By: Sara Sass

In Penglai Jinfu Stainless Steel Products, Inc. (“Penglai”) v. Geemacher, LLC (“Geemacher”), Chinese company Penglai was denied a preliminary injunction to grant relief sought as a temporary restraining order despite Geemacher owing Penglai over a million dollars.[1]

Steel manufacturer Penglai is based in Shandong, China and its main product is a stainless steel barrel used for alcohol processing[2]. Defendant Geemacher is based in an area of eastern Pennsylvania with 149-year old steel companies[3] and advertises two types of kegs “Made in the U.S.A.” on its website.[4]

In this case, Penglai and Geemacher entered several sales agreements which required Penglai to manufacture, sell and ship steel kegs to Geemacher.[5] In 2014, Geemacher was unable to make the keg payments according to Penglai’s sales agreements.[6] As a result, Penglai suspended performance of the sales agreements and discontinued shipping.[7] Penglai estimates Geemacher has multiple steel kegs not paid for in its possession and an outstanding balance of $1,344,325.75 on failed sales agreements.[8] To date, Geemacher refuses to pay or return Penglai’s steel kegs. Geemacher is insolvent and has contracted with a buyer to liquidate its assets, including the kegs. However, the projected sale would be insufficient to satisfy the debt with Penglai. Penglai chose to file a motion for preliminary injunction against Geemacher for relief and the steel kegs return.[9]

Preliminary injunctive relief is an “extraordinary remedy” and “should be granted only in limited circumstances”[10]. To win, a plaintiff must demonstrate:

(1) a likelihood of success on the merits; (2) the probability of irreparable harm if the relief is not granted; (3) that granting injunctive relief will not result in even greater harm to the other party; and (4) that granting relief will be in the public interest[11].

Penglai asserts that irreparable harm will occur if relief is not granted, because there is no other alternative since Geemacher is insolvent. Geemacher violated a contract, and so an alternate payment plan be can determined at court.[12] The court analyzed irreparable plaintiff harm, and found it failed because the plaintiff could still seek damages in continuing lawsuits if relief was not granted in this case.[13] So the court found that the plaintiff did not have all factors for granting preliminary injunctive relief.[14]

Penglai’s second count is requesting its steel kegs returned from Geemacher. In Pennsylvania, as a seller of goods, Plaintiff’s contractual remedies include withholding good delivery but not reclaiming goods provided on credit (the kegs).[15] In Pennsylvania, a seller’s right to reclamation is subordinate to the interests of a good faith purchaser.[16] Geemacher has a good faith purchaser’s interests due to its secured creditor status in an identified bank in Pennsylvania at the time of buying Penglai’s products.[17] The court notes that Penglai is an unsecured creditor in Pennsylvania, by not investing with state identified banks, and so the interests the court protects are more aligned with Geemacher. Thus Penglai was denied relief.[18]

The accreditation of Geemacher and its locality in steel rich eastern Pennsylvania[19] lent it a security and loyalty that an unaccredited twenty-year old Chinese company[20] could not establish. If Geemacher defaults on any future judgments, it will be easier to track down with its local bank[21] than a company across an ocean and continent in Shandong, China. This case underlines the preference and public policy for American manufacturers over Chinese manufacturers in Pennsylvania and the nation at large. Over 80% of Americans prefer American-made products to Chinese-made products.[22] Due to the overwhelming support for American products, Chinese manufacturers may find themselves regularly confronted with stringent legal statutes to attain relief. Such a pro-American social policy move by the courts strengthens this country. As The New York Times Peter Navarro succinctly states, “every job China gains by dumping steel into American markets is an American job lost. Each steelworker’s job in America generates additional jobs in the economy, along with increased tax revenues. With over 20 million Americans now unable to find decent work, we could certainly use those jobs”[23]. Courts aligned with the Pennsylvania court mentality here, analyzing creditor status in the states for good faith efforts by businesses, will tilt towards American enterprises.

[1] Penglai Jinfu Stainless Steel Products Co., Ltd. v. Geemacher, LLC, No. 16-0552, 2016 WL 660920 (3d Cir. 2016).

[2] Penglai Jinfu Stainless Steel Products Co., Ltd., https://jcco-jinfu.en.alibaba.com/company_profile.html (last visited Mar. 4, 2016).

[3] Pennsylvania Steel, https://www.pasteel.com/ (last visited Mar. 4, 2016).

[4] Geemacher, (last visited Mar. 4, 2016).

[5] Penglai Jinfu Stainless Steel Products Co., Ltd. v. Geemacher, LLC, No. 16-0552, 2016 WL 660920 (3d Cir. 2016).

[6] Id at 1.

[7] Id.

[8] Id. at 2.

[9] Id.

[10] See Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004)

[11] See Frank’s GMC Truck Ctr., Inc. v. Gen. Motors Corp., 847 F.2d 100, 102 (3d Cir. 1988); see also Allegheny Energy, Inc. v. DQE, Inc., 171 F.3d 153, 158 (3d Cir. 1999).

[12] Penglai Jinfu Stainless Steel Products Co., Ltd. v. Geemacher, LLC, No. 16-0552, 2016 WL 660920 at 4 (3d Cir. 2016).

[13] Id.

[14] Id.

[15] 13 Pa. Cons. Stat. §§ 2703-2710.

[16] See Lavonia Mfg. Co. v. Emery Corp., 52 B.R. 944, 945 (E.D. Pa. 1985).

[17] Penglai Jinfu Stainless Steel Products Co., Ltd. v. Geemacher, LLC, No. 16-0552, 2016 WL 660920 at 7 (3d Cir. 2016).

[18] Id.

[19] “The Borough of Pottstown, Pennsylvania,” https://www.pottstown.org/ (last visited Mar. 20, 2016).

[20] Penglai Jinfu Stainless Steel Products Co., Ltd., https://jcco-jinfu.en.alibaba.com/company_profile.html (last visited Mar. 4, 2016).

[21] Penglai Jinfu Stainless Steel Products Co., Ltd. v. Geemacher, LLC, No. 16-0552, 2016 WL 660920 at 7 (3d Cir. 2016).

[22] Kathleen Kim, “Study: Consumers Prefer Made in USA”, The Wire, https://www.inc.com/kathleen-kim/consumers-prefer-products-labeled-made-in-the-usa.html (last visited Mar. 4, 2016).

[23] Peter Navarro, The Price of ‘Made in China’, The New York Times, https://www.nytimes.com/2013/08/05/opinion/the-price-of-made-in-china.html?_r=0 (last visited Mar. 4, 2016).

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