Coffee Solutions, LLC v. Uni-Splendor Corp., 3:19-cv-01848, No. 6 (D.Or. Dec. 27, 2019) (2024)

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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 2 of 8
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`Coffee Solutions is an Oregon limited liability company with its principal place of
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`business in unincorporated Washington County, Oregon.
`On information and belief, Defendant Uni-Splendor contends it is a
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`manufacturing company incorporated under the laws of the British Virgin Islands with its head
`office in Taiwan. Defendant Uni-Splendor (a) engages in business in the United States through
`products made in China; (b) possesses a judgment against Coffee Solutions in the amount of
`$20.7 million, plus interest; (c) has engaged litigation counsel located here in Portland, Oregon;
`and (d) has taken specific discovery and collection actions within the State of Oregon.
`Remington Designs, LLC (“Remington”), a California limited liability company,
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`was an appliance company founded by inventor and entrepreneur Bruce Burrows (“Burrows”).
`Remington focused on the single-use coffee market, contracting with Uni-Splendor to
`manufacture single-cup coffee makers utilizing proprietary designs owned by Remington.
`From 2014 to 2017, I invested a total of approximately $4.9 million in Remington
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`in exchange for a 3.92 percent membership interest. My brother, Ed Maletis, individually and
`through a family trust, separately invested $5 million in Remington in exchange for a 4 percent
`membership interest.
`I served on Remington’s board of managers (the “Board of Managers”) from
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`October 2014 until I resigned July 15, 2017. Ed Maletis also served on the Board of Managers
`from 2015 until he resigned on July 15, 2017. Neither Ed nor I had any meaningful role in the
`day-to-day management of the company. Burrows controlled the day-to-day management of
`Remington.
`In or around the spring of 2016, Remington experienced financial difficulties and
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`began to accrue a significant balance with Uni-Splendor. Remington asserted flaws in the
`manufacturing by Uni-Splendor caused the financial difficulties. Uni-Splendor denied such
`allegations.
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 3 of 8
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`In late March or early April of 2016, Burrows raised the possibility of Ed and me
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`providing funding of $700,000 for a new coffee brewer prototype that could make espresso from
`a single-serve pod.
`Ed and I agreed to separately advance $350,000, but only as loans, each secured
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`by all of Remington’s intellectual property (the “Intellectual Property”). Burrows had
`contributed the Intellectual Property to Remington and represented its value to be $35 million,
`although its precise value was unknown.
`On July 21, 2016, following unanimous approval by the Board of Managers,
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`Remington, Ed and I entered into a Junior Intellectual Property Security Agreement (the “2016
`Loans”) (Exhibit 1), which included a grant by Remington to us of a security interest in certain
`intellectual property (the “IP Collateral”) (Exhibit 2). Ed Maletis and I understood the IP
`Collateral and Intellectual Property were the same. Pursuant to the 2016 Loans, Ed and I each
`separately advanced $350,000 to Remington and we duly recorded and properly perfected
`security interests in the IP Collateral (the “IP Lien”).
`On December 16, 2016, Uni-Splendor sued Remington in the United States
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`District Court, Central District of California (the “Court”) (Case No. 2:16-cv-9316 PA (SSx)
`(the “Uni-Splendor Litigation”), alleging breach of contract and quantum meruit. Remington
`answered and asserted numerous counterclaims.
`On June 23, 2017, the Board of Managers and Burrows discussed the possibility
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`of Remington executing an assignment for the benefit of creditors, focusing primarily on the
`Intellectual Property, the company’s primary assets.
`The Board of Managers instructed Burrows to obtain two independent valuations
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`of the company. However, Burrows apparently only arranged for a single independent valuation
`of the Intellectual Property, which resulted in a valuation of $875,000 based on the income
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 4 of 8
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`approach. Neither Ed nor I participated in the selection of the appraiser, communicated with the
`appraiser, or had any other involvement in the valuation of the Intellectual Property.
`On July 15, 2017, Ed and I resigned from Remington’s Board of Managers.
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`On July 27, 2017, the Court granted, in part, Uni-Splendor’s motion for summary
`judgment, requiring further evidence on the appropriate level of damages. Finding that material
`issues of disputed fact remained, the Court declined to grant Uni-Splendor’s motion for summary
`judgment on Remington’s counterclaims.
`On August 30, 2017, I formed Coffee Solutions as an Oregon limited liability
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`company and serve as its sole member.
