Of all the busted entertainment deals involving Chinese buyers, perhaps none has been stranger than the one involving Voltage Pictures.
Last November, Voltage agreed to sell an 80% stake in the company to Anhui Xinke New Materials Co., a Chinese metals manufacturer, for $350 million. The deal promptly collapsed a month later, amid new restrictions in China on overseas acquisitions.
Voltage has been in L.A. Superior Court ever since, seeking the return of a $4 million deposit. The company sued both Xinke and the Zhong Lun Law Firm, alleging that the firm set up the deal in such a way as to allow Xinke to back out without forfeiting the deposit. Zhong Lun, which has an L.A.-based affiliate, has countered that it owed no fiduciary duty to Voltage, and in essence contends that Voltage has no one but itself to blame for losing out on the money.
Xinke is based in Wuhu, China, an industrial city on the Yangtze River. At first, the company did not even respond to the suit. In April, a judge entered a default judgment against Xinke.
Xinke has since hired U.S. counsel to argue that the default should be set aside, as it is immune from litigation in the United States.
“This Court does not have general jurisdiction over Xinke because Xinke simply has no direct contact with California,” attorney Kimberly Rich argued. “Xinke is not incorporated in California, does not have its principal place of business in California, has no offices or operations in California, owns no real estate in California, and is not registered to do business in California.”
Rich argued that even if a California judge were to grant damages to Voltage, the award could not be enforced in China.
“They would have to file a proceeding in the PRC to enforce the judgment, as Xinke does not maintain any bank accounts in the United States,” she argued. “Chinese counsel for Xinke is not aware of any instance in which a Chinese court has enforced a U.S. judgment in the PRC.”
Xinke’s attorney also suggested that Voltage “could and should” file suit in China, “where Plaintiffs would be afforded similar procedural protections and could enforce a future judgment, if any, against Xinke.”
Rich also argued that Voltage’s attorneys failed to properly serve Xinke with the complaint. According to Xinke, Voltage served the suit on Leodis Matthews, an attorney for Zhong Lun who no longer represents Xinke. Xinke argues that Voltage should have served the suit in accordance with the terms of the Hague Convention, which entails noticing government officials in Beijing.
On Thursday, Voltage filed a first amendment complaint accusing Matthews of negligence in his handling of the escrow on the deal, adding to earlier fraud claims.