United States District Court, D. Kansas
American Maplan Corp., doing busines as battenfeld-cincinnati USA, Plaintiff,
Hebei Quanen High-Tech Piping Co., LTD, et al., Defendants.
MEMORANDUM AND ORDER
THOMAS MARTEN, JUDGE.
American Maplan Corporation, doing business as
battenfeld-cincinnati USA (Battenfeld US) entered into an
agreement with Hebei Quanen High-Tech Piping Co. under which
Battenfeld U.S. would manufacture extrusion equipment for
Quanen to use at its plants in China for making plastic pipe.
Quanen is a subsidiary of J-M Manufacturing Company, which
has operated as JM-Eagle. Walter Wang is the President and
CEO of Eagle.
plaintiff alleges Quanen failed to pay for equipment
delivered pursuant to the agreement, and brings claims for
breach of contract, breach of the implied covenant of good
faith and fair dealing, conversion, unjust enrichment, and
fraud. In addition, the plaintiff alleges that Wang and Eagle
were directly involved in the negotiations leading to the
transaction, with Quanen being formed as a corporation only
after the nature of the transaction was shaped by Battenfeld
and Eagle. Plaintiff alleges that Wang and Eagle
intentionally interfered with their contractual relations
with Quanen, and fraudulently induced them to enter into the
contract by misrepresenting Quanen's ability to perform.
The matter is before the court on defendants' motions to
dismiss. Quanen argues that Maplan's allegations fail to
state a claim for relief. In addition, it argues the fraud
claim is time barred, and fails to allege fraud with
particularity. Defendants Wang and Eagle seek dismissal for
an asserted lack of personal jurisdiction. The court has
reviewed the pleadings and other materials in the action, and
finds that the motions to dismiss should be denied.
Motion to Dismiss
plaintiff satisfies the requirements of Fed.R.Civ.P. 8 by
presenting a plausible claim for relief, something which goes
beyond mere conclusions or the “formulaic recitation of
the elements of a cause of action.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2009). In determining
whether plaintiff has presented a plausible claim for relief,
the court accepts as true all well-pleaded facts presented in
the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). A plausible claim is one sets forth facts which
create “the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. at
678. Plausibility is “context-specific task that
requires the court to draw on its judicial experience and
common sense.” Id. at 679.
viability of Maplan's contract and tort claims must take
account of the allegations raised in its complaint. According
to the plaintiff, Battenfeld U.S. has manufactured plastic
extruders and extrusion lines, including extrusion systems
for the production of PVC and PE pipe, since 1995. Battenfeld
U.S. makes equipment for some of the world's largest pipe
producers, including Eagle.
2011, Walter Wang told Battenfeld U.S. he planned to expand
Eagle's operation into the Chinese market by forming a
new affiliated company in Langfang, China, and he wanted
Battenfeld U.S. to supply extrusion equipment for the
affiliate. Eagle gave Battenfeld U.S. information on the new
affiliate (including the type of pipe it planned to
manufacture, and output rates and efficiencies it desired for
the requested extrusion equipment) to allow Battenfeld U.S.
to formulate price quotations and equipment specifications.
CEO, Kurt Waldhauer, met with Wang on January 19, 2012. Wang
said that the new affiliate would have the requisite
infrastructure, capacity, and know-how to operate pipe
extrusion equipment, and assured Battenfeld that Hebei Quanen
would pay for the equipment. Wang and Eagle knew Battenfeld
would have to incur millions of dollars in production and
operating costs to make the equipment. Wang represented that
he and Eagle would back Hebei Quanen. Battenfeld relied on
January 24, 2012, Waldhauer emailed a proposed delivery
schedule to Wang. Because of the long lead time necessary to
manufacture this equipment, in April 2012, Wang and Waldhauer
agreed that Battenfeld should begin preparations to
manufacture the equipment. Wang represented that Battenfeld
US's delivery of the extrusion equipment to China on a
tight schedule was critical for his China expansion.
19, 2012, Jürgen Arnold, a member of Battenfeld US's
Board of Directors, alerted Wang that Battenfeld U.S. had
already started investing the substantial costs, time, and
effort needed to prepare to manufacture the equipment,
including reserving time in Battenfeld US's production
schedules and negotiating with suppliers.
and Wang caused Hebei Quanen to be incorporated on or about
July 23, 2012 as the Chinese affiliate of Eagle. Franco An
has been the President of Hebei Quanen since it was formed.
complaint alleges that Hebei Quanen is the alter ego of Wang,
that it operates under his direction and control, and that he
incorporated the affiliate as a vehicle to carry out his
personal business for his own personal advantage to such an
extent that Hebei Quanen has no separate interests of its
own. Plaintiff claims Hebei Quanen was grossly
under-capitalized and was financed entirely by Wang or Eagle
(of which Wang is the President and CEO). The complaint
alleges that Hebei Quanen failed to observe corporate
formalities and was used as a facade for Wang's own
business activities. For all effective purposes, Wang and
Hebei Quanen are one and the same because that is the
perception that Wang seeks to create in the minds of third
parties, including Battenfeld US. The complaint alleges that
recognition of Hebei Quanen as a distinct legal entity would
result in injustice to Battenfeld US.
