JDH UNLIMITED INC v. APKZ MEDICAL INC WESTERN MED SUPPLIES LLC CHEK SHIN SHEN JESSE SHEN JESSICA ROSE KOEHLER (2024)

REPORT AND RECOMMENDATION

Plaintiff JDH Unlimited Inc. commenced this action on June 2, 2021 against Defendants APKZ Medical Inc. (“APKZ”), Western Med Supplies LLC (“Western”), Chek Shin Shen a/k/a Jesse Shen (“Shen”), and Jessica Rose Koehler (“Koehler”) (collectively, “Defendants”), asserting causes of action for fraud, breach of contract, conversion, and unjust enrichment. See generally Dkt. No. 1.

On November 23, 2021, Plaintiff moved for default judgment against all Defendants. See Dkt. No. 21 (“Plaintiff's Motion”). On February 1, 2022, the Court entered a default judgment in the sum of $475,870.85 after Defendants failed to appear in this action or respond to the complaint. See Dkt. No. 24. On July 6, 2022, Koehler moved to vacate the default judgment pursuant to Fed. R. Civ. P. 55(c) and 60(b), to dismiss the complaint for lack of personal jurisdiction, for a stay of execution of the judgment, and for the return of all funds executed upon in connection with the judgment. See Dkt. No. 25 (“Koehler's Motion”). On July 13, 2022, the Court denied Koehler's Motion. See July 13, 2022 Dkt. Order. On August 9, 2022, Koehler appealed. See Dkt. No. 32. On September 27, 2023, the United States Court of Appeals for the Second Circuit vacated the Court's July 13, 2022 judgment and remanded this action for further proceedings consistent with the Second Circuit's order. See Dkt. No. 33.

Currently pending before this Court, on a referral from the Honorable William F. Kuntz II, United States District Judge,¹ is Koehler's Motion and Plaintiff's Motion. For the reasons set forth below, this Court respectfully recommends that Koehler's Motion be granted. The Court also respectfully recommends that Plaintiff's Motion be denied, without prejudice to renew.

I. Background

A. Factual allegations

Unless otherwise indicated, the following facts are taken from Plaintiff's complaint and the various declarations submitted by the parties on the issue of the Court's personal jurisdiction over Defendant Koehler. See Domond v. Great Am. Recreation, Inc., 116 F. Supp. 2d 368, 370 (E.D.N.Y. 2000) (“Because the Defendants’ motion to dismiss is based upon an alleged lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2), the Court will also consider the various affidavits submitted by the parties on that issue.” (citing Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 196-98 (2d Cir. 1990)).

Plaintiff is a New York corporation with a principal place of business in Brooklyn. See Dkt. No. 1 ¶ 1. In January 2021, Plaintiff and a non-party purchaser entered into an agreement wherein Plaintiff agreed to supply the purchaser with nitrile gloves in increments of three million. Id. ¶ 10. To fulfill the first order, Plaintiff entered into a separate contract with APKZ, a Florida corporation with a principal place of business in Doral, Florida. Id. ¶ 2. Pursuant to that contract, APKZ agreed to provide, and later did provide, Plaintiff with three million gloves. Id. ¶ 11.

In late January 2021, Plaintiff's purchaser requested that Plaintiff deliver a second batch of three million gloves. Id. ¶ 21. Plaintiff contacted APKZ to ask if it had an additional three million gloves that it could sell to Plaintiff. Id. ¶ 13. APKZ confirmed that it had the gloves in inventory, and based on this representation, Plaintiff entered into a second contract with APKZ for the purchase of three million gloves. Id. ¶¶ 15, 17. Koehler states in a sworn declaration that she was not a party to this agreement. Dkt. No. 39-1 ¶ 3.

On February 1, 2021 and February 2, 2021, respectively, Plaintiff wired APKZ the aggregate sum of $442,500.00 (“Plaintiff's Funds”) for the purchase of the second batch of gloves. Dkt. No. 1 ¶ 16. APKZ wired Plaintiff's Funds from its Chase bank account in New York to APKZ's bank account at City National Bank of Florida. Id.

Unbeknownst to Plaintiff, APKZ did not have three million gloves in its inventory to sell to Plaintiff. Id. ¶ 18. Instead, APKZ tried to source the gloves from Western, a Nevada limited liability company with a principal place of business in Las Vegas, Nevada. Id. ¶ 3. In early February 2021, APKZ and Western entered into a contract pursuant to which Western agreed to sell APKZ three million nitrile gloves for the aggregate sum of $439,500.00. Id. ¶ 20. On February 1, 2021 and February 2, 2021, APKZ wired the aggregate sum of $439,500.00, which Plaintiff claims consisted of Plaintiff's Funds, from its account at City National Bank of Florida to Western's bank account at Chase Bank. Id. ¶ 21.

In the first week of February 2021, a dispute arose between APKZ and Western, which ultimately resulted in Western refusing to provide APKZ with the gloves. Id. ¶ 22. This resulted in APKZ not being able to fulfill its contract with Plaintiff. Id. ¶ 24.

In early February 2021, Plaintiff, APKZ, and Western met via Zoom to discuss the dispute. Id. ¶ 25. The parties agreed that the transaction between APKZ and Western would be canceled and that Plaintiff's Funds would be returned to Plaintiff. Id. ¶ 25. Koehler states in a sworn declaration that she was “never a part of any Zoom meeting between the parties.” Dkt. No. 39-1 ¶ 4.

