King et al v. Wang et al

Filing 53

OPINION & ORDER re: 41 MOTION to Dismiss filed by Jian Bao Gallery, Bao Wu Tang, Shou-Kung Wang, Andrew Wang. For the foregoing reasons, the Court grants Defendants' motion to dismiss the amended complaint. Plaintiffs� 39; claims are dismissed without prejudice. If Plaintiffs wish to amend their complaint, they shall move this Court to do so no later than August 1, 2017. Otherwise the Court will enter an order dismissing Plaintiffs' claims with prejudice. T he Clerk of Court is respectfully requested to terminate the motion docketed at ECF No. 41. SO ORDERED. (Andrew Wang, Shou-Kung Wang, Jian Bao Gallery and Bao Wu Tang terminated.) (Amended Pleadings due by 8/1/2017.) (Signed by Judge John F. Keenan on 6/20/2017) (anc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------X
YIEN-KOO KING,
:
NORTHWICH INVESTMENTS, LTD.,
:
and SOON HUAT, INC.,
:
:
Plaintiffs,
:
:
No. 14 Civ. 7694 (JFK)
Case 1:09-md-02013-PAC Document 57 Filed 09/30/10& Page 1 of 45
-against:
OPINION
ORDER
:
ANDREW WANG, SHOU-KUNG WANG,
:
USDC SDNY
BAO WU TANG, JIAN BAO GALLERY, :
DOCUMENT
ANTHONY CHOU, CHEN-MEI-LIN, WEI :
ELECTRONICALLY FILED
ZHENG, YE YONG-QING, YUE DA-JIN,:
DOC #: _________________
and JOHN DOES 1-9,
:
DATE FILED: 6/20/2017
:
UNITED STATES DISTRICT COURT
Defendants.
SOUTHERN DISTRICT OF NEW YORK :
--------------------------------X
-----------------------------------------------------------x
APPEARANCES MAE 2008 SECURITIES
In re FANNIE
:
08 Civ. 7831 (PAC)
LITIGATION
:
09 MD 2013 (PAC)
FOR PLAINTIFFS YIEN-KOO King,
:
NORTHWICH INVESTMENTS, LTD., and SOON HUAT, INC.: & ORDER
:
OPINION
Sam P. Israel
-----------------------------------------------------------x
Timothy Savitsky
FOR DEFENDANTS ANDREW WANG, SHOU-KUNG WANG,
BAO WU TANG, and JIAN BAO GALLERY:
HONORABLE PAUL A. CROTTY, United States District Judge:
Carolyn J. Shields
Ying Liu

BACKGROUND1
JOHN F. KEENAN, United States District Judge:
The early years of this decade saw a boom in home financing which was fueled, among
Before the Court is a motion by Andrew Wang (“A. Wang”),
other things, by low interest rates and lax credit conditions. New lending instruments, such as
individually and doing business as Bao Wu Tang, and Shou-Kung
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
Wang (“S.K. Wang”), individually and formerly doing business as
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
the Jian Bao Gallery (hereinafter, the “Wang Defendants”), to
assumption that the market would Complaint and that refinancing complaint”)
dismiss the First Amended continue to rise (the “amended options would always be
available Plaintiffs Yien-Koo King lacking in the system. Mortgage originators did
filed by in the future. Lending discipline was (“Y.K. King”), Northwich
not hold these Ltd. mortgage loans. Rather than carry the rising risk on their books, the
Investments, high-risk(“Northwich”), and Soon Huat, Inc. (“Soon
originators sold their loans into the secondary mortgage market, often as securitized packages
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly

Huat”) (hereinafter, “Plaintiffs”).

For the reasons discussed

below, Defendants’ motion is granted and the amended complaint
is dismissed.
I.
A.

Background

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
2

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.)
3

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
4

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.)
5

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
6

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
7

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 the
RICO claims because the RICO claims sought to recover damages
from the Defendants personally and did not interfere with
property in the custody of state probate court. (Id. at 12.)
Finally, the Court found no good reason to exercise supplemental
jurisdiction over the Kings’ state law claims in light of the
fact that the Kings failed to state any federal claims upon
which relief could be granted. (Id. at 17.)
The Kings appealed the Court’s decision to the Second
Circuit. (See Notice of Appeal, ECF No. 29 (filed Aug. 12,
2015).)

