Usens, Inc. v. Chongqing Junma New Energy Automobile Co., Ltd.

Background

Usens sued Chongqing Junma New Energy Automobile Co. Ltd., Chongqing ZhongGan WeiShi Electronics Technology Co. Ltd., Chongqing Bruder Science & Technology Co. Ltd., Xiaofei Wu, and Anyu Cheng, alleging misappropriation of trade secrets. The six other engineers originally named in the complaint were voluntarily dismissed without prejudice. Another defendant, Chi Shi, appeared through counsel, and Usens later settled and dismissed its claims against him. The remaining defendants did not appear.

The court had previously denied Usens’s first motion for default judgment without prejudice because Usens had not provided enough information to support, or “prove up,” its requested damages. The court allowed Usens to file a renewed motion with additional evidence.

Court’s analysis

A default judgment is a judgment entered against a defendant who failed to plead or otherwise defend. Before entering one, the court must determine that it has jurisdiction and that service was adequate. The court found that Usens properly served the remaining defendants by email and mail under an earlier court order. It also found federal-question jurisdiction based on Usens’s federal trade-secret claim under 18 U.S.C. § 1836 and supplemental jurisdiction over related state-law claims. Taking the complaint’s well-pleaded factual allegations as true, the court also found personal jurisdiction over the defendants.

The court applied the Ninth Circuit’s factors for deciding whether to enter default judgment. It found that Usens would be prejudiced without a judgment, that the claims had at least some merit, that the complaint was sufficiently pleaded, and that the defendants’ failure to appear did not appear to result from excusable neglect. The possibility of a dispute over material facts was neutral. The significant amount sought and the general preference for decisions on the merits weighed against default judgment, but the court concluded that the factors overall favored entering judgment.

Damages

Usens requested ¥25,000,000 in compensatory damages. Its evidence included a declaration from Yue Fei, Usens’s chief executive officer, and contracts concerning licensing and purchases of hand-gesture control systems. The court found this evidence sufficient to support the compensatory-damages request for purposes of the default-judgment motion.

The court awarded prejudgment interest at 7 percent per year but rejected Usens’s proposed January 1, 2020 start date. Because the full alleged damages did not occur until the end of 2020, when the defendants failed to make the required purchases, the court began interest on January 1, 2021. It calculated total prejudgment interest through the order date as ¥1,932,191.78.

Usens also requested exemplary damages for allegedly willful and malicious misappropriation. The court found that the complaint adequately pleaded those allegations but reduced the exemplary-damages award to US$1,000,000.

Currency and disposition

Usens asked the court to issue the judgment in Chinese currency because enforcement would likely occur in China. The court instead applied the exchange rate on the judgment date and converted the ¥25,000,000 in compensatory damages plus ¥1,932,191.78 in prejudgment interest to US$4,238,553.33. Adding US$1,000,000 in exemplary damages, the court entered a total judgment of $5,238,553.33.

The court ordered that Usens’s renewed motion for default judgment was GRANTED IN PART. It awarded ¥25,000,000 in compensatory damages, ¥1,932,191.78 in total prejudgment interest since January 1, 2021, and US$1,000,000 in exemplary damages, with judgment to issue in the equivalent U.S.-dollar amount on the order date. Under the classification convention, this is a procedural order because default judgment follows the defendants’ failure to appear rather than an adversarial decision testing the claim’s merits.