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New World Trading Co. Ltd v. Avshalomov

September 24, 2012


The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.


Plaintiffs, New World Trading Co. Ltd. ("New World") and Fujian Uptop Trading Co., Ltd. ("Uptop"), bring this diversity action*fn1 against individual defendant Udi Avshalomov and corporate defendant 2 Feet Productions, Inc. ("2 Feet"). Plaintiffs bring causes of action for fraud and breach of contract against both defendants. Pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"), defendants moved to dismiss the Complaint in its entirety. For the following reasons, defendants' motion is granted in part and denied in part.


New World was incorporated in the People's Republic of China*fn3 and

"is in the business of having shoes manufactured by factories in China and selling these shoes to wholesalers abroad."*fn4 New World does not have an export license, which is needed in China to export goods out of the country.*fn5 Uptop is a trading company, also incorporated in China, which has such an export license.*fn6 New World exports its shoes through Uptop, which takes title to the shoes and exports them in its name.*fn7 K.J. Kim is the President of New World.*fn8 Avshalomov is the Chairman and Chief Executive Officer of 2 Feet.

From March 17 through March 20, 2010, Kim had a series of meetings with Avshalomov at his office in Jinjian City, Fujian, China.*fn9 The sales terms of various shoe designs were discussed and agreed upon in these meetings.*fn10

In each instance, "Avshalomov represented that the defendants would pay in full the amounts then agreed upon."*fn11 According to plaintiffs, "[a]t the time that Avshalomov made these representations, they were false, and Avsholomov knew they were false. Avshalomov never intended to pay, or to have 2 Feet pay, the amounts that had been agreed upon."*fn12

On April 1, 2010, 2 Feet began placing orders for shoes, having placed sixty-eight orders in that month alone.*fn13 Relying on defendants' representations, New World began ordering the production of the shoes ordered by 2 Feet.*fn14 The shoes manufactured at the behest of New World were shipped out by Uptop and accepted by the defendants.*fn15 Defendants proceeded to pay part of the amount owed through wire transfers.*fn16 Out of the total owed of $2,776,909.20, defendants paid $1,918,446.85, leaving a balance of $858,462.35.*fn17 Plaintiffs seek this amount in compensatory damages as well as $1,000,000.00 in punitive damages.*fn18


In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must "accept[] all factual allegations in the complaint as true, and draw[] all reasonable inferences in the plaintiff's favor."*fn19 The court evaluates the sufficiency of a complaint under the "two-pronged approach" advocated by the Supreme Court in Ashcroft v. Iqbal.*fn20 First, "[a] court 'can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.'"*fn21 "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to withstand a motion to dismiss.*fn22 Second, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."*fn23

To survive a Rule 12(b)(6) motion to dismiss, the allegations in the complaint must meet a standard of "plausibility."*fn24 A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."*fn25

Plausibility "is not akin to a probability requirement;" rather, plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."*fn26

"In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint."*fn27 The court may consider matters that are subject to judicial notice.*fn28 The court may also consider a document that is not incorporated by reference, "where the ...

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