Aaron Macgregor & Assocs., LLC v. Zhejiang Jinfei Kaida Wheels Co.

• Citation: 328 F.Supp.3d 906
• Decision Date: 20 June 2018
• Docket Number: CASE NO.: 3:15–cv–00254–MGG
• Parties: AARON MACGREGOR & ASSOCIATES, LLC and Future International, LLC, Plaintiffs, v. ZHEJIANG JINFEI KAIDA WHEELS CO., LTD., Future Industrial & Trading, Inc., and Ge Bingzao, Defendants. Zhejiang Jinfei Kaida Wheels Co., Ltd., Counter-claimant/Third–Party Plaintiff, v. Aaron, MacGregor & Associates, LLC, Counter-defendant, and Aaron Zou, Third–Party Defendant.
• Court: U.S. District Court — Northern District of Indiana

328 F.Supp.3d 906

AARON MACGREGOR & ASSOCIATES, LLC and Future International, LLC, Plaintiffs,

v.ZHEJIANG JINFEI KAIDA WHEELS CO., LTD., Future Industrial & Trading, Inc., and Ge Bingzao, Defendants.

Zhejiang Jinfei Kaida Wheels Co., Ltd., Counter-claimant/Third–Party Plaintiff,

v.Aaron, MacGregor & Associates, LLC, Counter-defendant,andAaron Zou, Third–Party Defendant.

CASE NO.: 3:15–cv–00254–MGG

United States District Court, N.D. Indiana, South Bend Division.

Signed June 20, 2018

Alexander R. Carlisle, Thomas R. Ruge, Tabitha L. Balzer, Lewis & Kappes PC, Indianapolis, IN, for Plaintiffs.

Hong Lu, Josephine Brosas, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, John A. Conway, LaDue Curran & Kuehn LLC, South Bend, IN, for Defendants.

OPINION AND ORDER

Michael G. Gotsch, Sr., United States Magistrate Judge

This case stems from a business relationship gone bad in the world of vehicle parts sales. Aaron Zou ("Zou"), president and founder of Aaron, MacGregor & Associates, LLC ("AMA"), met the Chairman of Zhejiang Jinfei Kaida Wheels Co., Ltd. ("Jinfei"), Bingzao Ge ("Ge"), on a trip to China in 2011 for a business conference. Zou and Ge began discussions that continued after Zou returned to Indiana about forming a new company in Elkhart through which AMA could assist Jinfei as it expanded into the recreational vehicle market in Elkhart. The two companies executed agreements to govern their new business relationship. Jinfei sought approval from the Chinese government to invest in the new American company. Zou hosted Jinfei employees in Indiana and facilitated meetings between Jinfei and prospective American clients.

Ultimately, things went south and the AMA–Jinfei relationship, as embodied in the creation of Future International, LLC ("Future International"), deteriorated. Jinfei decided to launch a separate business entity for its work, Future Industrial & Trading, Inc. ("FIT"). AMA and Zou claim Jinfei employed subterfuge to circumvent the parties' contractual relationship related to Future International while Defendants allege Zou misrepresented what he and AMA could do on Jinfei's behalf in Indiana before the contracts were executed. Through competing claims in this lawsuit, the parties allege damages arising from the demise of the business relationship that started with Zou and Ge's introduction at that 2011 business conference in China.

Now the Court has been presented with two motions for partial summary judgment, filed within a day of each other at the end of December 2017, that seek to eliminate all but the primary breach of contract claims between the parties. In their motion filed on December 28, 2017, Counterdefendant AMA and Third–Party Defendant Zou ask the Court to grant summary judgment as to all counterclaims by Jinfei. [DE 69]. Specifically, AMA and Zou challenge Jinfei's counterclaims of breach of fiduciary duty against AMA only and unjust enrichment, conversion, fraud against AMA and Zou. Through their motion filed on December 29, 2017, Defendants Jinfei, FIT, and Ge, seek summary judgment on Plaintiffs AMA's and Future International's claims of unjust enrichment; unfair competition under state and federal law; federal trademark infringement and false designation of origin; as well as all claims against Ge. [DE 73].

These are not clean motions for summary judgment, however. This case has been contentious throughout as evidenced by Defendants' previous motion for sanctions under Fed. R. Civ. P. 11, 28 U.S.C. § 1927, and the Court's inherent authority to manage its docket ("the Original Motion for Sanctions"), alleging that Plaintiffs had not conducted reasonable pre-complaint inquiry into their claims. The Court denied Plaintiffs' Original Motion for Sanctions without prejudice on October 30, 2017. [DE 64]. However, the parties' frustrations with each other did not subside as became clear through two motions filed within two days of the motions for summary judgment, both of which arguably seek to punish the nonmovants for their approach to this litigation.

