SWIFT v. PANDEY et al

Filing 46

OPINION fld. Signed by Judge Jose L. Linares on 4/30/14. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

ROBERT SWIFT,

Civil Action No. 13-650 (JLL)

Plaintiff,
OPINION
V.

RAMESH PANDEY, et al.,

Defendants.
LINARES, District Judge.

This matter comes before the Court by way of Defendants Ramesh Pandey
(“Ramesh”),
Bhuwan Pandey (“Bhuwan”), and Abhilasha Pandey (“Abhilasha”) (collec
tively “Defendants”)’
motion to dismiss Plaintiffs Second Amended Complaint pursuant to
Rule 12(b)(6) of the
Federal Rules of Civil Procedure. [CM/ECF No. 36.] The Court has
considered the submissions
made in support of and in opposition to the instant motion. No oral argum
ent was heard pursuant
to Federal Rule of Civil Procedure 78.

For the reasons that follow, Defendants’ motion to

dismiss is granted in part and denied in part.

The Court denies Defendants’ motion to dismiss

Counts Four and Seven for Unjust Enrichment against Ramesh and
Bhuwan. All remaining
counts, with the exception of Count Twelve, are dismissed with prejud
ice.
I.

2
BACKGROUND

Plaintiffs Amended Complaint was filed on August 5, 2013. In
an opinion issued on
November 13, 2013, this Court granted Defendants’ motion to dismis
s the Amended Complain.
[ECF No. 26.] Counts One, Two, Three, Four, Seven, Eight, Nine,
Eleven, Twelve, Thirteen, and
2

The Court accepts the following facts asserted in Plaintiffs Compl
aint as true solely for purposes of this motion.

1

Fourteen of the Amended Complaint were dismissed without prejudice Plaintiff
.
3
filed a Second
Amended Complaint on December 13, 2013. [CM/ECF No. 28.] According
to the Second
Amended Complaint, Plaintiff, Robert Swift

—

a Colorado resident

—

purchased all the right, title,

and interest to all assets of Xechem International, Inc. and Xechem, Inc. (collec
tively “Xechem”)
at Chapter 7 auction in Bankruptcy Court on August 24, 2011
(henceforth “Sec. Am. Compl.”)

(Second Amend. Compl.

¶ 6.) These assets included any and all right, title, and interest

to Xechem Pvt. Limited (“Xechem India”) and Xechem Pharmaceuticals Nigeri
a, Ltd.

(Id.)

This action stems from the alleged wrongful conduct of the Defendants
in connection with
Xechem and Xechem India.
Xechem India is based out of New Delhi, India and is owned and operated by Rames
h
and Bhuwan. (Id. at

¶J 12, 14-15.) Plaintiff alleges that Xechem India was a “shell company”

that the Defendants used to funnel money out of Xechem for their own financial
benefit. (See,
e.g., Id. at

¶ 27-42.) Ramesh was the Chief Executive Officer and Treasurer of Xechem from

1994 through July 5, 2007. (Id. at

¶ 14.) Ramesh is also the Chief Executive Officer and a

director of Xechem India. (Id.) Bhuwan was an officer of Xechem from
2002 until May 29,
2007. (Id. at ¶15.) He is also General Manager and a director of Xechem India.
(Id.) In 1998,
Ramesh transferred nearly all of his shares in Xechem India to Bhuwan, who,
as of August 2007,
owned nearly 100 percent of its stock. (Id. at
¶ 32-33.) Abhilasha Pandey “worked for Xechem
India since at least January 2000, and was the Sarbanes-Oxley.. Compl
iance Manager for
.

Xechem from June 2006 to July 2007.” (Id. at 164.)
¶
Plaintiff joined Xechem’s board of directors in May 2007 as the represe
ntative of the
interest of convertible bondholders he had brought to the company. (Id.
at

¶J 6, 51.) Over $2

Count Six was withdrawn and Counts Five, Ten, and Fifteen were dismis
sed with prejudice.

2

million of the money raised through the convertible bond offering was from Plainti
ffs friends
and family. (Id.)
Plaintiff alleges that Ramesh told the Xechem Board of Directors that Xechem India
was
a subsidiary of Xechem, (Id. at

¶

17), and that Xechem should lend money to Xechem India.

(Id.) As a result, Ramesh wired money from Xechem to Xechem India, and
“[bietween July 1,

2000 and April 16, 2007, Xechem India received $977,394 from Xechem.” (Id. at
¶J 17-18.) At a
May 29, 2007 meeting of Xechem’s board of directors, “the Board demanded
an accounting of
all money lent to Xechem India”. (Id. at

¶

52.) Ramesh told the board that $700,000 had been

lent from Xechem from Xechem India, that $100,000 of that loan had been sent
recently, “and
that Xechem India had no assets.” (Id.) Plaintiff alleges that aihough both Xeche
m and Xechem
India treated this transaction in their financial records as a loan, there was no
loan contract or
repayment agreement, and the transaction was not secured by collateral.
(Id. at

¶

19-23.)

Ramesh was subsequently removed from his position as Chief Executive
Officer, President, and
Treasurer of Xechem on July 5, 2007. (Id. at
Chapter Il bankruptcy. (Id. at

¶

¶

51.) On November 10, 2008, Xechem filed for

52.) Xechem India has not repaid the principal or interest on

this loan to Xechem, which, at this point, is over $2 million. (Id. at 83.)
¶
Plaintiff claims that all of the Defendants concealed and/or failed to disclos
e that Xechem
India was owned by Ramesh and Bhuwan, contrary to representation
s that Ramesh had
previously made to Xechem’s board of directors and the “investing public”
that Xechem India
was a “subsidiary” of Xechem. (Id. at 77.) Plaintiff alleges that Xeche
m’s Board of Directors
believed that the company owned two-thirds of Xechem India, and this
belief was based on
statements in “SEC filings by Ramesh, statements made by Ramesh to
the Board, and other non
public documents that refer to Xechem India as a subsidiary of Xeche
m.” (Id.

