King et al v. Wang et al

Filing 27

OPINION & ORDER re: 19 MOTION to Dismiss filed by Jian Bao Gallery, Bao Wu Tang, Shou-Kung Wang, Andrew Wang: Accordingly, for the foregoing reasons, the Court grants Defendant's motion to dismiss the complaint in its entirety, but without prejudice to Plaintiffs' right to refile their state-law claims in an appropriate state court. (Signed by Judge John F. Keenan on 7/13/2015) (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------X
KENNETH KING and
:
YIEN-KOO KING,
:
:
Plaintiffs,
:
:
-against:
:
ANDREW WANG, SHOU-KUNG WANG,
:
BAO WU TANG, JIAN BAO GALLERY, :
ANTHONY CHOU, CHEN-MEI-LIN, WEI :
ZHENG, YE YONG-QING, YUE DA-JIN,:
And JOHN DOES 1-9,
:
:
Defendants.
:
--------------------------------X
APPEARANCES

No. 14 Civ. 7694 (JFK)
OPINION & ORDER

FOR PLAINTIFFS KENNETH KING and YIEN-KOO King:
Sam P. Israel
FOR DEFENDANTS ANDREW WANG, SHOU-KUNG WANG,
BAO WU TANG, and JIAN BAO GALLERY:
Carolyn J. Shields
Ying Liu
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 complaint filed by Plaintiffs Kenneth King (“K.
King”) and Yien-Koo King (“Y.K. King”) pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure.

Defendants’ motion

seeks dismissal on ten separate grounds, including (1) that
Plaintiffs lack standing to recover for all of their claims, (2)

that Plaintiffs’ claims fall within the probate exception to
federal jurisdiction, and (3) that Plaintiffs’ have failed to
properly allege a federal cause of action.

For the reasons

discussed below, Defendant’s motion is granted and the complaint
is dismissed.
I. Background
The following facts are taken from the allegations in the
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”).

Plaintiff Y.K.

King, a New York City resident, is the daughter of C.C. Wang.
Together with her husband, Plaintiff K. King, Y.K. King brings
this action to recover works of fine art formerly belonging to
C.C. Wang’s estate (the “Estate”) or to Plaintiffs themselves.
Defendant S.K. Wang, a resident of Queens, New York, is the
son of C.C. Wang.

S.K. Wang is alleged to be the sole owner of

Defendant Jian Bao Gallery, an art gallery conducting business
in New York.

Defendant A. Wang, a New York City resident, is

the grandson of C.C. Wang and the son of Defendant S.K. Wang.
A. Wang is alleged to be the sole owner of Defendant Bao Wu
Tang, an art gallery conducting business in China.

Defendant

Anthony Chou (“Chou”) is a resident of Beijing, China.
Defendant Chen-Mei Lin (“Lin”) is a resident of Shanghai, China.
Defendant Wei Zheng (“Zheng”) is a resident of Rego Park, New
2

York.

Defendant Ye Yong-Qing (“Qing”) is a resident of

Shanghai, China.
Nanjing, China.

Defendant Yue Da-Jin (“Jin”) is a resident of
The complaint also asserts claims against John

Does 1-9, who are identified as natural persons serving as
agents of the Wang Defendants.

As of the date of this order,

only Defendants A. Wang and S.K. Wang, individually and on
behalf of their respective businesses, have appeared in this
action, although a copy of the summons and complaint was
purportedly served on Defendant Zheng on October 14, 2014.
C.C. Wang was a renowned Chinese-American artist and
collector. (Compl. ¶ 22.)

According to the complaint, he

assembled a collection of over 400 fine and rare Chinese
paintings, sculptures, and antiquities during his lifetime,
which are allegedly valued at more than $60 million. (Id. ¶ 23.)
This litigation—which principally pits C.C. Wang’s daughter and
son-in-law, Y.K. King and K. King, against his son and grandson,
S.K. Wang and A. Wang—centers on the ownership and inheritance
of C.C. Wang’s collection following his death in 2003.
According to the complaint, Defendants’ alleged misconduct
began in the early 1980’s, when S.K. Wang was working as his
father’s bookkeeper and assistant. (Id. ¶ 31.)

