GU v. WANG

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

DING GU,

Plaintift, Civil Action No. 24-4348 (MAS) (JBD)

MEMORANDUM OPINION

PETER ZUGUANG WANG, et al,

Defendants.

SHIPP, District Judge

This matter comes before the Court on two separate Motions to Dismiss Plaintiff Ding Gu

on behalf of Greenland Technologies Holding Corporation’s (“Plaintiff’ or “Gu”) Amended

Complaint (ECF No. 4). The first motion is filed by Defendant Cenntro Holdings Ltd. (“Cenntro”)

(ECF No. 24). The second is filed by Defendants Peter Zuguang Wang (“P. Wang”), Raymond

Wang (“R. Wang”), Ming Zhao (“Zhao”), Charles Athle Nelson (“Nelson”), Everett Xiaolin Wang

(“E. Wang”), and Frank Shen (“Shen”), and nominal Defendant Greenland Technologies Holding

Corporation (“GTEC”) (ECF No. 25) (collectively, the “GTEC Defendants” and, together with

Cenntro, the “Defendants”). Plaintiff opposed (ECF Nos. 30, 31), and Defendants replied,

respectively (ECF Nos. 32, 33).

The Court has carefully considered the parties’ submissions and decides the matter without

oral argument pursuant to Local Civil Rule 78.1(b). For the reasons set forth below, the Court

grants Defendants’ Motions to Dismiss.

I. BACKGROUND!

Gu brings this case, on behalf of GTEC, as a shareholder derivative action against

Defendants, alleging, among other things, breaches of fiduciary duty based on purported conflicts

of interest and self-dealing. (See generally Am. Compl., ECF No. 4.)

A. The Parties

Gu is a shareholder of GTEC. Ud. § 6.) GTEC is a corporation formed under the laws of

the British Virgin Islands (“BVI”), with its “principal executive office” in New Jersey. Ud. § 8.)

Cenntro is a company incorporated under the laws of Hong Kong, and Plaintiff pleads, upon

information and belief, that it also has its principal place of business in Hong Kong. (/d.)

P. Wang is the Chairman of GTEC’s Board of Directors (the “Board”). (Ud. § 9.) P. Wang

is also the sole director and shareholder of non-party Cenntro Enterprise Ltd. (“CEL”). Ud.) CEL

is the sole director and shareholder of Cenntro. Ud.) Cenntro owns approximately 45.69% of

GTEC’s outstanding stock and previously held as much as 59.44%. (Id. F§ 8, 23.)

R. Wang is the Chief Executive Officer (“CEO”) and President of GTEC. (/d. ¥ 10.)

R. Wang is also the son of P. Wang. (/d.) Zhao, Nelson, X. Wang, and Shen? are all members of

GTEC’s Board. Ud. J 11-14.)

B. Cenntro’s Purchase of Equity Interest & the First Repayment Agreement

In June 2017, GTEC’s subsidiary, Shanghai Hengyu Enterprise Management Consulting

Company LTD (“Hengyu”), sold 16.23% of its equity interest in non-party Sinomachinery Group

' For the purpose of considering the instant motions, the Court accepts all factual allegations in the

Amended Complaint as true. See Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008).

* Shen is also the Director of Research and Development at non-party Cenntro Electric Group Ltd.,

a wholly-owned subsidiary of non-party Cenntro Automotive Corporation, for which P. Wang

serves as CEO. (Am. Compl. { 11.)

Limited to Cenntro (the “Sale”). Ud. J 15.) Cenntro paid an unspecified amount of the Sale price

upfront, with an additional payment of $38,060,365.00? to become due and owing on October 27,

2020 (the “Balance”). Ud. § 16.) Cenntro did not repay any of the Balance before or on the due

date. (Ud. 9 17.)

On November |, 2020, GTEC and Cenntro entered into a repayment agreement dated

November 1, 2020 (“First Repayment Agreement”), which extended the deadline for repayment

of the Balance to April 27, 2022, and outlined a plan for periodic payments of the Balance. (Jd.

{ 18.) The First Repayment Agreement was executed by P. Wang, on behalf of Cenntro, and R.

Wang, on behalf of GTEC. (/d.) The First Repayment Agreement did not charge Cenntro interest

on the Balance and was not secured by collateral. 29.) The First Repayment Agreement also

did not indicate that GTEC’s Board reviewed, considered, voted on, or approved, the First

Repayment Agreement. (/d. { 19.) Ultimately, Cenntro failed to make any payments to satisfy the

Balance under the First Repayment Agreement. (/d. § 20.)

During this two-year period of the First Repayment Agreement, between October 2020 and

June 2021, Cenntro sold more than 750,000 shares of GTEC stock for more than $5.3 million. (/d.

{| 21.) None of the cash received by Cenntro for selling its GTEC stock, however, was used to

repay the Balance. (/d.) Additionally, between June 2021 and December 2023, Cenntro sold an

additional 520,000 shares of GTEC stock but did not file any Securities and Exchange Commission

(“SEC”) Form 4 to disclose the transaction. Ud. 22-23.) Cenntro received none of the cash from

this additional transaction to repay GTEC for the Balance. (/d.)

3 The Sale price was paid in foreign currency, so the amount of the Balance in United States dollars

fluctuates due to changes in conversion rates. (Am. Compl. ¥ 5 n.2.)

C. GTEC Extends Cenntro’s Payment Deadline for the Second Time

On March 30, 2022, GTEC and Cenntro entered into a second repayment agreement

(“Second Repayment Agreement” and, together with the First Repayment Agreement, the

“Agreements”), which further extended the deadline of the Balance to June 30, 2024, in which the

Balance was to be paid to GTEC in eight payments due on: September 30, 2022; December 31,

2022; March 31, 2023; June 30, 2023; September 30, 2023; December 31, 2023; March 31, 2024;

and June 30, 2024. Ud. ¥ 24.)

The Second Repayment Agreement, like the First Repayment Agreement, does not indicate

that GTEC’s Board reviewed, considered, voted on, or approved the Second Repayment

Agreement. Ud. § 27.) Also, the Second Repayment Agreement, like the First Repayment

Agreement, was executed by P. Wang and R. Wang on behalf of Cenntro and GTEC, respectively.

