Flextronics International USA, Inc. v. Sparkling Drink Systems Innovation Center Ltd., 186 F. Supp. 3d 852

Background

Flextronics (Calif. corp.) sued Aaron Bueno and his Hong Kong entities (SDS-IC, SDS-HK) alleging breach of an interim manufacturing agreement (signed by Flextronics’s Mauritius affiliate, “Medical”), fraud, negligent misrepresentation, promissory estoppel, and unjust enrichment.
SDS sought Flextronics to manufacture single‑use powder capsules for an at‑home beverage system; SDS representatives made optimistic statements about retail deals and demand projections during presentations and emails in 2014.
Medical executed the interim Agreement with SDS; the Agreement barred assignment without consent but included a clause permitting assignment to “Affiliates” or “to a third party financial institution for the purpose of receivables financing.”
Flextronics alleges Medical (by customary practice and course of dealings) assigned the Agreement to Flextronics, Flextronics performed/manufactured pods, SDS never paid or took the pods, and Flextronics incurred > $7 million in damages.
Defendants moved to dismiss for lack of subject‑matter jurisdiction (diversity), failure to state claims (Rule 12(b)(6)), and failure to join an indispensable party (Medical) (Rule 12(b)(7)).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Subject‑matter jurisdiction (diversity under 28 U.S.C. §1332(a)(2))	Flextronics is U.S. citizen; defendants are foreign (Hong Kong/Israel) so federal diversity jurisdiction exists.	Because Medical (Mauritius citizen) is the real party in interest, case involves only aliens and diversity jurisdiction fails.	Court finds SDS entities are foreign corporations (citizens of Hong Kong) and refuses to decide real‑party‑in‑interest merits at jurisdiction stage; diversity jurisdiction exists.
Breach of contract / Assignment	Medical validly assigned the Agreement to Flextronics (customary practice; Flextronics performed; assignment need not be in writing).	Agreement forbids assignment without SDS consent; the Affiliate/receivables‑financing clause prohibits assignment to affiliates absent financing purpose.	Assignment allegation plausible; contract language is ambiguous and Flextronics’s interpretation is reasonable; breach claim survives and Rule 12(b)(7) joinder challenge fails.
Fraud / Negligent misrepresentation (statements about clumping and sales projections)	Misrepresentations induced Flextronics to incur costs; defendants made present and future assurances.	Many statements were opinions/predictions or later contradicted, so not actionable and/or not reasonably relied upon.	Statements that were predictions/opinions (powder clumping fix unnecessary; future sales projections) are nonactionable as fraud/misrep and dismissed with prejudice; however, present‑fact misrepresentations (that SDS had existing retail contracts) survive and satisfy Rule 9(b).
Unjust enrichment	Flextronics seeks equitable relief for SDS’s failure to pay.	No allegation that defendants were enriched (SDS never accepted or kept the pods); other remedies (contract, fraud, estoppel) are appropriate.	Unjust enrichment claim dismissed without prejudice (plaintiff may amend).

Key Cases Cited

Lincoln Property Co. v. Roche, 546 U.S. 81 (Sup. Ct.) (rejecting searching for unnamed "real party in interest" to defeat jurisdiction; limited exceptions)
Smith v. Greystone Alliance, LLC, 772 F.3d 448 (7th Cir.) (court cannot resolve merits to defeat jurisdiction)
Intec USA, LLC v. Engle, 467 F.3d 1038 (7th Cir.) (no diversity where all parties are aliens)
Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012 (Sup. Ct.) (corporate citizenship rules under §1332(c)(1))
Rawoof v. Texor Petroleum Co., 521 F.3d 750 (7th Cir.) (Rule 17 real‑party‑in‑interest is a merits/joinder issue, not jurisdictional)
Casa Herrera, Inc. v. Beydoun, 32 Cal.4th 336 (Cal. 2004) (California parol‑evidence and extrinsic evidence to interpret ambiguous contracts)