3

¶

73.) Plaintiff

claims that Xechem’s board would not have authorized the loan “if it had known that
[Xechem
India] was not a Company subsidiary” and that “Bhuwan owned 99.8% of Xeche
m India.” (Id. at

¶ 72, 74.)
Plaintiff asserts that, through Xechem India, Ramesh and Bhuwan, assisted by Abhila
sha,
used the proceeds of the “sham loan” to: “(1) lease office space in India from Rames
h; (2) pay
money to relatives of Ramesh and Bhuwan in India; (3) pay the Defendants’ ‘person
al expenses’;
(d) buy ‘assets in India’; (4) acquire a leasehold interest in certain land in India; and (5)
purchase
a ‘spray dryer’ machine.” (Id. at

¶ 82.) In addition, Plaintiff alleges that Defendants concealed

these assets from Xechem’s board. (Id.)
In light of the foregoing, Plaintiffs Amended Complaint asserts twelve causes of
action
that fall into the following nine categories: (1) breach of fiduciary duty as
against Ramesh,
Bhuwan, and Abhilasha; (2) breach of duty of loyalty as against Rames
h, Bhuwan, and
Abhilasha; (3) ultra vires act as against all Defendants; (4) unjust enrichment
as against Ramesh,
Bhuwan, Abhishala, and Xechem India; and (5) civil conspiracy as agains
t all Defendants.
Defendants now move to dismiss all claims asserted in the Amended Compl
aint pursuant to
Federal Rule of Civil Procedure 1 2(b)(6).
II.

LEGAL STANDARD

For a complaint to survive dismissal, it “must contain sufficient factual matter
, accepted
as true, to ‘state a claim to relief that is plausible on its face.’ “Ashcroft
v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Threadbare recitals
of the elements of a cause of action, supported by mere conclusory statem
ents, do not suffice.”
Id.

4

In determining the sufficiency of a complaint, the Court must accept all well-pleaded
factual allegations in the complaint as true and draw all reasonable inferences in
favor of the
non-moving party. See Phillips v. Cnly. of Allegheny, 515 F.3d 224, 234 (3d
Cir. 2008). But,
“the tenet that a court must accept as true all of the allegations contained
in a complaint is
inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. Thus, legal conclusions
draped in the
guise of factual allegations may not benefit from the presumption of truthfu
lness. Id.
III.

DISCUSSION

Defendants present a variety of arguments in support of their motion to dismis
s. The Court will
address each argument, in turn.
1.

Breach of Fiduciary Duty and Duty of Loyalty Claims—Counts One, Three,
Five,
Six, Eight and Nine

Counts One, Three, Five, Six, Eight and Nine allege, in pertinent part, that Defend
ants
Ramesh, Bhuwan and Abhilasha respectively breached their fiduciary duties
of loyalty to
Xechem. In particular, Counts One, Five and Eight (captioned “Breach of Fiduci
ary Duty”)
allege that Defendants breached their respective fiduciary duties of loyalty
to Xechem by
engaging in self-dealing. Counts Three, Six and Nine (captioned “Breach of
Duty of Loyalty”)
allege that Defendants breached their respective duties of loyalty to Xechem
by misappropriating
its money. Plaintiff alleges that each of the Defendants breached their respec
tive fiduciary duties
of loyalty to Xechem by: (I) engaging in self-dealing, and (2) misappropriat
ing Xechem’s funds.
In seeking dismissal of the foregoing claims, Defendants urge the Court
to apply the substantive
law of the state of Delaware—not New Jersey.

Plaintiff’s Second Amended Complaint

indicates, instead, that New Jersey law should apply to such claims.
The Court agrees, as a
general matter, that the possible laws to be applied are Delaw
are (Xechem’s state of

5

4
incorporation) and New Jersey (Xechem’s principal place of business and the
state in which
Defendants are allegedly domiciled).
6
A.

Applicable Law

Generally speaking, since this Court exercises its diversity jurisdiction over this
action,
the law to be applied is that of the forum state—New Jersey.

See Am. Cyanamid Co. v.

Fermenta Animal Health, 54 F.3d 177, 180 (3d Cir. 1995). If a choice of law
dispute arises, a
federal court sitting in diversity applies the choice of law principles of the
forum state. See
Klaxon Co. v, Stentor Elec. Mfg. Co., 313 U.S. 487, 496—97, 61 S.Ct. 1020,
85 LEd. 1477
(1941); Warriner v. Stanton, 475 F.3d 497, 499—500 (3d Cir. 2007). In P. V.
v. Camp Jaycee, the

New Jersey Supreme Court held that the “most substantial relationship” test enunci
ated in the
Restatement (Second) of Conflict of Laws

§ 188 applies to choice of law disputes arising under

both contract and tort law. 197 N.J. 132, 136 (2008). New Jersey’s “most
significant
relationship” test consists of two prongs. First, a court must examine the
substance of the
potentially applicable laws in order to determine if an actual conflict exists.
Id. at 143 (citing
Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir. 2006)).

If there is no actual conflict, the

analysis ends and the court applies the law of the forum state. See In re
Ford Motor Co., 110
F.3d 954, 965 (3d Cir. 1997); Rowe v. Hoffman—La Roche, Inc., 189 N.J.
615, 621, 917 A.2d
767 (2007). However, if a conflict is found, the court must then determ
ine which state has the
“most significant relationship” to the claim at issue, as analyzed under the
Restatement (Second)
of Conflict of Laws. Camp Jaycee, 197 N.J. at 136. This test is applied
“on an issue-by-issue
basis” and “is qualitative, not quantitative.” Id. at 143.

‘

6

Amend. Compi. 43.
Amend. Compi., ¶7-1O.

6

Turning now to the first prong of New Jersey’s “most significant relationship” test, the
Court agrees with Defendant that there is an actual conflict because the statute of limitat
ions for
bringing tort claims in New Jersey is six years from the date of accrual, see N.J.S.A.

8
§ 2A:14-1,

whereas Delaware imposes a three-year statute of limitations for breach of fiduciary duty claims
,
see 10 Del.C.

