DRAGONS 516 LIMITED v. KNIGHTS GENESIS INVESTMENT LIMITED (2022)

The following e-filed documents, listed by NYSCEF document number (Motion 009) 163, 164, 165, 166, 167, 168, 169, 170 were read on this motion for JUDGMENT - DEFAULT.

The following e-filed documents, listed by NYSCEF document number (Motion 010) 172, 173, 174, 175, 176, 177, 178 were read on this motion for ATTORNEY DISQUALIFY/RELIEVE/SUBSTITUTE/WITHDRAW.

Motion sequences 009 and 010 are consolidated herein for disposition.

In this action alleging fraudulent inducement surrounding a $30 million investment by plaintiff, Dragons 516 Limited moves for a default judgment against defendants Jincheng Jason Yuan (“Yuan”) and Dunfei William Chen (“Chen”) (motion seq. no. 009). Defendants Yuan and Chen are majority shareholders and principals in Knights Genesis Investment Limited. In motion sequence 010, counsel for defendants Knights Genesis Investment Limited and Genesis Development Company LLC (hereinafter, the Genesis Defendants) moves to withdraw as counsel.

BACKGROUND

Plaintiff Dragons 516 Limited entered into various financial agreements with defendants regarding a real estate project in New York City. The complaint alleges that defendants, in concert, orchestrated and executed a complex scheme to steal $30 million from plaintiff through a series of material misrepresentations. Plaintiff commenced this action by filing a summons and complaint asserting three causes of action: fraud and conspiracy to defraud, conversion, and aiding and abetting conversion. Defendants Yuan and Chen are alleged to be personally involved in the scheme to defraud Dragon 516.

Plaintiff now moves for a default judgment against defendants Yuan and Chen on the ground of failure to appear and answer (mot. seq. no. 009). Counsel for the Genesis Defendants moves to withdraw as counsel (mot. seq. no. 010).

DISCUSSION

 Motion Seq. No. 009

On an application for a default judgment, pursuant to CPLR 3215, the plaintiff must submit “proof of service of the summons and the complaint[,] ․ proof of the facts constituting the claim, [and] the default” (CPLR 3215[f]). Upon default, “a defendant admits all traversable allegations contained in the complaint, and thus concedes liability, although not damages” (HF Mgt. Servs. LLC v Dependable Care, LLC, 198 AD3d 457, 458 [1st Dept 2021] [internal quotation marks and citation omitted]; Petty v Law Off. of Robert P. Santoriella, P.C., 200 AD3d 621, 621 [1st Dept 2021] [while plaintiff must submit proof of prima facie viability of its claims, “the standard of proof is minimal”] [internal quotation marks and citation omitted]).

Plaintiff asserts that it had service of process effectuated on Yuan by serving an individual of suitable age and discretion at his usual place of abode, 14221 26th Ave., Apt. 2B, Flushing, New York, 11354 on May 15, 2021, and by mailing copies of the papers to the same address on May 18, 2021. Plaintiff filed an affidavit of service on June 2, 2021, and service was completed no later than June 12, 2021. A copy of the affidavit of service is submitted.

Plaintiff also had its service of process effectuated on Chen by serving an individual of suitable age and discretion at his usual place of abode, 502 Park Ave., Apt. 5D, New York, New York, 10022 on May 17, 2021, and by mailing copies of the papers to the same address on May 18, 2021. Plaintiff filed the affidavit of service on June 2, 2021, and service was completed no later than June 12, 2021. A copy of the affidavit of service is submitted.

Plaintiff also served Chen on July 29, 2021, by effectuating service on him in China through the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Convention). In February 2022, plaintiff received completed Attestations of Service pursuant to the Hague Convention stating that Chen had been personally served at both addresses, New York and China, on November 9, 2021. Copies of the Attestations of Service and certified translations in English are submitted.

There is no opposition to the motion.

