Bayco Prods., Inc. v. ProTorch Co.
| Decision Date | 21 May 2020 |
| Docket Number | Civil Action No. 4:19-CV-00648-ALM |
| Court | U.S. District Court — Eastern District of Texas |
| Parties | BAYCO PRODUCTS, INC. v. PROTORCH COMPANY, INC., SUZHOU PROTORCH CO., LTD., TIM GOETZ & ASSOCIATES LLC, HONG HUANG |
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants ProTorch Company, Inc. ("ProTorch U.S."), Suzhou ProTorch Co., Ltd. ("ProTorch China"), Tim Goetz & Associates LLC ("Goetz & Associates"), and Hong Huang also known as Henry Huang's ("Huang") (collectively, "Defendants") First Amended Motion to Dismiss the Case and Compel Arbitration (Dkt. #37). Having considered the motion and the relevant pleadings, the Court finds that the motion should be granted.
As early as 2003, Plaintiff Bayco Products, Inc. established a relationship with Changshu Minghui Appliance Co., Ltd. ("Minghui"), a Chinese manufacturer (Dkt. #33 ¶ 29). Plaintiff's business involves providing a vast array of portable and corded lighting products (Dkt. #33 ¶ 14), and Plaintiff used Minghui as an Original Equipment Manufacturer ("OEM") for several of Plaintiff's products (Dkt. #33 ¶¶ 21, 29). The President and owner of Minghui is Huang, who is also a majority owner of ProTorch China and ProTorch U.S. (Dkt. #33 ¶¶ 34, 36, 39).
On March 31, 2010, Plaintiff and Minghui entered into an OEM Agreement (Dkt. #33 ¶ 32). As alleged by Plaintiff, the "OEM Agreement expressly stated that Minghui's (or Minghui's Affiliates) will not sell, market, or solicit orders regarding the OEM Products in any market . . ." (Dkt. #33 ¶ 33). Indeed, Plaintiff asserts that "the selling or provision of OEM Products by Minghui's (or Minghui's Affiliates) to any third party are unauthorized sales or marketing, especially any sale of similar products to Bayco's existing or prospective customers" (Dkt. #33 ¶ 33).
Plaintiff alleges that ProTorch China receives manufactured goods from Minghui and then represents itself as the OEM for products used, sold, imported, and offered for sale by ProTorch U.S. (Dkt. #33 ¶ 43). Specifically, Plaintiff claims that ProTorch U.S. and ProTorch China sell various electronic portable lighting products, retractable cord reels/reels and lightbulb changer kits in the United States, particularly to Lowe's Companies, Inc. ("Lowe's") (Dkt. #33 ¶ 41). ProTorch U.S. and ProTorch China's relationship with Lowe's is how the last defendant, Goetz & Associates, comes into play.
Plaintiff previously employed Tim Goetz as its National Accounts Manager during July 1998 through December 2005 (Dkt. #33 ¶ 43). According to Plaintiff, one of Mr. Goetz's key accounts when he worked for Plaintiff was Lowe's (Dkt. #33 ¶ 43). It appears that Mr. Goetz formed a company, Goetz & Associates, after Plaintiff terminated Mr. Goetz (Dkt. #33 ¶ 44). Plaintiff used Goetz & Associates as a manufacturer's representative after signing a Manufacturer's Representative Agreement ("MRA") effective January 1, 2006 (Dkt. #33 ¶ 44). According to Plaintiff, Goetz & Associates breached the MRA's NDA and secured a sales contract between ProTorch U.S. and Lowe's related to ProTorch products (Dkt. #33 ¶ 48). In fact, Plaintiff repeatedly refers to Goetz as an agent of Defendant ProTorch U.S. and Defendant ProTorch China in its complaint (Dkt. #33 ¶¶ 82, 84, 128-31, 134, 136-37).
Plaintiff asserts federal and common-law trademark infringement, federal and common-law unfair competition, and federal trade dress infringement against ProTorch U.S., ProTorch China, and Huang (Dkt. #33). Plaintiff asserts violation of the Texas Uniform Trade Secrets Act and violation of the Defend Trade Secrets Act against all Defendants (Dkt. #33). Plaintiff also has two breach of contract claims: Plaintiff alleges that Huang is liable for breach of the "Business Secret" Section of the March 31, 2010, OEM Agreement between Minghui and Plaintiff, and Plaintiff alleges that Goetz breached his duty under the "Confidential Information" Section of the January 1, 2006, MRA between Goetz and Plaintiff (Dkt. #33).
Plaintiff and Minghui entered into an OEM Agreement on March 31, 2010, where Minghui agreed to "manufacture various electronic portable lighting products (OEM products)" for Plaintiff (Dkt. #33 ¶ 32; Dkt. #33, Exhibit 6). Several provisions of the OEM Agreement are relevant to Defendants' Motion to Dismiss the Case and Compel Arbitration.
