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13-1532-cv

Zhang v. Schlatter

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY 

FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. 

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST 

CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION 

ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON 

ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at 

the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New 

York, on the 2

nd day of January, two thousand fourteen.

PRESENT: REENA RAGGI,

DENNY CHIN,

CHRISTOPHER F. DRONEY,

Circuit Judges.

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HAINING ZHANG and CHINA VENTURE PARTNERS, 

INC., 

Plaintiffs-Appellants,

v. No. 13-1532-cv

GARY H. SCHLATTER, ORALABS, INC., ROBERT C. 

GUST, MICHAEL I. FRIESS, ALLEN R. GOLDSTONE, 

CREATIVE BUSINESS STRATEGIES, INC., CHINA 

PRECISION STEEL, INC., BELMONT CAPITAL 

GROUP LIMITED, HENNY WEE & CO., SOON 

CHIANG HENNY WEE, KAM KAU EDDIE WONG, 

EDWON, INC., HUNG WAN, ADVANZ CAPITAL, 

INC., and ORALABS HOLDING CORP., 

Defendants-Appellees.

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APPEARING FOR APPELLANTS: KEVIN K. TUNG, ESQ., Kevin Kervung Tung, 

P.C., Flushing, New York.
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APPEARING FOR APPELLEES: ANTHONY L. LEFFERT, Robinson Waters & 

O’Dorisio, P.C., Denver, Colorado, for

Appellees Gary H. Schlatter, OraLabs, Inc., 

Robert C. Gust, Michael I. Friess, Allen R. 

Goldstone, and Creative Business Strategies, 

Inc.

JOHN MICHAEL DEITCH, Coughlin Duffy 

LLP, Morristown, New Jersey, for Appellees 

China Precision Steel, Inc. and OraLabs 

Holding Corp.

MARY H. TOLBERT (Harry A. Woods, Jr., 

Bruce W. Day, and Tara A. LaClair, Crowe & 

Dunlevy, P.C., Oklahoma City, Oklahoma; 

Thomas J. Mullaney, Leventhal, Cursio, 

Mullaney & Sliney, LLP, Roslyn, New York, on 

the brief) Crowe & Dunlevy, P.C., 

Oklahoma City, Oklahoma, for Appellees

Belmont Capital Group Limited, Henny Wee & 

Co., Soon Chiang Henny Wee, Kam Kau Eddie 

Wong, Edwon, Inc., Hung Wan, and Advanz 

Capital, Inc.

Appeal from a judgment of the United States District Court for the Southern District 

of New York (Andrew L. Carter, Jr., Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the judgment entered on March 19, 2013, is AFFIRMED.

Plaintiffs Haining Zhang and China Venture Partners, Inc. (“CVP”) appeal the 

dismissal of their Amended Complaint, challenging, among other things, the district 

court’s determination that (1) their breach of contract and unjust enrichment claims are 

barred by the applicable statutes of limitations, (2) they failed adequately to plead a claim 

for fraud, and (3) their breach of contract claim against Belmont Capital Group Limited 
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(“Belmont Capital”) is subject to arbitration. “We review de novo the dismissal of a 

complaint under Federal Rule of Civil Procedure 12(b)(6), accepting all factual allegations 

as true and drawing all reasonable inferences in favor of the plaintiff.” Askins v. Doe No. 

1, 727 F.3d 248, 252–53 (2d Cir. 2013) (internal quotation marks omitted). We assume 

the parties’ familiarity with the facts and the record of prior proceedings, which we 

reference only as necessary to explain our decision to affirm.

1. Claims Against OraLabs Defendants

a. Breach of Contract Claims

“Under New York law, a claim for breach of contract must be filed within six years 

of when the claim accrues.” Muto v. CBS Corp., 668 F.3d 53, 57 (2d Cir. 2012) (citing 

N.Y. C.P.L.R. § 213(2)). “A cause of action for breach of contract ordinarily accrues and 

the limitations period begins to run upon breach.” Guilbert v. Gardner, 480 F.3d 140, 149 

(2d Cir. 2007). “The plaintiff need not be aware of the breach or wrong to start the period 

running.” Id. “If, however, a contract requires continuing performance over a period of 

time, each successive breach may begin the statute of limitations running anew.” Id. at 

150.

