Richard Chen, CEO of bankrupt pool parts supplier Blueworks Corp., has been accused by Hayward Industries Inc., a U.S.-based competitor, of orchestrating a scheme to evade payment of a $16 million judgment for false advertising and unfair business practices. According to a motion filed by Hayward in federal court, Chen recently fled to China, leaving the company without leadership and allegedly transferring assets in violation of court orders.

Background of the Dispute

The legal battle stems from Blueworks’ sale of replacement salt cells for saltwater swimming pools. In a February trial, Hayward Industries alleged that Blueworks misled customers by blurring distinctions between its own products and Hayward’s in advertisements on Amazon. While a jury cleared Blueworks of trademark infringement, it found the company liable for false advertising and violations of the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA).

The court awarded Hayward $4.9 million in damages, which was later trebled under UDTPA to $14.7 million. An additional $1.3 million in prejudgment interest brought the total to $16 million.

Bankruptcy and Asset Freeze

Following the judgment, Blueworks filed for Chapter 11 bankruptcy, citing the financial strain of the litigation. The court subsequently issued a temporary restraining order (TRO) to freeze the assets of Blueworks and its parent company, Ningbo CF Electronic Tech Co. Ltd., to prevent asset transfers intended to avoid payment. Hayward has since filed 16 motions to extend the asset freeze, the latest on Sunday.

Alleged Misconduct and Asset Transfers

Hayward accuses Blueworks, Ningbo, and Chen of repeatedly undermining its efforts to collect the judgment. The company alleges that:

• Chen and his wife, Gina Lu, have been transferring large sums of money between business and personal accounts, violating the TRO.
• Ningbo has continued its multi-million-dollar operations and transferred assets without court authorization.
• Blueworks attempted to use its bankruptcy case to shield Ningbo from collection efforts.

Hayward has also sought to extend the TRO to include Chen and Lu personally, citing their alleged role in transferring assets and obstructing enforcement of the judgment.

International Efforts to Secure Assets

In addition to U.S. proceedings, Hayward obtained an injunction in Hong Kong against Ningbo, Chen, and another company linked to him, FIG Global Ltd. The Hong Kong injunction bars the removal or diminishment of assets up to $7.8 million globally.

Legal Representation and Developments

Blueworks’ legal team, led by Michelle C. Dunn of Platinum Intellectual Property LLP, recently withdrew from the case, citing nonpayment of fees and an inability to contact Chen. Hayward’s legal team includes attorneys from McCarter & English LLP and Womble Bond Dickinson.

Hayward argued in its latest motion that lifting the TRO or failing to impose a stronger injunction would render its years-long litigation efforts meaningless.