Chih Shen Chen v. Inteplast Grp., Ltd.
| Decision Date | 31 March 2014 |
| Docket Number | Case No. 4:12–cv–0618. |
| Citation | 11 F.Supp.3d 824 |
| Parties | CHIH SHEN CHEN, et al., Plaintiffs and Counter–Defendants, v. INTEPLAST GROUP, LTD., Defendant and Counter–Plaintiff. |
| Court | U.S. District Court — Southern District of Texas |
John June–Chul Na, Minh Tam Tran, The Tammy Tran Law Firm LP, Houston, TX, for Counter–Defendants.
Neil Kenton Alexander, Porter & Hedges, L.L.P., Houston, TX, for Counter–Plaintiff.
This case is before the Court on Defendant and Counter–Plaintiff Inteplast Group, Ltd.'s (“Inteplast”) Motion for Partial Summary Judgment [Doc. # 52] (“Inteplast's Motion for Summary Judgment”) and on Plaintiff and Counter–Defendant Chih Shen Chen's (“Gary Chen”) Motion for Partial Summary Judgment [Doc. # 55] (“Gary Chen's Motion for Summary Judgment”).1 Also before the Court are Defendant Inteplast's Motion for Judicial Notice of Foreign Law [Doc. # 33] and Plaintiffs Gary Chen and Alpha Plastics (Vietnam) Co. Ltd. (“APV”, and together with Gary Chen, “Plaintiffs”)'s Motion for Judicial Notice of Foreign Law [Doc. # 56]. These motions are ripe for consideration.2 Having reviewed the parties' briefing, the applicable legal authorities, and all matters of record, the Court grants in part and denies in part Inteplast's Motion for Summary Judgment, grants in part and denies in part Gary Chen's Motion for Summary Judgment, and denies Inteplast's Motion for Judicial Notice of Foreign Law and Plaintiffs' Motion for Judicial Notice of Foreign Law.
The background facts of this case are hotly contested. Because both parties have moved for summary judgment, the Court presents each party's description of the facts, to the extent those descriptions are supported by the evidence of record.3
Inteplast is a North American manufacturer and purchaser of plastic bags. In addition to purchasing plastic bags directly from foreign companies, Inteplast also outsources the manufacturing of bags to foreign companies.4 After creating or purchasing the bags, Inteplast sells them to retailers, such as Macy's and Albertsons.5
Like Inteplast, Plaintiff Gary Chen is also in the business of manufacturing plastic bags. Gary Chen's companies include or have included Alpha Plastics, Inc. and Spring Packaging, both Texas companies involved in the plastic bag industry.6 Gary Chen also previously held an ownership interest in a Chinese company named Hong Jie that manufactured and sold plastic bags.7
In 2004, the United States Department of Commerce imposed anti-dumping tariffs on plastic bags imported from China, including those from Hong Jie.8 As a result, Gary Chen, along with two other investors, Mi–Yi Chen and Ming–Chih Wang, created a Vietnamese company, Alpha Plastics (Vietnam) Co., Ltd. (“APV”).9 At the time, Vietnam was not subject to anti-dumping tariffs.10 Gary Chen claims that he created APV at the suggestion of Inteplast, who told him either to relocate to Vietnam or lose Inteplast's business.11
APV was organized as a limited liability company (“LLC”) under the laws of Vietnam.12 Of APV's original three shareholders, only Minh–Chih Wang was initially registered as a shareholder with the Vietnamese government.13 In 2008, APV was re-registered as a two-member LLC, with Gary Chen as the Chairman of the Board of Principal Members and Mi–Yi Chen as General Director and “legal representative.”14 From November 28, 2008 to July 5, 2013, Mi–Yi Chen was the sole legal representative of APV.15 On July 5, 2013, Gary Chen acquired all of Mi–Yi Chen's shares and interest in APV and became APV's legal representative.16
In 2005, Inteplast paid $180,000 in order to acquire a 20% shareholder interest in APV.17 A year later, Inteplast invested another $180,000 to acquire another 20% interest in APV, for a total of 40%.18 Inteplast asserts that Gary Chen stated and orally agreed to register Inteplast as a shareholder with the proper Vietnamese authorities.19 Inteplast never actually acquired these shares under Vietnamese law.20
In 2006, APV sought to expand its capacity, at a cost of $1.5 million.21 With the expansion, APV anticipated that its Vietnam plant would be able to produce 1,000 tons of plastic bags per month, and expected to export 900 tons of T-shirt bags per month.22 On May 22, 2006, APV and Integrated Bagging Systems, Inc. (“IBS”), a division of Inteplast,23 appear to have entered into an agreement (the “May 22, 2006 Agreement”), memorialized in writing, in which APV agreed to increase its production of T-shirt bags for export to 900 tons per month, and to produce and supply to IBS 700–750 tons per month of T-shirt, merchandise, and wave-top bags.24 IBS agreed to purchase 600–650 tons per month of bags from APV.25
