Skinner, Inc. v. Lucheng Li

Decision Date10 March 2022
Docket NumberCivil Action 20-11402-MPK[1]
PartiesSKINNER, INC., Plaintiff, v. LUCHENG LI, MAOLIANG FANG, et al., Defendants.
CourtU.S. District Court — District of Massachusetts

SKINNER, INC., Plaintiff,
v.
LUCHENG LI, MAOLIANG FANG, et al., Defendants.

Civil Action Nos. 20-11402-MPK[1]

United States District Court, D. Massachusetts

March 10, 2022


MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIM (#44).

M. PAGE KELLEY, CHIEF UNITED STATES MAGISTRATE JUDGE

I. Introduction.

On July 24, 2020, Skinner, Inc., an auction house, filed an interpleader complaint against Lucheng Li and others, alleging that they submitted suspicious funds to Skinner on behalf of Li in connection with his purchase of a vase at a June 18, 2020 auction. (#1.) Through this litigation, Skinner learned that Li had made the winning bid of $1, 330, 000 on behalf of Maoliang Fang. (#35 ¶¶ 11, 13-14.) Skinner alleged that Li and Fang failed to make full and timely payment on the vase as required by its Conditions of Sale, and that they caused unknown third parties to submit over 160 separate payments to Skinner. Id. ¶¶ 20-21, 26.

Li and Fang filed a counterclaim, alleging that their purchase was not solely governed by the Conditions of Sale and that the parties had agreed to allow Fang additional time to submit payment in full. (#40 ¶¶ 27, 34-35.) They also claim that the purchase was not subject to sales tax,

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which Skinner charged; that they submitted 28 separate payments for the vase, not 160; and that they ultimately paid more than was due on the vase. Id. ¶¶ 16-17, 22, 28-30, 43. Skinner filed a motion to dismiss the counterclaim, which Li and Fang oppose. (##44, 48, 51). For the reasons set out below, Skinner's motion to dismiss the counterclaim is denied in part and allowed in part.

II. Legal Standard.

“In assessing whether counts in [d]efendants' [c]ounterclaims survive a motion to dismiss, the [c]ourt treats them the same way it would treat counts in a plaintiff's complaint.” Fossa, Ltd. v. Lin, No. 16-cv-11914-LTS, 2017 U.S. Dist. LEXIS 162258, at *8 (D. Mass. Sep. 29, 2017). Dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6) is inappropriate if the complaint satisfies Rule 8(a)(2)'s requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); see Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 11-12 (1st Cir. 2011); see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Detailed factual allegations are unnecessary; Rule 8(a)(2) only requires sufficient detail to provide a defendant with fair notice of a plaintiff's claim and the bases for it. Twombly, 550 U.S. at 555.

Yet a plaintiff is only entitled to relief if the complaint's factual allegations raise the stated right to relief above a speculative level. Twombly, 550 U.S. at 555. To survive a Rule 12(b)(6) motion, a complaint must allege enough facts to state a claim that is “plausible on its face.” Id. at 570; see Iqbal, 556 U.S. at 678. A complaint “has facial plausibility” when it alleges enough facts to “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678; see Twombly, 550 U.S. at 556. This is not a “probability requirement” but demands “more than a sheer possibility that a defendant acted unlawfully.” Iqbal, 556 U.S. at 678; see Twombly, 550 U.S. at 556.

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In reviewing a motion to dismiss under Rule 12(b)(6), the court must “separat[e] a complaint's factual allegations from its legal conclusions.” Ocasio-Hernández, 640 F.3d at 10. Factual allegations are entitled to a presumption of truth; legal conclusions are not. Id.; see Iqbal, 556 U.S. at 678. Determining whether a complaint states a facially plausible claim is a “context-specific task that requires the . . . court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679; see Ocasio-Hernández, 640 F.3d at 11. If the court “can[no]t infer from the well-pleaded facts ‘more than the mere possibility of misconduct,' then the complaint has not shown ‘that the pleader is entitled to relief.'” Justiniano v. Walker, 986 F.3d 11, 19 (1st Cir. 2021) (citation omitted) (quoting Iqbal, 556 U.S. at 679).