Western subsequently failed to return the money to Plaintiff, prompting APKZ to submit a fraud report with City National. Dkt. No. 1 ¶¶ 26-27. City National forwarded the fraud report to Chase bank where Western's account was holding Plaintiff's Funds. Id. ¶ 27. Chase subsequently closed Western's account and sent Defendants Shen and Koehler, the owners of the Chase account, a check for the account balance, which included Plaintiff's Funds. Id. ¶¶ 4-6, 28. Shen and Koehler are both residents of Las Vegas, Nevada and the alleged sole members of Western. Id. ¶ 6. Plaintiff alleges that upon receipt of the check, Western, Koehler, and Shen (collectively referred to as the “Western Defendants”) deposited Plaintiff's Funds into their various personal accounts. Id. ¶ 29.

Plaintiff subsequently canceled its contract with APKZ and demanded that the Western Defendants and APKZ return Plaintiff's Funds. Id. ¶¶ 30-31. APKZ returned $3,000.00 of Plaintiff's Funds to Plaintiff but refused to return the remaining $439,500.00 balance. Id. ¶ 32.

B. Procedural history

On June 2, 2021, Plaintiff filed a complaint against Defendants for the return of Plaintiff's Funds. See generally Dkt. No. 1. The complaint includes causes of action against APKZ for fraud and breach of contract and causes of action against the Western Defendants for conversion and unjust enrichment. Id. ¶¶ 33-52. Koehler was personally served with the complaint on July 8, 2021. See Dkt. No. 13. Each of the other defendants was served on or before July 30, 2021. See Dkt. Nos. 14, 15, 16. Defendants failed to timely file an answer or otherwise appear in the case.

On September 15, 2021, Plaintiff requested certificates of default against Defendants, which the Clerk of Court entered on September 24, 2021. See Dkt. Nos. 17, 18. As noted above, on November 23, 2021, Plaintiff's Motion was filed. See Dkt. Nos. 19, 21.

On February 1, 2022, the Court held a hearing on Plaintiff's Motion. See Feb. 1, 2022 Minute Entry. Defendants did not appear at the hearing, and the Court entered default judgment against Defendants “for the sum of $475,870.85, which is the sum of $439,500.00 in principal plus pre-judgment interest at 9% from March 1, 2021, presently amounting to $36,370.85, plus costs, and disbursements of this action in the amount of $0.00” (the “Default Judgment”). See Dkt. No. 24. Plaintiff then proceeded to enforce the Default Judgment against Defendants in Nevada via writs of execution. See Dkt. No. 39, at 11-12; see also Dkt. Nos. 26, 27, and 29.

On July 6, 2022, Koehler's Motion was filed in which she sought vacatur of the Default Judgment pursuant to Fed. R. Civ. P. 60(b). See Dkt. No. 25. Koehler also sought dismissal of the complaint against her in its entirety and an order “returning to Koehler all funds restrained and executed upon from Koehler's bank accounts or assets in connection with [the Default Judgment] procured by [P]laintiff, lifting all restraints imposed upon Koehler's bank accounts and/or assets and for a stay of all enforcement efforts against Koehler by plaintiff, their counsel and the writ of the Sherriff and/or Marshall of the County of Clark, State of Nevada, in connection with the February 1, 2022 judgment.” Id. In support of her motion, Koehler argues that: (1) the district court lacked personal jurisdiction over and thus the Default Judgment is void; and (2) because her failure to appear was not willful, she had a meritorious defense, and Plaintiff would not be prejudiced by vacatur, the Default Judgment is voidable. See Dkt. No. 25-1. In a declaration attached to her motion, Koehler stated that her “only connection with this lawsuit is through [her] status as ex-girlfriend of defendant [Shen],” and it was her understanding that her ex-boyfriend's attorney would represent her in this case. Dkt. No. 25-3 ¶¶ 8, 16. Koehler further reported that Plaintiff had garnished $45,982.20 from her bank account, and she seeks a stay of all enforcement actions brought against her. See id. ¶ 17.

On July 13, 2022, the Court entered a text order denying Koehler's Motion. See July 13, 2022 Dkt. Order. Koehler appealed this decision and raised the same arguments as in the district court, to wit: (1) the default judgment is void because the district court lacked personal jurisdiction; and (2) that the district court abused its discretion in denying her motion for vacatur under Rule 60(b) because she had established good cause to vacate the judgment. See Dkt. No. 32, see also JDH Unlimited Inc. v. Koehler, No. 22-CV-1721, 2023 WL 6289951, at *1 (2d Cir. Sept. 27, 2023).

On September 27, 2023, the United States Court of Appeals for the Second Circuit vacated the Court's July 13, 2022 judgment and remanded the action for further proceedings. See Dkt. No. 33; see also JDH Unlimited Inc., 2023 WL 6289951 at *2 (“We thus remand so the district court can give [Plaintiff] an opportunity to respond and provide a reasoned explanation for its ruling on Koehler's motion under Rule 60(b).”). The Second Circuit noted that it did not “reach Koehler's argument that the default judgment is void for lack of personal jurisdiction or her challenge to the district court's initial decision to enter the default judgment in the alleged absence of such jurisdiction.” JDH Unlimited Inc., 2023 WL 6289951, at *1.

On January 15, 2024, the parties requested a briefing schedule in response to the Second Circuit's order, whereby Plaintiff would file its opposition to Koehler's Motion, and Koehler would file a reply in support of her motion. See Dkt. No. 37. Consistent with the Second Circuit's order, the Court set a briefing schedule accordingly.

On January 31, 2024, Plaintiff filed its opposition to Koehler's Motion, arguing that the Court has personal jurisdiction over Koehler and that the Default Judgment should not be vacated. See Dkt. No. 38. Plaintiff also argues that this Court lacks the authority to vacate any orders entered by the United States District Court for the District of Nevada or to restrain any actions taken by officials in Clark County, Nevada in connection with the enforcement of the Default Judgment. See Dkt. No. 38.

