SoundVision Techs., LLC v. Templeton Grp. Ltd., Case Nos. 2:09–CV–870 TS, 2:10–CV–1208 TS.
| Decision Date | 08 March 2013 |
| Docket Number | Case Nos. 2:09–CV–870 TS, 2:10–CV–1208 TS. |
| Citation | 929 F.Supp.2d 1174 |
| Parties | SOUNDVISION TECHNOLOGIES, LLC, a Utah limited liability company, doing business as TruAudio, Plaintiffs, v. TEMPLETON GROUP LTD., a Nevada corporation, Defendant. Templeton Group Ltd., Counterclaimant, v. Soundvision Technologies, LLC, Counterclaim Defendant, Templeton Group Ltd., Plaintiff, v. Kai Shuai Industrial Co. Ltd., Defendant. |
| Court | U.S. District Court — District of Utah |
OPINION TEXT STARTS HERE
Lynn S. Davies, Russell C. Fericks, Richards Brandt Miller Nelson, Salt Lake City, UT, for Plaintiffs, Counterclaimant Defendant, and Defendant.
Eric P. Lee, Park City, UT, Kathleen E. McDonald, Jones Waldo Holbrook & McDonough, Salt Lake City, UT, for Defendant, Counterclaimant and Plaintiff.
This matter is before the Court on the following three Motions for Summary Judgment: (1) Defendant/Counterclaim Plaintiff Kai Shuai Industrial's Motion for Summary Judgment; (2) Plaintiff/Counterclaim Defendant Soundvision Technologies' Motion for Summary Judgment; and (3) Defendant/Counterclaim Plaintiff/Consolidated Plaintiff Templeton Group's Motion for Summary Judgment.
TruAudio is a Utah company that develops and sells speakers and related audio products to distributors and dealers. Although TruAudio designs and sells its branded products, it outsources the manufacturing of these products to factories located in China. Historically, instead of working directly with the Chinese factories, TruAudio has relied on third party vendors to communicate with the factories and get product shipped to TruAudio.
Kai Shuai is a Taiwan company that owns one of the Chinese factories that produces TruAudio's products. Before this factory, known as Yung Tong, is able to manufacture products for TruAudio, it must first build tooling that will enable the mass production of the products. Yung Tong has two relevant types of tooling: (1) open tooling, or generic tools, that the factory can use to create and sell product to anybody; and (2) tooling owned by a customer that may only be used to manufacture product for that customer.
Templeton is a Nevada corporation with its principal place of business in California. Templeton is a company founded by Chris Swan that works directly with factories in China to help TruAudio and other United States companies outsource their production. Prior to starting Templeton, Mr. Swan worked for and co-owned a company called Audio Technologies Incorporated (hereinafter “ATI”). While Mr. Swan was at ATI he developed a relationship with one of ATI's customers, TruAudio. After several years, Mr. Swan decided to leave ATI to start Templeton. In December of 2006, TruAudio elected to keep its business with Mr. Swan, and informed both ATI and Templeton that it would use Templeton to supply its current and developing products.
Although the extent of Templeton's services are disputed in this case, the company not only communicates and negotiates with the Chinese factories, it also provides design services to assist the United States companies. From numerous emails provided to the Court, it is clear that TruAudio had Templeton help turn product ideas into workable designs. At times, TruAudio provided Templeton with rough sketches, models, or ideas for product modifications and had Templeton either create a design to take to the Chinese factories or work directly with the factories to make the changes.1 At times, TruAudio would request that Mr. Swan create a design for various products.2
According to TruAudio's president, Brent Howard, Templeton handled most of the communication with the Chinese factories during the time Templeton was TruAudio's vendor.3 In his deposition, Mr. Howard further described the services provided by Mr. Swan and Templeton as follows:
During the course of their relationship, TruAudio never paid Templeton a flat fee or an hourly rate for the services it provided. Instead, Templeton would pay the factories for the products, add a markup, and then resell the products to TruAudio. The price TruAudio paid was negotiated between Templeton and TruAudio before TruAudio ordered the products. In the event a product never made it into mass production, Templeton would not receive any compensation for its work on that product. However, when a product did make it into mass production, Templeton's practice was to continue charging a markup until TruAudio would “sunset,” or cease production of, the product.
Other than purchase orders for individual shipments of product, Templeton and TruAudio never signed formal documents describing the details of their relationship. Consequently, there is no written agreement covering the termination of the relationship between Templeton and TruAudio. Nor is there any written agreement describing how, or if, Templeton should be compensated for products it assisted TruAudio in developing, but that TruAudio decided to purchase from the factories either directly or through a vendor other than Templeton.
When Mr. Swan left ATI to start Templeton, some customers for whom he had performed work stayed with ATI, and some, like TruAudio, followed him to Templeton. Mr. Swan's prior co-owner at ATI, Mr. Melillo, testified that following the split, ATI customers were not required to compensate Templeton for future purchase orders of product on which Mr. Swan had performed work. 8 Likewise, TruAudio was not required to compensate ATI for any new purchase orders made between TruAudio and Templeton for product that was developed when TruAudio was purchasing from ATI.9
Mr. Melillo further testified that there was nothing to prevent TruAudio from taking its business for a specific product to a new supplier, unless there was a “firm, hard contract,” 10 or, in other words, “a contract that says that—that product is going to be delivered exclusively by that—by that company to TruAudio.” 11 Finally, Mr. Melillo testified that it was his understanding that, at least while TruAudio worked with ATI, TruAudio had the right to change suppliers of its products.12
Although the parties dispute the degree of work performed by Templeton, from December of 2006 until April of 2009, Templeton helped TruAudio develop a new product, the “X” series, redesign an existing series, the “Revolve” series, and develop several models within the “Ghost” series. Although it was Templeton that worked with Kai Shuai's Yong Tong factory to develop tooling for and produce these products, Kai Shuai knew that the products were ultimately going to TruAudio.13
In fact, in September of 2008, a Yong Tong employee sent TruAudio an email, stating that they 14 In addition to this email, Mr. Howard testified that he had received solicitations from Kai Shuai to work directly with the Yong Tong factory prior to 2008.15
Around April of 2009, a Yong Tong employee provided its price list for TruAudio products to ODM, a United States engineering company that worked with TruAudio. ODM, in turn, provided this price list to TruAudio, revealing to TruAudio the prices that Templeton was being charged for TruAudio's products. Kai Shuai's representative, Ms. Hui–Chuan Lee, testified as follows concerning the decision to provide the price list to ODM:
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