Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Ltd.
| Decision Date | 19 July 2021 |
| Docket Number | B272170 |
| Court | California Court of Appeals Court of Appeals |
| Parties | ROCKEFELLER TECHNOLOGY INVESTMENTS (ASIA) VII, Plaintiff and Respondent, v. CHANGZHOU SINOTYPE TECHNOLOGY CO., LTD., Defendant and Appellant. |
NOT TO BE PUBLISHED
APPEAL on remand from the California Supreme Court, from an order of the Superior Court of Los Angeles County No. BS149995 Randolph Hammock, Judge. Affirmed.
Law Offices of Steve Qi and Associates, Steve Qi and May T. To Law Offices of Steven L. Sugars and Steven L. Sugars for Defendant and Appellant.
Paul Hastings, Thomas P. O'Brien, Katherine F. Murray, and Nicole D. Lueddeke; Blum Collins LLP, Steven A. Blum, and Gary Ho for Plaintiff and Respondent.
This appeal concerns an aborted international business deal between Changzhou SinoType Technology Co., Ltd. (SinoType), a Chinese company, and Rockefeller Technology Investments (Asia) VII (Rockefeller Asia), an American investment partnership. When the relationship between the two entities soured, Rockefeller Asia pursued contractual arbitration against SinoType in Los Angeles. SinoType did not appear or participate in the arbitration proceeding, and the arbitrator entered a default award in excess of $414 million against it. The award was confirmed and judgment entered, again at a proceeding in which SinoType did not participate.
Approximately 15 months later, SinoType moved to set aside the judgment asserting that it had never entered into a binding contract with Rockefeller Asia and had not agreed to contractual arbitration.[1] The trial court denied the motion finding, among other things, that SinoType had not acted with the requisite diligence. SinoType appealed.
We affirm. Pursuant to Code of Civil Procedure[2] section 473 a judgment may be set aside more than six months after it was entered only if it is void-that is, if the trial court acted without fundamental authority over the subject matter or a party. In the present case, the trial court had subject matter jurisdiction pursuant to section 1280 et seq., and it had personal jurisdiction over SinoType, a nonresident defendant, by virtue of SinoType's execution of a memorandum of understanding in which it specifically “submit[ted] to the jurisdiction of the Federal and State Courts in California.” Accordingly, the judgment was not void, and the trial court properly denied the motion to set it aside.
SinoType is a Chinese company headquartered in Changzhou, China that develops and licenses Chinese fonts. Kejian (Curt) Huang (hereafter, Curt)[3], a citizen and resident of China, is SinoType's chairman and general manager.
Rockefeller Asia is an American investment partnership headquartered in New York. Faye Huang (hereafter, Faye) is Rockefeller Asia's president.
In 2007 and 2008, Curt and Faye met several times in Los Angeles to discuss forming a new company to market international fonts. On February 18, 2008, they signed a four-page Memorandum of Understanding (MOU), which stated that the parties intended to form a new company, known as World Wide Type (WWT). SinoType would receive an 87.5 percent interest in WWT “and shall contribute 100% of its interests in the companies comprising Party A, i.e., Changzhou SinoType Technology.” Rockefeller Asia would receive a 12.5 percent interest in WWT “and shall contribute 100% of its interests in the companies comprising Party B, i.e., Rockefeller Technology Investments (Asia) VII.”
The MOU provided that “[t]he parties shall proceed with all deliberate speed, within 90 days if possible, to draft and to all execute long form agreements carrying forth the agreements made in this Agreement, together with any and all documents in furtherance of the agreements.” It also provided that “[u]pon execution by the parties, this Agreement shall be in full force and effect and shall constitute the full understanding of the Parties that shall not be modified by any other agreements, oral or written.”
The MOU contained several provisions governing potential disputes between the parties, as follows:
The relationship between the parties soured, and the “long form agreements” were never finalized. In February 2012, Rockefeller Asia filed a demand for arbitration with the Judicial Arbitration & Mediation Service (JAMS) in Los Angeles. SinoType did not appear at the arbitration, which proceeded in its absence.