(id. {| 24.) Despite Cenntro’s non-payment of the Balance under the First Repayment Agreement,

the Second Repayment Agreement also does not charge Cenntro any interest. (Id. § 29.) Cenntro,

however, purported to “pledge” its common shares as collateral for repayment of the Balance under

the Second Repayment Agreement. (/d. § 26.) In the end, Cenntro again failed to make any

payments under the Second Repayment Agreement. (/d. { 28.) GTEC, through its Board, and under

the control of Cenntro and P. Wang, failed to take any remedial action regarding Cenntro’s failure

to pay under the Second Repayment Agreement, including seeking to foreclose on the common

shares of Cenntro that were “pledged” as collateral. 7d. § 33.)

D. Cenntro and P. Wang’s Purported Self-Dealing

In April 2022, GTEC’s public shareholders learned, after reading GTEC’s 2021 SEC Form

10-K, of the Second Repayment Agreement. (U/d. { 30.) Subsequently, approximately 100

shareholders wrote to GTEC, demanding an explanation for the Second Repayment Agreement

and information about GTEC’s efforts to collect upon the Balance owed by Cenntro. (/d.) R. Wang

responded and explained that Cenntro’s stock served as collateral against the Balance. (/d. ¥ 31.)

But, as of December 2023, the collateralized shares have decreased in number, were now owned

by CEL, and were worth a fraction of what they were worth when “pledged” in 2022 in connection

with the Second Repayment Agreement. (Jd. § 32.) GTEC has not taken any action to collect upon

the overdue Balance or to foreclose on the collateral shares that secured part of the Balance. (/d.

{ 33.) GTEC’s public SEC filings, however, indicate that the overdue Balance was written off.‘

(Ud. {J 33-38.) According to Plaintiff, GTEC’s provision in its SEC Form 10-K filing, concerning

the inability to collect the Balance, effectively forgives Cenntro of any obligation to repay the

Balance. (/d. { 35.) As a result, GTEC, and its minority shareholders indirectly, suffered damages

in the amount of at least $38,060,365. Ud. J 39.)

E. GTEC Announces the Spin-Off Transaction

GTEC, on February 15, 2024, announced that its Board had approved a plan to separate

GTEC’s electric industrial vehicle and drivetrain segments into two independent, publicly-traded

companies (the “Spin-Off Transaction”).° (/d. § 41.) Specifically, under the Board-approved plan,

GTEC’s existing drivetrain business would operate separately post-spin-off and be publicly traded

on the Over-the-Counter (“OTC”) market.® (7d) GTEC’s electrical industrial vehicle business

4 GTEC’s SEC Form 10-K, filed on April 16, 2024, stated that, as of December 31, 2023, GTEC

had written Cenntro’s Balance off as an expected loss, stating that GTEC recorded a full provision

of the Balance for expected credit losses for the year ended December 31, 2023. (Am. Compl.

| 35.) The next day, GTEC filed an amended 10-K, revising GTEC’s expectation regarding

Cenntro’s payment of the balance—that it was back on the list of receivables and not considered

expected credit losses. Ud. [§ 36-37.)

> As of February 15, 2024, Cenntro had not paid any of the balance under the Second Repayment

Agreement. (See Am. Compl. § 45.)

6 GTEC’s drivetrain business accounts for 90% of its revenue. (Am. Compl. § 42.)

would remain publicly traded on the NASDAQ. (/d.) GTEC’s Board claims that its goal in the

Spin-Off Transaction was to enhance shareholder value. Ud. § 42.) But, since the announcement

of the Spin-Off Transaction, GTEC’s stock price has dropped by at least 57%. (/d.) Plaintiff

contends that, upon information and belief, the Spin-Off Transaction is designed only to benefit P.

Wang. (d. § 43.)

F, This Action

On March 28, 2024, Plaintiff derivatively, on behalf of GTEC, filed the instant action

asserting the following five causes of action: (1) breach of fiduciary duty against Defendants in

connection with their failure to obtain repayment of the Balance (“Count One”); (2) Waste (“Count

Two”); (3) unjust enrichment against P. Wang and Cenntro (“Count Three”); (4) breach of

fiduciary duty against Defendants in connection with the Spin-Off Transaction (“Count Four”);

and (5) violation of Section 16(a) of the Exchange Act and SEC Rule 14A-9 against Defendants

(“Count Five”).’ (See generally Compl., ECF No. 1.) Before filing the instant derivative action,

Plaintiff did not personally make a demand on GTEC’s Board to assert such claims because,

according to him, a demand would have been futile. (Am. Compl. § 45.) On July 8, 2024,

Defendants filed the instant Motions to Dismiss the Amended Complaint. (ECF Nos. 24, 25.)

Plaintiff opposed (ECF Nos. 31, 32), and Defendants replied, respectively (ECF Nos. 32, 33). The

Motions are now ripe for review.

7 On April 26, 2024, Plaintiff filed an Amended Complaint (ECF No. 4), following the filing of

GTEC’s 2023 10-K Form, where it was announced that GTEC had incorporated a provision for

the inability to collect the Balance from Cenntro. (Am. Compl. § 35.) All other allegations remain

the same in the Amended Complaint as in the initial Complaint. (Compare Compl., with Am.

Compl.)

II. LEGAL STANDARDS

A. Rule 12(b)(2)®

Rule 12(b)(2) “provides for dismissal of an action when the Court does not have personal

jurisdiction over a defendant.” Dzielak v. Whirlpool Corp., No. 12-89, 2018 WL 6985013, at *2

(D.N.J. Dec. 21, 2018), R. & R. adopted, No. 12-89, 2019 WL 145608 (D.N.J. Jan. 8, 2019). “If

an issue is raised as to whether a court lacks personal jurisdiction over a defendant, the plaintiff

bears the burden of showing that personal jurisdiction exists.” Marten v. Godwin, 499 F.3d 290,

295-96 (3d Cir. 2007) (citing Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir. 2001)).