Koehler filed a reply on February 7, 2024. See Dkt. No. 39. As set forth in the declaration attached to her reply, Koehler notes that, contrary to Plaintiff's assertion, she was not active in advertising Western's products on various online platforms. Dkt. No. 39-1 ¶ 5. Instead, Koehler alleges that she was employed as an executive assistant for a company called ShieldWorks3PL but “never conducted any advertising on behalf of any of the co-defendants.” Id. ¶ 6.²

II. Legal Standards

Fed. R. Civ. P. 55(c) provides that a “court may set aside an entry of default for good cause, and it may set aside a final default judgment under Rule 60(b).”

“The Second Circuit has held that three factors govern a district court's decision to set aside a default judgment under either Rule 55(c) or 60(b): ‘(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented.’ ” Am. Transit Ins. Co. v. Bilyk, 546 F. Supp. 3d 192, 197 (E.D.N.Y. 2021) (quoting Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)); see also State St. Bank and Tr. Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 166-67 (2d Cir. 2004) (same). “These factors are applied more rigorously against a defendant after a default judgment has been entered.” Am. Transit Ins. Co., 546 F. Supp. 3d at 197 (citing Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981)). “Moreover, the preference for resolving disputes on the merits does not go so far as to relieve the defendant from the burden of proving the applicable factors.” Id. (citing Sony Corp. v. Elm State Elecs., 800 F.2d 317, 320 (2d Cir. 1986)).

It is well-established that a default judgment entered by a court that lacks personal jurisdiction over the parties is void. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 138 (2d Cir. 2011). The Second Circuit has stated that “when a defendant declines to appear, a plaintiff generally proceeds by means of a motion for default judgment, see generally Fed. R. Civ. P. 55, and we agree with our sister circuits that before a court grants a motion for default judgment, it may first assure itself that it has personal jurisdiction over the defendant.” Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., 619 F.3d 207, 213 (2d Cir. 2010) (emphasis added); see also Mickalis Pawn Shop, LLC, 645 F.3d at 133 (2d Cir. 2011).

“Personal jurisdiction is a necessary prerequisite to entry of a default judgment.” Burns v. Scott, 635 F. Supp. 3d 258, 273 (S.D.N.Y. 2022) (internal quotations and citation omitted), report and recommendation adopted, No. 20-CV-10518 (JGK), 2022 WL 18858909 (S.D.N.Y. Nov. 9, 2022). In some circumstances, however, “courts have declined to exercise their discretion to review whether personal jurisdiction exists” during their analysis of a motion for default judgment. Empire Cmty. Dev. LLC v. Campoverde, No. 22-CV-4046 (RPK) (VMS), 2023 WL 7000878, at *3 (E.D.N.Y. Aug. 23, 2023) (citing Kaplan v. Hezbollah, No. 19 Civ. 3187 (BMC), 2022 WL 2207263, at *2-3 (E.D.N.Y. June 21, 2022)). But even when supporting the exercise of restraint in reviewing personal jurisdiction in the default context, courts have noted that “[p]ersonal jurisdiction should be examined on a motion for a default judgment when a plaintiff's submissions clearly show an absence of personal jurisdiction or even when they show that sustaining personal jurisdiction is highly unlikely. That is just judicial efficiency.” Kaplan, 2022 WL 2207263, at *2. “It makes no sense for a court to enter a default judgment when there is a certainty or high likelihood that the judgment will never be enforced because of a lack of personal jurisdiction.” Id.; see also Yao Wu v. BDK DSD, No. 14-CV-5402 (CBA), 2015 WL 5664256, at *2 (E.D.N.Y. Aug. 31, 2015), report and recommendation adopted, 2015 WL 5664534 (Sept. 22, 2015) (“Judgments rendered against a defendant over whom a court lacks personal jurisdiction are void and may later be vacated by motion brought pursuant to Fed. R. Civ. P. 60(b)(4).”).

Courts also may examine personal jurisdiction in the default judgment context because of case- or party-specific reasons; for instance, if similar cases filed by the plaintiff had been dismissed for lack of personal jurisdiction. See, e.g., Freeplay Music, LLC v. Nian Infosolutions Private Ltd., No. 16-CV-5883 (JGK) (RWL), 2018 WL 3639929, at *4 (S.D.N.Y. Jul. 10, 2018), report and recommendation adopted, 2018 WL 3632524 (Jul. 31, 2018).

At bottom, if the Court determines that a judgment is void for lack of personal jurisdiction, “it is a per se abuse of discretion” for the Court to deny a movant's motion to vacate under Fed. R. Civ. P. 60(b)(4). State St. Bank & Tr. Co., 374 F.3d at 178 (citation omitted).

III. Koehler's Motion

A. Whether this Court has Personal Jurisdiction over Koehler

The Court's first consideration in this case is whether personal jurisdiction over Koehler exists in New York.

To determine whether there is personal jurisdiction over a defendant, the Court must first look to state law—in this case, New York law. Spiegel v. Schulmann, 604 F.3d 72, 76 (2d Cir. 2010) (“A district court's personal jurisdiction is determined by the law of the state in which the court is located.”). After first determining whether New York's long-arm statute permits the Court's exercise of personal jurisdiction over Koehler, the Court must then decide whether that exercise of jurisdiction is permissible under the Due Process Clause of the Fourteenth Amendment. Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59-60 (2d Cir. 2012); Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L., 264 F.3d 32, 37 (2d Cir. 2001) (“district courts must conduct a two-part analysis, looking first to the state's long-arm statute and then analyzing whether jurisdiction comports with federal due process.”). New York's long-arm statute provides two bases to obtain jurisdiction over a foreign entity: general and specific. See CPLR §§ 301 (general), 302(a) (specific).

