Daredevil, Inc. v. ZTE Corp.
| Decision Date | 26 November 2019 |
| Docket Number | Case No. 4:12 CV 01166 RWS |
| Parties | DAREDEVIL, INC., Plaintiff, v. ZTE CORP., Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
Plaintiff Daredevil, Inc. (Daredevil) sued ZTE USA, a wholly-owned subsidiary of Defendant ZTE Corp., for breach of contract, fraud, and unjust enrichment. The case went to arbitration. Because Daredevil had not sued ZTE Corp. at the time of the arbitration, the arbitrator found that Daredevil's claims against ZTE Corp. were outside the scope of the arbitration. After the arbitrator made this determination, Daredevil brought this suit against ZTE Corp., asserting the same grounds for relief it had sought from ZTE USA. This case was stayed pending arbitration between Daredevil and ZTE USA. Ultimately, the arbitrator rejected Daredevil's claims against ZTE USA. The District Court for the Middle District of Florida confirmed the arbitration award, see PTA-FLA, Inc. v. ZTE USA, Inc., No. 3:11-cv-510-J-32JRK, 2015 WL 12843833 (M.D. Fla. Oct. 6, 2015), and the Eleventh Circuit Court of Appeals affirmed, see PTA-FLA, Inc. v. ZTE USA, Inc., 844 F.3d 1299 (11th Cir. 2016). The stay in the present case was lifted and ZTE Corp. moved for summary judgment, arguing that Daredevil's claims are precluded based on the arbitrator's decision. I find that Daredevil's claims are precluded. As a result, I will grant ZTE Corp.'s motion for summary judgment.
This lawsuit arises out of Daredevil's attempt to develop a cell-phone network in St. Louis, Missouri.1 On September 25, 2008, two ZTE USA representatives—Neil Kushner and Joey Jia—visited Eric Steinmann, Daredevil's owner, at his house in California. After some negotiations, Daredevil entered into a contract (the Missouri MSA) that same day with ZTE USA and ZTE Corp. (ZTE USA's parent corporation).2 This contract consisted of a five-page "Agreement" aswell as a standardized "Master Supply Agreement" (MSA). The Agreement begins by noting that "the terms of the attached agreement [i.e., the MSA] will apply" and ends with "[a]dditional terms as included." [Doc. #78, Ex. 2.] As Daredevil acknowledged in arbitration, the Agreement and the MSA "was all to be interpreted as one integrated document." See also Doc. #78, Ex. 3 at 24 ( ).]3 The Missouri MSA specified terms regarding the establishment of Daredevil's St. Louis network. Among other things, ZTE agreed to supply Daredevil with network infrastructure (e.g., cable bundles, battery cabinets, other "core network components," and base stations) by particular dates, to provide handsets at low prices, and to help with software development for phone applications.
Things did not go as planned. On May 4, 2011, Daredevil sued ZTE USA for breach of contract, rescission, and unjust enrichment in this Court. See Daredevil, Inc. v. ZTE USA, Inc., 4:11 CV 1054 TIA (E.D. Mo.). Daredevil alleged that ZTE USA had breached the Missouri MSA by failing to deliver the equipment in a timely fashion and that this caused Daredevil to lose the opportunity to develop the St. Louis network. ZTE USA moved to compel arbitration because the MSA included an arbitration provision. The Court granted the motion to compel arbitration on June 22, 2011. See Daredevil, Inc. v. ZTE USA, Inc., 4:11 CV 1054 TIA, 2011 WL 2473083 (E.D. Mo. June 22, 2011).
Daredevil's lawsuit against ZTE USA is only one of a series of lawsuits against ZTE brought by related entities. Around the same time, Daredevil affiliates—collectively known as "ClearTalk" and each "owned and controlled by Eric Steinmann"—filed related cases against ZTE USA. [Doc. #78, Ex. 7.] In South Carolina, PTA-FLA, Inc. sued ZTE USA; in Tennessee, NTCH-West Tenn., Inc. sued ZTE USA; in Washington, NTCH-WA sued ZTE USA; and in California, Steinmann sued ZTE USA and ZTE Corp. In December 2011, after several of these cases were sent to arbitration, the parties stipulated to a consolidated arbitration in Jacksonville, Florida. After the stipulation, the cases operated as a unified proceeding that bound ZTE USA, Daredevil, PTA-FLA,NTCH-West Tenn., and NTCH-WA (hereafter collectively referred to as "ClearTalk entities").
