United States District Court, S.D. New York
YUSIN BRAKE CORPORATION and YUN SHENG INDUSTRY COMPANY, LTD., Plaintiffs,
MOTORCAR PARTS OF AMERICA, INC., Defendant.
Matthew P. Allen, Miller,
Canfield, Paddock and Stone, PLC, Detroit, MI, For the Plaintiffs
Michael F. Perlis, Cary J. Economou, and F. Phillip Hosp, Locke Lord LLP,
Los Angeles, CA, For the Defendant
Gregory T. Casamento, and William D. Foley, Locke Lord LLP,
Three World Financial Center, New York, NY
OPINION AND ORDER
DENISE COTE, District Judge.
Yusin Brake Corporation ("Yusin") and Yun Sheng Industry Company, Ltd. ("Yun Sheng") (collectively "Plaintiffs") filed this action against Motorcar Parts of America, Inc. ("Motorcar") seeking $3 million for unpaid invoices. The purchase orders for the goods in question were signed by two entities: Fenwick Automotive Products Limited ("Fenwick"), a subsidiary of Motorcar, and Motorcar. Since the events giving rise to the causes of action, Fenwick has commenced bankruptcy proceedings.
Motorcar moved to dismiss the operative complaint, contending, inter alia, that the automatic stay of the Fenwick bankruptcy extends to the present action. For the reasons explained below, the motion is denied.
The following facts are as alleged in the operative complaint and are assumed to be true. Plaintiffs are Taiwanbased companies that manufacture automotive parts for passenger and commercial vehicles. Motorcar is a New York corporation based in Torrance, California that manufactures and distributes automotive parts in North America. Fenwick was, prior to its acquisition by Motorcar, incorporated and based in Canada.
From 2008 onwards, Plaintiffs sold automotive parts to Fenwick. Typically, to purchase such parts, Fenwick would send to Plaintiffs purchase orders, which were signed by a Fenwick representative and set forth the type, quantity, and cost of the desired parts. Plaintiffs would then deliver the parts in accordance with the purchase orders, and issue invoices to Fenwick for the amount owed.
In May 2011, Motorcar acquired all of the common stock shares of Fenwick, and Fenwick became its wholly owned subsidiary. Following the acquisition, Motorcar moved many of Fenwick's business operations to Motorcar's California location, where its agents assumed control of the operations. Motorcar received the shipments sent by Plaintiffs.
In 2012, Fenwick began to fall behind on its payments. Motorcar's senior executives agreed that, in exchange for Plaintiffs' continued shipments of parts, Motorcar would be a co-obligor on all future purchase orders, which it would counter-sign. Beginning in April 2012, the purchase orders were signed by both Fenwick and Motorcar.
An example of such a purchase order, dated December 2012, is offered as illustrative: the first page lists, in the top left corner, "Fenwick Automotive Products" with an address of Torrance, California. Yusin is listed as the supplier, and the "ship to" field lists Fenwick, again with an address of Torrance, California. The remainder of the first page, and half of the second page, is devoted to terms and conditions of the order, all of which are specific to Fenwick. The remainder of the order lists the parts requested, by type, quantity, and cost. The final page computes the total cost for the requested parts. Under that total appears the signature of a Motorcar employee, "Bryan Cain, " whose title is listed as "VP Product Development" and email is listed as "email@example.com." The signature is time stamped.
Between April 2012 and May 2013, 96 such purchase orders were sent to Plaintiffs, each of which was signed by Fenwick and counter-signed by a Motorcar senior executive. For each of these purchase orders, Plaintiffs delivered the parts to Fenwick and Motorcar, pursuant to the details of each purchase order, and the parts were accepted by Fenwick and Motorcar.
Plaintiffs issued invoices and statements of account for these purchase orders to Fenwick and Motorcar. In so doing, Plaintiffs advised Fenwick and Motorcar of outstanding balances due. Neither Motorcar nor Fenwick object to the invoices. On several occasions, Motorcar acknowledged the outstanding balances due and promised to bring the account current.
By late 2012 and early 2013, Fenwick and Motorcar were again delinquent. Senior Motorcar executives promised Plaintiffs that, in exchange for continued shipments of parts, Motorcar would honor the terms of the prior purchase orders and pay the outstanding debt.
