Guo Zhong Wu v. Qiao Lin (In re Qiao Lin)

• Decision Date: 28 September 2017
• Docket Number: Case No. 14–42344–ess,Adv. Pro. No.: 14–01111–ess
• Citation: 576 B.R. 32
• Parties: IN RE: QIAO LIN, Debtor. Guo Zhong Wu, Rong Zheng, and Wen Dong Lin, Plaintiffs, v. Qiao Lin, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

576 B.R. 32

IN RE: QIAO LIN, Debtor.

Guo Zhong Wu, Rong Zheng, and Wen Dong Lin, Plaintiffs,

v.Qiao Lin, Defendant.

Case No. 14–42344–ess

Adv. Pro. No.: 14–01111–ess

United States Bankruptcy Court, E.D. New York.

Signed September 28, 2017

Rebecca J. Osborne, Esq., Vladeck, Raskin & Clark, PC, 565 Fifth Avenue, 9th Floor, New York, NY 10017, Attorneys for Plaintiffs

Yimin Chen, Esq., Law Offices of Chen & Associates, 39–15 Main Street, Suite 502, Flushing, NY 11354, Attorneys for Defendant

MEMORANDUM DECISION ON PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT

HONORABLE ELIZABETH S. STONG, UNITED STATES BANKRUPTCY JUDGE

Introduction

Before the Court is a motion for partial summary judgment by plaintiffs Gu Zhong Wu, Rong Zheng, and Wen Dong Lin seeking an order finding that the default judgment entered against the defendant Qiao Lin and others in Wu v. Glyphs Garden, Inc., No. 12–07995 (S.D.N.Y. May 20, 2013) (the "District Court Action"), a case brought by these plaintiffs in the United States District Court for the Southern District of New York, is nondischargeable under Bankruptcy Code Section 523(a)(6). The Plaintiffs argue that there is no genuine dispute as to a material fact as to each element of their claim based on the record here, and separately, based on the collateral estoppel effect of the District Court's judgment.

Mr. Lin opposes this motion on grounds that collateral estoppel does not apply here, and that the Plaintiffs have not established that there is no genuine dispute as to a material fact as to whether he engaged in "willful" and "malicious" conduct as required by Section 523(a)(6).

Jurisdiction

This Court has jurisdiction over this adversary proceeding pursuant to Judiciary Code Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the Order dated December 5, 2012, of the United States District Court for the Eastern District of New York. In addition, this Court may adjudicate these claims to final judgment to the extent that they are core proceedings pursuant to Judiciary Code Section 157(b), and to the extent that they are not core proceedings, pursuant to Judiciary Code Section 157(c) because the parties have stated their consent to this Court entering a final judgment. See Wellness Int'l Network, Ltd. v. Sharif, ––– U.S. ––––, 135 S.Ct. 1932, 1940, 191 L.Ed.2d 911 (2015) (holding that in a non-core proceeding, a bankruptcy court may enter final orders "with the consent of all the parties to the proceeding").

Background

The District Court Action and Default Judgment

On October 26, 2012, the Plaintiffs commenced an action (the "District Court Action") by filing an amended complaint in the District Court against Mr. Lin, as well as Glyphs Garden, d/b/a Saigon Grill, d/b/a/ Saga (the "Restaurant"), Bei Lin, Xin Wei Lin, and Hsiao Tong Chang a/k/a Frank Chang (the "Restaurant Defendants"). In that action, the Plaintiffs asserted violations of the Fair Labor Standards Act of 1938 (the "FLSA"), promulgated and enforced under New York's Minimum Wage Act and Labor Law (the "NY Labor Law"). Neither Mr. Lin nor the other defendants responded to the amended complaint.

On February 8, 2013, the Clerk of the Court entered a Certificate of Default as to Mr. Lin and the other Restaurant Defendants, and a motion for default judgment followed. That motion asserted that Mr. Lin, among others, willfully circumvented minimum wage and overtime laws; willfully falsified pay stubs by reporting incorrect hours worked; willfully failed to post lawfully required notices concerning federal and state minimum wage protections or otherwise to inform the Plaintiffs of those protections; willfully failed to provide the Plaintiffs with notices required under the NY Labor Law; willfully retained portions of the Plaintiffs' tip earnings; and unlawfully dismissed employees Mr. Wu and Mr. Zheng. The Plaintiffs sought entry of a default judgment against all of the Restaurant Defendants, including Mr. Lin.

On April 25, 2013, the District Court held a hearing on the motion for default judgment. None of the Restaurant Defendants appeared or opposed the motion, and on April 26, 2013, the District Court entered an order granting the motion for default judgment. On May 20, 2013, the District Court entered a judgment in the amount of $180,933.65 against the Restaurant Defendants, jointly and severally, comprised of $125,422 in damages and $55,511.65 in attorneys' fees and costs, pursuant to the FLSA and the NY Labor Law (the "Default Judgment"). Default Judgment, ECF No. 32, Wu v. Glyphs Garden, Inc., No. 12 Civ. 7995 (S.D.N.Y.).

