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Wai Feng Trading Co. Ltd. v. Quick Fitting, Inc.

United States District Court, D. Rhode Island

December 17, 2018

WAI FENG TRADING CO. LTD, and EFF MANUFACTORY CO., LTD., Plaintiffs,
v.
QUICK FITTING, INC., Defendant. QUICK FITTING, INC., Plaintiff,
v.
WAI FENG TRADING CO., LTD., EASTERN FOUNDRY & FITTINGS, INC., EASTERN FOUNDRY AND FITTINGS, LLC, NINGO EFF MANUFACTORY CO, LTD., f/k/a/ NINGO W&F MANUFACTORY CO., LTD. WAI MAO COMPANY, LTD., CIXI CITY WAI FENG BALL VALVE COMPANY, LTD., W&F MANUFACTURING, and CHI YAM “ANDREW” YUNG, Defendants.

          REPORT AND RECOMMENDATION

          PATRICIA A. SULLIVAN, UNITED STATES MAGISTRATE JUDGE.

         The commercial dispute framed by these contentiously litigated cases[1] has finally cleared the discovery hurdles and reached the summary judgment phase, though not without significant bumps along the way.[2] The first of the two cases (13-33) was initially filed in Canada, on August 2, 2012, and was refiled in this Court on January 17, 2013. As framed in the operative pleading, the Fourth Amended Complaint, (ECF No. 80) (“13-33 complaint”), 13-33 is a simple collection action, seeking to recover money for plumbing push-fit products sold, delivered and accepted. The second case - 13-56 - was filed on January 25, 2013. As amended, its operative pleading is the Second Amended Verified Complaint, (13-56 ECF No. 135)[3] (“13-56 complaint”), which counters the collection action with eleven Counts alleging, inter alia, breach of various non-competition, confidentiality, non-solicitation and non-disclosure clauses in the agreements between the parties, the misappropriation of trade secrets, the stealing of intellectual property, defamation and the delivery of unmerchantable and defective goods. Many (but not all) of the claims in 13-56 are counterclaims in 13-33. ECF No. 81 (Amended Counterclaim) (“13-33 counterclaims”). Ultimately, the cases were consolidated (without prejudice to bifurcation for trial) on September 30, 2015.[4] Unless otherwise indicated, all docket references in this report and recommendation will be to 13-33, which the Court has designated as the lead case.

         Now pending before the Court in each of the cases are six motions for summary judgment, five brought by the Wai Feng parties[5] and one brought by Quick Fitting, [6] as well as eight motions to strike brought by the Wai Feng parties and a motion seeking a finding of spoliation brought by Quick Fitting. All of the motions have been referred to me, some for determination, some for report and recommendation. 28 U.S.C. § 636(b)(1)(A)-(B).

         This report and recommendation addresses four of the pending summary judgment motions.[7] Its principal focus is on the Wai Feng parties' motion for summary judgment challenging Count IV of Quick Fitting's 13-33 counterclaim and Count I of Quick Fitting's 13-56 complaint. 13-56 ECF No. 255.[8] This motion calls into question the legal enforceability of three categories of challenged clauses contained in the three agreements[9] between various of the parties - a “Liquidated Damages/Contract Penalty” clause, several non-compete clauses and several non-solicitation/confidentiality clauses. For the reasons that follow, I recommend that the Court grant this aspect of the motion because all the challenged clauses are unenforceable as a matter of law. This motion also challenges the sufficiency of Quick Fitting's evidence of breach, including whether it has presented enough to prove damages. I recommend that the Court deny this aspect of the motion because I find that the evidence is adequate for a trial regarding whether there was a breach of the unchallenged restrictive covenants in the Agreements, including whether Quick Fitting is entitled to actual or nominal damages based on any such breach.

         The other three summary judgment motions addressed in the report and recommendation challenge the viability of Quick Fitting's claims against Andrew Yung in Count IX of the 13-56 complaint (13-56 ECF NO. 256) and against EFF LLC in all Counts of the 13-56 complaint (13-56 ECF No. 257), as well as the viability of Quick Fitting's claims in Counts II through VIII, X and XI in the 13-56 complaint (13-56 ECF No. 254). For the reasons that follow, I recommend that Andrew Yung's motion be denied, that EFF LLC's motion be granted and that judgment should enter in favor of the Wai Feng parties and against Quick Fitting as to the state law claims of defamation and fraud and misrepresentation, but be denied as to the claims based on the Rhode Island Uniform Trade Secrets Act (R.I. Gen. Laws § 6-41-1, et seq.), as well as the related claim of civil conspiracy, and be denied as to the claim for injunctive relief. I.BACKGROUND[10]

         A. The Industry

         This case is focused on the manufacture and sale of highly engineered plumbing parts and components by entities competing in the plumbing industry; the product in issue is known by the generic term, “push-fit.” Push-fit refers to a plumbing technology that allows for the permanent connection of plumbing pipes and fittings simply by pushing them together by hand without the need for soldering or other heat. QF SUF # 1 ¶ 4. The forging, manufacturing, assembly and testing of push-fit requires precise tooling and material standards to be developed and used by the manufacturer. Crompton Aff. # 2 ¶ 35. Plumbing products that can be connected using push-fit are manufactured from metal (such as copper) or synthetic raw materials by an array of manufacturers pursuant to an array of designs; some are sold unbranded and some are branded with a mark and manufactured pursuant to a particular design. WF SUF # 1 ¶ 45; QF SUF # 1 ¶ 4. For example, Mueller Industries (“Mueller”) contracted with Quick Fitting for Quick Fitting to supply it with its private label brand name ProLine products, while Quick Fitting ordered ProLine products to be manufactured for Mueller by, inter alia, the Wai Feng parties. Crompton Aff. # 2 ¶ 55; QF SUF # 3 ¶ 70. Other push-fit brands include Shark Bite and Gator Bite, both of which are manufactured pursuant to product designs that are not the intellectual property of Quick Fitting. WF SUF # 1 ¶ 45. To be sold in the United States, all plumbing products, including push-fit, must conform to local, state and federal regulations, as well as various industry standards and certifications. Crompton Aff. # 2 ¶¶ 40-41.

