Hounen Solar, Inc. v. UL LLC

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HOUNEN SOLAR, INC., Plaintiff, v. UL LLC, RENESOLA YIXING CO., LTD. Defendants.

No. 22 CV 3240

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

April 13, 2023

ORDER

John J. Tharp, Jr. Judge

For the reasons set forth in the Order and Statement below, Defendant UL LLC's motion to dismiss the Second Amended Complaint [23] is granted without prejudice. Plaintiff is granted leave to amend its complaint by May 12, 2023.

STATEMENT

Plaintiff Hounen Solar, Inc. (“Hounen”), a solar-module distributor, sues UL LLC (“UL”), a company that certifies products and manufacturing facilities as adhering to safety standards.^[1]Hounen alleges that UL committed fraud and negligence by eliciting promises that it knew it never intended to honor. UL guaranteed that it would confirm to United States Customs and Border Patrol (“CBP”) that Hounen was authorized to use UL's mark on its solar modules should a problem arise with importing the modules into the United States. But when push came to shove, UL reneged on its promise. According to Hounen, UL led CBP to believe the modules were counterfeit, which caused CBP to seize them. Hounen alleges that it was injured by this seizure because it delayed delivery of the modules to an end buyer in the United States.

UL moves to dismiss the complaint. Many unresolved questions remain regarding the relationships between relevant actors and the reasonableness of Hounen's reliance on UL's representations, which would counsel against granting the motion. Hounen's own allegations show, however, that UL did not cause Hounen's injury: a delay in shipment that led to a breach of contract. Hounen would have breached the underlying contract regardless of any action on UL's part. UL's motion is therefore granted without prejudice.

I. Background^[2]

Hounen distributes solar modules (more colloquially known as solar panels). In October 2019, Hounen began negotiating with Endepo, Inc., a company that facilitates foreign goods transactions, to sell solar modules to a commercial utility project in North Carolina. Hounen and Endepo agreed that they would work together to facilitate that transaction, but only if they could find suitable agreements with other necessary parties, such as a module manufacturer and a safety-standard certifier. To account for these unknown factors, Hounen and Endpo reached a baseline agreement wherein terms such as price and quantity of the solar modules were tentative. The only essential term of the agreement was that the modules would be delivered to North Carolina between March 10 and April 15, 2020.

Hounen and Endepo decided to pursue licensing with the internationally recognized solar-module brand ReneSola. Defendant ReneSola, which is headquartered in China and has not yet appeared in this action, licenses its trademark brand to solar-module manufacturers. Since 2005, ReneSola has sought to expand its brand both in the Chinese market and internationally by collaborating with manufacturing facilities all over the world.

Licensing the solar-module mark was only one step in Hounen's process of procuring the solar modules for the North Carolina project. Although certification is not required to import foreign products to the United States, many imported products also bear a mark indicating that the product complies with certain safety standards. Hounen and Endepo sought a third-party safety certification company to signal to its end buyers that their products were safe and reliable.

Defendant UL markets itself as one of the most prominent safety certification companies for products imported into the United States. Relying on UL's reputation in the certification market, Hounen and Endepo decided to pursue UL as a potential third-party certifier. Hounen, however, did not interact with UL directly. Instead, Hounen sought out what UL describes as a “certification body” called UL-CCIC, a UL-affiliated body that operates in China. UL owns several certification bodies, which are legal entities that exist independently from UL. UL-CCIC, which appears to be a joint venture between UL and a third-party foreign investor provides services for UL by authorizing customers to use UL marks. In the next step of the Endepo project, Hounen representatives contacted UL-CCIC to discuss UL certification.

Meanwhile Hounen and Endepo arranged for a Cambodian company, Da Chuan Investment, to manufacture the solar modules. Although the facility where Da Chuan envisioned manufacturing the modules had the capacity to produce the modules, the facility itself did not have UL certification.

Around the same time, ReneSola agreed to license the ReneSola brand to Da Chuan's manufacturing facility. A ReneSola representative named “Guo Min” told a Hounen representative named “Lisa” that UL and ReneSola had worked together previously on similar projects. In fact ReneSola had separately applied for a certification from UL for the same type of modules that Da Chuan was set to manufacture. Considering ReneSola and UL's prior relationship, Guo Min told Lisa that he would help facilitate UL certification for the project.

