3e Mobile, LLC v. Global Cellular, Inc.

• Decision Date: 19 March 2019
• Docket Number: Case No. 14-cv-1975 (GMH)
• Parties: 3E MOBILE, LLC, Plaintiff and Counter Defendant, v. GLOBAL CELLULAR, INC. Defendant and Counter Claimant.
• Court: U.S. District Court — District of Columbia

3E MOBILE, LLC, Plaintiff and Counter Defendant, v. GLOBAL CELLULAR, INC. Defendant and Counter Claimant.

Case No. 14-cv-1975 (GMH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

March 19, 2019

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This is the rare contract case in which two fairly sophisticated parties—Plaintiff and Counter Defendant 3E Mobile, LLC ("Plaintiff" or "3E") and Defendant and Counter Claimant Global Cellular, Inc. ("Defendant" or "Global")—entered into an agreement about which they had such fundamentally different understandings that it cannot be said that they had the required "meeting of the minds" to form an enforceable agreement. That failure of accord is evidenced (and perhaps was exacerbated) in part by the vagueness of the written agreement; but it was more clearly manifested by the parties' discordant conduct during the approximately eleven months that each behaved in keeping with its apparent perception of the letter and spirit of the document. Upon consideration of the record and the evidence and testimony presented at trial,¹ the Court finds that no enforceable agreement was formed, and that, therefore, neither can be liable for breach.

I. PROCEDURAL HISTORY

This lawsuit arises from a dispute over a putative contract between 3E and Global that was entered into in September 2013. In November 2014, 3E filed its complaint alleging that Global had breached the contract, known as the Manufacturing Agreement or the Manufacturer Agreement.² ECF No. 1. In January 2015, Global filed a counterclaim alleging that 3E had breached that agreement and the implied covenant of good faith and fair dealing or that 3E had been unjustly enriched. ECF No. 5 at 9-14. 3E then filed a motion to dismiss Global's counterclaims or, in the alternative, to strike its request for attorney's fees. ECF No. 11-2. Judge Sullivan denied the motion to dismiss and motion to strike on August 11, 2015.³ See 3E Mobile, LLC v. Glob. Cellular, Inc., 121 F. Supp. 3d 106 (D.D.C. 2015).

An initial scheduling order was entered in September 2015 (ECF No. 26), and the parties engaged in discovery and attempted, unsuccessfully, to mediate the dispute (ECF No. 31). A bench trial was scheduled to begin on January 24, 2017. ECF No. 33 at 2. However, discovery disputes arose, and Global filed a motion to compel 3E to respond to document requests and interrogatories in August 2016 (ECF No. 38) and a motion for sanctions in October 2016 (ECF No. 41). In light of the pending motions, the trial date was adjourned sine die. Minute Order dated Nov. 30, 2016. Noting that 3E had not filed an opposition to Global's motion to compel, Judge Sullivan granted it on December 22, 2016. Minute Order dated Dec. 22, 2016. Judge Sullivan also granted in part and denied in part Global's motion for sanctions, finding that 3E's conduct did not merit issue-related sanctions, such as an adverse evidentiary inference, but imposing monetary sanctions inthe form of attorney's fees. 3E Mobile, LLC v. Global Cellular, 222 F. Supp. 3d 50, 57 (D.D.C. 2016). The trial date was eventually rescheduled to February 26, 2018. Minute Order dated Sept. 6, 2017.

Soon after the trial date was rescheduled, the parties consented to the jurisdiction of the undersigned for all purposes pursuant to 28 U.S.C. § 636(c) and Local Civil Rule 73.1. Minute Order dated Oct. 20, 2017. Therefter, the date for commencement of the bench trial was again rescheduled to March 20, 2018. ECF No. 65. The trial began as scheduled on that date and continued on April 19, and 20, 2018.⁴ At trial, 3E called three witnesses: Tommy Wang and Harry Wang, brothers who are the owners of 3E (ECF No. 72 at 35), and Walter Tymoczko, its Chief Financial Officer (id. at 178). Global also called three witnesses: Konstantinos (known as "Taki") Skouras, CEO of Gobal (ECF No. 80 at 54-55), Joseph Brown, Global's Chief Product Officer (ECF No. 81 at 76-77), and Susan Duan, Global's Procurement and Logistics Manager (ECF No. 79 at 10). After testimony concluded, the parties simultaneously submitted proposed findings of fact and conclusions of law on June 8, 2018 (ECF No. 86; ECF No. 87) and responses on June 22, 2018 (ECF No. 88; ECF No. 89). The Court then heard closing arguments on July 13, 2018.