During this

time, Plaintiffs contend that S.K. Wang used his position to
remove and embezzle approximately 160 paintings belonging to
C.C. Wang. (Id.)

As a result, S.K. Wang was allegedly fired by
3

his father in 1997, after which time C.C. Wang turned over all
business management responsibilities to Y.K King and K. King.
(Id. ¶¶ 27, 31-32.)

These responsibilities included overseeing

CY Art Ltd., a company that had previously been established by
Y.K. King for the purpose of facilitating the management of C.C.
Wang’s artwork and collection. (Id. ¶ 25.)

According to the

complaint, CY Art Ltd.’s assets included a safety deposit box
used to store artwork belonging to both C.C. Wang and Y.K. King.
(Id. ¶ 26.)
C.C. Wang’s health began to fail in 2003, to the point
that, in or about April 2003, his doctors reportedly determined
that he lacked sufficient mental capacity to execute his own “Do
Not Resuscitate” order. (Id. ¶ 27.)

Thereafter, Plaintiffs

assert that the Wang Defendants’ secretly moved C.C. Wang to
S.K. Wang’s home in Queens, New York in order to prevent further
contact between C.C. Wang and Y.K. King. (Id. ¶ 33.)
On January 31, 2003, Y.K. King allegedly took an inventory
of the contents of the CY Art Ltd. safety deposit box and
discovered that twenty-one paintings were missing, including ten
works that were owned by corporations belonging to Plaintiffs.
(Id. ¶¶ 34-36.)

That same day, Y.K. King claims to have

witnessed A. Wang and S.K. Wang leaving C.C. Wang’s apartment
building with two bags.

Upon checking the apartment, Y.K. King

found that another four paintings were missing, including three
4

more works that were owned by corporations belonging to
Plaintiffs (together with the ten works noted above, the
“Personal Artwork”). (Id. ¶¶ 37-38.)
Thereafter, during a conversation on February 4, 2003, A.
Wang reportedly admitted that he and S.K. Wang had taken all
twenty-five missing paintings, but promised not to sell any of
them if Y.K. King turned over the balance of the family’s assets
to them. (Id. ¶¶ 36, 40, 41.)

Five of the missing paintings

were later returned by A. Wang in May 2005. (Id. ¶ 41.)
C.C. Wang died on July 3, 2003.

Following her father’s

death, Y.K. King submitted a will dated June 13, 2000, along
with a July 10, 2002 codicil (together, the “2002 Will”), to the
New York County Surrogate’s Court.

Under the 2002 Will, Y.K.

King was named executor and a principle beneficiary. (Id. ¶ 45.)
At approximately the same time, the Wang Defendants produced a
second will allegedly executed by C.C. Wang on February 18, 2003
(the “2003 Will”) while he was residing at S.K. Wang’s home in
Queens.

The 2003 Will purports to disinherit Y.K. King and

instead designates A. Wang as executor and names A. Wang, A.
Wang’s brother—Stephen Wang—and S.K. Wang as C.C. Wang’s chief
beneficiaries. (Id. ¶ 48.)
In July 2003, Y.K. King initiated a proceeding in the
Surrogate’s Court in order to challenge the legitimacy of the
2003 Will. (Id. ¶ 49.)

On August 4, 2003, the Surrogate’s Court
5

issued temporary letters of administration to the Public
Administrator and preliminary testamentary letters to A. Wang.
(Id.)

Thereafter, Plaintiffs allege that the Wang Defendants

exploited A. Wang’s preliminary status as executor of the Estate
to illegally “wrest control” of the Estate’s assets from
Plaintiffs. (Id. ¶¶ 50-51.)