On November 27, 2019, representatives from UL-CCIC, Hounen, and Da Chuan met in China to discuss the Hounen/Endepo project. Sometime prior to the meeting, Lisa from Hounen had initiated discussions about UL Certification with a UL-CCIC employee named “Yongbin.”^[3]The main topic of discussion was whether UL (acting through UL-CCIC) could authorize Hounen and Da Chuan to use its mark within the timeframe contemplated in the Hounen/Endepo agreement. Lisa explained to Yongbin that its potential buyer, Endepo, would only accept delivery of the ReneSola modules by the specified timeframe, between March 10 and April 15, 2020. Lisa further emphasized that Hounen and Endepo made clear that their agreement was contingent upon UL, or a competitor's, authorization of its mark in time for a smooth delivery.

In response, Hounen alleges, Yongbin guaranteed that UL would authorize use of the UL Mark on ReneSola modules in time, “regardless of whether certification had been completed.” Second Am. Compl. ¶ 118, ECF No. 16. Yongbin first opined that the certification would likely be complete by the time the ReneSola modules reached the United States. If that assessment proved overoptimistic, Yongbin assured Hounen that UL would still authorize the modules to bear the mark. UL would retroactively certify the product by field testing it once the products arrived in the United States.

Explaining the logistics, Yongbin specified that the ReneSola modules would be listed on UL ProductiQ, a UL database that is visible to CBP, once they were certified. The modules' inclusion in the database would indicate to CBP that certification was complete and that the ReneSola modules was authorized to bear the UL mark. If the modules were not certified by the time they arrived in the United States, Yongbin would provide a declaration from UL that confirmed that certification was ongoing and that would serve as evidence that UL authorized the mark's use. Yongbin assured Hounen that it was common practice for UL customers to use the UL mark before the certification process was over and that UL would confirm that it authorized use of the mark should CBP raise any concerns.

Satisfied that the project could be completed in time, Hounen decided to pursue UL as a certifier for the ReneSola modules. At the conclusion of these discussions, Hounen alleges, the parties envisioned the following roles: ReneSola would grant Da Chuan a license to use ReneSola's trademarks, Da Chuan would manufacture the modules, UL would authorize Da Chuan's use of the UL mark, and Hounen would ship the ReneSola modules to Endepo using UL's mark.

Hounen and Da Chuan then executed documents for ReneSola module production. In December 2019, Hounen (sometimes acting through third parties) completed all the paperwork for UL certification and paid the associated fees.

At the end of December 2019, Hounen and Endepo entered into their first purchase order contract. That contract set out the purchase price and number of ReneSola brand modules to be delivered to North Carolina no later than March 10, 2020. About a month later, Hounen and Endepo entered into their second purchase order contract. That purchase order contract envisioned two more shipments of ReneSola modules to be delivered on April 5 and April 15, 2020, respectively.

The baseline agreements having been finalized, Da Chuan began production of ReneSola modules. On January 3, 2020, Da Chuan and Hounen informed ReneSola that the modules were ready for shipment and asked ReneSola for the UL mark to append to the modules. Guo Min, the ReneSola representative, passed along the mark to Da Chuan and Hounen from a UL engineer. After receiving the go-ahead from Hounen, Da Chuan appended the UL mark to the manufactured ReneSola modules.

Around February 9, 2020, Da Chuan shipped the first batch of ReneSola Modules bearing the UL Mark to the United States. UL, however, had not yet completed certification of the mark. On February 25, 2020, Yongbin provided ReneSola with a declaration that bore UL-CCIC's official seal and stated that “testing is ongoing.” ReneSola then forwarded the declaration to Hounen and Da Chuan. Consistent with Yongbin's prior representations at the November 2019 meeting, Hounen and Da Chuan assumed that the February 2020 Declaration would signify to CBP that they were authorized to use the UL mark.

On March 25, 2020-15 days after the first shipment of modules was supposed to arrive in North Carolina-CBP targeted the first shipment of solar modules for examination, suspecting the modules were counterfeit. In early April, CBP detained the shipment, and on April 15, 2020, CBP...