Procraft Cabinetry, Inc. v. Sweet Home Kitchen & Bath, Inc.
| Decision Date | 24 September 2018 |
| Docket Number | No. 3:17-cv-01392,3:17-cv-01392 |
| Citation | 348 F.Supp.3d 752 |
| Parties | PROCRAFT CABINETRY, INC., Plaintiff, v. SWEET HOME KITCHEN AND BATH, INC., et al., Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Andre J. Bahou, Nicholas R. Valenti, Samuel F. Miller, Miller Legal Partners PLLC, Maia T. Woodhouse, Adams and Reese LLP, Wayne Edward Ramage, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Nashville, TN, for Plaintiff.
Casey Leigh Miller, E. Todd Presnell, Joel D. Eckert, Joshua J. Phillips, Kristi W. Arth, Lela M. Hollabaugh, Bradley Arant Boult Cummings LLP, William Bryan Jakes, III, Howell & Fisher, PLLC, Taylor B. Mayes, Joseph F. Welborn, III, Butler Snow LLP, Nashville, TN, Christina Lesko, Mary S. DiRago, Trent P. Cornell, Troutman Sanders LLP, Chicago, IL, for Defendants.
Sweet Home Kitchen and Bath, Inc., Hillside, IL, pro se.
ProCraft Cabinetry Florida, LLC, Deerfield Beach, FL, pro se.
ProCraft Cabinetry Dallas, LLC, Dallas, TX, pro se.
ProCraft Cabinetry, Houston, LLC, Houston, TX, pro se.
ProCraft Cabinetry Seattle, LLC, Kent, WA, pro se.
The Cabinet and Granite Depot, LLC, Cincinnati, OH, pro se.
Qiang Huang, Lisle, IL, pro se.
Min Hua Lin, Woodridge, IL, pro se.
Yongchun Yang, Nashville, TN, pro se.
Shu Lin, Addison, IL, pro se.
Yao Zhao, Owens Cross Roads, AL, pro se.
Xiguang Tang, Owens Cross Roads, AL, pro se.
Paul Chin Yang Lin, Algonquin, IL, pro se.
Tao Yu Zheng, Houston, TX, pro se.
Jia Liu, Frisco, TX, pro se.
Qiqi Jiang, Crown Point, IN, pro se.
Wenchen Chen, Mount Prospect, IL, pro se.
Longrong Lin, Tinley Park, IL, pro se.
Kevin Guo, Des Plaines, IL, pro se.
Changuang Lin, Richton Park, IL, pro se.
Shaochun Lin, Oakland Gardens, NY, pro se.
Shengquan Guo, Bronx, NY, pro se.
Changzhu Lin, Orland Park, IL, pro se.
Qingfen Chen, Woodridge, IL, pro se.
Qiao Yun Huang, Cincinnati, OH, pro se.
Qiao Hunt, West Chester, OH, pro se.
Derick Hunt, West Chester, OH, pro se.
ProCraft Custom Cabinets, LLC, Stockbridge, GA, pro se.
Procraft Cabinetry, Inc. ("Procraft Cabinetry") brought this action against multiple entities and individuals including two of its shareholders, Qiang Huang and Min Hua Lin, alleging trademark infringement, violations of the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq., and contract violations for violating the Shareholder Agreement. (Doc. No. 235.) In response, Huang and Lin filed a Third Party Complaint against Sophia Chen, the third shareholder and president of Procraft Cabinetry, alleging that she usurped her corporate authority by unilaterally directing Procraft Cabinetry to bring this action. (Doc. No. 255.) Count Five of the Third Party Complaint demands that Chen direct Procraft Cabinetry to withdraw this lawsuit. (Id. at 24.) After hundreds of filings and multiple hearings over a six-month period, on April 27, 2018, the Court issued an Order pursuant to Federal Rule of Civil Procedure 56(f) that it intended to dismiss the case, granting summary judgment to Huang and Lin on Count Five of the Third Party Complaint. (Doc. No. 270.) After a reasonable time for discovery and reviewing the additional briefing from the parties, summary judgment is granted to Huang and Lin on Count Five of the Third Party Complaint.1
On January 15, 2010, Chen formed Procraft Cabinetry by filing the formation papers with the Tennessee Secretary of State. (Doc. No. 325 at 1-2.) At the time, Chen was the only shareholder of Procraft Cabinetry. (Id. at 2.) In November 2014, Chen, Huang, and Lin entered into the "Shareholders' Agreement of Procraft Cabinetry, Inc. Company." (Doc. No. 235-29.) The Shareholders' Agreement purported to form "Procraft Cabinetry, Inc. (429 McNally Dr., Nashville, TN 37211-3311, which shall be the only cabinet manufacturing company with occupancy in the entire building) a Company to be registered in Nashville, Davidson County, Tennessee...for cabinetry sales...." (Id. at 2.) Huang, Lin, and Chen entered into the agreement because they saw a "growing market opportunity to provide company services for both residential and commercial needs," and wanted to pursue that "opportunity by their engagement with The Company." (Id. ) "The Company" is defined as "Procraft Cabinetry, Inc." (Id. )
Under the Shareholders' Agreement, Chen became the President with 50% of the shares, Huang and Lin became Vice Presidents with a combined 50% of the shares. (Id. at 2-4.) Chen, as President, performed three tasks that were not shared with the Vice Presidents: (1) "represent[ing] and warrant[ing] that all debts and liabilities have been paid in full prior to the execution of this agreement"; (2) making "daily decisions that involve $5,000.00 or less in all Procraft locations"; and (3) "ensur[ing] all taxes are paid and that there are no outstanding debts." (Id. at 3.) All three partners shared the remaining ten tasks: (1) "voting on decisions that involve more than $5,000.00, where the majority vote will rule"; (2) "overseeing manufacturing of cabinetry"; (3) "ordering and distributing cabinetry supplies to all Procraft Cabinetry locations"; (4) "communicating with cabinetry suppliers"; (5) "determining the quality of cabinets/cabinetry from other suppliers"; (6) "set pricing of cabinetry"; (7) "implement marketing for Procraft Cabinetry, Inc. and all Procraft Cabinetry locations"; (8) "approve of local advertisements for all Procraft Cabinetry locations"; (9) "operational decisions for other Procraft Cabinetry locations"; and (10) "determining commission rates for any business referrals form one Procraft Cabinetry location to another." (Doc. Id. at 3-4.) Chen, Huang, and Lin all signed the Shareholders' Agreement and their signatures were each notarized. (Id. at 9.) It is undisputed that the Shareholders' Agreement is a "true and correct copy of the Shareholders' Agreement of Procraft Cabinetry Inc. Company." (Doc. No. 325 at 5.)
