Sourcing Unlimited, Inc. v. Elektroteks, LLC

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SOURCING UNLIMITED, INC. d/b/a JUMPSOURCE, Plaintiff, v. ELEKTROTEKS, LLC, SERKAN GULER, JOHN E. FOX, INC., HARRY BERZACK, POLANCO INDUSTRIAL CORP., FABIO SYRING and SETH SERVICE-MANUTENACAO E COMERCIO DE EQUIPAMENTOS LTDA, Defendants.

Civil Action No. 20-cv-11955-ADB

United States District Court, D. Massachusetts

September 18, 2023

MEMORANDUM AND ORDER

ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

Plaintiff Sourcing Unlimited, Inc. d/b/a Jumpsource (“Jumpsource” or “Plaintiff”) asserts several claims against the Estate of Harry Berzack (“Berzack”) and John E. Fox, Inc. (“Fox”) (collectively, “Berzack and Fox” or “Defendants”); as well as Polanco Industrial Corp. (“Polanco Corp.”).^[1] Jumpsource's claims stem from an alleged scheme, carried out by Defendants and non-parties, to sabotage and bankrupt Jumpsource. [ECF No. 1 at 12-57 (“Compl.”)]. Currently before the Court is Berzack and Fox's motion for summary judgment on Counts I-VI and VIII. [ECF No. 222]. For the reasons set forth below, the motion is DENIED.

I. BACKGROUND

A. Factual Background

The record here is replete with contested facts that bear on the claims at issue, and thus summary judgment is not appropriate. In any event, to provide context, a short summary of the relevant contested and uncontested facts identified by the parties follows. See [ECF No. 237-1 at 3-34].

a. Parties

Plaintiff Jumpsource is a manufacturer of industrial sewing machine parts. [ECF No. 237-1 ¶ 1]. It has designed molds for creating those parts which were made and used for manufacturing in China. [Id. ¶¶ 1, 2].

Defendant Fox is a seller of parts for industrial sewing machines. [ECF No. 237-1 ¶ 4]. Defendant Harry Berzack was the Chief Executive of Fox. [Id. ¶ 5].

b. Alleged Conduct

From approximately 2012 to 2016, Fox bought parts from Jumpsource. [ECF No. 237-1 ¶ 6].^[2] Jumpsource generally alleges that around the time that the business relationship ended in 2016 and thereafter, Fox and Berzack “entered into a secret agreement with rogue Jumpsource employees, [Anson Fang and Jose Polanco], to purchase stolen Jumpsource products and products manufactured from stolen Jumpsource equipment and resell them in foreign and interstate commerce.” [ECF No. 237 at 1]. Fang was a Jumpsource employee, based in China, who was responsible for overseeing parts of Jumpsource's business there. [ECF No. 237-1 ¶ 3]. Polanco was a Jumpsource salesman. [Id. ¶ 20]. The other facts underlying these claims are largely disputed.

For example, in 2015-2016, Fox sent several emails to Jumpsource complaining about order deliveries and product quality. [ECF No. 237-1 ¶¶ 27-31, 35]. The parties dispute the basis and interpretation of those complaints (i.e., whether they were the result of business failures or the alleged conspiracy), but generally agree that at least some of the issues with Jumpsource stemmed from its business operations in China, where Fang worked. See [id. ¶¶ 2731, 35, 44].

In September 2016, Fang resigned from Jumpsource. [ECF No. 237-1 ¶¶ 6, 21, 23]. Also in 2016, Berzack, Fox's CEO, contacted Polanco and Polanco began taking product orders from Fox. [Id. ¶¶ 49-51]. The parties dispute whether (1) these interactions occurred before or after Polanco and Fang left Jumpsource, [id. ¶ 49], (2) Berzack knew Polanco worked for Jumpsource, [id. ¶ 75], (3) Berzack knew that Polanco was using Jumpsource's molds and parts, [id. ¶¶ 50-52, 55, 63-64], and (4) the parts Polanco shipped were in fact from Jumpsource's molds, [id. ¶ 68]. Though Polanco sourced the products that he got for Fox from Fang, and payments from Fox were wired to an entity chosen by Fang, [id. ¶¶ 58-59], the parties dispute whether Berzack knew Fang, [id. ¶ 60].

c. State Court Action

In a separate action brought in Massachusetts state court in 2016 (the “State Action”), Jumpsource sued Polanco in his individual capacity and an individual named Michael Pierce, who was allegedly also involved in the general scheme underlying this case. [ECF No. 223 at 10; ECF No. 237-4]. There, the jury considered, as most relevant here, whether Polanco (1) interfered with a business relationship between Jumpsource and Fox, (2) committed an unfair or deceptive act or practice in violation of Mass. Gen. Laws. Ch. 93A, (3) converted Jumpsource's parts, and (4) engaged in a civil conspiracy with Fang and Pierce to breach a duty owed to Jumpsource. See generally [ECF No. 237-4]. The jury found that Polanco interfered with Jumpsource and Fox's business relationship, but that he did not “intentionally persuade Fox . . . not to continue [the] relationship between Jumpsource and Fox,” [id. at 1-2], and found against Polanco on all other claims identified above, [id. at 4-5 (93A claim), 7-8 (conversion claim), 10-11 (civil conspiracy claim)].

