HUMPHREY et al v. GLAXOSMITHKLINE PLC et al

Filing 27

MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE NITZA I QUINONES ALEJANDRO ON 9/29/17. 9/29/17 ENTERED AND COPIES E-MAILED.(ti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
PETER HUMPHREY, et al.
Plaintiffs
v.
GLAXOSMITHKLINE, PLC., et al.
Defendants

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CIVIL ACTION
NO. 16-5924

NITZA I. QUIÑONES ALEJANDRO, J.

SEPTEMBER 29, 2017

MEMORANDUM OPINION
INTRODUCTION
Before this Court is a motion to dismiss filed pursuant to Federal Rule of Civil Procedure
(“Rule”) 12(b)(1), (2), (6), and (7) by Defendants GlaxoSmithKline plc (“GSK PLC”) and
GlaxoSmithKline LLC (“GSK LLC”) (collectively “Defendants”), which seeks the dismissal of
federal claims for racketeering and conspiracy related racketeering under 18 U.S.C. § 1962(c)
and § 1962(d), respectively, and state law claims for fraud, intentional infliction of emotional
distress, negligent infliction of emotional distress, and civil conspiracy, asserted against them by
Plaintiffs Peter Humphrey (“Humphrey”), Yu Yingzeng (“Yingzeng”),

1

and ChinaWhys

Company Ltd. (“ChinaWhys”) (collectively “Plaintiffs”) in the complaint. [ECF 19]. Plaintiffs
oppose the motion. [ECF 23]. The issues raised in the motion to dismiss have been fully briefed
by the parties, 2 and are now ripe for disposition. For the reasons stated herein, Defendants’
motion to dismiss is granted.

1

The caption of the complaint and the section describing the parties identifies this Plaintiff as “Yu
Yingzeng.” (Compl. at p. 1, ¶ 7). However, later in the complaint, she is identified as “Yingzeng Yu.”
(Id. ¶ 50). For clarity, this Court will refer to this party as “Yingzeng.”

2

In considering the motion to dismiss, this Court has also considered Defendants’ reply, [ECF 25],
and their notice of supplemental authority. [ECF 26].

BACKGROUND
Plaintiffs initiated this action on November 15, 2016.

[ECF 1].

In their motion,

Defendants argue that the complaint should be dismissed because: (1) pursuant to the consulting
agreement that forms the basis of all of Plaintiffs’ claims, all claims against Defendants are
subject to arbitration; (2) this Court lacks personal jurisdiction over GSK PLC; (3) the complaint
fails to state claims upon which relief may be granted; (4) Plaintiffs have failed to join an
indispensable party; (5) Plaintiffs lack standing to assert claims brought pursuant to the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.; and
(6) this Court lacks diversity jurisdiction over Plaintiffs’ state law claims. Plaintiffs challenge
these contentions.
When ruling on Defendants’ motion to dismiss, this Court must accept, as true, all
relevant and pertinent factual allegations in the complaint and construe these facts in the light
most favorable to Plaintiffs. See Fowler v. UMPC Shadyside, 578 F.3d 203, 210-11 (3d Cir.
2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009)); Constitution Party of Pa. v. Aichele,
757 F.3d 347, 357 (3d Cir. 2014) (standard applies to Rule 12(b)(1) motions). Here, the factual
allegations in the complaint are summarized as follows:
Plaintiffs Humphrey and Yingzeng are co-founders of ChinaWhys, a
company that assists businesses in the United States and Europe in addressing
compliance issues pertaining to anti-bribery regulations. (Compl. ¶¶ 6-8).
Humphrey and Yingzeng are married to each other. (Id. ¶ 7). Yingzeng is a
United States citizen. (Id.). At the relevant time of the events in the complaint,
they shared a home in Beijing, China. (Id. ¶ 91); [see ECF 23 at 13]. Much of
ChinaWhys’ business involved companies based in the United States. (Compl. ¶
9).

