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Jin Yung Chung v. Yoko Sano

March 31, 2011

JIN YUNG CHUNG,
PLAINTIFF,
v.
YOKO SANO, FORT LEE ZAIYA, INC., D/B/A PARISIENNE BAKERY, ZAIYA, INC. (NEW JERSEY CORPORATION), ZAIYA, INC. (NEW YORK CORPORATION),
SHOIE YOSIDA, AND IKUE YOSIDA,
DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge:

MEMORANDUM AND ORDER ADOPTING REPORT AND RECOMMENDATION

Plaintiff Jin Young Chung ("Plaintiff") brought this diversity action alleging: (i) breach of obligation to repay a loan against defendants Zaiya Fort Lee, Zaiya, Inc. in New York ("Zaiya NY") and Zaiya, Inc. in New Jersey ("Zaiya Hackensack"); (ii) entitlement to the reasonable value of the shares of corporate stock held by Plaintiff in the three entities and to liquidate her interest in such shares; (iii) defamation and trade defamation against defendant Yoko Sano; (iv) conversion of plaintiff's stock interests against defendant Yoko Sano; and (v) breach of fiduciary duty by defendants. On July 15, 2010, Plaintiff moved for default judgment, and on November 3, 2010, Plaintiff submitted a letter to the court requesting that she be allowed to withdraw her claims against Zaiya NY. U.S. Magistrate Judge Cheryl L. Pollak issued a Report and Recommendation, dated February 25, 2011, recommending that Plaintiff's motion for default judgment be denied in its entirety and Plaintiff's motion to withdraw her claims against Zaiya NY be granted. (See Docket Entry No. 38 ("R & R").) Plaintiff objected. For the reasons set forth below, the R & R is adopted in its entirety and expanded upon herein.*fn1

DISCUSSION*fn2

I.Legal Standards

Where a party objects to a R & R, a district judge must make a de novo determination with respect to those portions of the R & R to which the party objects. See FED. R. CIV. P. 72(b);

United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997). Portions of the R & R to which the parties have not objected are reviewed for clear error. See Orellana v. World Courier, Inc., 2010 WL 3861013, at *2 (E.D.N.Y. Sept. 28, 2010).The district court may then "accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." FED. R. CIV. P. 72(b); see also 28 U.S.C. § 636(b)(1).

II.Analysis

The Magistrate Judge recommends that Plaintiff's motion to withdraw her claims against Zaiya NY be granted and Plaintiff's motion for default judgment be denied in its entirety. (See R & R.) Although Plaintiff states in her objections that "no deference is to be applied" to the R & R, (see Plaintiff's Objection to Report and Recommendations, Docket Entry No. 40 ("Pl. Obj.") at 12), the court will review de novo only those portions of the R & R to which Plaintiff objects. See FED. R. CIV. P. 72(b); Orellana, 2010 WL 3861013 at *2. Plaintiff does not object to the Magistrate Judge's recommendations regarding jurisdiction or choice of law, or the recommendation that Plaintiff's motion to withdraw her claims against Zaiya NY be granted.

The court finds no clear error as to those recommendations and, thus, upon due consideration, adopts those findings in their entirety.

Plaintiff does, however, object to the Magistrate Judge's recommendation that Plaintiff's motion for default judgment be denied for failure to state a claim. Plaintiff also argues that the court may not deny a motion for default judgment for failure to state a claim, because the court may not take any action on a motion for default judgment other than determining the amount of damages. Thus, the court will determine de novo whether the court may take action other than determining the amount of damages when addressing a motion for default judgment, and whether, here, Plaintiff has in fact stated a claim upon which relief can be granted for the five claims alleged in the Complaint.

A.Court's Power to Deny Default Judgment Where Complaint Fails to State a Claim Plaintiff argues that on a motion for default judgment, the court may not make any inquiries or findings other than a determination of the amount of damages.*fn3 Plaintiff's position is unfounded. FED. R. CIV. P. 55(a) provides that, "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk shall enter the party's default." However, while all well-pleaded factual allegations in the complaint are accepted as true upon entering a default, the district court may still deny a motion for default judgment where the complaint fails to state a cause of action.

See Orellana, 2010 WL 3861013 at *2 ("[a] court should deny a motion for entry of a default judgment if the facts a plaintiff alleges in his complaint, taken to be true, fail to state a valid cause of action upon which the relief sought can be granted"); Duffy v. Master Waterproofers, Inc., 2010 WL 3781057, at *1 (E.D.N.Y. Sept. 17, 2010) (adopting the magistrate judge's recommendation that "Plaintiff's default judgment be denied . . . because Plaintiffs had failed to provide 'legal support for entry of such judgment'"); Garden City Boxing Club, Inc. v. Giambra, 2004 WL 1698633, at *1 (W.D.N.Y. Jul. 27, 2004) ("[p]rior to entering default judgment, the court must determine whether the facts alleged in the Complaint are sufficient to state a claim for relief as to each cause of action for which the plaintiff seeks default judgment"). Plaintiff provides no support to the contrary. In fact, one of the cases relied on by Plaintiff in her objections to the R & R, (see Pl. Obj. at 18), clearly states that "a district court has discretion under [FED. R. CIV. P.] 55(b)(2) once a default is determined to require proof of necessary facts and need not agree that the alleged facts constitute a valid cause of action."*fn4 Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Therefore, the court has the authority to deny a motion for default judgment where a plaintiff fails to state a claim, even if defendants do not object to the motion.

B.Plaintiff's Failure to State a Claim Upon Which Relief Can Be Granted

In order to state a claim for relief, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief" so defendants have "fair notice of what the . . . claim is and the grounds upon which it rests." FED. R. CIV. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). To satisfy this standard, a complaint must allege "enough facts to state a claim that is plausible on its face." Id. at 570. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint . . . has not shown that the pleader is entitled to relief." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (internal citations and quotation marks ...


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