1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
90736195.v1
JOHN J. SHAEFFER (SBN 138331)
JShaeffer@FoxRothschild.com
JEFF GRANT (SBN 218974)
JGrant@FoxRothschild.com
CHARLIE NELSON KEEVER (SBN 322664)
CNelsonKeever@FoxRothschild.com
FOX ROTHSCHILD LLP
Constellation Place
10250 Constellation Blvd, Suite 900
Los Angeles, CA 90067
Telephone: (310) 598-4150
Facsimile: (310) 556-9828
Attorneys for Defendants JASON HUANG, an individual;
RULONG CHEN, an individual; JIANPING HUANG a/k/a
JAMES HUANG, an individual
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CTC GLOBAL CORPORATION, a
Delaware corporation,
Plaintiff,
v.
JASON HUANG, an individual;
RULONG CHEN, an individual;
JIANPING HUANG a/k/a JAMES
HUANG, an individual; and DOES 1-15,
inclusive,
Defendant.
Case No. 8:17-CV-02202-AG (KESx)
Judge Andrew J. Guilford
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT.
NO. 163]
JASON HUANG, an individual,
Counterclaimant,
v.
CTC GLOBAL CORPORATION, a
Delaware Corporation,
Counterdefendant.
Complaint Filed: December 18, 2017
Date: April 15, 2019
Time: 10:00 a.m.
Place: Courtroom 10-D
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 1 of 9 Page ID #:12545
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
Defendants Jason Huang, Rulong Chen, and Jianping Huang aka James
Huang (“Defendants”) oppose Plaintiff CTC Global Corporation’s (“CTC”) Motion
for Sanctions (“Motion”) (Dkt. No. 163). To be clear, Defendants do not dispute
that Jason Huang’s conduct was improper. However, the relief requested by CTC
in its Motion – including terminating sanctions and six-figure monetary sanctions –
is not warranted and grossly disproportionate to the subject conduct.
Jason Huang asserts a claim against CTC for wrongful termination and
retaliation in violation of California Labor Code section 1102.5. Dkt. No. 46.
Those claims have been proven valid during discovery, and Jason Huang expects to
prevail on them at trial. It would be a due process violation to dismiss those claims
as a sanction in this case or to issue a six-figure punitive sanction. The Ninth
Circuit is clear that, whenever possible, claims should be decided on the merits and
punitive sanctions are rarely permissible.
I. BACKGROUND
A. The Counterclaims CTC Seeks to Have Dismissed as a Sanction
Jason Huang served as both CTC’s Chief Executive Officer and, later, its
Chief Technical Officer. Dkt. No. 46, ¶¶ 17, 25. He was also appointed to be the
General Manager for a Joint Venture entered into between CTC, on the one hand,
and the Chinese government, on the other, to service the China market. Id. ¶ 26.
As an executive, Jason Huang initiated tests of CTC’s conductors. Id., ¶ 37. He
did so because he was concerned that CTC’s sales materials included unproven
claims. Among other things, CTC’s sales material asserted that its conductors
could operate at 200º for at least 10,000 hours. Id., ¶¶ 38-40. This feature was a
critical selling point for operators in warm environments, like deserts. It was not,
however, supported by test data.
The results of tests commissioned by Jason Huang established that CTC’s
conductors did not perform as advertised. Dkt. No. 46, ¶¶ 41-51. Jason Huang
suspected that these deficiencies could be at least partially responsible for several
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 2 of 9 Page ID #:12546
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
prior line failures and presented a danger to public safety going forward. Id., ¶ 53.
As Jason Huang became more vocal about CTC’s false claims, and as testing data
confirming the deficiencies in CTC’s conductor started to pile up, Jason Huang was
terminated.
