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Sunny Handicraft (H.K.) Ltd. v. Edwards

United States District Court, N.D. Illinois, Eastern Division

March 20, 2017

SUNNY HANDICRAFT (H.K.) LTD., a Hong Kong corporation, and BIN TEH HANDICRAFT SHENZHEN CO. LTD., a China corporation, Plaintiffs,


          John Z. Lee United States District Judge

         Plaintiffs Sunny Handicraft (H.K.) Ltd. (“Sunny”) and Bin Teh Handicraft (Shenzhen) Co. Ltd. (“Bin Teh”) have sued Defendants Beth Ann Edwards (“Edwards”) and Robert J. Hetzler (“Hetzler”), alleging claims for fraud, breach of fiduciary duty, and defamation. Defendants have moved to dismiss the complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(2). In the alternative, they have moved to dismiss Plaintiffs' defamation claims for failure to state a claim to relief pursuant to Rule 12(b)(6). For the reasons stated herein, Defendants' motion to dismiss [6] is granted in part and denied in part.


         Plaintiff Bin Teh is a Chinese corporation that manufactures Christmas decorations. Compl. ¶ 3, ECF No. 1. Plaintiff Sunny is a Hong Kong corporation that processes orders from retailers for the purchase of decorations manufactured by Bin Teh. Id. ¶¶ 2-3. From 2006 to 2013, Plaintiffs worked with a Florida-based company called Envision This! LLC (“Envision”). Id. ¶¶ 1, 8. Envision served as Plaintiffs' sales representative, assisting Plaintiffs in managing their business relationships with various retailers. Id. ¶ 8. Envision's sole members are Defendants Edwards and Hetzler, both of whom are Florida residents. Id. ¶ 4.

         Beginning in 2007, Walgreen Co. (“Walgreens”), an Illinois corporation with its principal place of business in Deerfield, Illinois, regularly purchased merchandise from Plaintiffs. Id. ¶¶ 7, 10-11. From 2007 to 2012, Plaintiffs sold and shipped merchandise to Walgreens on at least eleven occasions. Id. ¶ 11. Envision served as Plaintiffs' sales representative with respect to these shipments. Id. ¶ 12. For each shipment, Walgreens paid for Plaintiffs' merchandise by issuing letters of credit listing Sunny as the sole beneficiary. Id. ¶¶ 13, 15.

         According to Plaintiffs, one of Envision's responsibilities as Plaintiffs' sales representative was to ensure that Walgreens paid Plaintiffs by issuing letters of credit. Id. ¶ 40. To that end, in coordinating sales of Plaintiffs' goods, Envision was responsible for forwarding “Import Buying Confirmation Forms” from Plaintiffs to Walgreens. Id. ¶ 41. The Confirmation Forms included information that designated Sunny as the entity to be named as the beneficiary for the letters of credit backing each transaction. Id. ¶¶ 41-42.

         In 2013, as in past years, Walgreens placed orders for the purchase of Plaintiffs' merchandise in anticipation of the holiday season. Id. ¶ 16. Walgreens ordered about $3.5 million in merchandise. Id. Plaintiffs' general manager, Daniel Huang, sent Confirmation Forms for these orders to Edwards and Hetzler, with the understanding that Edwards and Hetzler would then forward the forms to Walgreens and that Walgreens would pay Plaintiffs accordingly. Id. ¶ 42. In the meantime, Plaintiffs began manufacturing the ordered merchandise and preparing its shipment to Walgreens. Id. ¶ 20.

         According to Plaintiffs, however, Edwards and Hetzler did not forward the Confirmation Forms to Walgreens as instructed. Id. ¶ 43. Instead, after they received the forms from Huang, Edwards and Hetzler altered them so as to designate Envision-not Sunny-as the beneficiary of Walgreens's letters of credit. Id. Plaintiffs allege that these alterations were made without Plaintiffs' approval or knowledge. Id. After making the alterations, Hetzler e-mailed the Confirmation Forms to Walgreens representatives in Illinois, flagging in the body of his e-mail that Walgreens should “note the change of beneficiary.” Id. ¶ 44.