CPLR 3215 (f) requires as proof upon applying for a default judgment proof of service of the summons and complaint, proof of the facts constituting the claim, and the default. Plaintiff submitted affidavits of service regarding the two defendants. Plaintiff is also required to submit proof of its underlying claim against them. An affidavit or verified complaint submitted in support of this motion need only allege enough facts to enable a court to determine the existence of a viable cause of action (see Woodson v Mendon Leasing Corp., 100 NY2d 62 [2003]). Here, plaintiff submitted a copy of its complaint and an affirmation from a principal of plaintiff's company with personal knowledge of the facts. These documents provide an adequate description of the activities of Yuan and Chen with respect to the allegations of fraudulent inducement and conversion. However, the complaint is not verified and the affirmation is not an affidavit. Thus, the proof is not sufficient. Plaintiff's motion is denied without prejudice and with leave to renew upon a submission of proper supporting documentation.

 Motion Sequence No. 010

Counsel for the Genesis Defendants, Thompson, Coburn, Horn and Hessen LLP (Thompson), moves to withdraw by order to show cause pursuant to CPLR 321(b)(2) and 321(c) and requests a stay of all proceedings against the Genesis Defendants for 30 days to allow for them to attain new counsel.

Thompson argues that withdrawal is warranted due to its inability to communicate constructively with its clients and litigate in a professional manner. Thompson cites 22 NYCRR section 1200.15(c) and Rule 1.16 (c)(7). Thompson contends that it has just cause for withdrawing and that no party would suffer prejudice as a result.

Two defendants, Shanghai Municipal Investment Corporation and Shanghai SMI Assets Management Co., Ltd., entered a stipulation that they do not object to the withdrawal of Thompson as counsel to the Genesis Defendants.

Plaintiff objects to the motion on the ground that it would allow an automatic stay for 30 days. Plaintiff argues that Thompson should not be allowed such a stay because it improperly moved pursuant to CPLR 321(c). According to plaintiff, there has been no death or disability of an attorney here. Plaintiff also argues that the granting of the motion would be prejudicial as a summary judgment motion is presently before this court. Plaintiff argues that, if CPLR 321(c) is applicable, then the court should serve a notice to appoint another attorney on the Genesis Defendants via email and by certified mail at their last known address, thus triggering the 30-day stay.

Under CPLR 321(b)(2), counsel can voluntarily withdraw its services to its clients. Although CPLR 321(c) does not apply in this case, the court has the discretion to impose a stay on proceedings. Thus, withdrawing counsel shall serve a notice to the Genesis Defendants via email and certified mail at their last known address. The Genesis Defendants shall have 30 days from the receipt of notice to attain new counsel and all proceedings related to them shall be stayed during that period.

Accordingly, it is

ORDERED that plaintiff Dragons 516 Limited's motion for a default judgment is denied without prejudice; and it is further

ORDERED that the motion of Thompson, Coburn, Horn and Hessen LLP to be relieved as counsel for defendants Shanghai Municipal Investment (Group) Corporation and Shanghai SMI Assets Management (Group) Co. Ltd. is granted upon a filing of proof of compliance with the following conditions; and it is further

ORDERED that said attorney serve a copy of this order with notice of entry upon the former clients at their last known address by certified mail, return receipt requested, and upon the attorneys for all other parties appearing herein by regular mail; and it is further

ORDERED that, together with the copy of this order with notice of entry served upon the former client, moving counsel shall forward a notice directing the former clients to appoint a substitute attorney within 30 days from the date of mailing the notice and the clients shall comply; and it is further

ORDERED that any new attorney retained by said defendants file a notice of appearance with the Clerk of the Trial Support Office (Room 158) and the Clerk of the Part within 30 days from the date the notice to retain new counsel is mailed; and it is further

ORDERED that no further proceeding may be taken against the former clients without leave of this court for a period of 30 days after service on the former clients of the aforesaid notice to appoint a substitute attorney.

Robert R. Reed, J.