California Verdicts

Plaintiff(s):

MJC Supply, LLC , 

MJC America Ltd. , 

MJC America Holdings Co. Inc.

Plaintiff Attorney(s):

Stephen J. Erigero;
Ropers Majeski Kohn Bentley PC;
Los Angeles,
CA,
for
MJC Supply, LLC, MJC America Ltd., MJC America Holdings Co. Inc. ■ Neal R. Marder;
Winston & Strawn LLP;
Los Angeles,
CA,
for
MJC Supply, LLC, MJC America Ltd., MJC America Holdings Co. Inc. ■ Ali R. Rabbani;
Winston & Strawn LLP;
Los Angeles,
CA,
for
MJC Supply, LLC, MJC America Ltd., MJC America Holdings Co. Inc. ■ Ian C. Eisner;
Winston & Strawn LLP;
Los Angeles,
CA,
for
MJC Supply, LLC, MJC America Ltd., MJC America Holdings Co. Inc.

Plaintiff Expert(s):

Alan Schoem; Esq.; Consumer Goods; North Potomac,
MD called by:
Stephen J. Erigero, Neal R. Marder, Ali R. Rabbani, Ian C. Eisner ■ Michael Wallace; Business Interruption/Lost Profits; Los Angeles,
CA called by:
Stephen J. Erigero, Neal R. Marder, Ali R. Rabbani, Ian C. Eisner

Defendant(s):

Gree Electric Appliances Inc. of Zhuhai, 

Hong Kong Gree Electric Appliances Sales Ltd.

Defense Attorney(s):

Ellen N. Adler;
Morrison & Foerster;
San Diego,
CA,
for
Gree Electric Appliances Inc. of Zhuhai, Hong Kong Gree Electric Appliances Sales Ltd. ■ Mark C. Zebrowski;
Morrison & Foerster;
San Diego,
CA,
for
Gree Electric Appliances Inc. of Zhuhai, Hong Kong Gree Electric Appliances Sales Ltd. ■ Joanna L. Simon;
Morrison & Foerster;
San Diego,
CA,
for
Gree Electric Appliances Inc. of Zhuhai, Hong Kong Gree Electric Appliances Sales Ltd.

Defendant Expert(s):

Douglas Anderson;
Accounting;
San Diego,
CA called by:
Ellen N. Adler, Mark C. Zebrowski, Joanna L. Simon ■ Richard Stern;
Mechanical;
Warrenville,
IL called by:
Ellen N. Adler, Mark C. Zebrowski, Joanna L. Simon

In July 2012, plaintiff MJC America Ltd., which was doing business as Soleus International Inc., a maker of comfort products for the home, began to receive complaints from its customers about dehumidifiers that it sold through a joint venture with the manufacturer, Gree Electric Appliances Inc. of Zhuhai, an appliance maker. MJC and Gree Electric previously formed a joint venture, Gree USA Inc., in April 2010. Under their agreement, MJC transferred all its customer accounts, including those with major hardware stores — such as The Home Depot Inc. and Lowe’s Cos. Inc. — to the newly formed entity. MJC then intended to market the Gree Electric-manufactured products to its customer base and sales and service networks under the brand name "SoleusAir Powered By Gree." However, in July 2012, MJC’s customers began to complain that the Gree-manufactured dehumidifiers were prone to catching fire. MJC claimed that when it insisted that Gree Electric report the defects to the United States government, Gree Electric retaliated by attempting to terminate the joint venture by stopping the production of its appliances, raising prices, and then attempting to take away its biggest customers, all of which MJC claimed caused Gree USA, the joint venture, to lose out on lucrative contracts. MJC America Ltd. (doing business as Soleus International Inc.), MJC America Holdings Co. Inc., and MJC Supply, LLC sued Gree Electric Appliances Inc. of Zhuhai and Hong Kong Gree Electric Appliances Sales Ltd. The MJC entities alleged that the Gree Electric entities’ actions constituted fraud, intentional interference with a business contract, and intentional interference with prospective economic advantage. MJC voluntarily dismissed its derivative claims, and its claims for breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, and two trademark claims. The court then dismissed MJC’s remaining trademark claim and denied MJC’s claim for unfair business practices. Gree Electric subsequently filed a separate action against MJC in California Superior Court, seeking to recover nearly $30 million that it alleged that MJC took from the joint venture on the eve of filing suit, as well as other damages to Gree Electric and the joint venture. That case was set for trial in October 2015, and evidence regarding MJC’s alleged conduct was excluded from the federal trial. During the federal trial, MJC claimed that it warned Gree Electric about the defect with the Gree-manufactured dehumidifiers, but that Gree Electric insisted that only a small batch of its dehumidifiers had been made using non-fire-retardant plastic and that the material was used by many appliance manufacturers in China and was determined to be safe. However, MJC hired product-testing experts to investigate, and the experts confirmed that there was a design error with the dehumidifiers produced for Gree USA and that the products built between 2010 and 2012 were made using substandard materials. As a result, MJC pulled the products off the market in November 2012, though the stop-sale did not occur until June 2013. Additionally, MJC claimed that it brought the defect to the federal government’s attention, as it posed a threat to the public, and that the U.S. Consumer Product Safety Commission announced a recall of the dehumidifiers on Sept. 12, 2013. MJC claimed that in response to the recall, Gree Electric launched a campaign to intimidate and financially ruin the American company and the joint venture, even before it brought the defect to the federal government’s attention. It also claimed that Gree Electric stopped production of products sold by the partnership, which MJC had become reliant on after MJC transferred operational and intellectual property assets to Gree USA. MJC further claimed that the production freeze made it impossible for the company to deliver on a large portion of its confirmed orders. In addition, it claimed that Gree Electric refused to pay operating expenses owed to MJC and threatened to force Gree USA out of business if MJC did not acquiesce to its demands. Gree Electric argued that MJC’s claims lacked legal and factual merit. Counsel for Gree Electric contended that Gree Electric and MJC jointly reported the product issue to the Consumer Product Safety Commission in March 2013, and that Gree Electric initiated a voluntary recall of the dehumidifiers on Sept. 12, 2013. Gree Electric’s counsel argued that the joint venture failed not because of any product issues, but because it was unprofitable as a result of MJC taking all the profit out of the company in the form of commissions. Counsel contended that Gree Electric’s actions were not in retaliation for MJC’s pressuring it to report to the Consumer Product Safety Commission. Instead, counsel contended that when Gree Electric sought to restructure the joint venture to accomplish its original agreed objectives of selling Gree-branded products, rather than "SoleusAir Powered by Gree" products, and to be a profitable company, rather than a shell company paying its profits out as commissions to MJC, that MJC resisted and surreptitiously set up its own competing endeavor, and then sued and initiated dissolution of the joint venture.

MJC’s counsel asked the jury to award damages sufficient to compensate MJC for its losses, including lost profits caused by Gree Electric’s alleged wrongful and intentional destruction of the joint venture. The plaintiffs’ accounting expert testified about MJC’s damages, including lost profits and related topics. The plaintiffs’ consumer products expert testified about reporting issues and topics related to the Consumer Product Safety Commission. Counsel for Gree Electric disputed MJC’s claim for damages based on lost profits.

The jury found for MJC on its contract interference and economic advantage claims against Gree Electric. However, it found for Gree Electric on MJC’s fraud claim. The jury determined that MJC’s damages totaled $42.5 million, including $12.5 million in compensatory damages and $30 million in punitive damages.

Judge:

S. James Otero

Trial Length:

11
 days

This report is based on information that was provided by plaintiffs’ and defense counsel.