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King v. Wang

United States District Court, S.D. New York

June 20, 2017


          FOR PLAINTIFFS YIEN-KOO King, NORTHWICH INVESTMENTS, LTD., and SOON HUAT, INC.: Sam P. Israel Timothy Savitsky


          OPINION & ORDER

          JOHN F. KEENAN, United States District Judge:

         Before the Court is a motion by 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 (hereinafter, the “Wang Defendants”), to dismiss the First Amended Complaint (the “amended complaint”) filed by Plaintiffs Yien-Koo King (“Y.K. King”), Northwich Investments, Ltd. (“Northwich”), and Soon Huat, Inc. (“Soon Huat”) (hereinafter, “Plaintiffs”). For the reasons discussed below, Defendants' motion is granted and the amended complaint is dismissed.

         I. Background

         A. Factual Background

         The following facts are taken from the allegations in the amended complaint and are accepted as true only for purposes of this motion to dismiss. This action concerns the estate of artist and collector, Chi-Chuan Wang (“C.C. Wang”). (Amended Complaint ¶ 2, ECF No. 36 (filed September 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 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.)

         Defendant S.K. Wang, a resident of Queens, New York, is the son of C.C. Wang. (Id. ¶ 16.) S.K. Wang is alleged to be 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 alleged to be the sole owner of Defendant Bao Wu Tang, an art gallery conducting business in China. (Id. ¶ 22.) Defendant Anthony Chou is a resident of Beijing, China. (Id. ¶ 17.) Defendant Chen Mei-Lin is a resident of Shanghai, China. (Id. ¶ 18.) Defendant Wei Zheng is a resident of Rego Park, New York. (Id. ¶ 19.) Defendant Ye Yong-Qing is a resident of Shanghai, China. (Id. ¶ 20.) Defendant Yue Da-Jin is a resident of Nanjing, China. (Id. ¶ 21.) The amended complaint also asserts claims against John Does 1-9, who are identified as natural persons serving as agents of the Wang Defendants. (Id. ¶ 24.) As of the date of this order, only A. Wang and S.K. Wang, individually and on behalf of Bao Tu Wang and Jian Bao Gallery-their respective businesses-have appeared in this action, although a copy of the summons and complaint was purportedly served on Defendant Wei Zheng on October 14, 2014. (See Affidavit of Service, ECF No. 6 (filed Oct. 23, 2014).)

         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. (Am. Compl. ¶¶ 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.) As part of her management 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 in or about January 2003 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 Queens, New York home 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 these 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 these 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 these 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 thirty-five 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 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 dominion and control over Estate assets. (Id. ¶ 85.) The proceedings in Surrogate's Court regarding the Estate remain ongoing. (Id. ¶ 64; see also Pls.' Mem. of L. in Opp. to Mot. to Dismiss at 3.)

         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”-the other Defendants in this action- in order to acquire the works for A. Wang himself at deflated prices (the “Straw Men Scheme”). (Id. ¶¶ 85, 105-107.) To orchestrate this scheme, Plaintiffs allege that the Wang Defendants reinvested the funds derived from the sale of the twenty-five artworks stolen in 2003 to fraudulently purchase Estate assets through straw men at artificially low prices. (Id. ¶ 103.) Between 2005 and 2009, A. Wang sold ninety-eight Estate-owned 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 Men Scheme “even though the true value of the sold works exceeds $40 million.” (Id. ¶ 298.) Plaintiffs did not discover until 2013 that many of these ninety-eight artworks had been resold at Chinese auctions in 2008 and 2009 for as much as 2, 000 percent of the straw men's purchase price. (Id. ¶¶ 290, 292, 299.)

         The amended complaint asserts eleven causes of action relating to the 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 seeking to impose a constructive trust upon any property within A. Wang's control, as well as for conversion, common law fraud and conspiracy to defraud, breach of fiduciary duty and aiding and abetting breach of fiduciary duty, replevin, and violations of New York State Debtor and Creditor Law section 270. (See id. ¶¶ 249-379.) Two of the RICO claims are asserted by all Plaintiffs against all Defendants and two are asserted by Y.K. King on behalf of the Estate against each of the Wang Defendants. (See id. ¶¶ 249-322.)

         B. Procedural History

         Plaintiffs filed their original complaint in this action on September 23, 2014. (See Complaint, ECF No. 1 (filed Sept. 23, 2014).) Only Y.K. King and her husband, Kenneth King (“K. King” and together “the Kings”), were named as plaintiffs in the original complaint. (See id.) The same Defendants are named in both the original and amended complaints. 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 Kings failed to properly allege a federal cause of action. (See Defs.' Mot. to Dismiss, ECF No. 15 (filed January 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 Rule 12(b)(6). (See Op. & Order, ECF No. 27 (filed July 13, 2015).) The Court found that the Kings lacked standing to sue on claims related to their personal artwork because they were not the real parties in interest under Federal Rule of Civil Procedure 17 because corporations, and not the Kings, owned the artwork. (Id. at 10.) While Rule 17 typically permits a plaintiff to amend the complaint to allow the real party in interest to ratify, join, or be substituted into 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 ...

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