United States District Court, N.D. California
ORDER DENYING MOTION TO DISMISS RE: DKT. NO.
Jeffrey S. White United States District Judge
before the Court is the motion to dismiss filed by Defendants
Dong Chen and Jing Li (“Defendants”). The Court
has considered the parties' papers, relevant legal
authority, and the record in this case, and it finds the
motion suitable for disposition without oral argument.
See Civil L.R. 7-1(b). For the reasons set forth
below, the Court HEREBY DENIES Defendants' motion to
LLC (“Teetex”) is a California-based limited
liability company engaged in the business of importing
textiles from China for resale in the United States. (Dkt.
No. 6 (First Amended Complaint (“FAC”)) ¶
10.) The parties heatedly contest most other pertinent facts
about the company, its origins, and its makeup. The claims in
the FAC center around Plaintiff Jiajie Zhu's contention
that Defendants misrepresented Teetex's profits and
therefore underpaid Mr. Zhu when Mr. Zhu sold his interest in
Teetex to Defendant Jing Li. In their motion, Defendants
argue that Mr. Zhu lacks standing to sue because Mr. Zhu was
only a “nominal” member of Teetex on behalf of his
father-in-law Anwen Li. Therefore, according to Defendants, Mr.
Zhu did not own the shares Mr. Zhu claims to have sold. Mr.
Zhu contends that he was never a “nominal” member
or a proxy and argues that he, not Mr. Li, had rights of
membership with respect to the pertinent shares.
agreements are tangled in this dispute. The first pertinent
agreement is titled “Limited Liability Company
[M]anagement Operating Agreement of TEETEX, LLC”
(“Operating Agreement”). (Dkt. No. 17-1 (Exhibits
to Declaration of Doug Chen) p. 11.) The first paragraph of
the Operating Agreement states that it is effective as of
October 28, 2012, and “is adopted by the members whose
signatures appear at the end of this agreement.”
(Id.) The Operating Agreement is signed by Mr. Zhu,
Ms. Li, and Mr. Guan. (Id. p. 20.) Each are
identified in this agreement as “Members.”
the heading “Membership Withdrawal and Transfer
Provisions, ” the Operating Agreement states:
Restrictions on the Transfer of Membership: A member shall
not transfer his or her membership in the LLC unless all
nontransferring [sic] members in the LLC first agree to
approve the admission of the transferee into this LLC.
Further, no member may encumber a part or all of his or her
membership in the LLC by mortgage, pledge, granting of a
security interest, lien or otherwise, unless the encumbrance
has first been approved in writing by all other members of
Notwithstanding the above provision, any member shall be
allowed to assign an economic interest in his or her
membership to another person without the approval of the
other members. Such an assignment shall not include a
transfer of the member's voting or management rights in
this LLC, and the assignee shall not become a member of the
(Id. p. 19-20.) The Operating Agreement is in
English, and there is no indication the document provided to
the Court is a translation from Chinese. An exhibit to the
Operating Agreement is a document titled “Chinese
Agreement, ” which is not translated.
second pertinent agreement is an “Internal Agreement to
Form a New Company in San Francisco, California, the United
States of America” (“Internal Agreement”).
(Id. p. 7.) The Internal Agreement, of which Mr. Zhu
avers he was heretofore unaware, states that “[t]hrough
discussion and negotiation among Anwen Li (Alvin
Li), Tony Chen (Dong Chen), and Juan Hu
(Joanne Hu), the parties reached an [sic] unanimous
agreement to form a new company (TEETEX LLC) in San
Francisco, California. . . .” (Id. (emphasis
in original denotes original text in English).) The agreement
provides that: “The initial registered capital of
[Teetex] shall be US$100, 000 structured as the following:
Anwen Li (Alvin Li) holds 60% of shares, Tony
Chen (Dong Chen) holds 30% of shares, and Juan Hu
(Joanne Hu) holds 10% of shares. . . .”
(Id. (emphasis in original denotes original text in
English).) The agreement notes that Mr. Li's share of
capital investment is $60, 000. (Id.)
Internal Agreement also contains the following clause:
“The Nominal Shareholders of the Company shall be
LI, Jing (in place of Tony Chen), GUAN,
Xin (in place of Juan Hu), and ZHU, Jia Jie (in
place of Anwen Li).” (Id. (capitalization and
emphasis in original denotes original text in English).) This
agreement is dated October 29, 2012 and is signed by Mr.
Chen, Mr. Li, and Ms. Hu. (Id. p. 9.) The top of the
document as provided to the Court states “Certified
Translation, ” but the document is not accompanied by a
certification from the translator.
third agreement is an “Assignment.” (Id.
at 44.) This document states: “THIS ASSIGNMENT is made
and executed between Xin Guan, member of the Teetex LLC
(“Assignor”) and Jiajie Zhu, member of the
Teetex, LLC (“Assignee”) dated on August 28,
2014. Assignor does hereby assign, transfer[, ] and convey to
Assignee, without consideration, 10% of the membership
interest in Teetex LLC.” (Id. (capitalization
in original).) Mr. Guan signed below this text.
(Id.) Under “Acceptance of Assignment, ”
the following appears: “I accept the above assignment
of 10% of the membership interest in Teetex LLC and agree to
hold it subject to the provision of the operation agreement
for Teetex LLC.” (Id.) Under “Agreement
Regarding Transfer of [M]embership Interest, ” the
On or about August 28, 2014, Mr. Xin Guan as member of Teetex
LLC (“LLC”) agreed to transfer all his right,
title, and interest in the LLC, 10% membership interest in
the LLC to Jiajie Zhu without consideration. After this
transfer, Jiajie Zhu has 70% membership interest in the LLC,
Jing Li has 30% membership interest in the LLC, Xing Guan is
no longer the member of the LLC. All parties to the transfer
hereby and all members in the LLC acknowledge and consent to
(Id. p. 45.) Mr. Zhu, Ms. Li, and Mr. Guan's
signatures all appear at the bottom of this ...