The Court may exercise personal jurisdiction over a non-resident defendant to the extent

permitted by New Jersey’s long-arm statute. Murphy v. Eisai, Inc., 503 F. Supp. 3d 207, 221

(D.N.J. 2020). New Jersey’s long-arm statute permits the same protections afforded by the Due

Process Clause under the Fourteenth Amendment of the United States Constitution. Miller Yacht

Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir. 2004) (citing N.J. Ct. R. 4:4-4(c)). The Court,

therefore, may exercise personal jurisdiction so long as the defendant maintains “certain minimum

contacts with [New Jersey] such that the maintenance of the suit does not offend ‘traditional

notions of fair play and substantial justice.’” Henry Heide, Inc. v. WRH Prods. Co., 766 F.2d 105,

108 (3d Cir. 1985) (quoting Int’? Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).

Although a plaintiff bears the burden of showing that personal jurisdiction exists, “when

the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only

establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its

allegations taken as true and all factual disputes drawn in its favor.” Miller Yacht Sales, 384 F.3d

Unless otherwise stated, all references to “Rule” or Rules” refer to the Federal Rules of Civil

Procedure.

at 97 (citation omitted). Still, the plaintiff must establish “with reasonable particularity sufficient

contacts between the defendant and the forum state” to support jurisdiction. Mellon Bank (E.)

PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992) (quoting Provident Nat’l Bank

v. Cal. Fed. Sav. & Loan Ass’n, 819 F.2d 434, 437 Gd Cir. 1987)). And the plaintiff must establish

these “jurisdictional facts through sworn affidavits or other competent evidence .... [A]t no point

may a plaintiff rely on the bare pleadings alone in order to withstand a defendant’s Rule 12(b)(2)

motion to dismiss for lack of [personal] jurisdiction.” Miller Yacht Sales, 384 F.3d at 101 n.6 (first

and second alteration in original) (internal citation and quotation marks omitted). Indeed, the

plaintiff must respond to the defendant’s motion with “actual proofs”; “affidavits which parrot and

do no more than restate [the] plaintiffs allegations . . . do not end the inquiry.” Time Share

Vacation Club vy. Atl. Resorts, Ltd., 735 F.2d 61, 66 n.9 (3d Cir. 1984). If the plaintiff meets this

burden, the burden shifts to the defendant, who must make a compelling case that the exercise of

jurisdiction would be unreasonable. Mellon Bank, 960 F.2d at 1226 (citations omitted).

B. Rule 12(b)(6)

Rule 12(b)(6) provides that a court may dismiss a complaint for “failure to state a claim

upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). On a motion to dismiss for failure to

state a claim, the moving party “bears the burden of showing that no claim has been presented.”

Hedges v. United States, 404 F.3d 744, 750 (d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor,

Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)); Haney v. USA Gymnastics, Inc., No. 21-7213, 2022 WL

909871, at *2 (D.N.J. Mar. 29, 2022). When reviewing a motion to dismiss for failure to state a

claim, courts first separate the factual and legal elements of the claims and accept all of the

well-pleaded facts as true. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009),

While Rule 8(a)(2) does not require that a complaint contain detailed factual allegations, “a

plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief? requires more than

labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (citation omitted).

Thus, to survive a Rule 12(b)(6) motion to dismiss, the complaint must contain sufficient factual

allegations to raise a plaintiffs right to relief above the speculative level, so that a claim “is

plausible on its face.” Jd. at 570; Phillips, 515 F.3d at 231 (citation omitted). “A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009). All reasonable inferences must be made in the plaintiffs favor. See In re Ins.

Brokerage Antitrust Litig., 618 F.3d 300, 314 Gd Cir. 2010).

Il. DISCUSSION

A. Cenntro’s Motion to Dismiss

Cenntro moves to dismiss primarily on the grounds that it is not subject to the Court’s

exercise of personal jurisdiction and, in the alternative, that Plaintiff does not have prudential

standing to maintain this derivative action. (See generally Cenntro’s Moving Br., ECF No. 24-1.)

Because jurisdiction is a threshold question, the Court will address those arguments first.

L. Personal Jurisdiction over Cenntro

Plaintiff argues that this Court has personal jurisdiction over Cenntro because: (1) its

“managing agent, P. Wang, . . . was served in New Jersey,” subjecting it to general personal

jurisdiction; and (2) “Cenntro . . . has sufficient contacts with New Jersey to sustain a finding of

specific personal jurisdiction.” (Pl.’s Opp’n Br. to Cenntro’s Mot. to Dismiss 10, ECF No. 31.)

A court is authorized to exercise two types of personal jurisdiction: general jurisdiction or

specific jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15

(1984). General jurisdiction applies when an individual is domiciled in the forum state. Chanel,

Inc. v. Matos, 133 F. Supp. 3d 678, 684 (D.N.J. 2015) (“[A]n ‘individual’s domicile,’ or home,

constitutes the paradigmatic ‘forum for the exercise of general jurisdiction.’”) (quoting Daimler

AG v. Bauman, 571 U.S. 117, 137 (2014)). “[D]omicile is established by an objective physical □

presence in the state or territory coupled with a subjective intention to remain there indefinitely.”

Washington v. Hovensa LLC, 652 F.3d 340, 344 (3d Cir. 2011). Specific jurisdiction, on the other

hand, allows a Court to exercise jurisdiction over a non-resident defendant when: (1) the defendant

purposefully avails itself of the privilege of conducting its activities within the forum; (2) the

litigation arises out of or relates to at least one of those activities; and (3) the exercise of jurisdiction

comports with fair play and substantial justice. O’Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d

312, 317 (3d Cir. 2007).

a. General Personal Jurisdiction

The Court first considers whether Plaintiff has met his burden to establish general personal

jurisdiction over Cenntro.

Plaintiff argues that this Court has general personal jurisdiction under Rule 4(k)(1)(A) over

Cenntro because Cenntro’s managing agent, P. Wang, was served with process in New Jersey.

(PI.’s Opp’n Br. to Cenntro’s Mot. to Dismiss 10.) Put differently, Plaintiff argues that this Court

has general personal jurisdiction over Cenntro because of the Third Circuit’s recognition of “tag

jurisdiction.”