Specifically, Plaintiffs allege

that the Wang Defendants used the Jin Bao and Bao Wu Tang
galleries to orchestrate a scheme in which Estate assets were
ostensibly sold to collectors in the Chinese art community.
Plaintiffs contend that these collectors—who include the other
named Defendants:

Chou, Lin, Zheng, Quing, and Jin—were merely

“straw men” and that A. Wang was in fact acquiring the works for
himself at deflated prices. (Id. ¶¶ 61-62.)
Probate proceedings before the Surrogate’s Court apparently
remain ongoing. (See Defs. Mem. at 1.)

Nevertheless, Plaintiffs

commenced the present action by filing a complaint in the
Southern District of New York on September 23, 2014.

The

complaint asserts eight causes of action relating both to the
Personal Artwork and to property of the Estate, including two
claims under federal law for violations of the Racketeer
Influence and Corrupt Organizations Act (“RICO”) and six 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, breach of fiduciary duty,
6

replevin, and violations of New York State Debtor and Creditor
Law section 270.

In response, Defendants filed the instant

motion to dismiss.
II. Discussion
A.

Legal Standard

A motion to dismiss should be denied so long as the
complaint “contain[s] sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Accordingly, in addressing a 12(b)(6) motion, a court must
accept the plaintiff’s allegations of fact as true and draw all
reasonable inferences in the plaintiff’s favor. See Ganino v.
Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000); Fed.
Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V., 4 F.
Supp. 3d 395, 403 (S.D.N.Y. Aug. 25, 2014).
B.

Analysis

Federal jurisdiction in this case is premised on the
existence of a federal question raised by Plaintiffs claims in
counts one and two of the complaint, which allege violations of
RICO and conspiracy to violate RICO. See 18 U.S.C §§ 1962, 1964;
28 U.S.C. § 1331.

Plaintiffs also ask the Court to exercise

supplemental jurisdiction over six state common law and
statutory claims on the ground that they form “part of the same
7

case or controversy” as Plaintiffs’ federal claims. See 28
U.S.C. § 1367(a).

In response, Defendants assert in part that

this action is barred by the probate exception to federal
jurisdiction on the ground that Plaintiffs’ state law claims
seek, in essence, to have the Court assert control over property
of the Estate that remains under the control of the Surrogate’s
Court or to distribute funds belonging to the Estate based on
Plaintiffs’ disputed status as an Estate beneficiary. See
Lefkowitz v. Bank of N.Y., 528 F.3d 102, 106 (2d Cir. 2007)
(hereinafter “Lefkowitz II”) (addressing similar claims and
noting that the plaintiff was attempting to “mask in claims for
federal relief her complaints about the maladministration of her
parent’s estates”).
Although the Court notes that many of Plaintiffs’ state law
claims in this case appear to turn on issues that at least
overlap with Plaintiffs’ claims before the Surrogate’s Court,
the Court ultimately concludes that it need not resolve this
tension because (1) Plaintiffs lack standing to assert claims
concerning the Personal Artwork and (2) dismissal of Plaintiffs’
RICO claims is appropriate because the complaint fails to
establish a pattern of racketeering activity.

Accordingly, in

the absence of a valid federal cause of action or diversity of
citizenship, the Court declines to exercise supplemental

8

jurisdiction over Plaintiffs’ state-law claims and therefore
grants Defendants’ motion to dismiss in its entirety.
1. The Personal Artwork:

Plaintiffs’ Standing As the

Real-Party in Interest
As an initial matter, Defendants contend that Plaintiffs
lack standing to assert claims relating to the Personal Artwork
because Plaintiffs are not the legal owners of these works;
rather, the Personal Artwork is owned by “corporations, in turn,
owned by the Plaintiffs.” (Compl. ¶¶ 36, 38; Defs. Mem. at 20.)
The Court agrees.
In every case, a plaintiff’s standing to assert the claims
at issue must be addressed at the outset. See Lawrence v. Cohn,
932 F. Supp. 564, 571 (S.D.N.Y. 1996).