         From May to August 2013, Huang repeatedly asked Edwards and Hetzler when letters of credit would issue from Walgreens, explaining that Plaintiffs needed the letters of credit in order to obtain a loan to finance the manufacture of the merchandise Walgreens had ordered. Id. ¶¶ 47-48. In response, Edwards and Hetzler represented to Huang that a letter of credit naming Sunny as the beneficiary was forthcoming. Id. ¶ 49. According to Plaintiffs, however, these representations were false, and Edwards and Hetzler knew all along that no such letters of credit would be issued. Id.

         On July 18, 2013, Walgreens issued an irrevocable, transferable letter of credit naming Envision as the sole beneficiary. Id. ¶ 22. Several days later, Walgreens employee Karl Waldschmidt, while in Illinois, e-mailed Hetzler to inform him that this letter of credit had been issued. Id. ¶ 52. On August 1, 2013, Walgreens issued a second letter of credit, again naming Envision as the sole beneficiary. Id. ¶ 23. Around this time, Hetzler instructed Huang not to discuss the letters of credit with any of Walgreens's representatives. Id. ¶ 53. Plaintiffs allege that Hetzler gave Huang this instruction in order to conceal the fact that Edwards and Hetzler had surreptitiously altered the Confirmation Forms to name Envision as the beneficiary for the letters of credit. Id.

         On August 8, 2013, Hetzler informed Plaintiffs for the first time that Walgreens had issued letters of credit naming Envision, rather than Sunny, as the beneficiary. Id. ¶ 24. Plaintiffs asked Edwards and Hetzler to transfer these letters of credit to Sunny, but they refused to do so, falsely telling Plaintiffs that the letters of credit were nontransferable. Id. ¶¶ 25, 59-60.

         Without a letter of credit to guarantee payment, Plaintiffs had difficulty financing the manufacturing and shipment of the merchandise that Walgreens had ordered. Id. ¶ 27. Edwards and Hetzler promised to assist Plaintiffs in arranging financing by obtaining a $1.5 million letter of credit for Plaintiffs, but they never delivered on this promise. Id. ¶ 28. According to Plaintiffs, Edwards and Hetzler promised to provide this letter of credit in order to induce Plaintiffs to continue manufacturing and shipping the merchandise for Walgreens. Id. ¶¶ 61-62.

         On September 16, 2013, Walgreens issued a third and final letter of credit listing Envision as the beneficiary. Id. ¶ 29. According to Plaintiffs, Envision pocketed approximately $3 million by drawing down on the three letters of credit, and neither Envision nor Walgreens has ever paid Plaintiffs anything for manufacturing and shipping the merchandise that Walgreens ordered for the 2013 holiday season. Id. ¶¶ 34, 36, 39.

         On October 11, 2013, Edwards sent an e-mail to various Walgreens employees. See Id. ¶ 79; id., Ex. F. At least one of these employees was located in Illinois.[1] Id. ¶ 75; id., Ex. F. Edwards's e-mail was a response to an inquiry from Walgreens employee Teresa Chu about the status of certain shipments of merchandise from Plaintiffs. See id., Ex. F. In responding to Chu's inquiry, Edwards wrote:

[T]he bookings were done by the factory. They changed our passwords [on the freight forwarding system] and . . . we are blind with the facts, hence the reason we were working on trying to gather the information collectively to help put a stop to the nonsense. . . . Again, all our facts were all documents were submitted. So there is a litany of misrepresentations by Sunny Handicraft. Such to the fact that legal action has transpired.

Id. at 2.

         Two days later, on October 13, 2013, Edwards sent a separate e-mail to Hadieh Hasan, a Walgreens employee also located in Illinois. Id. ¶ 75. In this e-mail, Edwards wrote:

As for Daniel [Huang] at this point this is just pure Chinese thievery, gangsters. We have written confirmation all docs were submitted. It is one continual lie upon lie on their end. Their actions are ...

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