Yien-Koo King, Northwich Invs., Ltd. v. Wang
| Decision Date | 26 March 2018 |
| Docket Number | No. 14 Civ. 7694 (JFK),14 Civ. 7694 (JFK) |
| Parties | YIEN-KOO KING, NORTHWICH INVESTMENTS, LTD., and SOON HUAT, INC., Plaintiffs, v. ANDREW WANG, SHOU-KUNG WANG, BAO WU TANG, JIAN BAO GALLERY, ANTHONY CHOU, CHEN-MEI-LIN, WEI ZHENG, YE YONG-QING, YUE DA-JIN, and JOHN DOES 1-9, Defendants. |
| Court | U.S. District Court — Southern District of New York |
NORTHWICH INVESTMENTS, LTD., and SOON HUAT, INC.:
BAO WU TANG, and JIAN BAO GALLERY:
Carolyn J. Shields
Ying Liu
Before the Court is a motion by Plaintiffs Yien-Koo King ("Y.K. King"), Northwich Investments, Ltd. ("Northwich"), and Soon Huat, Inc. ("Soon Huat") (collectively, "Plaintiffs") in a case that proves that family feuds are universal. The motion is for reconsideration of the Court's June 20, 2017 Opinion and Order granting a motion by Defendants Andrew Wang ("A. Wang"), individually and doing business as Bao Wu Tang, and Shou-Kung Wang ("S.K. Wang"), individually and formerly doing business as the Jian Bao Gallery (collectively, the "Wang Defendants") to dismiss the First Amended Complaint (the "amended complaint") with leave to replead. For the reasons that follow, Plaintiffs' motion is granted.
The following facts are taken from the allegations in the proposed amended complaint. This action concerns the estate of artist and collector, Chi-Chuan Wang ("C.C. Wang"). (Am. Compl. ¶ 2, ECF No. 36 (filed Sept. 27, 2016).) Plaintiff Y.K. King, a New York City resident, is the daughter of C.C. Wang; she brings this action—together with Northwich and Soon Huat, corporations that she and her husband, Kenneth King, own—to recover works of fine art formerly belonging to C.C. Wang's estate (the "Estate") or to Northwich and Soon Huat. (Id. ¶¶ 2, 12-14.)
Defendant S.K. Wang, a resident of Queens, New York, is the son of C.C. Wang, thus the brother of Y.K. King. (Id. ¶¶ 16, 44.) S.K. Wang is the sole owner of Defendant Jian Bao Gallery, an art gallery conducting business in New York. (Id. ¶ 23.) Defendant A. Wang, a New York City resident, is the grandson of C.C. Wang and the son of S.K. Wang. (Id. ¶¶ 15-16.) A. Wang is the sole owner of Defendant Bao Wu Tang, an art gallery conducting business in China. (Id. ¶ 22.) The amended complaint names fourteen additional Defendants ("the Straw MenDefendants"), however, only A. Wang and S.K. Wang, individually and on behalf of Bao Wu Tang and Jian Bao Gallery, have appeared in this action.
C.C. Wang was a renowned Chinese-American artist and art collector who amassed over 400 fine and rare Chinese paintings, sculptures, and antiquities during his lifetime, valued at a total of $60 million. (Id. ¶¶ 25-26, 32.) C.C. Wang died in 2003, but the Wang Defendants' alleged misconduct began in the 1980s and 1990s when S.K. Wang, working as his father's bookkeeper and assistant, embezzled 160 paintings from his father's collection. (Id. ¶¶ 34-35, 39.) In 1997, when C.C. Wang discovered S.K. Wang's wrongdoing, he fired S.K. Wang and hired Y.K. King to run his affairs. (Id. ¶ 29.) In this role, Y.K. King established CY Art Ltd. to facilitate management of C.C. Wang's artwork and collection. (Id. ¶ 30.) CY Art Ltd. owned a safe deposit box that contained artwork belonging to C.C. Wang, Northwich, and Soon Huat. (Id. ¶ 31.)
C.C. Wang's health began to deteriorate and he was hospitalized in March 2003. (Id. ¶¶ 40-41.) In April 2003, his doctors reportedly determined that he lacked the mental capacity to execute his own medical forms. (Id. ¶ 41.) Sometime later in the spring of 2003, the Wang Defendants secretly moved C.C. Wang to S.K. Wang's home in Queens, New York to prevent further contact between C.C. Wang and Y.K. King. (Id. ¶ 44.)
Earlier, on January 31, 2003, Y.K. King took inventory of CY Art Ltd.'s safe deposit box and discovered that twenty-one paintings were missing—nine of the paintings are owned by Northwich, one is owned by Soon Huat, and the remaining eleven are owned by the Estate. (Id. ¶¶ 48-50.) A. Wang returned five of the paintings to Y.K. King many years later; the remaining sixteen have not been recovered by Plaintiffs or the Estate. (Id. ¶ 50.) Also on January 31, 2003, Y.K. King checked her father's apartment and discovered that an additional four paintings were missing—three of the paintings are owned by Northwich and one is owned by the Estate. (Id. ¶¶ 51-53.) During a sworn deposition in 2005, A. Wang admitted to taking the paintings from the safe deposit box, allegedly with the help of 96-year-old C.C. Wang, but he has since recanted his statements. (Id. ¶¶ 56, 66.)
