Dafeng Hengwei Textile Co., Ltd. v. Aceco Industrial & Commercial Corporation et al

Filing 75

MEMORANDUM & ORDER ADOPTING REPORT AND RECOMMENDATIONS. For the reasons set forth in the attached Memorandum and Order, the Court adopts the 57 August 21, 2014 report and recommendations of Judge Viktor V. Pohorelsky. The Court grants the 34 motion to vacate the Order of Attachment. Ordered by Judge Margo K. Brodie on 11/7/2014. (Krause, Aimee)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------DAFENG HENGWEI TEXTILE CO., LTD.,
Plaintiff,

MEMORANDUM & ORDER
13-CV-5829 (MKB)

v.
ACECO INDUSTRIAL & COMMERCIAL
CORPORATION, ACECO, INC., DAVID LIU a/k/a
DAVID Z. LIU a/k/a ZUOWEI LIU, and CHANGZHU YU a/k/a CEE CEE YU, individually and
as agents of Aceco Industrial & Commercial
Corporation and Aceco, Inc.,
Defendants.
--------------------------------------------------------------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. (collectively “Aceco”),
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 veilpiercing 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 November 7, 2013 and February 11, 2014, Plaintiff caused the U.S. Marshal to levy certain
property owned by Aceco, Liu and Yu. Liu and Yu (collectively “Movants”) seek to vacate the
Attachment Order. (Def. Mot. to Vacate Order of Attachment (“Def. Mot.”), Docket Entry No.
34.) The Court referred the motion to vacate to Magistrate Judge Victor V. Pohorelsky for a
report and recommendation. By Report and Recommendation (“R&R”) dated August 21, 2014,

Judge Pohorelsky recommended that the Court grant Movants’ motion to vacate the Attachment
Order. (“R&R,” Docket Entry No. 57.) Plaintiff timely filed an objection to Judge Pohorelsky’s
R&R, (“Pl. Obj.,” Docket Entry No. 61), and Movants timely responded to Plaintiff’s objections,
(“Def. Response,” Docket Entry No. 63). With Plaintiff’s consent, Movants submitted a
supplemental response to Plaintiff’s objections on September 29, 2014. (“Supp. Def. Response”,
Docket Entry No. 68.) No other objections were filed. For the reasons set forth below, the Court
adopts the R&R in its entirety.
I.

Background
The Court assumes familiarity with the parties and background to this case, which is set

forth in greater detail in its October 20, 2014 Memorandum and Order. Dafeng Hengwei Textile
Co. v. Aceco Indus. & Commercial Corp., --- F. Supp. 3d ---, 2014 WL 5319688 (E.D.N.Y. Oct.
20, 2014). The facts necessary to decide this motion are outlined below.
a.

The alleged breach of contract

Plaintiff, a Chinese textile manufacturer, commenced this action on October 23, 2013,
seeking to recover on an unpaid contract in the amount of $1,977,642.02 from Defendants, who
distributed textiles from Plaintiff for resale in the United States through K-Mart. (Compl. ¶¶ 13–
17.) Movants are the primary officers and sole shareholders of Aceco. Aceco contracted with
Plaintiff to supply its products beginning in late 2009. (Id. ¶ 14.) Though the parties initially
agreed that the payment term was “Documents against Payment (“D/P”) at sight,” (id. ¶ 15),
Aceco’s collecting bank was occasionally unable to satisfy Plaintiff’s invoices, at which point
Aceco would request payment extensions and promise to make future payments, (id. ¶ 20).
Aceco began to accumulate an unpaid balance based on its failure to pay as promised. (Id. ¶ 21.)

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Over the course of 2013, Aceco negotiated additional shipments from Plaintiff upon promises to
pay the outstanding amount. (Id. ¶¶ 22-30.)
During the same period of time in 2013, Aceco paid $1,298,741.15 toward its overdue
existing balance, leaving an unpaid total of $1,977,642.02. (Id. ¶ 31.) By the end of July 2013,
China Citic Bank, Aceco’s collecting bank, returned to Plaintiff all unpaid invoices and payment
requests. (Id. ¶ 34.) Despite repeated requests, Aceco failed to pay its outstanding balance.1 (Id.
¶¶ 37–51.) Plaintiff alleges that Aceco terminated its business relationship with K-Mart, and that
Liu informed Plaintiff that Aceco would no longer continue its business with Plaintiff. (Id.
¶¶ 35–36.)
b.

