Court Opinion

ID: 9942823
Source: CourtListenerOpinion
Date Created: 2024-02-21 21:09:01.749827+00
Date Added: 2024-06-11T13:44:43.569489
License: Public Domain

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.
  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                                                           INDEX NO. 531388/2023
  NYSCEF DOC. NO. 22                                                                               RECEIVED NYSCEF: 02/16/2024

          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,                                           Decision and order

                                - against -                                               Index
                                                                                          . . . .. . No. 531388/2023
                                                                                                         .  . . .   .

           DAOTONG LLC, 201 LIBERTY LLC, SHUNHE
           MANAGEMENT LLC, XIANG YU CAO, ABC
           COMPANY #1-20, JOHN DOE #1-20,
                                          Defendants,                                          February 15, 2024
           -·- - - - -- - - -- . -- . -- --·- - -·-·- -·- -- - -·- -·-- - - - - - -- -x
           PRESENT: HON. LEON RUCHELSMAN                                                          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 46 t.h

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

           sold the property to defendant Shunhe Maha.gement LLC for tw.enty-

           three 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

                                                                 1 of 5
[* 1]
  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                                   INDEX NO. 531388/2023
  NYSCEF DOC. NO. 22                                                        RECEIVED NYSCEF: 02/16/2024

           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 •

                                                     2

                                                   2 of 5
[* 2]
 FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                            INDEX NO. 531388/2023
 NYSCEF DOC. NO. 22                                                 RECEIVED NYSCEF: 02/16/2024

              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 i t 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

---------------------------------------------·----··--·-·-····-·
[* 3]                        3 of 5
  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                                INDEX NO. 531388/2023
  NYSCEF DOC. NO. 22                                                    RECEIVED NYSCEF: 02/16/2024

           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, i t 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

                                                4

                                              4 of 5
[* 4]
  FILED: KINGS COUNTY CLERK 02/16/2024 10:37 AM                            INDEX NO. 531388/2023
  NYSCEF DOC. NO. 22                                                 RECEIVED NYSCEF: 02/16/2024

          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.

                                         ENTER~~
           DATED: February 15, 202.4            ~
                   Brooklyn N. Y;             Hem. Leon Ruchelsman
                                              J.st

                                                5

                                              5 of 5
[* 5]