Ji Jiang Zheng v Daotong LLC

2024 NY Slip Op 30512(U)

February 15, 2024

Supreme Court, Kings County

Docket Number: Index No. 531388/2023

Judge: Leon Ruchelsman

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.
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SUPREME COURT OF THE STATE OF NEW YORK 

COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 

-· . . . -·-· ----· ·-·--.-------·-· ----------------x· 

JI JIANG ZHENG, individually and as a 

member of Daotong LLC, 

Plaintiff, 

- against -

DAOTONG LLC, 201 LIBERTY LLC, SHUNHE 

MANAGEMENT LLC, XIANG YU CAO, ABC 

COMPANY #1-20, JOHN DOE #1-20, 

Defendants, -·-- - - --- - -- . --. ----·-- -·-·--·---- -·--·--- - - - - ---x 

PRESENT: HON. LEON RUCHELSMAN 

Decision and order 

Index 

. . . .. . No. 531388/2023 . . . . . 

February 15, 2024 

Motion Seq. #1 

The defendants have moved pursuant tb CPLR §3211 seeking to 

dismiss various portions of the complaint for the failure to 

allege any causes of action.. The plaintiff opposes the motion. 

Papers were submitted by the parties and arguments were held. 

After reviewing all the cl.rguments this court now makes the 

following determination. 

According to the verified complaint the plaintiff is a 34% 

owner of defendant Daotong LLC and is managed by defendant Xiang 

Yu Cao. Daotorig LLC is a fifty percent owner bf defendant 201 

Lihert:.y LLC. The verified complaint alleges that on October 20, 

2016, 201 Liberty LLC purchased property located at 201 46t.h 

Street in Kings County. On October 14, 2021, 201 Liberty LLC 

sold the property to defendant Shunhe Maha.gement LLC for tw.entythree million dollars. The verified compla,int .alleges that none 

of the. proceeds of .the sale or of ar1y income earned by 201 

Liberty LLC was. ever transferred to Daotong LLC or to the. 

plaintiff. The complaint asserts a derivative arid direct ca.use 

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of action for the breach of fiduciary duty by Cao, a derivative 

cause of action for breach of co11tract by Cao, aiding and 

a9etting a breach of a fiduciary duty by Shunhe LLC and an 

individual cai1se of action for an accounting of both Daotohg LLC 

and 201 Liberty LLC. The defendants have moved seeking to 

dismiss portions of the complaint on the grounds the complaint 

impermissibly mixes direct and eierivative claims and in any event 

fails to allege causes of action. As noted the plaintiff opposes 

the motion. 

Conclusions of Law 

It is well settled that upon a motion to dismiss the court 

must determine, accepting the allegations of tlle complaint as 

true, whether the party can succeed upon any reasonable view of 

those facts (Perez v. Y & M Transportation Corporation, 219, AD3d 

14 4 9, 196 NYS3d 145 [2d Dept., 2023] ) . Further, all the 

allegations in the complaint are deemed true and all reasonable 

inferences may be drawn in favor o:E the plaintiff {Archival Inc., 

V. 177 Realty Corp., 220 AD3d 909 1 198 NYS2d 567 [ 2d Dept., 

2023]). Whether the complaint will later survive a, motion for 

summary judgment, or whether the plaintiff will ultimately be. 

able to prove its claims, of course, plays no part in the 

detetmiriation of~ ~te-disco~ery CPLR §3211 motion to dismiss 

(see, Lam v. Weiss; 2.19 AD3d 713.,. 195 NYS3d 488 [ 2d Dept., 

20,23] j • 

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In order to assert any derivative claims the person must be a 

sha:r.:ehblder of the co:tporatioh (Marx v. Akers, 88 NY2d 189; 644 

NYS2d 121 [19.96]). Of course, a shareholder cannot assert 

derivative claim.s when the indiviciual merely maintains individual 

claims not shared by all the shareholders. Further, the same 

lawsuit may contain both derivative and direct claims. In Serino 

v. Lipper; 123. AD3d 34, 994 NYS2d 64 [Pt Dept., 2014] the court 

explained that to distinguish a derivative claim .from an 

individual claim the court must engage in two inquiries. First, 

whether any harm was suffered by the corporation or an individual 

stockholder and whether the corporation or the individual 

stockholder would receive the benefit of any re.covery. As the 

court stated "if there is any harm caused to the individual, as: 

