Joyous JD Ltd. v. Yolanda Asset Mgt. Corp.

2024 NY Slip Op 33318(U)

• Court: New York Supreme Court, New York County
• Decided: September 19, 2024
• Docket: Index No. 652028/2023
• Status: Unpublished

Opinion

Joyous JD Ltd. v Yolanda Asset Mgt. Corp. 2024 NY Slip Op 33318(U) September 19, 2024 Supreme Court, New York County Docket Number: Index No. 652028/2023 Judge: Lyle E. Frank Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYLE E. FRANK PART 11M Justice ----------------------------------------------------------------- ----------------X INDEX NO. 652028/2023 JOYOUS JD LIMITED, MICROALGO INC.,VIYI ALGORITHM INC. MOTION DATE 05/13/2024

Plaintiff, MOTION SEQ. NO. 001

- V -

YOLANDA ASSET MANAGEMENT CORPORATION, DECISION + ORDER ON ZHIGUO ZHANG, YANMING LIU, MOTION

Defendant. ------------------------------------------------------------------- --------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,20,21,22,23,24,25,26,27,28,29,30, 31, 32,33, 34,35 were read on this motion to/for DISMISS

Background 1

Plaintiffs, Joyous JD Limited ("Joyous"), MicroAlgo Inc., and VIYI Algorithm Inc.,

bring this action against Defendants alleging causes of action based on several agreements, the

common law, and for Securities Act of 1933 (the "Securities Act") violations.

Defendant Yolanda Management Corporation ("Yolanda") is a BVI company

incorporated in 2018. Zhiguo Zhang ("Zhang") oversees day-day management of Yolanda.

Together, Yolanda and Zhang will be referred to as the "Defendants". Liu, another defendant, did

not join in the motion to dismiss. On May 14, 2018, Yolanda formed and invested in another

company-Venus Acquisition Corporation ("Venus")-a blank check or special purpose

acquisition company (colloquially known as a "SPAC"). Some of the allegations in this case

concern Venus despite the fact that Venus is not a named party.

1 The Court would like to thank Special Master Jason Lowe, Esq. for his assistance in this matter. 652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 1 of 7 CORPORATION ET AL Motion No. 001

1 of 7 [* 1] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

Defendants brings a motion to dismiss arguing this action must be dismissed due to lack

of personal jurisdiction, pursuant to the forum non conveniens doctrine, due to res judicata and/or

collateral estoppel, for lack of standing, and for failure to state a cause of action. The Court

analyzes each of these grounds below.

Analysis

Foreign Language Documents Submitted As Part of This Motion

Initially, the Court notes that the parties submitted foreign language documents as part of

this motion. The foreign language documents are not considered by the Court. CPLR 2101 (b)

requires all documents submitted to the Court to be in English. Thus, the untranslated documents

submitted by Defendant are not considered as they are not in English. With regards to the

documents submitted by Plaintiff that are translated into English, CPLR 2101 (b) requires the

documents to be "accompanied by an English translation and an affidavit by the translator stating

his qualifications and that the translation is accurate." In this case, a certification was submitted,

which is not an affidavit. In addition, the certification does not purport to be from the person

doing the translation. Therefore, it fails to meet the requirements of CPLR 2101 (b) and cannot be

considered by this Court.

Personal Jurisdiction

Defendants Zhang and Yolanda move to dismiss due to lack of personal jurisdiction. Mr.

Zhang notes he is the actual controller of Yolanda and then asserts that Yolanda has no business

offices in New York. However, Venus lists an address in New York as its principal office in

filings with the SEC. One of the SEC filings states " Yolanda Management Corporation

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 2 of 7 CORPORATION ET AL Motion No. 001

2 of 7 [* 2] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

("Yolanda") is the founder/sponsor of [Venus] and does not conduct other business activity."

NYSCEF #26 at page 4.

Further, the SEC filings state that "Mr. Liu is the sole director and shareholder of

Yolanda with sole right and power vote and dispose of the securities of the Issuer held by

Yolanda." That same SEC filing shows that Mr. Liu maintains an office in New York.

Thus, Mr. Zhang's statements that Yolanda does not do any business in New York seem

to be undercut by the idea that Yolanda's only business was being the founder/sponsor of a

company whose principal office is in New York and that there was a time when Yolanda's sole

shareholder and director maintained an office in New York at the same address where Venus

maintained its principal office.

In addition, Plaintiffs allege causes of action related to an initial public offering for

a SPAC in New York along with a de-SP AC that allegedly occurred in New York.

To defeat a motion for summary judgment pursuant to CPLR 321 l(a)(8) a plaintiff need

only establish, prima facie, that the defendant was subject to the personal jurisdiction of the

Supreme Court. (PC-16 Doe v Hill Regional Career High Sch., 223 AD3d 518,518 [1st Dept

2024][On this pre-answer motion to dismiss, plaintiff has made prima facie showing that

defendants are subject to personal jurisdiction]; Weitz v Weitz, 85 AD3d 1153 [2nd Dept. 2011]).

The above is sufficient to establish, prima facie, that Yolanda is subject to personal jurisdiction

in New York.