`On August 31, 2017, Remington executed an Intellectual Property Assignment
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`and a General Assignment for the benefit of creditors (jointly, the “Assignment”) (Exhibit 3),
`naming David Hagen (“Hagen”) as the assignee. On information and belief, all parties entitled
`to notice of the Assignment received notice from Hagen according to statutory rules governing
`assignments for the benefit of creditors in California pursuant to Cal. Code Civ. Pro § 1802(a).
`The Assignment states that it is a general assignment of all assets of Remington (the “Assets”),
`although the only assets transferred to Hagen pursuant to the Assignment were certain items of
`intellectual property of Remington. I understood that the only assets that Remington possessed
`at the time of the transfer was the Intellectual Property.
`Subsequently, on August 31, 2017, Hagen, as seller, and Coffee Solutions, as
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`buyer, entered into an Asset Purchase and Sale Agreement (the “Coffee Solutions Purchase”)
`(Exhibit 4), pursuant to which Coffee Solutions purchased the Assets, subject to the IP Lien
`(Exhibit 5). The purchase price was $875,000, consistent with an appraisal obtained by Burrows
`of the Intellectual Property. Specifically, the consideration from Coffee Solutions consisted of
`(a) credit for assuming the security interest I own ($388,896 including principle and interest) and
`the security owned by Ed Maletis ($388,896 including principle and interest), plus (b)
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 5 of 8
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`approximately $97,000 in cash, which I paid. Coffee Solutions purchased the assets reflected in
`the Coffee Solutions Purchase.
`On September 18, 2018, Hagen informed the Court of the occurrence of the
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`Assignment. On October 25, 2017, Hagen informed the Court that he did not intend to further
`defend the Uni-Splendor Litigation or prosecute the counterclaims.
`On November 7, 2017, the Court entered judgment in favor of Uni-Splendor and
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`against Remington in the amount of $20,744,484.23 (the “Judgment”).
`On May 18, 2018, Uni-Splendor moved to amend the Judgment (the “Motion to
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`Amend”) to add Coffee Solutions, Burrows and me as debtors under the Judgment. Uni-
`Splendor’s allegations in support of the Motion to Amend included alter ego, successor liability,
`constructively fraudulent transfer, and the need to add parties to promote equity and prevent
`injustice.
`On October 23, 2018, the Court issued a Civil Minutes decision (the “Order”)
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`(Exhibit 6) granting the Motion to Amend as to Coffee Solutions, but denying it as to Burrows
`and me, citing due process concerns (Exhibit 6, p. 10). In the Order, the Court noted that certain
`of Remington’s assets, including inventory, accounts receivable, bank accounts and other assets
`had not been accounted for (Exhibit 6, p. 9).
`On October 30, 2018, Uni-Splendor, through its Portland-based counsel, initiated
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`an action in the Circuit Court of the State of Oregon for the County of Multnomah, Case No.
`18CV49432, styled as an action “In the Matter of a Foreign General Judgment Rendered in the
`[Uni-Splendor Litigation]” (the “Multnomah County Action”) (Exhibit 7), in which Uni-
`Splendor registered the Judgment and issued a notice of garnishment to the Portland, Oregon
`branch of a financial institution (Exhibit 8).
`On November 23, 2018, in the Multnomah County Action, Uni-Splendor sought
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`and obtained an order directing a representative of Coffee Solutions to appear for a judgment
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 6 of 8
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`debtor examination to be conducted at the Multnomah County Circuit Courthouse in Portland,
`Oregon.
`On December 6, 2018, Portland-based counsel for Uni-Splendor administered the
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`judgment debtor examination at the Multnomah County Circuit Courthouse with Coffee
`Solutions appearing though me as its sole member (Exhibit 9).
`After becoming aware that there may exist additional assets that were not
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`transferred to Hagen pursuant to the General Assignment and, in turn, to Coffee Solutions
`pursuant to the Coffee Solutions Purchase, Coffee Solutions requested of Hagen an accounting of
`all of Remington’s assets at the time of the General Assignment. Coffee Solutions has also made
`repeated written requests of Hagen to execute and/or ascertain documents to effectuate transfer
`to Coffee Solutions of intellectual property that should have been conveyed to it pursuant to the
`Coffee Solutions Purchase. To date, Hagen has not provided such an accounting and has failed
`in large part or declined to execute and/or ascertain such documentation.
