Jiaxing Super Lighting Electric Appliance Co., LTD. v. Bruggeman ( 2023 )

1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 JIAXING SUPER LIGHTING ELECTRIC Case No. 21-cv-08489-MMC APPLIANCE CO., LTD., 8 Plaintiff, ORDER GRANTING DEFENDANT 9 SIGNIFY HOLDING B.V.'S MOTION v. TO DISMISS 10 JOHN BRUGGEMAN, et al., 11 Defendants. 12 13 Before the Court is defendant Signify Holding B.V.’s (“Signify”) “Motion to Dismiss 14 Pursuant to Rule 12(b)(6),” filed January 19, 2023, whereby Signify seeks dismissal of 15 one of the claims in the Second Amended Verified Complaint (“SAC”), the operative 16 pleading in the instant action. Plaintiff Jiaxing Super Lighting Electric Appliance Co., Ltd. 17 (“Super Lighting”) has filed opposition, to which Signify has replied. Having read and 18 considered the papers filed in support of and in opposition to the motion, the Court rules 19 as follows.1 20 In the SAC, Super Lighting asserts a single cause of action against Signify for 21 “Actual and Constructive Fraudulent Transfer of Patents” under the Delaware Uniform 22 Fraudulent Transfer Act (“DUFTA”) and California Uniform Voidable Transfer Act 23 (“CUVTA”). (See SAC ¶¶ 228-239.) In particular, Super Lighting, in the Second Cause 24 of Action, alleges that Signify, by purchasing 37 patents (“the Patents”) belonging to 25 debtor and nominal defendant Lunera Lighting, Inc. (“Lunera”) for consideration that was 26 27 1 “less than reasonably equivalent value” (see SAC ¶ 233),2 “put the Patents . . . beyond 2 Super Lighting’s reach and delayed, hindered, and impeded its ability to enforce its 3 arbitration award and [j]udgment” against Lunera (see SAC ¶ 236). Based thereon, 4 Super Lighting seeks equitable relief and damages. (See SAC ¶ 239.) 5 By order filed December 2, 2022 (“December 2 Order”), the Court granted in part 6 and denied in part Signify’s Motion to Dismiss the First Amended Verified Complaint 7 (“FAC”) to the extent it alleged a claim against Signify for “Actual and Constructive 8 Fraudulent Transfer of Patents.” In particular, the Court granted the motion to the extent 9 such claim was based on constructive fraudulent transfer of the Patents, and denied the 10 motion in all other respects. (See December 2 Order at 9:19-22.) In so ruling, the Court 11 found Super Lighting “ha[d] not pled facts establishing the actual market value of the 12 [P]atents” (see December 2 Order at 8:15-16), and that Super Lighting’s “conclusory 13 assertion” that the consideration Lunera received for the Patents was “less than 14 reasonably equivalent value” did not, “absent factual support . . . suffice for purposes of 15 pleading its [constructive fraudulent transfer] claim” (see December 2 Order at 8:18-26 16 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))). 17 Thereafter, Super Lighting, with leave of Court, filed the SAC, in which Super 18 Lighting now adds a description of the Patents, namely, that “Lunera’s Patents fall into 19 two categories—structure and circuit—and were used in three categories of Lunera 20 products (i) place-in-lamps; (ii) high intensity discharge lamps; and (iii) linear lighting,” 21 and, as to value, now alleges: 22 Lunera’s internal financial and operating data, including Lunera’s own 23 financial statements and historical sales and projections, as well as several industry factors relevant to the Patents such as licensing, remaining patent 24 life, and projected segment revenue growth, establish that the Patents had 25 2 Super Lighting alleges the Patents were sold to defendant Tynax, Inc. (“Tynax”), 26 a broker that “acquir[ed] the Patents on behalf and at the request of Signify” for $125,000 (see SAC ¶ 161) and, on the same day, “transferred the Patents to Signify in exchange 27 for $160,000 ($125,000 purchase price, plus a $35,000 commission to Tynax) pursuant an actual fair market value of between $5.5 million and $6.9 million on 1 January 18, 2019, the date of their transfer. 2 (See SAC ¶¶ 162; see also SAC ¶ 110.) By the instant motion, Signify argues Super 3 Lighting has failed to cure the deficiency noted by the Court in its previous order of 4 dismissal, in that Super Lighting again fails to plead facts plausibly supporting the alleged 5 market value of the Patents. As set forth below, the Court agrees. 6 The pleading requirements for fraudulent transfer under DUFTA and CUVTA are 7 identical. See In re PennySaver USA Publ’g, LLC, 602 B.R. 256, 267 (Bankr. Del. 2019). 