PPG Indus. v. Jiangsu Tie Mao Glass Co.

PPG INDUSTRIES, INC., Plaintiff, v. JIANGSU TIE MAO GLASS CO., LTD., et al, Defendants.

2:15-cv-00965

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

March 31, 2020

OPINION

Mark R. Hornak, Chief United States District Judge

In February 2015, PPG Industries, Inc., learned that one of its former employees stole and then sold multi-million-dollar trade secrets to Jiangsu Tie Mao Glass Company ("TMG"), a Chinese competitor of PPG. PPG would go on to learn that TMG engaged in a years-long effort to obtain its proprietary information from the former employee in exchange for tens of thousands of dollars funneled to the employee via a TMG representative's bank account. In the weeks and months following the news, the Federal Bureau of Investigation arrested the former PPG employee and a federal grand jury him for stealing PPG's trade secrets.

It was also during those months that PPG initiated this civil action against TMG and two (2) of its representatives, Benhua Wu and Mei Zhang (collectively, "Defendants"). PPG's Complaint alleged several claims, and after Defendants failed for years to answer the Complaint, PPG sought an entry of default. Now, PPG moves for a default judgment on its trade secrets misappropriation claim. Defendants, having entered an appearance at the last minute, move to set aside the Clerk's entry of default. PPG's motion is GRANTED IN PART as set forth below, and is also DEFERRED IN PART without prejudice, and Defendants' motion is DENIED.

I. BACKGROUND

TMG and PPG are competitors in the transparencies industry—meaning that they manufacture and sell commercial glass products, such as airplane windows. TMG maintains its headquarters in China, while PPG operates out of its Pittsburgh, Pennsylvania main office. At issue in this case are Defendants' efforts to misappropriate a wide array of PPG's proprietary transparencies-related manufacturing processes, in particular those related to a product called Opticor. Starting in 2013, Defendants colluded with a former PPG employee, Thomas Rukavina, to unlawfully acquire PPG's proprietary technology and information. During the two-and-a-half years when Defendants operated their trade secrets stealing scheme, they paid Rukavina over $100,000 for proprietary PPG information. Eventually, however, the law caught up to Defendants. PPG got wind of the conspiracy and alerted the FBI, who promptly arrested Rukavina.

Shortly after Rukavina's arrest, PPG brought this action against TMG, as well as Benhua Wu and Mei Zhang. Wu serves as TMG's general chairman—the equivalent of a chief executive officer. According to PPG's Complaint, Wu personally oversaw the effort to steal PPG's trade secrets with Rukavina's help. Zhang serves as a purchasing agent for PPG. According to the Complaint, she served as Rukavina's handler—often helping TMG funnel money from its corporate account to Rukavina's personal bank account—and personally assisted in TMG's efforts to trick a PPG subcontractor into supplying additional confidential information.

In its Complaint, PPG included claims under the federal RICO statute and Pennsylvania tort and contract law, as well as a Pennsylvania Uniform Trade Secrets Act ("PUTSA") misappropriation claim. (Compl., ECF No. 1.) After several unsuccessful attempts to serve Zhang at her California home, PPG moved the Court for an Order deeming service on Zhang complete via electronic service. The Court approved that request (ECF Nos. 24 and 25.) As for Wu andTMG—both located in China—PPG retained a professional vendor and completed service in a manner consistent with the Hague Convention. (ECF Nos. 32; 33; 35; and 36.)

Despite PPG serving all Defendants, none filed an Answer or any motion in response to PPG's claims. While it waited, PPG served all Defendants with requests for admissions. (ECF No. 107, at 6.) Like PPG's Complaint, those requests went unanswered. (Id.) Then, in October 2017, PPG filed a request for an entry of default from our Clerk of Court. (ECF No. 79.) The Clerk promptly granted PPG's request. (ECF No. 80.) In preparation for an eventual default judgment motion, and because Defendants' failure to participate in this case deprived it of traditional civil discovery, PPG engaged in significant third-party discovery following the entry of default. (ECF No. 104.)

