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Xiao Wei Yang Catering Linkage In Inner Mongolia Co., Ltd. v. Inner Mongolia Xiao Wei Yang USA, Inc.

United States District Court, D. Massachusetts

March 30, 2018

XIAO WEI CATERING LINKAGE IN INNER MONGOLIA CO. LTD., AND FEI XIE, Plaintiffs, and Defendants-in-Counterclaim,
v.
INNER MONGOLIA XIAO WEI YANG USA, INC., d/b/a XIAO WEI YANG AND/OR LITTLE LAMB RESTAURANT, CHENG XU, AND YONGHUA QIN, Defendants, and Plaintiffs-in-Counterclaim.

          ORDER ON DEFENDANTS' MOTION FOR SANCTIONS (#129).

          M. Page Kelley United States Magistrate Judge.

         I. Introduction.

         This case involves an agreement gone awry between a hot-pot restaurant chain headquartered in China, and the owners of a restaurant in Boston, Massachusetts, who tried to become a franchisee of the Chinese company. The suit has been marked by frequent, acrimonious discovery disputes, which in large part have been caused by plaintiffs' failure to follow the rules of discovery. In this Order, the court finds that under 28 U.S.C. § 1927, plaintiffs' counsel, Attorney Frank Xu, admitted to this court pro hac vice from New York, should pay reasonable attorneys' fees and costs to defendants' counsel for their work on a motion for a protective order and to quash subpoenas issued by plaintiffs. The court further orders under its inherent authority that Attorney Xu should be formally sanctioned for gratuitously accusing defendant's counsel, Attorney Elizabeth Brady Murillo, of fabricating documents.

         The facts of this case are described in detail in Judge Casper's Order on defendants' motion for summary judgment, in which she dismissed counts I-IV of the nine-count complaint. (#81 at 2-4, 15.)[1] The facts are repeated here in abbreviated form. Plaintiffs, Xiao Wei Catering Linkage in Inner Mongolia Co., Ltd. (Linkage), and Fei Xie, a chef employed by Linkage, brought suit against defendants Inner Mongolia Xiao Wei Yang USA, Inc. (Inner Mongolia), and two individuals, Cheng Xu and Yonghua Qin. (#1.) Plaintiff Linkage is a large, well-known restaurant chain in China; defendant Inner Mongolia is a Massachusetts corporation that operated a restaurant in Boston, Massachusetts called the “Little Lamb Restaurant.” (#1 ¶¶ 1-3; #90 at 10.) Defendants Xu and Qin are married, live in Massachusetts, and are president and treasurer of Inner Mongolia, respectively. Id. ¶¶ 4-6.

         In 2011, Xu and Qin traveled to China and negotiated a Cooperation Agreement with Linkage so that they could become Linkage's first franchisee in the United States. Id. ¶¶ 11-12. The complaint alleges that Xu and Qin fraudulently represented themselves to Linkage, concealed material facts, and so induced Linkage to enter into the Cooperation Agreement, which Linkage would not have done but for Xu and Qin's misrepresentations.[2] Id. ¶¶ 13-15. Xu and Qin are also alleged to have misappropriated Linkage's brand-name and confidential knowledge, and are said to have violated Linkage's federal trademark registration and other intellectual property rights. Id. ¶¶ 16-17.

         Plaintiffs allege that defendants breached the Cooperation Agreement by withdrawing visa sponsorship for Xie, the chef Linkage sent to work with Xu and Qin, and exploited Xie's specialized knowledge and trade secrets while refusing to pay for his expenses as the Cooperation Agreement required them to do. Id. ¶ 19.

         Finally, plaintiffs claim that defendants gained business revenues as a franchisee, but did not pay franchise fees as the Cooperation Agreement provided. Id. ¶¶ 18, 22. Pursuant to the Agreement, Linkage transferred capital and money to defendants, including loans totaling approximately $66, 000. Id. ¶ 20.

         II. Facts.

         Plaintiffs in this case have repeatedly failed to comply with the rules of discovery. When defendants object to plaintiffs' actions in motions filed with the court, counsel for plaintiffs responds by filing counter-motions accusing defendants of wrongdoing and asking the court to impose sanctions on the defendants. See, e.g., ##94-95 (defendants' motion to dismiss for plaintiff's flagrant disregard for rules of discovery); #98 (plaintiffs' opposition); ##101-103 (plaintiffs' motion to compel and for sanctions against defendants). While the court will not detail every instance of this history, brief descriptions of two prior discovery disputes in the case are instructive and provide a backdrop for the court's decision on this matter.

         A. The Discovery Dispute of March 2016.

         Early in the case, Judge Casper gave the parties sixty days in which to conduct discovery as to whether the forum selection clause in the Cooperation Agreement had been triggered. (#26.) In March 2016, the parties had a discovery dispute during the limited discovery period.[3] In their motion to compel, defendants complained that plaintiffs had produced unsigned, incomplete, and inadequate responses to defendants' discovery requests, which was particularly prejudicial given the fast-approaching deadline. (#32, #33 at 3, 5.) In addition, plaintiffs had refused to produce a corporate designee for a Rule 30(b)(6) deposition notice sent to plaintiffs. (#32 at 2.) Defendants' counsel had attempted to confer with Attorney Xu, but he did not respond. Id. at 3.

         In response, plaintiffs filed a motion for protective order to prevent defendants from noticing a deposition of the Rule 30(b)(6) witness who needed to travel to Boston from China for the deposition (##34-35), and also filed an opposition to defendants' motion to compel discovery, stating that because discovery at that stage of the case was confined to the jurisdictional question, they had “no relevant and responsive materials to produce” to defendants. (#37 at 2.)

         Defendants responded that with regard to the Rule 30(b)(6) witness, since plaintiffs elected to sue in Massachusetts, the deposition should take place here. (#39 at 2.) Defendants also described in detail their attempts to engage in discovery practice and plaintiffs' repeated dilatory and conflicting responses to defendants' efforts, see Id. at 2-5.

         At a hearing on defendants' motion in April 2016, plaintiffs abandoned their argument that they need not engage in discovery practice and agreed to give defendants discovery. (#52.) The court found that defendants had properly noticed the deposition of the Rule 30(b)(6) witness to take place in ...


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