Wistron NeWeb Corp. v. Genesis Networks Telecom Servs.

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WISTRON NEWEB CORPORATION, Plaintiff, v. GENESIS NETWORKS TELECOM SERVICES, LLC and GNET ATC, LLC, Defendants.

No. 22-cv-2538 (LJL)

United States District Court, S.D. New York

July 12, 2023

OPINION AND ORDER

LEWIS J. LIMAN UNITED STATES DISTRICT JUDGE

Plaintiff Wistron NeWeb Corporation (“Plaintiff” or “Wistron”) moves for summary judgment, pursuant to Federal Rule of Civil Procedure 56, awarding Plaintiff no less than $9,212,256.94 plus interest, attorneys' fees and costs, jointly and severally against defendants Genesis Networks Telecom Services LLC (“Genesis”) and GNET ATC, LLC (“GNET”) (collectively “Defendants”), on Plaintiff's breach of contract claims, and in the alternative, its account stated claims against both Defendants. Dkt. No. 67. Genesis moves to strike portions of materials filed in connection with Wistron's motion for summary judgment. Dkt. No. 73. GNET joins Genesis's motion to strike in its entirety. Dkt No. 81.

For the following reasons, the Plaintiff's motion for summary judgment is granted in part and denied in part^[1] and Defendants' motion to strike is denied.

BACKGROUND

The following facts are drawn from the materials submitted in connection with Plaintiff's motion for summary judgment. The facts are undisputed except where otherwise indicated and all reasonable inferences are drawn in favor of the non-movant.

I. The Entities

This action seeks to recover for unpaid invoices for products manufactured and delivered pursuant to a distributor agreement.

Plaintiff Wistron is a corporation organized under the laws of Taiwan, with its principal place of business in Hsinchu, Taiwan. Dkt. No. 69-4 ¶ 6. Wistron manufactures and sells wireless communication products. Dkt. No. 69-1 at ECF p. 9; Dkt. No. 69-9 at 20. Wistron has a wholly owned subsidiary, W-NeWeb Corporation (“W-NeWeb”), that is based in Milpitas, California. Dkt. No. 69-4 ¶ 6. For customs clearing purposes, and during all relevant time periods, W-NeWeb acted as a U.S. importer, and issued invoices and collected payments for products that were manufactured and sold by Wistron to Genesis. Dkt. No. 70 ¶¶ 2, 8; Dkt. No. 76 ¶ 36.

Defendants Genesis and GNET are Texas limited liability companies. Dkt. No. 69-1 at ECF p. 9; Dkt. No. 69-4 ¶¶ 7-8. Goodman Networks, also known as Goodman Solutions, is the parent company of GNET and owns 100% of its shares. Dkt. No. 69-4 ¶ 8; Dkt. No. 69-5 ¶ 10; Dkt. No. 76 ¶¶ 6-7. Goodman Networks does not own any part of Genesis. Dkt. No. 78 ¶ 4; Dkt. No. 91 ¶ 1. Genesis, however, is related to GNET though James Goodman, who holds an ownership interest in Genesis and also has an ownership interest in Goodman Networks, along with his four brothers, including John Goodman, and through other entities with approximately 250 other common and preferred shareholders. Dkt. No. 69-4 ¶ 9; Dkt. No. 76 ¶ 5. During certain relevant time periods, John Goodman was the chief executive officer (“CEO”) of Goodman Networks and GNET. Dkt. No. 76 ¶ 9.

II. The Distributor Agreement

On February 1, 2019, Wistron and Genesis entered into a Non-Exclusive Distributor Agreement (“Distributor Agreement”). Dkt. No. 69-1; Dkt. No. 77 ¶ 5. Under the Distributor Agreement, Wistron and Genesis agreed that Genesis would “engage in the business of selling and distributing the [p]roducts for [Wistron] in the [t]erritory” of North and South America. Dkt No. 69-1 at ECF p. 9, § 1.10. The products were devices for satellite television reception and video output to television sets or other display devices. Id. § 1.7. The agreement appointed Genesis as a non-exclusive distributor in North and South America for a term of three years. Id. § 16.1. Under the agreement, Genesis ordered products from Wistron and resold them to AT&T. Dkt. No. 77 ¶ 5.

