Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-04686/USCOURTS-cand-3_19-cv-04686-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1346 Breach of Contract

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United States District Court

Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SHENZHEN MERRYNICE 

COSMETICS CO, LTD.,

Plaintiff,

v.

LUXIE, INC., et al.,

Defendants.

Case No. 19-cv-04686-CRB 

ORDER GRANTING IN PART AND 

DENYING IN PART MOTION TO 

DISMISS

The motion to dismiss is denied insofar as it argues that this case must be dismissed 

because Shenzhen Merrynice Cosmetics Co. has failed to pay franchise tax owed to the 

California Franchise Tax Board, for the reasons stated by the Court at oral argument.

The motion to dismiss Shenzhen’s second cause of action for failure to comply with 

the pleading requirements of Federal Rule of Civil Procedure 9(b) is granted in part and 

denied in part. The following allegations are dismissed with leave to amend, for the 

reasons described below.

The first two purported misrepresentations identified in the FAC relate to a 

supposed restructuring: “[t]hat the LUXIE Defendants were undergoing a financial 

restructuring . . . which would be complete by May of 2019” and “[t]hat the LUXIE 

Defendants were achieving record sales volume and were able to pay the debt due to 

MERRYNICE, but for the disruption of the payments due to the restructuring.” FAC 

(dkt. 32) ¶ 51(a), (b). The FAC contains no allegations explaining who represented that 

the restructuring was the sole reason for Luxie Inc.’s failure to pay its debts, when this 

representation was made, or where it was made. See generally id. While the FAC does 

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United States District Court

Northern District of California

allege that Luxie Chief Financial Officer Jenny Aw and Chief Executive Officer Conor 

Riley described Luxie’s planned restructuring at a December 17, 2018, meeting in San 

Jose, California, id. ¶ 12, it does not explain why this claim was false. There are no 

allegations that Luxie was not actually undergoing a restructuring or was being 

restructured on a different timetable then the one promised by Riley and Aw.

Merrynice also alleges that the Luxie defendants falsely represented that they 

“could and would comply with and satisfy the payment requirements of MERRYNICE’s 

payment plan of February 28, 2019.” Id. ¶ 51(d). The FAC does not allege who agreed to 

the February arrearage payment plan or when and where such an agreement was made. 

See generally id.

Merrynice alleges that Luxie falsely promised “[t]hat 2019 orders would be paid on 

60-day terms.” Id. ¶ 51(f). The FAC contains no allegations of who agreed to this 

requirement, when such an agreement was made, or where the agreement happened. See 

generally id.

Additionally, Merrynice alleges that Luxie “knowingly concealed” five facts with 

the intent of deceiving Merrynice. Id. ¶ 52. One fact allegedly concealed is that Luxie and 

Riley had no intention of satisfying the February arrearage payment plan. Id. ¶ 52(a), (b). 

This allegation is inadequately alleged, for the reasons stated above. 

The next two facts that Luxie allegedly concealed are “[t]hat the LUXIE Defendants 

and CONOR RILEY . . . executed a scheme to obtain product without expense from 

MERRYNICE, count the product as an asset of LUXIE for balance sheet purposes, sell the 

product at market prices to customers and divert the proceeds from LUXIE, Inc. and to the 

offshore LUXIE Defendants to delay, hinder and defraud MERRYNICE,” and “[t]hat the 

LUXIE Defendants and CONOR RILEY . . . diverted the proceeds from sales of 

MERRYNICE products so as to engage in voidable transfers to third parties . . . for which 

LUXIE, INC. did not receive reasonably equivalent value.” Id. ¶ 52(c), (d). The FAC 

does not appear to include any factual allegations regarding the details of these schemes, 

such as when they were executed, who participated in the wrongful conduct, or where the 

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