GSK PLC is a global pharmaceutical company headquartered in
Brentford, England; Philadelphia, Pennsylvania; and Durham, North Carolina;
and at all relevant times, exercised control over its subsidiary, GlaxoSmithKline
(China) Investment Co., Ltd. (“GSK China”). (Id. ¶ 10). GSK LLC is a

2

subsidiary of GSK PLC, and its principal place of business is Philadelphia,
Pennsylvania. (Id. ¶ 11). 3 GSK China is not a party defendant.
Plaintiffs allege that since at least 2010, Defendants, with the approval of
Mr. Mark Reilly (“Reilly”), the CEO of GSK China, engaged in widespread
bribery in China in order to increase Defendants’ sales in China. (Id. ¶¶ 25, 50).
In December 2011, a whistleblower, who worked for Defendants, began emailing
information about Defendants’ widespread fraud and corruption to Chinese
regulators, ultimately sending approximately two dozen emails over a 17-month
period. (Id. ¶ 27). In April 2012, Defendants learned of the whistleblower and
worked to uncover his or her identity. (Id. ¶ 28).
In December 2012, Defendants terminated Vivian Shi (“Shi”), the head of
government affairs for GSK China for allegedly falsifying travel expenses. (Id.¶
29). Plaintiffs contend that Shi was actually fired because Defendants suspected
that she was the whistleblower. (Id.). Subsequent to Shi’s firing, several emails
were sent anonymously to Defendants detailing the corruption and bribery that
was taking place; specifically that the head of GSK China’s internal audit had
uncovered GSK China’s policy of paying doctors, fabricating a paper record to
show anti-bribery compliance, and instructing its employees to destroy noncompliant promotional materials and gifts. (Id. ¶¶ 30-44).
On April 15, 2013, Humphrey and Yingzeng, at the behest of a former
client, met with CEO Reilly, April Zhao (“Zhao”), legal counsel for GSK China,
and Brian Cahill (“Cahill”), another attorney, at GSK China’s Shanghai office.
(Id. ¶¶ 49-50). At that meeting, Humphrey and Yingzeng were told that Shi had
been terminated for expense fraud and that she was suspected of orchestrating a
smear campaign against the company by sending false emails to Chinese
government officials regarding alleged corruption and bribery. (Id. ¶ 51).
Humphrey and Yingzeng were led to believe that Shi was a disgruntled former
employee who had a motivation to make false accusations. (Id. ¶ 52). Plaintiffs
allege, however, that “GSK officials” knew that the allegations of corruption and
bribery were not false, and that the illegal scheme had been conducted at Reilly’s
direction. 4 (Id. ¶¶ 53, 59). Plaintiffs also allege that the “GSK officials” knew
that Shi had “powerful unidentified allies within the Communist party elite” and
that it was extremely dangerous to investigate her. (Id. ¶ 53).
At that meeting, Humphrey and Yingzeng agreed to investigate Shi and
her activities, understanding that they may uncover information that would help
undermine her credibility. (Id. ¶ 63). While not referenced in the complaint but
3

Plaintiffs refer to GSK PLC and GSK LLC collectively and interchangeably as “GSK”
throughout their complaint. (Compl. ¶ 11).
4

The complaint appears to identify Reilly, Zhao, and Cahill as “GSK officials,” instead of
identifying them as officers and employees of GSK China.

3

argued in the motion to dismiss, on April 26, 2013, Humphrey, on behalf of
ChinaWhys (Shanghai) Consulting Co. Ltd. entered into a “Consultancy
Agreement” with GSK China to investigate Shi. [ECF 19-5].5 The Consultancy
Agreement provides, inter alia, that the agreement is to be governed by the laws
of the People’s Republic of China, and that all disputes “arising out of or in
connection with this Agreement” that cannot be amicably settled, must be
submitted to the “China International Economic and Trade Arbitration
Commission in Beijing for arbitration . . . .” (Consultancy Agreement ¶ 11).
During the investigation into Shi, Humphrey made repeated requests for
copies of the whistleblower allegations against Shi, but these requests were
denied. (Compl. ¶¶ 56, 64, 66). On June 6, 2013, Humphrey sent the
investigation report on Shi to Zhao and Cahill. (Id. ¶ 70).
On June 12, 2013, The Wall Street Journal published an article about the
bribery allegations in China and GSK PLC’s investigation which revealed that
GSK China’s sales staff had engaged in widespread bribery in China. (Id. ¶¶ 7173). On June 17, 2013, Jennifer Huang (“Huang”), senior counsel at GSK China
R&D Company Ltd., emailed Humphrey to ask ChinaWhys to identify the source
of the whistleblower emails, and on June 26, 2013, June Soon, executive secretary
at GSK Pte Ltd., 6 forwarded two whistleblower emails to Humphrey. (Id. ¶¶ 7980). On June 27-28, 2013, GSK China’s offices were raided by the Chinese
police. (Id. ¶ 82). Subsequent to these raids, Huang and GSK China’s head of
business development, Leslie Chang, asked Humphrey to investigate China’s
Public Security Bureau and other government entities, including the Ministry of
Public Security and the Economic Crimes Investigation Department, to ascertain
who was conducting the investigation into GSK China’s conduct. (Id. ¶¶ 82-84).
Humphrey refused to investigate these government entities. (Id. ¶ 85). On July 1,
2014, Reilly and Humphrey met, and Reilly told Humphrey that Shi had “read
your report and she will be coming after you.” (Id. ¶ 87). On July 2, 2013, Reilly
fled China for London. (Id. ¶¶ 89-90).
5