Plaintiffs specifically allege that defendants OraLabs, Inc., Gary H. Schlatter, 

Robert C. Gust, Michael I. Friess, and Allen R. Goldstone (together, “OraLabs 

Defendants”) breached the Non-Disclosure/Non-Circumvention Agreement at issue by 

meeting with representatives from Belmont Capital and Partner Success Holdings Limited
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(later named China Precision Steel, Inc. (“CPSI”)) between December 2005 and January 

2006, a time frame more than six years before the March 2012 filing of the instant suit. 

See Am. Compl. ¶¶ 97–98, J.A. 150–52. This pleading belies the contention that the date 

of breach is “unclear” and requires discovery. Appellants’ Br. 11.

Plaintiffs also argue that (1) obligations under the Non-Disclosure/

Non-Circumvention Agreement were ongoing, such that conduct in December 2005 was,

at most, an anticipatory repudiation, and subsequent breaches after March 2006 re-started 

the limitations clock; and (2) the OraLabs Defendants should be equitably estopped from 

asserting a limitations defense (or the limitations period should be equitably tolled)

because they concealed their breach.

Because plaintiffs failed to argue anticipatory repudiation in the district court, we 

deem the argument forfeited. See In re Flanagan, 503 F.3d 171, 182 (2d Cir. 2007) (“We 

generally will not consider arguments raised for the first time on appeal.”). In any event, 

the argument fails because plaintiffs do not allege a breach by Goldstone—the only 

OraLabs Defendant who signed the Agreement—that occurred after OraLabs, Inc. and 

CPSI signed their letter of intent on January 9, 2006, that could re-trigger the statute of 

limitations. Indeed, plaintiffs cannot plausibly allege that Goldstone “re-disclosed”

confidential information to Belmont Capital and CPSI or “re-circumvented” plaintiffs’ role 

in the reverse merger after the essential terms of the transaction had been agreed upon.

Nor can plaintiffs benefit from equitable tolling or estoppel. Even assuming that 
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the OraLabs Defendants fraudulently concealed their breach in December 2005, plaintiffs 

unquestionably were aware of the breach in April 2006 when the transaction between 

OraLabs, Inc. and CPSI was publicly announced and filed with the Securities and 

Exchange Commission, which provided plaintiffs with sufficient time to investigate and 

timely file their claims for breach of contract by December 2011. See Putter v. N. Shore 

Univ. Hosp., 7 N.Y.3d 548, 553–554, 825 N.Y.S.2d 435, 438 (2006) (holding equitable 

estoppel “inappropriate as a matter of law” because defendant’s alleged misstatement “did 

not alter [plaintiff’s] timely awareness of the facts requiring him to make further inquiry 

before the statute of limitations expired”); Simcuski v. Saeli, 44 N.Y.2d 442, 449–50, 406 

N.Y.S.2d 259 (1978) (holding that, where equitable estoppel applies, “burden is on the 

plaintiff to establish that the action was brought within a reasonable time after the facts 

giving rise to the estoppel have ceased to be operational”); Kotlyarsky v. N.Y. Post, 195 

Misc. 2d 150, 154, 757 N.Y.S.2d 703, 707 (N.Y. Sup. Ct. 2003) (“A plaintiff seeking to 

invoke either the doctrines of equitable estoppel or equitable tolling is required to 

demonstrate that the failure to timely commence the lawsuit is not attributable to a lack of 

diligence on his or her part.”). The district court thus correctly dismissed all breach of 

contract claims against the OraLabs Defendants.

b. Fraud Claims

Reasonable reliance on the part of the plaintiff is also an element of fraud under 