`Neither Ed Maletis nor I ever received a dividend or payment in respect of our
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`equity from Remington. I regard my $4.9 million investment in Remington to be a total loss. I
`understand Ed Maletis holds the same view regarding his $5.0 million investment in Remington.
`Following entry of the Order adding Coffee Solutions to the Judgment, Uni-
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`Splendor and Coffee Solutions have engaged in ongoing settlement discussions, which are
`privileged.
`The sole asset in Coffee Solutions’ possession is intellectual property of unknown
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`value and marketability.
`The intellectual property is subject to competing claims, specifically the IP Lien
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`and the Judgment. I assert that the IP Lien, which Ed and I own, is a valid and senior lien on the
`assets of Coffee Solutions, including its intellectual property.
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 7 of 8
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`On information and belief, Uni-Splendor asserts that its Judgment is the senior
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`priority claim against the assets of Coffee Solutions, including its intellectual property.
`Certain unsecured creditors have also asserted claims focused on the intellectual
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`property.
`The resolution of these competing claims requires adjudication.
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`Due in part to these competing claims to its assets, Coffee Solutions has been
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`frustrated and unable to effectively market, value or sell its assets, primarily the intellectual
`property. In part due to the competing claims, Coffee Solutions has been unable to determine an
`acceptable approach to sell the intellectual property or to distribute the proceeds should such a
`sale occur.
`Coffee Solutions consents to the appointment of a receiver by this Court.
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`The harm to Coffee Solutions of being hindered in its ability to value or liquidate
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`its assets to satisfy Defendant or its creditors outweighs any injury Defendant may sustain by the
`Court’s appointment of a receiver.
`I do not believe Defendant will be harmed by the appointment of a receiver.
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`I believe it is in the best interests of all parties for this Court to appoint an
`independent receiver to (a) take charge of the assets of Coffee Solutions, (b) determine the most
`beneficial disposition of those assets, and (c) with this Court’s assistance, determine the
`appropriate distribution of any net proceeds of such disposition.
` I believe that appointment of a receiver under these circ*mstances is reasonably
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`necessary to secure justice to the parties, to determine and protect the assets of Coffee Solutions
`and to protect the interests of the various interested parties. Such interests will be well-served by
`the appointment of a receiver.
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`DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`1120 N.W. Couch Street, 10th Floor
`Portland, OR 97209-4128
`Phone: 503.727.2000
`Fax: 503.727.2222
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`Case 3:19-cv-01848-YY Document 6 Filed 12/27/19 Page 8 of 8
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`1 believe that a judicial determination will resolve all aspects of the controversy
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`concerning the claims of priority pertaining to the assets of Coffee Solutions, including its
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`intetlectual property, and will serve a useful purpose in clarifying the legal relations at issue.
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`I have reviewed the qualifications ofHamstreet & Associates, including Clyde
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`Hamstreet and Maren Cohn. I am not personally acquainted with the Hamstreet firm or the
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`individuals associated with it. Based on their qualifications and their reputation in the
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`community for competence, integrity and independence, I believe the Hamstreet firm is well
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`qualified to serve as receiver in this case.
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`I understand there will be fees and costs associated with the receivership,
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`including but not limited to: the services of the receiver and those hired to assist in carrying out
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`the duties of the receiver, the management, evaluation and sale of the assets of the receivership
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`estate, and the distribution of the proceeds of those assets that comprise the receivership estate
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`(collectively, the "Receivership Fees").
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`If the Court appoints a receiver in this case, I will personally commit to the
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`prompt and full payment of such Receivership Fees as are approved consistent with the orders of
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`this Court on the condition that the proceeds of the sale of any property of the receivership estate
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`will go first to reimburse any amounts advanced by me toward Receivership Fees.
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`I hereby declare that the above statement is true to the best of my knowledge and belief,
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`and that I understand it is made for use as evidence in court and is subject to penalty for perjury.
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`DATED: December 27. 2019
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`c~~ e_ lfv\.cJl,_ i--:1 ~
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`Christopher C. Maletis ID
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`8- DECLARATION OF CHRISTOPHER MALETIS
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`136359-
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`Perkins Coie LLP
`ll20 N.W. Couch Street. loth Floor
`Portland, OR 97209-4128
`?_)hone: 503.727.2000
`Fax: 503.727.2222
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