“Tag jurisdiction” is “jurisdiction based on service of a person who happens to be in the

jurisdiction, however fleetingly.” Pastor Ents. v. GKN Driveline N. Am., Inc., No. 19-21872, 2020

WL 5366286, at *4 (D.N.J. Sept. 8, 2020).

10

General jurisdiction arises over a corporate defendant only in “its place of incorporation

and principal place of business,” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. 351, 359

(2021), and, in “exceptional” cases, in jurisdictions where its activities are “so continuous and

systematic as to render it essentially at home in the forum State,” Daimler, 571 U.S. at 119. For

purposes of “tag jurisdiction,” “it is undisputed that mere service on a corporate agent cannot

establish personal jurisdiction without a minimum contacts inquiry.” Nehemiah v. Athletics Cong.

of the U.S.A., 765 F.2d 42, 47 Gd Cir. 1985).

At the outset, the Court declines to find that it has general personal jurisdiction over

Cenntro in such a scenario, as here, where a non-resident foreign corporation’s purported

“managing” agent’? is served with process within the boundaries of the forum state, In any event,

Plaintiff must still show that Cenntro has minimum contacts with New Jersey, warranting the

exercise of personal jurisdiction over it. Nehemiah, 765 F.2d at 47.

Here, Plaintiff concedes that Cenntro is incorporated under the laws of Hong Kong and

that, upon information and belief, its principal place of business is in Hong Kong.!”

'° Tn the David He (“CEO He”) Declaration, CEO He certified that Cenntro neither has a registered

agent for service of process in New Jersey nor is authorized to do business in New Jersey. (Decl.

of David He in Supp. of Cenntro’s Motion to Dismiss (“CEO He Decl.”) 9 5, ECF No. 24-2.)

'' Plaintiff fails to cite any cases that stand for this proposition. (See generally Pl.’s Opp’n Br. to

Cenntro’s Mot. to Dismiss.) Instead, Plaintiff merely cites cases that involve: (1) “tag jurisdiction”

over an individual party and not a corporate agent; and (2) Pennsylvania’s

foreign-corporation-registration regime, under which the Pennsylvania Constitution permits courts

to exercise general jurisdiction over registered foreign corporations. As to the second group of

cases, New Jersey has no such law. See Simplot India LLC v. Himalaya Food Int'l Ltd., No.

23-1612, 2024 WL 1136791, at *10 (D.N.J. Mar. 15, 2024) (“New Jersey’s registration statute

does not include . . . an express consent requirement [to general personal jurisdiction]. This Court,

absent a legislative imprimatur, will not fill the void and write one in.”).

'2 The Amended Complaint does not allege general personal jurisdiction over Cenntro based on

its place of incorporation or principal place of business. (See generally Am. Compl.)

11

(Am. Compl. § 8.) This leaves Plaintiff with one way to establish general personal jurisdiction

over Cenntro: Plaintiff must demonstrate that its activities are so continuous and systematic to

essentially render it “at home” in New Jersey. JWQ Cabinetry, Inc. v. Granada Wood & Cabinets,

Inc., No. 13-4110, 2014 WL 2050267, at *3 (D.N.J. May 19, 2014). The Court finds that Plaintiff

has failed to do so. Plaintiff's Amended Complaint is devoid of allegations about Cenntro having

any employees, bank accounts, land or personal property, or telephone listings in New Jersey.

Instead, in support of Cenntro’s Motion, CEO He has certified that Cenntro is not registered or

authorized to do business in New Jersey, has no employees or office space in New Jersey, and has

no bank accounts, telephone listings, or operations in New Jersey. (CEO He Decl. 5-6.) As such,

the Court finds that Plaintiff has failed to show that Cenntro maintains such a robust presence in

New Jersey that it could fairly be considered “at home” to invoke this Court’s general personal

jurisdiction over Cenntro. See Abira Med. Labs., LLC v. Mutual of Omaha Ins. Co., No. 23-3953,

2024 WL 2746088, at *3 (D.N.J. May 29, 2024) (finding no general personal jurisdiction where

“nothing in the record . . . suggest[ed] that [d]efendant was either incorporated or headquartered

in New Jersey or that its business operations in New Jersey are so substantial that they give rise to

the exceptional case of general [personal] jurisdiction”). The Court, accordingly, finds that Cenntro

is not subject to general personal jurisdiction in this Court. See Daimler, 571 U.S. at 137.

b. Specific Personal Jurisdiction

Having failed to establish general personal jurisdiction over Cenntro, the Court now

considers whether Plaintiff can show that this Court has specific personal jurisdiction over

Cenntro.

To assert specific personal jurisdiction, Plaintiff must allege “claim-specific jurisdiction

over defendants,” meaning “an affiliatio[n] between the forum and the underlying controversy.”

12

Christie v. Nat’l Inst. for Newman Stud., 258 F. Supp. 3d 494, 499 (D.N.J. 2017) (alteration in

original) (quoting Walden v. Fiore, 571 U.S. 277, 283 n.6 (2014)). Because a specific personal

jurisdiction analysis is claim-specific, the Court typically analyzes claims separately. See Remick

v. Manfredy, 238 F.3d 248, 255-60 (3d Cir. 2001). Claim-specific analysis, however, is not

required where the claims at issue factually overlap. O’Connor, 496 F.3d at 318 n.3.

Here, Plaintiff's claims stem from the same underlying factual circumstances—namely,

the Repayment Agreements, purported breaches of fiduciary duties, and purported nondisclosed

stock sales—and the parties have likewise addressed the issue of specific personal jurisdiction

without differentiating between specific claims. The Court, therefore, will not employ a

claim-specific approach to discern whether it may properly exercise specific personal jurisdiction

over Cenntro. See Grant Indus., Inc. v. Isaacman, No. 21-13094, 2022 WL 2358422, at *10 n.12,

(D.N.J. June 30, 2022) (analyzing breach of contract, misappropriation of confidential information

and trade secrets, fraud, and conversion claims together because they arose from the “same

sequence of events and factual allegations’).

i. Purposeful Availment

Turning to the first requirement of specific personal jurisdiction, the Court must be satisfied

that Cenntro purposefully directed its conduct or activities to New Jersey. In the Amended

Complaint, Plaintiff alleges that:

[t]his Court has personal jurisdiction over each Defendant named

herein because each Defendant is either a corporation that conducts

business in and/or maintains operations in this District, or is an

individual who has sufficient minimum contacts with this District

so as to render the exercise of jurisdiction by this Court permissible

under traditional notions of fair play and substantial justice.