On August 26, 2016, the Second Circuit affirmed in part

and vacated and remanded in part the Court’s opinion and order
8

on Defendants’ motion to dismiss.
32 (filed August 26, 2016).)

(See Summary Order, ECF No.

The Second Circuit panel affirmed

the Court’s exercise of jurisdiction over the RICO claims as
falling outside of the probate exception to federal
jurisdiction, but vacated and remanded the Court’s determination
that the Kings failed to adequately plead closed-ended
continuity. (See id.)

The Second Circuit panel found that

closed-ended continuity existed because, in essence, the related
predicates occurred over a substantial period of time. (Id. at
3.)

The panel directed the Court to permit the Kings to file an

amended complaint to add the real parties in interest who owned
certain artwork at issue and to consider whether it may exercise
jurisdiction over the Kings’ state law claims consistent with
the probate exception. (Id.)
On September 27, 2016, Plaintiffs filed their amended
complaint, adding Northwich and Soon Huat as the real parties in
interest and removing Kenneth King. (See Amend. Compl. at 1.)
The amended complaint contains essentially the same claims but
newly alleges some of the claims by Y.K. King on behalf of the
Estate—rather than in an individual capacity—including violation
of civil RICO and breaches of fiduciary duty and aiding and
abetting breaches of fiduciary duty. (See id. at 49, 54, 62.)
On October 25, 2016, Defendants filed the instant motion to
dismiss the amended complaint seeking dismissal on four separate
9

grounds:

(1) Plaintiffs lack standing to assert RICO claims,

(2) Plaintiffs’ RICO claims are time-barred, (3) Plaintiffs’
state law claims fall within the probate exception to federal
jurisdiction, and (4) the Court should abstain from entertaining
this action under the Colorado River doctrine. (See Defs.’ Mem.
of L. in Support of Mot. to Dismiss.)
II. Discussion
A.
1.

Standing
Legal Standard

“A case is properly dismissed for lack of subject matter
jurisdiction under Rule 12(b)(1) when the district court lacks
the statutory or constitutional power to adjudicate it.”
Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)
(citing FED. R. CIV. P. 12(b)(1)).

Under Article III of the

United States Constitution, federal courts may hear only
“[c]ases” and “[c]ontroversies.” U.S. Const. art. III, § 2, cl.
1.

Thus, “[i]f plaintiffs lack Article III standing, a court

has no subject matter jurisdiction to hear their claim.” Cent.
States Se. & Sw. Areas Health & Welfare Fund v. Merck–Medco
Managed Care, L.L.C., 433 F.3d 181, 198 (2d Cir. 2005).
When considering a motion to dismiss pursuant to Rule
12(b)(1), the Court must accept as true all well-pled facts
alleged in the complaint and must draw all reasonable inferences
in a plaintiff’s favor. Sweet v. Sheahan, 235 F.3d 80, 83 (2d
10

Cir. 2000).

“But, when the question to be considered is one

involving the jurisdiction of a federal court, jurisdiction must
be shown affirmatively, and that showing is not made by drawing
from the pleadings inferences favorable to the party asserting
it.” Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d
Cir. 1998).

Rather, a plaintiff must prove subject matter

jurisdiction exists “by a preponderance of the evidence.”
Makarova, 201 F.3d at 113; see also Whitmore v. Arkansas, 495
U.S. 149, 154 (1990) (“It is well established . . . that before
a federal court can consider the merits of a legal claim, the
person seeking to invoke the jurisdiction of the court must
establish the requisite standing to sue.”).

In considering a

motion to dismiss under Rule 12(b)(1), a court “may refer to
evidence outside the pleading.” Makarova, 201 F.3d at 113.
2.

Analysis

Defendants argue that Y.K. King lacks standing to assert
RICO claims either individually or on behalf of the Estate.
(Defs.’ Mem. of L. in Supp. of Mot. to Dismiss at 3-4.)
Defendants first contend that Y.K. King cannot bring claims on
an individual basis because the complaint alleges that the
artwork at issue belongs to Northwich, Soon Huat, or the Estate.
(Id. at 3.)
“[S]tanding is to be determined as of the commencement of
suit.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n.5
11

(1992).

Federal Rule of Civil Procedure 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. JP Morgan Chase Bank, Nat. Ass’n, 27 F. Supp. 3d 494,
513 (S.D.N.Y. 2014).

The Court has already held, and the Second

Circuit has affirmed, that Y.K. King does not have standing to
bring claims for stolen property owned by the corporation
Plaintiffs. See Op. & Order at 10; Summary Order at 3.