Alleged disappearance of assets and attachment of property

By September 25, 2013, “Kmart had fully paid all invoices issued by Aceco for
Plaintiff’s goods delivered, in the amount of $3,575,385.48 . . . .” (Pl. Obj. 3.) Plaintiff
produced evidence that Aceco used the money from K-Mart to pay both Plaintiff and other
vendors, and to make payments on loans. (Id. at 3–4) According to Plaintiff, Aceco’s bank
records show “abnormal amounts of loans and loan payments and transfers.” (Id. at 5.) Plaintiff
alleges that “at least some of the loans may have been made to finance some mortgage loans
taken by other individuals and interrelated and jointly owned entities . . . .” (Id.) Aceco’s bank
records suggest that a payment was made directly from the corporate account to a loan addressed
in the name of Movants as individuals rather than Aceco as a corporation. (Id. at 8; Ex. I,
annexed to Supp. Decl. of Bing Li in Supp. of Pl. Obj. dated Sept. 8, 2014 (“Li Decl. II”),
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Movants argue that Aceco does not owe the balance Plaintiff claims, in part because KMart discovered defects in the textiles shipped by Plaintiff, which resulted in “chargebacks”
against Aceco totaling approximately $850,000. (Decl. of David Liu dated Mar. 29, 2014,
annexed to Affirmation of Jonathan Gould in Supp. of Mot. to Vacate Order of Attachment (“Liu
Decl.”) ¶¶ 10–12.)

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Docket Entry No. 61-1.)
On or about November 7, 2013, Plaintiff requested the U.S. Marshal to levy on Aceco’s
account at Rosenthal & Rosenthal (a factoring company), Movants’ bank account with People’s
United Bank, Aceco’s corporate account with K-Mart, and Aceco’s bank accounts at China Citic
Bank.2 (Decl. Bing Li in Opp’n to Def. Mot. to Vacate Order of Attachment (“Li Decl. I”) ¶¶
11–15, Docket Entry No. 37.) The levy on Aceco’s K-Mart account and Rosenthal & Rosenthal
accounts failed to attach any funds, (Li. Decl. I ¶¶ 12, 14), and the levy on Aceco’s bank
accounts failed because the bank asserted a secured interest in Aceco’s assets. (Pl. Obj. 3–4.)
Movant’s bank account had $193 in attachable assets. (Li Decl. I ¶ 13, Ex. I.) On or about
February 11, 2014, Plaintiff caused the U.S. Marshal to levy on three parcels of real property,
two of which were owned by Movants and one of which was owned by non-party Rockaway
Associates.3 (Li Decl. I ¶¶ 33–35.)
Following the issuance of the Attachment Order, Plaintiff alleges that Movants attempted
to close Aceco’s business, pointing to evidence that Movants had relocated Aceco’s corporate
offices from an address in Great Neck to Movants’ own residence in Manhasset. (Pl. Obj. 4.)
Plaintiff also notes that Movants listed their real properties for sale after the commencement of
the lawsuit, in late 2013 and early 2014. (Id. at 11.)

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In the process of executing service of process of the levies, the U.S. Marshal listed that
Aceco’s offices in Great Neck were closed. (Pl. Obj. 4.)
3

The notice of attachment filed against the property owned by Rockaway Associates,
located at 25 Gracewood Drive, Manhasset, NY 11030, is the subject of this Court’s October 20,
2014 Memorandum and Order. Dafeng Hengwei Textile Co. v. Aceco Indus. & Commercial
Corp., --- F. Supp. 3d ---, 2014 WL 5319688 (E.D.N.Y. Oct. 20, 2014).

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II. Discussion
a.

Standards of Review
i.

Report and recommendation

A district court reviewing a magistrate judge’s recommended ruling “may accept, reject,
or modify, in whole or in part, the findings or recommendations made by the magistrate judge.”
28 U.S.C. § 636(b)(1)(C). When a party submits a timely objection to a report and
recommendation, the district court reviews the parts of the report and recommendation to which
the party objected under a de novo standard of review. Id.; see also Larocco v. Jackson, No. 10CV-1651, 2010 WL 5068006, at *2 (E.D.N.Y. Dec. 6, 2010). The district court may adopt those
portions of the recommended ruling to which no timely objections have been made, provided no
clear error is apparent from the face of the record. 28 U.S.C. § 636(b)(1)(C); see also Larocco,
2010 WL 5068006, at *2. The clearly erroneous standard also applies when a party makes only
conclusory or general objections, or simply reiterates its original arguments. See Rahman v.
Fischer, No. 10-CV-1496, 2014 WL 688980, at *1 (N.D.N.Y. Feb. 20, 2014) (“If no objections
are made, or if an objection is general, conclusory, perfunctory, or a mere reiteration of an
argument made to the magistrate judge, a district court need review that aspect of a reportrecommendation only for clear error.” (citations omitted)); Time Square Foods Imports LLC v.
Philbin, No. 12-CV-9101, 2014 WL 521242, at *2 (S.D.N.Y. Feb. 10, 2014) (clearly erroneous
standard applies when party reiterates arguments made to the magistrate judge); see also
DePrima v. City of N.Y. Dep’t of Educ., No. 12-CV-3626, 2014 WL 1155282, at *3 (E.D.N.Y.
Mar. 20, 2014) (collecting cases).
ii.

