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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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 7 PRODUCTS AND VENTURES INTERNATIONAL, Plaintiff, 8 vs. 9 10 AXUS STATIONARY (SHANGHAI) LTD., ET AL., United States District Court Northern District of California Re: Dkt. No. 195 ROBERTA TRADING CORPORATION, Counterclaimant, 13 14 ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT Defendants. 11 12 CASE NO. 16-cv-00669-YGR vs. 15 PRODUCTS AND VENTURES INTERNATIONAL; AND CARLOS FAIRBANKS 16 Counterclaim Defendants. 17 Plaintiff Products and Ventures International brings this action against defendants1 for 18 alleged breaches of contract and tort claims relating to a wooden pencil distribution agreement. 19 The Court previously dismissed the complaint for lack of personal jurisdiction, but granted leave 20 to amend and provided a period for jurisdictional discovery. (Dkt. No. 72.) Plaintiff filed its 21 amended complaint on September 19, 2016 (Dkt. No. 100, “FAC”), and defendants again brought 22 a motion to dismiss. The Court granted in part and denied in part defendants’ motion, dismissing 23 defendants Axus HK, Highton, Howin, and Noblesse for lack of personal jurisdiction, and 24 dismissing Counts One and Two against Kenpark and Mr. Viegas and Counts Three and Four 25 26 27 28 1 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. 2 the only remain e ning claims were Counts One and Tw against R s wo Roberta Trad ding and Cou Three unts 3 and Four again Viegas.2 The Court denied plaint d nst d tiff’s request for leave to amend, but permitted t o t 4 pla aintiff to file a later motion for leave to amend sh hould further developme of the rec r ent cord warrant t 5 suc request, due to severa thousands of documen produced after the clo of jurisdi ch d al nts ose ictional 6 dis scovery. Current before the Court is pl tly laintiff’s mo otion for leav to file a se ve econd amend ded 7 8 com mplaint, whi plaintiff claims is bas on its rev ich sed view of late-produced d documents. ( (Dkt. No. 9 195 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 11 United States District Court Northern District of California 10 pla aintiff’s theory of alter eg liability; (ii) re-allege claims dism go e missed for fa ailure to state a claim; e 12 and (iii) add a claim for fra d c audulent tran nsfer against Kenpark an Shanghai Marco and a claim for t nd 13 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 14 15 pap and exh pers hibits submit on this motion, and f the reaso set forth more fully b tted m for ons below, the 16 Court GRANTS IN PART pla S aintiff’s mot tion for leave to file a second amend complain as e ded nt, 17 des scribed herei 3 in. 18 I. 19 LEGAL FRAMEWOR RK Under the Federal Rules of Civ Procedure courts are to grant leav to amend “when t R vil e, ve 20 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 21 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 22 Band of Missio Indians v. Rose, 893 F.2d 1074, 1 079 (9th Cir 1990). Ge on F r. enerally, a co should ourt 23 det termine whether to grant leave indul t lging “all inf ferences in fa favor of gran nting the mot tion.” 24 25 26 27 28 2 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 . 3 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 1 Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 ( e I (9th Cir. 199 99). That sai “leave to amend is id, o 2 not to be grante automatic t ed cally.” Jack kson v. Bank of Hawaii, 9 F.2d 138 1387 (9t Cir. 902 85, th 3 199 90). 4 The Co weighs the following factors in r ourt t g ruling on a m motion for le eave to amen (1) bad nd: 5 fait (2) undue delay; (3) prejudice to the opposin party; (4) futility of th amendmen and (5) th; e p ng he nt; 6 wh hether the mo ovant has pre eviously am mended its ple eadings. Fo oman v. Davi 371 U.S. 178, 182 is, 7 (19 962); see also Johnson v. Buckley, 35 F.3d 1067 1077 (9th Cir. 2004). Of these fa 56 7, h actors, “the 8 con nsideration of prejudice to the oppos o sing party [ ] carries the greatest wei ight.” Emine ence 9 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 11 United States District Court Northern District of California 10 par of the mov rt vant, repeate failure to cure deficien ed c ncies by ame endments pr reviously allo owed, undue e 12 pre ejudice to the opposing party . . . , [o futility of amendment . . . .’” Son e p or] f t noma Cty. As of ss’n 13 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 14 182 Ordinari however “courts wil defer cons 2). ily, r, ll sideration of challenges t the merits of a f to s 15 pro oposed amen nded pleadin until after leave to am ng mend is granted and the a amended plea ading is 16 file ed.” Netbula LLC v. Dis a, stinct Corp., 212 F.R.D. 534, 539 (N Cal. 20 , . N.D. 003). 