BESTHERB, INC. v. YINLINK INTERNATIONAL INC.
3:22-cv-06548
| D.N.J. | Feb 20, 2025Background
- Bestherb, Inc. (Plaintiff) sold herbal extract products to Yinlink International Inc. (Defendant) for $763,500, of which only $50,000 was paid.
- Edison Yin is the President and CEO of Yinlink International and communicated directly with Bestherb's president, Chao Xu, regarding the unpaid balance.
- Yin claimed the delay was due to bank issues, stating Bestherb needed to send a payment to Yinlink to demonstrate a normal business relationship—a claim on which Xu relied, sending $34,500, which was never returned.
- Plaintiff alleges that Yin’s request for the payment was fraudulent and that Yin had no intent to return the money, resulting in damages to Bestherb.
- The first fraud claim was previously dismissed without prejudice for lack of specificity; the Second Amended Complaint (SAC) provided additional factual detail.
- Defendant Yin moved to dismiss the SAC's fraud claim for failure to state a claim and for lack of individual liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal liability for fraud (veil piercing) | Yin could be personally liable under several theories | No basis for personal liability without veil piercing | Plaintiff did not adequately plead veil piercing; theory rejected on facts pled |
| Personal liability: Participation theory | Yin’s direct involvement in fraud supports liability | Participation theory inapplicable to contract claims | Court found theory applies here because fraud alleged (intentional tort) |
| Sufficiency of fraud pleadings (Rule 9(b)) | SAC corrects prior defects; details "who, what, when, how" | Plaintiff failed to state fraud with particularity | Court found SAC met Rule 9(b) specificity requirements |
| Overall motion to dismiss (12(b)(6)) | Fraud claim is now sufficiently pled on facts and theory | SAC still insufficient; should be dismissed | Motion to dismiss denied; fraud claim survives |
Key Cases Cited
- Allstate New Jersey Ins. Co. v. Lajara, 117 A.3d 1221 (N.J. 2015) (enumerates elements for common law fraud in New Jersey)
- Banco Popular N. Am. v. Gandi, 876 A.2d 253 (N.J. 2005) (sets standard for fraud claim elements)
- Saltiel v. GSI Consultants, Inc., 788 A.2d 268 (N.J. 2002) (defines participation theory for corporate officer personal liability)
- State Dep’t of Env’t Prot. v. Ventron Corp., 468 A.2d 150 (N.J. 1983) (discusses general rule of corporate veil and shareholder liability)
- Frederico v. Home Depot, 507 F.3d 188 (3d Cir. 2007) (sets out Rule 9(b) standard for particularity in fraud pleadings)