         B. The Wai Feng Parties

         Andrew and Jacky Yung are brothers who are originally from China and now live in Ontario, Canada. QF SUF # 1 ¶ 6. Together with their father, Jimmy Yung, they own and operate a network of companies in China, Canada and the United States (namely, Massachusetts) that are engaged in the business of manufacturing, selling and distributing a wide range of plumbing parts and components. Id. ¶¶ 7-8. Their Canadian companies - Wai Mao, acting as the importer, and Wai Feng Trading, acting as the seller and distributor - are engaged in importing, selling and distributing in North America. WF SUF # 1 ¶ 4. At some point in 2011, Wai Feng Trading's operations and employees were shifted to EFF Inc., except that Wai Feng Trading continued the activities related to this litigation, principally the issuing of invoices and the collection of payment, as well as the maintenance of bank and accounting operations to perform those functions.[11] QF SUF # 3 ¶ 8.

         Originally, the Wai Feng parties' manufacturing was done at CCWFBV, a factory of a Chinese-based company owned by an uncle of Andrew and Jacky Yung. A trade name, W&F Manufacturing, was used to refer to the venture comprising Wai Mao, Wai Feng Trading and CCWFBV. WF SUF # 1 ¶ 5. At some point between 2008 and 2011, manufacturing shifted from the uncle's factory to EFF Manufactory, a Chinese factory owned and operated by Andrew Yung.[12] Id. ¶¶ 6-7. Through EFF Manufactory, the Wai Feng parties manufacture a wide range of plumbing products, including products made from both copper and polyvinyl chloride (“PVC”). In addition, EFF Manufactory purchases components for its plumbing products, such as the retaining and release rings that were made by Cixi Welday. Prior to entering the contractual relationship with Quick Fitting, none of the Wai Feng parties had manufactured or sold push-fit products. QF SUF # 1 ¶ 9.

         C. Quick Fitting

         Quick Fitting is a Rhode Island company that specializes in the design, manufacture and distribution of push-fit plumbing fittings and valves made of copper or PVC. QF SUF # 1 ¶¶ 1, 3-4. These are manufactured using design features, materials, sourcing and methods of manufacture that constitute Quick Fitting's intellectual property. QF SUF # 1 ¶ 5. According to the first affidavit signed by David Crompton, President and Chief Executive Officer (“CEO”) of Quick Fitting, its push-fit products are sold “nationally, ” Crompton Aff. # 1 ¶ 19, while Crompton's second affidavit asserts that Quick Fitting sells “throughout North America.” Crompton Aff. # 2 ¶¶ 2, 40. Although Quick Fitting has not alleged in these cases that any of its patents were infringed, it claims to have patented certain features of its push-fit product line and strives to protect as trade secrets other features, as well as the material, sourcing and methods of manufacture of its push-fit products. QF SUF # 1 ¶ 5. It is unclear whether the push-fit products in issue that were manufactured by the Wai Feng parties and sold to Quick Fitting all included design features protected by patent or as trade secrets. Compare WF Ex. 23 at 2-3 (Ochoa testifies that all Quick Fitting push-fit products are patent-protected), with WF Ex. 4 at 1 (2010 License/Supply Agreement states that not all push-fit to be manufactured for Quick Fitting would incorporate Quick Fitting's intellectual property). Quick Fitting's push-fit products are manufactured by various entities (including several manufacturers based in China) with which Quick Fitting has entered into supply agreements requiring manufacture pursuant to Quick Fitting's confidential specifications. WF SUF # 1 ¶ 13. Quick Fitting does not claim to own the exclusive right to manufacture and sell push-fit products. Id. ¶ 45. Quick Fitting's push-fit products compete with other push-fit and plumbing products sold in the United States and North America. WF Ex. 8 at 27.

         D. The Buy-Sell Relationship

         In late 2009 or early 2010, Crompton of Quick Fitting and Andrew Yung of the Wai Feng parties met at a trade show and began to discuss setting up a supply relationship whereby the Wai Feng parties would manufacture push-fit products to Quick Fitting's specifications for sale to Quick Fitting, which would resell to its customers. QF Ex. #3 E at 10. These discussions resulted in the formation of a business relationship that began in February 2010 and ended in July 2012. In addition to the three Agreements, the array of purchase orders and invoices limn the supply relationship.

         During the period from February 2010 until July 2012, pursuant to purchase orders issued by Quick Fitting to “W&F” or to EFF Manufactory, push-fit products manufactured to Quick Fitting's specifications were delivered to Quick Fitting for resale to its customers. WF SUF # 1 ¶¶ 63-67; QF Ex. # 3 N (ECF No. 196-1). Upon the acceptance of the delivered product, [13]invoices were sent to Quick Fitting either by EFF Manufactory or by Wai Feng Trading, which Quick Fitting paid as agreed through October 2011. WF SUF # 1 ¶¶ 61-63. Quick Fitting partially paid an invoice dated October 5, 2011, made an advance payment in March 2012 of $45, 000, and then, in July 2012, stopped paying entirely. It is undisputed that Quick Fitting continued to accept push-fit product for which Wai Feng Trading invoiced Quick Fitting a total of $432, 611.47, but for which Quick Fitting did not pay. WF SUF # 1 ¶ 72; QF Ex. # 3 EEE. It is also undisputed that Quick Fitting sold most of this product to its customers, although it claims that some of it had to be repaired or cleaned before it could be sold and some had to be redirected for sale in geographic regions that had not yet mandated that all plumbing parts must be lead-free; a small portion (20, 699 items) was quarantined, allegedly because the items were unsalvageable. WF SUF # 1 ¶¶ 70, 71, 73; WF Ex. 1.

         Based on the non-payment of these invoices, the Wai Feng parties initiated this litigation in Canada in August 2012.

         II. STANDARD OF REVIEW

         Under Fed.R.Civ.P. 56, summary judgment is appropriate if the pleadings, the discovery, disclosure materials and any affidavits show that there is “no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Taylor v. Am. Chemistry Council, 576 F.3d 16, 24 (1st Cir. 2009); Commercial Union Ins. Co. v. Pesante, 459 F.3d 34, 37 (1st Cir. 2006) (quoting Fed.R.Civ.P. 56(c)). A fact is material only if it possesses the capacity to sway the outcome of the litigation; a dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in favor of the non-moving party. Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010). The evidence must be in a form that permits the court to conclude that it will be admissible at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986); see also Rivera-Rivera v. Medina & Medina, Inc., 898 F.3d 77, 89 (1st Cir. 2018) (“Hearsay evidence, inadmissible at trial, cannot be considered on a motion for summary judgment.”) (alteration omitted). There are no trial-worthy issues unless there is competent evidence to enable a finding favorable to the nonmoving party. Goldman v. First Nat'l Bank of Bos., 985 F.2d 1113, 1116 (1st Cir. 1993).