Motion to vacate Attachment Order

New York State Law governs this Court’s authority over provisional remedies, including

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attachment. See Fed. R. Civ. P. 64(a)–(b). Where a plaintiff obtains an order of attachment, “the
defendant, the garnishee or any person having an interest in the property or debt may move . . .
for an order vacating or modifying the order of attachment.” N.Y. C.P.L.R. § 6223 (2012).
“Upon a motion to vacate . . . the plaintiff shall have the burden of establishing the grounds for
the attachment, the need for continuing the levy and the probability that he will succeed on the
merits.” 4 Id. § 6223(b); see Rothman v. Rogers, 633 N.Y.S.2d 361, 361 (App. Div. 1995)
(holding grant of vacatur appropriate because plaintiff failed to establish grounds for
attachment). The Court has “broad discretion . . . to vacate an attachment order ‘when evidence,
though not lacking altogether, may seem too weak or uncertain to justify the remedy.’” Trigo
Hnos., Inc. v. Premium Wholesale Groceries, Inc., 424 F. Supp. 1118, 1123 (S.D.N.Y. 1976)
(“Trigo Hnos. I”) (quoting AMF Inc. v. Algo Distribs. Co. 369 N.Y.S.2d 460, 468 (App. Div.
1975)); see also Rothman, 633 N.Y.S.2d at 361 (“The court has broad discretion in considering
such an application.”) (citing Zenith Bathing Pavilion v. Fair Oaks S.S. Corp., 148 N.E. 532, 534
(1925)).
The grounds for attachment are enumerated by statute. New York Law provides in
pertinent part that:
An order of attachment may be granted in any action, except a
matrimonial action, where the plaintiff has demanded and would
be entitled, in whole or in part, or in the alternative, to a money
judgment against one or more defendants, when: . . . 3. the
defendant, with intent to defraud his creditors or frustrate the
enforcement of a judgment that might be rendered in plaintiff's
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The parties’ dispute centers on whether Plaintiff made an adequate showing of the
grounds for attachment, namely that Movants have disposed of or secreted assets with intent to
defraud their creditors or frustrate the enforcement of a judgment. See N.Y. C.P.L.R. § 6201(3).
Because the Court finds that Plaintiff has failed to meet its burden on this prong, it does not
address the adequacy of Plaintiff’s allegations regarding the need for continuing the levy or the
probability that Plaintiff will succeed on the merits.

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favor, has assigned, disposed of, encumbered or secreted property,
or removed it from the state or is about to do any of these
acts . . . .”
N.Y. C.P.L.R. § 6201. However, “‘[b]ecause attachment is a harsh remedy,’ these statutory
factors ‘must be strictly construed in favor of those against whom’ attachment is sought.” DLJ
Mortg. Capital, Inc. v. Kontogiannis, 594 F. Supp. 2d 308, 319 (E.D.N.Y. 2009) (quoting
Monteleone v. Leverage Grp., No. 08-CV-1986, 2008 WL 4541124, at *6 (E.D.N.Y. Oct. 7,
2008)) (citing Brastex Corp. v. Allen Int’l, Inc., 702 F.2d 326, 332 (2d Cir. 1983); Kornblum v.
Kornblum, 828 N.Y.S.2d 404 (App. Div. 2006)).
b.

Plaintiff’s Objections

Plaintiff objects to Judge Pohorelsky’s recommendation that the Court grant Movants’
motion to vacate the Attachment Order, arguing that Judge Pohorelsky made three errors: (1)
making findings of disputed facts in favor of Movants; (2) failing to shift the burden to Movants
to explain and document the disappearance of their assets; and (3) failing to address Plaintiff’s
additional facts which supported its argument that Defendants intended to frustrate the
enforcement of a judgment. At its core, Plaintiff objects to the conclusion that it failed to meet
its burden to show Movants disposed of or secreted assets with intent to commit fraud, as
required by N.Y. C.P.L.R. § 6201(3). For the reasons discussed below, the Court adopts Judge
Pohorelsky’s recommendation and grants Movants’ motion to vacate the Attachment Order.
i.

