Sourcing Unlimited, Inc. v. Elektroteks, LLC
| Decision Date | 08 July 2021 |
| Docket Number | Civil Action No. 20-cv-11955-ADB |
| Parties | SOURCING UNLIMITED, INC. d/b/a JUMPSOURCE, Plaintiff, v. ELEKTROTEKS, LLC, SERKAN GULER, JOHN E. FOX, INC., HARRY BERZACK, POLANCO INDUSTRIAL CORP., FABIO SYRING and SETH SERVICE-MANUTENACAO E COMERCIO DE EQUIPAMENTOS LTDA, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
BURROUGHS, D.J.
Plaintiff Sourcing Unlimited, Inc. d/b/a Jumpsource, ("Jumpsource") asserts several claims against Elektroteks, LLC ("Elektroteks"), Serkan Guler ("Guler"), John E. Fox, Inc. ("Fox"), Harry Berzack ("Berzack"), Polanco Industrial Corp. ("Polanco Corp."), Fabio Syring ("Syring"), and Seth Service-Manutenacao E Comercio De Equipamentos LTDA ("Seth Service" and, together with Elektroteks, Guler, Fox, Berzack, Polanco Corp., and Syring, "Defendants"). Jumpsource's claims stem from an alleged scheme, carried out by Defendants and non-parties, to sabotage and bankrupt Jumpsource. [ECF No. 1 at 12-57 ("Compl.")]. Currently before the Court are (1) Berzack and Fox's motion to dismiss, [ECF No. 8]; (2) Elektroteks and Guler's motion to dismiss, [ECF No. 13]; and (3) Berzack and Fox's motion to strike exhibits appended to Jumpsource's opposition brief, [ECF No. 21]. For the reasons set forth below, the motions to dismiss are GRANTED in part and DENIED in part, and the motion to strike is DENIED.
The following facts are taken from the complaint, [Compl.], the factual allegations of which are assumed to be true when considering a motion to dismiss. Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014).
Jumpsource is a corporation that manufactures and sells sewing machine parts. See [Compl. ¶ 16]. Michael Porter ("Porter") founded Jumpsource in 2000 and serves as its president. [Id. ¶¶ 16-17]. The parts that Jumpsource makes are replicas of parts made by other companies, and, in most cases, Jumpsource is the only source for the parts, other than the original equipment manufacturers ("OEMs"). . Jumpsource designed and tested the molds it uses to make these parts in China and spent more than $1 million doing so. [Compl. ¶¶ 18-20].
In 2015, Jumpsource invested about $75,000 to develop an aluminum casting mold to produce a sewing machine head, called the Pfaff 5625, which was originally sold by a German company. [Compl. ¶ 35]. Jumpsource also invested "substantial funds" to develop a new "flange" sewing machine, which could be used in mattress manufacturing. [Id.].
At the core of its complaint, Jumpsource asserts that Defendants, along with several non-parties, formed an "association-in-fact" enterprise that conspires to bankrupt Jumpsource by (1) converting and misappropriating Jumpsource's molds, parts, designs, and plans for the Pfaff 5625 and flange machine; (2) selling stolen parts and parts made from Jumpsource's stolenmolds in foreign and interstate commerce; and (3) converting and misappropriating Jumpsource's customer lists, contact information, and copyrighted photos. [Compl. ¶¶ 188-89]. The enterprise consists of the following individuals and entities:
In 2015, members of the enterprise took steps to gain control of Jumpsource's molds and parts. On October 27, 2015, Fang emailed Polanco and Morneau to tell them he had placed Jumpsource's molds in his warehouse in China. [Compl. ¶ 38]. Next, Fang, with the help of Peng, transferred Jumpsource's molds into the factories of vendors they had selected, and also purchased Jumpsource's entire inventory of specially made parts. [Id. ¶¶ 42-43].