Inteplast made two additional capital contributions to APV. It contributed $200,000 and $100,000 on January 12, 2007, and April 10, 2007, respectively, to fund the proposed plant expansion.26 Inteplast asserts, in this connection, that Gary Chen stated and orally agreed to contribute an equal amount of capital to APV on a pro rata basis.27 Gary Chen claims that he also contributed $300,000 in this time frame towards the plant expansion by transferring money to an account of Alpha Century Global in Taiwan.28 However, according to Mi–Yi Chen, a former shareholder of APV, neither he nor Gary Chen ever contributed additional capital to APV after Inteplast became a shareholder.29
Inteplast also made several loans to APV. Inteplast loaned APV $756,000 in 2007 in order to cover a shortfall in the expansion plan resulting from APV's inability to obtain a bank loan.30 In 2008, Inteplast loaned APV another $500,000, paid in several installments.31 Here too, Inteplast asserts that Gary Chen orally agreed that if Inteplast would loan this money to APV, he would cause APV to increase its production to 900 tons per month.32
As part of Inteplast's 2008 loans, Gary Chen entered into a Personal Guarantee Agreement (“PGA”) in favor of Inteplast.33 The PGA provides that Gary Chen (the “Guarantor”) “unconditionally guarantees prompt payment when due of any existing or future Indebtedness” of APV (the “Debtor”).34 The version of the PGA signed by Gary Chen on July 17, 2008 contains a provision that “[t]his Guarantee Agreement will become and void once INTEPLAST acquires security interest on Debtor's property” (the “Nullity Provision”).35 The version of the PGA sent by Ben Tseng on behalf of Inteplast to Gary Chen on July 16, 2008 did not contain the Nullity Provision.36 Gary Chen asserts that “[he] did not want to execute the personal guarantee but Inteplast promised [him] that the guarantee would be and void once Inteplast had a security interest in property of APV” and he “substantially relied on that promise and executed the guarantee.”37 Inteplast, in contrast, asserts that Gary Chen added the Nullity Provision without notice to or the agreement of Inteplast.38 The PGA, by its terms, is governed by New Jersey law.39
The parties' relationship deteriorated in 2009. Inteplast “substantially reduced” its plastic bag purchases from APV in June of that year and completely stopped purchasing from APV that August.40 APV paid interest on Inteplast's loans through July 2009 and ceased all payments thereafter.41
At some point in 2009, the United States imposed anti-dumping tariffs on the import of plastic bags from Vietnam.42 The tariffs were applied to APV.43 In August 2010, Inteplast, Gary Chen, and Mi–Yi Chen decided to close APV and try to sell the company.44 The shareholders were not able to make a sale.45 APV terminated its plastic bag production in 2010 and has been out of business since then.46
Meanwhile, on March 16, 2007, in connection with Inteplast's $756,000 loan to APV, APV (as “Pledgor”) and Inteplast (as “Pledgee”) entered into a Chattel Pledge Agreement (“CPA”).47 In the CPA, APV “pledged” to Inteplast “the unmovable property and equipment ... located at Trang Bang industrial park, Trang Bang District, Tay Ninh Province,” which is the location of APV itself.48 That property reportedly had, at the time of signing, a value of $1,506,0000.49 According to Inteplast, APV never delivered any of this property to Inteplast.50 There is no record of APV or Gary Chen having registered Inteplast's loans with Vietnam's Centre for Regulation of Transactions and Assets.51 The CPA, by its terms, is governed by Vietnamese law.52
On February 13, 2012, over two years after APV's plant ceased operating and after this lawsuit was filed, Gary Chen, on behalf of APV, signed and delivered to Inteplast a pledge agreement (“First Pledge Agreement”).53 There is no evidence that the document was ever counter-signed by Inteplast.54 Under the First Pledge Agreement, APV (the “Pledgor”), “in order to secure a line of credit in the amount of $1,256,000,” conveyed a security interest in “all of Pledgor's rights, title, and interest in property of Pledgor, including fixtures and equipment,” which is described as the building and factory located at 7th Street—Industrial Zone of Trang Bang in An Tinh, Vietnam.55 The First Pledge Agreement recites that it is governed by Texas law.56
Finally, on July 11, 2013, more than a year after the First Pledge Agreement, Gary Chen, on behalf of APV, signed a second pledge agreement (“Second Pledge Agreement”) in favor of Inteplast.57 Like the First Pledge Agreement, the Second Pledge Agreement is not counter-signed by Inteplast. The Second Pledge Agreement conveys to Inteplast a security interest in “all of Pledgor's rights, title and interest in all property of Pledgor including all equipment and inventory, and all fixtures” and stated it is signed “in order to secure a line of credit in the amount of $1,256,000.”58 The Second Pledge Agreement does not contain a choice of law provision.
On January 31, 2012, Gary Chen filed this suit against Inteplast,...
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