United States District Court, E.D. Michigan, Southern Division
ORDER GRANTING DEFENDANT ROSTA INTERNATIONAL
LIMITED'S MOTION TO SET ASIDE DEFAULT [DKT. NO.
Page Hood Chief Judge, United States District Court.
August 8, 2016, the Court entered Default Judgment against
Defendant Rosta International Limited
(“Defendant”). On February 23, 2017, Defendant
filed a Motion to Set Aside Default Judgment (the
“Motion”). Dkt. No. 29. The Motion has been fully
briefed. On April 19, 2017, the Court held a hearing on the
Motion. For the reasons that follow, the Court grants the
Motion turns on the residence of Defendant for purposes of
service. In short, Plaintiff has asserted (and continues to
assert) that Defendant is a resident of China, but Defendant
maintains that it is a resident of Taiwan and the Cayman
Islands (and not China).
March 25, 2005, Defendant and Plaintiff executed an agreement
(“Agreement”) under which, in exchange for $250,
000, Plaintiff would become a shareholder and Vice Chairman
on Defendant's Board of Directors. (Doc. No. 32, Ex. H,
¶3; Ex. A). Defendant also agreed to pay Plaintiff $50,
000 a year and reimburse any business-related expenses up to
$2, 000/month. The Agreement further provided that “any
and all disputes or controversies, whether of law or fact or
any nature whatsoever .. . . arising from or related to your
services to Defendant or the termination of such services,
shall be resolved by final and binding arbitration” to
be held in Southfield, Michigan in Oakland County. (Doc. 32,
Ex. H at ¶10; Ex. A). The Agreement was signed by
Defendant's then-Chairman and Chief Executive Officer,
Jerry Huang. (Doc. 34, Ex. A).
paid the $250, 000, accepted the Vice Chairman position, and
provided services to Defendant. (Doc. No. 32, Ex. H at
¶5). In August 2005, Defendant provided Plaintiff with a
Share of Stock Remittance Receipt (a temporary receipt) which
confirmed that Defendant had received $250, 000 from him for
Defendant stock shares. Defendant informed Plaintiff that he
would be provided with a stock certificate as soon as it
updated its “official documentation” (Doc. No.
32, Ex. H at ¶4; Ex. B). Plaintiff attended an initial
Board of Directors meeting in Taiwan, which he believes was
before the Defendant facilities were completed in the Jiangsu
Province in China. Subsequently, he attended Board meetings
and performed services for Defendant at the Jiangsu Province
facility in China. For those Board meetings that Plaintiff
did not attend in person, he telephoned China to participate
by phone. Mr. Huang, the Chairman and CEO of Defendant,
worked and lived in China, and Plaintiff met with him in
China (Doc. No. 32, Ex. H at ¶7). Yuan Feng Industrial
was an established aluminum wheel manufacturer in Taiwan, and
Plaintiff understood that Yuan Feng and Crimson Investment in
California would be the primary investors in Defendant.
However, the intent was to establish Defendant as an
independent company with an independent Board of Directors,
and it was not to be a subsidiary of any other Company. The
strategy was for Defendant to operate in China and become a
global automotive supplier by manufacturing and supplying
wheels from China (Doc. No. 32, Ex. H at ¶6).
argues that Defendant's principal place of business was
clearly in China. Plaintiff states that Defendant
manufactured its product in China, its customers visited it
in China, and its CEO, Chairman and other managers worked and
resided in China (Doc. No. 32, Ex. H at ¶8). Plaintiff
notes that the fact that Defendant would be engaging in
business in China was referenced in Plaintiff's initial
Agreement as follows: “You will have the option, but
not the obligation, to invest another $250, 000 at the same
price and terms in 2006 when Defendant seeks additional
capital to complete the expansion of its second China
facility.” (Doc. No. 32, Ex. H at ¶9; Ex. A).
about June 25, 2007, Mr. Huang as “President” of
Defendant terminated Plaintiff's consulting services due
to cost cutting measures but indicated that they still valued
his “participation on the board as the Vice Chairman of
the Board of Directors.” (Doc. No. 32, Ex. H at
¶11; Ex. C). Defendant never provided Plaintiff with the
stock certificate, a shareholder package or comparable and
satisfactory evidence of his ownership interest, or any other
financial information despite his repeated requests (Doc. No.