(Am. Compl. § 3.)

13

To establish purposeful availment for specific personal jurisdiction, “[t]he plaintiff must

show that the defendant took “some act by which [it] purposefully avail[ed] itself of the privilege

of conducting activities within the forum State.” Rickman v. BMW of N. Am. LLC, 538 F. Supp.

3d 429, 436 (D.N.J. 2021) (quoting Ford Motor Co., 592 U.S. at 359). “The contacts must be the

defendant’s own choice and not ‘random, isolated, or fortuitous.’” Ford Motor Co., 592 U.S. at

359 (quoting Keeton v. Hustler Mag., Inc., 465 U.S. 770, 774 (1984)). “[Plaintiff] must show that

the defendant deliberately ‘reached out beyond’ its home—by, for example, ‘exploi[ting] a market’

in the forum State or entering a contractual relationship centered there.” Jd. (quoting Walden, 571

USS. at 285).

Here, the Court finds that Plaintiff fails to adequately allege that Cenntro purposefully

directed its conduct or activities to New Jersey. Plaintiff merely alleges, in a conclusory fashion,

that “Defendant[s are] either a corporation that conducts business in and/or maintains operations

in this District, or is an individual who has sufficient minimum contacts with this District so as to

render the exercise of jurisdiction by this Court permissible under traditional notions of fair play

and substantial justice.” (Am. Compl. § 3.) Setting aside the fact that the Court need not accept

Plaintiff's “group-pled’”’? allegations about Defendants’ contacts with New Jersey, Plaintiff fails

to show that Cenntro purposefully availed itself of New Jersey. That is, neither the Amended

'3 The Court need not accept conclusory and “group-pled” allegations as true at the pleadings stage.

See, e.g., Jovanovic v. U.S. Olympic & Paralympic Comm., No. 22-2098, 2023 WL 7179298, at

*8 (D.N.J. Mar. 31, 2023) (‘Insofar as the [c]omplaint asserts group pleading to establish personal

jurisdiction over each [d]efendant, the Court agrees with [defendants] that this is improper, because

‘[eJach defendant’s contacts with the forum state must be assessed individually.’” (alteration in

original) (quoting Keeton, 465 U.S. at 781 n.3)). This defect alone, therefore, warrants dismissal

for failure to properly allege personal jurisdiction over each defendant. Wade v. Kenan Advantage

Grp., Inc., No. 20-18155, 2021 WL 4704962, at *2, *7 (D.N.J. Oct. 8, 2021)) (dismissing

complaint that broadly alleged defendant had “engaged in business within . . . New Jersey on a

regular systemic, continuous and substantial basis and ha[d] purposefully established significant

contacts within New Jersey”).

14

Complaint nor the proofs submitted in opposition to Cenntro’s Motion demonstrate that Cenntro

negotiated the Repayment Agreements, executed the Repayment Agreements, or made investment

decisions in, or had any other connection to, New Jersey.

Moreover, Plaintiff fails to rebut any of the statements made in the CEO He Declaration

concerning Cenntro. In particular, CEO He certified that “Cenntro is not authorized to do business

in New Jersey and has no offices, employees, bank accounts, telephone listings, or operations of

any kind in New Jersey.” (CEO He Decl. 5.) CEO He also certified that “Cenntro is not a foreign

corporation [registered] with the New Jersey Division of Revenue and Enterprise Services,

Business Services Bureau.” Ud. J 6.) What’s more, CEO He further certified that “Cenntro has no

physical presence in New Jersey and has no registered agent for service of process in New Jersey.”

(id. 1 5.)

To the extent Plaintiff argues that this Court should infer that, because Cenntro is GTEC’s

controlling shareholder, it is likely that Cenntro entered into the Repayment Agreements in New

Jersey, such argument is unavailing (Pl.’s Opp’n Br. to Cenntro’s Mot. to Dismiss 15

(“The ... Repayment Agreements were executed by P. Wang... and R. Wang, a New Jersey

resident who works in New Jersey as CEO of GTEC ....It is... reasonable to infer... that

Cenntro entered into the... Repayment Agreements in New Jersey.”).) Shareholders, however,

are not the same as the corporations they own. Richard J. Pulaski Constr. Co. v. Air Frame

Hangars, Inc., 950 A.2d 868, 877 (N.J. 2008) (“[New Jersey] abide[s] by ‘the fundamental

propositions that a corporation is a separate entity from its shareholders, and that a primary reason

for incorporation is the insulation of shareholders from the liabilities of the corporate enterprise.’”

(citation omitted)). So, “for a [p]laintiff to ‘impute the jurisdictional contacts’ of a corporation to

a shareholder so as to subject the shareholder defendant to personal jurisdiction, “[p]laintiff must

15

present sufficient facts to support a showing of piercing the corporate veil.’” Lawson v. Dick

Sporting Goods, Inc., No. 22-1560, 2023 WL 2207421, at *5 (D.N.J. Feb. 24, 2023) (quoting Air

Sea Int'l Forwarding, Inc. y. Glob. Imports & Trading, Inc., No. 03-268, 2008 WL 11510000, at

*9 (D.N.J. Apr. 18, 2008)). Here, the Amended Complaint does not contain any allegations to

suggest that Plaintiff seeks to impute personal jurisdiction under an “alter-ego” theory. As such,

the Court rejects Plaintiff's argument that Cenntro, as a controlling stockholder, “likely executed”

the Agreements in New Jersey, subjecting it to specific personal jurisdiction.