§ 8l06. Based on the facts pled, the Court construes Plaintiff’s breach of

fiduciary duty claims as accruing at some point in 2007. (Sec. Am. Compi.,

¶ 24))0 Thus, the

apparent conflict between New Jersey’s six year statute of limitations and Delaware’s
three year

8

In particular, the statute provides:
Every action at law for trespass to real property, for any tortious injury to real or
personal property, for taking, detaining, or converting personal property, for
replevin of goods or chattels, for any tortious injury to the rights of another not
stated in sections 2A: 14-2 and 2A: 14-3 of this Title, or for recovery upon a
contractual claim or liability, express or implied, not under seal, or upon an
account other than one which concerns the trade or merchandise between
merchant and merchant, their factors, agents and servants, shall be commenced
within 6 years next after the cause of any such action shall have accrued.

N.J.S.A. 2A:14-1.
In particular, the Delaware statute provides:
No action to recover damages for trespass, no action to regain possession of
personal chattels, no action to recover damages for the detention of personal
chattels, no action to recover a debt not evidenced by a record or by an
instrument under seal, no action based on a detailed statement of the mutual
demands in the nature of debit and credit between parties arising out of
contractual or fiduciary relations, no action based on a promise, no action based
on a statute, and no action to recover damages caused by an injury
unaccompanied with force or resulting indirectly from the act of the defendant
shall be brought after the expiration of 3 years from the accruing of the cause of
such action; subject, however, to the provisions of § 8108-8110, 8119 and 8127
of this title.
10 Del.C.

§ 8106.

‘°

See generally Fike i’. Ruger, 754 A.2d 254, 260 (Del. Ch. 1999) (“A cause of action
accrues at the moment of the
wrongful act, even if the plaintiff is ignorant of the wrong.”); Tevis v. Tevis, 79
N.J. 422,431(1979) (stating that a
cause of action in tort usually accrues “at the time of the commission of the wrong
and the suffering of injury”). As
discussed in greater detail below, Plaintiff provides no compelling legal argument
or binding legal authority
suggesting that his fiduciary duty claims accrued at a later date.

7

statute of limitations would be material in the adjudication of Plaintiff’s breach of
fiduciary duty
claims inasmuch as such claims would be time-barred if Delaware law is found apply.
’
to 1
Before reaching the second prong of New Jersey’s “most significant relationship”
test,
the Court notes that “[u]nder New Jersey’s choice-of-law rules, the law
of the state of
incorporation governs internal corporate affairs.” Fagin v. Gilmartin, 432 F.3d
276, 282 (3d Cir.
2005) (citing Brotherton v. Celotex Corp., 202 N.J. Super. 148 (Law Div. 1985))
; see also North
Am. Steel Connection, Inc. v. Watson Metal Products Corp., 515 Fed. Appx.
176, 182 n. 14 (3d
Cir. 2013) (“Although New Jersey law governs NASCO’s claims genera
lly, Delaware law
governs the internal affairs of a Delaware entity.”). More specifically, “under the
internal affairs
doctrine, anyone controlling a Delaware corporation is subject to Delaware law
on fiduciary
obligations to the corporation and other relevant stakeholders.” In re Telegl
obe Commc’ns Corp.,
493 F.3d 345, 386 (3d Cir. 2007) (citing In re Topps Co. S’holders Litig., 924
A.2d 951, 960
(Del. Ch. 2007) (explaining that the law of fiduciary obligations is one
of the most important
ways a state regulates a corporation’s internal affairs) and Restatement (Secon
d) of Conflict of
Laws

§ 306 (1971)). Xechem is a Delaware corporation. [See CM/ECF No. 28, ¶

43.]

Plaintiff’s claims of breach of fiduciary duty and breach of duty of loyalty
are all premised on
the notion that each of the Defendants owed a fiduciary duty to Xeche
m by virtue of their
respective roles within the company and that they each breached their
respective duties by
misappropriating Xechem’s money and by engaging in other forms of self-de
aling, resulting in
financial injury to Xechem. This Court finds that such allegations—of duties
owed by Ramesh,
Bhuwan and Abhilasha to Xechem by virtue of their roles as directo
r and officers of the
company—fall squarely within the scope of “internal affairs” as contem
plated by the internal
affairs doctrine. See generally Edgar v. MITE Corp., 457 U.S. 624,
645 (1982) (“The internal
Plaintiff’s Complaint was filed in January 2013.

8

affairs doctrine is a conflict of laws principle which recognizes that only one State
should have
the authority to regulate a corporation’s internal affairs—matters peculiar
to the relationships
among or between the corporation and its current officers, directors, and shareh
olders—because
otherwise a corporation could be faced with conflicting demands.”). To
the extent Plaintiff
attempts to argue that the claims at issue are distinguishable from those alleged
in the Intarome
12
case, or do not otherwise fall within the internal corporate affairs doctrine becaus
e the claims
are not brought by Xechem’s shareholders, the Court finds Plaintiffs
argument to be
unconvincing. Although Plaintiff correctly notes that this action is not brough
t as a shareholders
derivative action, Xechem—through Plaintiff—is suing its own former directo
r and officers for:
(1) allegedly engaging in self-dealing and competing against the company while
acting in their
capacity as officers of the company, and (2) for allegedly misappropriat
ing the company’s
money, also while acting in their capacity as officers of the company. It would
be difficult to
conceive of a situation that could be any more “peculiar to the relationships
among or between
the corporation and its current officers, directors, and shareholders” than the
fact pattern alleged
by Plaintiff in the Second Amended Complaint. Edgar, 457 U.S. at 645.

Thus, pursuant to the

internal corporate affairs doctrine, the Court begins its prong two analys
is with the presumption
that Delaware law governs claims relating to Xechem’s internal corporate
3
affairs.’ See Fagin,
432 F.3d at 282.

12

Intarome Fragrance & Flavor Corp.
2009).

V.

