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Interleda Co. v. Zhongshan Broad-Ocean, Motor Co., Ltd.

United States District Court, N.D. Indiana, Fort Wayne Division

March 24, 2015

INTERLEDA COMPANY, Plaintiff,
v.
ZHONGSHAN BROAD-OCEAN, MOTOR CO., LTD., Defendant.

OPINION AND ORDER

RUDY LOZANO, District Judge.

This matter is before the Court on "Defendant's Motion and Memorandum of Law to Dismiss Plaintiff's Complaint on the Grounds of Lack of Personal Jurisdiction, Improper Venue, Forum Non Conveniens, Failure to State a Claim, and More Definite Statement, " filed by Defendant, Zhongshan Broad-Ocean Motor Co., Ltd., on April 30, 2014. (DE #14.)[1] For the reasons set forth below, the motion is DENIED.

BACKGROUND

Plaintiff, Interleda Company ("Interleda"), filed its Complaint on December 19, 2013. (DE #1.) Interleda amended its Complaint on January 8, 2014. (DE #5.) The Amended Complaint lists the following claims: Count I - Breach of Contract against Zhongshan Broad-Ocean Motor Co., Ltd. ("BOMC"), and Count II - Violation of the Indiana Wholesale Sales Representative Commission Act (the "Act"). ( Id. at 2-4.) In response to the Amended Complaint, BOMC filed the instant Motion to Dismiss on April 30, 2014, requesting dismissal based on Federal Rules of Procedure 12(b)(2), 12(b)(3), 12(e), 9(b), and the doctrine of forum non conveniens. (DE #14.) Subsequently, BOMC was granted leave to amend its Motion to Dismiss because the first four pages were inadvertently left off of the original filing. (See DE #21.) The complete amended document was filed on May 2, 2014. (DE #20.) Interleda filed its response on June 2, 2014. (DE #24.) BOMC filed its reply on July 16, 2014. (DE #32.)

DISCUSSION

Facts

Interleda is an Indiana corporation with its principal place of business located in Indiana. (Am. Comp., DE #5 ¶ 1.)[2] BOMC is a Chinese corporation with its principal place of business in Zhongshan, China. ( Id. at ¶ 2.) BOMC produces, manufactures, imports, sells, and distributes products for wholesale and conducts business in the Northern District of Indiana. ( Id. at ¶¶ 3 & 14.) Specifically, on January 1, 2003, the parties entered into a Sales Agent Agreement (the "Agreement") wherein the parties agreed that Interleda would solicit business for the sale of BOMC's products to Interleda's exclusive customers, including those in Indiana. ( Id. at ¶¶ 6-7, 16; see also Agreement, DE #5 pp. 6-8.) The Agreement states that Interleda's office is located in Indiana, while BOMC's office is located in China. (Agreement, DE #5, p. 6.) It includes the following clause:

This Agreement shall remain in effect for a period of five (5) years. It will be considered automatically renewed for successive three (3) year terms unless notice of intent not to renew is given in writing by either party at least ninety (90) days prior to expiration of the then current term, in which case this Agreement shall be terminated as of the end of the then current term.

( Id. at 7.) The Agreement was renewed for successive terms through December 31, 2013. (Am. Comp., DE #5 ¶ 9.) However, on or about April 20, 2013, BOMC unilaterally terminated the Agreement, effective immediately, and refused to pay Interleda the compensation it was owed pursuant to the Agreement. ( Id. at ¶¶ 10-11.)

According to the president and owner of Interleda, Richard Lou ("Lou"), he drafted the Agreement in Indiana and forwarded it to BOMC via email in late 2002 or early 2003. (Lou Aff., DE #25 ¶¶ 8-10.)[3] The parties did not engage in any additional negotiations once the email was sent. ( Id. at ¶ 10.) Ultimately, the parties met at a hotel in Chicago, Illinois, and the Agreement was signed by Lou and the chairman of BOMC, Charles Lu ("Lu"). ( Id. at ¶¶ 11-12; see also Agreement, DE #5 p. 8.) The Agreement as presented included a document entitled Schedule A, which identified several customers that Interleda would be expected to call upon to solicit sales for BOMC. (Lou Aff., DE #25 ¶ 15; see also Schedule A, DE #25 p. 9.) One of those customers was Dometic, which is located in Indiana. ( Id. ) At the time the Agreement itself was signed, Lou and Lu agreed that Schedule A would remain unsigned because the customer list was expected to grow and change. (Lou Aff., DE #25 ¶ 13.) Schedule A was, in fact, amended from time to time, and other customers from Indiana were added to the list including Carrier, which has offices and a large manufacturing facility in Indianapolis, Indiana. ( Id. at ¶¶ 15, 17.)

