HONGDA CHEM USA, LLC et al v. SHANGYU SUNFIT CHEMICAL COMPANY, LTD.
Filing
331
MEMORANDUM OPINION AND ORDER signed by JUDGE CATHERINE C. EAGLES on 03/10/2020, that the plaintiffs' and third-party defendants' motion for a new trial or new trial nisi remittitur in the alternative, Doc. 320 , is DENIED IN PART and GRANTED IN PART as follows: 1. The plaintiffs' and third-party defendants' motion for a new trial nisi remittitur, Doc. 320 , is GRANTED in part to the following limited extent: a. Sunfit's Chapter 75 da mages from Hongda are remitted to $3, and its Chapter 75 damages from Gary David McKnight, Raymond Perkins, Wei Xu, and Vasto Chemical, Co., are remitted to $29,601,105 each. b. Sunfit has the option of accepting the reduced awards or pr oceeding to a new trial on the Chapter 75 damages as against all of the movants. c. If Sunfit consents to remittitur, it shall file its consent in writing no later than March 23, 2020, and the Court will enter the attached amended judgment. If Sun fit does not file written consent, the Court will vacate the parts of the judgment awarding Chapter 75 damages and order a new trial on that issue only. 2. The plaintiffs' and third-party defendants' motion for a new trial, Doc. 320 , is otherwise DENIED. (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.
SHANGYU SUNFIT CHEMICAL
COMPANY, LTD.,
Third Party Plaintiff,
v.
GARY DAVID MCKNIGHT;
RAYMOND P. PERKINS; WEI XU;
and VASTO CHEMICAL COMPANY,
Third Party Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
1:12-CV-1146
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
In October 2019, after a seven-day trial, a jury returned a verdict finding that
Hongda Chemical USA, LLC failed to pay for many tons of a chemical fertilizer additive
known as NBPT that Hongda ordered and received from Shangyu Sunfit Chemical
Company, Ltd., in breach of a contract with Sunfit, and that Hongda, its owners, and an
affiliated company engaged in a large-scale fraudulent scheme related to these purchases.
The jury awarded Sunfit millions of dollars in damages for Hongda’s breach of
contract—specifically, $9,867,035—based largely on a stipulation as to the amount of
unpaid invoices.
The jury also found that Hongda, its owners, and the affiliated company never
intended to pay for all of the NBPT that Hongda ordered from Sunfit; used the money
Hongda obtained from selling the NBPT to fund other business enterprises instead of
paying Sunfit, as Hongda had agreed to do; competed with Sunfit in deliberate violation
of an exclusivity provision in the contract; and made misrepresentations in furtherance of
the fraudulent scheme. The jury awarded Sunfit $9,867,035 in breach of contract
damages and $6,000,000 over and above that for Hongda’s unfair and deceptive trade
practices under N.C. Gen. Stat. § 75-1.1, and $15,867,035 in unfair trade practices
damages against Hongda’s owners and Vasto Chemical Company, the affiliated
company.
Hongda, its owners, and Vasto now ask for a new trial or, in the alternative,
remittitur. The evidence was overwhelming that Hongda, its owners, and Vasto
committed unfair trade practices that were part and parcel of Hongda’s refusal to pay for
the NBPT, and to the extent the jury awarded unfair trade practices damages against
Hongda’s owners and Vasto in the amount of money equal to the breach of contract
damages, that award is well-supported by the evidence. But as the unfair trade practices
damages were larger than the breach of contract damages and appear to have been based
on a lost profits theory that Sunfit did not disclose pre-trial, remittitur is appropriate as to
the remainder of the Chapter 75 damages.
2
FACTS1
David McKnight, Ray Perkins, and Wei Xu organized Hongda2 in late 2010 for
the purpose of manufacturing and distributing chemical products. See Doc. 1 at ¶ 12.
That same year, Sunfit and Hongda began doing business with each other under a oneyear distribution agreement. Sunfit, a Chinese company, sold NBPT it manufactured in
China to Hongda for distribution in North America. NBPT was much in demand in the
United States, and Hongda’s principals had a relationship with an American buyer.
In 2011, the parties entered into an exclusive sales contract wherein Hongda
agreed it would only buy Chinese-manufactured NBPT from Sunfit, and Sunfit agreed it
would only sell its NBPT to North American buyers through Hongda. Doc. 1-1. The
contract had a minimum purchase provision requiring Hongda to buy at least one million
pounds of NBPT a year from Sunfit for the first two years, and a minimum of two million
pounds a year by 2014. Id. at ¶ 5.
Under this contract, Hongda ordered and Sunfit shipped thousands of pounds of
NBPT to Hongda, for which Hongda was required to pay within 90 days from shipment.
1
For most facts recited, the Court does not provide a citation to the record, as the parties did
not provide a complete trial transcript and the facts are based on the Court’s memory of the
evidence. The Court has cited some of the exhibits made part of the record pre-trial, but all such
documentary evidence cited was admitted at trial.
