Contract Law & Unjust Enrichment

By April 16, 2014 October 24th, 2018 Commercial Litigation, Jenna

CHINESE BUSINESS OWNER WINS JUDGEMENT AGAINST CALIFORNIA FIRM FOR UNPAID INVOICES

Highlights

  • Based on his expertise in contract law and business litigation, attorney James Wakefield successfully represented a Chinese business owner who, as an individual, sued a California company for more than $800,000 in unpaid invoices.
  • During trial, Mr. Wakefield pursued a claim of “unjust enrichment,” establishing that the California company had received products supplied by the Chinese manufacturer but had failed to pay for the goods delivered.
  • Mr. Wakefield’s skilled cross-examination of the defendant exposed inconsistencies in his testimony about alleged payments made via wire transfers from a Hong Kong company, which actually went back to himself and his family.
  • The judge agreed with the claim for unjust enrichment and ruled that the Hong Kong company was a sham. The owner of the Chinese manufacturer received a judgment totaling more than $1.1 million.

Attorneys

Case Study

James Wakefield of Cummins & White, LLP, successfully represented a Chinese business owner who sought to collect payment from a California company that had ordered and received goods manufactured in China, but had unpaid invoices totaling more than $800,000. A key step in the litigation was transferring the rights and interests of the manufacturer and its licensed exporter to the business owner as an individual, allowing him to seek recovery in the California courts. At trial, Mr. Wakefield successfully argued that the defendant was “unjustly enriched” by receiving product without paying the bills, and impeached the defendant’s testimony regarding alleged payments. The judge agreed, and awarded the Chinese business owner full damages, plus costs and interest, totaling more than $1 million.

Background

AC International Corporation (ACI), located in Chino, California, was formed to import and sell digital scales manufactured in China. Its offerings included products manufactured by Shanghai Heng Cheng Electronics Co., Ltd., a Chinese company financed and built by Ping Pan, the father of one of ACI’s founders. Over the course of six years, orders, invoices, and payments were routinely sent both directly and indirectly from ACI to Heng Cheng and its licensed exporter. From July 2009 to August 2010, ACI made a series of purchases totaling $922,080.50 but paid only $100,000, leaving a balance due of $822,080.50. This unpaid balance negatively impacted the manufacturer, and it ceased operations in November 2010. Seeking payment of the invoices, Mr. Pan retained Cummins & White, LLP, to handle litigation in California.

Legal Strategy

James Wakefield of Cummins & White represented Mr. Pan in the lawsuit and executed a litigation plan that included:

  • Establishing the issuance of purchase orders from ACI, manufacturer of goods by Heng Cheng, shipment of goods by licensed exporter ZiJiang, and receipt of goods by ACI.
  • Establishing the issuance of invoices, as well as partial payment of goods and outstanding balances owed. This also included an explanation of the convoluted ordering and payment pathway deployed by ACI when making indirect purchases that involved a sham company in Hong Kong created to avoid taxes and disguise the contractual relationship between ACI and Heng Cheng.
  • Obtaining an assignment to Mr. Pan of all the rights and interests in the unpaid invoices from manufacturer Heng Cheng and its licensed exporter, ZiJiang. This was important, as the exporter, which played a key role in the shipping and invoicing process, did not wish to pursue litigation in the United States.
  • Seeking full restitution of the unpaid invoices by arguing that ACI was “unjustly enriched” by receiving product manufactured by Heng Cheng but failing to pay for that product.

Results/Implications

After a three-day bench trial that included witness testimony and presentation of evidence, the court found that ACI had created a sham relationship in Hong Kong to avoid financial responsibility and was unjustly enriched by its receipt of goods manufactured by Heng Cheng and failure to pay for them. A judgment was entered in favor of Mr. Pan in the amount of $822,080.50, plus costs and interest, totaling more than $1.1 million.

Mr. Wakefield said that while it was clear that ACI owed more than $800,000 in unpaid invoices, the key in this breach of contract case was establishing a legal position that allowed owner Ping Pan to seek restitution in California. “There are important nuances in contract law, especially when parties are from different countries and, as corporations, do not want to pursue litigation in the United States. As a result, we focused on Mr. Pan as an individual suing in the California courts, and secured a legal victory that allows him to collect a significant debt.”

According to Ping Pan’ son, Edward, they were pleased with Cummins & White and the outcome of the trial. “Cummins & White skillfully represented my father in this case, which was important to us financially as Chinese business owners working with California companies, as well as for our professional reputation, which had been disparaged by ACI. We are vindicated by the judge’s ruling.”

For Chinese Translated Version, Click Here.