Defendants attached the Consultancy Agreement to their motion to dismiss. [ECF 19-5]. “To
decide a motion to dismiss, courts generally consider only the allegations contained in the complaint,
exhibits attached to the complaint and matters of public record.” Pension Ben. Guar. Corp. v. White
Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993); see also Cooper v. Samsung Elec. Am., Inc., 374
F. App’x 250, 253 n.3 (3d Cir. 2010) (“In general, when ruling on a motion to dismiss pursuant to
12(b)(6), a court may only consider the contents of the pleadings.”). However, “a court may consider an
undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the
plaintiff’s claims are based on the document.” Pension Ben., 998 F.2d at 1196. While Plaintiffs do not
assert a breach of contract claim, and claim to not be signatories to the Consultancy Agreement, they do
not dispute the authenticity of this document, and it is clear that Plaintiffs’ investigation of Shi was
performed pursuant to this agreement. Thus, this Court may properly consider the Consultancy
Agreement in the present analysis.
6

GSK Pte Ltd. is a GlaxoSmithKline entity based in Singapore. [ECF 19-1 at 8].

4

On July 10, 2013, police raided ChinaWhys’ office in Shanghai, and
Humphrey’s home in Beijing, China. (Id. ¶ 91). The police arrested both
Humphrey and Yingzeng and interrogated them until past midnight. (Id.).
Humphrey and Yingzeng were told this was “related to GSK.” (Id.). Humphrey
and Yingzeng were separately transported to the Shanghai Detention House and
placed in crowded cells without furniture, hot water, clean bedding, or private
toilet. (Id. ¶ 92). Both were prohibited from writing letters or making phone calls
to family or lawyers, and were forced to sit on the floor for continuous hours,
causing extreme pain. (Id.). On August 16, 2013, Humphrey and Yingzeng were
formally arrested, and subjected to an “abusive” prosecution “lacking in any due
process,” a prosecution procured allegedly at the behest of Shi. (Id. ¶¶ 94-97).
Constant delays in the proceeding prolonged Humphrey and Yingzeng’s
detentions. (Id. ¶ 95). Finally, on August 18, 2014, Humphrey and Yingzeng
were tried, Humphrey was sentenced to two and a half years imprisonment, and
Yingzeng was sentenced to two years imprisonment. (Id. ¶¶ 96-97). Until their
release on June 9, 2015, both Humphrey and Yingzeng suffered ill treatment by
the detention officials, and their medical issues were ignored and mistreated. (Id.
¶¶ 98-105). On June 17, 2015, Humphrey and Yingzeng were released and
deported from China. (Id. ¶ 106). Plaintiffs allege that their business was
“destroyed and their prospective business ventures eviscerated” by Defendants’
conduct. (Id. ¶ 132).
Plaintiffs further allege that on September 19, 2014, GSK PLC issued a
statement of apology to China, announcing that “GSK China Investment Co. Ltd
(GSKCI) has been identified according to Chinese law to have offered money or
property to non-government personnel in order to obtain improper commercial
gains, and has been found guilty of bribing non-government personnel.” (Id. ¶
116). On the same day, China fined GSK PLC approximately $492 million for its
activities in China. (Id.). Reilly was convicted of bribing doctors and was
sentenced to three years in prison and deported from China. 7 (Id. ¶ 117). On
September 30, 2016, GSK PLC entered into a settlement agreement with the
Securities and Exchange Commission for its bribery practices in China, and
agreed to pay $20 million in fines. (Id. ¶ 120).
LEGAL STANDARD
As noted, Defendants move to dismiss Plaintiffs’ complaint pursuant to: (1) Rule
12(b)(1) on the basis that Plaintiffs have failed to allege facts sufficient to establish Article III
standing for Plaintiffs’ federal RICO claims and that diversity jurisdiction does not exist over
Plaintiffs’ state law claims; (2) Rule 12(b)(2) for lack of jurisdiction over GSK PLC; (3) Rule
7

The complaint does not specify when or why Reilly returned to China after “fleeing” to London.

