Professional Documents
Culture Documents
1 CARLYLE (CARY) W. HALL III (CA Bar No. 184842; AZ Bar No. 026958)
POLSINELLI SHUGHART PC
2 Security Title Plaza
3636 N. Central Ave., Suite 1200
3 Phoenix, AZ 85012
TEL: (602) 650-2000 / FAX: (602) 264-7033
4 EMAIL: chall@polsinelli.com
11
UNITED STATES DISTRICT COURT
13
CONG WANG, an individual; SEASENG, Case No. CV 09-7145-JFW (JEMx)
14 INC., a/k/a KMD POWERSPORTS, a
California corporation,
15
Plaintiffs, PLAINTIFFS’ MEMORANDUM OF
16
POINTS AND AUTHORITIES IN
17 v. OPPOSITION TO MOTION TO
DISMISS FIRST AMENDED
18 ZHEJIANG KANDI VEHICLES CO., LTD., COMPLAINT
a/k/a KANDI TECHNOLOGIES CORP, a
19 foreign corporation; KANDI Date: January 25, 2010
20 TECHNOLOGIES CORP., a Delaware Time: 1:30 p.m
Corporation, f/k/a STONE MOUNTAIN Courtroom: 16
21 RESOURCES INC.; ZHEJIANG
YONGKANG TOP IMPORT AND
22 EXPORT CO. LTD., a/k/a DINGJI, a foreign
23 corporation; ZHEJIANG MENGDELI
ELECTRONIC CO., LTD.; a foreign
24 corporation; XIAO MING HU, an individual;
WANG YUAN HU, an individual,
25
26
Defendants.
27
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN
28
OPPOSITION TO MOTION TO DISMISS FIRST AMENDED
COMPLAINT
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1 I. INTRODUCTION
2 Defendants claim that the First Amended Complaint (“FAC”) is “thin on facts and
3 thick with bare conclusions and formulaic recitations of the elements of the claims.”
5 mischaracterizes the FAC, and ignores key allegations in favor of repeatedly using terms
7 In fact, the FAC alleges in great detail a conspiracy by the Defendants to take over
8 Plaintiffs’ business through threats, extortion, threats, and other criminal and racketeering
9 activity. The FAC sets forth multiple predicate RICO violations, properly alleges a
10 conspiracy, and identifies Plaintiffs’ damages arising from the Defendants’ scheme.
11 Accordingly, the FAC properly alleges claims for violation of RICO, and
12 Defendants’ Rule 12(b)(6) motion should be denied. Because the state law claims
13 alleged in the FAC share a common basis of operative facts with the RICO claims – and
14 Defendants do not contend otherwise – this Court has supplemental jurisdiction over
15 those claims, and Defendants’ motion to dismiss those claims for lack of jurisdiction
16 should be denied.
20 alleges that Defendants used threats, extortion, intimidation, harassment, and abuse of
25 various businesses who would be interested in selling Kandi products. See Complaint
25 Wang and Seaseng to help them set up their own presence and business in California, to
26 train their employees and then began looking for ways to take over Plaintiff Seaseng’s
1 When Plaintiff Wang refused to surrender control over his company to Defendants
2 or to disclaim his interest in the profits earned or to be earned through the sale of Kandi
3 products; Defendants Kandi, Kandi China and/or Zhejiang (in or before February 2008)
4 stole Plaintiff Seaseng’s corporate documents, including but not limited to customer
5 contact lists, customer invoice lists, Seaseng corporate documents and unsigned Seaseng
7 On or about February 13, 2008, Defendant Zhejiang filed a lawsuit, case number
8 KC052313 (“First Lawsuit”), in the Superior Court of California, County of Los Angeles,
9 against Plaintiff Wang and Plaintiff Seaseng, stating claims for fraud, conversion, breach
10 of fiduciary duty, appointment of receiver, accounting, constructive trust, equitable lien,
11 injunctive and declaratory relief and seeking to take control over Plaintiff Seaseng. See
12 Complaint ¶44. The First Lawsuit, however, was never served on Plaintiffs and was later
13 dismissed. See Complaint ¶¶45-46.
14 C. Defendants’ Threats, Intimidation, and Harassment
15 In addition to Defendants’ theft of Plaintiff Seaseng’s corporate documents, in
16 February, 2008, Plaintiff Wang learned that his relatives in China were harassed and
19 to be issued for Plaintiff Wang’s arrest in China under the theory that Plaintiff Wang was
20 an employee of Defendants Kandi, Kandi China and/or Zhejiang and that Plaintiff Wang
21 misappropriated company documents from the Defendants. See Complaint ¶43. None of
25 ¶47. At approximately 4:00 a.m. on February 28, 2008, Defendant Xiao Ming demanded
26 that Plaintiff Wang meet him to sign a promissory note and settlement agreement drafted
27 by Xiao Ming and/or his attorneys or else face physical violence. Id.
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN
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OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
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1 Plaintiff Wang then met with Defendant Xiao Ming who purported to represent the
2 interests of Defendants Kandi, Kandi China, Zhejiang and Mengdeli. See Complaint ¶48.
3 Plaintiff Wang sought to address any miscommunications, restore control over his
4 company Plaintiff Seaseng, and to settle any disputes with Defendants. See Complaint
5 ¶48. The parties entered into a Settlement Agreement. See Complaint ¶¶49-53.