2
The plaintiffs are Hongda Chem USA, LLC and Hongda Group Limited, LLC, but for
purposes of this case they acted and have been treated as one entity. The court will do the same
here. While there was some dispute at trial about Mr. Xu’s role with Hongda, viewed in the light
most favorable to Sunfit he was at least an owner and a director. Each of the individual thirdparty defendants was involved in the operation of Hongda, and the evidence showed that they
acted together and on each other’s behalf. For simplicity, the Court will refer to Mr. Xu, Mr.
McKnight, and Mr. Perkins collectively as “the owners.”
3
Id. at ¶ 11. While Hongda paid for some of the NBPT, Hongda was consistently late in
paying invoices, and it quickly grew behind in what it owed Sunfit. Hongda blamed
these late payments on its buyer, but the evidence showed that Hongda’s buyer was
paying Hongda on time or close to it, at a price higher than what Sunfit charged Hongda,
and that Hongda often used a factoring service to obtain earlier payment as well. Instead
of paying Sunfit, Hongda and its owners used these moneys to fund Hongda’s business
operations and transferred large sums of money to other entities they owned. Emails
between the owners made it clear that they never intended to pay Sunfit for all the NBPT,
but instead were planning to cheat Sunfit the entire time.
Despite the exclusivity provision in the 2011 contract with Sunfit, from day one
Hongda and its owners were working to identify a different Chinese source of NBPT,
including the possible establishment of their own NBPT plant in China. In order to avoid
detection, the owners established a new limited liability company, the third-party Vasto,
through which they made at least one sale to a U.S. company of Chinese NBPT they got
from someone other than Sunfit. Their plan was to find an excuse to terminate the
contract with Sunfit as soon as they had an alternative source for NBPT, thus cutting
Sunfit out of the American market and increasing their own profits. As Hongda had no
other significant customers or business other than Sunfit, it was essentially using money
it owed Sunfit to create a company to compete with Sunfit and take over its market share.
By the summer of 2012, Hongda was seriously behind on paying invoices, and
Sunfit was no longer willing to ship NBPT to Hongda until it was paid for the overdue
invoices. Hongda began claiming, without credible evidence, that Sunfit was violating its
4
obligations under the exclusivity provision, which Sunfit denied. Sunfit stopped
shipments and gave Hongda notice that it would terminate the contract if Hongda did not
bring the account current. Hongda did not do so and instead filed this lawsuit claiming
that Sunfit breached the 2011 exclusive sales contract by selling NBPT to another North
American company in violation of the contract. Doc. 1. Sunfit counterclaimed against
Hongda alleging state law claims for breach of contract, conversion, Chapter 75
violations, fraudulent transfer, and quantum meruit. Doc. 51. Sunfit also sued Hongda’s
owners and Vasto for unfair trade practices and for making fraudulent transfers. Id.3
At summary judgment, the evidence was undisputed that Hongda had bought tons
of NBPT from Sunfit for which it had failed to pay. Doc. 209 at 30. Summary judgment
was thus granted in favor of Sunfit on its claim that Hongda had breached the contract, id.
at 52–53, though there remained disputes over the amount Sunfit was entitled to recover
as a result of the unpaid invoices and whether the breach of contract damages should
include the amount of a VAT tax Sunfit had paid. Hongda’s breach of contract claim and
most of Sunfit’s state law claims, including the Chapter 75 unfair trade practices claims,
also remained for trial.
Trial began on October 7, 2019. Minute Entry 10/07/2019. In support of its
breach of contract claim, Hongda presented evidence that on one occasion Sunfit sold a
3
Sunfit made claims against other third-party defendants as well, but those claims were
dismissed along the way and will not be discussed further.
5
small amount of NBPT to YMS Agriculture International Corp.,4 which YMS then sold
to a United States customer. Hongda had not known of this sale before filing suit, and it
was not a basis for Hongda’s claims before termination that Sunfit was violating the
exclusivity provision. But at trial Hongda contended this sale constituted an intentional
breach of the exclusivity provisions by Sunfit. Sunfit’s evidence showed that it did not
know YMS would sell the NBPT in the United States; the sales of NBPT to Hongda, if
Hongda had paid, would have been very profitable for Sunfit (with a minimum profit of
$3 million a year); and Sunfit thus had no motive to violate the exclusivity provision with
a one-time sale of an insignificant amount of NBPT.
On its counterclaim for breach of contract, Sunfit sought damages in the amount of
the unpaid invoices, plus interest and VAT taxes.5 The parties stipulated to the amount
on unpaid invoices and the interest, $9,061,729, and to the amount Sunfit had paid in
VAT taxes, $805,306, leaving it to the jury to determine if those taxes should be included
in the damages award. See Doc. 286. Sunfit did not ask the jury for lost profits in
connection with the breach of contract claim.
