Kandi Technologies Opposition to Motion to Dismiss
-
Upload
sharesleuthdocs -
Category
Documents
-
view
217 -
download
0
Transcript of Kandi Technologies Opposition to Motion to Dismiss
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 1/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED
COMPLAINT
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
CARLYLE (CARY) W. HALL III (CA Bar No. 184842; AZ Bar No. 026958)POLSINELLI SHUGHART PCSecurity Title Plaza3636 N. Central Ave., Suite 1200Phoenix, AZ 85012TEL: (602) 650-2000 / FAX: (602) 264-7033
EMAIL: [email protected]
RYAN D. LAPIDUS (Bar No. 196838)DANIEL C. LAPIDUS (Bar No. 227170)LAPIDUS & LAPIDUS, PLC177 South Beverly DriveBeverly Hills, California 90212TEL: 310-550-8700 / FAX: 310-943-2471EMAIL: [email protected]
Attorneys for Plaintiffs CONG WANG, an individual; SEASENG,INC., a/k/a KMD POWERSPORTS, a California corporation
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CONG WANG, an individual; SEASENG,INC., a/k/a KMD POWERSPORTS, aCalifornia corporation,
Plaintiffs,
v.
ZHEJIANG KANDI VEHICLES CO., LTD.,a/k/a KANDI TECHNOLOGIES CORP, aforeign corporation; KANDITECHNOLOGIES CORP., a DelawareCorporation, f/k/a STONE MOUNTAINRESOURCES INC.; ZHEJIANGYONGKANG TOP IMPORT ANDEXPORT CO. LTD., a/k/a DINGJI, a foreigncorporation; ZHEJIANG MENGDELIELECTRONIC CO., LTD.; a foreigncorporation; XIAO MING HU, an individual;WANG YUAN HU, an individual,
Defendants.
Case No. CV 09-7145-JFW (JEMx)
PLAINTIFFS’ MEMORANDUM OFPOINTS AND AUTHORITIES INOPPOSITION TO MOTION TODISMISS FIRST AMENDEDCOMPLAINT
Date: January 25, 2010Time: 1:30 p.mCourtroom: 16
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 1 of 11 Page ID #:264
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 2/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
1
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
I. INTRODUCTION
Defendants claim that the First Amended Complaint (“FAC”) is “thin on facts and
thick with bare conclusions and formulaic recitations of the elements of the claims.”
Motion, p. 7. That is a better description of Defendants’ motion, which persistentlymischaracterizes the FAC, and ignores key allegations in favor of repeatedly using terms
like “bare” and “conclusory.”
In fact, the FAC alleges in great detail a conspiracy by the Defendants to take over
Plaintiffs’ business through threats, extortion, threats, and other criminal and racketeering
activity. The FAC sets forth multiple predicate RICO violations, properly alleges a
conspiracy, and identifies Plaintiffs’ damages arising from the Defendants’ scheme.
Accordingly, the FAC properly alleges claims for violation of RICO, and
Defendants’ Rule 12(b)(6) motion should be denied. Because the state law claims
alleged in the FAC share a common basis of operative facts with the RICO claims – and
Defendants do not contend otherwise – this Court has supplemental jurisdiction over
those claims, and Defendants’ motion to dismiss those claims for lack of jurisdiction
should be denied.
II. FACTUAL ALLEGATIONS
Contrary to Defendants’ mischaracterization, the FAC alleges in great detail the
criminal acts and racketeering activities of the Defendants. Among other things, the FAC
alleges that Defendants used threats, extortion, intimidation, harassment, and abuse of
legal process to attempt to take over Plaintiffs’ business.
