Nanjing CIC Int'l Co. v. Schwartz

NANJING CIC INTERNATIONAL CO., LTD., Plaintiff, v. JAMES SCHWARTZ and FOUNDRY ASSOCIATES, INC., Defendants

No. 6:20-CV-07031 EAW

United States District Court, W.D. New York

January 19, 2022

DECISION AND ORDER

ELIZABETH A. WOLFORD, CHIEF JUDGE UNITED STATES DISTRICT COURT

INTRODUCTION

Plaintiff Nanjing CIC International Co., Ltd. (“Plaintiff”) commenced the instant action on December 3, 2020, asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, breach of fiduciary duty, and unjust enrichment against defendants Foundry Associates, Inc. (“Foundry”) and its president James Schwartz (“Schwartz”) (collectively “Defendants”). (Dkt. 1; see Dkt. 18-1 at ¶ 1). Currently pending before the Court are: (1) a motion for summary judgment filed by Defendants (Dkt. 18) and (2) a cross-motion for leave to amend filed by Plaintiff (Dkt. 29). For the reasons set forth below, the Court grants in part and denies in part Defendants' motion for summary judgment and denies Plaintiff's cross-motion for leave to amend.

FACTUAL BACKGROUND

The following facts are taken from the complaint (Dkt. 1) Defendants' Statement of Material Facts submitted in support of their motion for summary judgment (Dkt. 21), Plaintiff's response thereto (Dkt. 30), and the exhibits submitted by the parties. The Court has noted relevant factual disputes.

Foundry is a New York corporation with its principal place of business in this District. (Dkt. 21 at ¶ 1; Dkt. 30 at ¶ 1). It is undisputed that Foundry “designs, engineers, and sells metal castings, as well as machined parts and various other products.” (Dkt. 21 at ¶ 2; Dkt. 30 at ¶ 2). However, Plaintiff maintains that in its relationship with Foundry, “Foundry had a limited role in the design and engineering of the parts [Plaintiff] sold to its customers. . . . Instead, [Plaintiff] worked directly with the customer to design and engineer the [products]. . . .” (Dkt. 30 at ¶ 2).

Foundry represents that it has approximately 40 to 45 regular customers and approximately 250 occasional customers, all of whom are based in the United States. (Dkt. 21 at ¶¶ 3-4). Plaintiff does not controvert these representations but contends that it lacks information to respond to them due to a lack of discovery. (Dkt. 30 at ¶¶ 3-4).

As a general matter, when one of Foundry's customers needs a new part manufactured in China, it will submit a request for quote to Foundry, and Foundry will deliver that request for quote and any other pertinent information to a trading company in China. (Dkt. 21 at ¶¶ 5-6; Dkt. 30 at ¶¶ 5-6). The trading company in China will then identify a suitable factory or foundry in China to manufacture a sample part, which will be delivered to Foundry for inspection and feedback. (Dkt. 21 at ¶¶ 7-8). If the customer approves the sample part, it then has the option of ordering directly from the trading company with Foundry receiving a commission. (Id. at ¶ 9). In the alternative, Foundry may act as the purchaser and then resell the part to its customer in the United States. (Id. at ¶ 10).

Plaintiff does not dispute that this is Foundry's general process. However, Plaintiff contends that in its relationship with Foundry, “[Plaintiff's] customers typically placed orders directly with [Plaintiff].” (Dkt. 30 at ¶¶ 5-6). Plaintiff further contends that in its dealings with Foundry, it “routinely delivered sample parts directly to customers or potential customers for inspection and feedback and worked directly with those customers to make any required corrections or modifications.” (Id. at ¶ 8).

Foundry maintains that it has never entered into any agreement in which it would exclusively represent only a single trading company in China. (Dkt. 21 at ¶ 11). Plaintiff states that it “does not have sufficient information to address this statement” due to a lack of discovery. (Dkt. 30 at ¶ 11). However, in its complaint, Plaintiff alleges that it had a verbal contract with Defendants whereby they agreed to act as Plaintiff's exclusive agent in the United States. (Dkt. 1 at ¶ 12). Plaintiff contends that this “exclusive relationship” lasted for over 10 years and was “very clear to both parties in terms of commitments and actual operations.” (Dkt. 30 at ¶ 34).

Plaintiff is a trading company based in Nanjing, China. (Dkt. 21 at ¶ 12; Dkt. 30 at ¶ 12). The parties dispute the manner in which their relationship began. Foundry claims that it first engaged in business with Plaintiff in 2003 in connection with a project for its longtime client Ingersoll Rand. (Dkt. 21 at ¶ 13). However, Plaintiff maintains that it began working with Foundry because it “realiz[ed] that it needed an agent in the U.S. to support its attempts to grow sales of [its] products in the U.S.” (Dkt. 30 at ¶ 13). It is undisputed that between 2003 and 2008, the parties' relationship grew to encompass at least 13 other Foundry customers. (Dkt. 21 at ¶ 14; Dkt. 30 at ¶ 14).