As to its extra-contractual claims, Sunfit offered substantial and credible evidence
of many unfair trade practices, as discussed infra. During closing argument, counsel for
4
Well into the litigation and based on information learned in discovery, Hongda added YMS
as a defendant, contending that YMS had interfered with Hongda’s contract with Sunfit. The
jury ruled in favor of YMS on this claim, and Hongda has not raised any argument that this
verdict should be vacated. Therefore, the Court will leave YMS out of it from here on.
5
The evidence showed that upon shipping the NBPT out of China, Sunfit had to pay a valueadded tax (“VAT”). If Sunfit was paid in China for the NBPT within a certain amount of time,
the VAT tax would be refunded. As a result of Hongda’s failure to pay, Sunfit was not able to
obtain refunds of the VAT taxes paid.
6
Sunfit argued that damages flowing from the unfair and deceptive acts included the
$9,867,035 in breach of contract damages plus $12 million for lost profits on the
minimum purchases Hongda was required to make under the contract. Doc. 321-2 at 27–
28. Without objection, counsel for Sunfit pointed out that the contract had four more
years to run at the time of Hongda’s breach and reminded jurors of testimony by Sunfit’s
representative that Sunfit would have made a minimum of $3 million in profits each of
those four years had the contract continued for the full term. Id. Counsel for Sunfit
asked the jury to award Chapter 75 damages in the amount of $12 million against
Hongda, and $12 million plus the contract damages of $9,867,035 against each of
Hongda’s owners and Vasto. Id.6
In rebuttal argument, Sunfit’s counsel reiterated that the contract required Hongda
to buy one million pounds of NBPT per year and referred to testimony that Sunfit had a
“30 percent [profit] margin” on NBPT it sold to Hongda, which he contended supported
the $3 million per year calculation. Id. at 28–29. At this point, counsel for Hongda made
a non-specific objection, a motion for new trial, and a motion to strike, which the Court
denied. Id. at 29.7
Following closing arguments, the Court instructed the jury on the law and how it
should calculate its award of damages on the various claims if they were reached. Doc.
6
Counsel for Sunfit made no other suggestion to the jury about the amount of Chapter 75
damages, and it has pointed to no other evidence in the record that puts a dollar amount on, or
from which the jury could have calculated, its Chapter 75 damages.
7
The parties have not provided a transcript of any further discussion of this objection outside
the jury’s presence.
7
309. As to Sunfit’s Chapter 75 claims, the Court instructed the jury that if they found
Sunfit had proven that Hongda, its owners, or Vasto had committed unfair or deceptive
trade practices in or affecting commerce that damaged Sunfit, “then Sunfit is entitled to at
least nominal damages of $1, and if [Sunfit proved] actual damages by the greater weight
of the evidence, to any actual damages flowing from the specific misrepresentations or
conduct.” Id. at 30. The Court further instructed the jury that it should not include any
damages awarded against Hongda on Sunfit’s breach of contract claim in its calculation
of damages for Sunfit’s Chapter 75 claim against Hongda. Id. at 31. However, the Court
did instruct the jury that it could include the damages for breach of contract in its Chapter
75 damage awards against Vasto, David McKnight, Ray Perkins, and Wei Xu, but only if
these damages flowed from the specific conduct it found in violation of Chapter 75. Id.
The jury returned a verdict in Sunfit’s favor. Doc. 307. The jury found that Sunfit
was entitled to recover $9,867,035 for Hongda’s breach of contract, which was the total
of the unpaid invoices and the unrefunded VAT taxes, and rejected Hongda’s claim that
Sunfit had breached the contract. Id. at ¶¶ 1–2. The jury also found that Hongda, its
owners, and Vasto had each engaged in various specific acts that the Court had concluded
during the charge conference constituted unfair and deceptive trade practices in violation
of Chapter 75. Id. at ¶ 15.8 The jury awarded Chapter 75 damages against Hongda on
Specifically, the jury found that Hongda “[e]nter[ed] into the 2011 contract with Sunfit with
the intent to disregard and breach the exclusivity provisions,” ¶ 15(a), and “[c]onceal[ed] its sale
of Plant J NBPT to North America from Sunfit,” ¶ 15(g); that Hongda and its owners
“conspire[d] in the creation of Vasto as a vehicle to sell NBPT in North America and circumvent
Sunfit’s exclusivity,” ¶ 15(c), “[p]articipate[d] in and support[ed] the development of an NBPT
8
8
this claim in the amount of $6,000,000 and against the third-party defendants in the
amount of $15,867,035. Id. at ¶ 16. The jury also concluded that Hongda had
fraudulently transferred $2.75 million that rightfully belonged to Sunfit to other entities
connected to Hongda’s owners. Id. at ¶¶ 7–8.
The Court entered judgment in accordance with these findings, trebling the
Chapter 75 damages as authorized by North Carolina law. N.C. Gen. Stat. § 75-16.
