Powertech Industrial v. 360 Electrical

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
POWERTECH INDUSTRIAL CO., LTD.,
a Taiwan company,
Plaintiff, 	MEMORANDUM DECISION AND
ORDER DENYING MOTION FOR
DISPOSITIVE SANCTIONS
v.
Case No. 2:23-cv-00675-TC-CMR
360 ELECTRICAL, LLC, a Utah limited
liability company,
Defendant.
Judge Tena Campbell
Chief Magistrate Judge Cecilia M. Romero
Before the court is a motion filed by Plaintiff Powertech Industrial Co., Ltd. (Powertech)
asking the court to enter default judgment against Defendant 360 Electrical, LLC (360 Electrical)
and to strike the Defendant’s counterclaims as a sanction for the Defendant’s failure to retain
counsel despite repeated court orders requiring that the Defendant do so. (ECF No. 87.) For the
following reasons, the court denies the motion.
BACKGROUND
Powertech is a Taiwan-based manufacturing company that specializes in surge protectors
and other power management products. (Am. Compl. ¶ 6, ECF No. 15.) 360 Electrical is a
Utah-based company that sells wall outlets, power strips, and other electrical products. (Id. ¶ 7.)
Around 2008, the two companies began working together to develop 360 Electrical’s line of
rotating wall outlets and surge protector products (including, as relevant in this lawsuit, the
“Core Line” products and the “Revolve 2.4” and “Revolve 3.4” products). (Id. ¶¶ 8–11, 46–47.)
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Powertech created tooling that was used to produce parts of 360 Electrical’s Core Line
products, such as the top casing and bottom casing. (Id. ¶ 46.) Powertech incurred startup costs
from this product development and alleged that the tooling was specifically used to manufacture
the Core Line products. (Id. ¶¶ 46–47.) Since at least 2020, the parties have disputed whether
Powertech or 360 Electrical owns the tooling. (Id. ¶¶ 49–51.)
The parties’ dispute grew in scope on January 20, 2022. (Id. ¶ 13.) At that time,
360 Electrical emailed Powertech asserting that several Revolve 2.4 and Revolve 3.4 products—
specified in Purchase Order (PO) 1444 and PO 1474—did not meet 360 Electrical’s color
specifications. (Id.) After discovering the nonconforming products, 360 Electrical inspected its
existing products and determined that all the Revolve family of products were nonconforming
due to coloration issues. (Id. ¶ 17.) During the subsequent year, the parties were unable to reach
an agreement about how to resolve the conflict and both parties accused each other of acting in
bad faith. (Id. ¶¶ 63–69; Am. Countercl. ¶¶ 373–659, ECF No. 35.)
Powertech filed its original Complaint in this action on September 27, 2023. (ECF
No. 2.) After waiving service, on January 4, 2024, 360 Electrical filed a motion to dismiss the
action in part. (ECF No. 14.) Powertech then filed an Amended Complaint, asserting claims for
breach of contract, breach of the implied covenant of good faith and fair dealing, unjust
enrichment, conversion, and trade secret misappropriation. (ECF No. 15.) Among other
complaints, Powertech asserted that 360 Electrical inappropriately applied a unilateral
$812,493.80 credit on unrelated invoices to account for products for which 360 Electrical
maintained there was a warranty issue. (Id. ¶ 59.) Powertech also claimed that 360 Electrical
refused to pay $419,758.07 in overdue invoices for purchase orders that were unrelated to the
orders for which 360 Electrical claimed a warranty issue existed. (Id. ¶ 60.)
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360 Electrical filed an Answer and Counterclaim on February 9, 2024, which it later
amended on April 24 and 25, 2024. (ECF Nos. 23, 34–35). 360 Electrical maintained that
Powertech knowingly shipped nonconforming products and that the nonconforming products
were being stored at 360 Electrical’s expense. (Am. Countercl. ¶¶ 406, 570–76.)
The court issued a ruling on 360 Electrical ’s partial motion to dismiss on
September 17, 2024, granting the motion in part and denying the motion in part. (Order & Mem.