These claims have merit. As set forth in the concurrently-filed opposition to
CTC’s motion for summary judgment on these claims, the record establishes that
(a) Jason Huang’s complaints about thermal performance were well-founded, (b)
CTC nevertheless continued to misrepresent critical performance characteristics to
its customers, (c) shortly after Jason Huang’s fears became validated by internal test
data, CTC conducted an investigation of Jason Huang with the intent to build a
pretextual justification for his termination, and (d) Jason Huang was terminated
because he would not sit idle while CTC continued to make false claims. Jason
Huang should be allowed to present this evidence to a jury and have his claims
decided on the merits.
B. The October 21, 2018 Email
Defendants do not dispute that the email that is the focus of CTC’s Motion
contains confidential mediation information. Defendants do, however, disagree
with CTC’s characterization of the portions of the email that CTC has redacted.
Defendants ask that the Court review the unredacted email in conjunction with
deciding CTC’s Motion. Indeed, CTC itself offers to provide the Court with an
unredacted copy of the email (filed under seal or in camera review). Motion at 1,
fn. 1. Defendants also offer to provide the Court with a copy, either by filing the
same under seal or via in camera review.
Without risking further public disclosure, Defendants note that the email was
written in response to an inquiry about this litigation. CTC has repeatedly used this
litigation against Defendants to discourage others from doing business with
Defendants. The email contains reference to two settlement terms: one monetary
term and one non-monetary term. With respect to the monetary term discussed, the
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 3 of 9 Page ID #:12547
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
3
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
email references it only in a generality and does not provide anything by way of
specifics. Of course, information conveyed by way of generalities, nonetheless,
does not excuse the exchange. However, the substance of the email undercuts the
vitriolic assertions set forth in CTC’s Motion.
It should furthermore be noted that the thrust of the subject communications
concerns Jason Huang’s assertions (now founded on admissible evidence) that he
was fired for refusing to sit by while CTC misrepresented the safety characteristics
of its product. The email starts by noting that “CTC falsified the product
performance report and retaliated [against] me for [raising the] product
performance issue.”
The email was addressed to Brian Singh of WTEC Energy. WTEC is not a
customer of CTC. Rather, James Huang works with WTEC to develop and sell
conductors. CTC deposed WTEC after receiving this email and elicited no
testimony suggesting that any mediation information was communicated from
WTEC to any of CTC’s customers or, for that matter, to anyone who was not on the
email chain.
Finally, and despite CTC’s innuendo to the contrary, it was Jason Huang who
produced this document to CTC. As reflected on the document attached to the
Declaration of Aaron Goodman as Exhibit A (Dkt. No. 163-2), the document
features a bates-label staring with HUANG00069315. “HUANG” is the production
prefix used by the Defendants.
II. LEGAL STANDARD
In the Ninth Circuit, “courts have inherent power to dismiss an action when a
party has willfully deceived the court and engaged in conduct utterly inconsistent
with the orderly administration of justice.” Wyle v. R.J. Reynolds Industries, Inc.,
709 F.2d 585, 589 (9th Cir. 1983). However, “[d]ismissal is a permissible sanction
only when the deception relates to the matters in controversy, and because dismissal
is so harsh a penalty, it should be imposed only in extreme circumstances.” Id.
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 4 of 9 Page ID #:12548
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
“Due process limits the imposition of the severe sanctions of dismissal or default to
extreme circumstances in which the deception relates to the matters in controversy
and prevents their imposition merely for punishment of an infraction that did not
threaten to interfere with the rightful decision of the case.” Fjelstad v. Am. Honda
Motor Co., Inc., 762 F.2d 1334, 1338 (9th Cir. 1985) (citations and quotations
omitted). “Because of their very potency, inherent powers must be exercised with
restraint and discretion.” Chambers v. Nasco, Inc., 501 U.S. 32, 44 (“A court must,
of course, exercise caution in invoking its inherent power, and it must comply with
the mandates of due process, both in determining that the requisite bad faith exists
and in assessing fines.”).