Thus, judgment was entered against Hongda for breach of contract in the amount of
$9,867,035 and for unfair trade practices in the amount of $18,000,000, calculated by
trebling the jury award of $6,000,000. Doc. 319 at 2. The Court trebled the jury verdict
of $15,867,035 against the owners and Vasto and entered judgment against them in the
amount of $47,601,105. Id. The Chapter 75 judgments were joint and several.
Hongda, its owners, and Vasto have now filed a motion for a new trial or, in the
alternative, for remittitur. Doc. 320. At most, they make only passing reference to the
jury’s other liability verdicts and breach of contract damages. Instead, they direct their
attention almost in total to the unfair trade practices damages, which they contend were
not supported by the evidence and were unfair.
APPLICABLE LEGAL PRINCIPLES
plant in China to circumvent Sunfit’s rights [to] exclusivity,” ¶ 15(d), and “[m]isrepresent[ed]
Hongda’s sale activities in North America to Sunfit,” ¶ 15(e); and that Hongda, its owners, and
Vasto “[e]ngage[d] in a pattern of deception designed to deprive Sunfit of the benefits of the
contract between Hongda and Sunfit,” ¶ 15(b), and “[a]ctively solicit[ed] customers of North
America to purchase NBPT manufactured in China by Plant J other than Sunfit.” ¶ 15(f).
9
A court should grant a motion for a new trial only if the verdict (1) is against the
clear weight of the evidence, (2) is based upon evidence which is false, or (3) will result
in a miscarriage of justice. Bryant v. Aiken Reg’l Med. Ctrs. Inc., 333 F.3d 536, 543 (4th
Cir. 2003).9 Unlike a motion for judgment as a matter of law, the district court may
weigh evidence, assess credibility, and exercise its discretion in ruling on a motion for
a new trial. Bristol Steel & Iron Works, Inc. v. Bethlehem Steel Corp., 41 F.3d 182, 186
(4th Cir. 1994); see also Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 (4th Cir.
1998).
Under Rule 59(a) of the Federal Rules of Civil Procedure, a court may order a new
trial nisi remittitur if it “concludes that a jury award of compensatory damages is
excessive,” Sloane v. Equifax Info. Servs., LLC, 510 F.3d 495, 502 (4th Cir. 2007), or
will result in a miscarriage of justice. Bennett v. Fairfax Cty., 432 F. Supp. 2d 596, 599–
600 (E.D. Va. 2006). Remittitur is a process whereby a “trial court orders a new trial
unless the plaintiff accepts a reduction in an excessive jury award.” Atlas Food Sys. &
Servs., Inc. v. Crane Nat. Vendors, Inc., 99 F.3d 587, 593 (4th Cir. 1996). The
permissibility of remittitur is well-settled and if a reviewing court concludes that a verdict
is excessive, “it is the court’s duty to require a remittitur or order a new trial.” Id.
Whether damages are excessive is a decision “entrusted to the sound discretion of the
district court.” Robles v. Prince George’s Cty., 302 F.3d 262, 271 (4th Cir. 2002); see
also Fontenot v. Taser Int’l, Inc., 736 F.3d 318, 334 (4th Cir. 2013).
9
The Court omits internal citations, alterations, and quotation marks throughout this opinion,
unless otherwise noted. See United States v. Marshall, 872 F.3d 213, 217 n.6 (4th Cir. 2017).
10
A district court sitting in diversity must apply substantive state law standards when
it considers a motion for a new trial or for remittitur based upon the jury’s damage award.
Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 438–39 (1996); Konkel v. Bob
Evans Farms, Inc., 165 F.3d 275, 280 (4th Cir. 1999). Under North Carolina law and as
relevant here, a new trial may be granted for excessive damages “appearing to have been
given under the influence of passion or prejudice,” as well as for “[i]nsufficiency of the
evidence to justify the verdict.” N.C. Gen. Stat. § 1A-1, Rule 59(a)(6)–(7). In the
context of a motion for a new trial, insufficiency of the evidence means the verdict was
“against the greater weight of the evidence.” Justus v. Rosner, 371 N.C. 818, 825, 821
S.E.2d 765, 770 (2018). Discretionary remittitur is also appropriate under North Carolina
law if the party obtaining the judgment consents when a verdict “exceeds the evidence.”
See Redevelopment Comm’n of Durham v. Holman, 30 N.C. App. 395, 397, 226 S.E.2d
848, 849–50 (1976) (citing N.C. Gen. Stat. § 1A-1, Rule 59).
ANALYSIS
Hongda does not seriously challenge the jury’s finding on the amount of damages
awarded for the breach of contract claim, which was consistent with the parties’
stipulation. See Doc. 286. Nor do Hongda, its owners, and Vasto challenge the
sufficiency of the evidence to support the jury’s findings that they each committed the
numerous specified acts found by the jury. They do not challenge the jury’s conclusion
that Hongda engaged in fraudulent transfers nor do they seek to overturn the verdict that
Sunfit did not breach the contract. See Doc. 321.