The Court, therefore, finds that Plaintiff has failed to meet his burden in establishing that

the Repayment Agreements were negotiated or executed in New Jersey or that any purported

breaches of fiduciary duties, or purported nondisclosed stock sales occurred in, or had a connection

to, New Jersey through sufficient proof. See Rehrer v. Ativeh, No. 14-8031, 2015 WL 5680104, at

(D.N.J. Sept. 25, 2015) (explaining that once defendants submit sworn evidence supporting

dismissal for lack of jurisdiction, the burden shifts to plaintiff to “establish[] jurisdictional facts

through sworn affidavits or other competent evidence; reliance on the bare pleadings is not

enough”). For these reasons, the Court finds that Plaintiff has failed to demonstrate that Cenntro

has purposefully availed itself of New Jersey with respect to Plaintiffs claims.

ii, Remaining Elements

Because all three elements of the test must be met to establish specific personal jurisdiction,

the Court need not consider the remaining two elements. See O’Connor, 496 F.3d at 317. The

Court, accordingly, finds that Plaintiff fails to meet his burden to show that this Court has specific

personal jurisdiction over Cenntro. See Cerciello v. Canale, 563 F. App’x 924, 925 n.1 (Gd Cir.

2014) (“[BJare pleadings alone are insufficient to withstand a motion to dismiss for lack of

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personal jurisdiction.”) (internal quotation marks omitted). The Court, accordingly, also lacks

specific personal jurisdiction over Cenntro.

2. Remaining Claims Against Cenntro

Because the Court lacks personal jurisdiction over Cenntro, all claims against it are

dismissed without prejudice. TF Yachts, LLC v. Vandutch Prod. & Dev. B.V., No. 20-8044, 2021

WL 672659, at *6 (D.N.J. Feb. 22, 2021) (dismissing all claims against defendants because the

court lacked personal jurisdiction over defendants).

B. GTEC Defendants’ Motion to Dismiss

The GTEC Defendants move to dismiss the Amended Complaint for lack of prudential

standing under Rule 12(b)(6)'* because Plaintiff fails to allege facts sufficient to show that he first

had obtained or attempted to obtain permission from a BVI High Court to sue derivatively on

behalf of GTEC—a requirement under BVI law. (See generally GTEC Defs.” Moving Br., ECF

No. 25-1.) The GTEC Defendants further argue that even if New Jersey law applies, Plaintiff still

lacks prudential standing because “he never made a pre-suit demand on GTEC’s Board... , thus

depriving him of standing under New Jersey law.” (d. at 2.) Plaintiff, on the other hand, argues

that New Jersey law applies based on the forum’s choice of law principles and that he has

'4 Prudential standing to maintain a shareholder derivative suit is evaluated under Rule 12(b)(6).

Potter v. Cozen & O'Connor, 46 F.4th 148, 157 (3d Cir. 2022) (explaining that the shareholder

standing rule is prudential, not constitutional or jurisdictional, implicating the power to bring

claims, not the court’s power to hear them).

'S The GTEC Defendants assert that “New Jersey law does not recognize an exception to the

demand requirement based on futility.” (GTEC Defs.’ Moving Br. 18.)

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prudential standing under New Jersey law because he has sufficiently pled demand futility. !° (PI.’s

Opp’n Br. to GTEC Defs.’ Mot. to Dismiss 19-21, ECF No. 30.)

Thus, the heart of the issue is whether Plaintiff has prudential standing to assert derivative

claims on behalf of GTEC. Before reaching that issue, the Court must first determine whether the

laws of BVI or New Jersey apply based on its choice of law principles.

L. Choice of Law

In a federal action based on diversity jurisdiction, the Court must look to the choice of law

rules of the venue state, New Jersey, to determine which substantive law governs. See Am.

Cyanamid Co. v. Fermenta Animal Health, 54 F.3d 177, 180 (3d Cir. 1995); Klaxon Co. v. Stentor

Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Warriner v. Stanton, 475 F.3d 497, 499-500 (3d Cir.

2007). In assessing choice of law disputes arising under contract and tort law, New Jersey courts

apply the “most substantial relationship” test enunciated in the Restatement (Second) of Conflict

of Laws (the “Restatement”) § 188. P.V. ex rel. T.V. v. Camp Jaycee, 962 A.2d 453, 455 (N.J.

2008). New Jersey’s “most substantial relationship” test is two-pronged. /d. at 460. First, a court

assesses whether an actual conflict exists between the potentially applicable laws. Jd. If no actual

conflict exists, the court’s inquiry ends, and the court applies the law of the forum state. /d. at 461.

If, however, an actual conflict exists, the court turns to the second prong of the test—the “most

substantial relationship” prong. /d. at 455. This test is applied “on an issue-by-issue basis” and “is

qualitative, not quantitative.” Jd. at 460.

Applying the Court’s choice of law framework, the Court will first determine whether the

competing laws—BVI and New Jersey—are in conflict, which is to say whether “application of

Plaintiff, on the other hand, asserts that demand futility exists under New Jersey law. (See Pl.’s

Opp’n Br. to GTEC Defs.’ Mot. to Dismiss 10 (“[The GTEC Defendants] . .. mistake that demand

futility no longer exists under New Jersey law.”).)

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the different . . . laws would lead to a different outcome in the case.” Donovan v. W. R. Berkley

Corp., 566 F. Supp. 3d 224, 231 (D.N.J. 2021). If there is no conflict, New Jersey law applies, but

if a conflict exists, the Court will proceed to analyze which jurisdiction has the “most significant

relationship” to the dispute pursuant to Section 6 of the Restatement. See id.

a. Whether the Relevant Laws of BVI and New Jersey Conflict

The Court finds that a conflict exists between the relevant laws of BVI and New Jersey.

Under BVI law, a shareholder is permitted to assert derivative claims on behalf of a company only

if the shareholder first obtains consent from the BVI High Court. Jn re Kingate Mgmt. Ltd. Litig.,

No. 09-5386, 2016 WL 5339538, at *36 (S.D.N.Y. Sept. 21, 2016), aff'd, 746 F. App’x 40 (2d Cir.

