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Global Material Technologies, Inc. v. Dazheng M Fibre Co. Ltd.

United States District Court, N.D. Illinois, Eastern Division

May 1, 2015



MANISH S. SHAH, District Judge.

Global Material Technologies makes and sells metallic-wool products. Beginning in the 1990s, GMT began to obtain a large portion of its metallic fibers from Dahzeng M Fibre Co. (DNZ), a Chinese company. The two companies were initially on good terms and maintained a close business relationship. Eventually, however, the relationship disintegrated, and the parties became embroiled in a series of lawsuits in the United States and abroad.

GMT first sued DNZ in China for breach of contract. Two days later, GMT sued DNZ, as well as DNZ's president and one of its supposed affiliates, in the Middle District of Tennessee. In the Tennessee litigation, GMT claimed that the defendants had, among other things, stolen GMT's trade secrets and violated the United Nations Convention on Contracts for the International Sale of Goods. The Tennessee action was ultimately transferred to the Northern District of Illinois, but in the interim, the Chinese trial court rendered its judgment on GMT's claims (and DNZ's counterclaims) in China. The Chinese court ordered both parties to pay damages, though GMT was ordered to pay more than DNZ. Each party appealed, but the trial court's ruling was largely affirmed by the Chinese intermediate court.

In the present suit, defendants filed counterclaims seeking recognition and enforcement of the Chinese judgment. Defendants also asserted (in answer to GMT's current complaint) that both of GMT's remaining claims are barred by res judicata. Defendants filed a motion for judgment on the pleadings, which GMT opposes. For the reasons discussed below, Defendants' motion is granted in part and denied in part.

I. Legal Standard

A motion for judgment on the pleadings may be granted only if there are no material issues of fact and the moving party is entitled to judgment as a matter of law. See Nat'l Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987) (citation omitted); cf. Alexander v. City of Chicago, 994 F.2d 333, 336 (7th Cir. 1993) (citing Karaganis, 811 F.2d at 358). All facts must be construed, and all inferences drawn, in the non-movant's favor. See Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635, 639 (7th Cir. 2015) (citing Vesely v. Armslist LLC, 762 F.3d 661, 664-65 (7th Cir. 2014)). In considering a motion for judgment under Federal Rule of Civil Procedure 12(c), the district court may rely on the pleadings, documents attached to or critical to (and referred to in) the pleadings, or information subject to judicial notice. See Geinosky v. City of Chicago, 675 F.3d 743, 745 n. 1 (7th Cir. 2012) (discussing review of motions under Fed.R.Civ.P. 12(b)(6)) (citations omitted); Lodholtz, 778 F.3d at 639 (explaining that the same standards govern Rules 12(b)(6) and 12(c)) (citing Adams v. City of Indianapolis, 742 F.3d 720, 727-28 (7th Cir. 2014)).

II. Facts

A. GMT's Business Relationship with DNZ

GMT is an Illinois-based company that manufactures metallic-wool products. See [38] at 1 ¶ 1; id. at 2 ¶ 8; [149] at 1 ¶ 1; id. at 2 ¶ 8.[1] DNZ, a Chinese company based in Zhuhai, China, supplied GMT with steel fibers from 1996 to 2010. See [160] at 1 ¶ 179; id. at 2 ¶ 183. For a time, the two companies maintained a close business relationship: GMT's president attended meetings by DNZ's board of directors, and GMT maintained a 25% ownership interest in DNZ. See [38] at 3 ¶¶ 12, 17; [149] at 3 ¶¶ 12, 17. Annual transactions between the two companies at one time exceeded one million dollars. See [38] at 6 ¶ 32; [160] at 5 ¶ 32. But the relationship eventually soured, and the two parties (who no longer do business together, see [38] at 6 ¶ 33; [149] at 5 ¶ 33) became entangled in multiple lawsuits.

B. GMT's Suit in China

On February 26, 2011, GMT sued DNZ in the Zhuhai People's Court of Guangdong Province, China. See [160] at 4 ¶ 190; see also GMT's "Civil Complaint" (as translated), [172-2] at 8-15. In its Chinese complaint, GMT brought against DNZ a series of contract-based claims, alleging that DNZ had violated the parties' agreement by shipping to GMT (or its customers) products suffering from severe quality issues, products that otherwise did not conform to GMT's specific purchase orders, and products that GMT simply had not ordered at all.

1. The Parties' Claims in China

According to GMT, in June 2008 DNZ began to send steel-wool shipments that contained rusted fibers. See [172-2] at 10. The problematic shipments stemmed from the same invoice (No. RJCT0), see id. at 9, and triggered a series of back-and-forth communications between the two companies, see id. at 10-resulting, said GMT, in DNZ's agreement to: (1) pay the cost of sorting the rusty fibers from the usable ones; (2) accept the return of the rusted product; and (3) reimburse GMT for the shipment of said product back to DNZ (and all other related costs or expenses), see id. GMT did inspect all 752, 000 pounds or so of the RJCT0 shipments, identified and separated out 268, 568 pounds supposedly damaged by rust, and returned the latter (at GMT's own expense) to DNZ in China. See id. But DNZ never refunded GMT for the returned product, and never reimbursed GMT for any of its sorting- or shipping-related costs. See id.

Meanwhile, claimed GMT, DNZ had begun to disregard GMT's purchase orders completely, shipping to GMT large quantities of products that did not meet GMT's specifications (and about which customers had started to complain). See id. at 13. An inspection by GMT revealed that, of the 13, 170 pounds sent to GMT under invoice No. 1192011-whose shipments spanned from April to October 2008-only 1, 975 of them (approximately 15%) actually met GMT's requirements. See id. Similar issues resurfaced in July 2010, when GMT discovered more non-conforming goods in shipments related to a different invoice (No. 1172011). See id. at 11. One month later, one of GMT's customers found rust in yet another of DNZ's shipments (invoice No. 1172011-2). See id. According to GMT, DNZ admitted the presence of rust in the latter shipment, and admitted the non-conformity of certain goods (as to invoice No. 1172011), but refused to reimburse GMT for any of the products or to accept their return. See id. at 11-13.

GMT sued DNZ in China, requesting compensatory damages for DNZ's alleged breaches of contract, as well as an injunction requiring DNZ to accept the return of the faulty or non-conforming goods still in GMT's possession. See id. at 8. DNZ, for its part, denied any wrongdoing and alleged that GMT had fabricated the "quality" issues as a scheme to avoid paying DNZ for its shipments. See Civil Judgment of The People's Court of Jinwan District, Zhuhai City, Guangdong Province, The People's Republic of China (as translated), [172-3] at 29. According to DNZ, it was GMT-not DNZ-who had breached the parties' contract: first by amassing over nine hundred thousand dollars' worth of unpaid balances, and next by failing for several years to purchase quantities at or above the agreed annual minimum. See id. at 30. DNZ filed corresponding counterclaims, requesting ...

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