Where a defendant

asserts that a party other than the plaintiff has standing, the
unspoken premise underlying the claim is that a nonparty remains
the real-party in interest under Rule 17(a) of the Federal Rules
of Civil Procedure. See Abu Dhabi Comm. Bank v. Morgan Stanley &
Co., Inc., 888 F. Supp. 2d 478, 485 (S.D.N.Y. 2012).

Rule 17(a)

requires that an action “be brought by the person who, according
to the governing substantive law, is entitled to enforce the
right.” ImagePoint, Inc. v. JPMorgan Chase Bank, N.A., 27 F.
Supp. 3d 494, 513 (S.D.N.Y. 2014) (internal quotation marks
omitted).

In New York, shareholders of a corporation do not

hold legal title to any of the corporation’s assets; instead,
9

title is vested with the corporation itself. See EM Ltd. v.
Republic of Arg., 473 F.3d 463, 476 (2d Cir. 2007); JPMorgan
Chase Bank, N.A. v. Malarkey, 65 A.D.3d 718, 721 (N.Y. App. Div.
2009).

As a result, where the claim concerns property of a

corporation, it is the corporation that must seek to redress the
injury. See Bingham v. Zolt, 66 F.3d 553, 559-60 (2d Cir. 1995)
(noting that shareholders generally lack standing in such
cases).

Accordingly, because the complaint alleges that the

Personal Artwork belongs to corporations owned by Plaintiffs,
rather than to Plaintiffs themselves, these corporations are the
real-parties in interest with respect to the Personal Artwork.
Typically, the failure to name the real-party in interest
is not a lethal error.

Instead, where the change would be

merely formal and would not alter the core of the complaint’s
factual allegations, a court should permit the real-party in
interest a reasonable opportunity to ratify, join, or be
substituted into the action. See Fed. R. Civ. P. 17(a)(3); Abu
Dhabi Comm. Bank, 888 F. Supp. 2d at 486.

As discussed below,

however, the complaint fails to state a claim under RICO for the
loss of either the Personal Artwork or the Estate paintings.
Consequently, because the Court finds that dismissal would be
appropriate in any case, Plaintiffs’ request for leave to amend
the complaint to add the relevant corporations as parties is
denied.
10

2. The RICO Claims
i. The Probate Exception to Federal Jurisdiction
Before addressing the complaint’s substantive RICO
allegations, the Court notes that—whether or not the probate
exception excludes Plaintiff’s state law claims from federal
jurisdiction—federal jurisdiction is proper with respect to
Plaintiffs’ RICO claims. See Marshall v. Marshall, 547 U.S. 293,
296 (2006); Morrison v. Nat’l Austl. Bank Ltd., 547 F.3d 167,
170 (2d Cir. 2008) (noting that subject matter jurisdiction is a
“threshold inquiry”).

The probate exception imposes a narrow

limitation on the “otherwise proper [exercise of] federal
jurisdiction”:

a federal court may not probate or annul a will,

administer a decedent’s estate, or “dispose of property that is
in the custody of a state probate court,” but may adjudicate
matters outside those confines and otherwise within federal
jurisdiction. See Marshall, 547 U.S. at 311-12; see also
Lefkowitz, 528 F.3d at 105-06.

Consequently, federal

jurisdiction has been found to be proper where a plaintiff
brings an in personam action seeking to recover personally
against a defendant, even where the basis for the claim is that
the defendant interfered with the making of an inter vivos or
testamentary gift. See Marshall, 547 U.S. at 300-01, 312
(addressing allegations that the defendant interfered with an
expected gift or inheritance by barring the plaintiff and
11

decedent from having personal contact, making
misrepresentations, and transferring property contrary to the
decedent’s express wishes); see also Rothberg v. Marger, No. 11
Civ. 5497, 2013 WL 1314699, at *9-10 (D.N.J. Mar. 28, 2013)
(citing Marshall and finding that RICO claims were not barred by
the probate exception where the complaint alleged that the
defendants used unlawful means to prevent the plaintiffs from
receiving gifts promised to them by the decedent).
Here, Plaintiffs’ RICO claims are based on allegations that
Defendants engaged in an “ambitious scheme . . . designed to
change C.C. Wang’s financial affairs and long standing estate
plan” in order to facilitate the diversion of family assets away
from Plaintiffs and into Defendants’ hands. (Compl. ¶¶ 46, 15457, 179.)