A. The Parties’ Distributorship Agreement.
Starting in 2006, Defendants Kandi, Kandi China, Zhejiang and/or Mengdelibegan expanding their presence in the United States, California, by reaching out to
various businesses who would be interested in selling Kandi products. See Complaint
¶18. Plaintiff Seaseng agreed to act as a distributor of Kandi products, in turn,
Defendants Kani, Kandi China, Zhejiang and/or Mengdeli agreed to give Plaintiff
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 2 of 11 Page ID #:265
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 3/11
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 4/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
3
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
When Plaintiff Wang refused to surrender control over his company to Defendants
or to disclaim his interest in the profits earned or to be earned through the sale of Kandi
products; Defendants Kandi, Kandi China and/or Zhejiang (in or before February 2008)
stole Plaintiff Seaseng’s corporate documents, including but not limited to customercontact lists, customer invoice lists, Seaseng corporate documents and unsigned Seaseng
stock certificates – an event caught on camera. See Complaint ¶¶38-41.
On or about February 13, 2008, Defendant Zhejiang filed a lawsuit, case number
KC052313 (“First Lawsuit”), in the Superior Court of California, County of Los Angeles,
against Plaintiff Wang and Plaintiff Seaseng, stating claims for fraud, conversion, breach
of fiduciary duty, appointment of receiver, accounting, constructive trust, equitable lien,
injunctive and declaratory relief and seeking to take control over Plaintiff Seaseng. See
Complaint ¶44. The First Lawsuit, however, was never served on Plaintiffs and was later
dismissed. See Complaint ¶¶45-46.
C. Defendants’ Threats, Intimidation, and Harassment
In addition to Defendants’ theft of Plaintiff Seaseng’s corporate documents, in
February, 2008, Plaintiff Wang learned that his relatives in China were harassed and
physically threatened by Defendants’ representatives. See Complaint ¶42. Also,
Defendants Xiao Ming and Wang Yuan, on or about January 15, 2009, caused a warrant
to be issued for Plaintiff Wang’s arrest in China under the theory that Plaintiff Wang was
an employee of Defendants Kandi, Kandi China and/or Zhejiang and that Plaintiff Wang
misappropriated company documents from the Defendants. See Complaint ¶43. None of
this was true.
At approximately midnight on February 27, 2008, Defendant Xiao Ming calledPlaintiff Wang’s father and threatened Plaintiff Wang’s personal safety. See Complaint
¶47. At approximately 4:00 a.m. on February 28, 2008, Defendant Xiao Ming demanded
that Plaintiff Wang meet him to sign a promissory note and settlement agreement drafted
by Xiao Ming and/or his attorneys or else face physical violence. Id.
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 4 of 11 Page ID #:267
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 5/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
4
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
Plaintiff Wang then met with Defendant Xiao Ming who purported to represent the
interests of Defendants Kandi, Kandi China, Zhejiang and Mengdeli. See Complaint ¶48.
Plaintiff Wang sought to address any miscommunications, restore control over his
company Plaintiff Seaseng, and to settle any disputes with Defendants. See Complaint ¶48. The parties entered into a Settlement Agreement. See Complaint ¶¶49-53.
In July 2008, Defendant Zhejiang filed another lawsuit against Plaintiff Wang and
Plaintiff Seaseng, case number CIVRS 806472 (“The Second Lawsuit”) in the Superior
Court of California, County of San Bernardino, making essentially the same allegations
as in its First Lawsuit, including stating that Plaintiff Wang was a salaried employee of
Defendants Kandi, Kandi China and/or Zhejiang, and that he had a fiduciary duty to
make Seaseng the wholly-owned subsidiary of Defendant Zhejiang, and claiming that the
Settlement Agreement should be declared void and rescinded; this suit was later
withdrawn as well. See Complaint ¶¶54-56.
Because Defendant Zhejiang denied the validity of the Settlement Agreement
when it filed the Second Lawsuit in July 2008, Plaintiff Seaseng suspended his August
payment to Defendants Kandi China and Zhejiang under the Payment Plan. See
Complaint ¶57. On or about October 30, 2008, Plaintiffs Seaseng and Wang received a
letter from the California DMV stating that their distributor license was canceled; and
that these Plaintiffs were not unauthorized to sell Kandi vehicles as of September 2008.