Further,

the amended complaint makes clear, and Plaintiffs’ counsel
admitted during oral argument on Defendants’ motion to dismiss,
that Y.K. King does not own any of the stolen paintings herself.
(See Am. Compl. ¶¶ 48-53, 104-248; Transcript of Oral Argument,
May 24, 2017, 12:14-24 [hereinafter Tr.].)

Thus, Y.K. King does

not have standing to bring claims for the stolen artwork owned
by Northwich and Soon Huat, and the only issue that remains is
whether Y.K. King has standing to sue on behalf of the Estate
for claims related to stolen Estate property.
Defendants contend that Y.K. King lacks standing to assert
RICO claims on behalf of the Estate because she is neither a
fiduciary nor beneficiary of the Estate. (Defs.’ Mem. of L. in
Supp. of Mot. to Dismiss at 4.)

Federal Rule of Civil Procedure

17(a)(1) allows the executor or administrator of an estate to
sue in his or her own name “without joining the person for whose
benefit the action is brought.” Garmon v. Cty. of Rockland, No.
12

10 CIV. 7724 ALC GWG, 2013 WL 541380, at *2 (S.D.N.Y. Feb. 11,
2013).

However, according to the amended complaint, Y.K. King

is not the administrator or executrix of the Estate. (See Am.
Compl. ¶¶ 83-85.)

Thus, Y.K. King’s standing to sue on behalf

of the Estate is determined by New York law in accordance with
Rule 17(b)(3). See Garmon, 2013 WL 541380, at *2.
Under New York law, “only a duly appointed personal
representative may bring suit on behalf of a decedent’s estate.”
Friedman v. Clearview Gardens Second Corp., No. 23317/10, 2011
WL 489545, at *1 (N.Y. Sup. Ct. Feb. 3, 2011) (citing N.Y. EST.
POWERS & TRUSTS LAW § 11-3.1 (McKinney 2017)).

“A personal

representative is a person who has received letters to
administer the estate of a decedent.” § 1–2.13.

If letters of

administration have not been issued to an individual, he or she
has no standing to sue. See Palladino v. Metro. Life Ins. Co.,
590 N.Y.S.2d 601, 602 (App. Div. 3d Dep’t 1992); see also
Garmon, 2013 WL 541380, at *3 (“Since Plaintiff was not named
the administrator of the estate, he does not have standing to
bring claims belonging to the decedent.”); Friedman, 2011 WL
489545, at *1 (although plaintiff “clearly ha[d] an interest in
the cause of action,” he could not maintain that cause of action
individually where he had not been issued letters of
administration); In re Priestley, No. 2010-2469/H, 2017 WL
758341, at *5 (N.Y. Surr. Ct. Feb. 27, 2017) (“A beneficiary
13

does not have an independent cause of action to seek to recover
assets withheld from an estate [and] . . . must obtain letters
of administration before suing on behalf of the decedent’s
estate.”).
According to the amended complaint, on August 4, 2003, the
Surrogate’s Court issued temporary letters of administration to
the Public Administrator and preliminary testamentary letters to
A. Wang. (Am. Compl. ¶ 83.)

Thus, although the proceedings in

Surrogate’s Court regarding the Estate remain ongoing, as of the
date of the amended complaint, Y.K. King had not obtained
letters of administration and did not qualify as a “duly
appointed personal representative” with standing to bring claims
on behalf of the Estate.
New York courts have considered the possibility of estate
beneficiaries suing on behalf of an estate and held that such a
right only exists under “extraordinary circumstances such as
when a fiduciary refuses to act.” Lucas v. Tiernan, No. 07 CIV.
2011 (NRB), 2006 WL 4808614, at *3 (S.D.N.Y. Sept. 27, 2006).
“Typically, when a testator dies, the executor, not the
beneficiary, acquires standing to pursue claims on behalf of the
testator and the estate.” Lefkowitz v. Bank of N.Y., No. 01 CIV.
6252 VM, 2003 WL 22480049, at *6 (S.D.N.Y. Oct. 31, 2003), aff’d
in part, rev’d in part on other grounds, 528 F.3d 102 (2d Cir.
2007).

This rule is subject to exception in “cases of collusion
14

. . . or of the existence of other special circumstances such as
the fraudulent transfer of the trust property by the personal
representatives themselves.” Id.
Plaintiffs allege that A. Wang abused his status as Estate
fiduciary to fraudulently transfer and sell Estate assets
through the Straw Men Scheme. (Am. Compl. ¶¶ 263-264.)