On February 25, 2013, Plaintiffs' representatives met with Selwyn Joffe ("Joffe"), Motorcar's Chairman, President and Chief Executive Officer, in Torrance, California ("February 2013 Meeting"). Joffe acknowledged the outstanding debt, and agreed, on behalf of both Fenwick and Motorcar, to (1) pay all outstanding debt for parts shipped by Plaintiffs, and (2) to pay cash-on-delivery for all future shipments of parts.
At the February 2013 Meeting, Plaintiffs also asked Joffe about Fenwick's financial status. Joffe "represented that [Motorcar] was raising capital to pay for all outstanding amounts owed to Plaintiffs at that time, that Fenwick was in a strong financial position going forward, and that [Motorcar] stood behind Fenwick and was committed to paying Plaintiffs the outstanding amounts owed." Based on Joffee's representations, Plaintiffs continued to deliver parts to Fenwick and Motorcar.
Unbeknownst to Plaintiffs, at the time of the February 2013 Meeting, Fenwick was on the verge of bankruptcy. Additionally, Joffe had, prior to the February 2013 Meeting, sold his stock in Fenwick and Motorcar. Joffe did not inform Plaintiffs of Fenwick's financial condition or his stock sale at the February 2013 Meeting. Additionally, in further meetings and communications on April 2 and April 4, 2013, other senior executives at Motorcar did not disclose Fenwick's financial condition.
On June 10, Fenwick filed for bankruptcy. Plaintiffs have filed proofs of claim in the bankruptcy proceeding.
On December 31, Plaintiffs filed the present suit. Motorcar moved to dismiss. On March 24, 2013, Plaintiffs filed a First Amended Complaint ("Amended Complaint"), which is the operative complaint for present purposes.
The Amended Complaint consists of seven counts, all pleaded in the alternative. Count One is for account stated; it alleges that Plaintiffs sent account statements to Motorcar stating the amounts owed, and that Motorcar failed to object within a reasonable time.
Counts Two and Three are for breach of contract. Count Two alleges that Motorcar's act of signing the purchase orders created enforceable contracts between Plaintiffs and Motorcar. Count Three alleges that the oral promise made at the February 2013 Meeting - in which Joffe stated that, in exchange for Plaintiffs' continued shipment of goods, Motorcar would pay the outstanding debt owed to Plaintiffs - constitutes an enforceable contract between Plaintiffs and Motorcar.
Counts Four and Five are for promissory estoppel and unjust enrichment. Count Four alleges that Motorcar promised to pay for all parts supplied by Plaintiffs - including at the February 2013 Meeting - and that Plaintiffs reasonably relied on promises to continue delivering parts, to their detriment. Count Five alleges that Motorcar received a benefit when it received and accepted parts from Plaintiffs, and that - because Motorcar has not paid Plaintiffs for these parts - it would be unjust for Motorcar to retain these benefits without compensating Plaintiffs.
Count Six is styled "Misrepresentation/Fraud/Fraudulent Inducement." Count Six alleges that Motorcar made knowing material misstatements, misrepresentations, and omissions to deceive Plaintiffs into believing that they would be paid, so that Plaintiffs would continue to make shipments. Specifically, Plaintiffs point to the February 2013 Meeting, in which Joffe stated that Fenwick was in a strong financial condition going forward.
Count Seven is styled "Silent Fraud/Fraudulent Concealment." It alleges that Joffe intentionally failed to disclose material facts in the February 2013 Meeting - specifically the financial condition of Fenwick and Joffe's sale of his stock options - and that other senior executives intentionally failed to disclose material facts in subsequent communications on April 2 and April 4. Additionally, Count Seven alleges that Motorcar had a duty to disclose these material facts because (1) Plaintiffs made a specific inquiry into Fenwick's financial status and (2) because Motorcar possessed superior knowledge of facts not readily available to others and knew Plaintiffs were acting in reliance.
Yusin contends that Motorcar owes $2, 037, 990.76, plus interest, costs, and fees. Yun Sheng contends that Motorcar owes $1, 274, ...