B. Procedural Background

Jumpsource originally filed suit in the Essex County Superior Court on September 28, 2020. [Compl. at 57]. Fox and Berzack removed the case to this Court on October 30, 2020. [Compl. at 1-3]. Jumpsource's complaint asserted the following claims against Fox and/or Berzack: (1) Racketeering in violation of the federal civil Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) (Count I), [Compl. ¶¶ 194-220]; (2) use of income derived from a pattern of racketeering activity, 18 U.S.C. § 1962(a) (Count II), [id. ¶¶ 221-233]; (3) RICO conspiracy, 18 U.S.C. § 1962(d) (Count III), [id. ¶¶ 234-244]; (4) conspiracy to commit a business tort (Count IV), [id. ¶¶ 245-49]; (5) conversion (Count V), [id. ¶¶ 250-253]; (6) violation of Chapter 93A (Count VI), [id. ¶¶ 254-269]; and (7) breach of contract and the covenant of good faith and fair dealing against Fox (Count VIII), [id. ¶¶ 274281].

In November 2020, Berzack and Fox moved to dismiss all of these claims pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 8]. On July 8, 2021, the Court denied the motion in part and granted it in part. [ECF No. 27]. The surviving claims were Counts I-VI and Count VIII. See generally [id.].

On May 24, 2022, Fox and Berzack moved for summary judgment on all remaining claims. [ECF No. 222]. Plaintiff opposed on June 28, 2023, [ECF No. 237], and included in its opposition a response to the narrative of facts in Fox and Berzack's memorandum in support of their motion, [ECF Nos. 223 (Fox and Berzack memorandum); ECF No. 237-1 (Plaintiff's response to Fox and Berzack's narrative facts)].

II. LEGAL STANDARD^[3]

Summary judgment is appropriate where the moving party can show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[A]n issue is ‘genuine' if it ‘may reasonably be resolved in favor of either party.'” Robinson v. Cook, 863 F.Supp.2d 49, 60 (D. Mass. 2012) (alteration in original) (quoting Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir. 2008)). “A fact is material if its resolution might affect the outcome of the case under the controlling law.” Cochran v. Quest Software, Inc., 328 F.3d 1, 6 (1st Cir. 2003) (citation omitted). Thus, “[a] genuine issue exists as to such a fact if there is evidence from which a reasonable trier could decide the fact either way.” Id. “The moving party bears the initial burden of asserting the absence of a genuine issue of material fact and ‘support[ing] that assertion by affidavits, admissions, or other materials of evidentiary quality.'” McFee v. Lund, No. 18-cv-11158, 2021 WL 5310755, at *3 (D. Mass. Nov. 15, 2021) (alteration in original) (quoting Mulvihill v. Top-Flite Golf Co., 335 F.3d 15, 19 (1st Cir. 2003)).

To succeed in showing that there is no genuine dispute of material fact, the moving party must direct [the court] to specific evidence in the record that would be admissible at trial. That is, it must “affirmatively produce evidence that negates an essential element of the non-moving party's claim,” or, using “evidentiary materials already on file . . . demonstrate that the nonmoving party will be unable to carry its burden of persuasion at trial.”

Ocasio-Hernandez v. Fortuno-Burset, 777 F.3d 1, 4-5 (1st Cir. 2015) (second alteration in original) (quoting Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000)).

When reviewing the record, the Court “must take the evidence in the light most flattering to the [non-moving party], indulging all reasonable inferences in that party's favor.” Cochran, 328 F.3d at 6 (citation omitted). The First Circuit has noted that this review “is favorable to the nonmoving party, but it does not give him a free pass to trial.” Hannon v. Beard, 645 F.3d 45, 48 (1st Cir. 2011). “Once the moving party avers the absence of genuine issues of material fact, the nonmovant must show that a factual dispute does exist, but summary judgment cannot be defeated by relying on improbable inferences, conclusory allegations, or rank speculation.” Fontanez-Nunez v. Janssen Ortho LLC, 447 F.3d 50, 54-55 (1st Cir. 2006) (citation omitted). “The factual conflicts upon which he relies must [also] be both genuine and material.” Gomez v. Stop & Shop Supermarket Co., 670 F.3d 395, 397 (1st Cir. 2012). Further, “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

III. DISCUSSION

A. Preclusion

Fox and Berzack first argue that Plaintiff's claims are barred by the doctrine of res judicata. [ECF No. 223 at 10-13]. “The doctrine of res judicata may properly be asserted as a defense on a motion for summary judgment.” Miles v. Aetna Cas. & Sur. Co., 589 N.E.2d 314 316 (Mass. 1992). “Res judicata” is a broad term that...