5

12(b)(6) for failure to state a claim; and (4) Rules 12(b)(7) and 19 for failure to join an
indispensable party.

Because this Court concludes that it lacks Article III and diversity

jurisdiction over Plaintiffs’ claims, only the legal standard for a Rule 12(b)(1) motion will be
discussed.
“A motion to dismiss for want of standing is . . . properly brought pursuant to Rule
12(b)(1), because standing is a jurisdictional matter.” Constitution Party, 757 F.3d at 357. Rule
12(b)(1) challenges may be either facial or factual. Id. A facial challenge asserts that the
complaint does not allege sufficient grounds to establish subject matter jurisdiction. 8 Id. Where
a Rule 12(b)(1) motion is filed prior to an answer, as is the case here, it will be considered a
facial challenge to jurisdiction. Id. at 358. When considering such a facial challenge, a court
must apply the same standard of review that would apply on a motion to dismiss under Rule
12(b)(6).

Id.

As such, well-pleaded factual allegations are taken as true, and reasonable

inferences are drawn in the plaintiff’s favor. Id. The complaint will be dismissed for lack of
standing only if it appears that the plaintiff will not be able to assert a plausible claim of subject
matter jurisdiction. Cardio-Med. Assocs., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d
Cir. 1983). The burden to establish standing rests with the plaintiff. Finkelman v. Nat’l Football
League, 810 F.3d 187, 194 (3d Cir. 2016).
DISCUSSION
Initially, Defendants argue that Plaintiffs lack standing to assert RICO claims and,
further, that this Court lacks diversity jurisdiction over Plaintiffs’ state law claims. These are
threshold issues which must be decided before this Court considers Defendants’ other arguments.
8

A factual challenge, though not applicable herein, “is an argument that there is no subject matter
jurisdiction because the facts of the case—and here the District Court may look beyond the pleadings to
ascertain the facts—do not support the asserted jurisdiction.” Constitution Party, 757 F.3d at 358.

6

Standing To Assert Civil RICO Claims
Plaintiffs bring their RICO claims under 18 U.S.C. § 1962(c) and (d). 9 Before a district
court can consider the sufficiency of a plaintiff’s civil RICO claims, however, it must first
address whether the plaintiff has adequately pleaded sufficient facts to establish standing under
18 U.S.C. § 1964. 10 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, (1985) (holding that a
“plaintiff only has standing [under 18 U.S.C. § 1964] if, and can only recover to the extent that,
he has been injured in his business or property by the conduct constituting the violation”); Maio
v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000) (holding that “plaintiffs seeking recovery under
RICO must satisfy additional standing criterion set forth in section 1964(c) of the statute”);
Sarpolis v. Tereshko, 26 F. Supp. 3d 407, 424 (E.D. Pa. 2014) (same). Section 1964 provides
that any “person injured in his business or property by reason of a violation of section 1962 of
this chapter may sue therefor in any appropriate United States district court . . . .” 18 U.S.C. §
1964(c). Thus, “[t]o bring a civil RICO claim, a plaintiff must satisfy two statutory elements to
confer standing: (1) that she suffered an injury to her ‘business or property’; and (2) that her

9

Section 1962(c) provides:
It shall be unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering
activity or collection of unlawful debt.

18 U.S.C. § 1962(c). Section 1962(d) states that it “shall be unlawful for any person to conspire to violate
any of the provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C. § 1962(d). “To establish a
RICO claim, a plaintiff must show ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.’” Warden v. McLelland, 288 F.3d 105, 114 (3d Cir. 2002) (quoting Sedima, S.P.R.L
v. Imrex Co., 473 U.S. 479, 496 (1985)).
10

Section 1964 provides, in part, that the “district courts of the United States shall have jurisdiction
to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders . . . .” 18
U.S.C. § 1964(a).

