Sunwealth Glob. HK Ltd. v. Pinder Int'l, Inc.

SUNWEALTH GLOBAL HK LTD. and ANIL KUMAR DHANWANI, Plaintiffs, v. PINDER INTERNATIONAL, INC., 30 BELOW CORP.f/k/a CKEL GENERATION CORP., and JITANDER SINGH DHALL, Defendants.

20 Civ. 1436 (ER)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 23, 2021

OPINION AND ORDER

Ramos, D.J.:

Sunwealth Global HK Ltd. ("Sunwealth") and Anil Kumar Dhanwani ("Dhanwani") bring this action against Pinder International Inc. ("Pinder"), 30 Below Corp. f/k/a Ckel Generation Corp. ("30 Below"), and Jitander Singh Dhall ("Singh")¹ (collectively, "Defendants") for violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, ("RICO") and for conspiracy to violate RICO. Doc. 27, Am. Compl. Now pending before the Court is Defendants' motion to dismiss this action, or in the alternative, to stay this action pending the resolution of a state court action between the same parties. Doc. 30. For the reasons set forth below, the motion to dismiss or stay on the basis of a pending state court action is DENIED, and the motion to dismiss for failure to state a claim is GRANTED. Plaintiffs are granted leave to file an amended complaint.

I. BACKGROUND²

A. Shipments of Goods Between June 2016 and July 2017

Sunwealth is a Chinese corporation headquartered in Hong Kong, of which Dhanwani, a resident of India, is the principal and sole shareholder. Am. Compl. ¶¶ 3-4. Pinder and 30 Below are corporations domiciled in New York, and Plaintiffs allege Singh is the president, principal officer, and sole or controlling shareholder of Pinder and 30 Below. Id. ¶¶ 5-7.

From June 2016 to July 2017, Plaintiffs and Defendants were engaged in a business relationship in which Plaintiffs shipped clothing items, including fleece hoodies, joggers, shorts, and denim jeans (the "Goods"), to Defendants pursuant to purchase orders. Id. ¶ 13. During this time period, Sunwealth produced and sent thirty-five shipments of Goods to Defendants. Id. ¶¶ 13, 22. These shipments totaled 563,350 units for a value of $1,942,896.00. Id. ¶ 22. Plaintiffs allege that each shipment was the result of a specific order or request from at least one Defendant and that each shipment was documented by an invoice, a sales contract, and shipping documents, such as a Bill of Lading, which were all transmitted to Defendants. Id. ¶¶ 16-18. Plaintiffs only shipped the Goods after receiving assurances of payment from Singh or another employee of Pinder or 30 Below, and for each shipment, payment was due approximately one month after the shipment was made. Id. ¶¶ 19-20. Plaintiffs allege that Defendants have consistently failed to pay the full amount due. Id. ¶ 21. Each shipment of Goods was delivered to the Port of New York, pursuant to Defendants' instructions, and Defendants were responsible for clearing and arranging release orders for each shipment with Sunwealth's authorization.³ Id. ¶¶ 47-48.

During this time period, Plaintiffs allege that Singh and other representatives of 30 Below and Pinder made representations to Plaintiffs that payment for these shipments had been made, despite these payments never being received. Id. ¶ 24. On November 25, 2016, Dhanwani sent Singh an email regarding an overdue balance of $717,622.00 for Goods that had been shipped and already cleared through customs by that date. Id. ¶ 25. Singh allegedly responded by telephone. Id. ¶ 26. Dhanwani discussed their phone conversation in an email to Singh, emphasizing that Singh had assured Dhanwani that the overdue balance would be paid in its entirety in the next week. Id. Singh also allegedly sent an email the same day promising payment "after the holiday." Id. ¶ 27. In early January 2017, Singh allegedly told Dhanwani that a payment of $100,000.00 would be made to Plaintiffs on January 5, 2017, with more to follow, but only $76,859.76 was paid on January 7, 2017. Id. ¶¶ 30-31.

Sunwealth alleges that, prior to February 2017, Defendants had always cleared the goods without incident upon arrival in New York. Id. ¶¶ 48-49. However, Sunwealth alleges that between February 2017 and March 2017, Defendants failed to clear four containers of Goods (the "Uncleared Containers"). Id. ¶ 50. As a result, three of these containers were left at the port for over two years, incurring significant demurrage and other costs. Id. ¶ 52. The precise reason these containers were not cleared is not apparent from the Amended Complaint. Sunwealth alleges that it did not authorize the release of the three containers to Defendants, in part because of Defendants' failure to clear them, and "in part due to the Defendants' repeated failure to pay Sunwealth for previous shipments of Goods." Id. ¶ 51.⁴ The Uncleared Containers allegedly contained Goods worth $242,036.76. Id. ¶ 55. Sunwealth alleges that Defendants later took the Goods from the three Uncleared Containers without Sunwealth's authorization and without submitting payment to Sunwealth. Id. ¶ 54.