         In ruling on a motion for summary judgment, the court must examine the record evidence in the light most favorable to, and drawing all reasonable inferences in favor of, the nonmoving party. Mu v. Omni Hotels Mgmt. Corp., 882 F.3d 1, 5-6 (1st Cir. 2018), review denied, 885 F.3d 52 (1st Cir. 2018). The court must examine “whether the evidence presents a sufficient disagreement to require submission to a jury . . . or whether it is so one-sided that one party must prevail as a matter of law.” Nortel Networks Inc. v. Foundry Networks, Inc., Civil Action No. 01-CV-10442-DPW, 2003 WL 26476584, at *5 (D. Mass. Mar. 24, 2003) (quoting Paragon Podiatry Lab. v. KLM Labs., 984 F.2d 1182, 1185 (Fed. Cir. 1993)). However, if the non-movant is the party with the burden of proof and relies on pyramids of inferences upon inferences, summary judgment is appropriate. See Tyrell v. Dobbs Inv. Co., 337 F.2d 761, 765 (10th Cir. 1964); see also Bendis v. Alexander & Alexander, Inc., 67 F.3d 312 (10th Cir. 1995) (citing Tyrell); Jones v. Bales, 58 F.R.D. 453, 465 (N.D.Ga. 1972), aff'd, 480 F.2d 805 (5th Cir. 1973) (same).

         Because these are diversity cases, Rhode Island law provides the substantive rules of decision. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

         III. MOTION FOR SUMMARY JUDGMENT CHALLENGING ENFORCEABILITY OF CERTAIN RESTRICTIVE CLAUSES

         A. The Three Agreements

         All of the three Agreements in issue were drafted by Quick Fitting.[14] All were signed by Andrew Yung with no alteration of terms due to negotiation, including no correction corresponding to what the Wai Feng parties now contend were drafting errors in naming the wrong entities as parties in the first two Agreements. WF SUF # 1 ¶¶ 10, 16-20. All three call for the application of Rhode Island law; two of the three require that any disputes must be litigated in Rhode Island. WF Ex. 4 ¶ 7; WF Ex. 9 ¶ 7; WF Ex. 11 ¶¶ 5.11-5.12.

         1. 2010 License/Supply Agreement

         Effective as of February 16, 2010, the first of the three Agreements is the 2010 License and Supply Agreement. WF Ex. 4. It names “Quick Fitting” as “Licensor.” The identity of the counter-parties, defined as “Licensee, ” has been, and continues to be, disputed. E.g., Quick Fitting, 2015 WL 5719503, at *2. Briefly, the Agreement recites that it is between Quick Fitting and “W&F Manufacturing”; the latter is “comprised of three divisions” - Wai Mao, Wai Feng Trading and CCWFBV. Id. As Quick Fitting's original verified complaint in 13-56 confirms and as the Court has held, the parties understood that “W&F Manufacturing” was not a company, but simply a trade name used by the Wai Feng parties - “just a name to tell our customer that we have these companies, like that we work with these companies.” Id.; see ECF No. 132 at 3, 11-13 (finding W&F Manufacturing “is not an entity”).

         The three “divisions” were three separate entities. See Quick Fitting, 2015 WL 5719503, at *2. While Wai Mao and Wai Feng Trading are properly named (as each was to play a critical role in the business relationship as importer and distributor respectively), the Wai Feng parties contend that the naming of CCWFBV was an error committed by Quick Fitting's attorneys that was not noticed by Andrew Yung when he signed the document.[15] Id. According to the Wai Feng parties, prior to 2010, they had abandoned their venture with CCWFBV, which had been manufacturing for them. Instead, all manufacturing (including all manufacturing of product ordered by Quick Fitting) was done at EFF Manufactory, which should have been named in the 2010 License/Supply Agreement. WF Ex. 1 ¶¶ 11-13. Quick Fitting concedes that it drafted the document, but insists that it was told by Andrew Yung that manufacturing was to be done at CCWFBV, which it was, Quick Fitting claims, until April 2011 when it finally shifted to the Wai Feng parties' new manufacturing entity, EFF Manufactory. QF SDF # 1 ¶¶ 6, 18-19 & 60; Crompton Aff. # 1 ¶ 4; see WF SUF # 1 ¶ 59; QF SDF # 1 ¶ 59.[16] To avoid confusion, the disputed “Licensee[s]” in the 2010 License/Supply Agreement will be referred to as the “2010 WF Contracting parties.”

         The portion of the 2010 License/Supply Agreement that addresses the supply relationship contemplates that the 2010 WF Contracting parties will manufacture, and Quick Fitting “will purchase, ” certain “Finished Products, ” which are listed on Schedule 1 as consisting of “[a]ll sizes and variations” of push-fit fittings, valves, controls, supply line, retail packaged products and accessories, as well as “PEX barb fittings.” WF Ex. 4 at 1, 8 (Schedule 1). Importantly, the 2010 License/Supply Agreement expressly provides that the Finished Products “may, or may not include . . . intellectual property of [Quick Fitting].” Id. at 1. Nevertheless, all Finished Products were to be manufactured “for exclusive distribution by Quick Fitting.” Id. The 2010 License/Supply Agreement does not address the price of the Finished Products nor does it reference payment or delivery terms. It does require that the Finished Products must comply with applicable laws, regulations, specified testing standards and certifications and must be free of defects, dirt, spotting or discoloration. Id. ¶ 4(b, d). The 2010 WF Contracting parties were obliged to replace non-compliant products. Id. ¶ 4(d).

         In the provisions of the Agreement addressing the licensing arrangement, the 2010 License/Supply Agreement provides that Quick Fitting has intellectual property (including patents, and related concepts, processes and inventions) that it may in its sole discretion provide to the 2010 WF Contracting parties in connection with the manufacture of certain of the “Finished Products.” Id. at 1. The Finished Products that incorporate the designs and other intellectual property of Quick Fitting are the “Licensed Product.” Id. The license permits the 2010 WF Contracting parties to use its push-fit patents in connection with the manufacture of Finished Products “containing the Licensed Product.” Id. at 1, ¶ 1. Ancillary to the license, the 2010 License/Supply Agreement contains certain unchallenged restrictions on the use and disclosure of the information provided by Quick Fitting. In so doing, it distinguishes information that is not proprietary to Quick Fitting from “proprietary and confidential” information. Id. ¶ 3. As defined, “Information” is anything provided by Quick Fitting to the 2010 WF Contracting parties, whether or not proprietary; the 2010 WF Contracting parties are barred from using Information except to manufacture and distribute Finished Products for sale to Quick Fitting. Id. at 1, ¶ 3, 4(b). Only when Quick Fitting provides Information to the 2010 WF Contracting parties that is “designated in writing as being proprietary and confidential, ” are the 2010 WF Contracting parties also barred from disclosing such Information to any third party. Id. ¶ 3. Excluded from these limits on use and disclosure is any information that is publicly available or that was already known by, was in the possession of, or had been developed by the 2010 WF Contracting parties. Id. ¶ 3.