7

injury was proximately caused by the defendants’ violation of § 1962.” Sarpolis, 26 F. Supp. 3d
at 424 (citing Maio, 221 F.3d at 482-83).
While Section 1964 does not distinguish between foreign or domestic injuries, the
Supreme Court recently explained that because RICO’s private right of action does not have
extraterritorial application, it “requires a civil RICO plaintiff to allege and prove a domestic
injury to business or property and does not allow recovery for foreign injuries.” RJR Nabisco,
Inc. v. European Cmty., 136 S. Ct. 2090, 2111 (2016). In other words, claims that “rest entirely
on injury suffered abroad [] must be dismissed.” Id.
Instantly, Defendants assert that Plaintiffs lack standing to assert RICO claims because
any alleged injury to Plaintiffs’ business or property 11 was a “foreign” injury, as opposed to a
“domestic” injury. [ECF 19-1 at 43-46]. It is not always “self-evident . . . whether a particular
alleged injury is ‘foreign’ or ‘domestic.’” RJR Nabisco, 136 S. Ct. at 2111. Plaintiffs’ complaint
vaguely contends that as a result of Defendants’ alleged RICO violations, “Plaintiffs have been
injured in their property [and] Plaintiffs’ business was destroyed and their prospective business
ventures eviscerated by Defendants’ pattern of racketeering activity.” (Compl. ¶ 132). Plaintiffs
further allege that the injuries suffered “were directly and proximately caused by Defendants’
racketeering activity.” (Id. ¶ 133). In the motion to dismiss, Defendants contend that while
Plaintiffs may have had numerous U.S. clients, the alleged injuries suffered were clearly foreign
because Plaintiffs’ business was based solely in China, they had offices only in China, no work
was done outside of China, Plaintiffs resided in China and, finally, their business was allegedly

11

Any physical and/or emotional injuries Humphrey’s and Yingzeng may have suffered while in
custody are not harms to business or property, and are not cognizable under RICO. See, e.g., Magnum v.
Archdiocese of Philadelphia, 253 F. App’x 224, 227 (3d Cir. 2007) (“[P]hysical or emotional harm to a
person is not property under civil RICO. Similarly, losses which flow from personal injuries are not
property under RICO.”) (internal citations and quotations omitted).

8

destroyed when Plaintiffs were imprisoned in China by Chinese authorities. [ECF 19-1 at 4346]. To show that their alleged injury was domestic, Plaintiffs argue that the majority of
ChinaWhys’ contracts were with companies based in the United States and, as a result of
Defendants’ conduct, ChinaWhys lost significant revenue from the United States. (Id. ¶ 9).
Further, Plaintiffs argue that their allegations of working with largely U.S. corporations and U.S.
revenue streams is sufficient to allege a domestic injury. [ECF 23 at 34-38].
Neither the Third Circuit Court of Appeals, other Appellate Circuits, nor the District
Court for the Eastern District of Pennsylvania have addressed what constitutes a domestic or
foreign injury for civil RICO purposes subsequent to the RJR Nabisco decision, which made it
clear that it was proper to dismiss claims that rested “entirely on injury suffered abroad.” RJR
Nabisco, 136 S. Ct. at 2111. Those district courts that have considered the issue after the RJR
Nabisco decision have applied varying standards. As such, there is no consensus on what
specific factors must be considered when deciding whether an injury is domestic or foreign. The
parties here cite to numerous cases purportedly favorable to their respective positions. 12
In considering these and other cases that have addressed the issue, there appears to be two
emerging schools of thought. The first considers where the plaintiff lived at the time of the
12

Defendants note that the RJR Nabisco decision focused on the question of whether the court has
authority to recognize a cause of action for “injury suffered overseas,” and ultimately concluded that
claims resting “entirely on injury suffered abroad” must be dismissed. [ECF 19-1 at 44] (citing RJR
Nabisco, 136 S. Ct. at 2109, 2011). Defendants argue that Plaintiffs’ injuries were clearly suffered in
China, and rely on Bascunan v. Daniel Yarur Elsaca, 2016 WL 5475998 (S.D.N.Y. Sept. 28, 2016),
Union Commercial Servs. Ltd. v. FCA Int’l Operations LLC, 2016 WL 6650399 (E.D. Mich. Nov. 10,
2016), and Exeed Indus., LLC v. Younis, 2016 WL 6599949 (N.D. Ill. Nov. 8, 2016). Plaintiffs argue that
their injuries were clearly domestic, and rely upon the decisions in City of Almaty, Kazakhstan v.
Ablyazov, 226 F. Supp. 3d 272 (S.D.N.Y. 2016), Tatung Co., Ltd. v. Shu Tze Hsu, 217 F. Supp. 3d 1138
(C.D. Cal. 2016), Elsevier, Inc. v. Grossman, 199 F. Supp. 3d 768 (S.D.N.Y. 2016), Akishev v. Kapustin,
2016 WL 7165714 (D.N.J. Dec. 8, 2016). As discussed more fully below, this Court has carefully
analyzed the criteria each of the district courts considered in deciding whether a civil RICO injury is
domestic or foreign, and concludes that each district court’s respective reasoning, when applied to the
facts of this case, result in the same outcome: a finding that Plaintiffs’ injuries were suffered in China, and
not the United States.