Zarkades, Civ. No. 07-873, 2009 WL 931036, at *14 (D.N.J. March 30,

13

“The internal affairs doctrine, however, is not without exception. As stated
in § 302(2) of the Restatement, ‘[t]he
local law of the state of incorporation will be applied to determine such
issues, except in the unusual case where,
with respect to the particular issue, some other state has a more signifi
cant relationship to the occurrence and the
parties, in which event the local law of the other state will be applied
.’ “Intarome Fragrance & Flavor Corp. V.
Zarkades, Civ. No. 07-873, 2009 WL 931036, at *14 (D.N.J. March
30, 2009). Thus, the Court will proceed in its
choice of law analysis to determine if New Jersey, nevertheless, has more
a
significant relationship to the parties
and/or transactions in question. See generally Restatement (Second) of Confli
ct of Laws § 302 cmt. b (1971) (“The

9

The second step of the most significant relationship test is to weigh the
factors
enumerated in the section of the Restatement that corresponds to particular cause
of action, in
this case,

§ 309 of the Restatement (Second) of Conflict of Laws (1971). Section 309 provides:
The local law of the state of incorporation will be applied to
determine the existence and extent of a director’s or officer’s
liability to the corporation, its creditors and shareholders, except
where, with respect to the particular issue, some other state has a
more significant relationship under the principles stated in 6 to
§
the parties and the transaction, in which event the local law of the
other state will be applied.

Restatement (Second) of Conflict of Laws

§ 309 (1971). Section 6 of the Restatement (Second)

of Conflict of Laws, in turn, provides:
(1) A court, subject to constitutional restrictions, will follow a
statutory directive of its own state on choice of law.
(2) When there is no such directive, the factors relevant to the
choice of the applicable rule of law include
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the
relative interests of those states in the determination of the
particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(1) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to
be applied.
Restatement (Second) of Conflict of Laws

§ 6 (1971). Absent a statutory directive from the

forum state, the Court looks to the considerations set forth in subsection two
of § 6. “Reduced to
their essence, the section 6 principles are: “(1) the interests of interstate
comity; (2) the interests
of the parties; (3) the interests underlying the field of tort law; (4)
the interests of judicial
administration; and (5) the competing interests of the states.” Camp Jaycee
, 197 N.J. at 147.
principles stated in § 6 underlie all rules of choice of law and are
used in evaluating the significance of a
relationship, with respect to the particular issue, to the potentially interes
ted states, the occurrence and the parties.”).

10

Turning now to the

§ 6 factors, the first consideration—the interest of interstate comity—

seeks “to further harmonious relations between states and to facilitate commercial
intercourse
between them.” Restatement (Second) of Conflict of Laws

§ 6 cmt. d. In other words, “[ut

considers ‘whether application of a competing state’s law would frustrate the policie
s of other
interested states.’

“

Camp Jaycee, 197 N.J. at 152 (citation omitted). In Delaware, “the purpose

of an award of damages in a tort action is just and full compensation, with the focus
on the
plaintiffs injury and loss.” DeAngelis v. Harrison, 628 A.2d 77, 81 (Del. 1993)
(citing Jardel
Co., Inc. v. Hughes, 523 A.2d 518 (Del. 1987)). In Delaware, the “public policy
underlying
statutes of limitation in general [is] to compel timely pursuit of claims and
to avoid the
adjudication of stale claims.” State ex rd. Brady v. Pettinaro Enters., 870 A.2d 513,
532 (Del.
Ch. 2005).

In New Jersey, as the Third Circuit has consistently identified, the policie
s

underlying tort consist “primarily of compensation and deterrence.” Warriner v.
Stanton, 475
F.3d 497, 501 (3d Cir. 1007) (quoting Schum v. Bailey, 578 F.2d 493, 496
(3d Cir. 1978)
(internal quotations omitted)). The policies underlying New Jersey’s statutes of
limitations are to
“induce litigants to pursue their claims diligently so that answering parties
will have a fair
opportunity to defend” and “to spare the courts from litigation of stale claims
.” Galligan v.
Westfield Centre Serv., Inc., 82 N.J. 188, 192 (1980) (citations omitted). Thus,
the Court finds
that New Jersey and Delaware have similar policies regarding their statutes of
limitations and
general tort laws, such that application of Delaware law would not frustra
te the policy of New
Jersey.
The second factor—the interests of the parties—is “a factor of extreme import
ance in the
field of contracts,” but generally “plays little or no part in a choice-of-law
question in the field of
torts.” Fu v. Fit, 160 N.J. 108, 123 (1999) (citing Restatement (Second)
of Conflict of Laws

11

§

145 (1971) comment b). “That is so because persons who cause unintentiona
l injury ‘usually act
without giving thought to the law that may be applied to determine the legal
consequences of this
conduct.’ “Id.
The third factor—the interests underlying the field of tort law—largely overlap
s with the
first factor. As discussed above, the Court has concluded that the public
policies underlying
Delaware’s and New Jersey’s tort laws and statutes of limitations are similar
. For this reason,
the Court finds that the third factor does not serve to change the presumptive
choice of law under
the internal affairs doctrine.
The fourth factor—the interests of judicial administration—requires the court
to consider
“issues such as practicality and ease of application.” Camp Jaycee, 197 N.J.
at 154. Here, the
application of New Jersey law would be slightly easier than the application
of Delaware law, but
this factor, without more, is not sufficient to outweigh the internal affairs
doctrine.
The New Jersey Supreme Court has described the last factor—the compe
ting interests of
the states—as “the most significant factor in the tort field.” Fu, 160 N.J.
at 125. This factor
requires courts to consider:
whether application of a competing state’s law under the
circumstances of the case “will advance the policies that the law
was intended to promote.” The “law” can be either the decisional
or statutory law of a state. The focus of this inquiry should be on
“what [policies] the legislature or court intended to protect by
having that law apply to wholly domestic concerns, and then,
whether those concerns will be furthered by applying that law to
the multi-state situation.” This is another way of saying that “[i]f a
state’s contacts [with the transaction] are not related to the policies
underlying its law, then that state does not possess an interest in
having its law apply. Consequently, the qualitative, not the
quantitative, nature of a state’s contacts ultimately determines
whether its law should apply.”

12

Pfizer, Inc. v. Employers Ins, of Wausau, 154 N.J. 187, 198 (1998). The
Court agrees with

Defendants that Plaintiff’s allegations of self-dealing and misappropriation of Xeche
m’s money
are, by their very nature, inextricably intertwined with the internal affairs
of Xechem.

In

Plaintiff’s own words, Defendants misled Xechem’s Board into violating Xeche
m’s policy of not
lending money to non-subsidiaries, and unwittingly transferring money to a
company owned by
Ramesh and Bhuwan. (Sec. Am. Compi,

¶ 45).

