United States District Court, D. Massachusetts
INTEGRATED COMMUNICATIONS & TECHNOLOGIES, INC., et al., Plaintiffs,
HEWLETT-PACKARD FINANCIAL SERVICES COMPANY, et al., Defendants.
ORDER ON MOTIONS TO DISMISS (DOCS. 46, 57) AND MOTION
FOR RECONSIDERATION (DOC. 68)
SOROKIN, UNITED STATES DISTRICT JUDGE
reasons that follow, the Court: (1) ALLOWS IN PART AND DENIES
IN PART, WITHOUT PREJUDICE, Defendant Hewlett-Packard
Financial Services Company's (“HPFS”) Motion
to Dismiss (Doc. 46); (2) DENIES WITHOUT PREJUDICE Defendant
Hewlett-Packard Financial Services (India) Private
Limited's (“HPFS India”) Motion to Dismiss
(Doc. 57); and (3) DENIES Plaintiffs' Motion for
Reconsideration (Doc. 68). Plaintiffs have until February 8,
2017, to file a motion for leave to amend, with a proposed
amended complaint, if they wish. Defendants may file any
opposition to that motion within 14 days of its filing.
Alternatively, if Plaintiffs do not file a timely motion for
leave to amend, Defendants may renew arguments from the
instant Motions to Dismiss that the Court has not decided..
December 9, 2015, Plaintiffs Integrated Communications &
Technologies, Inc. (“Integrated”), and its
employees Jade Cheng, Jason Yuyi, and Cathy Yu
(“Individual Plaintiffs”) commenced this action
in Massachusetts Superior Court. Doc. 1-1 at 7. Plaintiffs
essentially allege Defendants knowingly or negligently sold
counterfeit information-technology equipment to Integrated,
which led Chinese authorities to take various hostile actions
toward Integrated and the Individual Plaintiffs. Doc. 41 at
February 23, 2016, Defendants removed the action to this
Court. Doc. 1. On March 31, 2016, HPFS filed a motion to
dismiss. Doc. 19. On July 8, 2016, the Court allowed a
request by Plaintiffs to amend the complaint and found
HPFS's motion moot. Doc. 40.
18, 2016, Plaintiffs filed the instant Amended Complaint
(“Complaint”). Doc. 41. On August 18, 2016, HPFS
filed its Motion to Dismiss (Doc. 46), and on October 5,
2016, HPFS India filed its Motion to Dismiss (Doc.
January 4, 2017, Plaintiffs filed a motion for leave to file
a second amended complaint. Doc. 64. The Court denied the
motion without prejudice, and Plaintiffs have filed the
instant Motion for Reconsideration (Doc. 68).
THE COMPLAINT'S ALLEGATIONS
Integrated Agrees to Buy and Resell Used Equipment from
2010, HPFS India, a wholly owned subsidiary of HPFS,
purchased new information-technology equipment manufactured
by Hewlett-Packard Company (“HP”) and H3C
Technologies Co., Ltd. (“H3C”). Doc. 41 at 5.
HPFS India purchased the equipment from “an authorized
HP distributor in India” called Inspira. Id.
HPFS India leased the equipment it purchased to another
end of the leases, in 2011, HPFS India received the equipment
back. Id. It hired a company, TT Global, to process
equipment returns. Id. Pursuant to HPFS's
standard operating procedures, TT Global “or other
persons acting on behalf of HPFS India inspected the returned
equipment (the ‘2011 Inspection').”
Id. at 6. HPFS India “would have become aware
that the equipment was counterfeit as a result of that
about June 14, 2011, an HPFS manager offered the used
equipment to a representative from Integrated, a
Massachusetts corporation, specifically “for
remarketing purposes.” Id. The HPFS manager,
JT Silvestri, explained to the representative, Alexander
Pekar, that the equipment was manufactured by H3C
Technologies Co., Ltd. (“H3C”), and was
“coming off a short-term lease from HPFS's Asia
region.” Id. at 7. Silvestri provided Pekar
with a preliminary list of the equipment. Id.