9

alleged injury and where their property or business was located, among other related factors. See
Bascunan v. Daniel Yarur Elsaca, 2016 WL 5475998, at *4-6 (S.D.N.Y. Sept. 28, 2016)
(applying a “(1) who became poorer, and (2) where did they become poorer,” test when finding
that Chilean resident and citizen suffered a foreign injury when the plaintiff had millions of
dollars stolen by Chilean defendants who fraudulently caused New York banks to wire the
plaintiff’s funds to the defendants’ accounts in New York); Union Commercial Servs. Ltd. v.
FCA Int’l Operations LLC, 2016 WL 6650399, at *4 (E.D. Mich. Nov. 10, 2016) (applying a
“substantial effects” test, which requires the court to consider whether the effect of a defendant’s
conduct, i.e., the injury, is foreign or domestic when finding injury was foreign where the
plaintiff was owned by an Angolan citizen and sold motor vehicles in Angola and was harmed
when U.S.-based supplier of vehicles ended distributor agreement after bribing Angolan officials
and supplying an unauthorized distributor with the vehicles for sale in Angola); Exeed Indus.,
LLC v. Younis, 2016 WL 6599949 (N.D. Ill. Nov. 8, 2016) (relying on Bascunan when deciding
injuries were foreign even though a large number of the plaintiffs’ suppliers were in the United
States where the plaintiffs were based in the United Arab Emirates); see also City of Almaty,
Kazakhstan v. Ablyazov, 226 F. Supp. 3d 272 (S.D.N.Y. 2016); Tatung Co., Ltd. v. Shu Tze Hsu,
217 F. Supp. 3d 1138 (C.D. Cal. 2016); and Elsevier, Inc. v. Grossman, 199 F. Supp. 3d 768
(S.D.N.Y. 2016).
The second school of thought considers the location of the RICO conduct to be relevant
to the inquiry. See Akishev v. Kapustin, 2016 WL 7165714, at *1-2, 7-8 (D.N.J. Dec. 8, 2016)
(noting that when RICO conduct crosses borders, “the extraterritoriality analysis should be a
two-way street,” where the plaintiffs could have come from anywhere in the world but the
defendants choose to operate their fraudulent scheme from the United States).

10

The RJR Nabisco decision strongly suggests that it is the location of the injury, and not
the location of the injurious conduct, that is relevant to determine whether a particular plaintiff
has standing to bring a civil RICO claim. However, under the facts and allegations of this case,
this Court need not decide whether the focus is entirely on where the injury occurred or if the
location of the conduct is relevant, because under any of the injury-focused tests employed by
other district courts, and under a conduct-focused test, it is clear to this Court that the alleged
injuries suffered by Plaintiffs are foreign, and not domestic.
Specifically, Plaintiffs’ allegations establish that, while much of Plaintiffs’ business
comes from U.S. corporations, Humphrey and Yingzeng, at the time of the alleged conduct, lived
in China, and Plaintiffs’ business was based in China and assisted companies, both U.S. and nonU.S. entities, which sought to conduct business in China. (Compl. ¶¶ 6-9, 91). 13 Plaintiffs do
not allege that they had offices in the United States or any assets or property in the United States.
It is also clear that any business Plaintiffs lost was lost in China because that is where Plaintiffs
provided their services to U.S. and non-U.S. multinational companies seeking to operate in
China, in compliance with Chinese and non-Chinese laws. 14 In other words, companies came to
Plaintiffs when they sought to do business in China, and it is in China that the effects of
Defendants’ alleged conduct were felt. When applying any of the methodologies employed by
13

This Court notes that ChinaWhys’ “About Us” website page, which identifies both Humphrey
and Yingzeng as people involved with the company, states that the company is there to assist
“multinational corporations relocating their supply base to Asia and increasingly to China.” [ECF 19-10].
It goes on to state that ChinaWhys “specializes in discrete risk mitigation solutions, consulting and
investigation services to corporate clients . . . across Greater China and the Asia Pacific [and] provide[s]
regular advice to the business community on risk management and conduct[s] services in China for large,
medium, and small multinationals . . . .” (Id.).
14

While not dispositive, this Court notes that Plaintiffs’ Consultancy Agreement with GSK China
required payment in Chinese currency, [ECF 19-5 ¶ 3.1], and Plaintiffs, on the civil cover sheet created to
initiate this case, identified China as the place of the incident or transaction underlying this case. [ECF 11 at 2].

