as to
causation and damages. Therefore, the Recommendation to deny YMS’s motion
for summary judgment on Hongda’s claim of unfair and deceptive trade practices is
adopted.
VII.
McKnight has moved for summary judgment on Sunfit’s unfair and deceptive
trade practices (“UDTPA”) claim. [Doc. #137.] Sunfit alleges that, prior to the
Agreement, McKnight, Perkins, Xu, Ego Agro Resources LLC (“Eco Agro”), Vasto
Chemical Company, Inc., and Kadi Resources, LLC conspired to create a competing
venture according to which they would manufacture NBPT in China, secretly ship
the product to the United States, and sell it. (Second Am. Countercl. ¶¶ 37-38
[Doc. #48]; see also ¶¶ 39-40.) These defendants also allegedly induced Sunfit to
manufacture and ship NBPT to Hongda for sale to Albemarle, the proceeds of
which these defendants would fraudulently transfer from Hongda to invest in their
scheme. (Id. ¶ 41.) After litigation commenced, a new entity, Eco Agro, was
organized and would take over the sale of NBPT in North American. (Id. ¶ 44.)
response to any issue Hongda raised in its brief in opposition. Therefore, as it
relates to YMS’s motion for summary judgment, this argument is not properly
before the Court.
45
McKnight focuses a lot of his summary judgment argument on Hongda’s
contractual relationship with Sunfit and its purported rights under the Uniform
Commercial Code. (See McKnight’s Br. in Supp. at 13-18 [Doc. #138].) He then
argues that Sunfit’s UDTPA claim simply arises from its breach of contract claim
against Hongda, that he is protected from liability because Hongda is a North
Carolina limited liability company, that there is an “absence of any improper act by
[him] that caused Sunfit to suffer an injury”, and that Sunfit did not rely on any
alleged misrepresentations by McKnight. (Id. at 19-23, 28-30.) McKnight also
attempts to distance himself from the related allegations against Eco Agro. (Id. at
23-28.27) In response, Sunfit argues that the evidence shows McKnight’s conduct
is sufficiently aggravated and that he is not shielded by North Carolina’s limited
liability laws. (Sunfit’s Br. in Opp’n at 6-10, 13-14 [Doc. #18].)
The Magistrate Judge recommended denying McKnight’s motion because of
“factual disputes” from which “a reasonable jury could conclude that Xu, Perkins
and McKnight conspired to commit unfair and deceptive trade practices as
evidenced through the documents of record” and that North Carolina’s limited
liability laws do not shield them. (Recommendation at 38-40.) In his objection,
McKnight argues that “the Recommendation relies on a misunderstanding of the
timeline and the terms of the contracts.” (Pls.’ & Third-Pty. Defs.’ Objs. at 4, 17-
27
Some of the exhibits that McKnight cites in support of his argument do not say
what McKnight claims they do. (See McKnight’s Br. in Supp. at 25 (citing Exs. 21,
22) & 26 (citing Ex. 24).)
46
24 [Doc. #205].) More specifically, he argues that the “Recommendation
improperly relies on internal communications made during the term of the original
2010 Sales Contract, before mutual exclusivity applied and prior to the Agreement
at issue”, that “the Recommendation ignores the fact that Sunfit has conceded
that its damages are limited to Hongda’s unpaid invoices”, and that “the Court
relies on a Hongda purchase of NBPT from Vasto, which creates a double standard
for what the Recommendation deems to be a ‘legitimate business purpose’.” (Id. at
17.)
First, there is no dispute that the 2010 Sales Contract did not require
Hongda to purchase Chinese-manufactured NBPT from Sunfit and that Hongda and
its owners were free to purchase from other sources. Nevertheless, the emails
that McKnight, Perkins, and Xu exchanged during the term of the 2010 Sales
Contract are relevant to their alleged deceptive acts at the time Hongda entered
into the Agreement and their ongoing conduct during the term of the Agreement.