11
Indeed, it would be difficult to do so. The evidence at trial was overwhelming that
Hongda ordered NBPT from Sunfit at an agreed-upon price, that it sold this NBPT to its
own customers at a higher price, and that Hongda rarely paid on time and never paid at
all for millions of dollars’ worth of NBPT it received from Sunfit. Instead Hongda used
that money to pay its own business expenses, and, along with its owners and Vasto, to
fund competing ventures in violation of the exclusivity provision in the contract with
Sunfit. There is plenary evidence to support the jury’s findings that Hongda never
intended to live up to its obligations under the exclusivity provisions in the 2011 contract
and that Hongda and its owners engaged in a pattern of deception intended to deprive
Sunfit of the benefits of the contract, conspired to create Vasto to circumvent the
contractual exclusivity provisions, participated in and supported the development of a
NBPT plant in China to circumvent the contract, misrepresented Hongda’s sales activities
in North America to Sunfit, and actively solicited customers to purchase NBPT in
violation of the exclusivity provisions.
These acts, especially taken together, constitute the kind of unfair and deceptive
trade practices for which Chapter 75 creates a cause of action. See Marshall v. Miller,
302 N.C. 539, 543–48, 276 S.E. 2d 397, 400–403 (1981) (noting Chapter 75 was enacted
with the purpose “to declare, and to provide civil means to maintain, ethical standards of
dealing between persons engaged in business . . . .” (quoting N.C. Gen. Stat. § 75-1.1(b)
(1975))); see also White v. Thompson, 364 N.C. 47, 52–53, 691 S.E.2d 676, 679–80
(2010). While Hongda makes a cursory effort to say that these acts are not in fact unfair
trade practices, noting that a breach of contract by itself is not an unfair trade practice,
12
that legal proposition does not apply here. The unfair and deceptive acts and practices
found by the jury and the evidence and testimony presented at trial more than
demonstrate that this breach was “surrounded by substantial aggravating circumstances”
sufficient to constitute unfair and deceptive trade practices. Griffith v. Glen Wood Co.,
184 N.C. App. 206, 217–18, 646 S.E.2d 550, 558–59 (2007) (collecting cases).
To the extent Hongda, its owners, and Vasto move for a new trial on the liability
issues decided by the jury and the amount of breach of contract damages, the motion is
denied.
Hongda, its owners, and Vasto do contend that the jury’s verdict awarding
damages for Sunfit’s unfair trade practices claims is against the clear weight of the
evidence and that upholding the verdict would result in a miscarriage of justice. See Doc.
321. Putting aside Hongda’s unwarranted attacks on Sunfit’s counsel, which are
frivolous and warrant no discussion, their primary contention is that the damages amount
was calculated based on evidence of lost profits, which was not admitted for that purpose
and which if allowed to stand would result in a miscarriage of justice.
At trial, Sunfit had the burden of presenting evidence of damages for its Chapter
75 claims based upon a standard from which the jury could calculate damages “with
reasonable certainty,” and which was “sufficiently specific and complete to permit the
jury to arrive at a reasonable conclusion.” Compton v. Kirby, 157 N.C. App. 1, 17, 577
S.E.2d 905, 915 (2003).
As all parties agree, the only evidence supporting the jury’s $6 million award
against Hongda for unfair and deceptive trade practices came from Sunfit’s lost profits
13
calculation based on the contract’s minimum purchase requirement. See supra n. 6.10
While Sunfit’s counsel suggested $12 million, calculated at $3 million in lost profits for
each of the four years remaining on the contract after Hongda breached and Sunfit
cancelled, the jury chose half that amount. There was some evidence that the contract
would only be in place for three years, not five, so it may be that the jury found Sunfit
had been injured by losing profits of $3 million per year for two years instead of four, or
it may be that the jury concluded four years of damages was too speculative or was
otherwise inappropriate.
There was evidence to support the argument made by Sunfit and the lost profit
calculations made by the jury. Sunfit’s representative, Weihang Wang, was
knowledgeable about the plant in China where the NBPT was manufactured and with the
finances of Sunfit, and he testified that Sunfit’s profit margin on one metric ton of NBPT
was at least $6,000. Doc. 321-1 at 21–22. The 2011 contract between Sunfit and Hongda
required Hongda to buy a minimum of one million pounds of NBPT a year from Sunfit.
Doc. 1-1 at ¶ 5. The math comes to roughly $3 million in annual profit. The plain
language of the contract imposed that minimum purchase obligation on Hongda for five
years, as one of Hongda’s owners testified. Doc. 1-1 at ¶ 1; Doc. 324-1 at 3–4.
