Viiva Glob. v. Xi Jian Zhou
| Decision Date | 15 February 2023 |
| Docket Number | 2:21-cv-00662 |
| Parties | VIIVA GLOBAL, LLC, a Utah limited liability company; BOWEN, LLC, a Utah limited liability company, SH GLOBAL, LLC, a Utah limited liability company; AFFE HOLDINGS, LLC, a Utah limited liability company, and 402K, LLC, a Utah limited liability company, Plaintiffs, v. XI JIAN ZHOU, an individual; GLOBAL LEGACY, LLC, a Nevada limited liability company; LI WEI WANG, an individual and JOHN AND JANE DOES 1 - 10, Defendants. |
| Court | U.S. District Court — District of Utah |
VIIVA GLOBAL, LLC, a Utah limited liability company; BOWEN, LLC, a Utah limited liability company, SH GLOBAL, LLC, a Utah limited liability company; AFFE HOLDINGS, LLC, a Utah limited liability company, and 402K, LLC, a Utah limited liability company, Plaintiffs,
v.
XI JIAN ZHOU, an individual; GLOBAL LEGACY, LLC, a Nevada limited liability company; LI WEI WANG, an individual and JOHN AND JANE DOES 1 - 10, Defendants.
No. 2:21-cv-00662
United States District Court, D. Utah
February 15, 2023
Daphne A. Oberg Magistrate Judge
MEMORANDUM DECISION AND ORDER DENYING [141] PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
David Barlow United States District Judge
Before the court is Plaintiff Viiva Global, LLC (“Viiva”); Bowen, LLC; SH Global, LLC; Affe Holdings, LLC; and 402K LLC's Motion for Summary Judgment of Plaintiffs.[1]Plaintiffs seek partial summary judgment against Defendants Xi Jian Zhou and Global Legacy, LLC, on the grounds of breach of contract and unjust enrichment concerning commission payments pursuant to Part 1 of Exhibit D to Viiva's Operating Agreement.[2]For the reasons that follow, the court denies the motion.
BACKGROUND
On July 18, 2018, the limited liability companies Bowen (managed by Zhigang “Bowen” Wang), SH Global (managed by Steinway Huang), Affe Holdings (managed by Devin Glazier), 402K (managed by Craig Johanson), SMACK Investments, and Global Legacy (managed by Xi Jian Zhou) executed the Operating Agreement for a limited liability company named Viiva Global.[3]Viiva is a “holding company involved in owning multi-level marketing and direct selling personal care, nutritional supplements, travel products, and other online technology and ecommerce companies.”[4] It was launched in the spring of 2019.[5]
The six companies comprised Viiva's only members.[6] Global Legacy became the majority member with an 84.74% Membership Interest.[7]The other five members became the minority members, together representing 15.26%.[8]There are presently five members-SMACK Investment departed and was paid back its capital contributions[9]-and Global Legacy remains the majority member with an approximately 91% Membership Interest.[10]
According to the Operating Agreement, Viiva is a manager-managed LLC.[11]Mr. Huang, Mr. Zhou, and Kent Wood were its initial managers.[12]Mr. Huang also worked in various capacities at Viiva, including the role of Chief Operating Officer.[13]
In a sub-section titled “Self-Dealing,” the Operating Agreement provides that “each Member and Manager . . . shall not participate or derive any benefit, directly or indirectly as a
distributor of [Viiva] except for specific base of the tree positions referenced in Exhibit D to facilitate the growth and development of the network.”[14] Exhibit D is titled “Viiva Positions.”[15] The exhibit identifies the six original members of Viiva Global as “Parties for Exhibit D.”[16]It instructs the Parties to cause Viiva “to establish 15 Base of the Tree Positions within the Viiva commissions tree prior to launch.”[17]It further instructs them to “grandfather[] in” those 15 positions “at the highest rank and force commission qualified at the highest amount in the compensation plan.”[18]
Exhibit D then provides that:
Following the calculation of commissions that would have been earned by each of these 15 Viiva Positions, no payment will be made, but instead, Commissions expense will be reduced by the combined amount and added as a line item below Net Operating Income as Tree Distributions and amounts made to each of the Parties according to the following calculations
1. 50% of the total will be allocated to all Parties equally
2. The remaining 50% of the total will be allocated to the Parties by generating a sponsorship volume report of all Viiva19 sponsored positions allocated to each Party based on the attributed relationships of one or more Parties that led to those Viiva19 sponsored positions. In the system, while the positions show Viiva19 as the sponsor, the Parties will track an allocation of each position to one or more Parties. The allocation will take the 50% of the total commission to allocate times the total volume allocated to each Party, divided by the total volume from all Viiva19 positions in the sponsorship volume report in determining the amount to be paid to each Party.[19]