2018) (“Derivative actions, brought by shareholders on behalf of a company, [under BVI law,]

may only be brought... with leave of the [BVI High C]ourt.”). Section 184C of the BVI Business

Companies Act (“BVI Act”) provides as follows:

Derivative Actions

184C. (1) Subject to subsection (3), the Court may, on the

application of a member of a company, grant leave to that member

to—

(a) bring proceedings in the name and on behalf of

that company; or

(b) intervene in proceedings to which the company is

a party for the purpose of continuing, defending or

discontinuing the proceedings on behalf of the

company.

(2) Without limiting subsection (1), in determining whether to grant

leave under that subsection, the Court must take the following

matters into account—

(a) whether the member is acting in good faith;

(b) whether the derivative action is in the interests of

the company taking account of the views of the

company’s directors on commercial matters;

(c) whether the proceedings are likely to succeed;

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(d) the costs of the proceedings in relation to the

relief likely to be obtained; and

(e) whether an alternative remedy to the derivative

claim is available.

(3) Leave to bring or intervene in proceedings may be granted under

subsection (1) only if the Court is satisfied that—

(a) the company does not intend to bring, diligently

continue or defend, or discontinue the proceedings,

as the case may be; or

(b) it is in the interests of the company that the

conduct of the proceedings should not be left to the

directors or to the determination of the shareholders

or members as a whole.

(4) Unless the Court otherwise orders, not less than 28 days notice

of an application for leave under subsection (1) must be served on

the company and the company is entitled to appear and be heard at

the hearing of the application. .. .

(6) Except as provided in this section, a member is not entitled to

bring or intervene in any proceedings in the name of or on behalf of

a company.

BVI Act § 184C. As such, the BVJ Act expressly requires that a shareholder obtain leave from the

BVI High Court to initiate a derivative action on behalf of a BVI company. See id.

New Jersey law, on the other hand, contains no such consent requirement in order to bring

a shareholder derivative action. Instead, a derivative action may be brought under New Jersey law

upon a refused demand by a company’s board to undertake such action in the company’s name or

upon a showing that making such a demand would be futile. See N.J. Stat. Ann. § 14A:3-6.

Although the Court-—under New Jersey law—-plays an important function in determining whether

a plaintiff sufficiently pleads that a proper demand was made and refused or that a demand

otherwise would have been futile, a plaintiff is not required to seek permission to file a derivative

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action.'? New Jersey law, therefore, cannot be reconciled with BVI’s permission-based statutory

scheme. As such, a conflict is present because the application of each law could result in different

outcomes, See Donovan, 566 F. Supp. 3d at 231.

Having determined that a conflict exists under the relevant laws, the Court must proceed

to the next step of the analysis and consider how the Restatement’s choice of law principles under

Section 6 inform the “most-significant relationship test.” Donovan, 566 F. Supp. 3d at 233. But,

before doing so, the Court notes that “the internal affairs doctrine presumptively governs the

Court’s analysis.” See Krys v. Aaron, 106 F. Supp. 3d 472, 479 (D.N.J. 2015) (citing Camp Jaycee,

962 A.2d at 467). In other words,

[t]he internal affairs doctrine serves as a “conflict of laws principle

which recognizes that only one State should have the authority to

regulate a corporation’s internal affairs—matters peculiar to the

relationships among or between the corporation and its current

officers, directors, and shareholders—because otherwise a

corporation could be faced with conflicting demands.”

Id. at 484 (quoting Edgar v. MITE Corp., 457 U.S. 624, 645 (1982)). “New Jersey courts adhere

to this doctrine, and direct that ‘the law of the state of incorporation [governs] internal corporate

affairs.’” Id. (quoting Fagin v. Gilmartin, 432 F.3d 276, 282 (3d Cir. 2005)) (citation omitted).

But, at the same time, the Court recognizes that this general presumption associated with the

internal affairs doctrine “is not without exception.” /d. at 485. Nevertheless, because the internal

affairs doctrine “is not without exception,” the Court will proceed in its choice of law analysis to

determine whether, despite this presumption, New Jersey has a more significant relationship to the

disputed corporate actions. Swift v. Pandey, No. 13-650, 2014 WL 1745040, at *4 n.10 (D.N.J.

«The substantive requirements of demand are a matter of state law.” Blasband v. Rales, 971 F.2d

1034, 1047 (3d Cir. 1992) (citing Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 96-97 (1991)),

overruled on other grounds, In re Cognizant Tech. Sols. Corp. Deriv. Litig., 101 F.4th 250 (3d Cir.

2024).

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Apr. 30, 2014) (citation omitted) (generally noting that the internal affairs doctrine may be excused

in “‘unusual cases’”), recons. denied, 2014 WL 3362370 (D.N.J. July 8, 2014).

b. Whether New Jersey Has the “Most Significant Relationship” to

the Claims

The Court finds that Plaintiff fails to allege sufficient facts to demonstrate that the State of

New Jersey has a more significant relationship than the BVI to his shareholder derivative claims.

Section 302(2) of the Restatement sets forth a presumption that “the local law of the state

of incorporation” will apply unless “some other state has a more significant relationship . . . .”

Restatement (Second) of Conflict of Laws § 302(2) (1971). As such, the laws of the BVI are

presumed to apply to this matter because GTEC is incorporated under the laws of BVI, unless

Plaintiff established that New Jersey has a more significant relationship to the claims. The Court

now turns to the factors outlined in Section 6 to determine whether New Jersey has a more

significant relationship to Plaintiff's fiduciary duty claims to overcome this presumption.

Section 6 of the Restatement, which outlines universal principles for choice of law issues,

provides some considerations bearing on the question of what jurisdiction has a more significant

relationship to the dispute, including: (1) the interests of interstate comity; (2) the interests of the

parties; (3) the interests underlying the field of tort law; (4) the interests of judicial administration;

and (5) the competing interests of the states. Restatement (Second) of Conflict of Laws § 6; see

also Camp Jaycee, 962 A.2d at 463 (outlining Section 6 principles). The Court will consider each

factor in turn.