Foundry asserts that beginning in 2012 and continuing through 2015, it “received numerous complaints about [Plaintiff] from customers, including complaints about timeliness and quality of products.” (Dkt. 21 at ¶ 15). Plaintiff does not deny that there were customer complaints during this time period but contends that such complaints “were the result of [a] scheme Defendants engaged in with E. Chen (‘Chen'), a former employee of [Plaintiff's], to damage[] [Plaintiff's] business relationships with its customers and suppliers.” (Dkt. 30 at ¶ 15).

In October of 2012, Chen told Foundry that Plaintiff was in financial distress and did not have enough money to pay factories. (Dkt. 21 at ¶ 17; Dkt. 30 at ¶ 17). Chen then resigned her employment with Plaintiff in 2013. (Dkt. 21 at ¶ 18; Dkt. 30 at ¶ 18). Defendants contend that in 2014, Chen began operating PINO Industry Co., Ltd. (“PINO”) as a trading company in China. (Dkt. 21 at ¶ 19). Plaintiff maintains that PINO was incorporated in July 2015 as a British offshore company and not as a Chinese company. (Dkt. 30 at ¶ 19). It is undisputed that by mid-2014, Foundry was working with both Plaintiff and PINO. (Dkt. 21 at ¶ 20; Dkt. 30 at ¶ 20). Defendants contend that “[b]y 2015, faced with continued delays and quality issues with [Plaintiff], Foundry transitioned all but two of its customers from [Plaintiff] to PINO.” (Dkt. 21 at ¶ 21). Plaintiff again maintains that any quality issues were a direct result of a scheme between Defendants and Chen. (Dkt. 30 at ¶ 21).

In or about April of 2015, Plaintiff and its president and owner Xiao Su (“Xiao”) confronted Defendants about their business with PINO. (Dkt. 21 at ¶ 22; Dkt. 30 at ¶ 22). Over the next several months, Plaintiff and Xiao attempted to persuade Foundry to transition its customers back to purchasing from Plaintiff. (Dkt. 21 at ¶ 22; Dkt. 30 at ¶ 22).

Plaintiff represents that in July of 2015, it noticed a sharp decline in orders for the year. (Dkt. 30 at ¶ 39). Plaintiff states that it investigated the matter and determined that some of its customers were “making purchases from High Hope, the largest and most well-known Chinese trading company in Jiangsu Province.” (Id. at ¶ 39). Plaintiff further claims to have also discovered that certain of its clients were doing business with PINO and states that when it asked Schwartz about PINO, he “dissembled” and repeatedly falsely claimed that the sales downturn was due to “a dip in the economy.” (Id. at ¶¶ 40-41). Defendants further allegedly falsely stated that Ingersoll Rand had recommended another supplier who was taking business away from Plaintiff and denied that any of Plaintiff's former employees were involved in sales to Plaintiff's customers. (Id. at ¶¶ 42-43).

In August of 2015, Foundry advised Plaintiff that it would not bring its major customers back to Plaintiff due to Plaintiff's “poor reputation, ” but offered to both maintain its current level of ordering and to look for new customers to purchase from Plaintiff. (Dkt. 21 at ¶ 24; Dkt. 30 at ¶ 24). Plaintiff rejected this offer and further sent an email to Foundry suggesting that its actions could potentially subject it to criminal sanctions in China. (Dkt. 21 at ¶ 25; Dkt. 30 at ¶ 25).

Between October of 2015 and February of 2016, Plaintiff sent Foundry several drafts of a proposed “Sales Agency Agreement, ” which sought to establish an exclusive sales agency relationship. (Dkt. 21 at ¶ 26; Dkt. 30 at ¶ 26). Foundry ultimately declined to enter in the proposed relationship and did not sign an agreement with Plaintiff. (Dkt. 21 at ¶ 27; Dkt. 30 at ¶ 27).

Xiao's and Schwartz's relationship ended in 2016. (Dkt. 21 at ¶ 28; Dkt. 30 at ¶ 28). Further, Schwartz has not directly communicated with Xiao or anyone else at Plaintiff since 2016. (Dkt. 21 at ¶ 29; Dkt. 30 at ¶ 29). However, Foundry continues to work with Plaintiff “on an operational level to service the orders of the one remaining Foundry client that purchases from [Plaintiff].” (Dkt. 21 at ¶ 30; Dkt. 30 at ¶ 30).

PROCEDURAL BACKGROUND

Plaintiff commenced the instant action on December 3, 2020. (Dkt. 1). Defendants answered on January 20, 2021, and the matter was referred to United States Magistrate Judge Marian W. Payson for all pretrial matters excluding dispositive motions. (Dkt 8; Dkt. 9). On February 18, 2021, Judge Payson entered a scheduling order pursuant to which any motions to amend the pleadings were due by April 16, 2021, and fact discovery was to be completed by October 21, 2021. (Dkt. 14). This scheduling order states that no extension of the deadlines set forth therein will be granted “except upon written application, made prior to the cutoff date, showing good cause for the extension.” (Id. at 4 (emphasis in original)).

Defendants...