The Ninth Circuit has also held that the highest level of due process must be
satisfied before a court may impose monetary sanctions that are punitive, rather
than compensatory, in nature. Macias v. McGrath, 439 F.3d 1141 (9th Cir. 2006)
(reversing sanction of $1,500 fine and referral to State Bar, holding that heightened
due process procedures were required); F.J. Hanshaw Enters. v. Emerald River
Dev., Inc., 244 F.3d 1128, 1138 (9th Cir. 2000) ($500,000 fine for attempted
bribery of court-appointed receiver was punitive; sanction reversed for lack of due
process, including presumption of innocence and proof beyond a reasonable doubt);
cf. Lasar v. Ford Motor Co., 399 F.3d 1101, 1112 (9th Cir. 2005) (affirming fine of
$5,496 payable to court where district judge had “carefully limited” fine to amount
necessary to reimburse court for its own costs but noting that a “serious” monetary
sanction, would entitle an individual to a jury trial); Mackler Prods., Inc. v. Cohen,
146 F.3d 126, 130 (2d Cir. 1998) (vacating a $10,000 fine payable to the court).
The Ninth Circuit has differentiated between serious sanctions that require
heightened due process and less serious monetary sanctions as follows:
We have not established a precise limit for a serious sanction entitling
an individual to a jury trial. We have noted, however, that the
Supreme Court has implied that $5,000, at least in 1989 dollars, is the
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 5 of 9 Page ID #:12549
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
cutoff for a serious fine warranting a jury trial.
Lasar, 399 F.3d at 1112 n. 7 (citations and quotations omitted).
Here, CTC seeks a six-figure sanction award that is unrelated to any actual
costs it incurred as a result of the complained of action. That remedy is punitive in
nature and would necessitate a jury trial in and of itself.
III. ARGUMENT
CTC is not entitled to either terminating or punitive monetary sanctions.
A. Terminating Sanctions are Not Warranted
The conduct that is the subject of CTC’s Motion does not rise to a level that
would warrant the imposition of terminating sanctions. The October 18, 2018
email “did not threaten to interfere with the rightful decision of the case.” Fjelstad,
762 F.2d at 1338. While ill advised, this does not present an “extreme
circumstance.” Wyle, 709 F.2d at 589. However misguided. Jason Huang resorted
to generalities when referring to the monetary terms discussed during settlement
and his email was sent to one, not many.
CTC relies primarily on a case from the United States District Court for the
District of Kansas entitled Hand v. Walnut Valley Sailing Club, 2011 WL 3102491
(D. Kan. 2011). In Hand, the plaintiff was expelled from a country club and
thereafter sued to be reinstated. The plaintiff and the club participated in a
mediation. After the mediation concluded, and on that same day, the plaintiff sent
an email to 44 members of the club, “essentially providing his blow-by blow
description of everything that happened during the mediation.” Id. at *1. The e-
mail detailed confidential matters including 1) what the mediator did and said, 2)
the specific monetary offer made by plaintiff to settle the case, 3) what the
defendant’s response was to the offer, 4) the length of time that passed, 5) how
many attorneys represented the defendant, and 6) how much the representation
might cost. Id.
The Hand court held that no sanction less than dismissal of the case would
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 6 of 9 Page ID #:12550
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
adequately admonish the plaintiff for his behavior. Id. at *6. It noted that the
country club had suffered tremendous actual harm:
The Court believes that because defendant is a social club, its primary
value is found in the collegiality and interactions among the members.
Fostering discontent among the club’s members reduces the primary
value of belonging to such a club, and is prejudicial to that extent. Here,
where plaintiff’s suit seeks reinstatement to the Club, his acts also tend
to make that remedy less workable. Further, because the crucial issue
in the case is why defendant expelled plaintiff from the Club, it is
foreseeable that plaintiff’s emails reached Club members who are
potential witnesses in the case.
Id., * 3.
