Daily Journal Names Chinese Textile Co.’s $72M Win a Top 2016 Verdict
The Daily Journal has recognized as one of California’s top verdicts of 2016, Vinson & Elkins partner Mort Hartwell’s $72 million win for a Chinese textile company involved in a dispute over the sale of its interest in a U.S.-based distributor.
Representing Wuxi Luoshe Printing
and Dyeing Co., Ltd. and its owner Zhize Huang, Hartwell tried the case in San
Mateo Superior Court and secured final confirmation of the award in September
2016. The judgment ranks among the largest ever won by a Chinese national in
the U.S. courts.
But the case wasn’t without its challenges, Hartwell told
the Daily Journal in a recent profile.
“It was unusual that a Chinese citizen was willing to come
to the U.S. and subject himself to the U.S. system. … There was a little
hesitation, but our client finally told us he was looking for American justice.
He felt this was a wrong American justice could right,” Hartwell said.
The case involved the alleged
misappropriation and theft of tens of millions of dollars related to the
ownership and management of Standard Fiber, Inc. (now known as TA Home, Inc.),
a distributor in the United States and Canada of textile and bedding products
manufactured by Wuxi Luoshe, a Chinese company. The two shareholders of SFI
were plaintiff Huang and majority shareholder Anshan Li.
Huang alleged that SFI’s success
was directly tied to that of Wuxi Luoshe. Li cashed in on this success by
allegedly pocketing profits that should have been shared and eventually selling
SFI without informing Huang. In doing so, Li breached fiduciary and contractual
duties in order to fraudulently conceal the sale and collect the payout, Huang
alleged. Li subsequently sold the company to similarly-named Standard Fiber,
SFI was a California corporation, the Court held that Li, as a majority
shareholder, owed fiduciary duties to minority shareholder Huang, and that
those duties were breached. Following a bench trial, the Court awarded Wuxi
Luoshe and Huang a judgment against SFI and Li of more than $72 million.