Can You Sue a Chinese Company Listed on NASDAQ in New York for Breach of Contract in China?



Defendant Chinese company was incorporated in Delaware, trading on the NASDAQ and had an investor relation office in New York City. But Defendant had no other business operation other than what was mentioned above in New York or U.S. Its manufacturing facilities and management team were completely inside China. Plaintiff was a U.S. citizen and held several patents on battery. He primarily lived in China but maintained a house in California. While in China, he entered several Chinese agreements with Defendant who obtained rights to use his patents for an up front fee of one million US dollars, 300,000 shares of defendant’s stocks and five year employment as defendant’s Chief Technology Officer.

Defendant transferred Plaintiff only 20% of shares and terminated his employment in less than a year. Plaintiff filed a diversity cause of action in the federal district of Southern New York. Defendant moved to dismiss for forum non conveniens. The Court granted motion on the condition that Defendant consented to jurisdiction of Chinese court.

The Court highlighted the following facts. The agreements were in Chinese. They were negotiated and executed in China. The performances pursuant to the agreements were also inside China. All the relevant witnesses and documents were inside China. The agreements did not provide for choice of law or forum. Under New York choice of law, Chinese law would apply.

Had the agreement contained a choice of forum clause under New York General Obligation Law Section 5-1402, the Court would have denied the motion.

Ironically, according to Yahoo!Finance, Defendant was delisted late 2011 from NASDAQ and is currently trading on the OTC market. Its share price peaked above $6 between 2007 and 2008 and maintained around $3 while the case was litigated between the spring of 2010 and that of 2011. Between July 2, 2007 and July 2, 2012, the price dropped 87.32%.

Disclaimer: The above summary and commentary is based solely on the reading of the decision and Yahoo!Finance which does not necessarily recite the full record, and might be inconsistent with the full record.  Sui-Yang Huang v. Advanced Battery Technologies, Inc.,  Docket 09 CV 8297 (HB), 2010 U.S. Dist.   LEXIS 51694 (SDNY May 26, 2010). For more complete and accurate information, consult the full record and Yahoo!Fianance.