Disputed facts and additional facts

Plaintiff objects to Judge Pohorelsky’s conclusion that “the plaintiff offers no proof that
the money paid by K-Mart was in fact diverted to the individual defendants or otherwise
secreted,” and points to at least six statements Judge Pohorelsky makes in support of that
conclusion. (Pl. Obj. 12.) Plaintiff objects to these “findings of fact” he has inferred from Judge

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Pohorelsky’s R&R, including: (1) “the vast majority of the funds deposited into [Aceco’s China
Citic Bank] accounts during 2013 were used to pay down loans made to Aceco by the bank,”
(R&R 5); (2) “[t]he loans reflected in Aceco’s bank records may well have been advances used
to pay the plaintiff and other manufacturers who provided goods to Aceco for resale,” (id. at 6
n.6); (3) “[P]laintiff apparently acknowledges receiving payments totaling approximately $2.4
million from Aceco during 2013,” (id.); (4) “[a]ccording to the defendants, however, one of the
two [pieces of real] properties had been listed for sale as early as 2012 in an effort to raise
funds,” (id. at 6) and two additional statements related to a property owned by third-party
Rockaway Associates, which is no longer the subject of the current motion to vacate. (See Pl.
Obj. 12–18.) Plaintiff argues that: (1) not all of the funds were used to pay loans, and “it is not
known what these abnormal loan payments were for,” (Pl. Obj. 12.); (2) Aceco never used a loan
advance to pay Plaintiff, (id. at 14); (3) Plaintiff had not verified the payment amount at the time
of oral argument, (id. at 15); and (4) Plaintiff presented documents that the property was first
listed for sale in November of 2013, (id. at 16).
Plaintiff also objects to the R&R on the ground that Judge Pohorelsky erred by failing to
address Plaintiff’s contentions that Aceco was closing its business and its bank accounts, that Yu
made an incorrect statement to the U.S. Marshals who came to levy on her property,5 that
defendants “fail[ed] to provide documents showing the nature and use of the abnormal amount of
loans and loan payments” and otherwise did not comply with Plaintiff’s discovery requests, that
defendants disposed of “all of their interests in real properties,” and the timing of the listed acts.
5

According to Plaintiff, the U.S. Marshal attempted service of the Attachment Order at
Movants’ residence in Manhasset, New York, and noted on the second attempt “DOES NOT
KNOW ABOVE NAMED INDIVIDUALS PER OWNER OF RESIDENCE MRS. XU[.]:” (Pl.
Obj. 4–5.) Plaintiff asserts that the same individual later identified herself as Defendant Yu and
accepted the court papers for herself and for Liu. (Pl. Obj. 5.)

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(Pl. Obj. 21.) Plaintiff argues that “[t]hese facts, coupled with the unexplained disappearance of
funds from Aceco [a]ccounts, compel the conclusion that Aceco Defendants disposed of and
secreted assets with intent to frustrate enforcement of a judgment Plaintiff will obtain in this
action.” (Id.)
Movants argue, in sum, that Judge Phorelsky’s statements were not formal findings of
fact, but were rather illustrations and explanations of why he concluded that Plaintiff failed to
meet its burden. (Supp. Def. Response 6–7.)
In order to sustain an action based on Section 6201(3), the plaintiff must show both that
the defendant assigned, disposed of, encumbered or secreted property, and that such actions were
taken with intent to defraud creditors or frustrate the enforcement of a judgment. N.Y. C.P.L.R.
§ 6201. “It is well established in New York that the mere removal or other disposition of
property by a debtor is not a sufficient ground for an attachment.” Bank of Leumi Trust Co. of
N.Y. v. Istim, Inc., 892 F. Supp. 478, 483 (S.D.N.Y. 1995) (collecting cases); see also Ames v.
Clifford, 863 F. Supp. 175, 178–79 (S.D.N.Y. 1994) (“[T]he mere transfer of assets, without
some showing of fraudulent intent, will not justify attachment.” (citing Computer Strategies, Inc.
v. Commodore Bus. Machs., Inc., 483 N.Y.S.2d 716, 721 (App. Div. 1984))); Trigo Hnos. I, 424
F. Supp. at 1123 (“[P]referential payment to certain creditors, unless part of a larger scheme
undertaken with actual intent to defraud creditors, will not suffice to support an attachment.”
(citations omitted)).
The plaintiff must show “that such fraudulent intent really exists in the defendant’s
mind.” DLJ Mortg. Capital, 594 F. Supp. 2d at 319 (citations and internal quotations omitted).
The plaintiff must “present more than ‘a scintilla of proof as to the requisite elements of the
fraud cause of action alleged in the complaint.’” Trigo Hnos., Inc. v. Premium Wholesale