See Complaint ¶58. Around the same time, Plaintiffs Seaseng and Wang began receiving
numerous complaints from the ultimate purchasers of Kandi products regarding their
poor quality and performance, missing parts and defects who were seeking Plaintiff
Seaseng’s assistance with obtaining new parts or receiving refunds; Defendants did notrespond to Plaintiffs concerns and business and reputation began to suffer. See
Complaint ¶¶59-63.
Plaintiff Seaseng had no choice but to liquidate the Kandi products to distributors
in Mexico at heavy losses. See Complaint ¶64.
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 5 of 11 Page ID #:268
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 6/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
5
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
D. Defendants’ Continued Threats of Violence
On or about December 23, 2008, Hong Feng Zhu (“Zhu”), a bodyguard and driver
for Defendant Xiao Ming, appeared at Plaintiff Seaseng’s place of business to physicallythreaten Plaintiff Wang. See Complaint ¶65. Mr. Zhu first met with Neng Da Hu,
Plaintiff Wang’s friend, and told him that he was “warning” Plaintiff Wang, and that
Defendant Xiao Ming had already made a deposit with someone to “take care of Mr.
Wang.” See Complaint ¶66.
Plaintiff Wang was out of the office when this happened but when he came back
to the office, Mr. Zhu was still at this office and made the same threats of violence and
physical harm personally to Plaintiff Wang. See Complaint ¶67. December 24, 2008,
Plaintiff Wang filed a police report regarding the threats. See Complaint ¶68.
On or about June 8, 2009, Defendants Kandi China and Zhejiang filed yet another
lawsuit, case number CIVRS 906194 (“The Third Lawsuit”) in the Superior Court of
California, County of San Bernardino, seeking to now enforce the terms of the Settlement
Agreement, which these Defendants previously repudiated, and seeking to compel
Plaintiffs Seaseng and Wang to pay for the balance of the Kandi products, which they
previously refused to accept or service, let alone allow Plaintiffs to distribute. See
Complaint ¶69.
III. THE FIRST AMENDED COMPLAINT ALLEGES A VALID RICO
CLAIM
A. The FAC Alleges Predicate Acts Under RICO
The predicate acts necessary for stating a civil RICO claim are found in 18U.S.C.A. § 1961(1), which states that the “racketeering activity” means:
(A) any act or threat involving murder , kidnapping, gambling, arson,
robbery, bribery, extortion , dealing in obscene matter, or dealing in
narcotic or other dangerous drugs, which is chargeable under State law
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 6 of 11 Page ID #:269
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 7/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
6
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
and punishable by imprisonment for more than one year;
(D) any offense involving fraud connected with a case under title 11,
fraud in the sale of securities , or the felonious manufacture,
importation, receiving, concealment, buying, selling, or otherwisedealing in narcotic or other dangerous drugs, punishable under any law
of the United States, or
18 U.S.C.A. § 1961(1) (emphasis added).
Defendants’ threats of violence to Plaintiff Wang and his family members
constitutes extortion under California law as required by 18 U.S.C.A. § 1961(1). See CA
Penal § 518 (“Extortion is the obtaining of property from another, with his consent, or the
obtaining of an official act of a public officer, induced by a wrongful use of force or fear,
or under color of official right”); § 520 (extortion is punishable by two, three, or four
years in state prison).
Defendants’ theft of Plaintiffs’ corporate records is a violation of California Penal
Code § 484 (“Every person who shall feloniously steal, take, carry, lead, or drive away
the personal property of another, or who shall fraudulently appropriate property which
has been entrusted to him or her, or who shall knowingly and designedly, by any false or
fraudulent representation or pretense, defraud any other person of money, labor or real or
personal property . . .is guilty of theft.”).