         In addition to the exclusivity provision barring the 2010 WF Contracting parties from selling the Finished Products to any entity other than Quick Fitting, Id. ¶ 4(b), the Agreement also has a clause stating that Quick Fitting “agrees to purchase the Licensed Product described in the attached Purchase Schedule only from [the 2010 WF Contracting parties].” Id. ¶ 4(c). Despite this clause, throughout the period of the parties' course of dealing, Quick Fitting consistently purchased push-fit from a wide array of suppliers. WF SUF # 1 ¶¶ 12-13. Further, this arguable exclusivity clause relates only to “Licensed Product, ” rather than “Finished Product”; moreover, the clause references an “attached Purchase Schedule, ” yet the Agreement does not have an attachment so labeled.[17]

         The termination clause (¶ 5) in the body of the 2010 License/Supply Agreement provides that it continues until terminated; termination without cause requires 120 days' notice, but termination with cause needs only thirty days' notice; and the Agreement may be immediately terminated by a breach of the duties to manufacture to specification or to manufacture exclusively for Quick Fitting.[18] WF Ex. 4 ¶ 5(a-d). Post-termination, the license lapses and all use of Information provided by Quick Fitting (whether or not proprietary) must stop. Id. ¶ 6.

         The Wai Feng parties do not challenge the validity of any of the restrictive clauses described above. “Schedule 2, ” which appears on the last page of the 2010 License/Supply Agreement, is a different story. Id. at 9.

         While undisputedly part of the Agreement, [19] Schedule 2 is unsigned and is not referenced as an attachment in the body of the 2010 License/Supply Agreement. It is titled “Purchase Volume and Contract Term” and appears to establish the minimum purchase volumes that Quick Fitting must buy, with the duty imposed on Quick Fitting to “update volume demands on a quarterly basis to assist the Licensee in production planning and performance.” Id. The record does not reveal whether Quick Fitting complied with this duty.

         Consistent with the disconnect between Schedule 2 and the rest of the Agreement, Schedule 2 contradicts the body of the 2010 License/Supply Agreement in several key respects. First, contradicting the ambiguous mutual exclusivity provision in ¶ 4(c), Schedule 2 expressly specifies that exclusivity is unilateral in that the 2010 WF Contracting parties are bound by exclusivity but Quick Fitting is not. Id. at 9 (“Licensor manufactures on its own and through its other contract suppliers.”). Second, Schedule 2 establishes a completely different term for the length of the relationship: rather than open-ended duration, subject to termination on notice, Schedule 2 provides for a term of “a forty-eight (48) month period” from the date of execution. Id. Third, Schedule 2 contains two clauses on non-competition and non-solicitation/ confidentiality, both of which are starkly different from the protections baked into the body of the 2010 License/Supply Agreement. These two clauses are the only ones in the 2010 License/Supply Agreement that are challenged by the Wai Feng parties.

         The non-competition clause in Schedule 2 provides that the 2010 WF Contracting parties “may not compete with [Quick Fitting], directly or indirectly in any market [Quick Fitting] may serve[, ]” as well as that the 2010 WF Contracting parties “may not manufacture directly or through a third party any push-fit (push connect) fittings for any party outside of [Quick Fitting.]” Id. The non-competition clause has no time or geographic limit; nor is it restricted to push-fit products that incorporate Quick Fitting's proprietary or non-proprietary information; nor it is limited to push-fit products, as Quick Fitting “may serve” other plumbing parts or component markets.

         Schedule 2's confidentiality/non-solicitation clause is also sweeping. It provides that the 2010 WF Contracting parties “may never contact, either directly or indirectly, any customer or potential customer of [Quick Fitting], whether indicated below, [20] or unknown to [the 2010 WF Contracting parties], for any purpose.” Id. This clause is unlimited in time, geography and subject matter scope. Because it is undisputed that the Wai Feng parties were established as manufacturers and sellers of plumbing products before they entered into the Quick Fitting relationship, see WF SUF # 1 ¶¶ 3-4, this confidentiality clause prohibits them from contacting even their own customers.

         The severance clause in ¶ 9(f) of body of the 2010 License/Supply Agreement provides that, “[s]hould all or any portion of any provision of this Agreement be held unenforceable or invalid for any reason, the remaining portions or provisions shall be unaffected.” WF Ex. 4 ¶ 9(f).

         2. 2011 NDA

         Fifteen months into the parties' relationship, on May 4, 2011, the 2011 NDA was executed. WF Ex. 9. The second of the three Agreements, it neither confers a license nor is a supply agreement, but simply imposes non-disclosure obligations. Like the 2010 License/Supply Agreement, there is confusion regarding what entity was meant to be the proper party on the Wai Feng parties' side. Briefly, it names EFF LLC, the Massachusetts entity that had little to do with the relationship with Quick Fitting; the Wai Feng parties say it should have named EFF Inc.; while Crompton testified that it should have been “a new company, ‘EFF,' that was located in ‘Toronto and in China” and that the new company would be taking over the manufacturing operations formerly handled by the ‘W&F Manufacturing' factory.”[21] Crompton Aff. # 2 ¶¶ 12-13.

         The substance of the 2011 NDA is also limited. In scope, it operates solely to protect confidential information (“Information”) that was provided by Quick Fitting to the counter-party (whoever it might be) about its push-fit products for the sole purpose of procuring cost estimates for specified components. WF Ex. 9 ¶ I(B). For Information to be protected by the 2011 NDA, Quick Fitting could, but was not obligated, to label it as confidential. Id. ¶ I(3). The 2011 NDA barred the recipient from disclosing Information or using it to compete against Quick Fitting. Id. ¶ I(1)

         Only one clause in the 2011 NDA is challenged as overbroad and unenforceable. It is an outright ban on any “contact, communicat[ion] or negotiat[ion] with any competitor, supplier, customer or prospect” of Quick Fitting; this clause has no time or geographic limit and no direct relationship to the protection of the confidential information covered by the 2011 NDA. Id. ¶ I(1)(h). Unlike the analogous clause in the 2010 License/Supply Agreement, the 2011 NDA does require that the identity of the companies with which contact is forever prohibited must be “readily known[ or] disclosed by Quick Fitting or made known to the Recipient by any communication” from Quick Fitting.[22] Id.

