Products and Ventures International v. Axus Stationary (Shanghai) Ltd. et al

Filing 204

ORDER by Judge Yvonne Gonzalez Rogers granting in part 195 Plaintiff's Motion for Leave to File Second Amended Complaint. Amended Pleadings due by 8/9/2017. (fs, COURT STAFF) (Filed on 8/2/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PRODUCTS AND VENTURES
INTERNATIONAL,
Plaintiff,

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vs.
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AXUS STATIONARY (SHANGHAI) LTD., ET
AL.,

United States District Court
Northern District of California

Re: Dkt. No. 195

ROBERTA TRADING CORPORATION,
Counterclaimant,

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ORDER GRANTING IN PART PLAINTIFF’S
MOTION FOR LEAVE TO FILE SECOND
AMENDED COMPLAINT

Defendants.

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CASE NO. 16-cv-00669-YGR

vs.

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PRODUCTS AND VENTURES
INTERNATIONAL; AND CARLOS FAIRBANKS

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Counterclaim Defendants.

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Plaintiff Products and Ventures International brings this action against defendants1 for

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alleged breaches of contract and tort claims relating to a wooden pencil distribution agreement.

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The Court previously dismissed the complaint for lack of personal jurisdiction, but granted leave

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to amend and provided a period for jurisdictional discovery. (Dkt. No. 72.) Plaintiff filed its

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amended complaint on September 19, 2016 (Dkt. No. 100, “FAC”), and defendants again brought

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a motion to dismiss. The Court granted in part and denied in part defendants’ motion, dismissing

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defendants Axus HK, Highton, Howin, and Noblesse for lack of personal jurisdiction, and

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dismissing Counts One and Two against Kenpark and Mr. Viegas and Counts Three and Four

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The defendants in this action are as follows: Axus Stationery (Hong Kong) Ltd. (“Axus
HK”); Andrew Viegas, Highton Ltd.; Roberta Trading Corporation; Kenpark Ltd.; Howin
Investments Ltd.; Noblesse (Hong Kong) Limited; Axus Stationery (Shanghai) Ltd. (“Axus
Shanghai”); Shanghai Marco Stationery Co.; Shanghai Laikesheng Pen Material Co. Ltd.
(“Shanghai Lexon”), and Brian Peifeng Xu.

1

aga
ainst Kenpar and Rober Trading for failure to state a claim (Dkt. No 144 at 2.) As such,
rk
rta
f
o
m.
o.

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the only remain
e
ning claims were Counts One and Tw against R
s
wo
Roberta Trad
ding and Cou Three
unts

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and Four again Viegas.2 The Court denied plaint
d
nst
d
tiff’s request for leave to amend, but permitted
t
o
t

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pla
aintiff to file a later motion for leave to amend sh
hould further developme of the rec
r
ent
cord warrant
t

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suc request, due to severa thousands of documen produced after the clo of jurisdi
ch
d
al
nts
ose
ictional

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dis
scovery.
Current before the Court is pl
tly
laintiff’s mo
otion for leav to file a se
ve
econd amend
ded

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com
mplaint, whi plaintiff claims is bas on its rev
ich
sed
view of late-produced d
documents. (
(Dkt. No.

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195 Specifically, plaintif seeks to am
5.)
ff
mend the com
mplaint as fo
follows: (i) r
re-allege clai against
ims
the defendants dismissed for lack of pe
e
fo
ersonal jurisd
diction based on new do
d
ocuments ref
fining

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United States District Court
Northern District of California

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pla
aintiff’s theory of alter eg liability; (ii) re-allege claims dism
go
e
missed for fa
ailure to state a claim;
e

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and (iii) add a claim for fra
d
c
audulent tran
nsfer against Kenpark an Shanghai Marco and a claim for
t
nd

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civ conspiracy against Ke
vil
y
enpark.
Having carefully re
g
eviewed the pleadings, th proposed second ame
p
he
ended compl
laint, and the
e

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pap and exh
pers
hibits submit on this motion, and f the reaso set forth more fully b
tted
m
for
ons
below, the

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Court GRANTS IN PART pla
S
aintiff’s mot
tion for leave to file a second amend complain as
e
ded
nt,

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des
scribed herei 3
in.