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Groceries, Inc., 424 F. Supp. 1125, 1132 (S.D.N.Y. 1976) (“Trigo Hnos. II”) (quoting
MacMillan v. Hafner, 334 N.Y.S.2d 729, 729 (App. Div. 1973)). “Since direct evidence of
fraudulent intent is rare, courts often look for the presence of ‘badges of fraud’ which commonly
accompany fraudulent transfers in determining whether to infer fraudulent intent” from a
disposition of assets. U.S. Fid. & Guar. Co. v. J. United Elec. Contracting Corp., 62 F. Supp. 2d
915, 924 (E.D.N.Y. 1999); see also DLJ Mortg. Capital, 594 F. Supp. 2d at 319 (“Because fraud
is not lightly inferred, plaintiff’s moving papers must contain evidentiary facts as opposed to
conclusions proving the fraud.” (citations, internal quotations and alterations omitted)). The
“badges of fraud” courts consider include: (1) a close relationship between the parties involved
in the transfer or transaction; (2) secrecy in the transfer; (3) a questionable transfer not in the
usual course of business; (4) gross inadequacy of consideration; (5) the transferor’s knowledge
of the creditor’s claim and the transferor’s inability to pay it; (6) the use of fictitious parties; (7)
the retention of control of the property by the transferor after transfer. See U.S. Fid. & Guar. Co,
62 F. Supp. 2d at 924 (citing HBE Leasing v. Frank, 48 F.3d 623, 639 (2d Cir. 1995)); DLJ
Mortg. Capital, 594 F. Supp. 2d at 320.
Plaintiff has made a showing that Defendants have disposed of or are attempting to
dispose of at least some of their property. Movants have listed the parcels of real property for
sale, and Aceco has used a significant amount of its assets to make loan payments. However, the
mere disposition of property does not give rise to a presumption of intent to defraud. See DLJ
Mortg. Capital, 594 F. Supp. 2d at 319. Plaintiff must also present evidence that Movants had
fraudulent intent when they disposed of their assets, or otherwise intended to frustrate the
enforcement of this judgment. Plaintiff has failed to do so.
As Judge Pohorelsky stated, “the principal evidence offered by [Plaintiff] to establish that

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[Defendants] have secreted or disposed of their assets with the intent to defraud [Plaintiff] is the
fact that during the calendar year 2013 Aceco received some $3.5 million in payments from KMart for the bedding goods that were sold by [Plaintiff], but failed to pay approximately $2
million of the Plaintiff’s invoices for those products.” (R&R 5.) Plaintiff’s assertion that the
money paid from K-Mart should have gone directly to Plaintiff and that Defendant’s failure to
pay it directly to Plaintiff, and failure to account for exactly to whom the money was paid, is
insufficient to support an inference of fraud. See Ames, 863 F. Supp. at 179; Rosenthal v.
Rochester Button Co., 539 N.Y.S.2d 11, 12 (App. Div. 1989) (Plaintiff’s showing rapid
deterioration of corporation’s financial condition, combined with corporate sale of assets, still
“completely devoid of any evidence of fraudulent intent on the part of [the defendant].”)
Furthermore, Plaintiff has not presented evidence that any of the monetary or real-estate
transactions at issue demonstrate “badges of fraud” that would support a finding of fraudulent
intent. Bank records show that there may have been some money transfers between Aceco and
Movants, closely related parties, but only for small amounts in comparison to the amount owed
to Plaintiff. “The records of the [Movants’] bank accounts were produced to [Plaintiff] in
discovery, and disclose that except for modest transfers totaling perhaps $50,000 to $60,000,
there is no proof that any of the funds in the corporate accounts were diverted to the [Movants’]
accounts.” (R&R 6.) Plaintiff presents nothing more than its suspicions as to why this money
was transferred or the ultimate use of the money, and fails to show evidence of any “badge of
fraud” beyond the close relationship of the parties. See De Ping Song v. 47 Old Country, Inc.,
No. 09-CV-5566, 2011 WL 3846929, at *5–6 (E.D.N.Y. Aug. 30, 2011) (granting motion to
vacate order of attachment against corporate entities and individual owners/shareholders, despite
fact that bank records “tended to show that [individual defendants] were less than fastidious in