Finally, Defendants’ false representations in furtherance of their scheme to
defraud Plaintiffs violate 18 U.S.C. § 1341 (mail fraud) and § 1343 (wire fraud).
Defendants attempt to brush aside their criminal conduct with fatuous arguments
that their threats did not “connect any threat with the subject matter of this action,” that“[t]he very nature of the alleged threat are all left to surmise,” and that it could be “a
personal dispute of unknown nature.” Motion, p. 13. According to the Defendants, no
threat is actionable under RICO unless the defendant is foolish enough to spell out in
complete detail the nature of the threat and the reasons for it. Defendants claim that they
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 7 of 11 Page ID #:270
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 8/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
7
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
can, with impunity, threaten to “take care of” someone, and boast of having already
“made a deposit” to do so, because they did not say specifically, “we have hired someone
to kill or hurt you.”
This is specious. The FAC clearly alleges that Defendants threatened Plaintiffsand their family with physical harm, and that these threats were made in the context of,
and in furtherance of, Defendants’ attempts to take over Plaintiffs’ business. Certainly a
finder of fact could reasonably infer that the alleged threats were for this purpose. If
Defendants wish to defend this case on the theory that their agents were merely
threatening violence related to some unknown personal dispute, they are welcome to
present any evidence in support of such a theory to the finder of fact. But the standard
for pleading a valid claim under Rule 12 does not require Plaintiffs to conclusively negate
in their pleading any defense theory, no matter how fanciful, that Defendants can conjure
up.
B. The FAC Alleges a Pattern of Racketeering Activity
All Defendants are either the parent companies, owners or subsidiaries of the other
Defendants. All Defendants constitute the enterprise as they build market share as one
entity and sought to acquire Plaintiff Seaseng from Plaintiff Wang.
Defendants Kandi, Kandi China, Zhejiang, Mengdeli, Xiao Ming and Wang Yuan
combined their efforts as one partnership, association or enterprise (“RICO enterprise”)
for purposes of:
1) Increasing their share in the market for ATVs, UTVs, and go-karts in the United
States through expansion of their operations in the United States; and
2) Acquiring, by means of fraud, securities fraud, extortion and harassment, theUnited States companies who would store, market, distribute, service and be
otherwise responsible for Kandi products. See Complaint ¶72.
Defendants Kandi, Kandi China, Zhejiang, Mengdeli, Xiao Ming and Wang Yuan
engaged in racketeering activity when they:
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 8 of 11 Page ID #:271
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 9/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
8
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
1) Threatened Plaintiff Wang and his family members with physical violence in
order to extort his cooperation;
2) Abused process by filing a series of frivolous actions against Plaintiffs Seaseng
and Wang for ulterior reasons of harassment, extortion, and interference withPlaintiffs’ business;
3) Sought to deprive Plaintiff Wang of his ownership and management rights in
Plaintiff Seaseng without valid consideration, essentially ousting him from his
own company by means of fraud, intimidation and harassment. See Complaint
¶73.
The following are some of the predicate criminal acts which constitute a pattern of
racketeering activity and which Defendants knowingly committed:
1) Acting for Defendants Kandi, Kandi China, Zhejiang, or Mengdeli, Defendants
Xiao Ming and/or Wang Yuan stole corporate documents and/or
misappropriated trade secrets from Plaintiffs Seaseng and Wang.
2) Acting for Defendants Kandi, Kandi China, Zhejiang, or Mengdeli, Defendants
Xiao Ming and/or Wang Yuan made and/or directed death threats and threats
of bodily harm to Plaintiff Wang and/or his relatives, which are punishable as
criminal offenses. See Complaint ¶74.
The above-referenced actions of Defendants Kandi, Kandi China, Zhejiang, Mengdeli,
Xiao Ming and Wang Yuan have sufficient continuity so as to pose a threat of continued
criminal activity. See Complaint ¶75.