Decision, Sept. 17, 2024, ECF No. 45.) The court dismissed Powertech’s claim for conversion
but found that Powertech had adequately pleaded a claim for trade secret misappropriation. (Id.
at 9–10.)
The court then entered a scheduling order, and the parties proceeded to discovery.
360 Electrical later filed a Motion for Leave to Destroy or Abandon Excess and Duplicative
Non-Conforming Products. (ECF No. 63.) Although the parties briefed the motion and the court
set a hearing, the court vacated the hearing after 360 Electrical’s counsel moved to withdraw.
(Mot. Withdraw as Counsel, ECF No. 76; Order Vacating Mot. Hr’g, ECF No. 78.) In that
motion, defense counsel noted that 360 Electrical had been dissolved and was no longer in
business, it did not have any assets or employees, and it could not pay for ongoing legal services.
(ECF No. 76 at 2.) The court granted the motion to withdraw on April 24, 2026. (Order,
Apr. 24, 2026, ECF No. 77.) The court ordered that “[w]ithin 21 days, 360 Electrical, LLC must
retain an attorney and file a Notice of Appearance.” (Id. at 1.) The court noted that a business
entity such as a limited liability company “cannot proceed without representation” but must be
represented by an attorney. (Id. (citing DUCivR 83-1.3(c)(2)).) And the court stated: “A party
who fails to file a Notice of Appearance as required may be subject to sanctions under the local
rules [of] practice or Fed. R. Civ. P. 16(f)(1), including entry of an order of dismissal or default
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judgment.” (Id. at 2.) After 360 Electrical failed to file a notice of appearance for new counsel
within 21 days, the court denied without prejudice the Defendant’s motion concerning excess
products. (Mem. Decision & Order, July 17, 2026, ECF No. 83.)
Powertech then filed a motion for entry of default against 360 Electrical on July 20, 2026.
(ECF No. 85.) The court denied that motion. (Mem. Decision & Order, Aug. 3, 2026, ECF
No. 86.). It noted that an entry of default under Rule 55 of the Federal Rules of Civil Procedure
was not necessary or appropriate in the circumstances, given that 360 Electrical had initially
defended the action, but that Powertech could move for default judgment and to strike
counterclaims under Rule 37 as sanctions for 360 Electrical’s failure to comply with the court’s
order. (Id. at 1, 5–6.) And in its order, the court provided “a final warning to 360 Electrical that
… the court is inclined to grant a motion for default judgment and motion to strike counterclaims
due to 360 Electrical’s failure to retain new counsel and enter an appearance.” (Id. at 5–6.)
Two weeks after the court denied Powertech’s motion for entry of default, Powertech
filed the motion for dispositive sanctions that is now before the court. Eleven days later, on
August 28, 2026, 360 Electrical filed a notice of appearance. (ECF No. 93.) The court then
ordered 360 Electrical to file a response to Powertech’s motion. (Order, Sept. 3, 2026, ECF
No. 95.) The court also ordered the parties to file a status report about how they wished the court
to proceed now that 360 Electrical had obtained counsel. (Id.) The parties filed that status report
on September 10, 2026. (ECF No. 97.) Briefing on Powertech’s motion is now complete.
(Def.’s Mem. Opp’n, ECF No. 96; Pl.’s Reply, ECF No. 99.)
LEGAL STANDARD
When the court grants a motion to withdraw as counsel, “[a]n unrepresented party who
fails to appear within 21 days after entry of the order, or within the time the court requires, may
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be sanctioned under Fed. R. Civ. P. 16(f)(1), including entry of a default judgment or an order of
dismissal.” DUCivR 83-1.4(d). A court may issue an order imposing sanctions, “including
those authorized by Rule 37(b)(2)(A)(ii)–(vii), if a party or its attorney … fails to obey a
scheduling or other pretrial order.” Fed. R. Civ. P. 16(f)(1)(C). The sanctions permitted under
Rule 37(b)(2)(A) include “striking pleadings in whole or in part” and “rendering a default
judgment against the disobedient party[.]” Fed. R. Civ. P. 37(b)(2)(A)(iii), (vi). When
determining the proper sanction, the court considers: (1) “the degree of actual prejudice to the
defendant,” (2) “the amount of interference with the judicial process,” (3) “the culpability of the
litigant,” (4) “whether the court warned the party in advance that dismissal of the action would
be a likely sanction for noncompliance,” and (5) “the efficacy of lesser sanctions.” Ehrenhaus v.
