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Trading v. Clearplex Direct, LLC

United States District Court, N.D. California, San Jose Division

March 2, 2015

ET TRADING, LTD., Plaintiff,
v.
CLEARPLEX DIRECT, LLC, et al., Defendants.

ORDER DENYING EX PARTE APPLICATION FOR TRO Re: Dkt. No. 9

LUCY H. KOH, District Judge.

On February 11, 2015, Plaintiff ET Trading, Ltd. ("Plaintiff" or "ET Trading") filed an ex parte application for a temporary restraining order ("TRO") to enjoin Defendants' sale, promotion, or distribution of any ClearPlex automotive film products in the People's Republic of China and the use of certain trademarks. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without oral argument and hereby VACATES the hearing scheduled for March 3, 2015.

I. BACKGROUND

A. Factual Background

Plaintiff filed its complaint on January 29, 2015. ("Compl."), ECF No. 1. Plaintiff is an entity organized under the laws of the People's Republic of China with its principal place of business in Tianjin, China. Id. ¶ 1. Defendant ClearPlex Corp. ("CP-Corp") is a Utah corporation with its principal place of business in Morgan Hill, California. Id. ¶ 2. Defendant ClearPlex Direct, LLC ("CP-Direct") is a California limited liability company, with its principal place of business in Rocklin, California. Id. ¶ 3.

According to Plaintiff, CP-Corp produces and distributes ClearPlex Film, which is a "protective laminate[] for transparent surfaces such as automobile windshields, " in addition to related accessories. Id. ¶ 11. CP-Direct is a distributor for CP-Corp. Id. Effective June 12, 2013, ET Trading and CP-Corp entered into an exclusive distribution agreement ("Agreement"), which appointed ET Trading as the "exclusive distributor for the promotion, marketing, distribution, and sale of the Products in [China]." Id. ¶¶ 15, 17; Id. Exh. 3 ("Agreement"). The term of the Agreement was five years, beginning on July 1, 2013, and was agreed to terminate on July 1, 2018 absent renewal. Compl. ¶ 16. The Agreement also provided for a six-month trial period, at the end of which ET Trading and CP-Corp were to communicate in writing their intent to either continue or terminate the Agreement. Id. ¶ 23. Plaintiff avers that CP-Corp affirmed its intent to continue the agreement by issuing a "Certificate of Authorized Distribution, " declaring that effective December 8, 2013, ET Trading was the authorized, exclusive distributor of ClearPlex Films in China, Taiwan, Hong Kong, and Macao. Id. ¶ 26. The Agreement required ET Trading to purchase a minimum of 300 rolls of ClearPlex Film within the first six months of the agreement, and 1000 rolls within the first year. Id. ¶ 24. The Agreement did not otherwise require minimum purchases for the remaining four years. Id. Plaintiff exceeded the minimum required purchases of 300 rolls in the first six months and 1000 rolls in the first year. Id. ¶ 28.

Plaintiff alleges that it "worked diligently to promote and market" ClearPlex Film in China, and "expended substantial time and money to sell the products, build the ClearPlex brand, and train its sales personnel." Id. ¶ 27. ET Trading developed a network of "approximately 800 ClearPlex Film installers to which it sold" ClearPlex Film. Id.

Beginning in January 2014, ET Trading alleges that it and its installers began "experiencing quality problems with the ClearPlex Film, " which included "blurring on the film, adhesive residue marks, and problems with glare." Id. ¶ 30. ET Trading communicated the problems to CP-Corp, which agreed to refund "approximately $42, 000 plus $3, 000 shipping expense... [but] $23, 000 was never given to ET, " in credit or otherwise. Id. ET Trading received further complaints in May 2014 and September 2014 that the film was tearing, scratching, and that the film's top coat would peel away after installation. Id. ¶ 31. Plaintiff again communicated these problems to CP-Corp. Id. Plaintiff alleges that these quality issues "became so problematic that they substantially and negatively impacted ET's ability to sell ClearPlex Film and place new orders for film." Id. ¶ 32. Plaintiff did not place any additional orders for ClearPlex Film after August 2014. See id. ¶ 39; id., Exh. 6.

In or around October and November 2014, Plaintiff learned that "ClearPlex products were being offered for sale to ET's installer network by sources other than ET." Id. ¶ 33. As the "influx of products confused ET's customers and hurt its ability to sell the Products, " ET complained to CP-Corp. Id. In November 2014, Plaintiff discovered that Nanchang Aika Trading Co., LTD ("Aika"), was representing to ET's installer network and others that it was the authorized distributor of ClearPlex products in China. Id. ¶ 34. CP-Corp had also listed Aika as its distributor on its website. Id. Plaintiff alleges that CP-Corp used CP-Direct to "circumvent ET's exclusive distributorship in China, " by authorizing CP-Direct to distribute ClearPlex Film in China. Id. ¶ 35. According to Plaintiff, CP-Direct entered into an exclusive distributor agreement with Aika in October 2014, with CP-Corp's authorization and knowledge. Id.

On December 23, 2014, ET Trading then "insisted that CP-Corp honor the exclusivity rights under the Agreement." Id. ¶ 36. The next day, on December 24, 2014, CP-Corp indicated that it would only do so if "ET Trading agrees to purchase 50% more ClearPlex film in 2015 than [it] purchased in 2014, ' beginning in January 2015." Id. ¶ 36. On January 21, 2015, CP-Corp posted an announcement on its website that it and CP-Direct had entered into an exclusive distributor agreement with Aika, and that Aika had the exclusive right to market, distribute, and sell all ClearPlex products in China. Id. ¶ 37. That same day, CP-Corp's CEO, Peter Jensen, notified Plaintiff by email that "ClearPlex has no choice but to change our distributor agreement in China, " as Plaintiff had not purchased additional product in five months. Id. ¶ 39. Jensen copied officers of CP-Direct on the email to Plaintiff. Id.; Compl. Exh. 6.

Plaintiff alleges, on information and belief, that CP-Corp and CP-Direct have supplied Aika with ClearPlex products that are subject to the Agreement and that Aika has sold or offered to sell these products in the Chinese market, including to ET's network of installers. Id. ¶ 40. Plaintiff further alleges that Defendants' conduct has "confused ET's customers and prospective customers as to the entity that is the exclusive distributor, " "severely hindered" Plaintiff's ability to sell ClearPlex products, "misappropriated ET's network of installers, " and "eroded ET's good will in this market." Id. ¶ 41. Accordingly, Plaintiff alleges three causes of action against Defendants: (1) breach of contract; (2) intentional interference with contractual relations; and (3) violations of California Business & Professions Code § 17200.

B. Procedural Background

Plaintiff filed its complaint on January 29, 2015. ECF No. 1. On February 11, 2015, Plaintiff filed the instant ex parte application for a temporary restraining order ("TRO"), and an order to show cause why a preliminary injunction should not be issued. ECF No. 9. On February 12, 2015, the Court issued an order directing Defendants to file a response to Plaintiff's application. ECF No. 10. The parties filed a stipulation regarding the TRO briefing schedule, which the Court granted in part and denied in part on February 17, 2015. ECF No. 14. Defendants filed ...


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