GUANGZHOU, CHINA, January. 6, 2023 — Anderson & Anderson LLP, an international law firm with offices across Asia and the U.S., recently announced settlement of complex global litigation pending for more than two years involving a China-based $1 billion public conglomerate and the CEO’s estranged spouse, who was CFO for the company’s $22 million U.S. subsidiary that routinely contributed $150 million in sales to the parent company’s bottom line.
The Chinese company’s principal business is providing commercial grade industrial batteries and energy equipment to companies worldwide, including the Americas, Europe and Asia.
The litigation stemmed from the complex relationship between the Chinese company’s CEO and his spouse of more than 30 years, and who had founded and managed the U.S. company to exclusively distribute equipment produced by the China-based company. The couple had married in China during the early 1990s, and the CEO remained resident in China while his spouse took up residence in the United States, eventually becoming a U.S. citizen; subsequently the CEO himself applied and changed his citizenship from Chinese to Singaporean, while remaining resident in China.
During the couple’s marriage, the Chinese company CEO effectively treated the U.S. company founded by his spouse as a subsidiary, which continued to be managed principally by her as CFO. The international couple became estranged in 2018, though the spouse continued to manage the U.S. company until 2020, when she was terminated from the U.S. company after notifying the China Company CEO that she had filed for divorce from him.
The spouse then filed suit against the U.S. company she founded for wrongful termination under an implied employment contract theory that she contended violated an implied “good cause” requirement for removal, as well as the implied requirement of “good faith and fair dealing.” Concurrently, the spouse also sued her husband, the China Company CEO, for breach of marital fiduciary duty and fraud with respect to having effectively wrested control of the U.S. Company from her.
The U.S. company filed a countersuit against the discharged spouse CFO alleging wrongful taking of company funds before her employment was completely severed from the company.
Complicating these circumstances, the U.S. citizen spouse also owned and controlled a separate and independent limited liability company that owned the property and building in which the U.S. subsidiary operated under lease. The U.S. citizen spouse concurrently sued the U.S. company for breach of lease for failing to pay several months of rent. That suit was completely adjudicated while the other matters remained pending, with a court granting summary judgment to the property owner, the U.S. citizen spouse, who then successfully evicted the U.S. company as tenant. The remaining cases were consolidated and necessitated engagement of multiple experts covering such areas as forensic accounting, ethics in corporate governance and forensic vocation reporting.
The trans-Pacific scope of businesses and individuals involved posed complex issues with respect to discovery and civil procedure motions and other pre-trial litigation matters. For example, the China Company CEO succeeded in initially challenging service of process in Hong Kong, and later persistently thwarted being deposed by leveraging his residency in China and the illegality of taking deposition from there, as well as leveraging the international travel restrictions with respect to COVID-19, and other such maneuvers as changing legal representation three times: In sum, he managed to avoid deposition and delay discovery for nearly two years.
Further jurisdictional complications ensued given that the couple was originally married as Chinese nationals in China, but had each made subsequent international moves, changing countries of residence as well as changing citizenship. The international nature of the couple — particularly considering the CEO of the China Company had never resided in the United States — presented complicated challenges regarding marriage dissolution and property settlement with respect to the issues of most appropriate forum, venue and jurisdiction. Concurrent with all of the civil business litigation ongoing, the international couple were each pursuing marriage dissolution proceedings in numerous jurisdictions, including Hong Kong, Singapore, the United States and China.
The couple eventually agreed to dissolution and property settlement under U.S. jurisdiction, and the painstaking settlement negotiated and signed in November was global in scope, ending all civil business litigation in the United States, as well as settling all marriage dissolution and property settlement actions pending in various jurisdictions. While two years of pre-trial maneuvering and litigation cost both sides hundreds of thousands of dollars in legal expenses, the final global settlement avoided trial and ultimately saved both sides millions of dollars.
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