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Shandong Wieco Garment Co. Ltd. v. Vertical Source, Inc.

United States District Court, D. New Jersey

June 11, 2018

SHANDONG WIECO GARMENT CO. LTD, Plaintiff,
v.
VERTICAL SOURCE, INC., et al., Defendants,

          MEMORANDUM AND ORDER

          PETER G. SHERIDAN, U.S.D.J.

         Presently before the Court is Defendants Vertical Source, Inc, Christopher R. Neary, and Charles P. Moran's Motion for Partial Dismissal of Plaintiff Shandong Wieco Garment Company's Amended Complaint pursuant Federal Rule of Civil Procedure 12(b)(6). (ECF No. 11). The Court has diversity jurisdiction over this matter. For the reasons discussed herein, Defendants' Motion is granted in part and denied in part.

         Background

         At its core, the present matter is a basic breach of contract case, which Defendants do not challenge. In its Amended Complaint, Plaintiff Shandong Wieco (hereinafter, "Wieco") alleges that Defendants Vertical Source, Inc, Christopher R. Neary, and Charles P. Moran failed to make full payment of orders prepared by Wieco. In addition to the breach of contract claim, Wieco's Amended Complaint asserts nine other claims; however, at oral argument, Wieco withdrew Counts II (Action on the Book Account); IV (Identification of Goods to Contract); V (Wrongful Revocation of Acceptance of Goods); and IX (Unjust Enrichment). Wieco's remaining claims assert various contract-based causes of action: (I) breach of contract; (III) promissory estoppel; (VI) breach of fiduciary duty; (VII) fraud in the inducement; (VIII) breach of the covenant of good faith and fair dealing; and (X) unjust enrichment. Since this is a Motion for Partial Dismissal of the Complaint, and Defendants do not object to Count I (Breach of Contract), the Court limits its discussion to Counts III (promissory estoppel), VI (breach of fiduciary duty), VII (fraud in the inducement), VIII (breach of the covenant of good faith and fair dealing), and X (unjust enrichment).

         This case arises from a contractual dispute between a foreign garment manufacturer and domestic garment retailer. Wieco is a Chinese-based company engaged in the business of manufacturing and selling garment merchandise, and Vertical Source is a New Jersey-based trading company, engaged in the purchase and sale of garment merchandise. (Amended Complaint at ¶¶1, 5).

         According to the Amended Complaint, on May 15, 2014, Vertical Source placed purchase orders with Wieco for the delivery of Rossignol brand outdoor jackets and pants. (Id. at ¶ 11).[1]Five months later, on October 26 and 28, 2014, Wieco delivered the Rossignol shipment to Vertical Source. (Id. at ¶ 16). Although Vertical Source accepted the shipment, it refused to pay Wieco the full value of the shipment, claiming a portion of the shipment was flawed; instead, Vertical Source offered to "split the difference" of the balance and offered to pay Wieco $26, 512.50. (Id. at ¶ 19).

         Two days later, October 30, 2014, Vertical Source placed another order with Wieco for the shipment of three separate styles of outdoor jackets and vests. (Id. at ¶¶ 2, 7). The order was worth $357, 049.60 and memorialized into three separate commercial invoices: (1) 2014HT007-2 (the "Cloudveil Items"); (2) 2014HT008-2 (the "Cirq/Clymb Items"); and (3) 2014HT008-3 (the "Ultralight Items"). (Id. at ¶ 7; ECF No. 7-1 ("Commercial Invoices")). Wieco shipped the Cloudveil and Cirq/Clymb Items the following month, November 20, 2014, which Vertical Source accepted. (Id. at ¶¶ 12-15); however, Vertical Source did not immediately pay Wieco for the goods. Instead, on January 16, 2015, Vertical Source issued Wieco a "Letter of Guarantee," promising to: (1) pay in full the Cloudveil and Cirq/Clymb invoices by January 31, 2015; (2) pay for the Ultralight order (which remained stored in Wieco's warehouse); and (3) arrange for shipment of the Ultralight order. (Id. at ¶ 20). Wieco claims Vertical Source never fulfilled its promise. (Id. At ¶21).

         Over the next year, the parties exchanged various emails, discussing Vertical Source's outstanding balance and Wieco's demand for payment. (Id. at ¶ 22). According to the Amended Complaint, on June 3, 2015, Charles P. Moran, a New Jersey citizen and Vertical Source's Director of Operations, emailed Wieco, claiming:

We are committed to getting the factory paid for the entire amount of the original letter of guarantee of $273, 132.10 less the $50, 000.00 already paid or $223, 132.10 ... [and] We will commit to getting the balance of $188, 132.10 to Mr. Sun before the end of this year. If this is acceptable, we will put together a new Letter of Guarantee to Mr. Sun.

(Id. at ¶ 24). In this email, Moran also assured Wieco that it would make good on its outstanding balance, and complete the Ultralight order. (Id. at ¶ 25).

         Wieco responded the same day, demanding monthly installments of $50, 000, and disputed Vertical Source's claim that a portion of the Rossignol shipment was flawed:

I understand [the order was] not paid due to fabric color shade of which fabric supplier would be 'HFI'. Actually the factory is innocent on this issue as it's been shaded after making/shipping the garments. Robert confirmed to get compensation from 'HFI' soon. Pis check and confirm.

(Id. at ¶ 26). A subsequent email was sent that same day, wherein Wieco confirmed that Vertical Source's outstanding balance was $223, 132.10, which included $35, 000 for another order made by Vertical Source;[2] however, Wieco demanded that Vertical Source make monthly payments of $50, 000 beginning by the end of June. (Id. at ¶ 27). Vertical Source's President and CEO Christopher R. Neary, a New Jersey resident, responded to this email the following day, explaining that the company would need an extension for payments, since it was in "a tough cash position." (Id. at ¶ 29). Moran sent an email to the same effect on June 6, 2015, explaining their financial situation and that they expected to provide Wieco with "a concrete plan to move this forward" by Tuesday, June 9, 2015. (Id. at ¶ 31).

         On June 10, 2015, Moran provided Wieco with a payment plan, wherein Vertical Source would make monthly payments of $50, 000 by the end of each month, beginning in July, and a final payment of $23, 212.10 by the end of November. (Id. at ¶ 34). Wieco accepted the payment plan, but would ship the Ultralight order only after receiving full payment for it by the end of October. (Id. at ¶ 35). A week later, Moran responded to this demand, claiming:

We should be in a position to issue the Letter of Guaranty to Mr. Sun before the end of this month. . . Confirming that we are making every effort to get the ultra light jackets sold to a third party and get payment to Mr. Sun before end of October. . . Again, we appreciate your and Mr. Sun's understanding of these issues and willingness to work through them. We are in this situation because of production flaws in 2014 and poor operating procedures that lead to a loss of substantial revenues in 2015. We are also mindful of Mr. Sun's extraordinary efforts to get the 2014 production completed under difficult conditions. That is why we continue to send more orders to his factory.

(Id. at ¶ 37). According to the Amended Complaint, Vertical Source failed to make any payments, as set forth in their proposed payment plan; instead, on November 6, 2015, Vertical Source issued a Second Letter of Guarantee, signed by Neary and Moran, which acknowledged an outstanding balance of $330, 177.10. (Id. at ΒΆΒΆ 39-42). The letter also provided a new payment plan, wherein Vertical Source would make monthly payments of $50, 000, by the ...


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