11

the various district courts that have addressed this issue that have focused on the location of the
injury, it is clear that Plaintiffs’ injuries occurred in China, and not the United States.
Further, were this Court to consider where the alleged conduct occurred, the outcome
would be the same. Even a cursory examination of Plaintiffs’ allegations supports a finding that
GSK China’s conduct in China caused Plaintiffs’ injuries 15 Specifically, all of Plaintiffs’
contacts were with employees of either GSK China or GSK Pte Ltd., a Singaporean entity, and
none were with Defendants.

From the complaint, it is apparent that it was GSK China

employees and GSK China’s CEO who requested that Plaintiffs investigate Shi, an employee of
GSK China living in China, for her alleged emails to Chinese authorities, and it was Shi who,
through her contacts with the Chinese government, allegedly caused Humphrey and Yingzeng to
be arrested by Chinese authorities and held in a Chinese prison. (Compl. ¶ 25-53, 79-107).
Aside from a conclusory allegation that GSK PLC exercised control over GSK China, (id. ¶ 10),
and certain allegations that, after the bribery conducted by GSK China was discovered, GSK
PLC continued to mislead the public about what had occurred, (id. ¶ 108-15), Plaintiffs do not
allege any facts that would implicate either of the named Defendants, as opposed to GSK China,
let alone GSK LLC, a U.S. subsidiary of GSK PLC. In short, Plaintiffs have not alleged any
facts to support that the claimed wrongful conduct occurred in the United States. Thus, even if
this Court were to consider the location of the alleged conduct, it would still conclude that
Plaintiffs’ injuries are foreign, and not domestic.
Consequently, under either test, Plaintiffs have failed to adequately plead sufficient facts
to establish that they suffered a domestic injury resulting from Defendants’ alleged RICO

15

Notably, Plaintiff did not name GSK China as a defendant in this case. Instead, Plaintiffs
collectively and interchangeably referred to GSK PLC and GSK LLC as “GSK,” in an apparent attempt to
assert that the wrongful conduct occurred in the United States.

12

violations. For this reason, Plaintiffs lack standing to assert civil RICO claims, and these claims
are dismissed. See, e.g., Sedima, 473 U.S. at 496 (holding that a “plaintiff only has standing
[under 18 U.S.C. § 1964] if, and can only recover to the extent that, he has been injured in his
business or property by the conduct constituting the violation.”); RJR Nabisco, 136 S. Ct. at
2111.
Diversity Jurisdiction Over State Law Claims
Plaintiffs’ remaining claims for fraud, intentional infliction of emotional distress,
negligent infliction of emotional distress, and civil conspiracy are all premised on Pennsylvania
law.

Plaintiffs assert that this Court has diversity jurisdiction over these state law claims

pursuant to 28 U.S.C. § 1332. Defendants disagree.
Section 1332 provides that:
The district courts shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000, exclusive of interest
and costs, and is between--(1) citizens of different States; (2) citizens of a State
and citizens or subjects of a foreign state, except that the district courts shall not
have original jurisdiction under this subsection of an action between citizens of a
State and citizens or subjects of a foreign state who are lawfully admitted for
permanent residence in the United States and are domiciled in the same State; (3)
citizens of different States and in which citizens or subjects of a foreign state are
additional parties; and (4) a foreign state, defined in section 1603(a) of this title,
as plaintiff and citizens of a State or of different States.
28 U.S.C. § 1332(a).
Complete diversity is required, meaning that “no plaintiff can be a citizen of the same
state as any of the defendants.” Rose v. Husenaj, 2017 WL 3776226, at *1 (3d Cir. Aug. 31,
2017). “When pleading diversity jurisdiction for natural persons, a plaintiff must allege that each
person is a citizen of a different state from him.” Id. “Citizenship is synonymous with domicile,
and the domicile of an individual is his true, fixed and permanent home and place of habitation.”
Id. A “corporation shall be deemed to be a citizen of every State and foreign state by which it