First up are the first and third factors—the interests of interstate comity and of the field of

tort law. When analyzing the first and third factors, the Court must consider “‘whether application

of a competing state’s law would frustrate the policies or the body of law of other interested

states.’” Camp Jaycee, 962 A.2d at 463 (citation omitted); see also Swift, 2014 WL 1745040, at

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*6 (generally noting that the first and third factors call for, in essence, the same inquiry). Here,

under New Jersey law, directors of a corporation are obligated to “discharge their duties in good

faith and with that degree of diligence, care[,] and skill which ordinarily prudent people would

exercise under similar circumstances in like positions.” N.J. Stat. Ann. 14A:6-14. New Jersey law

also requires a director to perform their functions “in good faith” and “in a manner that he or she

reasonably believes to be in the best interests of the corporation.” Seidman v. Clifton Sav. Bank,

S.L.A.,14 A.3d 36, 52 (N.J. 2011). Similarly, BVI law, like New Jersey law, requires directors to

“act honestly and in good faith and in what the director believes to be in the best interests of the

company.” Stewart Title Guar. Co. v. Stewart Title Latin Am., Inc., No. 12-3269, 2017 WL

1078759, at *10 (S.D. Tex. Mar. 21, 2017) (quoting Section 120(1) of the BVI Act). Section 122

of the BVI Act also requires directors to “exercise the care, diligence, and skill that a reasonable

director would exercise in the same circumstances.” Amicorp Mgmt. Ltd. v. Insight Sec., Inc., No.

19-3745, 2021 WL 4502177, at *7 (N.D. IL. Sept. 30, 2021) (quoting Section 122 of the BVI Act).

New Jersey and BVI law concerning the duties of corporate directors is, therefore, “inherently

harmonized.” Krys, 106 F. Supp. 3d at 485. As such, the first and third factors are neutral.

Next up are the second and fourth factors—the interest of the parties and of judicial

administration. Here, the Court notes that with respect to issues of “practicality and ease of

application” under the fourth factor, Camp Jaycee, 962 A.2d at 467, the application of BVI Law

presents certain practical difficulties of determining foreign law. Nevertheless, any incidental

burden remains too insignificant to overcome the application of BVI Law under the internal affairs

doctrine.

Last up is the fifth factor—the competing interests of the jurisdictions. The Court must

consider the policies “the legislature or court intended to protect by having that law apply to wholly

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domestic concerns, and then, [must consider] whether those concerns will be furthered by applying

that law to the multi-state situation.” Pfizer, Inc. v. Emp’rs Ins. of Wausau, 712 A.2d 634, 639-40

(1998) (citation omitted). Here, Plaintiff argues that the Repayment Agreements “implicate[] and

touch[] upon New Jersey.” (P1.’s Opp’n Br. to GTEC Defs.’ Mot. to Dismiss 17.) Plaintiff further

maintains that GTEC has its executive offices in New Jersey and argues that it is reasonable to

infer that the Repayment Agreements were “likely executed” in New Jersey.'* (/d.) “The domicile,

residence, place of incorporation, and place of business of a defendant corporation are relevant,

although not dispositive, considerations in a choice-of-law determination.” Fu v. Fu, 733 A.2d

1133, 1141 (N.J. 1999) (citation omitted). Moreover, “unlike more conventional torts, a breach of

fiduciary duty by an officer or director based on actions causing the corporation to incur additional

debt is not manifested through identifiable physical conduct or harm.” Jn re Innovation Fuels, Inc.,

No. 13-1004, 2013 WL 3835827, at *6 (Bankr. D.N.J. 2013).

Even accepting Plaintiffs theory that the Repayment Agreements were executed in New

Jersey based on GTEC having an office in New Jersey, this by itself is insufficient to establish a

“significant connection” to New Jersey. See, e.g., Emerson Radio Corp. y. Fok Hei Yu, No.

20-1618, 2021 WL 1186824, at *4 n.2 (D.N.J. Mar. 30, 2021) (explaining that a corporation’s New

Jersey principal place of business was “insufficient on its own to warrant a departure from the

internal affairs doctrine”); Swift, 2014 WL 1745040, at *6 (explaining that defendants’ domicile

and the company’s corporate offices do not constitute “substantive facts” tying defendants’ alleged

misconduct to the state), As such, at the motion to dismiss stage, the Court finds that New Jersey

law does not apply. Put simply, Plaintiff has not set forth any specific facts demonstrating a

significant connection between the substance of the fiduciary duty claims and New Jersey. Absent

'§ Plaintiff also alleges that Shen and Nelson are New Jersey residents. (Am. Compl. §§ 11, 13.)

24

such a showing, the Court cannot find any competing interest of sufficient weight to justify

departure from the presumption of the internal affairs doctrine. As the allegations now stand, the

Court finds that the Section 6 factors weigh in favor of applying BVI law.

In sum, even considering and accepting as true Plaintiff's allegations that certain conduct

underlying his breach of fiduciary claims occurred in or was based out of New Jersey, the

application of the relevant Restatement factors demonstrates that the BVI has the most significant

relationship to this matter, For all of these reasons, at this juncture, the Court finds that the law of

the BVI, the location of GTEC’s incorporation, governs Plaintiff's breach of fiduciary duty claims

against the GTEC Defendants.

2. Remaining Claims Against the GTEC Defendants

Having found that BVI law applies to Plaintiff's breach of fiduciary claims at the motion

to dismiss stage, the Court now considers whether Plaintiff has adequately alleged that he has

obtained permission from a BVI High Court to maintain the instant shareholder derivative suit.

The Court’s analysis can be brief. The GTEC Defendants argue that Plaintiff has not, and Plaintiff

does not dispute, that the Amended Complaint makes no such allegation. (See generally Am.

Compl.) As such, because under BVI law Plaintiff must obtain leave from the BVI High Court to

initiate a derivative action on behalf of a BVI company and such allegations are absent from the

Amended Complaint, the Court dismisses Plaintiffs Amended Complaint. The Court, accordingly,

finds that Plaintiff lacks prudential standing to bring this suit.

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IV. CONCLUSION

For the reasons set forth above, the Court grants Defendants’ Motions to Dismiss. As to

the claims dismissed herein, the Court will grant Plaintiff leave to amend to correct the deficiencies

identified in this Memorandum Opinion in any second amended complaint. The Court will enter

an Order consistent with this Memorandum Opinion.

Ae A. tf hs

UNITED STATES DISTRI¢T JUDGE

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