6 In July 2008, Defendant Zhejiang filed another lawsuit against Plaintiff Wang and
7 Plaintiff Seaseng, case number CIVRS 806472 (“The Second Lawsuit”) in the Superior
8 Court of California, County of San Bernardino, making essentially the same allegations
9 as in its First Lawsuit, including stating that Plaintiff Wang was a salaried employee of
10 Defendants Kandi, Kandi China and/or Zhejiang, and that he had a fiduciary duty to
11 make Seaseng the wholly-owned subsidiary of Defendant Zhejiang, and claiming that the
12 Settlement Agreement should be declared void and rescinded; this suit was later
10 Penal § 518 (“Extortion is the obtaining of property from another, with his consent, or the
11 obtaining of an official act of a public officer, induced by a wrongful use of force or fear,
12 or under color of official right”); § 520 (extortion is punishable by two, three, or four
16 the personal property of another, or who shall fraudulently appropriate property which
17 has been entrusted to him or her, or who shall knowingly and designedly, by any false or
18 fraudulent representation or pretense, defraud any other person of money, labor or real or
19 personal property . . .is guilty of theft.”).
20 Finally, Defendants’ false representations in furtherance of their scheme to
21 defraud Plaintiffs violate 18 U.S.C. § 1341 (mail fraud) and § 1343 (wire fraud).
22 Defendants attempt to brush aside their criminal conduct with fatuous arguments
23 that their threats did not “connect any threat with the subject matter of this action,” that
24 “[t]he very nature of the alleged threat are all left to surmise,” and that it could be “a
25 personal dispute of unknown nature.” Motion, p. 13. According to the Defendants, no
26 threat is actionable under RICO unless the defendant is foolish enough to spell out in
27 complete detail the nature of the threat and the reasons for it. Defendants claim that they
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1 can, with impunity, threaten to “take care of” someone, and boast of having already
2 “made a deposit” to do so, because they did not say specifically, “we have hired someone
3 to kill or hurt you.”
4 This is specious. The FAC clearly alleges that Defendants threatened Plaintiffs
5 and their family with physical harm, and that these threats were made in the context of,
6 and in furtherance of, Defendants’ attempts to take over Plaintiffs’ business. Certainly a
7 finder of fact could reasonably infer that the alleged threats were for this purpose. If
8 Defendants wish to defend this case on the theory that their agents were merely
9 threatening violence related to some unknown personal dispute, they are welcome to
10 present any evidence in support of such a theory to the finder of fact. But the standard
11 for pleading a valid claim under Rule 12 does not require Plaintiffs to conclusively negate
12 in their pleading any defense theory, no matter how fanciful, that Defendants can conjure
13 up.
14 B. The FAC Alleges a Pattern of Racketeering Activity
15 All Defendants are either the parent companies, owners or subsidiaries of the other
16 Defendants. All Defendants constitute the enterprise as they build market share as one
18 Defendants Kandi, Kandi China, Zhejiang, Mengdeli, Xiao Ming and Wang Yuan
19 combined their efforts as one partnership, association or enterprise (“RICO enterprise”)
21 1) Increasing their share in the market for ATVs, UTVs, and go-karts in the United
22 States through expansion of their operations in the United States; and
23 2) Acquiring, by means of fraud, securities fraud, extortion and harassment, the
24 United States companies who would store, market, distribute, service and be
25 otherwise responsible for Kandi products. See Complaint ¶72.
26 Defendants Kandi, Kandi China, Zhejiang, Mengdeli, Xiao Ming and Wang Yuan
27 engaged in racketeering activity when they:
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN
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OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
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1 1) Threatened Plaintiff Wang and his family members with physical violence in
2 order to extort his cooperation;
3 2) Abused process by filing a series of frivolous actions against Plaintiffs Seaseng
4 and Wang for ulterior reasons of harassment, extortion, and interference with
5 Plaintiffs’ business;
6 3) Sought to deprive Plaintiff Wang of his ownership and management rights in
7 Plaintiff Seaseng without valid consideration, essentially ousting him from his
8 own company by means of fraud, intimidation and harassment. See Complaint
9 ¶73.
10 The following are some of the predicate criminal acts which constitute a pattern of
17 allege predicate acts. As set forth above, the FAC does in fact adequately allege
18 predicate acts, so this argument fails.
19 Defendants also claim that the FAC only alleges an agreement to commit predicate
20 acts rather than to join the conspiracy. This is also without merit. The FAC clearly
21 alleges that the Defendants joined together to attempt to take over Plaintiffs’ business by
22 unlawful means. Among other things, the FAC alleges that the Defendants “combined
24 purposes of: (a) Increasing their share in the market for ATVs, UTVs, and go-karts in the
25 United States through expansion of their operations in the United States; and (b)
26 Acquiring, by means of fraud, securities fraud, extortion and harassment, the United
27 States companies who would store, market, distribute, service and be otherwise
PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN
28
OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
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1 responsible for Kandi products.” FAC, ¶ 74. The FAC further alleges that “Defendants .
2 . . knowingly agreed or conspired to operate or manage their combined activities as a
3 RICO enterprise” FAC, ¶ 91.
4 IV. SUPPLEMENTAL JURISDICTION EXISTS OVER THE STATE LAW
5 CLAIMS
6 Defendants’ claim that this Court lacks jurisdiction over the non-RICO claims is
7 premised on their argument that the FAC does not adequately plead a RICO claim.
8 Defendants do not dispute that the state law claims share a common nucleus of operative
9 facts with the RICO claims. Because Defendants’ attacks on the RICO claims fail for the
11 fails.
12 V. CONCLUSION
13 For the reasons set forth above, the Court should deny Defendants’ motion to
14 dismiss. In the alternative, if the Court grants the motion to dismiss, Plaintiffs request
15 leave to amend.
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DATED: January __, 2010 POLSINELLI SHUGHART PC
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21
22 By: ______________________________
Carlyle (Cary) Hall III
23 Attorneys for Plaintiff
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PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN
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OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT
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