The OEM Agreement defines Minghui as "Party A" and Plaintiff as "Party B" (Dkt. #33, Exhibit 6). The OEM Agreement also contemplates actions taken by Minghui's affiliates in performance of the OEM Agreement:
Party A's affiliates mentioned in this agreements [sic] refer to other enterprises, organizations or individuals associated with Party A including but not limited to its factories, organs, subsidiaries, etc. according to China's existing tax laws, regulations and files.
(Dkt. #33, Exhibit 6 ¶ 1.6). The OEM Agreement then provides that Minghui "will not sell into, solicit orders from, nor market (either passively or actively) OEM products into any market worldwide" (Dkt. #33, Exhibit 6 ¶ 5.3). The OEM Agreement explicitly lists the following acts as unauthorized sales or marketing:
(Dkt. #33, Exhibit 6). And the OEM Agreement provides that:
article 5.3 in this chapter shall bind Party A's affiliates. Party A or its affiliates shall stop infringements (if any) upon receiving written notification from Party B and be liable for breach of agreement as well as pay compensation to Party B.
(Dkt. #33, Exhibit 6 ¶ 5.4). Minghui is also liable for "breach of contract if Party A or Party A's affiliates infringe the agreement." (Dkt. #33, Exhibit 6 ¶ 9.4.2).
The OEM Agreement's arbitration clause reads as follows:
Any dispute should firstly be negotiated to be resolved between both parties. In case any negotiation fails, the dispute shall be submit [sic] to CHINA INTERNATIONAL ECONOMIC AND TRADE ARBITRATION COMMISSION, SHANGHAI COMMISSION.
(Dkt. #33, Exhibit 6 ¶ 10.1). The only signatories to the OEM Agreement are Minghui and Plaintiff (Dkt. #33, Exhibit 6).
Plaintiff filed suit on September 9, 2019 (Dkt. #1). On December 31, 2019, Defendants filed their first Motion to Dismiss the Case (Dkt. #20). Defendants also filed a Motion to Stay Case Pending Resolution of Defendants' Motion to Compel Arbitration and Dismiss on February 3, 2020 (Dkt. #25). Plaintiff filed an Amended Complaint on March 20, 2020 (Dkt. #33).
On April 10, 2020, Defendants filed their First Amended Motion to Dismiss the Case and Compel Arbitration (Dkt. #37). Plaintiff responded on April 17, 2020 (Dkt. #38).1 Defendants filed their reply on April 24, 2020; Plaintiff filed its sur-reply on April 27, 2020 (Dkt. #45; Dkt. #46). The Court heard argument regarding Defendants' First Amended Motion to Dismiss on May 12, 2020 (Dkt. #51).2
Interspersed with the proceedings before the Court are several arbitration proceedings. On December 6, 2019—after negotiating with Plaintiff pursuant to the OEM Agreement's arbitration clause—Minghui, ProTorch China, and ProTorch U.S. filed an arbitration petition in the Shanghai International Economic and Trade Arbitration Commission ("SHIAC") (Dkt. #37 at p. 10). SHIAC instituted the arbitration the same day (Dkt. #37 at p. 10). Minghui, ProTorch China, and ProTorch U.S. later submitted supplemental arbitration requests to SHIAC that they claim encompass all of Plaintiff's claims in this lawsuit (Dkt. #37 at p. 10). SHIAC's arbitration tribunal was formed on February 17, 2020, and it accepted all of the supplemental arbitration requests the following week (Dkt. #37 at p. 10). As both parties represented to the Court during the May 12, 2020 hearing, SHIAC scheduled a hearing for this arbitration on June 6, 2020 (Dkt. #52).
Plaintiff also filed an arbitration petition against Minghui in SHIAC on February 28, 2020 (Dkt. #37 at p. 11). SHIAC instituted the arbitration filed by Plaintiff (Dkt. #37 at p. 11). As both parties represented to the Court during the May 12, 2020 hearing, SHIAC also scheduled a hearing for this arbitration on June 6, 2020 (Dkt. #52).
Defendants seek dismissal—or alternatively, a stay pending arbitration—of this suit based on an arbitration clause under either Rule 12(b)(1) or Rule 12(b)(3) (Dkt. #37 at p. 11).
Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a case for lack of subject matter jurisdiction when the district court lacks statutory and constitutional power to adjudicate the case. Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). If a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the Court will consider the jurisdictional attack under Rule 12(b)(1) before addressing any attack on the legal merits. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).
In deciding the motion, the Court may consider "(1) the complaint alone; (2) the complaint supplemented by the undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the [C]ourt's resolution of disputed facts." Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008) (quoting Barrera-Montenegro v. United States, 74 F.3d 657, 659 (5th Cir. 1996)). The...
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