TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & Others v. SONO INTERNATIONAL, LTD. & Others HENGTONG JUICE USA INC. & Others, Defendants-In-Counterclaim.

CourtMassachusetts Appeals Court
DecidedJuly 26, 2024
Docket23-P-0112
StatusUnpublished

This text of TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & Others v. SONO INTERNATIONAL, LTD. & Others HENGTONG JUICE USA INC. & Others, Defendants-In-Counterclaim. (TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & Others v. SONO INTERNATIONAL, LTD. & Others HENGTONG JUICE USA INC. & Others, Defendants-In-Counterclaim.) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & Others v. SONO INTERNATIONAL, LTD. & Others HENGTONG JUICE USA INC. & Others, Defendants-In-Counterclaim., (Mass. Ct. App. 2024).

Opinion

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).

COMMONWEALTH OF MASSACHUSETTS

APPEALS COURT

23-P-112

TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & others1

vs.

SONO INTERNATIONAL, LTD.2 & others;3 HENGTONG JUICE USA INC. & others,4 defendants-in-counterclaim.

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

This case concerns a business dispute between a group of

affiliated apple juice concentrate producers known as Hengtong5

and a purchaser of Hengtong's products, Steinhauser, Inc.

(Steinhauser). After Steinhauser failed to pay for product

1Shaanxi Hengtong Fruit Juice & Beverage Group Co., Ltd.; Shaanxi Hengxing Fruit Juice Co., Ltd.; and Gansu Tongda Fruit Juice & Beverage Co., Ltd.

2 Doing business as Sono Global.

3 Steinhauser, Inc. and Darren Jenkins.

4Binder International GMBH & Co KG, Binder International of Boston LLC, Peter Chakiris, and Thomas Nothelfer.

5Where the distinction between any of the Hengtong affiliates is immaterial to our discussion, we refer to all the Hengtong affiliates interchangeably as "Hengtong." delivered under various contracts, Hengtong brought suit against

Steinhauser, Steinhauser's parent company, Sono International,

Ltd. (Sono), and a Steinhauser employee named Darren Jenkins.

Steinhauser counterclaimed against Hengtong for civil

conspiracy, aiding and abetting, and violation of G. L. c. 93A.6

A Superior Court judge bifurcated Hengtong's claims from

Steinhauser's counterclaims, and Hengtong's claims proceeded to

a jury-waived trial before another Superior Court judge.7 The

trial judge found Steinhauser and Sono liable for breach of

contract, Sono liable for violation of G. L. c. 109A, and all of

the defendants liable for violation of G. L. c. 93A.

Thereafter, a third Superior Court judge entered summary

judgment in Hengtong's favor on Steinhauser's counterclaims.

After a judgment entered, Steinhauser and Jenkins appealed.8 We

affirm.

6 Steinhauser also asserted claims against several additional defendants-in-counterclaim, including another Hengtong affiliate. With the exception of the Hengtong affiliate, Steinhauser stipulated to the dismissal of its claims against the additional defendants-in-counterclaim.

7 As we explain, the trial was interrupted by the COVID-19 pandemic. The judge heard some of the testimony in person prior to the start of the pandemic and some of the testimony by video months later.

8 Sono did not appeal.

2 1. Background. a. Hengtong's claims. We recite the

following facts as found by the trial judge. See Cummings

Props., LLC v. Hines, 492 Mass. 867, 868 & n.3 (2023).9

Hengtong is a group of Chinese companies that make and sell

apple juice concentrate. Steinhauser, which was acquired by

Sono in 2012, was a Massachusetts-based company that purchased

and sold fruit juice products. Jenkins, a resident and citizen

of the United Kingdom, was a director of Steinhauser and Sono.

Steinhauser mostly dealt in "back-to-back" sales where (1)

a client would reach out to Steinhauser for a certain amount of

product and (2) Steinhauser would negotiate its purchase and

resale of the product at the same time, thereby guaranteeing

that Steinhauser would get paid. For many years, Hengtong was

one of Steinhauser's largest suppliers. However, that

relationship came to an end in 2017 after Steinhauser failed to

pay Hengtong approximately $3.4 million on four contracts for

back-to-back sales that Steinhauser and Hengtong entered into

between November 2016 and January 2017. At trial, there was no

dispute that Steinhauser breached the contracts by not paying

Hengtong. The parties' dispute instead centered on whether

9 The trial judge's decision included over fifty pages of detailed findings. With one minor exception, which we note, infra, Steinhauser and Jenkins do not argue that any of those findings were clearly erroneous.

3 Steinhauser acted unfairly toward Hengtong. Accordingly, we

describe in some detail the manner in which Steinhauser operated

its business.

Beginning in September 2015, Steinhauser funded its

business operations primarily through a $30 million revolving

line of credit from East West Bank (EWB). The line of credit

(EWB loan) contained covenants requiring Steinhauser to receive

EWB's "prior written consent" before making "any loans or

advances," "[i]nvestments," or "transaction[s] with any . . .

[a]ffiliate . . . on terms any less favorable than those which

might be obtained at the time from [p]ersons who are not such an

. . . [a]ffiliate." However, Steinhauser knew that "unless and

until EWB objected and enforced the covenants in the loan

documents, the EWB loan to Steinhauser presented an opportunity

. . . to move cash in related-party transactions" among the

various affiliates of Steinhauser's parent company, Sono.

In 2016, using funds from the EWB loan, Steinhauser began

making prepayments to Sono affiliates for juice products.10

Steinhauser did so to diversify its product base and minimize

10Prepayments in the juice industry are standard. As a general matter, prepayments are often necessary so that farmers have funds to plant, harvest, and deliver fruit. Industry standard calls for buyers and sellers to memorialize prepayment transactions with written contracts that include terms regarding delivery deadlines.

4 its reliance on Hengtong. However, Steinhauser also did so

without entering into written contracts or obtaining enforceable

commitments for delivery. In addition, Steinhauser's

prepayments to Sono affiliates were made without EWB's approval,

in violation of the EWB loan covenants. Steinhauser also used

funds from the EWB loan, without EWB's consent and in violation

of the EWB loan covenants, to loan over $2 million to a Sono

affiliate for the purchase of a juice factory in Brazil called

Cajuba (Cajuba loan).11

Even though Steinhauser repeatedly violated the EWB loan

covenants, EWB agreed on multiple occasions to forbear from

seeking full payment. With respect to the Cajuba loan in

particular, EWB informed Steinhauser in early 2017 that it

deemed the investment a violation of the EWB loan covenants.

However, EWB agreed to forbear from seeking full payment on the

conditions, among others, that (1) Steinhauser obtain repayment

of the Cajuba loan by May 30, 2017, and (2) Steinhauser use

those funds to reduce the outstanding principal balance of the

EWB loan by $2.37 million. EWB later extended the May 30, 2017,

deadline to July 31, 2017. Although Steinhauser never obtained

repayment of the Cajuba loan, Steinhauser did reduce the

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TONGDA FRUIT JUICE AND BEVERAGE LIQUAN CO., LTD. & Others v. SONO INTERNATIONAL, LTD. & Others HENGTONG JUICE USA INC. & Others, Defendants-In-Counterclaim., Counsel Stack Legal Research, https://law.counselstack.com/opinion/tongda-fruit-juice-and-beverage-liquan-co-ltd-others-v-sono-massappct-2024.