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Kelly v. Tianwei New Energy Holdings Co.

United States District Court, D. Idaho

November 10, 2014

JH KELLY, LLC, a Washington limited liability company, Plaintiff,
v.
TIANWEI NEW ENERGY HOLDINGS CO., LTD., a People's Republic of China company, TAO (MIKE) ZHANG, WEI XIA, SCOTT PAUL, DAUI (SEAN) LIU, AND DOES 1-10, Defendants

For JH Kelly, LLC, a Washington limited liability company, Plaintiff: Craig R. Yabui, LEAD ATTORNEY, Elam & Burke, P.A., Boise, ID; Joseph N Pirtle, William G Dryden, LEAD ATTORNEYS, ELAM & BURKE, Boise, ID.

For Tianwei New Energy Holdings Co., Ltd., a People's Republic of China company, Defendant: Matthew James McGee, Randall A Peterman, LEAD ATTORNEYS, MOFFATT THOMAS BARRETT ROCK & FIELDS, Boise, ID; Michael O Roe, LEAD ATTORNEY, Givens Pursley LLP, Boise, ID.

For Tao Zhang, also known as Mike Zhang, Dayi Liu also known as Sean Liu, Defendants: Jack S Gjording, James Bryant Smith, LEAD ATTORNEYS, GJORDING FOUSER PLLC, Boise, ID.

For Wei Xia, Defendant: Kelly Alfred Cameron, Stephen C Hardesty, LEAD ATTORNEYS, Perkins Coie LLP, Boise, ID.

For Scott Paul, Defendant: Celeste K Miller, LEAD ATTORNEY, McDevitt & Miller LLP, Boise, ID; Charles F McDevitt, Dean J Miller, LEAD ATTORNEYS, MCDEVITT & MILLER, Boise, ID; Howard Holderness, LEAD ATTORNEY, PRO HAC VICE, Morgan, Lewis & Bockius LLP, San Francisco, CA.

Page 1195

MEMORANDUM DECISION AND ORDER

B. Lynn Winmill, Chief Judge United States District Judge.

INTRODUCTION

Beginning in 2007, Plaintiff JH Kelly, LLC was the general contractor in charge

Page 1196

of building a manufacturing plant for a Chinese corporation. Construction ceased in 2012 when funding for the plant dried up. At that time, JH Kelly was owed approximately $25 million for work it had done on the plant. JH Kelly sued Tianwei New Energy Holdings Co., Ltd., a surety for the Chinese corporation, and several of the corporation's officers and directors, defendants Tao Zhang, Wei Xia, Scott Paul, and Daui Liu, to recover the outstanding debt.

Central to JH Kelly's complaint are allegations that Defendants knowingly misrepresented that Tianwei would fund the project through to completion. By making those misrepresentations, Defendants allegedly committed fraud, violated state and federal racketeering law, and, in the alternative, negligently misled JH Kelly into believing it would be paid for its work. Because JH Kelly has not alleged facts that show that Tianwei's stated commitment to the project was false, the Court will dismiss JH Kelly's fraud and racketeering claims. JH Kelly's negligence claim fails because it is not cognizable under Idaho law.

BACKGROUND

Hoku Corporation and its subsidiary, Hoku Material, Inc., (collectively " Hoku" ) are Chinese corporations focused on developing clean energy projects. As part of its solar initiative, Hoku decided to construct a polysilicon manufacturing plant in Pocatello, Idaho. Hoku hired Plaintiff JH Kelly as general contractor to build the plant, and construction commenced on August 8, 2007.

In early 2008, Tianwei committed to purchase Hoku's polysilicon for ten years. The total purchase price was $468 million, and Tianwei paid $79 million upfront. By fall of 2008, however, the market for polysilicon crashed. Shortly after the crash, Tianwei and Hoku entered into a financing arrangement whereby Tianwei became the majority shareholder and " funding arm of Hoku." Amend. Compl., Dkt. 35, ¶ 19. As such, Tianwei exercised a significant degree of control over Hoku and the construction of the plant. Tianwei installed Zhang, Liu, Xia, and Paul, all of whom had ties to Tianwei, as directors and officers for Hoku. See id. ¶ ¶ 20-21.

By July 2010, Hoku had fallen behind in paying JH Kelly for its work building the plant. When JH Kelly raised concerns about the late payments with Defendants, they assured JH Kelly that they " w[ould] ensure sufficient funds [were] in place till completion of the project." Id. ¶ 26. A pattern of similar occurrences repeated for about one year. Each time payments fell behind, Defendants reiterated Tianwei's financial strength and full commitment to the project. See id. ¶ ¶ 27, 33, 35.

In October 2011, Hoku stopped making payments to JH Kelly. See id. ¶ 50. In the months that followed, Defendants repeatedly assured JH Kelly that " Tianwei . . . had in place all required financing for completion of the [p]roject, and that it was strictly a matter of 'when, not if'" the funds would be sent. Id. ¶ 35; see also id. ¶ 39 (" Hoku/Tianwei [was] not a credit risk." ); id. ΒΆ 42 (" Tianwei 'will ensure that sufficient funds are in place till completion of the project." ). Defendants blamed the delay on various procedural hurdles, such as difficulty transferring funds from China to the United States. By the end of ...


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