However,

as of the date the amended complaint was filed, “the two C.C.
Wang wills remained in contest,” one of which—the 2003 will—
purports to disinherit Y.K. King from the Estate; thus, Y.K.
King’s status as an Estate beneficiary remains undecided. 1 (Id.
¶¶ 85, 262.)

Accordingly, even if the Wang Defendants’ actions

were to constitute the “extraordinary circumstances” that would
allow a beneficiary to sue on behalf of an estate, Y.K. King’s
status as a beneficiary of the Estate had not been determined as
of the commencement of this action.

Thus, Y.K. King does not

have standing to bring RICO claims on behalf of the Estate.

1

On April 26, 2017, a jury in Surrogate’s Court found that the 2003
will was executed at a time when C.C. Wang lacked testamentary
capacity, and was procured by undue influence and fraud on the part of
the Wang Defendants. Decree at 2-3, Proceeding to Probate Instrument
Dated Feb. 18, 2003, Estate of Chi-Chuan Wang, No. 2003-2250/B (N.Y.
Surr. Ct. May 9, 2017). Surrogate Mella accordingly ordered that the
2003 will was denied probate and revoked the preliminary letters
issued to A. Wang. Id. However, as of May 24, 2017, Y.K. King still
had not been issued letters of administration. (Tr. 19:22-25.) More
importantly, standing is determined as of the commencement of an
action, at which point Y.K. King had not received letters of
administration and had not been determined to be an Estate beneficiary
because, as discussed above, the two wills “remained in contest.” (See
Am. Compl. ¶ 85.)

15

a.

Defendants’ Standing Arguments Are Not Barred by the
Mandate Rule

Plaintiffs contend that Defendants’ arguments regarding
standing to sue on behalf of the Estate are precluded by the
“mandate rule” because they are identical to those Defendants
raised on appeal. (See Pls.’ Mem. of L. in Opp. to Mot. to
Dismiss at 3-5.)

Plaintiffs claim that Defendants argued in

their appellate brief that (1) the Kings lacked standing to
assert claims to artwork owned by the Estate, (2) the Kings
lacked standing under RICO to bring claims stemming from the
Estate’s injuries, and (3) Y.K. King could not sustain an action
on behalf of the Estate because she was neither a fiduciary nor
an adjudicated beneficiary of the Estate. (Id. at 4.)
The mandate rule is a subset of the law-of-the-case
doctrine. Burrell v. United States, 467 F.3d 160, 165 (2d Cir.
2006).

“[W]here issues have been explicitly or implicitly

decided on appeal, the district court is obliged, on remand, to
follow the decision of the appellate court.” Id.

There is a

corollary to this rule—“if an issue was not part of the
appellate decision, a trial court may consider the matter.” Id.
“To determine whether an issue remains open for reconsideration
on remand, the trial court should look to both the specific
dictates of the remand order as well as the broader ‘spirit of

16

the mandate.’” Id. (quoting United States v. Ben Zvi, 242 F.3d
89, 95 (2d Cir. 2001)).
In its summary order, the Second Circuit agreed with the
Court that the Kings lacked standing to bring “at least some of
their claims because a number of the paintings in question were
owned not by them but by corporations that plaintiffs, in turn,
owned,” and directed the Court to allow Plaintiffs to amend
their complaint to add the real parties in interest. (Summary
Order at 3.)

The Second Circuit further stated that it had

“considered the remainder of arguments raised in both appeals
and find[s] them to be without merit.” (Id.)
The Court holds that the mandate rule does not apply to
Defendants’ argument that Y.K. King does not have standing to
sue on behalf of the Estate.

First, the standing arguments

Defendants raised on appeal are necessarily different than the
arguments raised in their motion to dismiss the amended
complaint because all of the RICO claims in the original
complaint were alleged by the Kings in an individual capacity
and not on behalf of the Estate. (See Compl. at 33-41.)

In

their appellate brief, Defendants argued that (1) “[t]he Kings
similarly lacked standing to assert claims to artwork owned by
the Estate of C.C. Wang,” (2) the “alleged loss of paintings by
the . . . Estate are not injuries to the Kings,” and (3) “YienKoo King lacks standing to assert claims that belong to a
17

beneficiary or fiduciary of the estate.” (Defs.’ App. Br. at 67, 17.)