17 II. DISCU USSION 18 Plaintif seeks leave to file a second amend complain essentially to include t ff e ded nt y three 19 cat tegories of al llegations an claims: (i re-allege c nd i) claims again the defend nst dants dismis ssed for lack k 20 of personal juri p isdiction bas on new documents re sed d efining plain ntiff’s theory of alter ego liability; y o 21 (ii) re-allege cl ) laims dismissed for failu to state a claim; and ( allege ad ure (iii) dditional cla aims for 22 frau udulent tran nsfer against Kenpark and Shanghai M d Marco and f civil cons for spiracy again Kenpark. nst 23 The Court addr resses each category sep c parately, belo ow. 24 A. Claims Aga ainst Defend dants Dismi issed for La of Perso ack onal Jurisdic ction 25 The Co previous dismissed defendants Axus HK, H ourt sly d s Highton, Ho owin, and No oblesse for 26 lac of persona jurisdiction. Plaintiff argued that t ck al these compa anies should be subject t personal d to 27 jurisdiction her based on an alter ego theory. A p re a plaintiff must make a prima facie sho t owing that 28 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 3 1 the corporations as separate entities would result in inequity or injustice; and (2) a unity of interest 2 and ownership between the corporations such that their separate personalities do not actually exist. 3 Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015) (citing Doe v. Unocal, 248 F.3d 914, 926 4 (9th Cir. 2001)). The Court found that plaintiff failed to satisfy the “inequity or injustice” prong 5 of the test. Specifically, the Court explained that difficulty in enforcing a judgment or collecting a 6 debt does not alone satisfy the requirement of an inequitable act. See Axon Sols., Inc. v. San Diego 7 Data Processing Corp., No. 09-CV-2543-JM, 2010 WL 1797028, at *2–3 (S.D. Cal. May 4, 2010) 8 (applying alter ego theory based on allegation that the city intended to dissolve an agency to 9 “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 11 United States District Court Northern District of California 10 “substantial evidence to support that [defendants] formed a single enterprise for the purpose of 12 committing a continuing fraud against buyers” (emphasis supplied)). 13 Plaintiff has proposed new allegations, which it claims demonstrates that Viegas and Xu 14 have actively sought to avoid liability and potential judgment by repeatedly transferring assets 15 among the various corporate defendants. For instance, plaintiff seeks to allege that after Viegas 16 expressed concerns about plaintiff’s incipient lawsuit in 2014, he began to transfer approximately 17 $1.5 million in assets from Shanghai Marco to Kenpark, which then distributed this money to 18 other corporate defendants, including Highton and Axus HK. (See Dkt. No. 195-2 ¶¶ 164, 260– 19 62.) Additionally, plaintiff seeks to allege that many of the actions undertaken by the corporate 20 defendants were done not only to avoid taxes in China, but also to “obtain an unfair competitive 21 advantage because they could aggressively price their finished pencils at artificially low prices, 22 and some of those prices were so low that they attracted PVI’s customers away from PVI.” (Id. ¶ 23 172.) According to plaintiff, the new allegations in its proposed second amended complaint are 24 sufficient to state an alter ego theory of liability. 