Also in December 2011, the ClearTalk entities filed an Amended Statement of Claim in arbitration, where each entity (including Daredevil) asserted claims against ZTE USA and against ZTE Corp. ZTE Corp. objected to including these claims because, except for Steinmann's claims, this was the first time that they had been brought. Daredevil argued that ZTE Corp. should be included as an "alter ego" of ZTE USA—or, alternatively, that ZTE USA and ZTE Corp. were agent and principal or that their actions made them coconspirators. On June 4, 2012, the arbitrator agreed with ZTE Corp., "determin[ing] that the scope of the arbitration will be all the claims, counterclaims, and defenses that exist or may arise between and among the parties subject to the jurisdiction of the courts in the lawsuits pending at the time of the agreement to arbitrate." [Doc. # 78, Ex. 1.] In making this ruling, the arbitrator limited the claims against ZTE Corp. to those brought by Steinmann in California.
On August 1, 2012, Daredevil and the ClearTalk entities filed their final Statement of Claim in arbitration. This Statement of Claim included allegations relating to the St. Louis market, and ClearTalk attached the entire MissouriMSA—both the Agreement and the MSA—as an exhibit.4 Daredevil asserted claims against ZTE USA for breach of contract, fraud, and unjust enrichment.
The arbitration hearing began in August 2013. During ten days of live testimony, the arbitrator "heard close to 30 witnesses, and, in addition, reviewed many hundreds of exhibits submitted for consideration." [Doc. # 78, Ex. 7.] The individuals involved with the Missouri MSA—Steinmann, Kushner, and Jia—all testified at the hearing. Following the hearing, the parties submitted briefs, and the arbitrator heard a full day of closing argument in December 2013. In February 2014, the arbitrator issued the Final Award "in full settlement of all claims submitted to this arbitration," and held that the ClearTalk entities (including Daredevil) "shall take nothing from this action."5 The arbitrator's Final Award included Daredevil's claims relating to the Missouri MSA: the Final Award discussed the negotiations at Steinmann's home, the failed delivery of network equipment, and the lost opportunity to develop the St. Louis market. The arbitrator rejected Daredevil's claims:
Within a month after entering the Missouri MSA, ClearTalk sold the Missouri market to its competitor, Leap Wireless. While ClearTalk now insists that the reason for the sale was ZTE's failure to be able toperform under the Missouri MSA, the evidence at the time as reflected by the draft minutes of a meeting of one of ClearTalk's operatives[] do not mention the troubles with ZTE as the reason for the sale. ... ClearTalk also claims that the decision to sell the Missouri market was driven by a "race to market" by a competitor, but the evidence is clear that the competitor had launched its market in St. Louis before the Missouri MSA was signed. [Doc. # 78, Ex. 7 at 13-14.]
ZTE USA then moved for confirmation of the arbitrator's Final Award. On October 6, 2015, the United States District Court for the Middle District of Florida confirmed the arbitration award. See PTA-FLA, Inc., 2015 WL 12843833 at *2. On December 15, 2016, the United States Court of Appeals for the Eleventh Circuit affirmed the district court's judgment. See PTA-FLA, Inc., 844 F.3d 1299.
On June 28, 2012, after the arbitrator determined that Daredevil could not proceed against ZTE Corp., Daredevil filed this action. The First Amended Complaint was filed on August 20, 2012, three weeks after the final Statement of Claim in arbitration. [See Doc. #6.] In the Amended Complaint, Daredevil asserts claims against ZTE Corp. (arising out of the facts described above) for breach of contract, fraud, unjust enrichment, and tortious interference with contract. ZTE Corp. moved for a stay of this case pending arbitration. On April 4, 2013, the court granted the motion finding that "[t]he virtually identical facts and issues in the case against ZTE Corporation and the pending arbitration between Daredevil and ZTE USA warrant a stay of the present litigation." [Doc. # 33 (emphasis added).]
After arbitration concluded, this case was further stayed pending the motion to confirm the arbitration award. The stay was lifted and this case was reopened after the United States Court of Appeals for the Eleventh Circuit affirmed the district court's decision. ZTE Corp. then filed this motion for summary judgment, arguing that the arbitration and the resulting Eleventh Circuit decision precluded Daredevil from bringing its claims in this case.
Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Lynn v. Deaconess Medical Center, 160 F.3d 484, 486 (8th Cir. 1998) (citing Fed. R. Civ. P. 56(c)). The party seeking summary judgment bears the initial responsibility of informing the court of the basis of its motion and identifying those portions of the affidavits, pleadings, depositions, answers to interrogatories, and admissions on file which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When such a motion is made and supported by the movant, the nonmoving party may not rest on his pleadings but must produce sufficient...
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