Zhang v. YUAN

Background

Jinju Zhang sued Benlin Yuan and others over claims involving Camiwell US’s assets. The order addressed motions to dismiss the complaint, a motion to dismiss Yuan’s amended derivative counterclaim, a motion to strike, a motion for discovery, and a motion for summary judgment by Yuan and Lin.

Motions to dismiss the complaint

The court granted the motions to dismiss. It held that Zhang’s claims against Asiacom Americas were barred by the applicable statutes of limitations. The court said Zhang’s state-court complaint showed that he suspected wrongdoing by December 2018, at the latest by July 2020, while this case was not filed until November 2023. The court also held that, to the extent Zhang alleged that the defendants were alter egos of one another, the claims against Asiacom Americas were barred by the prior state-court judgment against Yuan and Lin. Because the limitations problem could not be fixed by amendment and Zhang had already had one opportunity to add timely claims, the dismissal was with prejudice.

The court also dismissed the claims against Beijing Asiacom and Camiwell Canada with prejudice. The complaint did not provide enough detail about those entities’ contacts with California to establish personal jurisdiction. The court concluded that amendment or jurisdictional discovery would not change the result because the claims would also be barred by the statutes of limitations and the prior state-court judgment. The request for jurisdictional discovery was therefore denied as moot.

Motion to strike

The court denied Yuan and Lin’s motion to strike. Because the claims against the Asiacom companies and Camiwell Canada were dismissed with prejudice, the motion was moot as to the complaint’s alter-ego allegations. The court declined to strike other allegations because they provided background and were not unfairly prejudicial.

Derivative counterclaim

The court granted Yuan’s motion to dismiss his amended derivative counterclaim with leave to amend. A derivative claim is brought on behalf of a company rather than for the individual’s own benefit. The amended counterclaim did not comply with Federal Rule of Civil Procedure 23.1, and it sought to have $50,000 allegedly belonging to Camiwell US paid to Yuan rather than returned to the company.

Yuan filed a second amended derivative counterclaim that corrected the Rule 23.1 problems, but it still sought payment to Yuan as custodian for Camiwell rather than payment directly to Camiwell. The court allowed Yuan one final opportunity to amend. Any renewed derivative counterclaim was due within 14 days of the order.

Summary judgment

The court denied Yuan and Lin’s motion for summary judgment. Summary judgment is a ruling without a trial when the record shows that no material factual dispute requires one. The court found it unclear whether the state-court compromise judgment resolved Zhang’s claims concerning all Camiwell US assets or only assets allegedly diverted from the company.

The court noted that Zhang remained a shareholder after the state-court judgment and that discovery in the state case had included the company’s remaining assets, but the materials did not clearly establish what claims the compromise was intended to resolve. Because compromise judgments and agreements are interpreted like contracts, and ambiguity is interpreted against the party that prepared the document, the court interpreted the uncertainty against Camiwell US rather than Zhang. The court also noted that Yuan and Lin, who asserted that the prior judgment barred Zhang’s claims, had the burden to establish that defense.

The denial of summary judgment was without prejudice. At the close of discovery, Yuan and Lin may renew the motion if additional state-court materials clearly show that Zhang placed his entitlement to a distribution of his entire share of Camiwell US’s assets at issue and sought to recover it.