As was understood by the parties when the Agreement was signed, Lou spent a substantial amount of time calling on customers and soliciting business for BOMC in Indiana. ( Id. at ¶¶ 14, 16.) For example, Lou solicited business from Carrier that included sales of BOMC's products to its Indianapolis facilities, and by 2012, sales of BOMC's products to those facilities had grown to more than $8 million annually. ( Id. at ¶¶ 17-18.) Similarly, Lou spent a substantial amount of time calling on Dometic at its headquarters in LaGrange, Indiana and at its manufacturing facilities in Elkhart, Indiana. ( Id. at ¶ 19.) Lou solicited business from Dometic that included sales of BOMC's products that were shipped directly to Indiana; those sales grew to $3 million annually by 2006. ( Id. at ¶ 20.) Throughout the duration of the Agreement, products solicited by Interleda and sold by BOMC were shipped from overseas to a warehouse located in Indianapolis, Indiana and were then distributed to facilities in Indiana and throughout North America. ( Id. at ¶¶ 21-22.) BOMC paid Lou his sales commissions via wire transfer to Lou's bank account at Wells Fargo Bank in Fort Wayne, Indiana. ( Id. at ¶ 25.) Ninety-five percent of those transfers originated from BOMC's bank accounts in China or Hong Kong, although Lou did receive a small amount of cash payments while in China for travel expenses. ( Id. at ¶ 26; Lu Aff., DE #32-1 ¶ 8.)

Lu attends many international conferences throughout the world, including locations within the United States. (Lu Aff., DE #32-1 ¶ 3.) According to Lou, for the duration of the Agreement (over ten years), he recalls Lu travelling to the United States approximately four or five times a year for two weeks at a time. (Lou Aff., DE #25 ¶ 27.) While Lou traveled to China at least once a year with clients, BOMC accommodated his alleged "financial difficulties" and reimbursed Lou for travel related expenses to China. (Lu Aff. DE #32-1 ¶¶ 5, 7; Agreement, DE #5, p. 7.)

Analysis

Choice of Law

The Seventh Circuit has held that, in a diversity action, a federal court must apply the choice of law rules of the forum state to determine the substantive law of the case. West Bend Mutual Ins. Co. v. Arbor Homes LLC, 703 F.3d 1092, 1095 (7th Cir. 2013). Indiana applies the most intimate contacts test to determine what state law should apply in contract actions. See Nat'l Union Fire Ins. Co. of Pittsburgh v. Standard Fusee Corp., 940 N.E.2d 810, 813-14 (Ind. 2010) (discussing the court's adoption of the "most intimate contacts" test, which uses the factors from the Restatement (Second) of Conflict of Laws section 188 to determine choice of law issues). The following factors are considered under the test: (1) the place of contracting, (2) the place of negotiation, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicile, residence, nationality, place of incorporation and place of business of the parties. Id. at 814. In general, even when multiple states are contemplated within an agreement, Indiana's choice of law jurisprudence favors applying the law of the state with the most intimate contacts to the entirety of the contract. Id. at 815.

Under Indiana law, "[a] contract is deemed to have been made in the state where the last act necessary to make it a binding agreement takes place.'" Id. at 817, n. 6 (citing W.H. Barber Co. v. Hughes, 63 N.E.2d 417, 421 (Ind. 1945)). However, when a contract is made in one state but its performance is intended to take place in another, the law of the state of performance applies. Elkhart Sawmill Co. v. Skinner, 42 N.E.2d 412, 414 (Ind. App. 1942). In this case, the Agreement was signed in Chicago, Illinois, [4] but it was contemplated that Interleda would be calling on and soliciting orders from customers located in Indiana and throughout the United States. Therefore, the place of contracting weighs in favor of applying Indiana law.

As to the place of negotiation, Indiana courts have noted that this factor "is of less importance when there is no one single place of negotiation and agreement, as, for example, when the parties do not meet but rather conduct their negotiations from separate states by mail or telephone." Am. Emp'r Ins. Co. v. Coachmen Indus., Inc., 838 N.E.2d 1172, 1179 (Ind.Ct.App. 2005) (quoting Rest. 2d. of Conflicts § 188 cmt. e (1971)). Here, the Agreement was drafted in Indiana and forwarded via email to BOMC in China. According to Interleda, there were no corresponding negotiations over its terms; rather, it was simply signed by Lu when he arrived at the hotel in Chicago, Illinois. Because there was no single place of negotiation (and because there is evidence that the Agreement was emailed from Indiana to China after it was drafted), the Court finds that this factor is not conclusive. See Id. at 1180.

The place of performance is the state where performance is to occur under the contract. Rest. 2d. of Conflicts § 188 cmt. e (1971). In the case at bar, also relevant to this factor is the Restatement's directive concerning ...


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