To the extent, therefore, that Plaintiffs’ RICO

claims seeks damages from Defendants personally on the ground
that their conduct prevented Plaintiffs from receiving an
expected gift or inheritance, they are exactly the type of
probate-related claims that Marshall permits federal courts to
address. See Marshall, 547 U.S. at 304; Rothberg, 2013 WL
1314699, at *11.
ii.

Plaintiffs’ RICO Allegations

To state a RICO claim, the plaintiff must meet two pleading
burdens.

First, the plaintiff must sufficiently allege the

existence of a RICO violation—namely, that the defendant,
12

through the commission of two or more predicate acts that
constitute a “pattern of racketeering activity,” directly or
indirectly invests in, maintains an interest in, or participates
in an “enterprise” affecting interstate or foreign commerce. See
Lefkowitz v. Bank of N.Y., No. 01 Civ. 6252, 2003 WL 22480049,
at *8 (S.D.N.Y. Oct. 31, 2003) (hereinafter “Lefkowitz I”),
rev’d on other grounds, Lefkowitz II, 528 F.3d 102 (2d Cir.
2007).

Second, the plaintiff must demonstrate an injury to her

business or property that was caused by the RICO violation. See
id.; see also Kerik v. Tacopina, No. 14 Civ. 2374, 2014 WL
6791615, at *8 (S.D.N.Y. Dec. 3, 2014).

Here, the complaint

asserts that Plaintiffs have been injured by a series of
predicate acts beginning as early as the mid-1980s, which
allegedly constitute a fraudulent scheme by Defendants to obtain
control of artworks belonging to C.C. Wang, his estate, and to
Plaintiffs personally with the “ultimate goal” of defrauding
Plaintiffs’ of property and money. (Compl. ¶¶ 151-169.)
Even accepting the complaint’s allegations of injury and
causation as true, however, dismissal of Plaintiffs’ RICO claims
is appropriate because the complaint fails to plead a pattern of
racketeering activity.

To adequately plead a pattern of

racketeering activity, a plaintiff “must establish ‘that the
racketeering predicates are related, and that they amount to or
pose a threat of continued criminal activity.’” See Lefkowitz I,
13

2003 WL 22480049, at *8 (quoting H.J. Inc. v. Northwestern Bell
Telephone Co., 492 U.S. 229, 239 (1989) (emphasis in original)).
The continuity necessary to establish a RICO claim can be
either “closed-ended” or “open-ended.” See Weizmann Inst. of
Sci. v. Neschis, 229 F. Supp. 2d 234, 256–57 (S.D.N.Y. 2002).
To establish close-ended continuity, a plaintiff “must allege ‘a
series of related predicates extending over a substantial period
of time.’” Id. at 256 (quoting H.J. Inc., 492 U.S. at 239).

By

comparison, open-ended continuity requires a “threat that the
occurrence of predicate acts will extend[ ] indefinitely into
the future.” See Lefkowitz I, 2003 WL 22480049, at *8 (internal
quotation marks omitted) (alteration in the original).