Reynolds, 965 F.2d 916, 921 (10th Cir. 1992) (citations omitted).
A trial court has “broad discretion in deciding whether to enter a default judgment.”
Galloway v. Hadl, No. 07-3016, 2008 WL 5109758, at *1 (D. Kan. Dec. 2, 2008) (citing
Grandbouche v. Clancy, 825 F.2d 1463, 1468 (10th Cir. 1987)). A plaintiff who moves for
default judgment must establish that the amount of requested damages is reasonable under the
circumstances. DeMarsh v. Tornado Innovations, L.P., No. 08-2588, 2009 WL 3720180, at *2
(D. Kan. Nov. 4, 2009) (citation omitted). “Damages may be awarded only if the record
adequately reflects the basis for [the] award via ‘a hearing or a demonstration by detailed
affidavits establishing the necessary facts.’” Id. (quoting Adolph Coors Co. v. Movement
Against Racism & the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985)).
ANALYSIS
Having carefully considered the Ehrenhaus factors, the court finds that dispositive
sanctions are not warranted. Although several factors weigh in favor of granting Powertech’s
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motion, there are lesser sanctions that would be effective and 360 Electrical’s culpability is
mitigated by the fact that an organization cannot represent itself in this court.
First, the court agrees with Powertech that 360 Electrical’s lengthy delay obtaining new
counsel prejudiced Powertech’s ability to pursue its claims and defend against 360 Electrical’s
counterclaims, and that the delay interfered with the judicial process. The court warned
360 Electrical several times that dismissal of its counterclaims and the entry of default judgment
were likely sanctions for its failure to obtain counsel. And on August 3, 2026, the court provided
a final warning in which it stated that, while it was reserving judgment about whether a default
judgment was appropriate until it considered the Ehrenhaus factors, it was inclined to grant
default judgment after considering Powertech’s forthcoming motion. (ECF No. 86 at 5–6.)
But dispositive sanctions are an “extreme sanction.” Derma Pen, LLC v. 4EverYoung
Ltd., 736 F. App’x 741, 745 (10th Cir. 2018) (quoting Ehrenhaus, 965 F.2d at 920). And
although 360 Electrical’s new counsel did not enter an appearance until the eleventh hour, it is
understandable that it was difficult for 360 Electrical to obtain representation given the assertion
made by its previous counsel that 360 Electrical had been dissolved and was no longer in
business. The court therefore disagrees with Powertech that 360 Electrical’s noncompliance was
wholly voluntary.
Moreover, the court finds that lesser sanctions would be effective in these circumstances.
The harm that Powertech asserts it suffered includes monetary harm from the cost of preparing
the motion for dispositive sanctions that is now before the court, as well as the uncertainty about
whether 360 Electrical has preserved the evidence that was the subject of its motion for leave to
destroy products. The court will therefore award Powertech reasonable attorneys’ fees for the
cost of preparing its motion. The court will also extend the fact discovery deadline, and
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Powertech may move for additional sanctions if it determines that 360 Electrical’s delay has
resulted in the spoliation of evidence.
ORDER
For the foregoing reasons, the court ORDERS as follows:
1. 	The Plaintiff’s Motion for Dispositive Sanctions (ECF No. 87) is DENIED.
2. 	The court extends fact discovery for an additional 60 days from the date of this
order.
3. 	Within 60 days from the date of this order, the parties must either file: 1) a motion
for a scheduling order containing deadlines for expert discovery and dispositive motions; or 2) a
motion to stay these proceedings.
4. 	At any time, the parties may file a stipulated motion for judicial settlement
conference if they believe that a court-moderated mediation would help them resolve their
dispute.1
DATED this 8th day of October, 2026.
BY THE COURT:
_____________________
Tena Campbell
United States District Judge
1 A template for this motion is available on the court’s website:
https://www.utd.uscourts.gov/forms/all-forms.
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