II. LEGAL STANDARD

Pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, in an action tried without a jury, the Court "must find the facts specially and state its conclusions of law separately."⁵ Fed. R.Civ. P. 52(a)(1). "In setting forth the findings of fact, the court need not address every factual contention and argumentative detail raised by the parties, [n]or discuss all evidence presented at trial." Yah Kai World Wide Enters., Inc. v. Napper, 292 F. Supp. 3d 337, 344 (D.D.C. 2018) (alteration in original) (quoting Moore v. Hartman, 102 F. Supp. 3d 35, 65 (D.D.C. 2015)), appeal dismissed, No. 18-7041, 2018 WL 4641349 (D.C. Cir. May 30, 2018). "The Court is neither 'require[d]' nor 'encourage[d]' 'to assert the negative of each rejected contention as well as the affirmative of those which they find to be correct.'" Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. de C.V., 188 F. Supp. 3d 22, 34 (D.D.C. 2016) (alterations in original) (quoting Schilling v. Schwitzer-Cummins Co., 142 F.2d 82, 84 (D.C. Cir. 1944), aff'd, 743 F. App'x 457 (D.C. Cir. 2018). Instead, the Court need only "make brief, definite, pertinent findings and conclusions on the contested matters" that are "sufficient to allow the appellate court to conduct meaningful review." Yah Kai World Wide Enters., 292 F. Supp. 3d at 344 (quoting Wise v. United States, 145 F. Supp. 3d 53, 57 (D.D.C. 2015)). Such findings and conclusions "may be incorporated in any opinion or memorandum of decision the court may file." Paleteria La Michoacana, 188 F. Supp. 3d at 34 (quoting Defs. of Wildlife, Inc. v. Endangered Species Sci. Auth., 659 F.2d 168, 176 (D.C. Cir. 1981)).

III. FINDINGS OF FACT

Global is a product company and wholesaler that sells accessories for mobile devices, such as cell phone cases, to a related company, Cellairis Franchise, Inc. ("Cellairis"), which franchises kiosks in the common areas of shopping malls. ECF No. 80 at 55-56. Global, a Georgiacorporation, was founded in 2000 by Taki Skouras, who is the C.E.O. of both Global and Cellairis, Joseph Brown, the Chief Product Officer of Cellairis, and another partner. ECF No. 68-4 at 1; ECF No. 80 at 56-57; ECF No. 81 at 76-77. Global obtains its products both from manufacturers, which fabricate the products Global orders, and from wholesalers, which generally buy products that another manufacturer builds and sells them to companies like Global. ECF No. 81 at 77-78. Most of the manufacturers and wholesalers with which Global works are located in the People's Republic of China. ECF No. 80 at 63; ECF No. 81 at 77.

In 2012, Crystal Icing, LLC ("Crystal Icing"), a company that also sold cell phone cases, sued Global and Cellairis in the U.S. District Court for the Western District of New York alleging that certain of Global's cell phone cases infringed on designs copyrighted by Crystal Icing. ECF No. 80 at 64-65. In April or May of 2013, 3E, a Pennsylvania company owned by brothers Tommy and Henry Wang through their company TMD Holdings,⁶ acquired Crystal Icing for a cash payment of $10,000, assumption of $25,000 in leases, and payment of an outstanding legal bill of approximately $30,000 connected with the infringement action against Global and Cellairis. ECF No. 68-4 at 1; ECF No. 72 at 35-36, 42-43, 129, 197-98, 200. In that transaction, 3E acquired Crystal Icing's trademarks and inventory as well as its copyright infringement case. ECF No. 72 at 198-99. 3E also took on two of Crystal Icing's employees. Id. 3E is not a manufacturing company but was created for the sole purpose of acquiring Crystal Icing and another mobile accessories company (called Lex Mobile) and merging them together to become the mobile accessories division of TMD. Id. at 129.

A. Mediation of Copyright Infringement Case

In June 2013, after 3E had acquired Crystal Icing, the parties to the copyright infringement case engaged in a mediation of the dispute in Rochester, New York. ECF No. 72 at 45, 48. Global was represented by Mr. Skouras and Mr. Brown; 3E was represented by Mr. Tymoczko and Tommy Wang. Id. at 45, 179-80; ECF 80 at 67; ECF 81 at 82. During the discussions, Global became interested in 3E's representations regarding its expertise in manufacturing and sourcing products from China; 3E was intrigued by Global's representations regarding the size of Cellairis and the extent of their purchasing needs. ECF No. 72 at 45; ECF No. 80 at 67-68. The parties discussed having 3E manufacture product for Global as well as having 3E purchase products from one of Global's suppliers and provide those products to Global. ECF No. 72 at 45, 70, 160; ECF No. 80 at 72. One of the ways that the latter strategy would benefit the parties was through a Chinese intra-country tax credit (that is, a tax credit on transactions between Chinese companies) that could be realized if 3E took a purchase order from Global for goods to be sourced from China, substituted one of 3E's affiliates located in China as the buyer, and placed that modified purchase order with a Chinese supplier. ECF No. 72 at 148-151, 159-60, 177; ECF No. 80 at 73-74, 76-77; ECF No. 81 at 82. Even if 3E placed an order with one of Global's then-current Chinese suppliers, the tax credit would kick in, and 3E could share that credit with Global by discounting the price of the order. ECF No. 72 at 159-60; ECF No. 80 at 47-48, 74, 77-78.

After a day of discussions, the parties signed a term sheet. ECF No. 68-2; ECF No. 72 at 47. As relevant here, the document reflected the parties' agreement that the Crystal Icing litigation would be dismissed once a settlement agreement was executed and that Global would pay 3E $100,000 within five days of the dismissal,...