Zhang v. Family Wu 1, LLC

• Court: District Court, E.D. New York
• Decided: March 24, 2022
• Docket: 1:19-cv-05723
• Status: Unknown

Opinion

Clerk’s Office Filed Date: 3/24/2022 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK U.S. DISTRICT COURT nenennnnen nenee enna nnnensennnne mannan EASTERN DISTRICT OF NEW YO BROOKLYN OFFICE NING ZHANG, RUOPENG CHE, YUZHOU WANG, YONGHONG GUO, XUSONG LIU, JIASHENG ZHANG, GUANGXIANG QU, LIANGPENG ZOU, and NIANCHUN ZHANG, on behalf of themselves and all other similarly situated employees, Plaintiffs, NOT FOR PUBLICATION against: MEMORANDUM & ORDER 19-cv-5723 (CBA) (RML)

FAMILY WU 1, LLC d/b/a FIRST LAMB SHABU, LAO CHENG YI GUO, FAMILY WANG, LLC, FAMILY WANG 1, LLC, YIJING WANG, and PENG WU, Defendants.

en ee nee nnn nnn nnn X AMON, United States District Judge: On February 17, 2020, the then-named parties to this litigation filed their consent to the

jurisdiction of Magistrate Judge Levy to resolve all dispositive issues. On August 31, 2020,

Plaintiffs filed an Amended Complaint, which named Family Wang, LLC and Family Wang 1,

LLC (collectively, “Moving Defendants”) as new defendants. (Docket Entry (“D.E.”) #19 “Am.

Compl.”).) On July 9, 2021, Moving Defendants filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). (D.E. # 30-1 (“Mot.”).) Unlike their co-defendants, Moving Defendants declined to consent to the jurisdiction of

Magistrate Judge Levy, and this case was reassigned to me for all purposes. I referred Moving

Defendants’ motion to dismiss to Magistrate Judge Levy for report and recommendation (“R&R”).

On February 22, 2022, Magistrate Judge Levy filed his R&R and recommended that I deny Moving

Defendants’ motion, finding that Plaintiffs’ claims under New York’s Debtor and Creditor Law

(“DCL”) against Moving Defendants are part of the same “common nucleus of operative fact” as

Plaintiffs’ claims under the Fair Labor Standards Act (the “FLSA”), and therefore, within the

supplemental jurisdiction of the Court. (See D.E. # 38 (“R&R”) 2-3.) Moving Defendants object on three grounds: first, that Magistrate Judge Levy “made no

determination regarding the lack of subject-matter jurisdiction over Plaintiffs’ DCL Claims,” (D.E.

# 39 (“Obj.”) 1); second, that Magistrate Judge Levy improperly found that the DCL claims were

within the ancillary jurisdiction of the Court, (id. at 2); and third that Magistrate Judge Levy

declined to “address the Court’s discretion to decline to exercise ancillary jurisdiction over

Plaintiff's claims,” (id. at 4). For the reasons that follow, I find no merit to Moving Defendants’

objections. DISCUSSION When deciding whether to adopt an R&R, a district court “may accept, reject, or modify,

in whole or in part, the findings or recommendations made by the magistrate judge.” 28 □□□□□□

§ 636(b)(1)(C). “To accept those portions of the R & R to which no timely objection has been

made, ‘a district court need only satisfy itself that there is no clear error on the face of the record,”

Augustin v. Cap. One, No. 14-cv-179 (CBA)(VMS), 2015 WL 5664510, at *1 (E.D.N.Y. Sept. 24,

2015) (quoting Jarvis v. N. Am. Globex Fund L.P., 823 F. Supp. 2d 161, 163 (E.D.N.Y. 2011)).

When specific objections are made, “(t]he district judge must determine de novo any part of the

magistrate judge’s disposition that has been properly objected to.” Fed. R. Civ. P. 72(b)(3).