New York law. See Crigger v. Fahnestock & Co., 443 F.3d 230, 234 (2d Cir. 2006). For 
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reasons already discussed in rejecting plaintiffs’ equitable arguments, plaintiffs cannot 

plausibly plead reasonable reliance on oral statements that OraLabs, Inc. did not intend to 

consummate a reverse merger with CPSI to state a claim for fraud. To the extent plaintiffs 

allege fraud based upon statements that the OraLabs Defendants would not disclose 

confidential and proprietary data provided by plaintiffs, would not circumvent plaintiffs, 

and would compensate plaintiffs for their efforts, the district court properly held that such 

claims were not sufficiently distinct from the defendants’ contract obligations under the 

Non-Disclosure/Non-Circumvention Agreement to avoid dismissal. See A.L. Eastmond 

& Sons, Inc. v. Keevily, Spero-Whitelaw, Inc., 107 A.D.3d 503, 503, 968 N.Y.S.2d 436, 

437 (1st Dep’t 2013) (“[P]laintiff’s proposed fraud claims fail since plaintiff failed to plead 

a breach of duty distinct from, or in addition to, the breach of contract or failure to perform 

under the contract.”).

c. Unjust Enrichment Claim

“Under New York law, for a plaintiff to prevail on a claim of unjust enrichment, he 

must establish (1) that the defendant was enriched; (2) that the enrichment was at the 

plaintiff’s expense; and (3) that the circumstances are such that in equity and good 

conscience the defendant should return the money or property to the plaintiff.” Golden 

Pac. Bancorp v. F.D.I.C., 273 F.3d 509, 519 (2d Cir. 2001). Unjust enrichment claims are 

subject to a six-year statute of limitations, which “accrues ‘upon the occurrence of the 

wrongful act giving rise to a duty of restitution and not from the time the facts constituting 
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the fraud are discovered.’” Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 364 (2d Cir. 

2013) (quoting Coombs v. Jervier, 74 A.D.3d 724, 724, 906 N.Y.S.2d 267, 268 (2d Dep’t 

2010)).

As discussed above, plaintiffs allege that the OraLabs Defendants wrongfully 

disclosed plaintiffs’ proprietary information to CPSI and Belmont Capital and improperly 

circumvented plaintiffs’ role in the reverse merger. In other words, the OraLabs 

Defendants allegedly committed the “wrongful act[s] giving rise to a duty of restitution” in 

December 2005 when they contacted Belmont Capital employees and CPSI. At the very 

latest, the OraLabs Defendants were unjustly enriched when plaintiffs’ proprietary 

information resulted in the execution of the letter of intent between OraLabs, Inc. and CPSI 

on January 6, 2006. As this alleged misconduct occurred more than six years prior to the 

filing of the instant suit in March 2012, plaintiffs’ unjust enrichment claim is time-barred.

2. Claims Against the Belmont Defendants

Plaintiffs submit that the district court erred in dismissing CVP’s contract claim

against Belmont Capital as subject to the arbitration provision of the Investment Banking 

and Reverse Merger Cooperation Agreement (“Cooperation Agreement”) because 

subsequent agreements between these parties, which are not the basis for CVP’s breach of 

contract claim, fail to include an arbitration clause. 1 The Federal Arbitration Act 

 

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Plaintiffs do not sufficiently develop their challenges to the district court’s conclusion 

that because only CVP and Belmont Capital executed the Cooperation Agreement,

(1) Zhang cannot state a claim for breach of contract against Belmont Capital, Henny Wee 
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“establishes a national policy favoring arbitration when the parties contract for that mode 

of dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349 (2008). “[T]hough the 

presumption in favor of arbitration is strong, the law still requires that parties actually agree 

to arbitration before it will order them to arbitrate a dispute.” Opals on Ice Lingerie v. 

Bodylines Inc., 320 F.3d 362, 369 (2d Cir. 2003).