Plaintiff does not allege any substantive facts

tying Defendants’ alleged misconduct in this regard with the State of New
Jersey. Plaintiff,
himself, is a citizen of Colorado. (Id. at ¶ 2). The only real connection to the
State of New Jersey
is that Defendants are alleged to be domiciled in New Jersey, and that
Xechem employed
Defendants in its corporate offices in New Jersey. (Id.). “The domicile, residen
ce, place of
incorporation, and place of business of a defendant corporation are relevan
t, although not
dispositive, considerations in a choice-of-law determination.” Fu, 160 N.J.
at 133. Moreover,
“unlike more conventional torts, a breach of fiduciary duty by an officer
or director based on
actions causing the corporation to incur additional debt is not manife
sted through identifiable
physical conduct or harm.

As such, the corporation sustains an injury in the state of

incorporation and wherever it has offices.” In re Innovation Fuels, Inc.,
No. 13-1004, 2013 WL
3835827, at *6 (Bankr. D.N.J. 2013).

Absent any specific facts establishing a significant

connection to New Jersey, the Court does not find that the weight of
the fourth and/or fifth
factors—which could arguably sway in favor of New Jersey—are suffici
ent to justif,’ departure
from the presumption of the internal affairs doctrine.
Thus, the Court concludes that Plaintiff’s breach of fiduciary duty and
breach of duty of
loyalty claims are governed by the law of the state of Xechem’s incorp
oration—Delaware law.
See, e.g., North Am. Steel Connection, Inc., 515 Fed. Appx. at
182 n. 14.

13

(3d Cir. 2013)

(“Although New Jersey law governs NASCO’s claims generally, Delaware law governs the
internal affairs of a Delaware entity.”).
B.

Analysis

Defendants move to dismiss Counts One, Three, Five, Six, Eight and Nine as timebarred. Each of the foregoing counts allege that Defendants Ramesh, Bhuwan and Abhilasha
breached their respective fiduciary duties of loyalty to Xechem by misleading Xechem’s Board,
engaging in self-dealing, and misappropriating Xechem’s money. As stated above, Delaware
imposes a three-year statute of limitations for breach of fiduciary duty claims. See 10 Del.C.

§

8106; Fike v. Ruger, 754 A.2d 254, 260 (Del. Ch. 1999) (“Under Delaware law, a three-year
statute of limitations applies to claims for breach of contract or breach of fiduciary duty.”) “A
.
cause of action accrues at the moment of the wrongful act, even if the plaintiff is ignora of the
nt
wrong.” Fike, 754 A.2d at 26-261 (citation omitted).

Plaintiff’s fiduciary duty claims, first

asserted in January 2013, relate to matters occurring in 2007. Such claims are therefo
re timebarred unless some basis exists to toll the running of that statute. Id. Plaintiff “bears the burden
of proving that tolling is available.” Id.
Generally speaking, “the limitations period is tolled until such time that person
s of
ordinary intelligence and prudence would have facts sufficient to put them on inquiry which,
if
pursued, would lead to the discovery of the injury.” Fike, 754 A.2d at 261. Plainti
ff himself
alleges that Xechem was aware that Xechem India was not its subsidiary as early
as May 29,
2007, and no later than September 20, 2007. (Sec. Am. Compl.,

¶J 52, 62-63.) The Court can

also draw the reasonable inference that Xechem was aware of Rames
h’s alleged
misappropriation and self-dealing—from which Bhuwan and Abhilasha’s alleged
liability
flows—as of the date on which he was removed from office as CEO, Preside
nt and Treasurer of

14

the Xechem—July 5, 2007. (Sec. Am. Compl.,

¶

24). See generally Iqbal, 556 U.S. at 663.

Plaintiff has given the Court no basis on which to find otherwise.
“The theory of equitable tolling will stop the running of the limitations period ‘for
claims
of wrongful selfdealing, even in the absence of actual fraudulent concealment,
where a plaintiff
reasonably relies on the competence and good faith of a fiduciary.’ “[‘ike, 754 A.
2d at 261. But
even equitable tolling “will only last until they knew or had reason to
know of the facts
constituting the alleged wrong.

Id.

As discussed above, the facts alleged in the Second

Amended Complaint allow the Court to draw the reasonable inference that Xeche
m knew of the
facts constituting Ramesh’s alleged misconduct by the date on which he was
removed from
office as CEO, President and Treasurer of Xechem, or at the very least by Septem
ber 20, 2007—
the date the company filed an SEC statement noting that it located a document
in India stating
that Xechem India was owned 100% by “Dr. Pandey and two family membe
rs.” (Sec. Am.
Compi., ¶ 52, 60, 63.

Plaintiff has given the Court absolutely no basis on which to find

otherwise.
To be clear, Plaintiff has come forward with no legal argument or legal author
ity even
suggesting that the statute of limitations should be tolled in this case.’ In
4
fact, Plaintiff does not
even raise an equitable tolling argument.’ As the Court clearly stated
5
in its prior Opinion,
“[w]hile the Court is mindful of Plaintiff’s pro se status, it is not the Court’
s responsibility to

“

To the extent any aspect of Plaintiffs opposition brief should be constru
ed as suggesting that the statute of
limitations pertaining to his fiduciary duty claims should be tolled until
the date on which he purchased all right, title
and interest in any and all assets of Xechem—August 24, 201 1—the Court
sees no legal basis for tolling the statute
of limitations in that manner. To the contrary, Plaintiff concedes that
he stands in Xechem’s shoes in bringing this
action. In other words, there is no question that plaintiff, as assigne
e of Xechem’s rights and interests, seeks redress
for the damages allegedly sustained by Xechem. See, e.g., Sec. Am.
Compl., ¶ 92 (“Xechem has been injured by
loss of the economic benefit
); 107 (“Ramesh damaged Xechem as a result of his acts.
‘

To the contrary, it is Plaintiffs position that New Jersey’s six-yea statute
r
of limitations should apply to Plaintiffs
breach of fiduciary duty claims.