“However, to the extent that a party makes only conclusory or general objections, or simply

reiterates the original arguments, the court reviews the [R&R] only for clear error.” Augustin,

2015 WL 5664510, at *1 (quoting Soley v. Wasserman, 823 F. Supp. 2d 221, 228 (S.D.N.Y.

2011)). Moving Defendants first object that “Plaintiffs have pled 28 U.S.C. § 1332(d)(2) [(the Class

Action Fairness Act)] as their sole basis for subject matter jurisdiction” and that Plaintiffs fail to

adequately allege jurisdiction under the that act. (Obj. 2.) They further highlight that Plaintiffs

identify “jurisdiction over state law claims asserted here pursuant to the Class Action Fairness

Act” and only allege “supplemental jurisdiction over the New York Labor Law [(the “NYLL”)]

claims,” not the DCL claims. (Am. Compl. { 6; Obj. 2.) Although Plaintiffs both fail to

explicitly state a basis for jurisdiction for the DCL claims in their Amended Complaint and seem

to link their state law claims to the Class Action Fairness Act cause of action, this inartful

pleading is insufficient to render this Court without jurisdiction to consider those claims.

Moving Defendants argue in their original motion and again in their objections that

Plaintiffs have failed to satisfy their burden to prove jurisdiction by a preponderance of the

evidence under the Class Action Fairness Act. (Mot. 4; Obj. 2.) Specifically, they argue that

Plaintiffs “have failed to establish that the matter in controversy against Moving Defendants

exceeds the sum or value of $5,000,000, and most critically, that Plaintiffs’ claims against Moving

Defendants are not brought on behalf of the purported class” as required by the jurisdictional

requirements of the Class Action Fairness Act. (Obj. 2.) “A court may dismiss for lack of subject matter jurisdiction only if it appears that the

plaintiff can prove no set of facts that would support jurisdiction.” United States v. Sforza, 326

F.3d 107, 110 (2d Cir. 2003). Whether or not Plaintiffs have adequately alleged facts supporting

jurisdiction under the Class Action Fairness Act, it is undisputed that the plaintiffs have pleaded

an independent basis of federal jurisdiction under the FLSA. 29 U.S.C. § 216(b); see 28 U.S.C.

§ 1331. Moreover, in the body of the Amended Complaint, Plaintiffs explicitly tie their DCL

claims to their underlying FLSA claims, alleging that Moving Defendants “willfully and

intentionally committed fraudulent conveyances of assets . . . in order to shield their assets from

potential liabilities to Plaintiffs.” (Am. Compl. { 45.) Moving Defendants’ second and third objections concern supplemental jurisdiction. Under

28 U.S.C. § 1367(a), a federal court may exercise “supplemental jurisdiction over all other claims

that are so related to claims in the action within such original jurisdiction that they form part of the

same case or controversy under Article III of the United States Constitution.” In short, if the

related claims fall within the same “common nucleus of operative fact” as the claims over which

the federal court has original jurisdiction, the federal court may hear those related claims. United

Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966). A “common nucleus of operative fact”

means that the state-law claims “must be such that the plaintiff ‘would ordinarily be expected to

try them all in one judicial proceeding.’” Montefiore Med. Ctr. v. Teamsters Loc. 272, 642 F.3d

321, 332 (2d Cir. 2011) (quoting Gibbs, 383 U.S, at 725). Supplemental jurisdiction also extends

to claims meant to “enforce a judgment entered by a federal court” because without such

jurisdiction, “the judicial power would be incomplete and entirely inadequate to the purposes for

which it was conferred by the Constitution.” Peacock v. Thomas, 516 US. 349, 356 (1996)

(quoting Riggs v. Johnson County, 73 U.S. (6 Wall.) 166, 187 (1868)). Moving Defendants argue that “Plaintiffs’ FLSA and NYLL claims are wholly unrelated

to Plaintiffs’ claims against them pursuant to DCL.” (Obj. 3.) Magistrate Judge Levy properly

rejected that argument, noting that the courts in both Yong Xiong He v. China New Star Restaurant