Here, Plaintiff alleges in the complaint (Dkt. No. 1 ¶ 8) that personal jurisdiction over Koehler is proper under CPLR § 302(a)(3)(ii), which states:

[A] court may exercise personal jurisdiction over any non-[resident] ․ who in person or through an agent ․ commits a tortious act [outside New York State] causing injury to person or property within [New York State] ․ if [they] ․

expect[ ] or should reasonably expect the act to have consequences in [New York State] and derive[ ] substantial revenue from interstate or international commerce.

In Penguin Grp. (USA) Inc. v. Am. Buddha, 16 N.Y.3d 295, 302 (2011), the New York Court of Appeals established the following five-part test for establishing personal jurisdiction under CPLR § 302(a)(3)(ii): “(1) the defendant must have committed a tortious act outside of New York; (2) the cause of action at issue must have arisen as a result of this act; (3) this act must have caused an injury to a person or property in New York; (4) the defendant expected or should have reasonably expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from either interstate or international commerce.” Jakob v. JPMorgan Chase Bank, N.A., No. 22-CV-3921 (HG), 2023 WL 5350814, at *4 (E.D.N.Y. Aug. 19, 2023) (citing Penguin, 16 N.Y.3d at 302)). “Each element of this test is essential, and if plaintiff fails to proffer sufficient evidence for any element, it is dispositive of the issue of personal jurisdiction under this provision.” Krisko v. Marvel Ent., LLC, 473 F. Supp. 3d 288, 300 (S.D.N.Y. 2020) (citing Yash Raj Films (USA) Inc. v. Dishant.com LLC, No. 08-CV-2715 (ENV) (RML), 2009 WL 4891764, at *8 (E.D.N.Y. Dec. 15, 2009)).

1. Torts committed outside New York

The first element is whether Koehler committed a tortious act outside New York. See CPLR § 302(a)(3)(ii). In order to satisfy this element, Plaintiff “need not actually prove that defendant committed a tort but rather need only state a colorable cause of action.” Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 125 (2d Cir. 2002) (Sotomayor, J.) (citation omitted). Plaintiff asserts two causes of action against Kohler in the complaint: one for conversion and the other for unjust enrichment. See Dkt. No. 1 at 7-8.

Under New York law, conversion occurs “when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession.” Colavito v. New York Organ Donor Network, Inc., 8 N.Y.3d 43, 49 (2006); see also Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400, 403-04 (2d Cir. 2006). A plaintiff can state a claim for conversion of money where there is “a specific, identifiable fund and an obligation to return or otherwise treat in a particular manner the specific fund in question.” Cnty. of Nassau v. Expedia, Inc., 120 A.D.3d 1178, 1180 (2d Dep't 2014). “The tort of conversion does not require defendant's knowledge that he is acting wrongfully, but merely an intent to exercise dominion or control over property in a manner inconsistent with the rights of another.” LoPresti v. Terwilliger, 126 F.3d 34, 41–42 (2d Cir. 1997) (citation omitted). “A claim of conversion under New York law cannot be predicated on a mere breach of contract.” Rynasko v. New York Univ., 63 F.4th 186, 196 (2d Cir. 2023).

Here, Plaintiff alleges that the Western Defendants are unlawfully withholding the $439,500.00 that Plaintiff originally sent to APKZ for the purchase of the gloves, i.e., “Plaintiff's Funds,” and which APKZ, in turn, wired to the Western Defendants’ bank account for the purchase of the gloves. See Dkt. No. 1 ¶¶ 47-51. While the Western Defendants arguably had a possessory right in Plaintiff's Funds vis-à-vis their contract with APKZ, that right was extinguished when APKZ and Western agreed to cancel their contract and Plaintiff made a demand for the return of Plaintiff's Funds. See St. John's Univ., New York v. Bolton, 757 F. Supp. 2d 144, 179 (E.D.N.Y. 2010) (“A cause of action for conversion is complete when the party in possession of the property openly interferes with the true owner's rights in it․ If the party in possession has not acquired possession wrongfully, and has not otherwise exercised wrongful dominion over the property, the possessor does not convert the property until he refuses a demand for its return from a party with a superior and immediate right of possession.”). At that point in time, the Western Defendants’—and Koehler's—possession of Plaintiff's Funds became wrongful and gave rise to a claim for conversion. See, e.g., Jami Mktg. Servs., Inc. v. Howard, No. 86-CV-3352 (JMM) (CMA), 1988 WL 46106, at *3 (E.D.N.Y. Apr. 26, 1988) (holding that plaintiff stated a claim for conversion against officers and shareholders of corporate defendant by alleging that they “converted and appropriated” a specified sum of money due to the plaintiff for their own use and purpose); see also Petrone v. Davidoff Hutcher & Citron, LLP, 150 A.D.3d 776, 777–78 (2d Dep't 2017) (holding that plaintiff stated a claim for conversion where funds were sent to defendant for a designated purpose and defendant used the funds for another purpose).

Plaintiff also asserts a claim against Koehler for unjust enrichment. To prevail on a claim for unjust enrichment under New York law, Plaintiff must establish: “(1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution.” Beth Israel Med. Center v. Horizon Blue Cross and Blue Shield of New Jersey, Inc., 448 F.3d 573, 586 (2d Cir. 2006). Plaintiff has stated a colorable claim for unjust enrichment by alleging that Koehler has enriched herself at Plaintiff's expense by wrongfully taking and withholding Plaintiff's Funds for her own benefit and refusing to return them to Plaintiff. See Dkt. No. 1 ¶¶ 52-55.