Several provisions of the Distributor Agreement are relevant to this action. First, the Distributor Agreement contained detailed terms with respect to the placement of orders and the payment for orders. The Distributor Agreement provided that Genesis, defined as “Distributor,” would “place planning orders . . . for all Products with WNC [Wistron] by using WNC's then current purchase form.” Dkt. No. 69-1 § 6.1. Upon the placement of a planning order, Wistron was required either to accept the order (by completing an order acknowledgment form) or to provide notice of its inability to fulfill the order or its rejection of the order. Id. An order would become firm 30 days prior to delivery date and neither party was permitted to cancel an order without providing written notice of a breach justifying cancellation. Id. §§ 6.1, 6.2. Genesis was required to pay for the products within 90 days after title transfer from Wistron. Id. § 4.2.

Second, the Distributor Agreement also outlined protocols for the exchange of documents in the case of a transaction under the agreement. Section 11, entitled “Electronic Data Interchange” (“EDI”), provided that “[a]t the request of either Distributor or [Wistron] and the mutual agreement of both Parties, the Parties shall exchange orders, payments, acknowledgments, invoices, remittance notices, and other records . . . electronically, in place of tangible documents. EDI requirements and transactions are outlined in Exhibit G.” Id. § 11. Of relevance here, Exhibit G to the Distributor Agreement described a transaction of a category number “850” as a “Purchase order” in which the “Sender” is the “Distributor” (Genesis), and the “Receiver” is Wistron. Id. at ECF p. 42. It also described another transaction of a category number “867” as a “Product Transfer (Consumption),” in which the “Sender” is Genesis, and the “Receiver” is Wistron. Id. Consumption referred to consumption by the “Customer,” who in this case is AT&T. Id. at ECF p. 36.

Third, the Distributor Agreement required Genesis, “at all times” during the term of the agreement, to maintain insurance at its sole cost and expense, including policy or policies with at least $20 million in coverage specially allocated to Wistron and on which Wistron would be named as a loss payee, covering losses for products provided by Wistron while on Genesis's premises. Id. § 17.4. The Distributor Agreement also recited that Wistron would be providing Genesis confidential information and required Genesis to keep that information confidential, id. §§ 13.1, 13.2, and required Genesis to take measures to strictly control access to facilities where Wistron's products and/or confidential information was stored, id. § 14.1.

Fourth, the Distributor Agreement prohibited Genesis from assigning the agreement to any third party, including to a subsidiary or affiliate of Genesis, without the prior written consent of Wistron. Id. § 19.8. In the event of a proposed appointment by Genesis to any subdistributor, the agreement also required Genesis to obtain and provide to Wistron background and/or due diligence information required by Wistron. Id. There was no equivalent condition for an assignment by Wistron to a subsidiary or affiliate. Id. Section 19.8 of the Distributor

Agreement, entitled “Assignment,” provided as follows:

This Agreement may not be assigned by Distributor, in whole or in part, to any third party, including any subsidiary or Affiliate of the Distributor or any subdistributor without the prior written consent of WNC. A Change of Control shall be deemed an assignment for purposes of this Section. WNC may assign its right and obligations hereunder to any of its respective subsidiaries or Affiliates. In the event of a proposed appointment by Distributor to any sub-distributor, Distributor shall obtain and provide to WNC such background and due diligence information with respect to such sub-distributor required by WNC. Any approved appointment of a sub-distributor may only be made by WNC in writing and in its sole discretion and shall not release Distributor from its obligations hereunder.

Id. A Change of Control was defined as follows:

“Change of Control” shall be deemed to have occurred if Distributor sells substantially all of its assets or a change occurs in the current ownership of capital stock or other securities of the Distributor which results in a change of twenty percent (20%) or more of the ownership of Distributor . . ., whether pursuant to internal transfers of capital stock or securities of the Distributor among the beneficial owners of such capital stock or other securities, or a third party stock or other securities purchase, merger, consolidation or other similar transaction.

Id. § 1.2 (bolding in original).

Fifth, the Distributor Agreement provided that its provisions “shall not be extended, varied, changed, modified or supplemented unless in writing and executed by a duly authorized representative of each Party.” Id. § 19.13. In addition, the Distributor Agreement also contained what is commonly termed a “no-waiver provision.” Section 19.10 stated that “[e]xcept as otherwise expressly stated herein, the failure of any [p]arty to enforce at any time or for any period of time, any of the provisions of this Agreement shall not constitute a waiver of such provisions or of the right of [Wistron] to enforce each and every provision.” Id. § 19.10.

Sixth, as for termination, the Distributor Agreement provided that “[e]ither [p]arty may terminate this Agreement by written notice in the event of: . . . a material breach of any provision of this Agreement where the breaching party fails to cure such breach within thirty (30) days following receipt of notice of such breach from the non-breaching party.” Id. § 16.2.

Finally the Distributor Agreement also contained additional terms and conditions relevant to the damages available to Wistron in the case of a breach. As to the interest rate that accrued on...