By Ashley Portero – Reporter, South Florida Business Journal
A South Florida circuit board distributor that claimed a Chinese manufacturer knowingly committed fraud and engaged in unlawful conduct to hijack some of its clients emerged victorious in a recent court battle.
Fort Lauderdale-based Circuitronix, was able to pursue the case due to a contract provision that specified any potential litigation between the two entities would be argued in a U.S. Court, according to the lawyers who represented Circuitronix in the case.
It was that provision that allowed the circuit board distributor to file – and win – its 2017 lawsuit against Shenzhen, China-based Kinwong Electronic Co.
On May 31, a federal jury in the U.S. Southern District of Florida awarded Circuitronix nearly $1.1 million in damages.
“Here’s a case where an American company decided to fight back because it didn’t want to sit back and get abused,” said Miami lawyer Chancey Cole, who represented Circuitronix. “That would have been almost impossible without a contractual guarantee that any litigation would be
conducted in South Florida.”
Circuitronix began doing business with Kinwong in 2005, when the South Florida distributor partnered with the Chinese firm to produce lower-cost printed circuit boards. In return, Circuitronix helped Kinwong modernize its Chinese facility. The agreement specified that Kingwong could not do business, directly or indirectly, with Circuitronix’s clients. Some of those clients include General Electric (NYSE: GE), Nissan and Kimball Electronics (Nasdaq: KE).After multiple legal disputes, the firms entered into a settlement agreement in 2010. But according to the 2017 suit, after the settlement, Kingwong used confidential and propriety information to do business directly with Circuitronix’s customers, leading to multi-million dollar losses.“
Years after Circuitronix put Kingwong on the map and got companies comfortable ordering from their factories, they tried to cut Circuitronix out, go after those clients and keep the money for themselves,” Cole said.
Stephen Rosenthal, a lawyer with Miami-based firm Podhurst Orseck who also represented Circuitronix, said top-ranking Kingwong executives were aware of the breach of contract. He said internal emails from the Chinese firm demonstrated Kingwong was intentionally
sabotaging products made for Circuitronix customers in orderto undermine the firm’s reputation and steal those customers for themselves.
Kingwong was represented by Miami law firm Greenberg Traurig in the case. Mark A. Salky, a shareholder at the law firm, declined to comment on the case.
China’s penchant for stealing trade secrets from international firms is one reason why the Trump administration imposed a 25% tax on imports from the country. Rosenthal said many U.S. firms don’t take action against Chinese companies due the fear of being blacklisted by the Chinese government. And even if they do want to take action, Rosenthal said, it’s unlikely they would stand a chance in a Chinese court. “It’s very smart to have a contractual guarantee that any litigation is conducted in the U.S. for that
reason,” he said.