Plaintiff has sufficiently alleged causes of action against Koehler for conversion and unjust enrichment. And because at all relevant times, Koehler was a resident of Nevada, the Western Defendants’ bank account was based in Nevada, and Koehler's personal bank account was also based in Nevada, Koehler's allegedly tortious acts all occurred outside of New York for purposes of CPLR § 302(a)(3)(ii).

2. Cause of action arising out of the tortious acts

Second, the Court must assess whether Plaintiff's claims for conversion and unjust enrichment arose from Koehler's tortious acts. “In order to meet this element of the jurisdictional test, the out-of-state act must be so close to the injury that reasonable people would regard it as a cause of the injury.” Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 467 (S.D.N.Y. 2008) (cleaned up).

Here, this element is satisfied because Plaintiff's causes of action for unjust enrichment and conversion stem from allegations that the Western Defendants are withholding Plaintiff's Funds. See Lawson v. Full Tilt Poker Ltd., 930 F. Supp. 2d 476, 485 (S.D.N.Y. 2013) (finding element satisfied in conversion case against individual defendants because “[a]lthough the Individual Defendants are not alleged to have personally participated in blocking access to the accounts, the [complaint] alleges that the Individual Defendants took millions of dollars of player funds.”). Accordingly, this Court finds that Plaintiff has established the second element of CPLR § 302(a)(3)(ii).

3. Injury in New York

Next, the Court must determine whether Koehler's tortious acts caused an injury to Plaintiff in New York.

To establish jurisdiction under CPLR § 302(a)(3)(ii), the plaintiff must show that the defendant's tortious acts caused an injury to plaintiff within New York. The general rule is that the location of the injury is determined by the place where the original event causing the injury occurs, i.e., the “situs-of-injury.” See Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990) (quoting Hermann v. Sharon Hosp., Inc., 135 A.D.2d 682, 683 (2d Dep't 1987)).

“Generally, in a conversion case, the tort and the injury will occur in the same location—where the conversion actually occurred.” Popper v. Podhragy, 48 F.Supp.2d 268, 274 (S.D.N.Y. 1998). In conversion or unjust enrichment cases involving the loss of money, the situs-of-injury is either where “the bank accounts holding the funds of the plaintiff were located and controlled or where the [defendants] managed those accounts.” Berdeaux v. OneCoin Ltd., 561 F. Supp. 3d 379, 407 (S.D.N.Y. 2021); Landau v. New Horizon Partners, Inc., 02-CV-6802 (JGK), 2003 WL 22097989, at *7 (S.D.N.Y. Sept. 8, 2003) (“It is undisputed that the bank accounts holding the funds of the plaintiff were located and controlled in Sweden, and that [defendant] manages its accounts from Sweden․ Any alleged conversion of funds or unjust enrichment took place in Sweden, and not in New York, because the funds were located in Sweden.”).

As explained above, the conversion of Plaintiff's Funds occurred when the Western Defendants refused to return Plaintiffs’ Funds despite the cancelation of the APKZ-Western contract and Plaintiff's demand for the return of the Funds. At that point in time, the Western Defendants were holding Plaintiff's Funds in Western's bank account. While Plaintiff does not specify where Western's bank account was located, the Court can infer that the account was located in Nevada because that is where Western is located. See Weintraub v. Empress Travel Trevose, Two-L's Ltd., No. 17-CV-00552 (PGG), 2018 WL 4278336, at *11 n.5 (S.D.N.Y. Mar. 6, 2018) (“Given that Plaintiffs reside in New Jersey, it is reasonable to infer that their bank accounts are located in New Jersey.”). Indeed, Plaintiff's Exhibit A, attached to Plaintiff's opposition to Koehler's Motion, shows a Las Vegas business address for Western's Chase bank account. See Dkt. No. 38-1, at 7. Further, the business signature card shows that the bank account was opened by a Chase bank located at the Trailwood and Village Center in Las Vegas, and the telephone number associated with the bank has a Las Vegas area code (702).³ See id. at 6.

Accordingly, the situs-of-injury for purposes of CPLR § 302(a)(3)(ii) was in Nevada, not New York.⁴ Thus, personal jurisdiction over Koehler does not exist in New York.⁵

4. Expectation of consequences in New York

As noted above, each element of the Penguin five-part test “is essential, and if plaintiff fails to proffer sufficient evidence for any element, it is dispositive of the issue of personal jurisdiction under this provision.” Krisko, 473 F. Supp. 3d at 300. Thus, Plaintiff's failure to establish that Koehler caused Plaintiff to suffer an injury in New York is dispositive regarding personal jurisdiction here.

Nonetheless, even if Plaintiff had shown a requisite harm in New York, there is nothing in the complaint to demonstrate that Koehler expected, or should have reasonably expected, her actions to cause consequences in New York. See Penguin, 16 N.Y.3d at 302. At best, Koehler should have reasonably expected her actions to cause consequences in Florida because that is where the incoming wire of Plaintiff's Funds originated. See Dkt. No. 1 ¶ 21. While Plaintiff claims that the Zoom meeting between Plaintiff, Western, and APKZ should have alerted Koehler to the New York consequences of her actions, Plaintiff does not allege that Koehler was at the meeting. Id. ¶ 25. Indeed, Koehler states in a sworn declaration that she was “never a part of any Zoom meeting between the parties.” Dkt. No. 39-1 ¶ 4.

