FT Glob. Capital v. Future Fintech Grp.

• Court: U.S. District Court — Northern District of Georgia
• Writing for the Court: J.P. BOULEE United States District Judge
• Decision Date: 10 November 2021
• Docket Number: Civil Action 1:21-CV-00594-JPB
• Parties: FT GLOBAL CAPITAL, INC., Plaintiff, v. FUTURE FINTECH GROUP, INC., Defendant.

FT GLOBAL CAPITAL, INC., Plaintiff, v. FUTURE FINTECH GROUP, INC., Defendant.

Civil Action No. 1:21-CV-00594-JPB

United States District Court, N.D. Georgia, Atlanta Division

November 10, 2021

ORDER

J.P BOULEE United States District Judge

This matter comes before the Court on Future Fintech Group's (“Defendant”) Motion to Dismiss [Doc. 5]. This Court finds as follows:

BACKGROUND

FT Global Capital, Inc., (“Plaintiff”) is a corporation that offers institutional investment banking merger and acquisition and other financial services primarily capital-raising services for U.S.- and China-based companies that are publicly listed on U.S. stock exchanges. [Doc. 1-1, p. 4]. Defendant is a publicly-traded corporation that operates a blockchain-based online shopping platform, an incubator for blockchain-based application projects, a digital payment system and a cross-border e-commerce platform. Id. at 5.

In July 2020, Plaintiff's principal, Patrick Ko, engaged in negotiations with individuals representing Defendant related to an agreement between their respective companies. Id. at 11. Plaintiff identifies these individuals as Shanchun Huang, Defendant's Chief Executive Officer; Yongke Xue, Defendant's Chairman; Lee Hoo, the Secretary of Defendant's Board; Long Yi, an advisor to Defendant; and Jeffrey Li, Defendant's outside legal counsel. Id.

Following these negotiations, Plaintiff and Defendant entered into an agreement (the “Agreement”) on July 28, 2020, pursuant to which Plaintiff would serve as Defendant's “Exclusive Placement Agent . . . in connection with public or private offering[s] or other financing or capital-raising transaction[s]” for three months. Id. at 17, 6. Under the terms of the Agreement, if Defendant closed a capital-raising transaction facilitated by Plaintiff, Defendant owed Plaintiff a “Placement Agent Fee.”^[1] Id. at 18. Defendant was also obliged to pay the Placement Agent Fee if, during the twelve months following the Agreement's termination (the “Tail Period”), Defendant entered into a capital-raising transaction with an investor to which Plaintiff had introduced Defendant. Id.

To facilitate this process, the Agreement required Plaintiff to provide Defendant, at Defendant's request or within ten days following the Agreement's termination, a list of the investors to which Plaintiff had introduced Defendant (the “Protected Investors List, ” comprised of “Protected Investors”). Id. The Agreement further provided that “[t]he identities of the investors to which [Plaintiff] introduces [Defendant] shall be proprietary information of [Plaintiff] and shall not be divulged to third parties by [Defendant], nor used by [Defendant] outside the scope of [Plaintiff's] engagement as described herein.” Id. at 17.

Plaintiff contends that it introduced Defendant to as many as twelve different investors and their affiliates during the term of the Agreement and that it incurred $30, 000 in expenses during this process. Id. at 7. Plaintiff provided Defendant with the Protected Investors List on November 2, 2020, after the Agreement's termination. Id.

According to Plaintiff, on December 29, 2020, Defendant initiated a securities purchase agreement with two investors that were named on the Protected Investors List, raising at least $8, 000, 000. Id. Plaintiff alleges that Defendant then entered into another securities purchase agreement on January 11, 2021, with the same two investors, raising an additional $15, 000, 000. Id. Plaintiff calculates the Placement Agent Fee from these two transactions to be $2, 380, 000 and contends that Defendant has not paid this amount. Id. at 8.