Over the next year, Fang, Peng, and Polanco continued scheming to sabotage Jumpsource and gain control of its molds and inventory. [Compl. ¶¶ 44-45]. As part of this scheme, theywould tell Jumpsource to order parts to fulfill customer requests, but Jumpsource would never receive the parts. [Id. ¶ 46]. Instead, Fang and Polanco would "take control" of the parts that Jumpsource had already paid for. [Id.]. Pierce, who was brought into the scheme by Polanco, would also sell parts manufactured by Fang using the molds stolen from Jumpsource. [Id. ¶ 47]. Pierce was aware that Fang, Peng, and Polanco were diverting orders from Jumpsource and then using molds stolen from Jumpsource to fill the orders. [Id. ¶ 48]. As a result of these efforts, Polanco's sales for Jumpsource fell from $923,000 in 2015 to $350,000 in 2016. [Id. ¶ 155].
In April 2016, in another attempt to divert sales and deplete Jumpsource's inventory, Polanco asked Jumpsource to send parts to an individual named Rigoberto Lima, who worked for a company called Maqplan. [Compl. ¶¶ 100, 102]. Jumpsource sent $50,000 worth of parts to Lima. [Id. ¶ 101]. Lima did not pay Jumpsource for the parts, and Jumpsource asked Polanco to demand that Lima pay for and/or return the parts. [Id. ¶¶ 103-04]. Polanco refused to do so. [Id. ¶ 104]. Lima never paid for the parts or returned them to Jumpsource. [Id. ¶ 106]. During this same period, Elektroteks and Fox placed orders with M.J. Pierce, Fang, and Polanco, for the same parts that were sent to Lima. [Id. ¶ 107].
From May 3, 2016 to September 8, 2016, Fang asked Jumpsource to pay for parts that would be used to fulfill orders. [Compl. ¶ 80]. Based on those requests, Jumpsource wired $53,629 to Fang to pay for parts, but those orders were never actually fulfilled. [Id. ¶¶ 79-80, 82]. Jumpsource, also at Fang's request, wired $5,782 to a company called "LG" for work on developing the flange machine and the Pfaff 5625. [Id. ¶ 80]. The wiring information provided by Fang to Jumpsource was incorrect and did not actually correspond to LG. [Id.].
On September 29, 2016, Fang emailed Morneau, Polanco, and Cruz, copying Porter, to notify them that he no longer worked at Jumpsource. [Compl. ¶ 87]. Fang told Morneau,Polanco, and Cruz that he would not ship any more parts to the Beverly office for them and that they should no longer contact him. [Id.]. Fang's email also explained that Jumpsource "has been written off for many years," was sued by its vendors, and did not have any parts. [Id.]. Polanco responded, "[w]hat is going on . . . this is not good news guys!" [Id. ¶ 88]. Jumpsource asserts that when Polanco sent this email, he was already aware of and involved in the scheme to steal Jumpsource's molds and to divert sales. [Id. ¶ 89]. Jumpsource contacted Fang after receiving his email and demanded to know where the molds were. [Id. ¶ 92]. Fang responded that the molds were in different factories and that Porter would never be able to locate them. [Id. ¶ 93].
At the same time that Fang sent his email notifying Polanco of his resignation, Berzack emailed Morneau to cancel Fox's outstanding orders with Jumpsource. [Compl. ¶ 91]. Jumpsource told Berzack that it had already paid for the parts to fulfill Fox's orders, which Fang had failed to deliver, and if Berzack accepted parts paid for by Jumpsource, he would be accepting stolen property. [Id. ¶¶ 94-95]. Jumpsource also told Berzack that Jumpsource, not Fang, owned the molds that made the parts for Berzack. [Id. ¶ 94].
Berzack said that he would buy parts from another source and not from Fang, but Berzack did proceed to buy the stolen parts from Fang. [Compl. ¶¶ 96-97]. Several years after the 2016 incident, Berzack admitted to buying parts from a "Jumpsource supplier," but with the belief that the molds were owned by that supplier. [Id. ¶ 98]. Prior to Fang's theft of the molds, however, Jumpsource and the OEMs were the only sources for these parts. [Id. ¶...
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