13

has been incorporated and of the State or foreign state where it has its principal place of
business,” 28 U.S.C. § 1332(c)(1), whereas the “citizenship of an LLC is determined by the
citizenship of its members.” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir.
2010). “The burden is on the plaintiff to affirmatively allege the essential elements of diversity
jurisdiction.” McCracken v. Ford Motor Co., 2009 WL 1185686, at *1 (E.D. Pa. May 1, 2009);
see also Freidrich v. Davis, 989 F. Supp. 2d 440, 442 (E.D. Pa. 2013) (“The party invoking
diversity jurisdiction bears the burden of proof.”).
Nowhere in Plaintiffs’ complaint do Plaintiffs identify the citizenships of Humphrey,
Yingzeng, 16 or ChinaWhys. (Compl. ¶ 6-8). Plaintiffs have also failed to allege either the place
of incorporation of GSK PLC, noting only that its headquarters is in England, Pennsylvania, and
North Carolina, (id. ¶ 10), or the citizenship of any of the members of GSK LLC, instead
providing only that GSK LLC’s principal place of business is in Pennsylvania. (Id. ¶ 11). By so
pleading, Plaintiffs have failed to satisfy affirmatively the requirements of diversity
jurisdiction. 17 As such, this Court lacks diversity jurisdiction.
In addition, although Yingzeng claims to be an American citizen, she appears to be
domiciled outside of the United States. 18 Thus, she is neither a “citizen[] of a State” of the

16

Regarding Yingzeng, Plaintiffs allege only that she is “an American citizen,” but do not identify
in which State she is domiciled. (Compl. ¶ 7).
17

This Court notes further that it appears that Humphrey currently resides in the United Kingdom,
where GSK PLC is alleged to maintain one of its headquarters. [ECF 1-1 at 2]; (Compl. ¶ 10). If both
Humphrey and GSK PLC are citizens of the United Kingdom, complete diversity does not exist.
18

Based on the allegations in the complaint, Yingzeng and Humphrey both lived in Beijing when
they were arrested by Chinese authorities, (Compl. ¶ 91), and were subsequently deported from China.
(Id. ¶ 106). The civil cover sheet attached to the complaint by Plaintiffs provides that Humphrey,
Yingzeng’s husband, maintains an address in the United Kingdom. [ECF 1-1 at 2]. This suggests that
Yingzeng is currently living in the United Kingdom, and not the United States. Further, nowhere do
Plaintiffs allege that Yingzeng lives in the United States. Plaintiffs’ failure to affirmatively plead in their

14

United States nor a “citizen[] or subject[] of a foreign state,” and, therefore, cannot sue or be
sued in federal court based on diversity jurisdiction. See Swiger v. Allegheny Energy, Inc., 540
F.3d 179, 184 (3d Cir. 2008) (“An American citizen domiciled abroad, while being a citizen of
the United States is, of course, not domiciled in a particular state, and therefore such a person is
‘stateless’ for purposes of diversity jurisdiction.”); see also Freidrich v. Davis, 767 F.3d 374,
378 (3d Cir. 2014) (noting that an American citizen domiciled in Germany is “stateless” for
diversity purposes and cannot sue or be sued in diversity). 19 For this additional reason, Plaintiffs
cannot rely upon diversity jurisdiction to have their state law claims adjudicated in federal court
and, therefore, Plaintiffs’ state law claims are dismissed. 20
CONCLUSION
For the reasons stated herein, Defendants’ motion to dismiss is granted, and Plaintiffs’
complaint is dismissed. An Order consistent with this Memorandum Opinion follows.

NITZA I. QUIÑONES ALEJANDRO, U.S.D.C. J.

complaint, or even to state in their response, that Yingzeng resides in the United States, prevents Plaintiffs
from satisfying their burden to establish that diversity jurisdiction exists.
19

The Third Circuit noted:
This conclusion, while troubling, is compelled by the language of the statute and by
precedent from both the Supreme Court and our circuit. We find this troubling because it
closes the doors of federal court to a citizen of a State who wishes to sue another citizen
based on diversity, as in this case. It may be that this “stateless person” doctrine is an
unintended consequence flowing from Congress’ now possibly outdated assumption that
U.S. citizens generally reside in the United States.

Freidrich, 767 F.3d at 378.
20

Because this Court lacks jurisdiction to hear Plaintiffs’ federal and state law claims, it does not
address Defendants’ remaining arguments.

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