Case of the Day: Global Material Technologies v. Dazheng Metal Fibre Co.

The case of the day is Global Material Technologies, Inc. v. Dazheng Metal Fibre Co. (N.D. Ill. 2014). GMT was in the business of producing and selling metallic wool products. It alleged that it owned a 25% stake in Dazheng, a Chinese firm which was in the same business. GMT ultimately stopped producing some products in its own facilities and instead outsourced production to Dazheng. At some point, Dazheng, according to GMT’s allegations, “refused to timely manufacture certain fibers and consumer products for GMT, disregarded GMT’s purchase orders, and shipped more than 750,000 pounds of rusted metallic fibers to GMT’s customers.” GMT sued Dazheng in the People’s Court of Jinwan District, Zhuhai City, Guangdong Province for breach of contract. That court dismissed the claim, and the Intermediate Court affirmed.

A few days after the People’s Court dismissed the case, GMT sued Dazheng in the Northern District of Illinois, alleging violations of the Convention on the International Sale of Goods. Dazheng moved to dismiss, arguing that the claim was barred by res judicata because the claims were substantially similar to the claims the Chinese court had dismissed. GMT argued that the Chinese litigation was “fundamentally unfair.”

But the court never got to the issue of the unfairness of the Chinese proceeding (or to the threshold issue whether GMT, which was the plaintiff in China, could even raise issues about the fairness of the proceeding). If the court was to give the Chinese judgment preclusive effect, it would give it the same preclusive effect that a Chinese court would give it, but neither party had briefed the issue of the preclusive effect of the judgment under Chinese law. So the court denied the motion without prejudice.

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