Xiao Wei Yang Catering Linkage in Inner Mong. Co. v. Inner Mong. Xiao Wei Yang USA, Inc.

• Decision Date: 14 December 2015
• Docket Number: Civil Action 15-cv-10114-DJC
• Citation: 150 F.Supp.3d 71
• Parties: Xiao Wei Yang Catering Linkage in Inner Mongolia Co., LTD., and Fei Xie Plaintiffs, v. Inner Mongolia Xiao Wei Yang USA, Inc., d/b/a, Xiao Wei Yang and/or Little Lamb Restaurant, Cheng Xu, and Yonghua Qin, Defendants.
• Court: U.S. District Court — District of Massachusetts

150 F.Supp.3d 71

Xiao Wei Yang Catering Linkage in Inner Mongolia Co., LTD., and Fei Xie Plaintiffs,

v.Inner Mongolia Xiao Wei Yang USA, Inc., d/b/a, Xiao Wei Yang and/or Little Lamb Restaurant, Cheng Xu, and Yonghua Qin, Defendants.

Civil Action 15-cv-10114-DJC

United States District Court, D. Massachusetts.

Signed December 14, 2015

Frank Xu, Law Office of Frank Xu, PLLC, New York, NY, Hunter D. Keeton, Michael A. Albert, Wolf, Greenfield & Sacks, PC, Boston, MA, for Plaintiffs.

Todd J. Bennett, Bennett & Belfort, P.C., Cambridge, MA, for Defendants.

MEMORANDUM AND ORDER

CASPER

, United States District Judge

I. Introduction

Plaintiffs Xiao Wei Yang Catering Linkage in Inner Mongolia Co., LTD. (“Xiao Wei Yang Catering-China”) and Fei Xie (“Xie”) (collectively, “Plaintiffs”) have filed this lawsuit against Defendants Inner Mongolia Xiao Wei Yang USA, Inc., d/b/a Xiao Wei Yang and/or Little Lamb Restaurant (“Inner Mongolia USA”), Cheng Xu (“Xu”) and Yonghua Qin (“Qin”) (collectively, “Defendants”) alleging breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), fraudulent inducement (Count III), unjust enrichment (Count IV), trademark infringement (Count V), false designation of origin (Count VI), trademark dilution (Count VII), unfair competition (VIII) and unfair and deceptive trade practices (Count IX). D.1. Defendants have now moved to dismiss. D. 8. For the reasons stated below, the Court DENIES the motion in part with prejudice (as to trademark claims) and in part without prejudice (as to the contract claims) and grants limited jurisdictional discovery regarding the forum selection clause.

II. Standard of Review

On a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6)

, the Court must determine if the facts alleged “plausibly narrate a claim for relief.” Schatz v. Republican State Leadership Comm. , 669 F.3d 50, 55 (1st Cir.2012) (citation omitted). Reading the complaint “as a whole,” the Court must conduct a two-step, context-specific inquiry. Garcia–Catalán v. United States , 734 F.3d 100, 103 (1st Cir.2013). First, the Court must distinguish the factual allegations from the conclusory legal allegations contained therein. Id. Factual allegations must be accepted as true, while conclusory legal conclusions are not entitled to credit. Id. Second, the Court must determine whether the factual allegations present a “reasonable inference that the defendant is liable for the misconduct alleged.” Haley v. City of Boston , 657 F.3d 39, 46 (1st Cir.2011). In sum, the complaint must provide sufficient factual allegations for the Court to find the claim “plausible on its face.” Garcia–Catalán , 734 F.3d at 103 (internal quotation marks and citation omitted).

III. Factual Background

The following allegations are drawn from the complaint, D.1, and are accepted as true for the purpose of the motion to dismiss. Xiao Wei Yang Catering-China is one of the leading and best known restaurant chains, brand names and franchises in China. D.1 ¶ 1. Xie is a master and expert chef for the chain. Id. ¶ 2. Inner Mongolia USA is a Massachusetts corporation that operates the “Little Lamb Restaurant” located in Boston, Massachusetts. Id. ¶ 3. Xu, a resident of Massachusetts, is the president of Inner Mongolia USA. Id. ¶ 4. Qin, also a resident of Massachusetts, is the treasurer and secretary of Inner Mongolia USA. Id. ¶ 5. At all times relevant to this lawsuit, Xu and Qin have been “de facto and/or legal spouses.” Id. ¶ 6. Xu and Qin are also owners and principals of Little Lamb USA, LLC, a limited liability company organized under the laws of Massachusetts. Id.

In or about early 2011, Xu and Qin traveled to Xiao Wei Yang Catering-China's headquarters in Inner Mongolia to engage in negotiations on Xiao Wei Yang Catering-China's franchise, brand-name licensing and related business developments in the United States. Id. ¶ 11. The negotiations resulted in a contract, the Cooperation Agreement (“Cooperation Agreement”). Id. ¶ 12. Under the terms of the Cooperation Agreement, Xu and Qin incorporated Inner Mongolia USA. Id. ¶ 16.

