United States District Court, E.D. New York
For Dafeng Hengwei Textile Co., Ltd., Plaintiff, Counter Defendant: Bing Li, LEAD ATTORNEY, Law Offices of Bing Li, LLC, New York, NY.
For Aceco Industrial & Commercial Corporation, Aceco, Inc., Defendants: Todd Wengrovsky, LEAD ATTORNEY, Todd Wengrovsky, Calverton, NY; Richard A. Chen, LAW OFFFICES OF RICHARD ALAN CHEN, ESQ., Flushing, NY.
For David Liu, also known as David Z. Liu, also known as Zuowei Liu, Chang-Zhu Yu, individually and as agents of Aceco Industrial & Commercial Corporation and Aceco, Inc., also known as Cee Cee Yu, Defendants: Jonathan S. Gould, Law Office of Jonathan Gould, New York, NY.
For China CITIC Bank International Limited, N.Y. Branch, Garnishee: Orlee Goldfeld, LEAD ATTORNEY, New York, NY.
For Rockaway Associates, Interested Party: Richard A. Chen, LAW OFFFICES OF RICHARD ALAN CHEN, ESQ., Flushing, NY.
For David Liu, Chang-Zhu Yu, individually and as agents of Aceco Industrial & Commercial Corporation and Aceco, Inc., Counter Claimant: Jonathan S. Gould, Law Office of Jonathan Gould, New York, NY.
For Aceco Industrial & Commercial Corporation, Counter Claimant: Todd Wengrovsky, LEAD ATTORNEY, Todd Wengrovsky, Calverton, NY; Richard A. Chen, LAW OFFFICES OF RICHARD ALAN CHEN, ESQ., Flushing, NY.
MEMORANDUM & ORDER
MARGO K. BRODIE, United States District Judge.
Plaintiff Dafeng Hengwei Textile Co., Ltd. filed the above-captioned action against Defendants Aceco Industrial & Commercial Corporation, Aceco, Inc., David Liu and Chang-Zhu Yu on October 24, 2013. Plaintiff asserts claims against Aceco for breach of contract and for account stated, and seeks to hold Liu and Yu liable through a veil-piercing theory of liability. By order dated October 30, 2013, the Court granted Plaintiff an ex parte prejudgment order of attachment (the " Attachment Order," Docket Entry No. 5), allowing the United States Marshal to levy against properties in which Defendants have an interest. On or about February 11, 2014, Plaintiff caused the U.S. Marshal to levy on a property located at 25 Gracewood
Drive, Manhasset, New York 11030 (the " Property" ). Rockaway Associates (" Rockaway" ), a partnership which is not a party in this action, as owner of the Property, has moved to vacate the Attachment Order levied against the Property, to quash a subpoena served on one of its banks, to seek a protective order, and for sanctions against Plaintiff pursuant to Rule 11 of the Federal Rules of Civil Procedure. (Docket Entry No. 44.) The Court referred the motion to vacate and for sanctions to Magistrate Judge Victor V. Pohorelsky for a report and recommendation. By Report and Recommendation (" R& R" ) dated August 7, 2014, Judge Pohorelsky recommended that the Court grant Rockaway's motion to vacate the Attachment Order levied against the Property, and deny Rockaway's motion for sanctions. (R& R, Docket Entry 56.) Plaintiff timely filed an objection to the portion of Judge Pohorelsky's R& R recommending that this Court grant the motion to vacate, (Docket Entry No. 58), and Rockaway timely responded to Plaintiff's objections, (Docket Entry No. 60). No other objections were filed. For the reasons set forth below, the Court adopts the R& R in its entirety.
a. Relevant parties and their relationships
Plaintiff is a textile manufacturer incorporated under the laws of the People's Republic of China. (Compl. ¶ 3.) Defendants Aceco Industrial & Commercial Corporation and Aceco, Inc. (collectively, " Aceco" ) are New York companies. Defendants Liu and Yu are directors and shareholders of Aceco. (Compl. ¶ ¶ 8, 10.) From late 2009 through mid-2013, Aceco contracted with Plaintiff for manufacture and delivery of textiles for resale in the United States. ( Id. ¶ 12, 14.) Plaintiff now seeks recovery from all Defendants for breach of contract resulting from unpaid invoices allegedly totaling $1,977,642.02. ( Id. ¶ 82(a).)
Movant Rockaway, a non-party, is a New York partnership that has owned the Property since 2005. Non-party Mo. Dai Li owns a 99% interest in Rockaway (Decl. of Mo. Dai Li in Supp. of Mtn. to Vacate Order of Attachment, Quash Pl.'s Third Party Subpoena & Other Relief (" Li Decl." ) ¶ 5, Docket Entry No. 44-1.) Rockaway claims that non-party Lea Tee owns the remaining 1% interest in Rockaway. ( Id.) Liu and Yu have used the Property as a residence, but claim to have
no current ownership interest in it or in Rockaway. It is undisputed that, at one time, Liu and Yu had partnership interests in Rockaway. Rockaway contends that Liu and Yu exchanged their interest in Rockaway for Li's interest in Aceco sometime in 2012, prior to the commencement of this action. ( See Ex. 3, annexed to July 23, 2014 Declaration of Richard A. Chen (" Chen Decl." ), Docket Entry No. 54-3.) Plaintiff contends that this is a " falsity." (Pl. Opp'n Mem. 13, Docket Entry No. 53.)
In 2005, Aceco was named as a guarantor for Rockaway's $1.9 million mortgage on the Property, and a later extension of that mortgage with China Citic Bank. ...