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WING WONG v. EAST RIVER CHINESE RESTAURANT

January 10, 1995

WING WONG, YI FAN LIN, SU-MIN ZHANG, SHERMAN YEE, HUNG CHEONG LUK, ANGELA YAN PIK YI, Plaintiffs, against EAST RIVER CHINESE RESTAURANT, Defendant.


The opinion of the court was delivered by: STERLING JOHNSON, JR.

 JOHNSON, District Judge:

 INTRODUCTION

 Before this Court is a motion for an Order for Default Judgment on a petition for attorney's fees filed by Kirlin, Campbell, and Keating ("KCMK" or "Petitioner"). *fn1" Petitioner is the former counsel for the Defendant, Al & Mic Enterprises, Ltd., d/b/a East River Chinese Restaurant ("ERCR"). Petitioner filed a Petition for Attorney's Fees ("Petition") against ERCR, ERCR's shareholders, and ERCR's alleged successor or alter ego, Golden River Chinese Restaurant ("GRCR") (collectively "Respondents"). Since no answer to the Petition was filed by ERCR, its shareholders, nor GRCR, Petitioner seeks an Order for Default Judgment against the Respondents. For the reasons stated below, this Court denies Petitioner's request for a Default Judgment against each Respondent, but grants the Petition for Fees against ERCR.

 Also before this Court is Plaintiffs' motion pursuant to Rules 37(b)(2)(C), 37(b)(2) and 37(d) of the Federal Rules of Civil Procedure for sanctions against Defendant ERCR for failure to comply with discovery. Magistrate Judge Azrack has filed a Report and Recommendation concerning this motion for sanctions and this Court considers that Report herein. For the reasons stated below, Plaintiffs' motion for sanctions is granted, but the relief requested is denied.

 BACKGROUND

 As of December 1992, Defendant ERCR and its shareholders were engaged in a dispute with their waiters over payment of minimum wages, overtime compensation and tips and representation by the Chinese Staff and Workers Association. As a result of this dispute, the waiters brought the instant action against ERCR pursuant to the Fair Labor Standards Act of 1938, §§ 6, 7, and 15, 29 U.S.C. §§ 206, 207 and 215, and the New York State Labor Law §§ 190 et. seq., 215, and 650 et. seq.

 In late February or early March 1993, ERCR retained the law firm of Jackson, Lewis, Schnitzler & Krupman to represent them in their various actions. That firm continued to represent ERCR until June 1993, during which time ERCR incurred fees to them of approximately $ 70,000.

 At the end of May 1993, the General Manager of ERCR approached Petitioner law firm on behalf of ERCR and discussed the possibility of retaining Petitioner in the action filed against ERCR. On July 6, 1993, ERCR retained Petitioner law firm in connection with the action filed against ERCR by its waiters. Mr. George K. Liu, one of ERCR's shareholders, signed the agreement on behalf of the other shareholders.

 As the initial Retainer, a check for $ 10,000 was given to Petitioner. The Retainer called for a fixed monthly payment to be made in advance every month, within 25 days of receipt of every statement.

 Between July 1993 and February 17, 1994, KCMK performed a variety of legal services in connection with ERCR's defense in the wage dispute with its former waiters. These services include the preparation and filing of responses to Plaintiffs' interrogatories and document requests.

 By March 2, 1994, ERCR had incurred legal bills for work done through February 17, 1994 in the amount of $ 166,405.45 plus interest. Despite repeated bills and requests for payment, Petitioner firm only received $ 8,000 in advance payments after the initial retainer. Two of ERCR's shareholders, Paul Mok and George Liu, repeatedly informed Petitioner that Mr. Wong was coming from Hong Kong with monies to make the payments.

 Despite lack of payments, Petitioner firm continued to represent ERCR. On January 31, 1994, Petitioner learned from Mr. Liu that ERCR had closed on January 27, 1994. In July 1994, Petitioner learned that a restaurant operating under the name of Golden River Chinese Restaurant had opened at the same location as ERCR's former location.

 On February 10, 1994, Petitioner moved for permission to withdraw as ERCR's counsel in the wage and hour litigation. This Court granted the motion on February 28, 1994. To avoid the possibility of a default judgment against ERCR, however, and because of Petitioner's inability to communicate with ERCR, Petitioner continued to defend ERCR by filing the appropriate pleadings. On March 2, 1994, Petitioner submitted its final bill to ERCR.

 On August 16, 1994, KCMK filed a Petition for Fees and moved that this Court exercise its ancillary jurisdiction over the fee dispute and determine the fees owed. Petitioner asserted the following causes of action: (1) account stated; (2) breach of contract; (3) services rendered; and (4) misrepresentation regarding ability to pay.

 The Defendant ERCR and its shareholders, King Sun Yee, Mable Mok, William H. Wong, Mui Wong Ng, Paul Mok, George K. Liu, Shi Xiong Wu, and Shi Yong Hu; ERCR's new counsel, Perry S. Heidecker; and ERCR's alleged successor and alter ego, Golden River Chinese Restaurant, were served with notice of the Petition on the same date. On September 15, 1994, Petitioner moved for an Order for Default Judgment pursuant to either Rule 55(b)(1) or (b)(2) of the Federal Rules of Civil Procedure. Petitioner requests $ 166,405.45 in compensatory damages, plus interest and costs, and punitive damages of $ 1,000,000.

 DISCUSSION

 I. Petitioner's Motion for an Order for ...


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