Inc., 19-cv-5907 (PKC) (CLP), 2020 WL 6202423 (E.D.N.Y. Oct. 20, 2020) and Kim v. Yoo, 776

F. App’x 16 (2d Cir. 2019) (summary order), determined that “a Debtor and Creditor Law

fraudulent conveyance claim made to enforce an FLSA judgment” is properly within the

supplemental jurisdiction of the federal courts. (R&R 4.) Moving Defendants argue that these

cases are distinguishable because Kim v. Yoo—upon which Yong Xiong He relies in its holding—

concerned “[a]n ancillary action to collect a judgment,” Kim, 776 F. App’x at 20, whereas there is

“not yet a judgment to effectuate” in this case. (Obj. 4.) Moving Defendants are correct that Kim v. Yoo concerned a decision in a different

procedural posture, but I find that this distinction does not make a difference in my analysis of the

propriety of supplemental jurisdiction. Ultimately, if the Plaintiffs prevail in this action and prove

liability under the FLSA and the NYLL, there will be a judgment to collect in this case. And

Plaintiffs have pleaded in their Amended Complaint that the transfers underlying the creation of

Family Wang LLC and Family Wang 1 LLC were made “with actual intent to hinder and delay

Plaintiffs’ recovery.” (Am. Compl. { 185.) DCL claims to avoid the transfer in advance of a

judgment of this case fit squarely within the supplemental jurisdiction of the federal courts. See

Peacock, 516 U.S. at 356 (“[W]e have approved the exercise of ancillary jurisdiction over a broad

range of supplementary proceedings involving third parties to assist in the protection of federal

judgments—including attachment, mandamus, garnishment, and the prejudgment avoidance of

fraudulent conveyances.” (emphasis added)). Plaintiffs’ ability to recover on their claims is

assuredly part of a “common nucleus of operative fact” with the underlying FLSA claims.

Accordingly, supplemental jurisdiction under § 1367 is appropriate, and I reject Moving

Defendants’ second objection. In the alternative, Moving Defendants argue in their third objection that I should decline to

exercise supplemental jurisdiction under 28 U.S.C. § 1367(c). That subsection provides that:

[T]he district courts may decline to exercise supplemental jurisdiction over a claim

under [§ 1367(a)] if—

(1) The claim raises a novel or complex issue of State law, (2) The claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) The district court has dismissed all claims over which it has original jurisdiction, or (4) In exceptional circumstances, there are other compelling reasons for declining jurisdiction 28 U.S.C. § 1367(c). Section 1367(c) establishes a “permissive rather than mandatory” basis for

a court to decline to exercise supplemental jurisdiction. Valencia ex rel. Franco v. Lee, 316 F.3d

299, 305 (2d Cir. 2003). “[T]herefore a district court may retain jurisdiction over the action even

+f one or more factors are met.” Blackrock Balanced Cap. Portfolio v. HSBC Bank USA, Nat’l

Ass’n, 95 F. Supp. 3d 703, 709 (S.D.N.Y. 2015). Moving Defendants note that under § 1367(c)(2)

a district court “may decline to exercise supplemental jurisdiction” where a state “claim

substantially predominates” over the federal claims. (Obj. 7.) Moving Defendants argue that the

DCL claims predominate because Plaintiffs’ FLSA and NYLL claims “are straightforward,” but

“(aldjudicating Plaintiffs’ DCL claims would add significant complexity to this relatively

straightforward . . . case.” (Id.) Moreover, Moving Defendants warn that “allowing Plaintiffs to

bring unrelated DCL claims... would open the floodgates to claims that are completely unrelated

to FLSA and NYLL claims,” and suggests that this constitutes “compelling reasons for declining

jurisdiction” under § 1367(c)(4). (Id.) Finally, Moving Defendants seem to argue that the relative

prejudice they would suffer if the lawsuit is not dismissed under Rule 12(b)(1) also constitutes

