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The Finley Group as Receiver for Industrial Piping, Inc. v. Zhang

United States District Court, D. Idaho

November 29, 2018



          B. Lynn Winmill Chief U.S. District Court Judge


         The Court has before it several motions that are fully briefed and at issue. For the reasons expressed below, the Court will deny the motion for partial summary judgment, deem moot the motion for extension, grant the motion to withdraw Count III, strike affirmative defenses Twelve through Twenty-Six, and grant the motion for sanctions.


         Plaintiff Industrial Piping Inc. (IPI) brings this lawsuit to recover payment for construction work it performed on a facility for Hoku Materials to produce solar panels. IPI and Hoku entered into a Master Construction Services Agreement (MCSA) in October of 2011 setting forth the work that IPI would perform and the payment it would receive - about $7 million. IPI claims that it performed the work but was never fully paid and has sued Hoku's President (Tao Zhang) and Hoku's Vice-President for Finance (Dayi Liu). Hoku went into bankruptcy and hence is not a party to this lawsuit. Both sides have filed various motions that the Court will consider and resolve below.

         Motion for Partial Summary Judgment

          IPI moves for a partial summary judgment on the issue of election of remedies. IPI argues that the largest amount it could receive from the Bankruptcy Court as a secured creditor is $1, 010, 968.69, and that it is entitled to apply this sum to the $5 million owed to it by Hoku rather than to any judgment obtained against defendants Zhang and Li in this action.

         Earlier in this action, defendants Zhang and Li sought a summary judgment ruling that IPI's decision to pursue payment from Hoku in the bankruptcy proceedings precluded IPI from seeking recovery against Zhang and Li based on the same set of facts, and asked the Court to dismiss the case. Judge Lodge, who was presiding at that time, decided that there was no reason to dismiss the action at that time, and that any potential double recovery could be addressed in jury instructions or post-judgment proceedings:

[R]ather than disallow the claim as a matter of law based on the proof of claim filed in the bankruptcy, the Court believes this concern can be addressed in terms of the proof of damages allowed in this case or, if necessary, in post-judgment proceedings. Defendants have failed to demonstrate any case law that would support summary dismissal of Plaintiff's claims in this case and at this stage of the proceedings based on election of remedies or concerns regarding double-recovery.

See Order (Dkt. No. 84). Now faced with the mirror-image motion filed by IPI, the Court finds that the ruling of Judge Lodge applies with equal strength: There is no need for a ruling at this stage of the proceedings. While it may be necessary to address the issue to some degree while drafting jury instructions, no trial date has even been set, and the issue can be adequately resolved in post-judgment proceedings. For these reasons, the Court will deny the motion without prejudice to the rights of both parties to raise this issue at a later point.

         Motion to Extend Time to Respond to the Motion for Partial Summary Judgment

         Defendants ask the Court for additional time to respond to IPI's motion for partial summary judgment regarding the election of remedies until more discovery can be done to identify the payments IPI has received from Hoku's bankruptcy estate. Given the ruling above, this motion is moot - if IPI eventually receives a judgment in this action, the issue of double recovery and any attendant discovery can be addressed in a post-judgment proceeding.

         Motion to Withdraw Count III and to Strike Defenses

          IPI moves to withdraw Count III of its Second Amended Complaint, and the Court will so order, conditioned on the award of sanctions, discussed further below. IPI also seeks to strike 15 new defenses raised by the defendants in their answer responding to the Second Amended Complaint containing Count III. IPI argues that because the defenses related to Count III, the withdrawal of Count III should result in the defenses being struck. Defendants respond that the Second Amended Complaint also contains changes to the allegations in Counts One and Two, and its defenses relate to those changes. But the changes were minor, and the defenses relate to Count III, not to these ...

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