opposed to the qorporation; then the individual rtiay proceed with 

a direct action ... On the other hand, even where an individual harm 

is claimed, if it is .confused with or embedded in the harm to the 

corporationr it cannot separately stahd" (id). Thus, where the 

alleged injury affects all shareholders not just the plaintiff 

then the action is derivative and hot direct (Vaughan v. Standard 

Gen~ral L.P., 154 AD3d 581, 63 ~YS3d 44 [1~ Dept., 2017]}. 

Consequently; wh.ile a complaint may contain both derivative 

claims and individual claims such claims cannot be intermingled 

within the same cause of action (~, Hettinga v. Nahouni.., 193 

AD.3d 449, 14i NYS3d 693 [Pt Dept., 2021L Greenberg v .. Falco 

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Construction Corp . , 2 9 Mis c3d 1202 (A) , 958 NY S2d 30 7 [ Supreme 

Court Kings County, 2010]) . 

In this case the first cause of action alleging a breach of 

a fiduciary duty sta:tes that ''Cao breached his fiduciary duty to 

the Plaintiff and the other members of Daotong when Cao failed to 

distribute income deriveci by Liberty pre-sale from the operations 

of the Subject Prbpertyll (see, Verified Complaint, 9I42 [NYSCEF 

Doc. No. 2]). The Verified Complaint impermissibly ±nixes 

derivative claims and individual claims in the same cau.se of 

action. Therefore, the motion seeking to dismiss the first caJJ.se 

of action is granted without prejudice and the plaintiff shall 

have an opportunity to properly re-plead the claims of a breach 

of a fiduciary duty, 

Further, without a valid underlying breach of fiduciary . . 

claim there can be no claim of aiding and abetting such breach of 

any fiduciary duty (see, Eccles v. Shamrock capital Advisors LLC, 

209 ADJd 486, 176 NYS3d 35 [1 st Dept,, 2022]). Therefore, the 

motion seeking. to dismiss. the third cause 0£ action is granted 

without prejudice. 

Concerning the motion seeking- to dismiss the accounting 

claim filed against 201 Liberty LLC, it is well settled that ''the 

right to an accounting is premis·ed ll.pbn the existence of a 

confidential or fi.dμciary relation;5hip and a brea.ch of the duty 

imposed by that relationship respecting property in which the 

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party seeking the accounting has an interest'' (see, Palazzo v. 

Palazzo, 121 AD2d 261, 503 NYSZd 381 [2d Dept., 1986]), The 

plaintiff, in his individual capacity does not maintain any 

fiduciary relationship with 201 Liberty LLC. "The fiduciary 

relationship necessapy to obtain an accounting is created by the 

plaintiff entrusting to the defenda.nt some money or property with 

respect to which defendant is bound t.o reveal his dealings" 

(Stevens v. St. Joseph's Hospital, 52 AD2d 722, 381 NYS2d 927 

[4th Dept., 197Ei]). The plaintiff;s mere minority ownership 

interest in Daotong LLC which in turn has an owne.rship interest 

in 201 Liberty LLC does not establish any fiduciary relationship 

between the individual plaintiff and 201 Liberty LLC. This is 

particularly true where the individual plaintiff is not a 

shareholder of 201 Liberty LLC (see, Castellotti v. Free, 138 

AD3d 198, 27 NYS3d 507 [Pt Dept., 2016], Royal Warwick S. A. v. 

Hotel Representati v:e Inc., 106 AD3d 451, 965 NYS2d 409 [ pt 

Dept .. , 2013]). Thus, the plaintiff's mere owners.hip in a company 

owned by 201 Liberty LLG doe.5 not e5tablish any fiduciary 

relationship. Therefore, the motion seeking to dismiss that 

portion of the accounting cause of action is grahted. 

So ordered. 

DATED: February 

Brooklyn 

ENTER~~ 

N. 

15, 

Y; 

202.4 

Hem. 

~ Leon Ruchelsman 

J.st 

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