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

United States District Court, D. Massachusetts

December 14, 2015

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

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[Copyrighted Material Omitted]

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          For Xiao Wei Yang Catering Linkage In Inner Mongolia Co., Ltd., Fei Xie, Plaintiff: Frank Xu, LEAD ATTORNEY, PRO HAC VICE, Law Office of Frank Xu, PLLC, New York, NY; Hunter D. Keeton, Michael A. Albert, Wolf, Greenfield & Sacks, PC, Boston, MA.

         For Inner Mongolia Xiao Wei Yang USA, Inc. doing business as Xiao Wei Yang doing business as Little Lamb Restaurant, Cheng Xu, Yonghua Qin, Defendants: Todd J. Bennett, Bennett & Belfort, P.C., Cambridge, MA.

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         MEMORANDUM AND ORDER

         Denise J. 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. García-Catalá n 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." García-Catalá n, 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

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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.

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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. ...


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