15

engage in its own legal research in order to find legal authority
to support Plaintiffs
arguments—nor would it be proper for the Court to do so. Again, the
Court has done its best,
under the circumstances, to assess Defendants’ legal arguments, along with
the arguments raised
by Plaintiff in opposition, despite Plaintiffs failure to cite to any legal
authority in support of
same.” November 13, 2013 Op. at 6. The Court has also made every effort
to liberally construe
Plaintiffs pro se submissions. That being said, the Court cannot formul
ate and/or rule on legal
arguments that Plaintiff, himself, has not made.
As such, for the reasons set forth above, the Court finds that Plainti
ffs breach of
fiduciary duty and breach of fiduciary duty of loyalty claims are
time-barred.

Defendants’

motion to dismiss Counts One, Three, Five, Six, Eight and Nine is granted
. Counts One, Three,
Five, Six, Eight and Nine of Plaintiffs Second Amended Complaint
are hereby dismissed with
prejudice. 16
2.

Ultra Vires—Count Two

‘

Even assuming, arguendo, that New Jersey law were to apply to Plainti
ffs breach of fiduciary duty claims, such
claims would still be dismissed with prejudice inasmuch as New Jersey
courts have consistently held, as a matter of
public policy, that tort claims cannot be assigned before judgment. See
Integrated Solutions, Inc. v. Serv. Support
Specialties, Inc., 124 F.3d 487, 490 (3d Cir. 1997) (citing Village ofRidg
ewood v. Shell Oil Co., 289 N.J. Super.
181, 673 A.2d 300, 307—08 (1996)); Costanzo v. Costanzo, 248 N.J. Super.
116, 121 (LawDiv.l991) (“[un New
Jersey, as a matter of public policy, a tort claim cannot be assigned.”);
see, e.g., In re O’Dowd, 233 F.3d 197, 201
(3d Cir. 2000) (“A true purchase of the omitted claims would have been
void under the New Jersey common law
prohibition against assigning prejudgment tort claims.”). Plaintiff
does not dispute that a prejudgment tort claim
cannot be assigned under New Jersey law; rather, Plaintiff maintains
that a breach of fiduciary duty claim “is not
necessarily a tort claim.” (P1. Opp’n Br. at 6). Plaintiff cites to absolu
tely no legal authority in support of this
position. In any event, the Appellate Division has specifically recogn
ized claims for breach of the duty of loyalty
and breach of fiduciary duty, in the corporate context, as torts.
See Wolfson v. Bonello, 270 N.J. Super. 274, 291 n.
12 (App. Div. 1994) (“The alleged torts committed by Bonello
included breach of the duty of loyalty, breach of
fiduciary duty, waste of corporate assets, misappropriation of
corporate oppoffimity and conversion.”); In re
Innovation Fuels, Inc., 2013 WL 3835827, at *6 (recognizing that
breach of fiduciary duty in corporate context is a
tort); see generally In re Estate ofLash, 169 N.J. 20, 27 (2001) (“Brea
ch of fiduciary duty is a tort.”). Plaintiff does
not dispute that he asserts his claims of breach of duty of loyalty
and breach of fiduciary duty on behalf of—or as
assignee of rights belonging to—Xechem. In light of the forego
ing, Plaintiff has failed to state a claim of breach of
duty of loyalty and!or breach of fiduciary duty that is plausible on
its face. See, e.g., Conopco, Inc. v. McCreadie,
826 F. Supp. 855, 867 (D.N.J. 1993) (“It is clear that under New
Jersey law, choses in action arising out of tort are
not assignable prior to judgment. Because Conopco asserts its claims
of professional negligence and malpractice
only as an assignee, those tort claims must fail as a matter of law.”).

16

Count Two of Plaintiff’s Second Amended Complaint alleges that: (a) “Xech
em was not
in the business of loaning money,” (b) “Xechem lacked the capacity or power
to loan money to a
company that was not its subsidiary,” and (c) “Ramesh transferred substa
ntial assets of Xechem,
$977,3940.00 and a spray dryer worth $106,288 to Xechem India withou
t board of director
approval, which is an ultra vires act.” (Sec. Am. Compi.,

¶J

99-103.) Defendants move to

dismiss this count on two grounds: (1) Plaintiff has failed to allege
facts establishing that the
alleged transfer of assets exceeded Xechem’s powers under its articles
of incorporation, and (2)
Plaintiff has failed to allege facts establishing that he has standing to bring
an ultra vires claim—
i.e., he has failed to allege sufficient facts establishing that he is Xechem’s
legal representative—
as opposed to merely an assignee of certain of its rights.
Even assuming, arguendo, that Plaintiff has standing to pursue an ultra
vires claim on
behalf of Xechem, the Court finds that dismissal of this claim is proper
18
given that Plaintiff has
once again failed to allege any facts which would allow the Court
to draw the reasonable
inference that Ramesh’s alleged “sham loan” and transfer of the spray
dryer to Xechem India
exceeded Xechem’s powers, or the powers conferred on the Board,
as provided in Xechem’s
governing documents.
As stated in the Court’s prior Opinion, the Appellate Division has
held that “[i]f a board

exceeds its powers as provided in its governing documents, then the
board’s action is ultra
vires.” Cmty. Access Unlimited v. Rockchffe, No. L-3487-07, 2012
WL 1431267, at *3 n. 4 (N.J.
Super. App. Div. April 26, 2012) (citing Verna v. Links at Valleybrook
Neighborhood Ass ‘n, 371
N.J. Super. 77, 91—92 (App. Div. 2004)).

Black’s Law Dictionary defines “governing

document” as “[a] document that defines or organizes an organization,
or grants or establishes its
See N.J.S.A. 14A:3-2. The parties do not dispute that
New Jersey law applies to this claim. See generally Am.
Cvanamid Co. v. Fermenta Animal Health, 54 F.3d 177, 180 (3d Cir.
1995).

17

authority and governance.

An organization’s governing documents may include a charter,

articles of incorporation or association, a constitution, bylaws and rules.” Black’
s Law
Dictionary 555

th
9
(

ed. 2009).

The Second Amended Complaint makes no reference to

Xechem’s governing document(s).