Importantly, the presence of Western at that meeting and the knowledge that Western purportedly gained about Plaintiff's association with New York cannot be imputed to Koehler despite her alleged status as one of the Western Defendants in the complaint. See Ontel Products, Inc. v. Project Strategies Corp., 899 F. Supp. 1144, 1148 (S.D.N.Y. 1995) (“In New York, the individual who owns a corporation is generally not subject to personal jurisdiction as a result of the corporation's activities unless (1) the corporate veil can be pierced or (2) the corporation acted as an agent for the owner.”); see also Wolo Mfg. Corp. v. ABC Corp., 349 F. Supp. 3d 176, 195 (E.D.N.Y. 2018) (“plaintiff's conclusory and vague allegations in the amended complaint, which generally refer to ‘defendants’ in the plural and fail to describe [owner's] specific role, if any, in the alleged acts of which plaintiff complains, are insufficient to demonstrate [owner's] personal involvement in any of the alleged misconduct.”).

Moreover, Plaintiff cannot rely on allegations levied against the “Western Defendants” “to satisfy [its] burden to establish a prima facie case of personal jurisdiction against each Defendant as to each claim asserted.” Berdeaux, 561 F. Supp. at 397 (holding that the Court was unable to exercise personal jurisdiction over a particular defendant based on allegations that fail to distinguish between the group defendants) (emphasis in original); HSM Holdings, LLC v. Mantu I.M. Mobile Ltd., No. 20-CV-967 (LJL), 2021 WL 918556, at *15 (S.D.N.Y. Mar. 10, 2021) (“In relying only on group pleadings, in which it conflates multiple parties and fails to provide specific allegations, Plaintiff neglects its burden of establishing personal jurisdiction over each defendant.”).

Accordingly, Plaintiff fails to establish the fourth element of the Penguin five-part test.

5. Substantial revenue from interstate and/or international commerce

Plaintiff also fails to demonstrate the fifth element of the Penguin five-part test. In short, Plaintiff has not established that Koehler derived substantial revenue from either interstate or international commerce. Apart from a passing reference in the complaint and opposition, Plaintiff does not explain how Koehler personally derived any revenue from interstate or international commerce. See Aziyz v. Cameca, No. 1:22-CV-579 (TJM), 2023 WL 6065850, at *13 (N.D.N.Y. Sept. 18, 2023) (“Plaintiff's lack of specific factual allegations relative to the Individual Defendants on this issue defeats any conclusion that personal jurisdiction may be obtained over the Individual Defendants pursuant to Section 302(a)(3)(ii).”). Plaintiff's conclusory allegations are insufficient to satisfy this fifth element of the Penguin five-part test. See, e.g., Davey v. PK Benelux B.V., No. 20-CV-5726 (VB), 2022 WL 1289341, at *4 (S.D.N.Y. Apr. 29, 2022) (finding that plaintiff's “conclusory allegation that defendant ‘derives substantial revenue from its sales of its subject products in the U.S. and in New York’ is insufficient for the Court to exercise personal jurisdiction over Defendant” under CPLR § 302(a)(3)(ii)); Snowbridge Advisors LLC v. Eso Cap. Partners UK, LLP, 589 F. Supp. 3d 401, 415 (S.D.N.Y. 2022) (finding that plaintiff's allegations that defendants “ ‘regularly conduct’ business in New York,” which “d[id] not specify further or otherwise allege that they derive substantial revenues from interstate or international commerce” were insufficient to establish personal jurisdiction under CPLR § 302(a)(3)).

Based on the foregoing, this Court finds that the Default Judgment is void for lack of personal jurisdiction under Fed. R. Civ. P. 60(b)(4) and respectfully recommends that Koehler's motion to vacate be granted and that the complaint be dismissed against her. In light of this finding, the Court need not consider Koehler's other arguments in favor of vacatur. See State St. Bank, 374 F.3d at 178 (it is a “per se abuse of discretion” for a court to deny a motion to vacate a default judgment where the court lacks personal jurisdiction over the defendant).

B. Stay of Enforcement, Lifting of Restraints, and Return of Funds

Koehler seeks a return of all funds executed upon in connection with the Default Judgment, which total approximately $45,982.20, the lifting of the restraint imposed upon her bank account by Plaintiff, and a stay of all enforcement actions brought against her. See Dkt. No. 25. In response, Plaintiff argues, without providing any supporting case law, that the Court lacks authority “to lift a bank account levy issued out of the court in the United States District Court for the District of Nevada and to enter an order restraining JDH, counsel[,] and officials in Clark County Nevada from taking certain actions.” Dkt. No. 38, at 9.

It is black-letter law that when money is paid pursuant to a court order that is subsequently reversed, the disadvantaged party has a right to restitution. In Baltimore & Ohio R.R. v. United States, 279 U.S. 781, 785-86 (1929), the Supreme Court found that railroads benefitting from an invalid order of the Interstate Commerce Commission were under an obligation to make restitution after the reversal of the decree sustaining that order. In relevant part, the Court held:

The right to recover what one has lost by the enforcement of a judgment subsequently reversed is well established. And, while the subject of the controversy and the parties are before the court, it has jurisdiction to enforce restitution and so far as possible to correct what has been wrongfully done.

Id. at 786. This holding was reaffirmed by the Supreme Court in United States v. Morgan, 307 U.S. 183 (1939), and has been followed in the Second Circuit. See Vera v. Banco Bilbao Vizcaya Argentaria, S.A., 946 F.3d 120, 145 (2d Cir. 2019) (“[T]he baseline rule in this Circuit is that ‘a party against whom an erroneous judgment or decree has been carried into effect is entitled, in the event of a reversal, to be restored by his adversary to that which he has lost thereby.’ ” (quoting LiButti v. United States, 178 F.3d 114, 120 (2d Cir. 1999)). Under Morgan, a court must restore that which has been “given or paid under the compulsion of a judgment” where “its judgment has been set aside and justice requires restitution.” 307 U.S. at 197.