8 Under either statute, to state a claim for constructive fraudulent transfer, a plaintiff must 9 allege that a “debtor made the transfer or incurred the obligation without receiving a 10 reasonably equivalent value in exchange for the transfer or obligation and the debtor was 11 insolvent at the time or . . . became insolvent as a result of the transfer or obligation.” 12 See 6 Del. C. Section 1305(a); Cal. Civ. Code Section 3439.05(a); see also Lachapelle v. 13 Kim, 2015 WL 7753235, at *7 (N.D. Cal. Dec. 2, 2015) (“[A]t its core, a constructive 14 fraudulent transfer claim has two elements: reasonable equivalent value and insolvency.” 15 (internal quotation and citation omitted)).3 16 “Determining reasonable equivalence requires case-by-case adjudication, which 17 depends on all the facts of each case, an important element of which is market value.” In 18 re BMT-NW Acquisition, LLC, 582 B.R. 846, 858 (Bankr. D. Del. 2018) (internal quotation 19 and citation omitted). Although, as the Court noted in its December 2 Order, a complaint, 20 “[a]t the pleading stage, . . . need only include allegations specifying in detail the date of 21 the transfer, the amount of the consideration received, and the alleged value of the asset 22 on the date of the transfer” (see December 2 Order at 8:9-12 (citing In re AstroPower 23 Liquidating Tr., 335 B.R. 309, 333-34 (Bankr. D. Del. 2005))), a complaint must still 24 “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is 25 plausible on its face,” see Iqbal, 556 U.S. at 678 (quoting Bell Atlantic Corp. v. Twombly 26 27 3 Here, as before, the parties do not dispute Super Lighting’s insolvency at the 1 550 U.S. 544, 570 (2007)). Here, as discussed below, the SAC is devoid of such factual 2 matter. 3 To the extent Super Lighting now alleges the $5.5 million - $6.9 million valuation 4 range ascribed to the Patents derives from Lunera’s “financial statements and historical 5 sales and projections” (see SAC ¶¶ 110, 162), it has not alleged specific data obtained 6 therefrom, let alone how any such figures are relevant to patent valuation. Similarly, to 7 the extent Super Lighting now alleges the valuation range derives from “industry factors 8 relevant to the Patents such as licensing, remaining patent life, and projected segment 9 revenue growth” (see SAC ¶ 162), the SAC again lacks factual elaboration,4 see, e.g., In 10 re SCI Real Estate Investments, LLC, 2013 WL 1829648, at *6 (C.D. Cal. May 1, 2013) 11 (finding “[c]omplaint fail[ed] to state a plausible claim to recover a constructive fraudulent 12 transfer” where complaint lacked sufficient “facts forming the basis for [asset’s] 13 valuation”). 14 Accordingly, to the extent the sole claim against Signify is based on constructive 15 fraudulent transfer of the Patents, it is again subject to dismissal. See In re Gilead 16 Sciences Securities Litigation, 536 F.3d 1049, 1055 (9th Cir. 2008) (holding “the Court [is 17 not] required to accept as true allegations that are merely conclusory, unwarranted 18 deductions of fact, or unreasonable inferences”). The Court will, however, afford Super 19 Lighting a further opportunity to amend to add factual allegations that suffice to support a 20 finding that the Patents were not transferred by Lunera to Signify for reasonably 21 equivalent value. 22 / / 23 / / 24 4 In its opposition, Super Lighting asserts it “engag[ed] outside experts to perform 25 a preliminary valuation of the [P]atents.” (See Opp. at 1:17.) The SAC, however, makes no mention of such experts, let alone any of their findings. See Schneider v. California 26 Dept. of Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) (holding district court, “[i]n determining the propriety of a Rule 12(b)(6) dismissal, may not look beyond the complaint 27 to a plaintiff’s moving papers, such as a memorandum in opposition to a defendant’s 1 CONCLUSION 2 For the reasons stated above, Signify’s motion to dismiss the SAC is hereby 3 || GRANTED, and the SAC is hereby DISMISSED with leave to amend. If Super Lighting 4 || wishes to file a Third Amended Complaint, it shall do so no later than May 12, 2023. 5 6 IT IS SO ORDERED. 7 8 || Dated: April 26, 2023 MM. MAKINE M. CHESNEY 9 United States District Judge 10 11 12 13 414 16 17 18 19 20 21 22 23 24 25 26 27 28