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keeping the banking activities of their three [corporations] separate” and that defendants were
otherwise “poor record keepers”). As to the loan payments made by Aceco, Plaintiff asserts that
“while it is not known what all [Defendants’] abnormal loan payments were for . . . it is
reasonable to infer that at least some of the payments went to finance” loans made by Movants,
or other companies in which Movants are involved. (Pl. Obj. 13.) The Court disagrees that this
inference is “reasonable,” and finds that Plaintiff failed to present sufficient evidence to support
a finding of fraudulent intent with regard to these payments.
ii.

Burden shifting

Plaintiff argues that the Judge Pohorelsky improperly imposed on Plaintiff “an enhanced
burden of proof . . . to prove where the funds are hidden after disappearance” by requiring
Plaintiff to show more than the transfer or disappearance of an “abnormal amount of property.”
(Pl. Obj. 18–19.) Plaintiff also argues that Aceco’s bank records prove that Aceco’s funds were
“diverted to the [Movants] personally or elsewhere to enrich the [Movants.]” (Id.)
To the extent Plaintiff argues that the unexplained disappearance of a large amount of
property establishes a proper basis for an attachment order, Plaintiff merely reiterates arguments
made in its opposition to the motion before Judge Pohorelsky, (see Pl. Opp’n 7–10), and the
Court will therefore review Judge Pohorelsky’s recommendation as to this argument for clear
error. See Rahman, 2014 WL 688980, at *1. On this point, Judge Pohorelsky concluded that
“[t]he evidence submitted to the court [] does not establish that the funds paid by K-Mart have
disappeared; it only establishes that [Defendants] used those funds to pay other debts.” (R&R 8.)
Having considered Judge Pohorelsky’s conclusions and the accompanying objections, the Court
concludes that Plaintiff has not shown any clear error.
If a plaintiff can establish the defendant has disposed of or hidden assets in order to

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defraud creditors, “[t]he burden then shifts to the defendant to explain the actions or to rebut the
plaintiff’s allegations.” Bank of Leumi Trust Co., 892 F. Supp. at 483; Monteleone v. Leverage
Group, No. 08-CV-1986, 2008 WL 4541124, at *9 (E.D.N.Y. Oct. 7, 2008) (noting defendants
failed to put forth a legitimate motive for spending investors’ money on personal matters rather
than investing it as promised); Mineola Ford Sales Ltd. v. Rapp, 661 N.Y.S.2d 281, 371–72
(App. Div. 1997) (affirming order of attachment, noting defendant-employee failed to explain
falsified business records and failed to explain what she had done with plaintiff-employer’s
money). However, before the burden will shift, a plaintiff must present evidence that shows both
a disposition of property and fraudulent intent on the part of the defendant. See Bank of Leumi
Trust, 892 F. Supp. at 483 (collecting cases).
As discussed above, Plaintiff has not presented sufficient evidence to establish that
Movants have acted with intent to defraud creditors. See De Ping Song, 2011 WL 3846929 at
*5–6. Assuming, however, that the facts presented were sufficient to establish a prima facie case
of fraudulent intent, Defendants have presented explanations for the money transfers and the real
estate sales. Aceco asserts that it had “numerous letters of credit” with China Citic Bank to
finance the operations of Aceco. (Decl. of David Liu dated Mar. 29, 2014, annexed to
Affirmation of Jonathan Gould in Supp. of Mot. to Vacate Order of Attachment ¶ 17.). Movants
also assert that they listed their parcels of real property “for financial reasons.” (Supp. Decl. of
David Liu dated Apr. 30, 2014 ¶ 15.) Those explanations are supported by bank records which
show numerous outgoing loan payments, and by the fact that China Citic Bank has a secured
interest in Aceco’s bank accounts. Given the evidence, “[i]t appears . . . that [Defendants’] lack
of funds is simply the product of poor business decisions or perhaps bad luck,” and not
necessarily of any intent to defraud creditors. (See R&R 8.)

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III. Conclusion
Having considered Judge Pohorelsky’s Report & Recommendation and Plaintiff’s
objections, the Court adopts the Report & Recommendation in its entirety. The Court grants
Movants’ motion to vacate the Attachment Order.
SO ORDERED:

s/MKB
MARGO K. BRODIE
United States District Judge
Dated: November 7, 2014
Brooklyn, New York

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