         The 2011 NDA arguably survived only three weeks in that it is expressly “supercede[d] and replace[d]” by the 2011 License Agreement. WF Ex. 11 ¶ 1.2. It is silent regarding the effect of a judicial finding that any of its terms are invalid or unenforceable.

         3. 2011 License Agreement

         Three weeks later, on May 31, 2011, the third agreement, the 2011 License Agreement, was executed. This one correctly names EFF Manufactory as the counter-party. Unlike the 2010 License/Supply Agreement, but like the 2011 NDA, the 2011 License Agreement is not a supply agreement.[23] Rather, it simply licenses EFF Manufactory to receive Quick Fitting's intellectual property[24] regarding its push-fit line of products “exclusively for the purpose of providing cost estimates and business proposals for the manufacture and supply of certain products and component parts of products in the hope that Quick Fitting will purchase said products and components [sic] parts from [EFF Manufactory].” WF Ex. 11 at 1. It also provides a nonexclusive license to EFF Manufactory to use listed patents, trademarks, and drawings and similar materials belonging to Quick Fitting for “the manufacture and supply . . . to Quick Fitting.” Id. ¶ 3.1. It leaves Quick Fitting free to license any other entity. Id. ¶ 3.2. It does not oblige Quick Fitting to place any orders: “Quick Fitting makes no representation that it will enter into a relationship; and is under no obligation to enter into any further agreement.” Id. ¶ 5.2. Although many of its terms are keyed to “termination, ” the 2011 License Agreement has no termination clause; under Rhode Island law, this means that it is terminable at will on reasonable notice. See Chapman v. Vendresca, 426 A.2d 262, 264 n.2 (R.I. 1981) (“when contract does not specify time within which notice of termination must be given, terminating party has reasonable time”) (citing Coopersmith v. Isherwood, 150 A.2d 243, 247-48 (Md. 1959)).

         The 2011 License Agreement contains a lengthy Section II, which deals with EFF Manufactory's treatment of Quick Fitting's “confidential information, ” as defined in ¶ 1.3. WF Ex. 11 ¶¶ 2.1-2.8. The Wai Feng parties do not challenge any of the clauses contained in Section II, which bar any disclosure or use of the confidential information, except as necessary to manufacture push-fit to be sold to Quick Fitting. Section IV of the 2011 License Agreement is headed “Terms of Non-Competition.” Id. ¶¶ 4.1-4.7. Its first two clauses focus on the confidential intellectual property covered by the Agreement, preventing EFF Manufactory from using it to “compete with, defame, hinder, or cause harm” to Quick Fitting. Id. ¶ 4.1. They also prevent EFF Manufactory from selling products “utilizing” the confidential information covered by the Agreement to any party other than Quick Fitting as directed by Quick Fitting. Id. ¶¶ 4.1-4.2. The Wai Feng parties do not challenge these two clauses either. Rather, the motion is focused on three of the remaining clauses, which appear in Section IV.

         The first challenged clause is at ¶ 4.6 and titled, “Liquidated Damages/Contract Penalty.” It provides that any breach of any clause in the non-competition section of the Agreement shall result in a contract penalty of $500, 000, in addition to any damages Quick Fitting is able to prove. Id. ¶ 4.6. During his Fed.R.Civ.P. 30(b)(6) deposition, Crompton testified that he did not know how the amount in the “Liquidated Damages/Contract Penalty” clause was determined, except that the amount was chosen to be “punitive.” WF Ex. 8 at 29-30. After the Wai Feng parties' challenge to this clause was filed, Crompton executed his second affidavit, in which he averred to a changed understanding that the clause reflected an estimate of business losses. Crompton Aff. # 2 ¶¶ 15, 33-37.

         The second challenged clause is the non-compete in ¶ 4.3. WF Ex. 11 ¶ 4.3. It permanently bans EFF Manufactory from ever, “directly or indirectly through others, compet[ing] with Quick Fitting in the design, manufacture, supply, sale, or distribution of push-fit connection valves, fittings, supply line or controls.” Id. Infinite in duration and worldwide in geographic scope, ¶ 4.3 is not limited to push-fit products incorporating either Quick Fitting's intellectual property or its non-proprietary information - it effectively bars EFF Manufactory from ever entering any push-fit market anywhere, including from manufacturing pursuant to the specifications of another owner of push-fit designs, as well as from developing its own push-fit designs. In his Fed.R.Civ.P. 30(b)(6) deposition, Crompton described his view of the noncompetition clause:

It would be my understanding that [the Wai Feng parties] were precluded from selling anything related to push fit products to any potential customers or competitors in North America, period.

WF SUF # 1 ¶ 75 (citing WF Ex. 17 at 7-8).[25]

         Third is the challenged non-solicitation/confidentiality clause in ¶ 4.4. WF Ex. 11 ¶ 4.4. Unlike the other challenged restraints, it is limited in duration to three years following the termination of the 2011 License Agreement. Id. During that three-year period, EFF Manufactory is barred from any contact or communication with any “customer or prospective customer of Quick Fitting” or with the representatives of such entities, including (but not limited to) any known to be such by EFF Manufactory. Id. And, if any such “Prohibited Party” or its representative should contact EFF Manufactory, EFF Manufactory must not respond but must forward such communication to Quick Fitting. Id. ¶ 4.5. This ban on all communication and contact is not limited as to subject matter.

         The 2011 License Agreement includes a provision that mandates how a court should proceed in the event that any of the clauses are held invalid or unenforceable: “such invalidity shall not affect the validity or operation of any other provision and such invalid provision shall be deemed to be severed from the Agreement.” Id. ¶ 5.21.

         B. Law and Analysis Applicable to Enforceability of Restrictive Clauses

         When contract language is clear and unambiguous, summary judgment is an appropriate vehicle for resolving contract interpretation disputes. See Mallane v. Holyoke Mut. Ins. Co., 658 A.2d 18, 20 (R.I. 1995); Elliott v. S.D. Warren Co., 134 F.3d 1, 9 (1st Cir. 1998). “Contract interpretation, including whether any ambiguities exist in the disputed contractual terms, is generally a question of law for the [c]ourt.” Doe v. W. New England Univ., 228 F.Supp.3d 154, 170 (D. Mass. 2017); see Rotelli v. Catanzaro, 686 A.2d 91, 94 (R.I. 1996); Kelly v. Tillotson-Pearson, Inc., 840 F.Supp. 935, 944 (D.R.I. 1994) (quoting In re Navigation Tech. Corp., 880 F.2d 1491, 1495 (1st Cir. 1989)). When a clause is clear and unambiguous on its face, the role of the court is to enforce it as written. Kelly, 840 F.Supp. at 944 (quoting Aetna Casualty & Sur. Co. v. Graziano, 587 A.2d 916, 917 (R.I. 1991)). “In determining whether or not a particular contract is ambiguous, the court should read the contract ‘in its entirety, giving words their plain, ordinary, and usual meaning.'” T.G. Plastics Trading Co. Inc. v. Toray Plastics (Am.), Inc., 958 F.Supp.2d 315, 321-22 (D.R.I. 2013) (quoting Haviland v. Simmons, 45 A.3d 1246, 1258 (R.I. 2012)). “[A] contract is ambiguous only when it is reasonably and clearly susceptible of more than one interpretation.” Rotelli, 686 A.2d at 94.

