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Chiaphua Industries Ltd. v. Idleaire Technologies Corp.

August 2, 2007

CHIAPHUA INDUSTRIES LIMITED, ET AL., PLAINTIFFS,
v.
IDLEAIRE TECHNOLOGIES CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Thomas W. Phillips United States District Judge

Phillips

MEMORANDUM AND ORDER

This action arises out of a manufacturing and sales agreement between plaintiff Chiaphua and defendant IdleAire, wherein Chiaphua agreed to manufacture an HVAC product for IdleAire. This matter is before the court on defendant's motions to dismiss plaintiffs' complaint [Docs. 3, 7]. For the reasons which follow, defendant's motions will be denied.

Background

Chiaphua and IdleAire entered into an agreement for Chiaphua to manufacture an HVAC product for IdleAire. During Chiaphua's negotiations and development work with IdleAire, Chiaphua entered into an agreement with Zymbo Electrical Manufacturing Company, Ltd., whereby Chiaphua provided Zymbo with its and IdleAire's proprietary information to enable Zymbo to assist Chiaphua in the development and testing of the subject HVAC product. Thereafter, Chiaphua's subsidiary, plaintiff Giabo Appliances Co., Limited, entered into a memorandum of understanding with Zymbo for the exclusive manufacturing and supply of the subject HVAC product to Chiaphua. Under the terms of the Zymbo Memo, Chiaphua was to purchase the product from Zymbo and would then sell the product to IdleAire. In June 2004, Chiaphua received its first purchase order from IdleAire for the manufacture and purchase of 5,120 HVAC units, and in July 2004, Chiaphua shipped the products to IdleAire.

In December 2004, Chiaphua learned that Zymbo was closing its business. Thereafter, the Zymbo Memo and all related agreements between Chiaphua and Zymbo were assigned to Zymbo's affiliated wholly-owned factory, Guangzhou Hong Shan Refrigeration Technology Company, Ltd. (HSRT), which IdleAire agreed and consented to. The parties continued to perform under the terms of this assignment and under the terms of their original agreement.

On May 12, 2006, Chiaphua received a notice of termination of the parties' manufacturing and sales agreement from IdleAire, and on May 19, 2006, Chiaphua received a notification from IdleAire advising that it should deliver all tooling to HSRT to enable it to continuing manufacturing the HVAC product. Prior to its notice of termination, IdleAire had negotiated directly with HSRT concerning the manufacture and supply of the HVAC product directly by HSRT.

Plaintiff filed its original complaint on November 27, 2006. Thereafter, on March 5, 2007, defendants filed their first motion to dismiss plaintiff's complaint [Doc. 3].

In response to this motion, on March 26, 2007, plaintiff filed an amended complaint, adding Giabo Appliances Co., Limited, as a party plaintiff. Plaintiffs have brought the following causes of action against IdleAire: (1) breach of contract; (2) intentional interference with contract and business relationship; (3) common law intentional interference with contract; (4) intentional interference with prospective business relationships; (5) civil conspiracy; and (6) violation of the Tennessee Consumer Protection Act. On April 9, 2007, defendants filed a second motion to dismiss plaintiffs' claims for: (1) breach of contract; (2) intentional interference with prospective business relationship; and (3) violation of the Tennessee Consumer Protection Act [Doc. 7].

Analysis

A motion to dismiss under Rule 12(b)(6), Federal Rules of Civil Procedure, requires the court to construe the complaint in the light most favorable to the plaintiff, accept all the complaint's factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of its claims that would entitle it to relief. Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir.) cert. denied, 498 U.S. 867 (1990). The court may not grant such a motion to dismiss based upon a disbelief of a complaint's factual allegations. Lawler v. Marshall, 898 F.2d 1196, 1198 (6th Cir. 1990); Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995) (noting that courts should not weigh evidence or evaluate the credibility of witnesses). The court must liberally construe the complaint in favor of the party opposing the motion. Id. However, the complaint must articulate more than a bare assertion of legal conclusions. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434 (6th Cir. 1988). "[The] complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Id. (citations omitted).

Breach of Contract

Defendant asserts that plaintiffs' claim for breach of contract should be dismissed for failure to state a claim upon which relief can be granted. The amended complaint in this matter alleges that defendant specifically breached the terms of the parties' agreement by holding negotiations and contracting with HSRT regarding the manufacture and supply of the HVAC product directly by HSRT prior to IdleAire sending its notice of termination to Chiaphua on May 12, 2006, before the 180 day notice period provided for in the parties' agreement had elapsed.

The record shows that the parties' agreement provided that in order to terminate the contract and move production to a wholly different manufacturer/supplier, IdleAire had to provide Chiaphua with 180 days notice. Plaintiff's complaint alleges that IdleAire breached this notice provision of the parties' agreement. Therefore, plaintiff has alleged the facts necessary to state a claim for breach of ...


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