The above-referenced acts of racketeering, occurring within ten years of one
another, constitute a pattern of racketeering activity within the meaning of 18 U.S.C. §1961(5). See Complaint ¶76.
C. The FAC Adequately Alleges Damages
Defendants’ motion ignores the allegations of the FAC that clearly set forth
Plaintiffs’ damages. Plaintiffs Seaseng and Wang were injured in their business and
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 9 of 11 Page ID #:272
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 10/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
9
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
property by reason of this violation of 18 U.S.C.A. § 1962, in that, as a direct and
proximate result of Defendants’ complained acts, Plaintiffs suffered damages, including
damages to their business, property and person.
As a result of actions of Defendants Kandi, Kandi China, Zhejiang, Mengdeli,Xiao Ming and Wang Yuan, Plaintiff Wang suffered emotional distress from concern for
his own safety and that of his family; Plaintiffs Seaseng and Wang’s business reputation
and trade name were tarnished; Plaintiffs Seaseng and Wang lost their customers and
opportunity to continue as a distributor of the Kandi products in California; and Seaseng
and Wang sustained other monetary losses arising from Defendants’ breach of
distributorship, ownership, settlement agreements and/or outright scheme by these
Defendants to defraud Plaintiffs. In addition, Defendants used extortion and fraud to
induce Plaintiffs to sign the Settlement Agreement, and to make payments of $90,000,
$164,256, and $181,850 under that agreement. See Complaint, ¶¶ 47-52.
D. The FAC Adequately Alleges a Conspiracy
Defendants’ attack on the FAC’s allegations of violation of §1962(d), conspiracy
to violate the RICO statute, largely rest on Defendants’ claim that the FAC does not
allege predicate acts. As set forth above, the FAC does in fact adequately allege
predicate acts, so this argument fails.
Defendants also claim that the FAC only alleges an agreement to commit predicate
acts rather than to join the conspiracy. This is also without merit. The FAC clearly
alleges that the Defendants joined together to attempt to take over Plaintiffs’ business by
unlawful means. Among other things, the FAC alleges that the Defendants “combined
their efforts as one partnership, association or enterprise (“RICO enterprise”) forpurposes of: (a) Increasing their share in the market for ATVs, UTVs, and go-karts in the
United States through expansion of their operations in the United States; and (b)
Acquiring, by means of fraud, securities fraud, extortion and harassment, the United
States companies who would store, market, distribute, service and be otherwise
DOCS\2574776.01
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 10 of 11 Page ID #:273
8/7/2019 Kandi Technologies Opposition to Motion to Dismiss
http://slidepdf.com/reader/full/kandi-technologies-opposition-to-motion-to-dismiss 11/11
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES INOPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
10
1
2
3
45
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
2324
25
26
27
28
responsible for Kandi products.” FAC, ¶ 74. The FAC further alleges that “Defendants .
. . knowingly agreed or conspired to operate or manage their combined activities as a
RICO enterprise” FAC, ¶ 91.
IV. SUPPLEMENTAL JURISDICTION EXISTS OVER THE STATE LAWCLAIMS
Defendants’ claim that this Court lacks jurisdiction over the non-RICO claims is
premised on their argument that the FAC does not adequately plead a RICO claim.
Defendants do not dispute that the state law claims share a common nucleus of operative
facts with the RICO claims. Because Defendants’ attacks on the RICO claims fail for the
reasons shown above, Defendants’ argument as to supplemental jurisdiction likewise
fails.
V. CONCLUSION
For the reasons set forth above, the Court should deny Defendants’ motion to
dismiss. In the alternative, if the Court grants the motion to dismiss, Plaintiffs request
leave to amend.
DATED: January __, 2010 POLSINELLI SHUGHART PC
By: ______________________________Carlyle (Cary) Hall III
Attorneys for Plaintiff
Case 2:09-cv-07145-JFW-JEM Document 25 Filed 01/04/10 Page 11 of 11 Page ID #:274