C.C. Wang died on July 3, 2003. (Id. ¶ 70.) Thereafter, Y.K. King submitted to New York County Surrogate's Court a June 13, 2000 will and July 10, 2002 codicil that named her the executor and a principle beneficiary of the Estate, and entitled both Y.K. King and S.K. Wang to 35 percent shares of the Estate. (Id. ¶ 71.) Contemporaneously, the Wang Defendants produced a second will allegedly executed by C.C. Wang on February 18, 2003 (the "2003 will"), four months before his death. (Id. ¶ 72.) The 2003 will purports to disinherit Y.K. King, designate A.Wang as executor, and name A. Wang, S.K. Wang, and Stephen Wang (A. Wang's brother) as chief beneficiaries. (Id. ¶¶ 74-75.) In July 2003, Y.K. King initiated Surrogate's Court proceedings in New York County to contest the 2003 will. (Id. ¶ 82.) On August 4, 2003, the Surrogate's Court issued temporary letters of administration to the Public Administrator and preliminary testamentary letters to A. Wang. (Id. ¶ 83.) A. Wang assumed the role of Estate fiduciary and exercised control over Estate assets. (Id. ¶ 85.)
Plaintiffs assert that A. Wang exploited his temporary status as Estate fiduciary to orchestrate a scheme by which the Wang Defendants used their galleries to sell the Estate's artwork to five "straw men" for deflated prices and then resell the paintings for greater amounts abroad (the "Straw Men Scheme"). (Id. ¶¶ 85, 105-107.) To orchestrate this scheme, the Wang Defendants reinvested the funds derived from the sale of the twenty-five artworks stolen in 2003 (including the five that A. Wang later returned) to fraudulently purchase Estate assets through straw men at artificially low prices. (Id. ¶ 103.) Between 2005 and 2009, A. Wang sold ninety-eight Estate paintings to five straw men who then resold the paintings for "astronomical resale values," with A. Wang pocketing the proceeds. (Id. ¶¶ 105, 111, 141.) According to Plaintiffs, the Estate received approximately $4 million from the Straw MenScheme "even though the true value of the sold works exceeds $40 million." (Id. ¶ 298.) Plaintiffs did not discover until 2012 or 2013 that many of these artworks had been resold at Chinese auctions in 2008 and 2009, sometimes for as much as 8,000 percent of the price paid to the Estate. (Id. ¶¶ 153, 175, 290.)
The amended complaint asserts eleven causes of action relating to the stolen corporation- and Estate-owned artwork, including four claims under federal law for violations of the Racketeer Influence and Corrupt Organizations Act ("RICO") and seven claims under New York law for conversion, common law fraud and conspiracy to defraud, breach of fiduciary duty and aiding and abetting breach of fiduciary duty, replevin, violations of New York State Debtor and Creditor Law § 270, and one claim seeking to impose a constructive trust upon any property within A. Wang's control. (See id. ¶¶ 249-379.)
Plaintiffs filed their original complaint in this action on September 23, 2014. (See Compl., ECF No. 1 (filed Sept. 23, 2014).) Only Y.K. King and her husband, Kenneth King (together "the Kings"), were named as plaintiffs. (See id.) On November 21, 2014, Defendants moved to dismiss the complaint on several grounds, including: (1) the Kings lacked standing to recover for all of their claims, (2) the Kings' claims fell within the probate exception to federal jurisdiction, and (3) the Kingsfailed to properly allege a federal cause of action. (See Defs.' Mot. to Dismiss, ECF No. 15 (filed Jan. 12, 2015).) On July 13, 2015, the Court granted Defendants' motion and dismissed the original complaint in its entirety for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (See Op. & Order, ECF No. 27 (filed July 13, 2015).) The Court found that the Kings lacked standing to sue because corporations, and not the Kings, owned the artwork. (Id. at 10.) While Federal Rule of Civil Procedure 17 typically permits a plaintiff to amend the complaint to allow the real party in interest to join the action, the Court denied this request because the complaint failed to adequately plead closed-ended continuity as required by the RICO statute. (Id. at 10, 15-16.) The Court also ruled that the probate exception did not strip federal jurisdiction from the RICO claims because the Kings sought to recover damages from the Defendants personally and did not interfere with property in the custody of state probate court. (Id. at 11-12.) Finally, the Court declined to exercise supplemental jurisdiction over the Kings' state law claims given that the Kings failed to state any federal claims upon which relief could be granted. (Id. at 17.)
The Kings appealed the Court's decision to the Second Circuit. (See Notice of Appeal, ECF No. 29 (filed Aug. 12, 2015).) On August 26, 2016, the Second Circuit affirmed in partand vacated and remanded in part the Court's Opinion and Order on Defendants' motion to dismiss. (See Summary Order, ECF No. 32 (filed Aug. 26, 2016).) The Second Circuit panel affirmed the Court's exercise of jurisdiction over the RICO claims as falling outside of the probate exception to federal jurisdiction, but vacated and remanded the Court's determination that the Kings failed to adequately plead closed-ended...
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