Although each signed the Shareholders' Agreement, none of the three Partners asked for it to be translated into their natural language, which is Mandarin, nor did they personally read the Agreement. (Id. at 15-16.) Instead, the attorney who drafted the Agreement, Michael Maksimovich, explained the provisions to Lin and Huang in English. (Doc. No. 284-1 at 34-39.) No one translated the Shareholders' Agreement to Chen prior to her signing the document.2 (Doc. No. 292-1 at 2.)
Eventually, the shareholders' relationship broke down. On October 19, 2017, Procraft Cabinetry, at Chen's direction, filed the original Complaint, alleging essentially that Huang and Lin created the other entity Defendants, conspired with them to infringe on Procraft Cabinetry's trademarks, and are using the scheme to compete with Procraft Cabinetry and ultimately cut Chen out. (Doc. No. 1.) The original Complaint alleged that Huang and Lin "were to become owners of ProCraft through their purchase of ProCraft stock." (Doc. No. 8 at 86.) The original Complaint sought relief that Huang and Lin be made to sell their shares of Procraft Cabinetry. (Id. at 89.) The same allegations were repeated in the Amended Complaint (Doc. No. 77 at 91-96), and the Second Amended Complaint, which is the operative Complaint (the "Complaint") (Doc. No. 235 at 103-09). However, the Complaint only demanded that Huang and Lin sell their shares of Procraft Cabinetry "to the extent [the Shareholders' Agreement] is valid, binding, and enforceable." (Id. at 109.)
On January 12, 2018, the Court issued a Temporary Injunction to maintain the status quo. (Doc. No. 87.) That injunction was in response to allegations that Huang and Lin were going to vote as shareholders of ProCraft to voluntarily dismiss this lawsuit. (Id. at 1.) The injunction enjoined Huang and Lin "from voting as shareholders or directors of ProCraft; participating in the operations of ProCraft; or taking any other action on behalf of ProCraft, directly or as a derivative action." (Id. ) The Court clarified that the injunction does not prevent Huang or Lin from filing any derivative actions in the instant case as counterclaims or third-party claims. (Doc. No. 248.)
In March 2018, Procraft Cabinetry filed its Motion to Amend the First Amended Complaint (Doc. No. 200). Two days later it filed another Motion for a Temporary Restraining Order, this time against Procraft Cabinetry Florida, LLC, for trademark infringement. (Doc. No. 205.) After reviewing the allegations in the almost-200 page Complaint, the Court ordered supplemental briefing on whether Chen had authority to unilaterally direct Procraft Cabinetry to file this action, finding it may be dispositive on the Motion for a Temporary Restraining Order. (Doc. No. 232 at 1.) Procraft Cabinetry responded, in part, that the Shareholders' Agreement gave Chen authority to direct it to file the lawsuit. (Doc. No. 237 at 4.)
On April 17, 2018, Huang and Lin filed the Third Party Complaint, which contained verified allegations that Chen improperly unilaterally directed Procraft Cabinetry to file this action. (Doc. No. 255.) Because this is a dispositive issue under Tennessee law, the Court stayed all the remaining discovery and ordered supplemental briefing on the issue. (Doc. No. 270-71.) In its Memorandum Opinion, the Court laid out all of the material facts to the issue, explained the law on corporate authority, and explained that, under the facts currently before the Court, Chen did not have authority to unilaterally direct Procraft Cabinetry to file the lawsuit. (Doc. No. 270.) It allowed further discovery on the narrow issue of corporate authority and allowed for supplemental briefing. (Doc. No. 271.) The parties have filed their supplemental briefs (Doc. No. 297, 330, 336, 358), and the issue is ripe for decision.
The Court may grant summary judgment on grounds not raised by a party after "giving notice and a reasonable time to respond."...
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