United States District Court, S.D. New York
GEORGE SARAFIANOS, et al. Plaintiffs,
SHANDONG TADA AUTO-PARKING CO., LTD., Defendant. SHANDONG TADA AUTO-PARKING CO., LTD., Third-Party Plaintiff,
CORINTHIAN PARTNERS LLC, K&L GATES LLP, and DAVID DODGE, Third-Party Defendants.
Robert S. Bernstein, Esq., Bernstein-Burkley, P.C., Pittsburgh, Pa, For Plaintiffs.
Yi Lin, Esq., Law Office of Yi Lin, New York, NY, For Third-Party Plaintiff.
Frederick B. Warder, III, Esq., Melissa R. Ginsberg, Esq., Patterson, Belknap, Webb & Tyler LLP, New York, NY, For Third-Party Defendant K&L Gates LLP.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
Third-Party Plaintiff Shandong Tada Auto-Parking Co., Ltd. ("Shandong") has filed an Amended Third-Party Complaint ("Complaint") against Corinthian Partners LLC ("Corinthian"), K&L Gates LLP ("K&L"), and David Dodge. The claims asserted against K&L are for common law fraud and misrepresentation, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and an equitable accounting. K&L seeks dismissal of each claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, K&L's motion is GRANTED in its entirety and the Complaint is DISMISSED with prejudice as to K&L.
A. The Investors's Complaint
Shandong is the defendant in a pending action brought by a group of investors (the "Investors") asserting a claim for breach of contract relating to a Purchase Agreement entered into in January 2011. The Investors allege that in 2010 in Beijing, Shandong signed a non-binding Term Sheet with Corinthian, which summarized the proposed terms of a bridge loan Shandong intended to obtain through Corinthian. The Term Sheet states that it "is not intended to be and should not be construed as a commitment to lend.... The final documentation... will be subject to approval by [Shandong], Corinthian, and the Lenders."
The Investors allege that Shandong sold and issued to them debentures pursuant to the Purchase Agreement. The Purchase Agreement provided the Investors with the option of converting all or part of the debentures into shares of a holding company to be created by Shandong for the purpose of a reverse merger. Each of the Investors transferred funds to Shandong through Shandong's Escrow Agent, K&L. The loan was to mature on September 30, 2011 or on a later-negotiated financing date. A new date was not negotiated and Shandong has not repaid the Investors. The Investors seek the return of their initial investment plus interest. They do no seek shares of the holding company.
B. Shandong's First Complaint
Shandong admits that it entered into the Term Sheet with Corinthian, but contends that the Purchase Agreement and other loan documents were entered into without its authorization or knowledge. On August 29, 2014, Shandong filed a Third-Party Complaint against Corinthian and K&L, alleging securities fraud and common law fraud and misrepresentation. On December 19, 2014, I dismissed Shandong's claims. The securities fraud claims were dismissed with prejudice because they could not be cured by repleading, but the fraud and misrepresentation claims were dismissed without prejudice "because their dismissal [was] based entirely on a failure of pleading." On January 12, 2015, Shandong filed the Complaint.
Shandong entered into a non-binding Term Sheet with Corinthian in Beijing China in 2010. Under the Term Sheet, Corinthian was to assist Shandong in securing a bridge loan in the United States. Shandong expected it would have an opportunity to approve the terms of any loan after further negotiations. But Corinthian ceased communications with Shandong after the execution of the Term Sheet, and therefore Corinthian did not and could not have received any further approvals from Shandong for any transaction.
Corinthian retained David Dodge to assume the position of Chief Financial Officer for Shandong without Shandong's authorization. Shandong had no prior knowledge of Dodge, who was never an employee of Shandong and never served any position at the company. On January 14, 2011, Dodge signed the Purchase Agreement and an Escrow Agreement on behalf of Shandong. Dodge also filed a Form D Notice of Exempt Offering of Securities with the Securities and Exchange Commission, in which he represented that he was the Chief Financial Officer of Shandong. Shandong contends that Dodge acted improperly ...