Applying these principles here, it is recommended that the Court order Plaintiff to return any funds it seized from Koehler in connection with the Default Judgment and to cease any enforcement efforts attendant to the Default Judgment. There is certainly no basis for Plaintiff to retain the funds obtained via the Default Judgment award as the Second Circuit has already vacated that judgment. The Court's authority here derives from its power over Plaintiff, a party who is indisputably within the Court's jurisdiction. See Baltimore & Ohio R.R., 279 U.S. at 786 (“It was the duty of the court to retain jurisdiction of the case, enter a decree that appellants are entitled to restitution.”); see also EM Ltd. v. Republic of Argentina, 695 F.3d 201, 208 (2d Cir. 2012) (“[p]rocess subsequent to judgment is as essential to jurisdiction as process antecedent to judgment, else the judicial power would be incomplete and entirely inadequate to the purposes for which it was conferred by the Constitution.” (quoting Riggs v. Johnson Cnty., 73 U.S. 166, 187 (1867)).

V. Plaintiff's Motion

This Court also respectfully recommends that Plaintiff's Motion be denied, without prejudice to renew. As set forth above, when a defendant declines to appear, and a plaintiff proceeds by means of a motion for default judgment, this Court “may first assure itself that it has personal jurisdiction over the defendant” before entering the requested default judgment. Sinoying Logistics Pte Ltd., 619 F.3d at 213; see also Mwani v. bin Laden, 417 F.3d 1, 6 (D.C. Cir. 2005) (“[A] court should satisfy itself that it has personal jurisdiction before entering judgment against an absent defendant.”).

Here, this Court finds it appropriate to consider whether it has personal jurisdiction over any of the remaining defendants prior to issuing any ruling on default judgment; doing so is particularly apt here given that personal jurisdiction does not exist over Koehler for the reasons described above. See Freeplay Music, LLC, 2018 WL 3639929, at *4; see also Yao Wu, 2015 WL 5664256, at *2 (“It therefore preserves judicial economy for the court to assess personal jurisdiction from the outset and thereby avoid rendering a void judgment.”). Based on the face of the complaint, as well as Plaintiff's submissions regarding Koehler, Plaintiff has not shown—for the same reasons outlined above regarding Koehler—that personal jurisdiction over any of the Defendants in this action is appropriate in New York.

Plaintiff's Motion is also procedurally deficient. “A motion for default judgment will not be granted unless the party making the motion adheres to all of the applicable procedural rules.” Annuity, Welfare & Apprenticeship Skill Improvement & Safety Funds of Int'l Union of Operating Engineers, Loc. 15, 15A, 15C & 15D, AFL-CIO v. Allstate Mapping & Layout, LLC, No. 22-CV-1831 (PKC) (TAM), 2023 WL 1475389, at *1 (E.D.N.Y. Feb. 2, 2023) (quoting Century Surety Company v. Adweek, No. 16-CV-335 (ENV) (PK), 2018 WL 10466835, at *1 (E.D.N.Y. Jan. 9, 2018)). “[L]ocal rules have the force of law, as long as they do not conflict with a rule prescribed by the Supreme Court, Congress, or the Constitution.” See Fin. Servs. Vehicle Tr. v. Osmeña, No. 22-CV-7491 (RPK) (CLP), 2023 WL 7000935, at *2 (E.D.N.Y. Aug. 15, 2023) (internal quotations and citation omitted).

Under Local Civil Rule 7.1, a motion for default judgment must consist of a notice of motion, a memorandum of law, and “[s]upporting affidavits and exhibits thereto containing any factual information and portions of the record necessary for the decision of the motion.” Loc. Civ. R. 7.1 (emphasis added). Plaintiff, however, has not provided such information as to whether personal jurisdiction exists over Defendants in New York, which is critical to the determination of Plaintiff's Motion. See Trustees of Bldg. Trades Educ. Benefit Fund v. Bridge Elec. NJ, LLC, No. 20-CV-3376 (DRH) (ARL), 2021 WL 6424628, at *1 (E.D.N.Y. Dec. 22, 2021) (denying motion for default judgment for failure to comply with Local Civil Rule 7.1 where “[t]he plaintiffs have also failed to address whether the Court has personal jurisdiction over the corporate defendant, whose office is located in New Jersey, and the individual defendant, who also appears to reside in New Jersey.”), report and recommendation adopted, 2022 WL 103666 (E.D.N.Y. Jan. 11, 2022).

Finally, under Local Civil Rule 55.2, a “party seeking a judgment by default ․ shall append to the application (1) the Clerk's certificate of default, (2) a copy of the claim to which no response has been made, and (3) a proposed form of default judgment,” and must mail these three items to the “last known business address” of the defaulting party (if not an individual). Loc. Civ. R. 55.2(b)-(c) (emphasis added). Plaintiff, however, has not attached a copy of the claim to which no response has been made—the complaint—to its motion. See Dkt. No. 21. Courts in the Eastern and Southern Districts of New York regularly deny such motions when strict procedural compliance is lacking. See, e.g., Yoon v. Toothsavers Dental Lab'y, Inc., No. 19-CV-2283 (ERK) (VMS), 2020 WL 13580466, at *8 (E.D.N.Y. June 22, 2020) (recommending denial of default judgment motion where plaintiff's submission in support of motion for default judgment did not include “a copy of the Clerk's certificate of default, a copy of the complaint, or a proposed form of default judgment”), report and recommendation adopted, July 27, 2020 Dkt. Order; Apex Moptedar. Co. v. Furniture, Inc., No. 11-CV-5365 (ENV) (RER), 2012 WL 1901266, at *1 (E.D.N.Y. May 18, 2012) (denying default judgment for, inter alia, plaintiff's failure to submit copy of certificate of default).