The arbitrator issued a final award on November 6, 2013. He found as follows:
Rockefeller Asia is a special-purpose entity organized to provide capital to support technology companies in Asia. Its partners include Rockefeller Fund Management Co., LLC.
In February 2008, SinoType and Rockefeller Asia entered into the MOU in which they agreed to form a new company (WWT). Each party was to contribute its entire interest in its business to WWT. In return, SinoType was to receive an 87.5 percent interest, and Rockefeller Asia was to receive a 12.5 percent interest, in WWT. In 2008, Rockefeller Asia was funded with stock worth $9.65 million.
In 2010, the parties sought additional investors to buy a 10 percent interest in WWT. The highest offer, obtained in May 2010, was for $60 million. After receiving this offer, SinoType insisted that Rockefeller Asia agree to a reduction of its interest. When Rockefeller Asia refused, SinoType unilaterally terminated the MOU.
Written proofs of service in the JAMS file, prepared and signed by JAMS Case Managers, confirm that SinoType was given written notice of all filings and hearings in the arbitration proceeding, including submission of the demand for arbitration, commencement of the arbitration, appointment of the arbitrator, and notice of the hearing. Notices and copies of all materials were sent by both email and Federal Express to Curt Huang. Because SinoType did not appear, the arbitration proceeded under Article 27 of the JAMS International Rules, which authorizes an arbitrator to proceed by default where one party has failed to appear.
Rockefeller Asia's damages expert opined that Rockefeller Asia's damages included three components: loss of its 12.5 percent interest in WWT; loss of its control premium, which the expert valued at 10 percent of WWT's total value; and loss of its anti-dilution rights, which the expert valued at 6.25 percent of WWT's total value. Thus, Rockefeller Asia's damages were equal to 28.75 percent (12.5% + 10% + 6.25% = 28.75%) of WWT's value. The expert opined that WWT's value at the time SinoType terminated the MOU was $600 million, and therefore Rockefeller Asia's damages at termination were approximately $172 million ($600, 000, 000 x.2875 = $172, 500, 000). However, the expert opined that Rockefeller Asia's damages should be valued at the time of the arbitration, not the time of the termination. He estimated SinoType's value at the time of arbitration using “the ‘wave' method... which assumes that [the company's] value has grown over the same interval at the same rate as other firms ‘riding the same economic wave.' ” The expert selected Apple Corporation as the “comparator firm, ” and estimated SinoType's current value by assuming a 240 percent increase between July 2010 and February 2012-i.e., the same increase that Apple experienced during a comparable period. The expert thus estimated Rockefeller Asia's damages to be $414 million, which was “28.5% of the estimated total value of [SinoType] of $1.440 billion, using the wave method.”
The Arbitrator “accept[ed] the evidence presented through [Rockefeller Asia's expert] concerning the percentage values of the control premium and the anti-dilution clause, ” and also “adopt[ed] [Rockefeller Asia's] proposal to set the date of valuation at February 2012.” Based on the foregoing, the arbitrator awarded Rockefeller Asia $414, 601, 200.
Rockefeller Asia filed a petition to confirm the arbitration award. Subsequently, it filed a proof of service of summons, which declared that it had served SinoType in China by Federal Express on August 8, 2014, in accordance with the parties' agreement.
Following a hearing at which SinoType did not appear, on October 23, 2014, the trial court confirmed the arbitration award and entered judgment for Rockefeller Asia in the amount of $414, 601, 200, plus interest of 10 percent from November 6, 2013.
On January 29, 2016, SinoType filed a motion pursuant to section 473 to set aside the judgment and to quash service of the summons. SinoType asserted that the order confirming the arbitration award and resulting judgment should be set aside because SinoType had not been validly served with the summons and petition to confirm the award pursuant to the Hague Service Convention, SinoType did not intend to waive service by...
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