         If an ambiguity is found and the extrinsic evidence of the intent of the parties is factually disputed, summary judgment is inappropriate and the proper construction of the contract is a question of fact for the fact finder. Toray, 958 F.Supp.2d at 322; see OfficeMax Inc. v. Sousa, 773 F.Supp.2d 190, 216 (D. Me. 2011) (court “may look to extrinsic evidence of the intent of the parties”) (quoting Villas by the Sea Owners Ass'n v. Garrity, 748 A.2d 457, 461 (Me. 2000)). However, even if a contract is ambiguous, when there are no facts in dispute, the interpretation of a contract is a question of law for the court. OfficeMax Inc., 773 F.Supp.2d at 216. “The preferable approach is to interpret a contract in a manner which will give effect to all of its provisions, ” and “where two clauses of an agreement appear to be in direct conflict, it is the duty of the court to reconcile the two clauses to give effect to the whole of the instrument.” Jadwin v. Cty. of Kern, 610 F.Supp.2d 1129, 1191 (E.D. Cal. 2009) (quoting In re Steven A., 15 Cal.App.4th 754, 771 (1993); In re Marriage of Whitney, 71 Cal.App.3d 179, 182 (1977)).

         1.Liquidated Damages/Contract Penalty” Clause

         The clause challenged as an improper penalty is titled “Liquidated Damages/Contract Penalty, ” and set out in ¶ 4.6 of the 2011 License Agreement. In full, it provides:

Liquidated Damages/Contract Penalty. Supplier acknowledges and agrees that any violation or breach of this Non-Competition section of this Agreement: (i) shall result in a contract penalty against supplier in an amount not less than five-hundred-thousand dollars and zero cents ($500, 000) (the “Contract Penalty”), payable to Quick Fitting within thirty (30) days after invoicing of this amount to Supplier; (ii) that Quick Fitting is authorized to withhold all or any portion of the Contract Penalty from any payments otherwise due to Supplier until such Contract Penalty is fully paid; and (iii) that the Contract Penalty amount shall be in addition to and shall not reduce the amount of actual damages Quick Fitting is able to prove for any breach or violation of this or any other section of this Agreement.

         WF Ex. 11 ¶ 4.6. It appears only in the third of the three Agreements, in which EFF Manufactory is the only party for the Wai Feng parties. Id. The content of ¶ 4.6 is not ambiguous - it crisply and clearly provides that EFF Manufactory must pay a “contract penalty” of $500, 000 in the event of any violation or breach of any of the clauses in Section IV of the Agreement. The Section IV clauses[26] include: (1) the ban on using Quick Fitting's confidential information to compete with Quick Fitting (¶ 4.1); (2) the ban on making push-fit with Quick Fitting designs for sale to third parties (¶ 4.2); (3) the absolute ban on ever competing with Quick Fitting by designing, manufacturing or selling any push-fit product (without regard to whether any Quick Fitting confidential information is used) anywhere in the world (¶ 4.3); and (4) the absolute ban on any communication regarding any topic with any customer or prospective customer of Quick Fitting (who may well be pre-existing customers of the Wai Feng parties) for three years following the termination of the Agreement (¶ 4.4). The “Liquidated Damages/Contract Penalty” clause also absolves Quick Fitting from paying what it owes EFF Manufactory until the “Contract Penalty” is paid in full. Id. ¶ 4.6. Confirming that it is not in lieu of damages, ¶ 4.6 provides that “the Contract Penalty amount shall be in addition to and shall not reduce the amount of actual damages Quick Fitting is able to prove for any breach or violation of this or any other section of this Agreement.” Id.

         During Quick Fitting's October 27, 2015, Fed.R.Civ.P. 30(b)(6) deposition, Crompton testified that he did not know how the amount in the Liquidated Damages/Contract Penalty clause was determined. WF Ex. 8 at 28-29. He stated, “I can't speak to that[, ]” and offered, “[i]t was put in there to be punitive to really thwart them, deter them from doing it.” Id. at 28-30 (“the number is picked as a deterrent”) (emphasis added). Crompton directly contradicted this Fed.R.Civ.P. 30(b)(6) testimony in his second affidavit, which was filed with Quick Fitting's opposition to the motion challenging the clause as an unenforceable penalty. In this changed testimony, he avers that the penalty actually represented an “estimate of our loss of business or loss of business profitability over time” that Quick Fitting would incur if one of its contracting manufacturers breached its contractual obligations, as well as the cost of finding a new manufacturer. Crompton Aff. # 2 ¶¶ 15, 33-37. Crompton's second affidavit alters his earlier description of the clause as merely punitive, asserting, “[a]ny reference to the word ‘punitive' in deposition testimony was intended to reflect my expectation that the amount would be significant enough to offset the aspects of harm and costs described here, which we anticipated but found difficult to estimate.” Id. ¶ 37.

