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Andes Indus., Inc. v. Lan

United States District Court, D. Nevada

November 19, 2014

ANDES INDUSTRIES, INC. and PCT INTERNATIONAL, INC., Plaintiffs,
v.
CHEN SUN LAN; KUN-TE YANG; CHI-JEN LAN; POLAR STAR MANAGEMENT, LTD.; EZCONN CORPORATION; and EGTRAN CORPORATION, Defendants

For Andes Industries, Inc., Plaintiff: Andrew Joseph Kabat, LEAD ATTORNEY, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN; Christopher Larus, PRO HAC VICE, John Harting, LEAD ATTORNEY, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN; Justin C. Jones, Wolf Rifkin Shapiro Schulman & Rabkin, LLP, Las Vegas, NV.

For PCT International Inc., Plaintiff: Andrew Joseph Kabat, LEAD ATTORNEY, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN; Christopher Larus, PRO HAC VICE, Denise Rahne, John Harting, LEAD ATTORNEY, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN; Justin C. Jones, Wolf Rifkin Shapiro Schulman & Rabkin, LLP, Las Vegas, NV.

For eGtran Corporation, Defendant: Guy Ruttenberg, LEAD ATTORNEY, PRO HAC VICE, Ruttenberg IP Law, Los Angeles, CA; Rosemary Missisian, Weinberg Wheeler Hudgins Gunn & Dial LLC, Las Vegas, NV.

ORDER

GEORGE FOLEY, JR., United States Magistrate Judge.

Motion for Leave to Conduct Jurisdictional Discovery - #35, #38

This matter is before the Court on Plaintiffs' Motion for Leave to Conduct Jurisdictional Discovery (#35, #38), filed on September 17, 2014. Defendant eGTran Corporation filed its Opposition (#57) on October 6, 2014. Plaintiffs filed their Reply (#60) on October 16, 2014. The Court conducted a hearing in this matter on October 22, 2014.

BACKGROUND

Plaintiffs filed their complaint in this action on March 18, 2014. Plaintiff Andes Industries, Inc. (" Andes") alleges that it is a closely held Nevada corporation and that its principal place of business is located in Mesa, Arizona. Complaint (#1), ¶ 8. Plaintiff PCT International, Inc. (" PCT") is also a closely held Nevada corporation with its principal place of business located in Mesa, Arizona. Andes owns all outstanding shares of PCT. ¶ 9. Plaintiffs allege that individual Defendants Cheng Sun Lan, Kun-Te Yang, and Chi-Jen (" Dennis") Lan are residents of Taiwan. ¶ ¶ 11-13. Defendants Polar Star Management Ltd. (" Polar Star") is a Taiwanese corporation, with places of business in Taiwan. ¶ 14. Defendant EZconn Corporation (" EZconn") is a Taiwanese corporation, with places of business in Taiwan and the Peoples' Republic of China. ¶ 15. Defendant eGTran Corporation (" eGTran") is a British Virgin Islands corporation, with a principal place of business in Taiwan. ¶ 16. Plaintiffs allege that at all times relevant to this action, Defendants Polar Star, EZconn, and eGTran were owned and controlled by Defendant Chen Sun Lan, who is referred to throughout the complaint as " Mr. Lan" to distinguish him from Co-defendant Chi-Jen (" Dennis") Lan. Plaintiffs allege that all of the corporate defendants' actions were directed and controlled by Mr. Lan. ¶ ¶ 14-16. Defendants Kun-Te Yang, Chi-Jen (" Dennis") Lan, and Polar Star are shareholders of Plaintiff Andes, through whom Defendant Mr. Lan allegedly " indirectly owns and controls his ownership interest in Andes." ¶ ¶ 12-14.