August 24, 2012, Battenfeld U.S. and representatives of Eagle
and Hebei Quanen, including Wang, Kaider Liao (Eagle's
Director of Engineering), and Franco An met to negotiate the
terms of Battenfeld US's sale of extrusion equipment to
Hebei Quanen. During the meeting Wang, Liao, and An told
Battenfeld U.S. that Hebei Quanen could operate the equipment
and that it would have the clients to generate the money to
pay Battenfeld US.
and Liao referenced the history between Battenfeld U.S. and
Eagle to make Battenfeld U.S. comfortable with the large
outlay of time, resources, and financial risk needed to enter
into a significant contract with a new foreign company like
Hebei Quanen. As a further inducement, Wang, Liao, and An
promised that Hebei Quanen would place very significant
orders with Battenfeld US.
on these representations, Battenfeld U.S. agreed to provide a
40% discount from the list price on Hebei Quanen's
purchase of equipment, in return for Hebei Quanen ordering at
least $75 million (list price) worth of equipment from
Battenfeld U.S. and from Battenfeld US's affiliate in
January 15, 2013, Battenfeld U.S. confirmed a Framework
Agreement with Hebei Quanen and Eagle, which provided various
price increases above the 40% discount if the volume of sales
did not reach $75 million by December 31, 2015.
US, Eagle, and Hebei Quanen continued to discuss the needed
equipment through the Fall of 2012, including, in some
instances, during on-site meetings in China. Throughout these
meetings, An, Liao, and Wang reiterated that Hebei Quanen,
although a new company, had the backing of Eagle and Wang,
and, therefore, would have the infrastructure, capacity, and
know-how to use the equipment and Hebei Quanen would have the
ability to pay Battenfeld US.
and Eagle effectively sought to have Battenfeld U.S.
underwrite their China expansion because the large discounts
on extrusion equipment furthered Wang's own interest in
using Battenfeld U.S. to help capitalize his planned China
expansion at vastly reduced cost. As a result, Hebei Quanen
received equipment with relatively little capital investment
September 27, 2012, Battenfeld U.S. provided the Terms and
Conditions that would govern the sales of the equipment. The
Terms and Conditions, which were substantially the same as
those agreed to by Wang and Eagle for years, were to govern
“all sales, ” and provided for interest at the
rate of 1.5% monthly (18% per annum) on all amounts not paid
by Hebei Quanen.
Terms and Conditions provided that all objects delivered by
Battenfeld U.S. would remain its property until it was paid
all sums due for any legal reason, even if the payments for
particularly designated items have been made, and that the
reservation of ownership would count as security for the
balance due. The January 15 Framework Agreement contained a
November 2012 and March 2013, Hebei Quanen submitted more
than fifty Purchase Orders to Battenfeld U.S. for the
delivery and installation of pipe extrusion equipment. These
Purchase Orders totaled approximately $22 million, after
applying the 40% volume discount off the list price. These
Purchase Orders were subject to the Terms and Conditions.
Purchase Orders and the January 15 Framework Agreement
generally required a 30% down payment at the time a Purchase
Order was placed, 50% payment upon delivery of the products
to Hebei Quanen, and the final 20% payment after acceptance.
complaint alleges that Hebei Quanen has made partial payments
under the Purchase Agreements for the extrusion equipment,
but has refused to pay millions of dollars still outstanding
under the Purchase Agreements.
March 31, 2013, Battenfeld U.S. (through its affiliate
Battenfeld U.S. China) began delivering and installing
equipment at the Langfang City plant. However, according to
the complaint, Hebei Quanen did not have the capacity,
infrastructure, or know-how to receive, install, or operate
to the complaint, the plant was too small to operate the
equipment. That is, while the equipment itself was installed
in the plant, the facility could not process the hot, uncured
pipe as it exited the extrusion line so that it could be
sufficiently cooled or cut. Hebei Quanen erected a tent to
cover the extruded pipe, but the tent could-and did-brush
against the hot, uncured pipe, damaging the pipe.
Quanen, Eagle, and Wang then entered into a plan to withhold
payments or otherwise cause Hebei Quanen to avoid its good
faith obligations to perform under the Purchase Agreements
and allow Wang to avoid further capital contributions at
Battenfeld US's expense.
Hebei Quanen refused to provide a proper commissioning plan
for acceptance of the PE and PVC lines and, as a result,
Battenfeld U.S. could not start the commissioning process for
delivered extrusion lines until June 2015. In addition, Hebei
Quanen and Eagle repeatedly cancelled or rescheduled
commissioning visits (often at the last minute) to avoid
Hebei Quanen's payment obligations. This refusal, at
Wang's and Eagle's direction, to commission many of
the delivered extrusion lines, wrongfully delayed payment of
the final 20% balance due.
plaintiff also alleges that Hebei Quanen lacked the client
base and cash flow to meet the payment schedule. Thus, Hebei
Quanen (allegedly at the direction of Wang and Eagle) refused
to accept equipment delivery by refusing access to its plant,
causing Battenfeld U.S. to incur improper storage costs.