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I.

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LEGAL FRAMEWOR
RK
Under the Federal Rules of Civ Procedure courts are to grant leav to amend “when
t
R
vil
e,
ve

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jus
stice so requi
ires.” Fed. R. Civ. P. 15
R
5(a)(2). The rule is “to b applied w extreme liberality.”
be
with

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Ow
wens v. Kaise Found. Health Plan, Inc., 244 F.3 708, 712 (
er
H
I
3d
(9th Cir. 200 see also Morongo
01);
o

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Band of Missio Indians v. Rose, 893 F.2d 1074, 1 079 (9th Cir 1990). Ge
on
F
r.
enerally, a co should
ourt

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det
termine whether to grant leave indul
t
lging “all inf
ferences in fa
favor of gran
nting the mot
tion.”

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Since the Court’s order on the motion to dismiss, def
e
s
fendants in th People’s Republic of
he
f
Ch
hina, namely Axus Shang
ghai, Shangh Marco, S
hai
Shanghai Lex
xon, and Mr Xu (collect
r.
tively, the
“PR Defenda
RC
ants”), have been served.
b
.
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The Court adopts the Backgro
C
s
ound in its o
order on defe
endants’ mot
tion to dismiss, dated
Jan
nuary 18, 2017 (Dkt. No. 144 at 2–4) and adds f
),
facts and alle
egations rele
evant to the i
instant
mo
otion, as nece
essary.
2

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Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 (
e
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(9th Cir. 199
99). That sai “leave to amend is
id,
o

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not to be grante automatic
t
ed
cally.” Jack
kson v. Bank of Hawaii, 9 F.2d 138 1387 (9t Cir.
902
85,
th

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199
90).

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The Co weighs the following factors in r
ourt
t
g
ruling on a m
motion for le
eave to amen (1) bad
nd:

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fait (2) undue delay; (3) prejudice to the opposin party; (4) futility of th amendmen and (5)
th;
e
p
ng
he
nt;

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wh
hether the mo
ovant has pre
eviously am
mended its ple
eadings. Fo
oman v. Davi 371 U.S. 178, 182
is,

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(19
962); see also Johnson v. Buckley, 35 F.3d 1067 1077 (9th Cir. 2004). Of these fa
56
7,
h
actors, “the

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con
nsideration of prejudice to the oppos
o
sing party [ ] carries the greatest wei
ight.” Emine
ence

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Cap
apital, LLC v. Aspeon, In 316 F.3d 1048, 1052 (9th Cir. 20
v
nc.,
d
2
003). “Court may decli to grant
ts
ine
lea to amend only if ther is strong evidence of ‘
ave
d
re
e
‘undue delay bad faith o dilatory m
y,
or
motive on the
e

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United States District Court
Northern District of California

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par of the mov
rt
vant, repeate failure to cure deficien
ed
c
ncies by ame
endments pr
reviously allo
owed, undue
e

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pre
ejudice to the opposing party . . . , [o futility of amendment . . . .’” Son
e
p
or]
f
t
noma Cty. As of
ss’n

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Ret
tired Emps. v. Sonoma Cty., 708 F.3d 1109, 111 7 (9th Cir. 2
C
2013) (quotin Foman, 3 U.S. at
ng
371

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182 Ordinari however “courts wil defer cons
2).
ily,
r,
ll
sideration of challenges t the merits of a
f
to
s

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pro
oposed amen
nded pleadin until after leave to am
ng
mend is granted and the a
amended plea
ading is

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file
ed.” Netbula LLC v. Dis
a,
stinct Corp., 212 F.R.D. 534, 539 (N Cal. 20
,
.
N.D.
003).

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II.

DISCU
USSION

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Plaintif seeks leave to file a second amend complain essentially to include t
ff
e
ded
nt
y
three

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cat
tegories of al
llegations an claims: (i re-allege c
nd
i)
claims again the defend
nst
dants dismis
ssed for lack
k

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of personal juri
p
isdiction bas on new documents re
sed
d
efining plain
ntiff’s theory of alter ego liability;
y
o

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(ii) re-allege cl
)
laims dismissed for failu to state a claim; and ( allege ad
ure
(iii)
dditional cla
aims for

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frau
udulent tran
nsfer against Kenpark and Shanghai M
d
Marco and f civil cons
for
spiracy again Kenpark.
nst

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The Court addr
resses each category sep
c
parately, belo
ow.