III. Factual Background.

Li is an art agent residing in the United Kingdom and Fang is an art dealer residing in China. (#40 ¶¶ 1-2.) Previously, in September 2017, Li won an item at a Skinner auction. Id.¶ 4. When Skinner sent Li an invoice that included sales tax, Li informed Skinner that the sale was exempt because the item would be shipped out of the country. Id. ¶¶ 5-6. Skinner then removed the charge for sales tax from the invoice. Id. ¶ 7.

More recently, on June 18, 2020, Skinner held an auction where a blue and white vase (“Vase”) was advertised with an estimated value of between $5, 000 and $10, 000. (#40 ¶¶ 8-9.) Several days prior, Skinner approved Li to participate in the auction. Id. ¶ 13. Based on terms Li found on Skinner's website, he believed that if he or Fang did not pay for any item(s) won within 35 days of purchase, they would face a 1.5% interest charge as well as a 1.5% storage charge for any item(s) left at Skinner's premises for more than 3 days after purchase. Id. ¶ 10. In addition, he understood that breach of the terms of sale would result in Skinner selling the item(s) won at a subsequent auction and recouping costs of that auction and any deficiency in a later sale from the

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breaching purchaser. Id. ¶ 11. However, defendants allege that these terms, also outlined in Skinner's Conditions of Sale, were not intended to be the exclusive agreement between them. Id. ¶ 35.

During the auction, Li submitted bids for the Vase on behalf of Fang and won it after entering a final bid for $1, 330, 000 (the “hammer price”). (#40 ¶ 14.) Fang planned to resell the Vase and to pay Li a commission for its purchase. Id. ¶¶ 47-48. The day after the auction, Skinner sent Li an invoice for $1, 709, 031.25, which included the hammer price, various charges, and sales tax. Id. ¶ 15. Li told Skinner that the Vase would be shipped out of the country to a foreign purchaser, so that the Vase would be exempt from sales tax. Id. ¶¶ 16-17, 22. In spite of this, Skinner did not adjust its invoice to deduct the $100, 531.25 charge for sales tax. Id. ¶ 23. After the sale, Li asked Skinner for additional information about the provenance of the Vase and to inspect it, but Skinner refused both requests. Id. ¶¶ 18-21.

On June 24, 2020, nearly a week after the auction, Skinner notified Li that if payment was not received by the following day, the Vase would be offered to the next highest bidder. (#40 ¶ 24.) Defendants allege that this changed the terms of purchase set forward on Skinner's website because they were not given 35 days in which to pay for the Vase, and that the request for immediate payment was also inconsistent with industry custom and Li's previous dealings with Skinner. Id. ¶ 25. For example, defendants allege on information and belief that Skinner did not require other buyers of items with an unexpectedly high hammer price to pay in full on the date of purchase. Id. ¶ 26.

Defendants allege that, on June 24, 2020, Li made a payment arrangement with Skinner, whereby Fang caused $1, 720, 440.00 to be sent to Skinner's bank account in twenty-eight separate

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transactions between June 24, 2020, and June 30, 2020. (#40 ¶¶ 27-29.)[2] On June 30, 2020, Li received an updated invoice that did not reflect all the payments Fang had caused to be made. Id. ¶¶ 32-33. On and after that date, Li contacted Skinner to confirm receipt of all the payments and to schedule a date to collect the Vase, but he was unsuccessful. Id. ¶ 38. It is defendants' belief that Skinner failed to properly account for the payments that Fang caused to be made, leading to its incorrect conclusion that defendants did not pay in full by June 30th. Id. ¶ 43.

Defendants assert that they complied with the Conditions of Sale and that Skinner did not notify them that they were in breach of the agreement or that they planned to cancel the sale. Id. ¶¶ 36-37. It was not until July 14, 2020, when Skinner's counsel contacted Li, that he learned Skinner had concerns about the propriety of the multiple payments Fang had caused to be made to Skinner. Id. ¶¶ 39, 44. Skinner's counsel informed Li that it was cancelling the sale of the Vase for breach of contract, citing inappropriate activities and “a possible scam.” Id. ¶ 44.[3]

Skinner filed an...

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