This Bankruptcy Case

On May 9, 2014, Mr. Lin filed a petition for relief under Chapter 7 of the Bankruptcy Code. On July 21, 2014, Richard J. McCord, the Chapter 7 Trustee, filed a Report of No Distribution, and on August 11, 2014, Mr. Lin received a discharge.

This Adversary Proceeding

On August 11, 2014, the Plaintiffs filed this adversary proceeding seeking a determination that the Default Judgment is nondischargeable pursuant to Sections 523(a)(2) and 523(a)(6). Here, as in the District Court Action, they allege that over the course of their employment at the Restaurant, they regularly worked hours without compensation and were paid less than the minimum wage, all in violation of the FLSA and the NY Labor Law. The Plaintiffs also allege that in July 2011, Mr. Wu and Mr. Zheng complained to Mr. Lin that they were not receiving compensation for hours that they worked in excess of forty per week, and he responded that they would not be compensated for any hours worked in excess of that amount. The Plaintiffs claim that on August 29, 2011, in retaliation for their complaints, Mr. Lin fired Mr. Wu and Mr. Zheng.

The Plaintiffs allege that the Default Judgment should not be discharged in Mr. Lin's bankruptcy case because it arises from their claims that Mr. Lin obtained services from them by violating minimum wage and overtime laws, including by falsifying pay stubs to report an incorrect number of hours that they worked, failing to post notices required by wage and labor laws, failing to provide Mr. Wu and Mr. Zheng with notices required by the NY Labor Law, and retaining portions of their tip earnings. They also allege that Mr. Lin undertook each of these actions willfully and maliciously.

On September 10, 2014, Mr. Lin answered the Complaint, and, in substance, denies information sufficient to form a belief as to the allegations. Mr. Lin also asserts seventeen affirmative defenses, including that the Complaint fails to state a claim upon which relief can be granted, the claims are barred by applicable statute of limitations, and the relief requested is precluded because his conduct was not willful; and as to damages, that the Plaintiffs failed to mitigate their damages, and their damages were de minimis.

This Motion for Partial Summary Judgment

On July 1, 2016, the Plaintiffs moved for partial summary judgment on their Section 523(a)(6) claim (the "Summary Judgment Motion"). The Plaintiffs argue that Mr. Lin is collaterally estopped from relitigating the elements of this claim, as these issues were previously decided by the District Court. They state that each of the elements of collateral estoppel is met, namely, that the issues raised here and in the District Court Action are identical, their claims were actually litigated and decided by the District Court, and Mr. Lin was afforded a full and fair opportunity to litigate the District Court Action. The Plaintiffs acknowledge that there has been a change in interpretation of the New York Wage Theft Prevention Act (the "WTPA") since the District Court entered judgment, but argue that this shift leads only to a modest reduction in the amount of that judgment, and is not "the type of ‘significant’ change in law that would preclude this Court from applying collateral estoppel." Plfs' Mem. at 13, ECF No. 48 (quoting Faulkner v. Nat'l Geographic Enters. Inc., 409 F.3d 26, 37 (2d Cir. 2005) ).

The Plaintiffs also argue that if this Court finds that collateral estoppel does not apply, they nevertheless should prevail on summary judgment because "there is significant undisputed evidence for this Court to find independently that [Mr. Lin] committed the alleged wage and hour violations." Plfs' Mem. at 14. They state that throughout the course of their employment, they were paid less than minimum wage, and are entitled to the difference. They also argue that they are entitled to overtime wages for their unpaid overtime hours each week. And they seek reimbursement for expenses incurred in connection with their employment, including costs arising from the maintenance of delivery vehicles, as well as "spread of hours" wages under the NY Labor Law, which requires employees to be paid an extra hour for each work day longer than ten hours. And finally, the Plaintiffs seek liquidated damages under the FLSA and NY Labor Law, including damages for Mr. Lin's retaliation in response to their complaints.

And the Plaintiffs contend that the Default Judgment should be found nondischargeable under Section 523(a)(6) because Mr. Lin's violations of the FLSA and NY Labor Law were "willful" and "malicious." Plfs' Mem. at 29. They argue that Mr. Lin's violations were "willful" because he acknowledged that "he knew the minimum wage laws," and that he was aware of these laws because he purchased the Restaurant by signing a $1 million promissory note to satisfy wage and hour violations committed by the previous owner of the Restaurant. Id.They state that "[b]y paying [the] Plaintiffs less than they were owed, each deficient paycheck the Restaurant issued to [the] Plaintiffs constituted a deliberate and intentional injury." Id.And they also argue that the retaliatory terminations of Mr. Zheng and Mr. Wu "constitute additional deliberate and intentional acts." Id.

The Plaintiffs argue that Mr. Lin's violations were "malicious" because "there is significant...