Nor does the Second Amended Complaint allege that

Xechem, or its Board of Directors, lacked authority to lend money or transfer assets to other
companies. Alleging that Xechem was not in the business of making loans, or that it would not
have lent money to Xechem India had it known it was not its subsidiary, is insuffi
cient to
plausibly allege that such acts were beyond the company’s powers. Swift states that
Ramesh
transferred the assets without Board approval, which was an alleged ultra vires act, but his
entire
Complaint is premised on the assertion, alleged throughout, that Ramesh misled the Board
into
believing that Xechem India was its subsidiary, and therefore into approving a “sham
loan.”
(Compare Sec. Am. Compl.,

¶ 103

with

¶J

75, 80.) It is not plausible for Swift to assert only

under his ultra vires claim that the Board did not approve the loan, and this fact is, in
any event,
immaterial for the reasons stated below.
“In its true sense the phrase ultra vires describes action which is beyond the purpos
e or
power of the corporation.” McDermott v. Bear Film Co., 219 Cal. App. 2d 607,
610, 33 Cal.
Rptr. 486, 489 (Cal. App. 1963). Based on the facts pled, the Court cannot draw the
reasonable
inference that Ramesh’s actions—in transferring assets to Xechem India with or withou
t Board
approval—were beyond Xechem’ s powers, as enumerated in its articles in incorp
19 That
oration.

See, e.g., Seabrook Island Property Owners Ass’n v. Peizer, 356 S.E.2d 411, 414 (S.C.
App. 1987) (“A
corporation may exercise only those powers which are granted to it by law, by its
charter or articles of incorporation,
and by any bylaws made pursuant thereto; acts beyond the scope of the powers
so granted are ultra vires.”); Twisp
Mm. & Smelting Co. v. Chelan Mm. Co., 133 P.2d 300, 312 (Wash. 1943) (“The
term ‘ultra vires’, in so far as it
applies to corporate transactions, is used to describe corporate transactions which
are outside the objects for which
the corporation was created, as defined in the law of its organization, and therefore
beyond the power conferred on
the corporation by the legislature.”); Savannah Ice Co. v. Canal-Louisiana Bank
& Trust Co., 79 S.E. 45, 46 (Ga. Ct.
App. 1913) (“An ultra vires act of a corporation is one in excess of charter power.
”).

18

Ramesh may have concealed his ownership in Xechem India, and transfe
rred assets from
Xechem to Xechem India, and that Xechem may not have lent money to Xeche
m India had it
known it was not its subsidiary do not—without more—render the transfe
r of assets, or the
related transactions, as outside the object for which Xechem was created.
°
2
In light of the foregoing, Plaintiff has failed to plead a facially plausible claim
of ultra
vires under New Jersey law. See Rockchffe, 2012 WL 1431267, at *3 n.
4. Because the Court
has already given Plaintiff an opportunity to cure the pleading deficiencies
in this claim, Count
Two of Plaintifts Second Amended Complaint is hereby dismissed with prejud
ice.
3.

Unjust Enrichment—Counts Four, Seven, Ten, and Twelve

Counts Four, Seven and Ten contain claims of unjust enrichment as agains
t Ramesh,
Bhuwan and Abhilasha Pandey, and Count Twelve pleads a claim for unjust
enrichment in the
alternative as against Xechem India. Defendants move to dismiss Counts
Four, Seven, and Ten
on the basis that such claims are in substance tort claims and New Jersey
does not recognize
unjust enrichment as an independent tort cause of action.
21
To state a claim for unjust enrichment under New Jersey law, a Plainti
22
ff must establish
that the “defendant received a benefit and that retention of that benefit withou
t payment would
be unjust” and that Plaintiff “expected remuneration from the defendant at
the time it performed
or conferred a benefit on defendant and that the failure of remuneration
enriched defendant
20

See, e.g., Nat ‘1 Lock Co. v. Hogland, 101 F.2d 576, 581 (7th Cir. 1938) (“A
Board of Directors cannot increase or
decrease corporate powers; and no action of a Board of Directors which the
corporation has the power to perform
through its directors can be ultra vires of the corporation merely because the
board previously has declared by
resolution that such action will not be taken.”).
21

Notably, Defendants’ ily argument as to why this Court should dismis Plainti
s
ff’s unjust enrichment claims is
that they sound in tort. Defendants do not address the theory of piercin
g the corporate veil. Defendants also do not
move to dismiss Count Twelve for unjust enrichment against Xechem India.
22

The parties do not dispute that New Jersey law applies to Plaintiff’s claims
of unjust enrichment. See generally
Am. Cyanamid Co. v. Fermenta Animal Health, 54 F.3d 177, 180 (3d Cir.
1995).

19

beyond its contractual rights.” VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554
(1994).
Moreover, under New Jersey law, “recovery under unjust enrichment may not
be had when a
valid, unrescinded contract governs the rights of the parties.” Van Orman v. Am.
Ins. Co., 680
F.2d 301, 310 (3d Cir. 1982).
The Court has carefully reviewed Counts Four, Seven, and Ten of the Second Amend
ed
Complaint. Taking Plaintiff’s allegations as true, the crux of his claims is that,
as a result of the
Defendants’ actions to cover up the true ownership of Xechem India, Xeche
m lent money to
Xechem India that it otherwise would not have, and that the Defendants used
the money for their
own personal gain. The Court finds Plaintiffs allegations in this respect suffici
ent to survive a
motion to dismiss.
Specifically, Plaintiff alleges that Xechem lent money to Xechem India, and that
Xechem
expected to be, but has not been, paid back. At this stage, the Court must accept
these assertions
as true. Even if Xechem did not expect to be paid back at the time it lent money
to Xechem
India, a claim for unjust enrichment will survive dismissal when Plaintiff demon
strates that “if
the true facts were known to plaintiff, he would have expected remuneration from
defendant, at
the time the benefit was conferred.” Stewart v. Beam Global Spirits & Wine, Inc.,
877 F. Supp.
2d 192, 196 (D.N.J. 2012) (citing Callano v. Oakwood Park Homes Corp.,
91 N.J. Super. 105,
219 A.2d 332, 334 (N.J.l966)). Since Xechem allegedly did not lend money
to non-subsidiaries,
at the very least it would have expected to be paid back had it known the
truth about Xechem
India’s ownership. Moreover, it appears from the allegations that no expres
s contract governs
the loan from Xechem to Xechem India.