In those emails, they discussed development of a new source of NBPT. As Sunfit
and Hongda negotiated the terms of the Agreement and Sunfit requested a
reciprocal exclusivity provision, Perkins expressed concern that someone was
discussing their plans to source NBPT elsewhere while Xu believed they could
work around such a provision in the Agreement. McKnight then executed the
Agreement as Hongda’s CEO. After the Agreement’s effective date, McKnight,
Perkins, and Xu continued their development of NBPT at the Jiangxi plant. The
relevance of their emails predating the Agreement cannot be disputed.
47
Next, the Magistrate Judge correctly determined that damages in this case
are to be determined by a jury. McKnight cites Sunfit’s counsel’s statement during
a hearing on a motion to compel that Sunfit was “asking for the – the amount of
money that was supposed to be paid over by the invoices” as a concession that
Sunfit’s damages are limited to Hongda’s unpaid invoices. Such a statement,
excerpted out of context from an argument on a motion to compel discovery,
cannot be determined as a matter of law to be a concession as to damages.
Finally, there is no double standard for what is determined to be a legitimate
business purpose. In contrast to the evidence of Sunfit’s sale of NBPT to
Albemarle directly, which a reasonable jury could find was done lawfully and
without a wrongful purpose, the evidence of Hongda’s purchase of NBPT through
Vasto could support a reasonable jury’s finding of deception and fraud. Prior to
the execution of the Agreement, McKnight, Perkins, and Xu discussed and
developed a new source of NBPT in China and continued to do so as they
negotiated and entered into the Agreement. Even once Hongda was a party to the
Agreement and bound by its reciprocal exclusivity provisions, McKnight, Perkins,
and Xu continued their efforts to source NBPT from the Jiangxi plant and Vasto
was integral to those prospective sales. McKnight, Perkins, and Xu planned to buy
the Jiangxi NBPT as Vasto then have Hongda purchase it from Vasto because they
believed the domestic purchase could not be tracked. As the Magistrate Judge
found, genuine disputes of material facts preclude the award of summary judgment
48
to McKnight. Therefore, the Recommendation to deny McKnight’s motion for
summary judgment is adopted.
VIII.
Perkins has also moved for summary judgment on Sunfit’s UDTPA claim.
[Doc. #139.] Sunfit’s allegations against Perkins are the same as those against
McKnight, (see Am. Countercl. ¶¶ 37-44), and Perkins’ arguments and evidence in
support of summary judgment on the claim are the same as those proffered by
McKnight, (compare McKnight’s Br. in Supp. [Doc. #138] & Index for Exs. [Doc.
#138-1] with Perkins’ Br. in Supp. [Doc. #140] & Index for Exs. [Doc. #140-1]).
The Magistrate Judge recommended denying Perkins’ motion for the same reasons
as he recommended denying McKnight’s motion. (Recommendation at 38-40.)
Unsurprisingly, Perkins’ objections to the Recommendation are identical to
McKnight’s. (See Pls.’ & Third-Pty. Defs.’ Objs. [Doc. 205].) For the same reasons
as explained above, the Recommendation to deny Perkins’ motion for summary
judgment is adopted.
IX.
As do McKnight and Perkins, Xu has moved for summary judgment on
Sunfit’s UDTPA claim. [Doc. #141.] Sunfit’s allegations against Xu are the same
as those against McKnight and Perkins, (see Am. Compl. ¶P 37-33), and Xu’s
arguments and evidence in support of summary judgment on the claim are the
same as those proffered by McKnight and Perkins, (compare McKnight’s Br. in
Supp. & Index for Exs. & Perkins’ Br. in Supp. & Index for Exs. with Xu’s Br. in
49
Supp. [Doc. #142] & Index for Exs. [Doc. 142-1]). Likewise, the Magistrate Judge
recommended denying Xu’s motion for the same reasons as he recommended
denying McKnight’s and Perkins’ motions. (Recommendation at 38-40.) And, Xu’s
objections to the Recommendation are identical to McKnight’s and Perkins’. (See
Pls.’ & Third-Pty. Defs.’ Objs.) For the reasons explained above, the
Recommendation to deny Xu’s motion for summary judgment is adopted.
X.
Eco Agro has also moved for summary judgment on Sunfit’s UDTPA claim.