None of these arguments address whether Y.K. King could

bring claims on behalf of the Estate, but rather the
deficiencies in Y.K. King’s standing in an individual capacity.
Second, neither this Court’s opinion nor the Second
Circuit’s summary order addressed whether Y.K. King has standing
to bring claims on behalf of the Estate.

Thus, the Court is not

precluded from considering this issue under the mandate rule.
See Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., 762 F.3d
165, 175–76 (2d Cir. 2014) (district court did not violate
mandate rule in “addressing on remand an issue that was not
decided by this Court in the original appeal”); New England Ins.
Co. v. Healthcare Underwriters Mut. Ins. Co., 352 F.3d 599, 606
(2d Cir. 2003) (“Put simply, the law of the case does not extend
to issues an appellate court did not address.”).
Accordingly, all RICO claims brought by Y.K. King are
dismissed for lack of standing.

Thus, Northwich and Soon Huat

are the only Plaintiffs with standing to bring RICO claims for
their allegedly stolen artwork.

However, as discussed below,

the paintings owned by Northwich and Soon Huat were discovered
stolen in 2003 and thus, any RICO claims relating to those
paintings are dismissed as time-barred.

18

B.

RICO Statute of Limitations
1.

Legal Standard

RICO claims are governed by a four-year statute of
limitations which “begins to run when the plaintiff discovers or
should have discovered the RICO injury.” In re Merrill Lynch
Ltd. P’ships Litig., 154 F.3d 56, 58 (2d Cir. 1998).

“The first

step in the statute of limitations analysis is to determine when
the [plaintiffs] sustained the alleged injury for which they
seek redress.” Id. at 59.

The second step in the analysis is to

determine when the plaintiff “discovered or should have
discovered th[e] injury.” Bankers Trust Co. v. Rhoades, 859 F.2d
1096, 1103 (2d Cir. 1988).

The limitations period begins to run

when the plaintiff has “actual or inquiry notice of the injury.”
In re Merrill Lynch Ltd. P’ships Litig., 154 F.3d at 60.

A

plaintiff is charged with inquiry notice when “a reasonable
person should have discovered the RICO injury.” In re Integrated
Res. Real Estate Ltd. P’ships Sec. Litig., 850 F. Supp. 1105,
1118 (S.D.N.Y. 1993).
2.

Analysis

Plaintiffs initially filed their complaint in this matter
on September 23, 2014.

Thus, if Plaintiffs had actual or

inquiry notice of the alleged injuries before September 23,
2010, their RICO claims are time-barred unless an exception to
the limitations period applies.

It is clear from the
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allegations in the amended complaint that Northwich and Soon
Huat had actual notice of the alleged RICO scheme as it
pertained to their property no later than 2003.

According to

the amended complaint, Y.K. King discovered in January 2003 that
twenty-five paintings had been stolen from CY Art Ltd.’s safe
deposit box and from her father’s apartment. (Id. ¶¶ 48-53.)
The amended complaint also states that, during a conversation in
February 2003, A. Wang admitted to Y.K. King that he and his
father had taken the twenty-five missing paintings, including
the thirteen works that were owned by Northwich and Soon Huat,
and demanded that Y.K. King turn over control of the balance of
the family’s assets to them. (Id. ¶¶ 59-62.)

Furthermore,

Plaintiffs concede in their opposition brief that RICO claims
related to the artworks stolen in 2003 are time-barred and state
that “none of the Plaintiffs seek recovery of the [twenty-five]
works stolen on January 31, 2003.” (Pls.’ Mem. of L. in Opp. to
Mot. to Dismiss at 5-6.)

Based on the foregoing facts, the

Court finds that Northwich and Soon Huat had actual notice of
the injuries to their property no later than February 2003.
Thus, any RICO claims pertaining to Northwich’s and Soon Huat’s
artwork became time-barred in February 2007.
Plaintiffs argue in opposition that the RICO claims
pertaining to the artwork sold through the Straw Men Scheme from
2005 to 2009 are not time-barred because, as alleged in the
20

amended complaint, Y.K. King did not discover that several of
these stolen paintings had been shipped to and sold in China
until 2012 or 2013. (Id. at 6-7; Am. Compl. ¶¶ 283-284, 290,
292.)

