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Eternal Asia Supply Chain Management (Usa) Corp v. Yian Chen A/K/A David Chen

April 25, 2013


The opinion of the court was delivered by: J. Paul Oetken, District Judge:


Presently before the Court are Plaintiff Eternal Asia Supply Chain Management (USA) Corporation's motion for default judgment and Defendant David Chen's motion to dismiss for lack of personal jurisdiction. For the reasons that follow, Plaintiff's motion is denied and Defendant's motion is granted.


Plaintiff alleges that it is the assignee of claims maintained by EA Display Ltd. ("EAD") against Defendant, a California resident, relating to Defendant's acts as President and a director of Amergence Technology, Inc. ("Amergence"). Specifically, Plaintiff alleges that in June 2010, Amergence-acting by and through Defendant-enticed, cajoled, and solicited EAD to enter into a purported joint venture agreement forming a corporation in the State of California for the purported purposes of developing a company with product, channel, marketing, operations, service and financial return. Plaintiff further alleges that Defendant and Amergence planned to and did defraud EAD out of hundreds of thousands of dollars in merchandise and EAD's initial investment in working capital. Plaintiff alleges causes of action for fraud and conversion.

The Complaint in this case was filed on August 21, 2012. On January 7, 2013, Plaintiff obtained a Clerk's Certificate of Default as to Defendant. On February 11, 2013, Defendant filed a motion to dismiss for lack of personal jurisdiction. The next day, February 12, 2013, Plaintiff filed a motion requesting entry of default judgment against Defendant.

In support of his motion to dismiss, Defendant has submitted an affidavit in which he explains that he lacks connections to New York:*fn2

I have never been a resident of New York. I have never maintained a bank account in New York. I have never had a telephone listing or a mailing address in New York. I have never owned, leased, or otherwise possessed any real or personal property in New York. I have never paid any taxes to New York. I have never worked for an entity incorporated or registered in New York. I do not have business relationships with any New York residents or businesses incorporated in New York. I have never made a general appearance as a party in any lawsuit in New York.

Defendant adds that he currently resides in California, that he last visited New York about five to seven years ago for a day trip, and that "it would be a severe hardship for [him] to defend a lawsuit in the Southern District of New York" because he "cannot afford to travel to New York as would be necessary for [him] to meet with [his] counsel or to appear in court." With respect to Amergence, Defendant makes the following statements:

Amergence Technology, Inc., a California entity of which I was then President, a shareholder and a member of the board of directors, entered into a joint venture agreement with [EAD], a Chinese entity, to form a California entity called Rich Tech International Co., Ltd. Appendix A, Paragraph D(4) of that agreement stated that the agreement would be "governed by, construed and interpreted in accordance with, the laws of the State of Calfornia" . . . . I never spoke or otherwise dealt with any representative of [Plaintiff] or any other New York persons or entities regarding the transaction(s) which are the subject of this case. I only interacted with [EAD] directly.

In an affidavit, counsel for Plaintiff states that the joint venture undertaken by Defendant and EAD contemplated the sale of electronic products at reduced prices to "wholesalers and suppliers throughout the country including in New York State." He states that Defendant, "through his companies[,] derived a portion of their [sic] revenue from interstate commerce, and made sales of goods within New York State and derived revenues from such sales," adding that "[i]t is reasonably foreseeable that [Defendant] knew goods would be delivered and sold in New York State, as it is a major electronics market." Counsel to Plaintiff adds that:

On Amergence's website, they describe themselves as a "Strong Sales and Global Purchasing Network" and describe how they have "channels in place around the globe to purchase or sell consumer electronics products.

Amergence's website further describes how their "large warehouse is available to use as a redistribution center."

In the alternative, Plaintiff requests jurisdictional discovery to ascertain the extent of Defendant's contacts with and activities in New York State.


A.Motion for Default Judgment

Federal Rule of Civil Procedure 55(c) authorizes a court to "set aside an entry of default for good cause." "In determining whether to set aside a party's default, the district court should consider principally '(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented.'" Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (quoting Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)). "Because there is a preference for resolving disputes on the merits, doubts should be resolved in favor of the defaulting party." Id. (quotation marks and citation omitted). Accordingly, "'good cause' under Rule 55(c) should be construed generously, and [t]he dispositions of motions for entries of defaults . . . and relief from the same under Rule 55(c) are left to the sound discretion of a district court because it is in the best position to assess the individual circumstances of a given case." Del Med. Imaging Corp. v. CR Tech USA, Inc., No. 08 Civ. 8556, 2010 WL 1487994, at *4 (S.D.N.Y. Apr. 13, 2010) (citations omitted). Here, there is no evidence that Defendant's default was "willful," there is no reason to believe that setting aside the entry of default would prejudice Plaintiff, and Defendant has presented a meritorious defense based on lack of personal jurisdiction. It is also significant that Defendant filed his motion to dismiss before Plaintiff filed its motion for default judgment, thereby actively engaging in this case and asserting meritorious arguments at an early stage following the entry of default.

Accordingly, the entry of default against Defendant is set aside pursuant to Rule 55(c) and the motion for default judgment is denied.

B.Motion to Dismiss Granted Due to Lack of Personal Jurisdiction

1.General Legal Standard for Personal Jurisdiction

"A plaintiff bears the burden of demonstrating personal jurisdiction over a person or entity against whom it seeks to bring suit." Penguin Gr. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir. 2010) (citation omitted). "In order to survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists." Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006). "Such a showing entails making 'legally sufficient allegations of jurisdiction,' including 'any averment of facts that, if credited[,] would suffice to establish jurisdiction over the defendant.'" Penguin Gr., 609 F.3d at 35 (citation omitted). In the absence of jurisdictional discovery, "allegations of jurisdictional fact must be construed in the light most favorable to the plaintiff." National Union Fire Ins. Co. of Pittsburgh, PA. v. BP Amoco PLC, 319 F. Supp. 2d 352, 357 (S.D.N.Y. 2004) (citing CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986)). "However, '[c]onclusory allegations are not enough to establish personal jurisdiction' and the allegations must be well-pled." Sikhs for Justice v. Nath, No. 10 Civ. 2940, 2012 WL 4328329, at *22 (S.D.N.Y. Sept. 21, 2012) (quoting Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003)); see also Accurate Grading Quality Assur., Inc. v. Thorpe, No. 12 Civ. 1343, 2013 WL 1234836, at *2 (S.D.N.Y. Mar. 26, 2013) ("The Court . . . will not draw argumentative inferences' in the plaintiff's favor and need not accept as true a legal conclusion couched as factual ...

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