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A.

Claims Aga
ainst Defend
dants Dismi
issed for La of Perso
ack
onal Jurisdic
ction

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The Co previous dismissed defendants Axus HK, H
ourt
sly
d
s
Highton, Ho
owin, and No
oblesse for

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lac of persona jurisdiction. Plaintiff argued that t
ck
al
these compa
anies should be subject t personal
d
to

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jurisdiction her based on an alter ego theory. A p
re
a
plaintiff must make a prima facie sho
t
owing that

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the following criteria are met to survive a Rule 12(
e
c
m
(b)(2) motion on an alter ego theory: (1) treating
n
r
:
g
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the corporations as separate entities would result in inequity or injustice; and (2) a unity of interest

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and ownership between the corporations such that their separate personalities do not actually exist.

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Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015) (citing Doe v. Unocal, 248 F.3d 914, 926

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(9th Cir. 2001)). The Court found that plaintiff failed to satisfy the “inequity or injustice” prong

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of the test. Specifically, the Court explained that difficulty in enforcing a judgment or collecting a

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debt does not alone satisfy the requirement of an inequitable act. See Axon Sols., Inc. v. San Diego

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Data Processing Corp., No. 09-CV-2543-JM, 2010 WL 1797028, at *2–3 (S.D. Cal. May 4, 2010)

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(applying alter ego theory based on allegation that the city intended to dissolve an agency to

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“avoid [wrongfully] liability for the monies owed to [plaintiff]”); see also Las Palmas Assocs. v.
Las Palmas Ctr. Assocs., 235 Cal. App. 3d 1220, 1249 (1991) (applying alter ego where there was

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United States District Court
Northern District of California

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“substantial evidence to support that [defendants] formed a single enterprise for the purpose of

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committing a continuing fraud against buyers” (emphasis supplied)).

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Plaintiff has proposed new allegations, which it claims demonstrates that Viegas and Xu

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have actively sought to avoid liability and potential judgment by repeatedly transferring assets

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among the various corporate defendants. For instance, plaintiff seeks to allege that after Viegas

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expressed concerns about plaintiff’s incipient lawsuit in 2014, he began to transfer approximately

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$1.5 million in assets from Shanghai Marco to Kenpark, which then distributed this money to

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other corporate defendants, including Highton and Axus HK. (See Dkt. No. 195-2 ¶¶ 164, 260–

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62.) Additionally, plaintiff seeks to allege that many of the actions undertaken by the corporate

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defendants were done not only to avoid taxes in China, but also to “obtain an unfair competitive

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advantage because they could aggressively price their finished pencils at artificially low prices,

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and some of those prices were so low that they attracted PVI’s customers away from PVI.” (Id. ¶

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172.) According to plaintiff, the new allegations in its proposed second amended complaint are

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sufficient to state an alter ego theory of liability.

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Defendants have primarily raised two arguments: (i) that the proposed amendments would
be futile because plaintiff still cannot allege any inequitable result and (ii) the dismissed

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defendants would face undue prejudice as a result of having to re-litigate the claims.4 The Court

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agrees. The Court provided plaintiff with several months of jurisdictional discovery to allege facts

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sufficient to demonstrate that each of these dismissed defendants were alter egos of each other and

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the defendants upon whom personal jurisdiction is independently appropriate. In granting in part

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defendants’ motion to dismiss certain entities for lack of personal jurisdiction, the Court found that

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plaintiff had failed to establish the inequity prong of the alter ego analysis. Plaintiff’s new

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proposed allegations still fail to explain how plaintiff could satisfy the “inequity” prong of the

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alter ego inquiry. This is particularly so given that the Court denied dismissal as to some claims

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against Viegas and Roberta Trading, and other foreign defendants, who appear to be more central

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to plaintiff’s claims, have now been served.

United States District Court
Northern District of California

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Thus, further amendment of the operative complaint to re-allege alter ego claims against

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the defendants already dismissed for lack of personal jurisdiction would be futile. Accordingly,

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the Court DENIES plaintiff’s motion for leave to file a second amended complaint as to the same.