Plaintiff alleges further that Defendant disclosed Plaintiff's confidential and proprietary information to third parties and used that information “to circumvent Plaintiff by soliciting capital-raising transactions directly with Plaintiff's [P]rotected [I]nvestors.” Id. at 9. Plaintiff contends that Defendant “directed Plaintiff's [P]rotected [I]nvestors to use a different business entity or a different fund name through which to fund the transaction[s].” Id. at 10. Finally, Plaintiff claims that during the July 2020 negotiations for the Agreement, Defendant's representatives misrepresented to Plaintiff that Defendant “intended to compensate Plaintiff for the rendition of its services” and that “some or all of these individuals knew that [Defendant] had no intention to compensate Plaintiff prior to entering into the Agreement.” Id. at 11-12.

Plaintiff brought suit against Defendant in Fulton County Superior Court on January 14, 2021. Id. at 4. Plaintiff alleged four claims: breach of contract, breach of the covenant of good faith and fair dealing, fraud and attorney's fees under O.C.G.A. § 13-6-11. Id. at 8-11. Defendant removed the case to this Court on February 9, 2021, on the basis of diversity jurisdiction. [Doc. 1, p. 3]. On March 9, 2021, Defendant filed the instant Motion to Dismiss. [Doc. 5].

ANALYSIS

A. Legal Standard

“At the motion to dismiss stage, all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). In determining whether this action should be dismissed for failure to state a claim, Federal Rule of Civil Procedure 8(a)(2) provides that a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Although detailed factual allegations are not necessarily required, the pleading must contain more than “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Importantly, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570).

Under Rule 9(b) of the Federal Rules of Civil Procedure, when “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” The purpose of Rule 9(b) is to “alert[] defendants to the ‘precise misconduct with which they are charged' and protect defendants ‘against spurious charges of immoral and fraudulent behavior.'” Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (quoting Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511 (11th Cir. 1988)). Rule 9(b), however, must not be applied in a manner that “abrogate[s] the concept of notice pleading.” Id. (citation and punctuation omitted). The Eleventh Circuit Court of Appeals has found that

Rule 9(b) is satisfied if the complaint sets forth “(1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) [the] same, . . . (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud.”

Id. (quoting Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1997)); see also U.S. ex rel. Matheny v. Medco Health Sols., Inc., 671 F.3d 1217, 1222 (11th Cir. 2012) (“The particularity requirement of Rule 9(b) is satisfied if the complaint alleges ‘facts as to time, place, and substance of the defendant's alleged fraud, specifically the details of the defendants' allegedly fraudulent acts, when they occurred, and who engaged in them.'” (quoting Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009))).

B. Breach of Contract

According to Plaintiff, Defendant committed two material breaches of the Agreement: (1) Defendant failed to pay Plaintiff the Placement Agent Fee for two transactions completed during the Tail Period with Protected Investors; and (2) Defendant disclosed Plaintiff's confidential and proprietary information to third parties, in violation of provisions in the Agreement prohibiting such disclosure. Defendant argues that Plaintiff has not stated a claim for breach of contract and has made allegations in a merely “conclusory fashion.” [Doc. 5, p. 8]. The Court will address each purported breach in turn.

As to the first alleged breach, Defendant takes issue with the fact that Plaintiff does not specifically name or describe the investors with which Defendant entered into the December 29, 2020 and January 11, 2021 transactions and that Plaintiff alleges were on the Protected Investor List. As to the second alleged breach, Defendant claims that Plaintiff does not provide any specific facts regarding how or to whom Defendant disclosed Plaintiff's confidential information and what, if any, confidential information was disclosed.

“The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken.” Bates v. JPMorgan Chase Bank, NA, 768 F.3d 1126, 1130 (11th Cir. 2014) (quoting Norton v. Budget Rent A Car Sys., Inc., 705 S.E.2d 305, 306 (Ga.Ct.App. 2010)). As to the first alleged breach, Plaintiff contended in its Complaint that (1) it entered into an agreement with Defendant; (2) the terms of that agreement required Defendant to pay Plaintiff a Placement Agent Fee if Defendant closed capital-raising transactions with Protected Investors during the Tail Period; (3) Defendant closed two transactions with two such investors during the Tail Period; and (4) Defendant did not pay the required Placement Agent Fee,...