With respect to Mr. Zhang, Plaintiffs argue that the Court has personal jurisdiction over

Mr. Zhang due to him being a controlling person of Yolanda. For the Court to have personal

jurisdiction over a controlling person due to a corporation's activities the controlling person must

have benefited from the transaction and exercised some degree of control over the corporation in

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 3 of 7 CORPORATION ET AL Motion No. 001

3 of 7 [* 3] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

relation to the transaction. (Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460,467, 527 N.Y.S.2d

195, 199 [1988]). The allegations that Mr. Zhang was Yolanda's principal shareholder, in charge

of the day-to-day management, and controlling director along with the allegations that Mr.

Zhang was compensated for being the promoter for Venus are sufficient to make out prima facie

showing of personal jurisdiction for Mr. Zhang as a controlling person of Yolanda. Therefore,

Defendants' motion to dismiss for lack of personal jurisdiction is denied.

Forum Non Conveniens

Defendants argue that this case should be dismissed pursuant to the forum non

conveniens doctrine. A court may dismiss an action on forum non conveniens grounds "where it

is determined that the action, although jurisdictionally sound, would be better adjudicated

elsewhere." (Islamic Republic v. Pahlavi, 62 N.Y.2d 474, 478-79 [1984]). "Among the factors to

be considered are the burden on the New York courts, the potential hardship to the defendant,

and the unavailability of an alternative forum in which plaintiff may bring suit." Id. at 479

(citation omitted). Further, a "court may also consider that both parties to the action are

nonresidents." Id.

Prior to this action being filed, Yolanda filed an action against Microalgo, Inc., one of the

plaintiffs in this case. See YOLANDA MANAGEMENT CORPORATION v. MICROALGO,

INC. et al; Index Number 650956/2024. The subject of that lawsuit was related to the subject

matter of this lawsuit. Thus, the hardship factor balances against dismissal.

Similarly, Plaintiffs argue that they could not bring many of the causes of action in an

alternative forum. Defendants do not argue that a majority of the claims could be brought in an

alternative forum. This factor, therefore, also weighs against dismissal on forum non conveniens

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 4 of 7 CORPORATION ET AL Motion No. 001

4 of 7 [* 4] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

grounds. Further, this factor is the most important factor in a forum non conveniens

analysis. (Islamic Republic ofIran v. Pahlavi, 62 N.Y.2d 474,479 [1984]).

Therefore, though the parties are both out of state, which weighs in favor of dismissal, the

other factors weigh against dismissal and thus the Court denies the motion to dismiss pursuant to

the forum non conveniens doctrine.

Collateral Estoppel/Res Judicata

Defendants argue that this action must be dismissed pursuant to res judicata, collateral

estoppel, and/or comity. This argument is based on an interpretation of what claims were

litigated in China. As is discussed above, the records from the Chinese proceeding are not

properly before this Court as they are either submitted in a foreign language or do not properly

follow the CPLR for the submission of foreign language documents. Therefore, this Court has an

inadequate record to analyze or determine whether dismissal is warranted pursuant to res

judicata, collateral estoppel, and/or comity. The motion to dismiss on these grounds is therefore

denied.

Lack of Standing and Failure to State a Claim

Defendants argue that the cause of action pursuant to Section 11 of the Securities Act

must be dismissed because Plaintiff Joyous has not presented evidence to establish that the

shares it purchased are directly traceable to the IPO stock that began trading on February 11,

2021. At the motion to dismiss stage, a party is not required to present evidence to prove the

allegations in their pleading. Therefore, Defendants' motion to dismiss the Section 11 claim is

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 5 of 7 CORPORATION ET AL Motion No. 001

5 of 7 [* 5] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

Defendants argue that pursuant to Section 12(a)(2) of the Securities Act, only offers or

sales of securities made by means of a prospectus or oral communication are actionable.

Defendants argue that aftermarket securities sales do not qualify under this standard. This is

incorrect. Some aftermarket securities sales may be actionable pursuant to Section 12(a)(2). (In

re Giant Interactive Group, Inc. Sec. Litig., 643 F Supp 2d 562, 574 [SDNY 2009]["To the

extent that shares of Giant were purchased in the aftermarket from the Underwriter Defendants

acting as dealers who had an obligation to distribute a prospectus, Section 12(a)(2) liability could

attach[.]"])

Finally, Defendants moved to dismiss pursuant to Limited Liability Company Law

(LLCL) § 808(a) which bars unregistered foreign LLCs from maintaining any action in this state

without a certificate of authority. However, since none of the Plaintiffs are limited liability

companies, LLCL § 808(a) does not provide any basis for dismissing this action.

Accordingly, it is hereby

ADJUDGED that Defendant Yolanda Management Corporation and Zhiguo Zhang' s

motion to dismiss is denied; and it is further

ORDERED that Defendants Yolanda Management Corporation and Zhiguo Zhang shall

file an answer within 20 days of this order being filed by the Court on NYSCEF; and it is further

ORDERED that the parties shall meet and confer regarding a preliminary conference

order. If the parties cannot agree on a preliminary conference order by October 18, 2024, the

parties shall email the part clerk to seek a conference.

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 6 of 7 CORPORATION ET AL Motion No. 001

6 of 7 [* 6] INDEX NO. 652028/2023 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 09/19/2024

9/19/2024 DATE LYLE E. FRANK, J.S.C.

~ ~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED 0 DENIED GRANTED IN PART □ OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

□ CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE

652028/2023 JOYOUS JD LIMITED ET AL vs. YOLANDA ASSET MANAGEMENT Page 7 of 7 CORPORATION ET AL Motion No. 001

7 of 7 [* 7]