The complaint alleges that PCT is engaged in the business of designing and developing a variety of products, including coaxial cable connectors, improved coaxial cable and amplifiers, many of which are protected by U.S. Patents. ¶ ¶ 18, 19. PCT " maintains strict confidentiality over its proprietary product designs, technical information regarding the products it sells, the prices at which it purchases those products, and its sales and marketing strategies." ¶ 22. In or about 1997, PCT, through its president and founder, Steve Youtsey, engaged EZconn, through its principal Mr. Lan, as PCT's " contract manufacturer" and provided EZconn " with detailed confidential technical information regarding its proprietary product designs, including PCT's amplifiers and patented coaxial cable connectors." ¶ ¶ 24-26. The written purchase orders between PCT and EZconn contained " Terms and Conditions" which provide that " any items, tools, materials, data, technical information and intellectual property developed by PCT" remains its property and shall not be reproduced by EZconn without prior express written authorization by PCT, and are also subject to a confidentiality agreement between the parties. ¶ 27.

The complaint alleges that " several years" after PCT first engaged EZconn as its contract manufacturer, EZconn was acquired by eGtran. Following this acquisition, EZconn held itself out as " an eGtran company." Plaintiffs allege on information and belief that following eGtran's acquisition of EZconn, eGtran directed and controlled the operations of EZconn. " For example, . . . EZconn and eGtran shared a common CEO, and eGtran controlled the channels of communication through which PCT communicated with EZconn." ¶ 29.

As stated above, Plaintiffs allege that Mr. Lan indirectly owns shares in Andes through Co-Defendants Kun-Te Yang, Chi-Jen (" Dennis") Lan, and Polar Star, The complaint further alleges that at some unspecified time, Mr. Lan requested to become a shareholder in Andes and that Plaintiff allowed him to do so. Mr. Lan, however, chose to hold his shares in the name of Defendant Kun-Te Yang. ¶ 35. " After becoming an indirect shareholder of Andes, Mr. Lan used his insider status to negotiate loan agreements with PCT by which he obtained, directly or indirectly, promissory notes and security interests in Andes treasury stock and PCT's valuable intellectual property, including the '422 and '631 Patents." ¶ 38. Mr. Lan also allegedly loaned funds to PCT in Co-Defendant Dennis Lan's name. Dennis Lan subsequently converted the promissory note securing one of the loans to become a shareholder of Andes. ¶ ¶ 40-41. Additional loans were also executed in the name of Defendant Kun Te Yang which were also converted into Andes shares in Kun Te Yang's name at the direction of Mr. Lan. ¶ 43. Mr. Lan later directed Polar Star to acquire shares in Andes. ¶ 44-45.

The complaint alleges that " [c]onsistent with the close relationship among its shareholders, Andes has operated much like a partnership, with no shareholder holding a majority position. Andes has not held formal shareholder meetings or elections. Rather, most substantial business decisions for PCT were addressed through communications between Mr. Lan and Mr. Youtsey. These communications were usually facilitated by English speaking representatives of EZconn and/or eGtran." ¶ 46. The complaint further alleges that " [t]hrough their relationships with PCT, the Defendants obtained access to PCT's most confidential proprietary information, including PCT's proprietary product designs and other intellectual property, technical information regarding the products PCT sells, the prices at which PCT purchases these products, the books and records of Andes and [PCT], and PCT's sales and marketing strategies." ¶ 47. Plaintiffs allege that by virtue of their relationships with PCT, each of the Defendants owed PCT a fiduciary duty. ¶ 48.

The complaint alleges that Defendants secretly usurped PCT's confidential proprietary information for their own financial benefit to the detriment of PCT and its other shareholders. ¶ 49. " EZconn, upon information and belief acting under the direction and control of eGtran and Mr. Lan, has sought to convert PCT's intellectual property by secretly filing patent applications claiming as its own intellectual property belonging to PCT." ¶ 50. " EZconn, upon information and belief acting under the direction and control of eGtran and Mr. Lan, filed these patent applications without license or permission from PCT. Indeed, none of ...


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