Dahua Technology USA Inc v. Zhang, 433 F.Supp.3d 41

Zhang was hired in 2016 as Dahua’s Chief Strategy Officer/VP with a guaranteed three‑year salary and a one‑time stock grant; the 2015 offer contained no release, confidentiality, or non‑compete provisions.
In August 2017 Dahua (through CEO Fu and in‑house counsel Yue) negotiated Zhang’s transition: Zhang would become a consultant (two years, $240,000/year), Dahua would pay out amounts due under the 2015 agreement (~$680,000), and would cash out his stock.
On August 28, 2017 the parties signed an offer letter and a severance agreement that—due to a drafting error—stated payment of $680,000 per month for 16 months (instead of $680,000 total paid over 16 months); the agreement also included a release, non‑compete, and confidentiality clause.
Dahua made reduced monthly payments from Sept–Dec 2017 that reflected the intended $680,000 total (i.e., ~$42,500/month), and Zhang accepted those payments without objection.
In January 2018 Zhang’s counsel asserted Dahua owed over $11 million under the severance agreement; Dahua sued for reformation/declaration of unenforceability and breach of the duty of good faith and fair dealing, and Zhang counterclaimed for breach of contract. The court granted Dahua summary judgment, reformed the agreement to provide $680,000 total (16 payments of $42,500), and found a breach of good faith by Zhang.

Issue	Plaintiff's Argument (Dahua)	Defendant's Argument (Zhang)	Held
Choice of law	Virginia clause should not control because Virginia has no substantial relation; Massachusetts law applies	Enforce the agreement’s Virginia choice‑of‑law clause	Massachusetts law governs (parties negotiated, signed, and performed in MA)
Admissibility of parol evidence to prove mistake	Parol evidence is admissible to show mistake; facts show a drafting error	The written agreement is clear; parol evidence cannot rewrite an unambiguous contract	Parol evidence admissible to assess mistake under Massachusetts law
Reformation / mistake standard	There was at least a unilateral mistake (likely mutual): parties intended $680,000 total; reform the contract	No mistake — Zhang knowingly accepted the $680,000/month term; only mutual mistake supports reformation	Reformation allowed: unilateral or mutual mistake established; reformed to $680,000 total paid in 16 monthly installments
Duty of good faith and fair dealing	Zhang should have known of the mistake and his later demand for >$11M breached good faith	Zhang relied on the written agreement and prior rejection of an earlier draft; no bad faith	Court found breach of duty of good faith by Zhang for failing to notify company and later asserting >$11M claim

Poulis‑Minott v. Smith, 388 F.3d 354 (1st Cir. 2004) (summary judgment—definition of genuine dispute and material fact)
Hayes v. Douglas Dynamics, Inc., 8 F.3d 88 (1st Cir. 1993) (definition of material fact for summary judgment)
Ferguson v. Gen. Star Indem. Co., 582 F. Supp. 2d 91 (D. Mass. 2008) (cross‑motions for summary judgment standard)
Adria Int’l Grp., Inc. v. Ferré Dev., Inc., 241 F.3d 103 (1st Cir. 2001) (cross‑motions do not alter Rule 56 standard)
Fadili v. Deutsche Bank Nat’l Tr. Co., 772 F.3d 951 (1st Cir. 2014) (draw inferences for nonmoving party on summary judgment)
Levin v. Dalva Bros., Inc., 459 F.3d 68 (1st Cir. 2006) (apply forum state choice‑of‑law rules in diversity cases)
Bushkin Assocs., Inc. v. Raytheon Co., 473 N.E.2d 662 (Mass. 1985) (functional choice‑of‑law test; factors to assess state interests)
Steranko v. Inforex, Inc., 362 N.E.2d 222 (Mass. App. Ct. 1977) (upholding parties’ choice of law if substantial relation exists)
Greene v. Ablon, 794 F.3d 133 (1st Cir. 2015) (Massachusetts law permits avoidance for unilateral mistake)
Polaroid Corp. v. Travelers Indem. Co., 610 N.E.2d 912 (Mass. 1993) (extrinsic evidence admissible to prove mistake; reformation standards)
Nissan Automobiles of Marlborough, Inc. v. Glick, 816 N.E.2d 161 (Mass. App. Ct. 2004) (reformation available for unilateral mistake when other party knew or should have known)