First, Defendants renewed their motion for sanctions ("the Renewed Motion for Sanctions"), seeking once again dismissal of all Plaintiffs' claims with prejudice citing additional evidence in support of allegation that Plaintiffs did not conduct reasonable pre-complaint inquiry into their claims. [DE 72]. Second, Plaintiffs filed a motion to compel seeking (1) complete discovery responses from Defendants related to requests made in 2016; (2) additional discovery related to the key issue of "use in commerce" on Plaintiffs' federal trademark infringement and false designation of original claim to support their opposition to Defendants' motion for summary judgment; and (3) discovery of Defendants' computers not ever requested before. [DE 75].

Lastly, Defendants have filed multiple objections to evidence Plaintiffs submitted in support of the Renewed Motion for Sanctions and the two motions for summary judgment. [DE 85, 90, 92, 98]. The Court heard oral argument on all these outstanding matters on April 26, 2018. The undersigned now issues the following opinion and order with jurisdiction conferred by the consent of the parties and 28 U.S.C. § 636(c).

I. RELEVANT BACKGROUND

A. Factual Background

As part of their joint efforts to sell vehicle parts in Indiana, AMA and Jinfei agreed to form Future International. In December 2011, Zou, on behalf of AMA, registered Future International as an LLC with the State of Indiana. Three contracts were executed between AMA and Jinfei to govern the funding, development, and management of Future International.

The first two contracts¹ , executed on February 26, 2012, ("the February 2012 Contracts") provided that AMA and Jinfei would both invest money to form Future International, an Indiana business entity that would purchase automotive parts from Jinfei for resale to American customers. The contracts more specifically provided that Jinfei would invest 90% of the funds in the amount of $270,000, while AMA would invest 10% of the funds in the amount of $30,000. The contracts also divided profits 90% to Jinfei and 10% to AMA.

In the contracts, AMA agreed to use his legal, tax, and business expertise in the American RV and automotive industries to help Jinfei's Chinese representatives build a warehouse for its products and conduct and solicit business in the United States. AMA was expected to lease a vehicle and an apartment as well for the Jinfei's representatives to use while visiting from China. In return, Jinfei agreed to fund the leases and to participate jointly with AMA in meetings with prospective American customers. The parties agreed that any results of their joint efforts would become the property of Future International.

Both AMA and Jinfei took steps to develop Future International. AMA facilitated the leases of the vehicle and apartment. Jinfei provided AMA with $30,000 for that purpose. Jinfei expended time and resources seeking Chinese approval of their investment in Future International. Yet by October 2012, neither company had invested in Future International. AMA chose not to invest before Jinfei did and Jinfei was waiting to invest until it received approval from the Chinese government. By October 2012, Jinfei had repeatedly told AMA that the approval had not yet been granted.

Therefore, AMA and Jinfei executed a new contract in October 2012 changing the parameters of their business relationship. The October 2012 Contract provided that AMA would transfer its 10% ownership in Future International to Jinfei while Jinfei would pay a consulting fee to AMA to compensate for its work for Future International back to February 2012. Jinfei also agreed to pay AMA a monthly consulting fee through November 2013. At the same time and at Jinfei's request, AMA canceled the apartment lease but maintained the vehicle lease for Jinfei. Yet AMA never transferred its ownership in Future International to Jinfei and Jinfei allegedly never paid AMA the consulting fees.

However, on January 31, 2013, Jinfei and Ge registered FIT as a corporation without AMA's knowledge. Through the complaint in this action filed in 2015, AMA and Future International allege that FIT is still operating and retaining all the profits generated as the result of AMA's work with Jinfei for Future International. The operative amended complaint includes claims for breach of the three contracts, breach of fiduciary duty, unjust enrichment, unfair competition, and trademark infringement. Jurisdiction for this action arises from 28 U.S.C. § 1331 and AMA and Future International's Lanham Act ( 15 U.S.C. § 1051 et seq. ) claim for federal trademark infringement.

II. ANALYSIS

A. Defendants' Evidentiary Objections

As a preliminary matter, Defendants filed objections to assorted evidence Plaintiffs submitted in support of the instant motions. Despite Defendants' multiple objections, the Court only needed to rely upon one piece of evidence that Defendants' challenged—Zou's Affidavit about how he spent the $30,000 Jinfei wired to AMA and whether he or AMA received any benefit from the $30,000—to resolve the relevant motions. [See DE 92 at 3 (citing DE 69–2 at ¶¶ 32–33) ]. As to Zou's Affidavit, Defendants argue that Zou is making improper legal conclusions about the definition of the term "benefit" in connection with various claims in this action. Additionally, Defendants contend that Zou's accompanying chart of expenditures lacks foundation because the chart is not the best evidence of the alleged use of monies and Jinfei disputes whether Zou actually spent the money as he claims.

Defendants' grounds for objection are not enough to justify exclusion of these statements in Zou's Affidavit in consideration of AMA and Zou's motion for partial summary judgment. First, Defendants cite only to Fed. R. Evid. 701/702 in support of their objection of improper legal opinion without directing the Court to any further interpretation to show that the term "benefit" in the...