Payments pursuant to Exhibit D generally are referred to as “Top Company Position” or “Top Position” commissions.[20]
The Operating Agreement also provides for attorney's fees: “[w]ith respect to any future claim, dispute, suit or action connected with, relating to or otherwise arising under or with respect to this Agreement, the party substantially prevailing in such dispute, claim, or action shall be entitled to recover all reasonable attorney fees and out-of-pocket litigation costs.”[21]
For purposes of summary judgment, it is undisputed that Viiva made payments to Global Legacy or Mr. Zhou in the amount of $3,603,881.74.[22]It is also undisputed that the payments to Global Legacy were for Top Company Positions commissions pursuant to Exhibit D,[23]but Global Legacy disputes that the payments to Mr. Zhou were “governed by the Operating Agreement.”[24] Defendants also aver that the payments to Global Legacy in the amount of $3,054,560.09 “are part of Viiva Global's risk management fund ....and remain the property of Viiva Global.”[25]Viiva's minority members aver that they have never been paid any Top Company Position commissions,[26]which Global Legacy partially disputes by pointing to purported payments to two of the minority members' managers.[27]
On October 20, 2021, Plaintiffs filed this action in state court.[28]Plaintiffs assert twelve causes of action against Defendants: Breach of Fiduciary Duty against all Defendants, Breach of Operating Agreement against Global Legacy and Mr. Zhou, Judicial Expulsion against Global
Legacy, Conversion against Global Legacy and Mr. Zhou, Trademark Infringement against all Defendants, Trade Dress Dilution against all Defendants, Unjust Enrichment against Mr. Zhou, Violation of U.C.A. § 48-3a-404 against Global Legacy, Readjustment of Capital Accounts and Improper Distributions from the Operating Agreement against Global Legacy, Identity Theft against Mr. Zhou, Accounting against Global Legacy, and Alter Ego against all Defendants.[29]Plaintiffs have not served Mr. Zhou,[30]and he has not made an appearance in this case.
On November 7, 2022, Plaintiffs filed this motion for summary judgment.[31]Plaintiffs seek summary judgment on their breach of contract claim (“Breach of Operating Agreement against Global Legacy and [Mr.] Zhou”) and their unjust enrichment claim.[32]
LEGAL STANDARD
Under Federal Rule of Civil Procedure 56, “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[33]A fact is material if it “might affect the outcome of the suit under the governing law.”[34] A dispute regarding a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[35]
At summary judgment, the court must “view the facts and draw reasonable inferences ‘in the light most favorable to the'” nonmoving party.[36]After doing so, “‘[w]here the record taken
as a whole could not lead a rational trier of fact to find for the nonmoving party,' summary judgment in favor of the moving party is proper.”[37]
“[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.”[38]“When the moving party has carried [this burden], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.”[39]“In the language of the Rule, the nonmoving party must come forward with ‘specific facts showing that there is a genuine issue for trial.'”[40]The nonmoving party may do this by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials.”[41]
Of course, “[i]t is well settled in this circuit that [courts] can consider only admissible evidence in reviewing an order granting summary judgment.”[42]So while a party “need not produce evidence in a form that would be admissible at trial, . . . the content or substance of the evidence must be admissible.”[43]
Both parties object to exhibits attached to the motion and the response. The court discusses in turn the portions of each objection that are pertinent to the resolution of the motion.
I. Plaintiffs' Exhibits
Plaintiffs have attached two exhibits to their motion for summary judgment. The first is the Operating Agreement of Viiva Global, LLC.[44]The second is titled “Bank Statements and Internal Company Documents.”[45]Global Legacy objects “to the documents attached to Plaintiffs' Motion for Summary Judgment on the grounds that the subject documents lack foundation to be admissible as evidence.”[46]
In the Tenth Circuit,
In order for documents not yet part of the court record to be considered by a court in support of or in opposition to a summary judgment motion they must meet a two-prong test: (1) the document must be attached to and authenticated by an affidavit which conforms to Rule 56(e); and (2) the affiant must be a competent witness through whom the document can be received into evidence.... Documentary evidence for which a proper foundation has not been laid cannot support a summary...
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