During the negotiation of the Cooperation Agreement, Plaintiffs allege that Xu and Qin fraudulently represented themselves as making an arms-length transaction. Id. ¶ 13. They contend that Xu and Qin concealed material facts, including that they were married and were self-dealing in this matter. Id. Xu and Qin expressly denied Xiao Wei Yang Catering-China's inquiry on this issue. Id. ¶ 14. Xu and Qin allegedly used their misrepresentations to induce Xiao Wei Yang Catering-China to enter into the Cooperation Agreement. Id. ¶¶ 13-14. Xiao Wei Yang Catering-China would not have entered into the Cooperation Agreement had they not relied upon Xu and Qin's fraudulent representations and concealment of material facts. Id. ¶ 15.

In the process of incorporating Inner Mongolia USA, it is further alleged that Xu and Qin misappropriated Plaintiffs' brand-name, confidential and specialized knowledge. Id. ¶ 16. Xu and Qin conducted business as “Xiao Wei Yang and/or Little Lamb Restaurant at 326 Cambridge Street, Boston, Massachusetts,” purportedly as Xiao Wei Yang Catering-China's first franchisee and/or brand-name restaurant in the United States. Id. Moreover, Plaintiffs alleged that Defendants “violated and are in continuous violation of” their federal trademark registration and common law rights and other intellectual property rights. Id. ¶ 17.

Plaintiffs also contend that Defendants gained substantial business revenues, monies and profits as a purported franchisee, party to and/or beneficiary of the Cooperation Agreement with Xiao Wei Yang Catering-China. Id. ¶ 18. Pursuant to the Cooperation Agreement, Xiao Wei Yang Catering-China has transferred capital investment and monies to Defendants. Id. ¶ 19. Xiao Wei Yang Catering-China also sent Xie, its expert chef with specialized knowledge, to the United States to train and monitor Inner Mongolia USA's business and operations. Id. During Xie's stay in the United States, Defendants requested and obtained loans and other advances of operation expenses from Xie as a representative of Xiao Wei Yang Catering-China. Id. ¶ 20. Those loans and advances amounted to $66,125.88. Id. According to Plaintiffs, Defendants were thereby unjustly enriched. Id.

Plaintiffs further allege that Defendants also breached the Cooperation Agreement by unilaterally withdrawing Xie's U.S. visa sponsorship and/or its renewal. Id. ¶ 19.

Defendants also allegedly exploited Xie's work, specialized knowledge and trade secrets while refusing to pay his compensation, accommodations, translation and transportation as required under Paragraph 11 of the Cooperation Agreement. Id. Defendants also failed to submit 50% franchise fees or applicable profits to Xiao Wei Yang Catering-China as required by the Cooperation Agreement. Id. ¶ 22.

IV. Procedural History

Plaintiffs instituted this action on January 16, 2015. D.1. Defendants have now moved to dismiss. D. 8. The Court heard the parties on the pending motion on October 14, 2015 and took the matter under advisement. D. 23.

V. Discussion

A. Whether the Forum Selection Clause Has Been Triggered

1. Forum Selection Clauses

“The prevailing view towards contractual forum-selection clauses is that ‘such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances.' ” Silva v. Encyclopedia Britannica Inc. , 239 F.3d 385, 386 (1st Cir.2001)

(quoting M/S Bremen v. Zapata Off–Shore Co. , 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) ). The burden to establish that enforcement of the clause would be unreasonable and unjust belongs to the party resisting the forum selection clause. See Claudio–De Leon v. Sistema Universitario Ana G. Mendez , 775 F.3d 41, 48 (1st Cir.2014).

The Court “treat[s] a motion to dismiss based on a forum selection clause as a motion alleging the failure to state a claim for which relief can be granted under Rule 12(b)(6)

.” Rivera v. Centro Medico de Turabo, Inc. , 575 F.3d 10, 15 (1st Cir.2009) (citing Silva , 239 F.3d at 387, n.3 ). As such, the Court “accept[s] as true the well-pleaded factual allegations of the complaint, draw[s] all reasonable inferences therefrom in the plaintiff's favor, and determine[s] whether the complaint, so read, limns facts sufficient to justify recovery on any cognizable theory.” Id. (quoting LaChapelle v. Berkshire Life Ins. Co ., 142 F.3d 507, 508 (1st Cir.1998) ). Generally, courts are limited to considering “only facts and documents that are part of or incorporated into the complaint.” Id. However, a court may consider the following: “documents the authenticity of which are not disputed by the parties; ... official public records; ... documents central to plaintiffs' claim; ... [and] documents sufficiently referred to in the complaint.” Alt. Energy, Inc. v. St. Paul Fire and Marine Ins. Co., 267 F.3d 30, 33 (1st Cir.2001) (internal quotation marks and citation omitted).

Defendants attached a translation of the Cooperation Agreement, originally written in Chinese, and a Certificate of Translation as exhibits to their motion to dismiss. D. 9-1; 9-2. Although Plaintiffs raise certain challenges to a portion of the translation not material to this motion,¹ Plaintiffs do not dispute its authenticity and agree that “the Court may use Defendants' translation to resolve the present motion.” D. 13 at 1 n.1; D. 24 at 8.

2. The Substance of the Forum Selection Clause

Paragraph 15 of the Cooperation Agreement states in relevant part:

In the event of dispute, and arbitration or litigation is needed, the location shall be the place of registration of the Overseas Management Company.

Paragraph 2 of the Cooperation Agreement states:

All 3 parties agreed to form and invest in a corporation in China. The name of the corporation to be formed shall be Inner

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