At the

same time, a scheme’s duration alone is not dispositive; rather,
whether continuity exists is dependent upon a number of
non-dispositive factors, including the length of time over which
the alleged predicate acts took place, the number and variety of
acts, the number of participants, the number of victims, and the
presence of separate schemes. See Schnell v. Conseco, Inc., 43
F. Supp. 2d 438, 445-46 (S.D.N.Y.1999).
In applying the above factors in similar cases, courts have
“uniformly and consistently held that schemes involving a
single, narrow purpose and one or few participants directed
towards a single victim do not satisfy the RICO requirement of a
closed or open pattern of continuity.” Patrizzi v. Bourne in
14

Time, Inc., No. 11 Civ. 2386, 2012 WL 4833344, at *5 (S.D.N.Y.
Oct. 11, 2012); Lefkowitz I, 2003 WL 22480049, at *9.

For

instance, in Weizmann, the court determined that the allegations
were insufficient to establish close-ended continuity because
“none of the (other) indicia of closed-ended continuity—i.e., a
large number and variety of predicate acts, a large number of
either participants or victims, and the presence of separate
schemes”—were present. Weizmann Inst. of Sci., 229 F. Supp. 2d
at 257 (noting that “duration alone is not dispositive” and
observing that the complaint pled only four predicate acts by
one participant against merely two victims and in furtherance of
a single scheme—to gain control of a decedent’s assets).
Likewise, in Lefkowitz I, the Court concluded that the plaintiff
failed to establish a pattern of open-ended continuity because
the nature of the predicate acts—which concerned the alleged
fraudulent administration of an estate—did not imply an ongoing
future threat of continued criminal activity. See Lefkowitz I,
2003 WL 22480049, at *9 (noting that “[o]nce the administration
[of the decedents’ estate] ends, the alleged threat of future
criminal activity, such as it is, presumably will end with it”).
As in Weizmann and Lefkowitz I, Plaintiffs’ RICO
allegations in this case essentially concern the conduct of a
discrete set of actors (a father and son, assisted in some
instances by a narrow group of friends), directed at a small
15

group of victims (Y.K. King, K. King, and possibly other Estate
beneficiaries), and undertaken principally for the limited
purpose of gaining possession of a decedent’s property—here,
C.C. Wang’s art collection and fortune.

Moreover, as noted by

the court in Lefkowitz I, because Defendants’ predicate acts
relate to the administration of a decedent’s estate, as opposed
to an “inherently unlawful” enterprise, the presumption is that
those acts will terminate with the conclusion of probate
proceedings and the final distribution of the Estate’s assets.
See id.

Thus, even accepting the allegations in the complaint

as true, Defendants’ alleged scheme “to denude the Estate of
assets and misappropriate the Estate’s and Plaintiffs’ property”
does not establish a pattern of racketeering activity as defined
by the case law in this District. (See Compl. ¶ 5.)

Defendants’

motion to dismiss Plaintiffs’ RICO claims is therefore granted
with prejudice.
3. Plaintiffs State-Law Claims
Having found that dismissal of Plaintiffs’ RICO claims is
appropriate, the Court must consider whether it should
nonetheless exercise supplemental jurisdiction over Plaintiffs’
remaining state law claims.

As an initial matter, a federal

court ordinarily has supplemental jurisdiction to hear claims
based in state law so long as they form “part of the same case
or controversy under Article III of the United States
16

Constitution" as Plaintiffs' federal claims. See 28 U.S.C.
§

1367.

A federal court may, however, decline to exercise

supplemental jurisdiction in cases where it has "has dismissed
all claims over which it has original jurisdiction." Id.;
Rothberg, 2013 WL 1314699, at *15.

Consequently, because the

Court is dismissing the complaint's only federal law claims-and
in the absence of diversity of citizenship-the Court also
declines to exercise jurisdiction over Plaintiffs' remaining
state law claims.

There is no good reason for this Court to

retain jurisdiction over Plaintiffs' remaining state law claims.
III. Conclusion

Accordingly, for the foregoing reasons, the Court grants
Defendant's motion to dismiss the complaint in its entirety, but
without prejudice to Plaintiffs' right to refile their state-law
claims in an appropriate state court.

SO ORDERED.

Dated:

New York, New York
July/jr 2015

-·~1~

~

17

John F. Keenan
United States District Judge