25 26 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 27 28 4 1 defendants would face undue prejudice as a result of having to re-litigate the claims.4 The Court 2 agrees. The Court provided plaintiff with several months of jurisdictional discovery to allege facts 3 sufficient to demonstrate that each of these dismissed defendants were alter egos of each other and 4 the defendants upon whom personal jurisdiction is independently appropriate. In granting in part 5 defendants’ motion to dismiss certain entities for lack of personal jurisdiction, the Court found that 6 plaintiff had failed to establish the inequity prong of the alter ego analysis. Plaintiff’s new 7 proposed allegations still fail to explain how plaintiff could satisfy the “inequity” prong of the 8 alter ego inquiry. This is particularly so given that the Court denied dismissal as to some claims 9 against Viegas and Roberta Trading, and other foreign defendants, who appear to be more central 10 to plaintiff’s claims, have now been served. United States District Court Northern District of California 11 Thus, further amendment of the operative complaint to re-allege alter ego claims against 12 the defendants already dismissed for lack of personal jurisdiction would be futile. Accordingly, 13 the Court DENIES plaintiff’s motion for leave to file a second amended complaint as to the same. 14 B. Claims Dismissed for Failure to State a Claim 15 The Court dismissed Counts One and Two against Kenpark and Mr. Viegas and Counts 16 Three and Four against Kenpark and Roberta Trading for failure to state a claim, in part because it 17 rejected plaintiff’s arguments regarding alter ego liability. Plaintiff seeks to re-plead these claims 18 based largely on their new allegations related to alter ego liability. With regard to the tort claims 19 in Counts Three and Four, however, plaintiff also alleges additional actions committed by 20 defendant Kenpark, which may state a claim for tortious interference. Thus, while the Court finds 21 that that leave to amend these claims based on additional alter ego allegations would be futile, 22 leave to amend the tortious interference claims as to Kenpark based on the proposed new 23 allegations is appropriate. Accordingly, the Court GRANTS IN PART plaintiff’s leave to amend 24 Counts Three and Four as to Kenpark, but otherwise DENIES plaintiff’s motion with respect to 25 these counts. 26 4 27 28 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. 5 C. 2 Finally, plaintiff seeks to add a claim for fr , raudulent tra ansfer agains Shanghai M st Marco and 3 Ke enpark and a claim for civil conspirac against K cy Kenpark only Defendan argumen against y. nts’ nts 4 gra anting leave to amend pr rimarily focu used on the d defendants d dismissed for lack of personal r 5 jurisdiction, an raised few arguments specific to t nd w these additio claims. With regard to the onal d 6 pro oposed claim for fraudulent transfer, defendants argue only t the new allegations fail to raise m that 7 me eritorious cla aims for relie because th are contr ef hey rary to some of the evide e ence plaintif obtained ff 8 dur ring jurisdict tional discov very. This argument doe not appea to be appro a es ar opriate even for a n 9 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 10 res served for su ummary judg gment or tria With rega to the pro al. ard oposed claim for civil co m onspiracy 11 United States District Court Northern District of California 1 aga ainst Kenpar defendan argue that it is merely an attempt by plaintiff to repackage its rk, nts t y e 12 dis smissed claim for tortiou interferen “premise on the sam deficient allegations. (Dkt. No. ms us nce ed me t .” 13 200 at 18.) Even if true, th analysis fo whether th 0 he or hose allegati ions were in nsufficient fo a tortious or 14 inte erference cla does not necessarily mean they are also insu aim t y ufficient for a civil consp piracy claim m. 15 In short, defend dants have failed to dem f monstrate sub bstantial prej judice in allo owing plaint to file a tiff 16 sec cond amende complaint adding thes two additi ed t se ional claims According the Cour GRANTS s. gly, rt 17 pla aintiff’s moti with resp to the sa ion pect ame. 18 III. . 19 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 20 mo otion with respect to (i) Counts Three and Four a to Kenpar only and ( additiona claims for C e as rk (ii) al 21 frau udulent tran nsfer and civi conspiracy The Cour otherwise DENIES plai il y. rt intiff’s motio on. 22 Plaintif must file a second ame ff ended compl laint within five (5) days of this Ord s der. 23 De efendants mu respond no later than twenty-one (21) days th ust n hereafter. N extensions will be No s 24 gra anted. 25 This Or rder terminates Docket Number 195 . N 26 IT IS SO ORDERED. 27 Da ated: August 2, 2017 YVON GONZAL ROGER NNE LEZ RS UNITED STA ATES DISTR RICT COURT JUDGE 28 6

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