10
The Court instructed the jury not to include any damages for breach of contract in the
Chapter 75 damages it awarded against Hongda in an effort to avoid any jury confusion over
duplication of damages. In view of the jury’s findings on liability, it would have been
appropriate to treble the breach of contract damages found by the jury as damages for the unfair
trade practices when entering judgment. See discussion supra. Apparently deciding that one
can’t get blood from a turnip, see Doc. 330, Sunfit did not ask the Court to do so.
14
Without deciding whether this evidence was sufficient to support the jury’s
damages finding, the Court concludes that the evidence from Mr. Wang about the profit
margin was not admissible to establish lost profits and that a remittitur is appropriate in
the unusual situation here. While Mr. Wang’s testimony was relevant to the disputed
issue of whether Sunfit breached the exclusivity provisions, it was not admissible to
establish lost profits as an element of damages because Sunfit did not give notice in its
Rule 26(a)(1)(A)(iii) disclosures that it would be relying on evidence of lost profits to
form the basis for unfair trade practices damages. See Docs. 330-1, 330-2; see also
Silicon Knights, Inc. v. Epic Games, Inc., No. 5:07-CV-275-D, 2012 WL 1596722, at *2
(E.D.N.C. May 7, 2012) (“When a party ‘fails to provide information . . . as required by
Rule 26 (a) or (e), the party is not allowed to use that information . . . at a trial, unless the
failure was substantially justified or is harmless.’” (quoting Fed. R. Civ. P. 37(c)(1)).11
The testimony from Mr. Wang arose in the context of explaining why Sunfit had
no motive to breach the exclusivity provisions in the contract with Hongda and was
11
Hongda attempts to rely on two discovery disputes to support its view that Sunfit never
sought lost profits. See Doc. 321 at 4–6. The evidence is much weaker than Hongda contends.
As Sunfit’s closing argument made clear, the lost profits it sought from the jury were calculated
based on the minimum amounts of NBPT Hongda was required to purchase per year, not on lost
sales to other entities. The minimum amount was set forth in the contract and was unaffected by
whether Sunfit did or did not make sales to other entities. The discovery disputes were related to
Sunfit’s sales to other entities, not to the minimum sale requirement. One of those was related to
Sunfit’s damages claim against a third-party defendant no longer in the case, Doc. 169-9, and the
other arose from Hongda’s desire to use this information to prove its own damages, not because
it needed the information to rebut any claim by Sunfit for damages based on lost sales. See
Docs. 98, 108. Given that Sunfit’s closing argument was based solely on the minimum
purchases required by the contract and not on actual or hypothetical post-breach sales to other
entities, these discovery disputes offer only minimal support for Hongda’s position.
15
admissible for that purpose. In the absence of an indication from Sunfit that it would be
seeking lost profits damages in connection with its Chapter 75 claim, Hongda had no
reason to object to this testimony or to ask for a limiting instruction. See Fed. R. Evid.
105 (noting evidence may be admissible for one purpose but not for another). Moreover,
had Sunfit disclosed that it would be seeking lost profits on the minimum sales required
under the contract as part of its Chapter 75 claim, Hongda would have almost certainly
cross-examined Mr. Wang on this point at trial. Without Mr. Wang’s testimony about
profit margins, the evidence is insufficient to support the jury’s finding that the conduct
of Hongda, the owners, and Vasto caused Sunfit to lose profits on the required minimum
purchases.12
Because the $6 million verdict against Hongda “exceeds the evidence,”
Redevelopment Comm’n, 30 N.C. App. at 397, 226 S.E.2d at 850, the Court will remit the
unfair trade practices damages against Hongda and enter judgment in the sum of $3—$1
in nominal damages, trebled—on this claim. See Estate of Hurst ex rel. Cherry v.
Moorehead I, LLC, 228 N.C. App. 571, 583–85, 748 S.E.2d 568, 577–78 (2013) (plaintiff
awarded $1 in nominal damages, and thus $3 in treble damages for unfair practices
violation); Pinehurst, Inc. v. O'Leary Bros. Realty, 79 N.C. App. 51, 61, 338 S.E.2d 918,
924–25 (1986).
12
During discussions with Hongda post-trial, Sunfit seems to have either agreed
substantively or decided this was not an issue worth fighting. Noting that the judgment “is
almost as valuable as Monopoly money,” Sunfit proposed dropping the lost profits award and
submitting a proposed final judgment “in the amount of $9,867,035, trebled, against each of the
losing parties,” but the other parties did not agree. Doc. 330 at ¶ 6. As noted supra at note 10,
such an award against Hongda for Chapter 75 damages would have been appropriate.
16
All parties also agree that the jury’s Chapter 75 damages determination against
Hongda’s owners and Vasto was based on the same $6 million in lost profits plus the
contract damages of $9,867,035, for a total of $15,867,035. For the same reasons set
forth as to Hongda, the Court will remit the lost profits component of $6 million.