In May 2019, PPG moved the Court for a default judgment and permanent injunction against Defendants on its PUTSA misappropriation claim. (ECF Nos. 106 and 107.) In addition to that motion, PPG moved the Court for an award of exemplary damages and attorneys' fees, costs, and expenses. (ECF Nos. 114 and 121.) At the final hour, Defendants entered an appearance and moved to set aside the entry of default. (ECF Nos. 129 and 130.) Defendants also opposed PPG's motion for a default judgment—though the bulk of their arguments in opposition went more toward damages mitigation than to liability. The parties fully briefed their respective motions. (ECF Nos. 136; 137; 144; and 146.) With briefing complete, the Court scheduled oral argument for late January 2020. (ECF No. 153.)

Having heard arguments on the motions and considered the parties' written submissions, the Court now decides PPG's Motion for Default Judgment and Permanent Injunction (ECF No. 106), and Defendants' Motion to Set Aside Entry of Default. (ECF No. 129.)

II. DEFENDANTS' MOTION TO SET ASIDE DEFAULT

Defendants move to set aside the default entered by our Clerk of Court. (ECF No. 129.) They base their motion entirely on the argument that this Court lacks personal jurisdiction over all three (3) Defendants. And without personal jurisdiction, Defendants argue, the Court is without the power to enter a default or grant a default judgment against them. Despite Defendants' argument that their contacts with Pennsylvania amounted to only "two email chains" that Rukavina initiated, the Record demonstrates otherwise. PPG provided more than enough evidence to establish this Court's personal jurisdiction over TMG, Zhang, and Wu. Defendants' Motion to Set Aside the Default (ECF No. 129), is denied.

The Third Circuit's usual standard for assessing a motion to set aside a default requires the Court to examine three (3) factors. First, the Court must ask whether the defendant has a meritorious defense. Without the potential to present a winning defense, the Court should deny the defendant's motion to set aside a default. Second, the Court must ask whether setting aside the default prejudices the plaintiff. Third, the Court must ask whether the default resulted from the defendant's culpable conduct. See, e.g., United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984).

But our Court of Appeals has also held that the three-factor test only applies when the question of setting aside the default is left to the Court's discretion. When the default is void, the Court need not invoke the three (3) factors listed above. See Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985) ("[I]t is not necessary for us to resort to an analysis of those factors in this case because they apply only when the default judgment was authorized and the only question before the district court is whether to exercise its discretion to set aside the default."). Instead, when the entry of default is void, it would be legal error for the Court to deny thedefendant's motion to set it aside. See id.; see also United States v. One Toshiba Color Tele., 213 F.3d 147, 156-57 (3d Cir. 2000).

Here, Defendants do not argue that the usual three-prong U.S. Currency standard tilts in favor of setting aside the default.¹ Instead, they argue that because the Court lacks personal jurisdiction, the default is void. PPG, on the other hand, invokes the three-prong U.S. Currency standard. But its merits prong arguments all revolve around why this Court does have personal jurisdiction over all three (3) Defendants. So the parties' apparent disagreement over what standard applies ultimately does not make any difference to the Court's analysis, because if the Court has personal jurisdiction, it will deny Defendants' motion.

A. Personal Jurisdiction

Personal jurisdiction comes in two (2) flavors: specific and general. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-15 (1984). General jurisdiction is all-purpose—allowing a court to exercise jurisdiction over the defendant for any claim lodged against that party. Id. at 414 & nn.8-9. Specific jurisdiction, on the other hand, depends on the connection between the plaintiff's claim and the defendant's contacts with the forum state. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316-17 (1945). Because none of the Defendants in this case are "at home" in Pennsylvania, PPG rightly does not argue that the Court has general jurisdiction over any Defendant. Cf. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). On the other hand, PPG does argue that this Court has specific jurisdiction to decide these claims against these Defendants. The Court agrees with PPG's assessment.

When a federal court must determine whether it has specific jurisdiction over a party, thereare typically two (2) sources of law that it must consider. The first source is state law, because under the Federal Rules of Civil Procedure, federal courts exercise personal jurisdiction according to the law of the state where the court sits. See Fed. R. Civ. P. 4(k)(1)(A). The second source is the United States Constitution, because the Due Process Clause constrains a state's power to exercise jurisdiction over a nonresident. See Walden v. Fiore, 571 U.S. 277, 283-84 (2014).

Here, the relevant state law is Pennsylvania's long-arm statute. See 42 Pa. Cons. Stat. § 5322(b). That statute gives Pennsylvania's courts jurisdiction over nonresidents "to the fullest extent allowed under the Constitution of the United States." Id. So the state law and federal constitutional law questions merge...