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B.

Claims Dismissed for Failure to State a Claim

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The Court dismissed Counts One and Two against Kenpark and Mr. Viegas and Counts

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Three and Four against Kenpark and Roberta Trading for failure to state a claim, in part because it

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rejected plaintiff’s arguments regarding alter ego liability. Plaintiff seeks to re-plead these claims

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based largely on their new allegations related to alter ego liability. With regard to the tort claims

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in Counts Three and Four, however, plaintiff also alleges additional actions committed by

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defendant Kenpark, which may state a claim for tortious interference. Thus, while the Court finds

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that that leave to amend these claims based on additional alter ego allegations would be futile,

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leave to amend the tortious interference claims as to Kenpark based on the proposed new

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allegations is appropriate. Accordingly, the Court GRANTS IN PART plaintiff’s leave to amend

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Counts Three and Four as to Kenpark, but otherwise DENIES plaintiff’s motion with respect to

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these counts.

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4

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Defendants also devoted several pages of their opposition to argue that plaintiff’s motion
for leave to amend should be deemed as a motion for reconsideration. The Court declines to do
so, and addresses plaintiff’s motion as presented based on the appropriate legal standards for the
same.
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C.

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Finally, plaintiff seeks to add a claim for fr
,
raudulent tra
ansfer agains Shanghai M
st
Marco and

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Ke
enpark and a claim for civil conspirac against K
cy
Kenpark only Defendan argumen against
y.
nts’
nts

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gra
anting leave to amend pr
rimarily focu
used on the d
defendants d
dismissed for lack of personal
r

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jurisdiction, an raised few arguments specific to t
nd
w
these additio claims. With regard to the
onal
d

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pro
oposed claim for fraudulent transfer, defendants argue only t the new allegations fail to raise
m
that

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me
eritorious cla
aims for relie because th are contr
ef
hey
rary to some of the evide
e
ence plaintif obtained
ff

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dur
ring jurisdict
tional discov
very. This argument doe not appea to be appro
a
es
ar
opriate even for a
n

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mo
otion to dism let alone a motion fo leave to fi an amend complain but are ra
miss
e
or
ile
ded
nt,
ather best

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res
served for su
ummary judg
gment or tria With rega to the pro
al.
ard
oposed claim for civil co
m
onspiracy

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United States District Court
Northern District of California

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aga
ainst Kenpar defendan argue that it is merely an attempt by plaintiff to repackage its
rk,
nts
t
y
e

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dis
smissed claim for tortiou interferen “premise on the sam deficient allegations. (Dkt. No.
ms
us
nce
ed
me
t
.”

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200 at 18.) Even if true, th analysis fo whether th
0
he
or
hose allegati
ions were in
nsufficient fo a tortious
or

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inte
erference cla does not necessarily mean they are also insu
aim
t
y
ufficient for a civil consp
piracy claim
m.

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In short, defend
dants have failed to dem
f
monstrate sub
bstantial prej
judice in allo
owing plaint to file a
tiff

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sec
cond amende complaint adding thes two additi
ed
t
se
ional claims According the Cour GRANTS
s.
gly,
rt

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pla
aintiff’s moti with resp to the sa
ion
pect
ame.

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III.
.

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Additional Claims aga
ainst Kenpa and Shanghai Marc
ark
co

CONCL
LUSION
For the foregoing re
easons, the Court ORDER as follow The Court GRANTS p
C
RS
ws:
plaintiff’s

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mo
otion with respect to (i) Counts Three and Four a to Kenpar only and ( additiona claims for
C
e
as
rk
(ii)
al

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frau
udulent tran
nsfer and civi conspiracy The Cour otherwise DENIES plai
il
y.
rt
intiff’s motio
on.

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Plaintif must file a second ame
ff
ended compl
laint within five (5) days of this Ord
s
der.

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De
efendants mu respond no later than twenty-one (21) days th
ust
n
hereafter. N extensions will be
No
s

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gra
anted.

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This Or
rder terminates Docket Number 195 .
N

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IT IS SO ORDERED.

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Da
ated: August 2, 2017
YVON GONZAL ROGER
NNE
LEZ
RS
UNITED STA
ATES DISTR
RICT COURT JUDGE

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