Thus, Plaintiffs allegations that Xechem lent money

to Xechem India with the expectation of renumeration, or that Xeche
m would have expected
renumeration had it known the true facts at the time, are sufficient to
state a plausible claim for

20

unjust enrichment against Xechem India or, if Plaintiff is able to pierce the corpor
ate veil, its
owners. Unlike Plaintiff’s claim in his related case, No. 13-cv-649, while Plaintiff’s
allegations
in the instant matter also revolve around accusations of misappropriation and breach
of fiduciary
duties, claims surrounding the making of a loan can be understood as quasi-contract
ual, not tortbased, causes of action. See Student Fin. Corp. v. Royal Indem. Co., 2004
U.S. Dist. LEXIS
4952, at *20..21 (D. Del. Mar. 23, 2004).

However, Plaintiff includes no evidence whatsoever that should he ultimately be
able to
pierce the corporate veil, Abilasha would be liable under an unjust enrichment theory
. Xechem
did not lend money to Abilasha, and she has no ownership stake in Xechem India.
Plaintiff’s
claims against Abilasha, for what essentially amount to aiding and abetting the other
Defendants’
fraud, sound in tort. New Jersey does not recognize unjust enrichment as an indepe
ndent tort
cause of action. See Castro v. NYT Television, 370 N.J. Super. 282, 299 (App.
Div. 2004)
(explaining that “the role of unjust enrichment in the law of torts is limited for
the most part to its
use as a justification for other torts such as fraud or conversion.”); SteamfItters Local
Union No.
420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 936 (3d Cir. 1999) (“In the
tort setting,
an unjust enrichment claim is essentially another way of stating a traditional
tort claim (i.e., if
defendant is permitted to keep the benefit of his tortious conduct, he
will be unjustly
enriched).”).

Therefore, the unjust enrichment claim against her (Count Ten) is dismis
sed.

Defendants’ motion to dismiss Counts Four and Seven is denied.
4.

Conspiracy—Count Eleven

Count Twelve contains a claim for civil conspiracy as against all Defendants.
It alleges
that “in committing the acts of wrongdoing alleged herein, all defendants
acted pursuant to a
common scheme to conceal and misappropriate assets from the Compa
ny;” that “they acted

21

together to hide the illegally [sic] transfer of Xechem’s money to Xechem India
through a sham
loan;” that “all defendants were aware of the common scheme and took steps
in furtherance of
such scheme by concealing facts that would have prevented or stopped the transfe
r of Xechem’ s
money to Xechem India in the form of a sham loan;” and that “[b]y concea
ling the true
ownership of Xechem India they acted together to prevent the transfer of
66 2/3% of Xechem
India to Xechem.” (Am. Compl.

¶J 196-200.)

Under New Jersey law, civil conspiracy is “a combination of two or more person
s acting
in concert to commit an unlawful act, or to commit a lawful act by unlawful
means, the principal
element of which is an agreement between the parties to inflict a wrong agains
t or injury upon
another, and an overt act that results in damage.” Morgan v. Union Cnly.
Bd. of Chosen
Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993) (citations and quotat
ions omitted); see
also Banco Popular N.A. v. Gandi, 184 N.J. 161, 177 (2005). The “gist of
the claim is not the
unlawful agreement, ‘but the underlying wrong which, absent the conspiracy,
would give a right
of action.” Morgan, 268 N.J. Super. at 364 (citations omitted). Thus,
civil conspiracy is a
dependent claim which must be alleged alongside a substantive claim.
See, e.g., Eli Lilly and
Co.

V.

Roussel C’orp., 23 F. Supp. 2d 460, 497 (D.N.J. 1998). Moreover, a plainti
ff cannot state a

claim for civil conspiracy by making “conclusory allegations of concer
ted action,” without
including allegations of fact regarding defendants’ joint action. Abbot v.
Latshaw, 164 F.3d 141,
148 (3d Cir. 1998).

Thus, in order to survive a Rule 12(b)(6) motion to dismiss, a civil

conspiracy claim must allege “at least some facts which could, if proven
, permit a reasonable
inference of a conspiracy to be drawn.” Durham v. City and Cnty. ofErie,
171 Fed. App’x. 412,
415 (3d Cir. 2006). A plaintiff can meet this requirement when his compla
int “sets forth a valid

22

legal theory and it adequately states the conduct, time, place, and persons respon
sible.” Lynn v.
Christner, 184 Fed. App’x. 180, 185 (3d Cir. 2006).
This Court dismissed Plaintiff’s conspiracy claim in its prior opinion because “Plain
tiff’s
Second Amended Complaint contains only a recitation of the elements of a conspi
racy-related
claim without reference to any supporting facts which would allow the Court
to draw the
reasonable inference that each of the Defendants in this action specifically
engaged in the
underlying unlawful acts by virtue of an agreement.

Plaintiff has failed to state a facially

plausible claim of civil conspiracy because the Amended Complaint fails to contain
, inter alia,
facts establishing the existence of any type of agreement between the Defendants
to inflict an
injury on the Plaintiff” Opinion, CM/ECF No. 26, at 20. Plaintiff has done nothin
g to cure this
deficiency.

His Second Amended Complaint contains no factual allegations to suppor
t an

agreement between the parties to deceive Xechem about its ownership of
Xechem India.
Defendants’ motion to dismiss Count Eleven is therefore granted; because this Court
has already
provided Plaintiff an opportunity to cure the deficiencies in his conspiracy claim,
Count Eleven
of the Amended Complaint is dismissed with prejudice.
IV.

CONCLUSION

Based on the reasons set forth above, Defendants’ motion to dismiss {CM/ECF
No. 36] is
granted in part and denied in part. Insofar as Defendants moved to dismiss Counts
Four and
Seven, their motion is denied. All remaining counts, with the exception of Count
Twelve, are
dismissed with prejudice.
An appropriate Order accompanies this Opinion.

23

/1

//
Dated: April

th
30

Linares
United States District Judge

2013

24