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Joint Venture – Loan Guaranty – Permissive v. Compulsory Counter Claims

By: Derek Hawkins//December 13, 2016//

Joint Venture – Loan Guaranty – Permissive v. Compulsory Counter Claims

By: Derek Hawkins//December 13, 2016//

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7th Circuit Court of Appeals

Case Name: Nalco Company v. Davit T. Chen et al

Case No.: 16-2902

Officials: EASTERBROOK and ROVNER, Circuit Judges, and SHADID, District Judge

Focus: Joint Venture – Loan Guaranty – Permissive v. Compulsory Counter Claims

Nalco and David Chen conducted a joint venture to sell environmental equipment in China. Nalco owned 55% of the venture, Chen 40%, and a third party 5%. When the joint venture (Nalco Mobotec Environmental Protection Technology (Shanghai) Co., or NMEPT) encountered business problems, Nalco guaranteed a loan, which NMEPT was unable to cover. Nalco paid the creditor and sued Chen (under the diversity jurisdiction) for his 40% share of the outlay. The district court entered judgment in Nalco’s favor for more than $2 million. 2014 U.S. Dist. LEXIS 76207 (N.D. Ill. June 4, 2014). Chen filed counterclaims against both Nalco and a subsidiary, Nalco Mobotec, Inc. (NMI), through which Nalco had made its investment in the joint venture. Chen contended that NMI had violated his rights under the agreement by causing the joint venture to borrow $300,000 without his approval, even though the agreement required all investors’ consent for borrowing money. When the joint venture did not repay this loan, the creditor petitioned it into bankruptcy under Chinese law—another violation of the agreement, Chen maintained. As Chen described things, the lender was doing Nalco’s bidding in an effort to get around a clause of the agreement requiring the three investors’ unanimous consent for bankruptcy proceedings. Nalco wanted to wind up the unprofitable venture, but Chen preferred to keep it alive (if dormant) in order to protect its intellectual property. Chen’s counterclaim included 12 counts under the laws of both China and Illinois. The district court granted summary judgment against Chen on 11 of the 12, see 2015 U.S. Dist. LEXIS 68095 (N.D. Ill. 2015), and he soon abandoned the twelfth. At this point the suit was over, but no one appealed. Chen is not reconciled to his loss, however, and filed a new suit, this time in China. He named as the defendant Mobotec LLC (Mobotec). Contending that Chen was attempting to relitigate claims already resolved in this nation, Nalco asked the district court to enjoin him from pursuing the Chinese litigation. The court issued an anti-suit injunction, 2016 U.S. Dist. LEXIS 75698 (N.D. Ill. June 10, 2016), and this time Chen appealed.

Affirmed

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