CVP and Belmont Capital clearly agreed to arbitrate any disputes concerning the

Cooperation Agreement, which requires that “[a]ny controversy, dispute or claim 

regarding the interpretation or performance of this Agreement shall be resolved by binding 

arbitration” in Hong Kong. Cooperation Agreement ¶ 10, J.A. 372. The subsequent 

agreements executed by these two entities do not address this arbitration clause, let alone 

alter its clear and broad mandate. Indeed, the Cooperation Agreement specifies that

“[c]ontract addendums may alter details on individual deals but not the overall Agreement 

between the two parties.” Id. ¶ 13, J.A. 372. Accordingly, like the district court, we 

conclude that CVP’s breach of contract claim against Belmont Capital—the only 

potentially viable claim against any of the Belmont Defendants—is unambiguously subject 

to arbitration and, therefore, required no discovery to support dismissal. See Collins v. 

 

& Co., Soon Chiang Henny Wee, Kam Kau Eddie Wong, Edwon, Inc., Hung Wan, and 

Advanz Capital, Inc. (together, “Belmont Defendants”); and (2) CVP cannot state a breach 

of contract claim against every Belmont Defendant apart from Belmont Capital. These 

claims are therefore deemed abandoned. See United States v. Botti, 711 F.3d 299, 313 (2d 

Cir. 2013) (“It is a settled appellate rule that issues adverted to in a perfunctory manner, 

unaccompanied by some effort at developed argumentation, are deemed waived.” (internal 

quotation marks omitted)).
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Harrison-Bode, 303 F.3d 429, 433 (2d Cir. 2002) (“Under New York law, the question of 

ambiguity vel non must be determined from the face of the agreement, without reference to 

extrinsic evidence.” (footnote omitted)).

3. Claims Against CPSI and OraLabs Holding Corp.

Because plaintiffs have failed meaningfully to challenge the dismissal of their

claims against CPSI and OraLabs Holding Corp., we deem these claims abandoned. See

United States v. Botti, 711 F.3d 299, 313 (2d Cir. 2013). In any event, for reasons already 

discussed with respect to the OraLabs Defendants, plaintiffs’ contract claims against 

OraLabs Holding Corp. and CPSI are time-barred. Further, all allegations of fraud in the 

Amended Complaint refer only to statements of the OraLabs Defendants and, thus, are not 

attributed with the requisite particularity to CPSI or OraLabs Holding Corp. See

Nakahata v. New York-Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 197 (2d Cir. 

2013) (reiterating that particularity requirement of Fed. R. Civ. P. 9(b) requires plaintiff 

(1) to specify fraudulent statements, (2) to identify the speaker, (3) to state where and when 

statements were made, and (4) to explain why statements were fraudulent). 

4. Claims Against Creative Business Strategies, Inc.

In opposing defendants’ motion to dismiss, plaintiffs voluntarily withdrew their 

claims against Creative Business Strategies, Inc. (“CBSI”), “reserving the right to seek 

leave to add CBSI as a defendant should discovery reveal a basis to assert valid causes of 

action against CBSI.” Pls.’ Mot. to Dismiss Opp’n 6 n.5, J.A. 471. On appeal, the 
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OraLabs Defendants request that the court “dismiss with prejudice any and all remaining 

claims against CBSI . . . because Plaintiffs have abandoned all claims against CBSI and 

have failed to allege or state any cause of action against CBSI.” OraLabs Defendants’ Br. 

1 n.1 (emphasis in original). Because the OraLabs Defendants failed to request this relief 

in the district court, see Zhang v. Schlatter, No. 12-CV-1793 (ALC) (GWG), 2013 U.S. 

Dist. LEXIS 138968, at *5 (S.D.N.Y. Mar. 13, 2013) (stating only that “Plaintiffs’ 

Opposition dismissed CBSI without prejudice”), we decline to award it on appeal but 

without prejudice to CBSI making a proper application in the district court. See In re 

Flanagan, 503 F.3d at 182.

We have considered plaintiffs’ remaining arguments and conclude that they too are 

without merit. We therefore AFFIRM the judgment of the district court.

FOR THE COURT: 

CATHERINE O=HAGAN WOLFE, Clerk of Court