32, Ex. H at ¶12). Defendant further failed to provide
Plaintiff with the compensation ($50, 000/year) that he
earned, and the company failed to reimburse him for the
business-related expenses that he incurred (Doc. No. 32, Ex.
H at ¶13). As a result, on June 12, 2012, Plaintiff
commenced arbitration proceedings against Defendant in
accordance with the arbitration provision in the Agreement.
(Ex. D). The Demand for Arbitration indicated that Defendant
was located in the Jiangsu Province in China. (Doc. No. 32,
Ex. H at ¶14; Ex. D).
retained attorney Peter Kirsanow from the law firm of
Benesch, Friedlander, Coplan & Aronoff LLP in Cleveland,
Ohio to represent it. Mr. Kirsanow's letter of June 29,
2012 indicated that all communications in the case should be
directed to him. (Doc. No. 32, Ex. H at ¶15; Ex. E). In
the arbitration, Defendant submitted a simple
“denial” of the claims, but never specifically
indicated or disputed that it was located in China. (Doc. No.
32, Ex. H at ¶16; Ex. F).
August 2013, Defendant and Plaintiff entered into a
“Negotiated Settlement Agreement and General
Release” (“Settlement Agreement”), which
provided that Defendant would pay Plaintiff for certain
consulting fees he had earned and provide him with copies of
the annual shareholder package, financial statements and
other material information provided to Crimson for fiscal
year 2006 through the present and stock certificates or other
comparable and satisfactory evidence of his ownership
interest and investment in Defendant (Doc. No. 32, Ex. H at
¶17). Plaintiff maintains that the fact that Defendant
was in China was “confirmed” by the fact that the
Agreement provided that the payment due date was dependent on
the publically recognized holidays of the Peoples Republic of
China. The Settlement Agreement expressly provided that it
would be governed by the laws of the State of Michigan and
that “the parties will submit to the jurisdiction of
the state and/or federal courts located within the State of
Michigan for the resolution of any dispute which may arise
thereunder.” Mr. Kirsanow was identified as counsel for
Defendant in the Settlement Agreement. The Settlement
Agreement expressly provided that it would not be interpreted
as releasing, waiving, compromising or restricting in any way
any claims or rights that Plaintiff might have arising out of
his investment in Defendant or his shareholder status (Doc.
No. 32, Ex. I at ¶6).
paid the consulting fees but failed to comply with the other
terms of the Settlement Agreement, including providing
Plaintiff with copies of the annual shareholder package,
financial statements and other material information provided
to Crimson for fiscal year 2006 through the present.
Defendant also failed to provide Plaintiff with stock
certificates or other comparable and satisfactory evidence of
his ownership interest and investment in Defendant for which
he had paid $250, 000 (Doc. No. 32, Ex. H at ¶18).
During 2013 and 2014, Plaintiff's counsel contacted Mr.
Kirsanow on numerous occasions to attempt to obtain
compliance with the settlement agreement. The most recent
response was that Mr. Huang had the documents and Defendant
was investigating. (Doc. No. 32, Ex. I at ¶8; Ex. G, p.
authorized legal counsel to commence this lawsuit on his
behalf and serve it on Defendant in China (Doc. No. 32, Ex. H
at ¶19). Count I of this lawsuit was for Breach of the
Settlement Agreement for failing to provide the required
information and Count II was for Fraud. Plaintiff's
counsel emailed the Summons and Complaint to Mr. Kirsanow on
February 11, 2015 and requested that he accept service on
behalf of Defendant. (Doc. No. 32, Ex. I at ¶9; Ex. G,
p. 2). On February 13, 2015, Mr. Kirsanow informed Mr.
Kotzian by telephone that he had contacted his client, that
Mr. Huang had taken the documents, and that he would waive
service of process once he had authority (Doc. No. 32, Ex. I
at ¶10). On February 17, 2015, Mr. Kirsanow informed Mr.
Kotzian by telephone that he could not accept service, and
that Defendant was going in a “different
direction” regarding representation (Doc. No. 32, Ex. I
states that he complied with all the necessary procedures for
serving Defendant in China. The Chinese Ministry acknowledged
receipt of the documents and translations and confirmed that
the Chinese Ministry was satisfied with the translation.
(Doc. No. 32, Ex. J at ¶9 and Ex. 1 to Ex. J (at 3)).
However, no certificate of service of any kind was received,
even though Plaintiff asserts ...