Hebei Quanen also made numerous meritless reports of
defective equipment. The complaint alleges that all equipment
was within industry standards. To the extent Hebei Quanen
identified any issues with the extrusion equipment,
Battenfeld U.S. worked diligently, professionally, and
successfully to rectify all such issues.
Hebei Quanen has refused to make full payment for the
extrusion lines, it has been using at least some of the
equipment to produce PVC and PE pipe, operating the
still-uncommissioned extrusion lines in excess of 4, 600
hours to date. Under the Purchase Agreements, that equipment
is owned by Battenfeld US, and Battenfeld U.S. has not
authorized Hebei Quanen to use it for commercial purposes.
extrusion equipment that Hebei Quanen did not commission or
otherwise begin using, it improperly stored such equipment
over the last several years, which completely destroyed its
value, thus making return of the equipment impossible because
Battenfeld U.S. can no longer sell it for any value.
Quanen's actions have caused substantial injury to
Battenfeld U.S. and other members of the
battenfeld-cincinnati corporate family. This strain led the
CEO of BC Extrusion Holding GmbH ("BC Extrusion
Holding"), the company responsible for managing the
financial risk for the corporate family, to plead with Wang
to direct Hebei Quanen to make its required payments because
the situation was threatening their covenants with creditors.
U.S. was jointly liable for default under the credit support
agreements with its affiliated companies. Thus, a default by
any of the battenfeld-cincinnati group of companies exposed
Battenfeld U.S. to liability. Nonetheless, Hebei Quanen, at
the direction of Wang, continued to withhold payment,
notwithstanding repeated written promises to remit payment
for the extrusion equipment.
all of these efforts to obtain payment failed, but still
relying on the good faith of defendants, representatives from
Battenfeld US, BC Extrusion Holding, Hebei Quanen, and Wang
agreed on a written global business resolution and go-forward
plan on May 27, 2015.
Agreement, Hebei Quanen recommitted to the original payment
terms whereby Battenfeld U.S. would provide a 40% list price
discount to Hebei Quanen in exchange for $75 million worth of
extrusion equipment orders. The parties also agreed on a
framework to resolve any technical complaints and set
extrusion equipment commissioning schedules in the Langfang
complaint alleges that, by leveraging the financial distress
caused by the defendants' bad faith conduct, Wang was
able to extract additional commitments from Battenfeld U.S.
to agree on a new 40% list price discount and “a
special ONE TIME only discount of an additional 30%” on
orders for plants Eagle owned and operated in the United
complaint alleges that defendants had no intention of
performing their obligations under the May 27 Agreement.
Despite its promises, Hebei Quanen still cancelled,
obstructed, and delayed technical delivery and commissioning
of the extrusion equipment. Battenfeld U.S. delivered or
offered to deliver to Hebei Quanen's Langfang City plant
on all of its obligations under the original Purchase Orders
and the May 27 Agreement. Nevertheless, Hebei Quanen-at the
direction of Eagle and Wang-still refused to pay Battenfeld
the following months, Battenfeld U.S. and BC Extrusion
Holding repeatedly followed up with Hebei Quanen and Eagle in
an effort to secure Hebei Quanen's overdue payments. In
response to those efforts, Hebei Quanen and Eagle personnel
repeatedly advised Battenfeld U.S. and BC Extrusion Holding
that Wang would not authorize payment by Hebei Quanen.
complaint alleges that Wang refused in bad faith to allow
Hebei Quanen to satisfy its obligations to Battenfeld U.S.
because he wanted to ruin Battenfeld U.S. and the entire
battenfeld-cincinnati corporate family's credit rating
and business value for his own benefit.
March 7, 2007, the battenfeld-cincinnati corporate family had
entered into a contractual relationship with West LB,
Germany, as lead arranger of a credit consortium, which
included Battenfeld U.S. as a guarantor with joint liability.
These Bank Covenants included EBITDA, cash flow, capital
expenditure, and EBITDA/interest ratios as key performance
Bank Covenants were structured such that Battenfeld US's
default would adversely impact the entire
battenfeld-cincinnati corporate family. In other words, the
cross default provisions of the Bank Covenants provided that
the insolvency of any entity within the battenfeld-cincinnati
corporate family would cause the entire credit facility to
default and give the credit consortium the right to credit
the Bank Covenants.
and Eagle knew how consequential the Langfang City project
was for Battenfeld US. Indeed, the approximately $22 million
worth of equipment (after a 40% discount from the list price)
ordered by Hebei Quanen represented a significant percentage
of Battenfeld US's overall business during 2013 and 2014.
Wang and Eagle leveraged the payment obligations under this
very large contract to ruin the value of Battenfeld U.S. and
the entire battenfeld-cincinnati corporate family.
addition, according to the complaint, Wang knew of this, and
purposefully instructed Hebei Quanen to withhold payments or
otherwise not comply with ...