But as to the remaining damages, no remittitur is appropriate. Sunfit demonstrated
with more than reasonable certainty that the unfair and deceptive trade acts and practices
committed by Hongda’s owners and Vasto were part of a scheme that directly led to
Hongda’s refusal to pay for the NBPT it ordered and received. See TradeWinds Airlines
v. C-S Aviation Servs., 222 N.C. App. 834, 842, 733 S.E.2d 162, 169 (2012) (“The
measure of damages applicable to claims for . . . unfair and deceptive trade practices is
broad and remedial[, and it] encompass[es] the concept of awarding such damages as will
restore the plaintiff to his, her, or its original condition.”).
Here, for example, Sunfit would not have sold NBPT to Hongda on credit had
Hongda’s owners not consistently and repeatedly misrepresented Hongda’s intentions or
if they had known that Vasto was competing with Sunfit on behalf of Hongda and its
owners in violation of the exclusivity clause. Nor can it be disputed that Hongda’s
refusal to pay Sunfit was the result of the unfair actions of Hongda’s owners and Vasto to
circumvent the contract. Damages in the amount of the unpaid invoices and unrefunded
VAT taxes meet the statutory goal of providing the victim of the unfair trade practices
“that which was lost as far as it may be done by compensation in money.” Bernard v.
Central Carolina Truck Sales, Inc., 68 N.C. App. 228, 233, 314 S.E.2d 582, 585 (1984);
see also TradeWinds, 222 N.C. App. at 841–42, 733 S.E.2d at 169.
17
Hongda contends that these damages should be remitted or vacated because a
breach of contract standing alone cannot give rise to a Chapter 75 claim. But as noted
supra, there was more than a breach of contract here. The evidence that Hongda’s
owners and Vasto were involved in a fraudulent scheme involving many unfair trade
practices was more than credible and sufficient—it was overwhelming.
The method the jury used to calculate the damages is clear from the circumstances,
and the amount of the unpaid invoices was undisputed at trial, as was the amount Sunfit
paid in VAT taxes that it was unable to recover because of the fraudulent scheme to
obtain NBPT without paying for it. The evidence fully supports the jury’s finding,
inherent in the verdict under the circumstances here, that Sunfit was entitled to recover
damages in an amount equal to the breach of contract damages, $9,867,035, from
Hongda’s owners and Vasto. Hongda has identified no evidentiary errors that even
arguably led to this finding. There is nothing to indicate that the lost profits evidence
affected this aspect of the damages award. The Court sees no reason to remit these
damages.
Therefore, the Court will remit the judgment amount as to these defendants and
reduce it to $9,867,035, trebled to $29,601,105.
Remittitur requires Sunfit’s consent. See, e.g., Weeks v. Holsclaw, 306 N.C. 655,
662–63, 295 S.E.2d 596, 601 (1982) (noting a court may allow remittitur with consent of
the plaintiff). In view of Sunfit’s most recent filing and the reasoning of this order, the
Court assumes Sunfit will consent. The Court will, however withhold entry of an
amended judgment to make sure its assumption is correct. Should Sunfit not consent, the
18
Court will grant the motion for a new trial, but only on the issue of what amount of
damages Sunfit is entitled to recover from Hongda, the owners, and Vasto for Chapter 75
damages.
CONCLUSION
Over the course of the week-long jury trial, Sunfit put on strong and compelling
evidence that Hongda, its owners, and Vasto engaged in a fraudulent scheme to obtain
NBPT from Sunfit without paying for it, to misappropriate money owed to Sunfit and use
it for their own purposes, and to unfairly compete with Sunfit despite an agreement to the
contrary. In furtherance of this scheme, Hongda, its owners, and Vasto engaged in the
numerous unfair and deceptive acts and practices discussed supra, which were proven at
trial. The evidence was more than sufficient for the jury to find in Sunfit’s favor.
However, because the jury’s unfair and deceptive trade practices damages were based in
part on a lost profits theory that Sunfit did not disclose it would pursue before trial,
remittitur is proper, if Sunfit consents.
It is ORDERED that the plaintiffs’ and third-party defendants’ motion for a new
trial or new trial nisi remittitur in the alternative, Doc. 320, is DENIED IN PART and
GRANTED IN PART as follows:
1. The plaintiffs’ and third-party defendants’ motion for a new trial nisi
remittitur, Doc. 320, is GRANTED in part to the following limited extent:
a. Sunfit’s Chapter 75 damages from Hongda are remitted to $3, and its
Chapter 75 damages from Gary David McKnight, Raymond Perkins,
Wei Xu, and Vasto Chemical, Co., are remitted to $29,601,105 each.
19
b. Sunfit has the option of accepting the reduced awards or proceeding
to a new trial on the Chapter 75 damages as against all of the
movants.
c. If Sunfit consents to remittitur, it shall file its consent in writing no
later than March 23, 2020, and the Court will enter the attached
amended judgment. If Sunfit does not file written consent, the Court
will vacate the parts of the judgment awarding Chapter 75 damages
and order a new trial on that issue only.