“As harsh at it may seem,” courts in this district “have repeatedly” denied motions for default judgment based on a movant's failure to adhere to Local Civil Rule 55.2(b). Lugo v. Allstate Ins. Co., No. 19-CV-7150 (JMA) (JMW), 2022 WL 3928727, at *5 (E.D.N.Y. Aug. 10, 2022) (recommending plaintiff's motion for default judgment be denied where “notably absent from Plaintiff's motion [was] the Clerk's certificate of default, a copy of the Complaint, and a proposed form of default judgment”), report and recommendation adopted, 2022 WL 3914981 (E.D.N.Y. Aug. 31, 2022). Indeed, “[t]he fact that the certificates of default and the Complaint ‘may be found electronically, scattered on the docket, does not absolve [plaintiff] of [her] obligation to collect and append copies to [her] moving papers.’ ” Koutlakis v. C P Grill Corp., No. 19-CV-1669 (DLI) (CLP), 2023 WL 7000847, at *3 (E.D.N.Y. July 12, 2023), report and recommendation adopted, Aug. 25, 2023 Dkt. Order; see also Yoon, 2020 WL 13580466, at *8 ( “[i]t is not enough that the complaint or Clerk's certificate of default can be found interspersed throughout the docket”); Rhoden v. Mittal, No. 18-CV-6613 (LDH) (SJB), 2020 WL 13664671, at *2 (E.D.N.Y. Jan. 3, 2020) (“Failure to comply with the requirements Local Rule 55.2 is a basis to deny a motion for default judgment”).

VI. Conclusion

Accordingly, this Court respectfully recommends that Koehler's Motion be granted, to wit: that the Default Judgment be vacated for lack of personal jurisdiction under Fed. R. Civ. P. 60(b)(4); that the complaint be dismissed against her; that the Court order the return of the funds collected from Koehler's bank account pursuant to the Default Judgment; and that the Court order Plaintiff to cease and desist all enforcement efforts attendant to the Default Judgment.

Additionally, this Court respectfully recommends that Plaintiff's Motion be denied, without prejudice to renew.

A copy of this Report and Recommendation is being electronically served on counsel. This Court directs Plaintiff's counsel to serve a copy of this Report and Recommendation by overnight mail and first-class mail to Defendants APKZ, Western, and Shen and to file proof of service on ECF by March 4, 2024.

Copies shall be served at the following addresses (see Dkt. No. 1 ¶¶ 2, 3, 4; Dkt. No. 23):

APKZ MEDICAL INC.

8350 NW 52 Terrace

Doral, Florida 33166

WESTERN MED SUPPLIES LLC

520 S. 4th Street, Fl. 2

Las Vegas, Nevada 89101

CHEK SHIN SHEN a/k/a JESSE SHEN

6979 Stober Court

Las Vegas, Nevada 89147

Any objections to this Report and Recommendation must be filed within 14 days after service of this Report and Recommendation. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2). See also Fed. R. Civ. P. 6(a) & (d) (addressing computation of days). Any requests for an extension of time for filing objections must be directed to Judge Kuntz. Failure to file objections within this period designating the particular issues to be reviewed waives the right to appeal the district court's order. See 28 U.S.C. § 636(b); Fed. R. Civ. P. 72(b)(2); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010); Kotlyarsky v. United States Dep't of Just., No. 22-2750, 2023 WL 7648618 (2d Cir. Nov. 15, 2023); see also Thomas v. Arn, 474 U.S. 140 (1985).

SO ORDERED.

FOOTNOTES

1.   The referral was made to then-United States Magistrate Judge Ramon E. Reyes, Jr. Upon Judge Reyes's appointment as a United States District Judge, the matter was re-assigned to the undersigned.

2.   In her reply, Koehler also addresses a criminal complaint that was filed against her in Clark County, Nevada styled State of Nevada v. Chek Shih Shen, Jessica Rose Koehler, 22-CR-035202, in which Plaintiff had accused Koehler of committing theft. See Dkt. No. 39-1. The charge against Koehler was dismissed without any plea agreement or admission of wrongdoing. See Dkt. Nos. 39-1, 39-2.

3.   See https://locator.chase.com/nv/las-vegas/1990-village-center-cir (last visited March 2, 2024).

4.   While this Court does not doubt that Plaintiff felt economic consequences in New York, these injuries are too attenuated to support an exercise of personal jurisdiction under CPLR § 302(a)(3). See Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 209 (2d Cir. 2001) (“The occurrence of financial consequences in New York due to the fortuitous location of plaintiffs in New York is not a sufficient basis for jurisdiction under § 302(a)(3) where the underlying events took place outside New York.”); Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326 (1980) (holding that the requisite injury must be of a direct nature and not a remote, derivative, or consequential injury which occurred in New York only because the plaintiff was domiciled there).

5.   The parties have not addressed whether the Eastern District of New York is a proper venue for this action. In light of the recommendation made herein, this Court does not substantively address the venue issue either. But if the Court were to permit claims against Koehler to go forward, the Court notes that Plaintiff does not appear to have shown that venue is proper in this district.

JOSEPH A. MARUTOLLO United States Magistrate Judge