It is not uncommon in litigation and, in fact, is sometimes mandated, that prior to filing a motion, counsel will submit a pre-motion letter to the Judge explaining their position, a preview of what’s to come. Some practitioners might be tempted to set forth a broad sketch of their positions and save the details and support for the motion itself. But, a recent decision in Jiaxing Leadown Fashion Co. Ltd. v. Lynn Brands LLC,,2021 WL 5180969, at *1 (S.D.N.Y. 2021), demonstrates an inherent risk in treading too lightly in a pre-motion letter sequence, as the Court took advantage of its prerogative to consider the letters themselves as a motion to dismiss, and then found certain positions unpersuasive due to the lack of detail or proof. The Jiaxing Court also took a deeper dive into the law than might occur in a preliminary letter, revealing some twists and turns worthy of note.
In Jiaxing, the plaintiff was a clothing manufacturer. The corporate defendant was a clothing supplier and distributor, and the individual defendants were officers of the corporate defendant. Plaintiff claims that the defendants engaged in a fraudulent scheme in which they would order clothes and then refuse to pay for them (along with allegations that the defendants had misled the plaintiff concerning its ability to pay). Specifically, the corporate defendant purchased custom clothes from the plaintiff and then, two months after the first shipment arrived, contended that half the clothes were of poor quality. When the plaintiff requested proof of the asserted defects with certification from the alleged dissatisfied customers, the corporate defendant provided only photos of the clothes. Plaintiff’s investigation then allegedly revealed that the “defects” were intentionally caused by the defendants. Nevertheless, the defendants still refused to pay for or return the clothes and tried instead to negotiate a discount. The action followed, asserting claims for breach of contract against the corporate defendant, and fraud and conversion claims against all defendants.
The defendants’ pre-motion letter sought to dismiss the entire action for improper service and to dismiss the fraud and conversion causes of action for failure to state a claim. Although the plaintiff did oppose the letter, a longer motion sequence never occurred, because the Court elected to construe the defendants’ letter as a motion to dismiss pursuant to FRCP 12(b)(5) and (b)(6).
Addressing first the sufficiency of service of process on the individual defendants, the Jiaxing Court criticized the individual defendants’ submission as consisting only of one paragraph and providing no support (such as an affidavit denying service) or otherwise refuting the plaintiff’s claims regarding service. Usually, such evidence might be submitted with the formal motion but — as would have been useful here — a practitioner might strongly consider annexing proof to the letter seeking relief, despite anticipating a subsequent motion sequence. Notwithstanding the foregoing, the Court, citing precedent, noted that holding out a location as a place of business subjects a defendant to service there, and remote work undertaken during the pandemic does not shift that standard. Emails with a signature containing the address provided critical evidence for the plaintiff to make its case.
Turning to the underlying causes of action, fraud is well known to be subject to a higher standard of pleading, and detailed allegations of fraud must be alleged against each defendant. In this matter, the plaintiff’s failure to set forth allegations regarding where and when the alleged misrepresentations were made proved fatal to its claim. It should be noted that the plaintiff did not have an opportunity in a subsequent formal motion to seek leave to amend or in any way supplement the pleadings.
However, the individual defendants were not dismissed as the claim for conversion against them survived. While normally claims for conversion are dismissed as duplicative of a breach of contract claim, the Court, citing precedent, refused to do so. Because this matter concerned the sale of goods, certain obligations between the parties are created under Article 2 of the Uniform Commercial Code when the goods sold have been rejected. The conversion claim – the refusal to pay for or return the goods – springs from those obligations and, therefore, survived. It is useful then when seeking to bring a claim alongside a breach of contract claim, to be familiar with laws such as the UCC that create parallel requirements and duties.
Another interesting side note is that deposition testimony from another matter involving the defendants, but not the plaintiff, was used by the plaintiff in support of its claims. The defendants objected pursuant to FRCP 32(a)(8) (which permits depositions from earlier actions between the same parties to be used in a present action) and therefore conversely should bar the depositions use in the present action between different parties. However, the Court stated that Rule 32(a) is applicable to hearings or trials, not motions.
Finally, and importantly as a matter of leverage, especially against individual defendants personally, the survival of the conversion claim means the survival of the claim for punitive damages, as the “public wrong” required under contract-based claims is not required here.
The critical lesson learned is that less may not be more on a pre-motion letter submission if there is a chance the parties may not be permitted to file plenary motions.