[Doc. #135.] As above, Sunfit’s allegations against the individual defendants are
the same as those against Eco Agro. (Second Am. Counter-Cl. ¶¶ 37-45.) Eco
Agro’s summary judgment argument is similar to those of McKnight, Perkins, and
Xu, but it also argues that it did not commit any unfair or deceptive trade
practices, as it did not exist during the effective dates of the Agreement. (Eco
Agro’s Br. in Supp. [Doc. #136].) “[I]t is impossible for Eco Agro . . . to have been
a part of an alleged conspiracy to shift business away from Hongda to Eco Agro
when Eco Agro did not come into existence until after Sunfit had terminated the
[Agreement].” (Id. at 22.) The Magistrate Judge recommended granting Eco
Agro’s motion because Eco Agro was not formed until after the Agreement was
terminated and the emails about an NBPT coating project on which Sunfit relies are
about a different product than Eco Agro’s and did not specifically mention Eco
Agro. (Recommendation at 40-41.) Sunfit objects, arguing that the
Recommendation’s reliance on Eco Agro’s formation date and its end product is
50
error and overlooks “the unethical business practices engaged in by Eco Agro and
its principals, to the detriment of Sunfit.” (Sunfit’s Obj. at 4 [Doc. #204].)
There is no dispute that Eco Agro did not exist at that time it was alleged to
have committed unfair and deceptive trade practices. Under the facts of this case,
Eco Agro could not have acted prior to its corporate existence. Those whom a
reasonable jury could find acted tortiously have been sued, and those claims are
going forward. Therefore, the Recommendation to grant Eco Agro’s motion for
summary judgment on Sunfit’s claim of unfair and deceptive trade practices is
adopted.
XI.
The recommendations to grant Kadi’s motion [Doc. #131], deny Vasto’s
motion [Doc. #133], deny Hongda’s motion for partial summary judgment as to its
claims against YMS [Doc. #143], grant in part Sunfit’s motion as to Hongda’s
request for declaratory judgment and claim of fraud [Doc. #149], and grant
Sunfit’s motion for partial summary judgment as to its counterclaim against
Hongda [Doc. #149] are uncontested and are hereby adopted.
XII.
For the reasons stated herein, the Memorandum Opinion and
Recommendation of the Magistrate Judge is adopted except for that relating to
Sunfit’s motion for summary judgment on Hongda’s claim of unfair and deceptive
trade practices. IT IS HEREBY ORDERED THAT:
51
a. YMS Agriculture International Corp.’s Motion for Summary Judgment [Doc.
#129] is DENIED;
b. Kadi Resources, LLC’s Motion for Summary Judgment [Doc. #131] is
GRANTED;
c. Vasto Chemical Company, Inc.’s Motion for Summary Judgment [Doc.
#133] is DENIED;
d. Eco Agro Resources LLC’s Motion for Summary Judgment [Doc. #135] is
GRANTED;
e. Gary David McKnight’s Motion for Summary Judgment [Doc. #137] is
DENIED;
f. Raymond P. Perkins’ Motion for Summary Judgment [Doc. #139] is DENIED;
g. Wei Xu’s Motion for Summary Judgment [Doc. #141] is DENIED;
h. Hongda Chem USA, LLC’s and Hongda Group Limited, LLC’s Motion for
Partial Summary Judgment [Doc. #143] is DENIED;
i. Hongda Chem USA, LLC’s and Hongda Group Limited, LLC’s Motion for
Partial Summary Judgment [Doc. #145] is DENIED;
j. Shangyu Sunfit Chemical Company, Ltd.’s Motion for Summary Judgment
[Doc. #149] is GRANTED IN PART as to Hongda’s request for a declaratory
judgment and claims of intentional interference with contractual relations
and fraud and as to liability on Sunfit’s counterclaim against Hongda for
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k. breach of contract AND DENIED IN PART as to Hongda’s claims of breach of
contract and unfair and deceptive trade practices.
This the 26th day of September, 2018.
/s/ N. Carlton Tilley, Jr.
Senior United States District Judge
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