         Rhode Island law distinguishes contractual penalties from liquidated damages. The former are unenforceable as a matter of public policy, while the latter may be enforceable if the harm caused by the breach is difficult to estimate and the amount fixed is a reasonable forecast of actual harm. See ADP Marshall, Inc. v. Noresco, LLC, 710 F.Supp.2d 197, 234-35 (D.R.I. 2010) (citing Howarth v. Feeney, P.C. No. 86-3543, 1992 WL 813502, at *3 n.2 (R.I. Super. Jan. 15, 1992) (“a sum of money . . . to be forfeited in case of breach, may be either a penalty or liquidated damages”), amended, No. C.A. No. 80-265, 1992 WL 813534 (R.I. Super. Mar. 17, 1992)); Psaty & Fuhrman v. Hous. Auth. of City of Providence, 68 A.2d 32, 38-39 (R.I. 1949) (if contract for liquidated damages amounts to imposition of penalty, it is unenforceable; “we consider the provision for liquidated damages . . . as coercive in nature and therefore in substance the imposition of a penalty”). To differentiate a true liquidated damages clause from an unenforceable contract penalty, Rhode Island courts rely on three criteria: first, the injury caused by the breach must be difficult accurately to estimate; second, the parties must intend to provide for damages rather than a penalty; and third, the sum stipulated must be a reasonable pre-estimate of the loss. Aetna Cas. & Sur. Co. v. R.I. Elec. Protective Co., No. 78-1761, 1979 WL 200238, at *1 (R.I. Super. Jan. 5, 1979). Reinforcing the importance of this judicially-created policy, the Rhode Island legislature adopted the same principle when it enacted the Rhode Island Uniform Commercial Code. See R.I. Gen. Laws § 6A-2-718 (“[d]amages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in light of the anticipated or actual harm caused by the breach”). To be enforceable, the purpose of the clause must be to compensate for loss, not to punish. Allstate Interiors & Exteriors, Inc. v. Stonestreet Constr., LLC, 907 F.Supp.2d 216, 247 (D.R.I. 2012). The label placed on the clause by the drafter is not dispositive - a self-described liquidated damages clause must be condemned if it is punitive in effect. Omni-Combined W.E., LLC v. 20/20 Commc'ns, Inc., No. PB 10-2530, 2012 WL 1957733, at *4 (R.I. Super. May 18, 2012) (accelerated rent clauses are enforceable if “they do not constitute a penalty”).

         Courts in other states applying the same principles have declined to enforce a fixed penalty because such a set sum can have no rational relationship to anticipated actual damages. Willard Packaging Co. v. Javier, 899 A.2d 940, 955-56 (Md. Ct. Spec. App. 2006) (fixed sum penalty - $50, 000 - is unenforceable); see XCO Intern. Inc. v. Pac. Scientific Co., 369 F.3d 998, 1004 (7th Cir. 2004) (if sanction is fixed and outsized, such as “$500, 000, period, ” it is highly likely to be prohibited a penalty). A fixed sum is particularly vulnerable to condemnation as a penalty if the same sanction for breach of varying provisions in an agreement is imposed without regard to the differing injury that each breach might inflict. Monsanto Co. v. McFarling, 363 F.3d 1336, 1346 (Fed. Cir. 2004) (applying Missouri law and stating, “[t]his fixed rule of Missouri contract law is not unusual. Variations on this anti-one-size rule are applied in a number of jurisdictions”); United States v. J.C. Martin Lumber Co., 246 F.2d 58, 62 (5th Cir. 1957) (applying Mississippi law and labeling a contractual damages clause a penalty because it provided for double payment and “without discrimination, provides the same penalty for leaving marked trees uncut as for cutting unmarked tress, and, as to trees injured through carelessness, provides the same penalty without regard to the extent in each case of the injury”).

         Another important characteristic of an unenforceable penalty is the ability of the non-breaching party to recover both the so-called liquidated damages, as well as actual damages resulting from the breach. See Nat'l Fitness Ctr., Inc. v. Atlanta Fitness, Inc., 902 F.Supp.2d 1098, 1108-09 (E.D. Tenn. 2012) (where “liquidated damages” in license agreement is fixed sum that does not supplant other available remedies, it acts as a penalty and may not be enforced); Webster Ins., 2009 WL 5698072, at *2 (“contract provision that authorizes the non-breaching party to recover both actual damages and all revenues earned as a result of the breach constitutes an invalid penalty, unenforceable as a matter of public policy”). And if a liquidated damages provision is “designed to coerce performance by punishing default[, ]” any doubt as to its character must be resolved by finding it to be an unenforceable penalty. Captain D's, LLC v. Arif Enters., Inc. No. 3:09-00809, 2010 WL 5060289, at *9 (M.D. Tenn. Dec. 6, 2010) (quoting Guesthouse Int'l Franchise Sys., Inc. v. British Am. Props. MacArthur Inn, LLC, No. 3:07-0814, 2009 WL 278214, at *9-10 (M.D. Tenn. Feb. 5, 2009)).

         The validity of a liquidated damages clause is a pure question of law for the court. See Clark-Fitzpatrick, Inc./Franki Found. v. Gill, 652 A.2d 440, 443 (R.I. 1994) (“Contract interpretation is a question of law; it is only when contract terms are ambiguous that construction of terms becomes a question of fact.”); Wholey Boiler Works v. Lewis, 123 A. 595, 598 (R.I. 1924) (“The question whether a deposit or other payment is to be regarded as a penalty or liquidated damages is to be decided upon consideration of the provisions of the whole agreement, in view of the circumstances of each case; and the intention of the parties as thus disclosed is the decisive test.”); see also Olcott Intern. & Co..v. Micro Data Base Sys., Inc., 793 N.E.2d 1063, 1077 (Ct. App. Ind. 2003) (“the question whether a liquidated damages clause is valid, or whether it constitutes an unenforceable penalty, is a pure question of law for the court”). The party challenging the enforceability of a liquidated damages clause has the burden of proving that it is a penalty. Honey Dew Assocs. v. M & K Food Corp., 241 F.3d 23, 27 (1st Cir. 2001).

         Applying these principles to the 2011 License Agreement is an easy task in light of the clarity of ¶ 4.6. Apart from the heading, Quick Fitting has drafted the operative clause such that it unambiguously amounts to a penalty. For starters, the $500, 000 consequence is an outsized sum, XCO Intern. Inc., 369 F.3d at 1004, which is expressly defined as a “Contract Penalty, ” in that the clause expressly recites that “any violation or breach . . . shall result in a contract penalty . . . in an amount not less than [$500, 000.]” WF Ex. 11 ¶ 4.6. It clearly operates as a penalty because it is a fixed one-size-fits-all consequence applied for breach of an array of noncompetition clauses, Monsanto Co., 363 F.3d at 1346, to be imposed without regard to whether the harm caused by a breach is substantial or mild, XCO Intern. Inc., 369 F.3d at 1004. Also pellucid is that it is not intended as an estimate of hard-to-calculate damages. To the contrary, ¶ 4.6 expressly provides that “the Contract Penalty amount shall be in addition to and shall not reduce the amount of actual damages Quick Fitting is able to prove for any breach or violation of this or any other section of this Agreement.” WF Ex. 11 ¶ 4.6 (emphasis added). The clause's imposition of a penalty that also permits recovery of actual damages is further reason why it must be condemned as an outright penalty. See Psaty, 68 A.2d at 39; Nat'l Fitness Ctr., Inc., 902 F.Supp.2d at 1108-09. Accordingly, in reliance on the plain and unambiguous text of ¶ 4.6, I find that Quick Fitting attempted to impose a draconian penalty contrary to the public policy of Rhode Island, so that this Court should hold that ¶ 4.6 is unenforceable.

