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Sae Han Sheet Co., Ltd. v. Commonwealth Laminating and Coating, Inc.

United States District Court, W.D. Virginia, Danville Division

April 11, 2019

SAE HAN SHEET CO., LTD., Plaintiff,
v.
COMMONWEALTH LAMINATING AND COATING, INC., et al., Defendants.

          MEMORANDUM OPINION

          HON. JACKSON L. KISER SENIOR UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants Commonwealth Laminating and Coating, Inc., and Eastman Chemical Corp.'s Motion to Dismiss [ECF No. 21]. Defendants filed their Motion on January 4, 2019, Plaintiff Sae Han Sheet Co., Ltd., responded on January 23, and Defendants replied on January 30. I heard oral arguments on the Motion on February 28. I have reviewed the pleadings, arguments of counsel, and relevant law, making the matter ripe for disposition. For the reasons stated herein, I will grant Defendants' Motion and grant Plaintiff fourteen (14) days to file an amended complaint, if it so chooses.

         I. STATEMENT OF FACTS AND PROCEDURAL BACKGROUND[1]

         Plaintiff Sae Han Sheet Co., Ltd. (“Plaintiff”) is a South Korean company engaged in international trade. Defendant Eastman Chemical (“Eastman”) is a business entity with its corporate headquarters in Tennessee and its corporate offices in New Jersey. Defendant Commonwealth Laminating and Coating (“CLC”) is a Virginia company which may have manufactured some or all the goods at issue in this case. Eastman purchased CLC in December 2014.

         From 2008-2013, Plaintiff and CLC were parties to a contract for the sale of Suntek brand glass-tinting film. In December 2013, CLC cancelled the contract because of Plaintiff's “inability to meet the purchase requirements” of the contract. CLC did, however, permit Plaintiff to continue to purchase its products and hold itself out as an “authorized dealer” of Suntek products.[2]

         In late 2014 or early 2015, CLC (now owned by Eastman) reconfigured the chemical composition of its product as a cost-saving measure, but it marketed the new product as “the same” as its old product. The new version of the glass-tinting film was, according to Plaintiff, markedly inferior, and resulted in numerous complaints about the product. Customers complained of “lunar-crater type mold” on the film which rendered the product “unsuitable and unmerchantable for sale and application to consumers.” (Compl. ¶ 15.) Instead of correcting to flawed design, Eastman's “officers and managers kept silent about the defects created by their own re-mixing of ingredients; and attempted to avoid adverse publicity by seeking General Releases as a flagrantly unconscionable ‘condition' of replacing obviously[] defective products with non-defective products and wasted precious time, while [P]laintiff's business became associated with the functional, commercial equivalency of selling ‘leprosy' ridden products in South Korea.” (Id. ¶ 16.)

         By November 2016, Plaintiff's “handful of customers” began disserting it en masse in favor of “suppliers who provided reliable, defect-free lines of products.” (Id. ¶ 19.) At that time, Plaintiff contends Eastman's officers were “falsely” claiming to Plaintiff that it had only “recently discovered” the defects, even though other Eastman employees confided to Plaintiff that Eastman was aware as early as August 2016.

         Plaintiff filed the present action in the United States District Court for the Eastern District of Virginia on September 26, 2018. By order of that court, the case was transferred to this court on December 21, 2018. (Order, Dec. 21, 2018 [ECF No. 19].) On January 4, 2019, Defendants filed the present Motion to Dismiss. [ECF No. 21.] Plaintiff responded on January 23 [ECF No. 31], and Defendants replied on January 30 [ECF No. 32]. I heard oral arguments on the Motion on February 28, and the matter is now ripe for disposition.[3]

         II. STANDARD OF REVIEW

         To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. In determining facial plausibility, the court must accept all factual allegations in the complaint as true. Id. The complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief” and sufficient “[f]actual allegations . . . to raise a right to relief above the speculative level . . . .” Twombly, 550 U.S. at 555 (internal quotation marks omitted). Therefore, the complaint must “allege facts sufficient to state all the elements of [the] claim.” Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003). Although “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ” a pleading that merely offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.

         III. DISCUSSION

         Plaintiff has brought six counts against Defendants: breach of contract under the U.N. Convention for the International Sale of Goods (“UNCISG”) (Count 1); breach of the covenant of good faith and fair dealing (Count 2); unjust enrichment (Count 3); tortious interference with a prospective advantage (Count 4); tortious interference with business relations (Count 5); and tortious interference with a contract (Count 6).

         a. Choice of Law

         The parties have made no effort to determine what law applies: Virginia, South Korea, or Delaware.[4] A federal court, sitting in diversity jurisdiction, applies the choice-of-law provisions of the state in which it sits. See Seabulk Offshore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 418-19 (4th Cir. 2004) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). Defendants have submitted a presumably valid “Conditions of Sale” that Plaintiff does not appear to contest. That document, which purportedly covers all sales, states that the contract will be “governed by and construed under the laws of the State of Delaware . . . .” [ECF No. 22-1.] As to the contract claims, then, Delaware law controls. See Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 624 (4th Cir 1999) (“Virginia law looks favorably upon choice-of-law provisions in a contract, giving them full effect except in unusual circumstances.” (citing Tate v. Hain, 25 S.E.2d 321, 324 (Va. 1943)), As to the non-contract claims, the question arises of what law should apply. In 2016, Judge Ellis in the Eastern District of Virginia faced a virtually identical question. See Run Them Sweet, LLC v. CPA Global Limited, 224 F.Supp.3d 462 (E.D. Va. 2016). He held that contract language that the parties' relationship would be “governed by and construed in accordance with the laws of the Commonwealth of Virginia” was sufficiently broad to ...


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