“compelling reasons for declining jurisdiction.” (Id. at 7-8.) I disagree with Moving Defendants’ premise that allowing Plaintiffs to bring DCL claims

would “open the floodgates” to unrelated litigation. As discussed above, these DCL claims are

related to Plaintiffs’ efforts to recover a potential judgment for the FLSA violations they allegedly

suffered. Accordingly, I do not find this argument persuasive. I am also unpersuaded by Moving

Defendants’ arguments regarding the prejudice they face—which appears to be that they would be

forced to defend this action and pay legal fees, and that they have “only a limited amount of time

left to conduct discovery.” (Id.) Neither of these grounds rises to the level of “compelling

reasons.” See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 448 (2d Cir.

1998) (warning that “[t]he use of ‘exceptional circumstances’ [in § 1367(c)(4)] indicates that

‘Congress has sounded a note of caution that the bases for declining jurisdiction should be

extended beyond the circumstances identified in subsections (c)(1)-(3) only if the circumstances

are quite unusual” (quoting Exec, Software N. Am., Inc. v. U.S. Dist. Ct for Cent. Dist. of Cal., 24

F.3d 1545, 1558 (9th Cir. 1994), overruled on other grounds, Cal. Dept. of Water Res. v. Powerex

Corp., 533 F.3d 1087 (9th Cir. 2008))). Moving Defendants’ argument concerning the relative complexity of Plaintiffs’

FLSA/NYLL claims and their DCL claims fares slightly better—but the outcome is the same. The

predominance exception to “the exercise of supplemental jurisdiction” should be invoked only

“when ‘permitting litigation of all claims in the district court can accurately be described as

allowing a federal tail to wag what is in substance a state dog.’” Jager v. Bos. Rd. Auto Mall, Inc.,

No. 14-cv-614 (LLS), 2015 WL 235342, at *5 (S.D.N.Y. Jan. 16, 2015) (quoting Luongo v.

Nationwide Mut. Ins. Co., No. 95-cv-3190 (MBM), 1996 WL 445365, at #5 (S.D.N.Y. Aug. 7,

1996)). The determination of whether “state-law claims .. . predominate over federal claims”

turns on issues like “proof, ... scope of the issues raised, or... the comprehensiveness of the

remedy sought.” Fixed Income Shares: Series M_v. Citibank N.A., 130 F. Supp. 3d 842, 852

(S.D.N.Y. 2015) (quoting Dedalus Found, v. Banach, No. 09-cv-2842 (LAP), 2009 WL 3398595,

at *5 (S.D.N.Y. Oct. 16, 2009)). Moving Defendants argue that the DCL claims will require

different proof and examine different factual and legal bases than Plaintiffs’ underlying FLSA claims do. But even if Moving Defendants are correct that the DCL claims “predominate” over the FLSA claims, I may nonetheless exercise supplemental jurisdiction. The Second Circuit has been clear that “a district court should not decline to exercise supplemental jurisdiction unless it also determines that doing so would not promote the values articulated in Gibbs: economy, convenience, fairness, and comity,” Jones v. Ford Motor Credit Co., 358 F.3d 205, 214 (2d Cir. 2004) (internal citation omitted). “Litigants come to court to have their problems solved,” and resolving these DCL claims in connection with the FLSA claims will aid in that pursuit. Catzin v. Thank You & Good Luck Corp., 899 F.3d 77, 86 (2d Cir. 2018). Having the Plaintiffs resolve their DCL claims in separate state court litigation would not advance the values of “economy, convenience, fairness, and comity” set forth in Gibbs. Jones, 358 F.3d at 214. Accordingly, after de novo review, I adopt Magistrate Judge Levy’s recommendation to exercise supplemental jurisdiction over Plaintiffs* DCL claims against Moving Defendants. SO ORDERED. Dated: March js. 2022 Brooklyn, New York s/Carol Bagley Amon United States Distet Judge