         A lingering issue is whether the ambiguity in the heading - “Liquidated Damages/Contract Penalty” - somehow saves the day. This heading seems to be an attempt by the drafter to straddle the fence between liquidated damages and penalty, while actually crafting text that is unambiguously a penalty. There are several problems with this proposition. First, Quick Fitting has not asserted this argument; indeed, it does not contend that any aspect of ¶ 4.6 is ambiguous. Second, traditional principles of construction stipulate that headings cannot alter the plain meaning of the text. See Bhd. of R. R. Trainmen v. Baltimore & O. R. Co., 331 U.S. 519, 527-28 (1947) (“[H]eadings and titles are not meant to take the place of the detailed provisions of the text. Nor are they necessarily designed to be a reference guide or a synopsis.”); Lyons v. Ga.-Pac. Corp. Salaried Emps. Ret. Plan, 221 F.3d 1235, 1246 (11th Cir. 2000) (“reliance upon headings to determine the meaning of a statute is not a favored method of statutory construction”); see also Navarro-Ayala v. Hernandez-Colon, 951 F.2d 1325, 1352 (1st Cir. 1991) (no individual provision, even a heading, should be interpreted in isolation from its context within the document as a whole). Third, Rhode Island cases teach that the court interpreting such a clause must look beyond labels to substance and condemn those that have the effect of a penalty despite an attempt to hide the penalty in the raiment of liquidated damages. See, e.g., Allstate Interiors & Exteriors, Inc., 907 F.Supp.2d at 247-48 (with no damages, liquidated damages clause punitive in effect and unenforceable); Howarth, 1992 WL 813502, at *3 (otherwise valid liquidated damages clause becomes punitive and unenforceable if it imposes damages when none were incurred); cf. Applied Elastomerics, Inc. v. Z-Man Fishing Prods., Inc., 521 F.Supp.2d 1031, 1044-45 (N.D. Cal. 2007) (applying California law, whether contract uses label “penalty” or “liquidated damages” is not determinative; court must interpret clause based on substance); see also Omni-Combined W.E., LLC, 2012 WL 1957733, at *7-8 (lease acceleration clause under examination at summary judgment found not to be punitive in effect and therefore enforceable).

         To save ¶ 4.6, Quick Fitting asks the Court to focus on Crompton's testimony in his second affidavit, which contradicts his Fed.R.Civ.P. 30(b)(6) testimony on the same topic. Without explaining why unambiguous contract language should be interpreted by reference to extrinsic evidence, Quick Fitting argues that the Court should find that it crafted ¶ 4.6 because the harm flowing from a breach would be difficult to quantify and that $500, 000 is reasonable because it approximates the costs of bringing a new supplier up to speed.[27]

         This extrinsic evidence argument is unavailing. A threshold problem is that Quick Fitting has not even argued that ¶ 4.6 is ambiguous, which it must be for the Court to consider such extrinsic evidence of what the parties intended. Toray, 958 F.Supp.2d at 322. And this penalty clause is simply not ambiguous; therefore, the Court must interpret the Agreement's words (chosen by Quick Fitting) and cannot rely on Crompton's extrinsic evidence of intent contrary to the meaning of the words. In any event, if the Court were inclined to consider any extrinsic evidence, the operative testimony would be Crompton's answers during his Fed.R.Civ.P. 30(b)(6) deposition that $500, 000 was selected to be punitive and that, otherwise, Crompton has no information suggesting any relationship to actual damages. The averments in the clearly contradictory affidavit later submitted to avoid summary judgment, with no satisfactory explanation for why the testimony was changed, should be disregarded as a sham. A.J. Amer Agency, Inc. v. Astonish Results, LLC, C.A. No. 12-351 S, 2014 WL 3496964, at *12-13 (D.R.I. July 11, 2014) (contradictory portions of affidavit may be treated as sham and disregarded at summary judgment). So even if the Court did look beyond the Agreement's words, the cognizable extrinsic evidence confirms that this clause is a paradigmatic penalty intended to be an in terrorem spur to compliance, and not as a fair estimate of damages. It is well-settled contract law that courts do not give their imprimatur to such arrangements. Priebe & Sons v. United States, 332 U.S. 407, 413 (1947).

         Based on the foregoing, I recommend the Court find that ¶ 4.6 of the 2011 License Agreement (“Liquidated Damages/Contract Penalty”) is unenforceable and deem it severed from the Agreement.[28]

         2.Non-competition Clauses

         The Wai Feng parties challenge two non-competition clauses in Schedule 2 of the 2010 License/Supply Agreement. They provide:

[2010 WF Contracting parties] will only manufacture fittings for [Quick Fitting] exclusively and may not enter into any agreement to manufacture push fit fittings for any other company. . . .
[2010 WF Contracting parties] may not compete with [Quick Fitting], directly or indirectly in any market [Quick Fitting] may serve. [2010 WF Contracting Parties] may not manufacture directly or through a third party, any push fit (push connect) fittings for any party outside of [Quick Fitting].

         WF Ex. 4 at 9. These clauses lack any limits with respect to time and geography. In scope, they broadly apply not just to the push-fit products manufactured using Quick Fitting's information (whether or not proprietary) but to any push-fit product, including push-fit developed independently by the Wai Feng parties and push-fit manufactured to the specifications of a design developed by a third party unrelated to Quick Fitting. The second of the two clauses goes beyond push-fit and beyond direct competition with Quick Fitting, barring the 2010 WF Contracting parties from competing in any market Quick Fitting “may serve, ” arguably barring the Wai Feng parties from competing in any plumbing product market anywhere in the world, effectively putting them out of business.

         The Wai Feng parties also challenge the enforceability of one non-competition clause in the 2011 License Agreement. The challenged 2011 clause provides:

Due to the nature of the Confidential Information and [EFF Manufactory's] unique access to it, [EFF Manufactory] agrees that it shall not, during the term of this Agreement or at any time thereafter, either directly or indirectly through others, compete with Quick Fitting in the design, manufacture, supply, sale, or distribution of push-fit connection valves, fittings, supply line or controls.

         WF Ex. 11 ¶ 4.3. Like the challenged clauses from the 2010 License/Supply Agreement, ¶ 4.3 has no temporal or geographic limits and sweeps in all push-fit products without regard to whether any Quick Fitting ...


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