In early July 2017, Singh allegedly told Dhanwani that a payment on the unpaid balance owed on the Goods had been sent on behalf of 30 Below and Pinder. Id. ¶ 38. On July 10, 2017, Dhanwani sent Singh an email stating that Singh had not yet paid. Id. ¶ 39. On August 21, 2017, Dhanwani sent Singh a text message requesting the overdue payment. Id. ¶ 40. Singh allegedly responded on the same day, saying "I am sending," but no payment was made. Id. ¶ 41. On August 23, 2017, Dhanwani emailed Singh about the overdue payments and stated that Sunwealth required those payments to function as a business. Id. ¶ 68. On August 27, 28, and 30, 2017, Dhanwani again sent Singh emails asking for payment and stating that Sunwealth was unable to operate without the funds and urgently needed payment on the overdue invoices. Id. ¶¶ 69-72. On August 31, 2017, Singh allegedly made oral promises to Dhanwani that Defendants would send at least $68,000.00 by the end of August and would clear the Uncleared Containers still at the port. Id. ¶ 74. On September 1, 2017, Dhanwani emailed Singh because Defendants had not made the promised payments, and the Uncleared Containers had still not been cleared. Id. ¶ 75. On September 4 and 8, 2017, a Sunwealth employee and Dhanwani, respectively, sent emails to Singh referencing the alleged oral promise made by Singh to pay the overdue balance. Id. ¶ 76. No such payments had been made when the emails were sent. Id. ¶¶ 76-77. On September 11, 2017, Dhanwani emailed Singh to report that Defendants' failure to pay and Sunwealth's corresponding inability to pay its own suppliers had led to three factories shutting down and Dhanwani losing his personal residences and cars in China. Id. ¶ 78. Dhanwani sent Singh a text message to send payment, and Singh allegedly responded saying he could not pay until Dhanwani released a bill of lading, which would allow Defendants to clear a shipment of Goods without paying for it.⁵ Id. ¶ 60. Dhanwani later sent another text message to Singh asking for payment, to which Singh allegedly responded that he would make a payment only if a bill of lading for the Goods was released.⁶ Id. ¶¶ 42-43. No payment was made on that date. Id. ¶ 44.

Because of Defendants' failure to pay for the Goods, Sunwealth represents that, by mid-2017, it was in "dire financial distress" and unable to pay the companies Plaintiffs used to manufacture the Goods. Id. ¶ 63. Dhanwani represents that he exhausted his personal savings to keep Sunwealth afloat and that he was receiving demands for payment and threats from Sunwealth's suppliers in China. Id. ¶¶ 63, 73.

B. First and Second Settlement Agreements

Plaintiffs allege that Singh approached Dhanwani to make a deal requiring Sunwealth to release the Uncleared Containers, and on October 30, 2017, Pinder, 30 Below, and Sunwealth entered into a Settlement Agreement (the "First Agreement"). Id. ¶¶ 117-18. Plaintiffs allege that Singh forced the First Agreement on them because Singh knew Sunwealth desperately needed funds, and that Singh told Sunwealth the only way it would get money from Defendants was through the parties signing a settlement agreement. Id. ¶¶ 119, 123. The First Agreement stipulated that Defendants would pay a total of $550,000.00 to Plaintiffs in installments over six months, ending in May 2018. Id. ¶ 122. The first installment of $30,000.00 was due on November 1, 2017, and Defendants did not pay it, instead demanding an adjustment to the deal. Id. ¶¶ 124-25. Plaintiffs allege that they conceded to the adjustment because Sunwealth desperately needed funds. Id. ¶ 126.

On November 8, 2017, the parties entered into a revised Settlement Agreement (the "Second Agreement"), which contained a provision stating it superseded all previous agreements made between the parties. Id. ¶¶ 128-29. The Second Agreement stipulated that Defendants would pay a total of $450,000.00 over six months in installments. Id. ¶ 130. The first installment of $50,000.00 was due on November 9, 2017, after which Plaintiffs would need to immediately release one of the Uncleared Containers.⁷ Id. ¶ 131. Defendants made the $50,000.00 payment on November 10, 2017, and Plaintiffs released one of the Uncleared Containers. Id. ¶¶ 132-33. Defendants did not make the second installment of $30,000.00, due on November 20. 2017, but the third installment of $30,000.00, due on December 5, 2017, was paid. Id. ¶¶ 134-35. Defendants also did not pay the required $30,000.00 installments due on December 20, 2017, January 5, 2018, and January 20, 2018. Id. ¶ 137. On January 31, 2018, Singh allegedly sent Dhanwani an email promising that payment was coming and that he needed a few more days. Id. ¶ 138. On February 3, 2018, Singh sent Dhanwani an email saying "Check bank Monday." Id. ¶ 140. However, Defendants did not make the payment, and they also did not make the required installments of $30,000.00 due on February 5, February 20, March 5, March 20, and April 5, 2018. Id. ¶¶ 144-45. Defendants additionally missed three payments of...