The circumstances giving rise to CTC’s Motion are readily distinguishable
from those in Hand. Unlike the plaintiff in Hand, Jason Huang did not extensively
publish a “blow-by-blow description of everything that happened during the
mediation.” His email was to an audience of one, not 44. He did not relate
anything the mediator said. Jason Huang did not set forth the “specific monetary
offer” made (other than to characterize the amount in generalities). Further, Jason
Huang’s communications with a representative of his own business associate (a
representative with WTEC) did not foment discontent. He did not influence
potential witnesses, Brian Singh, who CTC did not even bother to depose and who
is not on any witness list. Indeed, while CTC did depose a Rule 30(b)(6) witness
for WTEC, there was no suggestion during that deposition that any information
conveyed to Mr. Singh was disseminated any further. CTC has failed to establish
actual prejudice.
Given these circumstances, CTC’s demand for terminating sanctions should
be denied. See Marble Brewery, Inc. v. Marble City Brewing Co., LLC, 2012 WL
1205744 (E.D. Tenn. 2012) (admonishing and warning, but not imposing sanctions
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 7 of 9 Page ID #:12551
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
7
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
for violating mediation confidentiality); In re Anonymous, 283 F.3d 627, 635-25
(4th Cir. 2002) (refusing to grant sanctions absent evidence of bad faith or malice,
where disclosures did not have an adverse impact on the dispute); Powell v. Carey
Intern., Inc., 547 F.Supp.2d 1281 (S.D. Fla. 2008), aff'd, 323 Fed. Appx. 829 (11th
Cir. 2009) (denying sanctions for disclosure of information disclosed in mediation);
Williams v. Johanns, 529 F. Supp. 2d 22 (D. D.C. 2008) (assessing nominal fine for
breaching confidentiality).
B. Punitive Sanctions Are Not Warranted
CTC seeks to be reimbursed for the costs it incurred in conjunction with the
mediation. CTC avers that the mediation, which took place on a single day and was
hosted by the Magistrate, resulted in costs of more than $100,000. Putting aside
whether that amount is even remotely reasonable, it does not constitute costs
incurred as a result of any misconduct.
The mediation was conducted on September 14, 2018. The email that is the
subject of CTC’s Motion was sent on October 21, 2018 – more than a month after
the mediation. It simply cannot be that the costs that CTC incurred in September
were a result of an act that occurred one month later. Put another way, Jason
Huang’s October 2018 email did not cause CTC to participate in a mediation in
September 2018, one month prior.
CTC seeks costs unrelated to those incurred as a result of any misconduct.
As such, its prayer is for punitive (not compensatory) sanctions. Such cannot be
awarded by way of a simple motion. Rather, Jason Huang is entitled to the “highest
level of due process” before such an award can issue. Macias v. McGrath, 439 F.3d
1141 (9th Cir. 2006). As this is a six-figure request, he is entitled to a jury trial on
the issue of punitive sanctions, in addition to a presumption of innocence and proof
beyond a reasonable doubt. Lasar, 399 F.3d at 1112 n.7; F.J. Hanshaw, 244 F.3d
at 1138. While CTC could be said to have been entitled to the costs associated with
bringing the Motion itself, CTC did not pray for such relief in its Motion. The
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 8 of 9 Page ID #:12552
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8
OPPOSITION TO PLAINTIFF’S
MOTION FOR SANCTIONS [DKT. NO. 163]
relief it requested is punitive in nature, and should be denied.
III. CONCLUSION
For all of the foregoing reasons, CTC’s Motion should be denied.
Dated: March 18, 2019 Respectfully Submitted,
FOX ROTHSCHILD LLP
By:/s/ John Shaeffer
John J. Shaeffer
Jeff Grant
Charlie Nelson Keever
Attorneys for Defendants JASON
HUANG, an individual; RULONG
CHEN, an individual; JIANPING
HUANG a/k/a JAMES HUANG,
an individual
Case 8:17-cv-02202-AG-KES Document 176 Filed 03/18/19 Page 9 of 9 Page ID #:12553