Integrated then forwarded the list to its office in China to
determine its market value there, since H3C “was a
China-based brand” and “China presented the best
resale market” for the equipment. Id.
Silvestri “concealed and did not disclose to Mr. Pekar
that the equipment was counterfeit.” Id.
September 2011, Pekar met with another HPFS employee, by the
name of Mr. O'Grady, who “was in charge of the H3C
project, ” to discuss the purchase of the equipment.
Id. at 8. Mr. O'Grady also “concealed and
did not disclose to Mr. Pekar that the equipment was
about November 21, 2011, HPFS's in-house counsel, David
Gill, sent a draft contract to Integrated for the equipment
purchase. Id. Gill “concealed and did not
disclose to [Integrated] that the equipment was not
‘H3C equipment' as stated in the draft but
about December 6, 2011, HPFS India entered into a Referral
and Revenue Share Agreement (“RRSA”) with
Integrated. Id. at 9. In the RRSA, HPFS India
“agreed to sell the equipment ‘AS IS' to an
Indian broker, Shinto Creative Elements Private Limited
(‘Shinto').” Id. Integrated agreed
to acquire the equipment from Shinto for the purposes of
reselling it, and to share fifty percent of any net profit
from the resale with HPFS India. Id. at 9, 11.
Integrated was required to remarket the equipment without
identifying HPFS as the source of the equipment. Id.
same date that HPFS India and Integrated entered into the
RRSA, HPFS India and Shinto entered into a Wholesale Sale
Agreement (“WSA”). Id. at 10. In the
WSA, Shinto agreed to purchase the equipment from HPFS India,
specifically for the purpose of reselling it to Integrated.
the RRSA and WSA “specifically identified the equipment
as HPFS/H3C-manufactured equipment, ” and Integrated
“had no reason to believe otherwise.”
Id. However, “the equipment was not
H3C-manufactured equipment but a counterfeit.”
Id. at 11. “Defendant HPFS, which conducted
the sales negotiations, and Defendant HPFS India, the party
named in the contracts as the seller of the equipment, both
concealed the fact that the equipment was counterfeit.”
Id. Had Defendants “told the truth,
[Integrated] would not have agreed to purchase and remarket
the equipment because counterfeit equipment is unlawful to
end of December 2011, Integrated received, in China, the
first shipping installment of the equipment from Shinto.
Id. That installment consisted of approximately 3,
000 transceivers purportedly manufactured by H3C.
Id. Upon receiving the first installment, Integrated
representatives “realized that the equipment was in a
substandard condition . . . and not marketable as
anticipated.” Id. at 12. Integrated's
“originally arranged customers, who expected the
equipment in an ‘AS IS' but relatively new
condition, backed out and refused to buy the
equipment.” Id. “[T]he condition would
have become apparent to Defendants during the 2011
Inspection, ” and “should have raised a red flag
for the Defendants indicating potential substitution of the
equipment with a counterfeit.” Id.
Integrated's sales team in China “started to
develop new resale channels, which . . . produced lower gross
sales receipts.” Id.
“October/November 2012, ” Pekar and an HPFS
representative “conducted a joint inspection of the
remaining three installments” of the equipment
(“2012 Inspection”). Id. They agreed
that the remaining equipment “was likewise in a
substandard” condition and “determined not to go
through with the remaining installments.” Id.
Unlike Integrated, “[D]efendants had the knowledge,
expertise and technical means to determine that the equipment
was counterfeit during the 2012 Inspection.”
Id. at 13. However, at no point did “any of
Defendants' representatives inform [Integrated] that the
equipment was counterfeit.” Id.
continued to try to resell the first installment of
H3C Complains that Integrated Is Selling Counterfeit H3C
Equipment, Which Leads to Action by the Chinese
December 2012, “representatives of H3C lodged a
complaint with the local police accusing Plaintiffs [of]
marketing counterfeit H3C products because the transceivers
contained counterfeit H3C trademark logos.”
Id. However, those representatives did not disclose
to the police that Integrated bought the equipment from HPFS
and HPFS India, which are ...