2. The plaintiffs’ and third-party defendants’ motion for a new trial, Doc. 320,
is otherwise DENIED.
This the 10th day of March, 2020.
__________________________________
UNITED STATES DISTRICT JUDGE
20
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
1:12-CV-1146
HONGDA CHEM USA, LLC, and
HONGDA GROUP LIMITED, LLC,
Plaintiffs,
-againstSHANGYU SUNFIT CHEMICAL
COMPANY, LTD. and YMS
AGRICULTURE INTERNATIONAL
CORP.,
Defendants.
SHANGYU SUNFIT CHEMICAL
COMPANY, LTD.,
Third-Party Plaintiff,
-againstGARY DAVID MCKNIGHT; RAYMOND
P. PERKINS; WEI XU; and VASTO
CHEMICAL COMPANY, INC,
Third-Party Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
AMENDED FINAL JUDGMENT
WHEREAS, this matter came on for trial before a jury beginning on October 7,
2019.
WHEREAS, the jury returned its verdict on October 15, 2019. Doc. 307.
WHEREAS, the jury was presented with a special verdict sheet regarding the
parties’ claims for unfair and deceptive trade practices under N.C. Gen. Stat. § 75-1.1.
WHEREAS, Defendant and Third-Party Plaintiff Shangyu Sunfit Chemical
Company (“Sunfit”) and Defendant YMS Agriculture International, Corp. (“YMS”) have
moved for entry of judgment, pursuant to Rule 58 of the Federal Rules of Civil Procedure,
against Plaintiffs Hongda Chem USA, LLC and Hongda Group Limited, LLC (“Hongda”)
and Third-Party Defendants Gary David McKnight, Raymond P. Perkins, Wei Xu, and
Vasto Chemical Company, Inc. (“Vasto”) (the “Third-Party Defendants”).
WHEREAS, the Court concludes, as a matter of law, that the conduct engaged in
by Hongda and the Third-Party Defendants was unfair or deceptive in violation of N.C.
Gen. Stat. § 75.1.1.
WHEREAS, the Court has granted the motion by Hongda and the Third-Party
Defendants for remittitur, Doc. ___, and Sunfit has consented. Doc. ___.
NOW THEREFORE, IT IS HEREBY ORDERED AND ADJUDGED THAT:
1.
Hongda is liable to Sunfit for breach of contract in the amount of $9,867,035;
2.
Hongda’s conduct, as found by the jury, was unfair or deceptive, in
commerce, and injured Sunfit in violation of N.C. Gen. Stat. § 75-1.1;
3.
Hongda is liable to Sunfit for violation of N.C. Gen. Stat. § 75-1.1 for
damages distinct from the breach of contract damages in the amount of $1 trebled to $3
pursuant to N.C. Gen. Stat. § 75-16;
4.
The conduct of the Third-Party Defendants, as found by the jury, was unfair
or deceptive, in commerce, and injured Sunfit in violation of N.C. Gen. Stat. § 75-1.1;
2
5.
The Third-Party Defendants are liable to Sunfit for violations N.C. Gen. Stat.
§ 75-1.1 in the amount of $9,867,035 trebled to $29,601,105 pursuant to N.C. Gen. Stat. §
75-16;
6.
Hongda fraudulently transferred $1,000,000 and $750,000 to DravCo, Inc.
(“DravCo”) on September 17, 2012 and September 26, 2012, respectively, in violation of
N.C. Gen. Stat. § 39-23.1 et seq. (2012). Those transfers are avoided pursuant to N.C. Gen.
Stat. § 39-23.7 (2012).
7.
Hongda fraudulently transferred $1,000,000 to Carolina Wine Distributor,
LLC (“Carolina Wine”) on August 21, 2012 in violation of N.C. Gen. Stat. § 39-23.1 et
seq. (2012); that transfer is avoided pursuant to N.C. Gen. Stat. § 39-23.7 (2012).
8.
Pursuant to North Carolina General Statutes § 1-358, the Court hereby
enjoins Hongda, Vasto, McKnight, Perkins, Xu, Carolina Wine and/or DravCo from
transferring, disposing of, or in any manner interfering with their respective property that
is not exempt from execution of Judgment.
9.
The Clerk of the Court is directed to enter final judgment in this matter
against Hongda and in favor of Sunfit forthwith in the amount of $9,867,038.
10.
The Clerk of the Court is directed to enter final judgment in this matter
against the Third-Party Defendants and in favor of Sunfit forthwith in the amount of
$29,601,105;
11.
The Court hereby dismisses with prejudice Hongda’s remaining claims
against Sunfit and YMS in this action; and
3
12.
Taxable costs are awarded to Sunfit and YMS as the prevailing parties in this
matter. Any award of attorneys’ fees shall be addressed by a separate Judgment.
SO ORDERED: This the ____ day of March, 2020.
__________________________________
UNITED STATES DISTRICT JUDGE
4
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?