A plaintiff may assert a valid cause of action under the

Second Circuit’s “separate accrual rule” for RICO claims, which
provides that “a new four-year period is triggered each time the
plaintiff ‘discovers, or should have discovered, a new injury’
caused by otherwise time-barred predicate acts.” See Kerik v.
Tacopina, 64 F. Supp. 3d 542, 558 (S.D.N.Y. 2014) (quoting
Bingham v. Zolt, 66 F.3d 553, 559-60 (2d Cir. 1995)); see also
In re Merrill Lynch, 154 F.3d at 59 (noting that the RICO
limitations period begins “afresh with each new injury”).

For

the rule to apply, the injury for which relief is sought must be
“new and independent,” and a plaintiff may still only recover
for “injuries discovered or discoverable within four years of
the time suit is brought.” See Bingham, 66 F.3d at 560; Kerik,
64 F. Supp. 3d at 558.
Plaintiffs’ counsel stated during oral argument that some
of the paintings sold through the Straw Men Scheme, specifically
the paintings described in paragraphs 138, 142, and 153 of the
amended complaint, were owned by Northwich. (Tr. 12:25-14:1.)
However, per the clear allegations in the amended complaint, all
of the paintings sold through the Straw Men Scheme from 2005 to
2009, including those identified at oral argument, are owned by
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the Estate.

The amended complaint describes all of the

paintings sold through the Straw Men Scheme as “Estate
paintings,” provides Estate Identification Numbers for each
painting—including those listed in paragraphs 138, 142, and 153—
and states that some of the stolen paintings were sold at
auction for an exponentially larger price than was paid “to the
Estate.” (See Am. Compl. ¶¶ 131-224.)

Indeed, Plaintiffs argue

in their opposition brief that “[t]he Estate’s ability to
recover under its RICO claims due to [A. Wang’s] sales to [straw
men] between 2005 and 2009 . . . is not barred by RICO’s fouryear statute of limitations.” (Pls.’ Mem. of L. in Opp. to Mot.
to Dismiss at 6.) (emphasis added).

Thus, the separate accrual

rule is irrelevant here because the paintings sold through the
Straw Men Scheme were owned by the Estate, who is not a party to
this action, and on whose behalf Y.K. King does not have
standing to assert claims.

Accordingly, Northwich’s and Soon

Huat’s RICO claims are dismissed as time-barred.
C. 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.

Defendants assert that these state-

law claims are barred by the probate exception to federal
jurisdiction on the ground that they essentially seek the return
22

of property of the Estate that remains under the control of
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, 107 (2d Cir. 2007)
(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”).
A federal court ordinarily has supplemental jurisdiction to
hear claims based on state law so long as they form “part of the
same case or controversy under Article III of the United States
Constitution” as the asserted 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 v. Marger, No. CIV. 11-5497 RBK/KMW, 2013 WL 1314699,
at *15 (D.N.J. Mar. 28, 2013).

Because the Court is dismissing

the amended complaint’s only federal law claims—and in the
absence of diversity of citizenship—the Court declines to
exercise jurisdiction over Plaintiffs’ remaining state law
claims.

Accordingly, the Court need not consider Defendants’

arguments regarding Colorado River abstention.

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III. Leave to Amend
In their opposition brief, Plaintiffs request leave to replead any “curable deficiencies” if all or part of the amended
complaint is dismissed. (Pls.’ Mem. of L. in Opp. to Mot. to
Dismiss at 11.)

Federal Rule of Civil Procedure 15 instructs a

court to “freely give leave” to amend “when justice so
requires.” FED. R. CIV. P. 15(a)(2).

However, amendment “is not

warranted absent some indication as to what [a plaintiff] might
add to [its] complaint in order to make it viable.” Shemian v.
Research In Motion Ltd., 570 F. App’x 32, 37 (2d Cir. 2014)
(quoting Horoshko v. Citibank, N.A., 373 F.3d 248, 249 (2d Cir.
2004)).

Accordingly, should Plaintiffs wish to amend, their

motion must demonstrate how it will cure the deficiencies in its
claims and that justice requires granting leave to amend.
IV. Conclusion
For the foregoing reasons, the Court grants Defendants’
motion to dismiss the amended complaint.
dismissed without prejudice.

Plaintiffs’ claims are

If Plaintiffs wish to amend their

complaint, they shall move this Court to do so no later than
August 1, 2017.

Otherwise the Court will enter an order

dismissing Plaintiffs’ claims with prejudice.

The Clerk of

Court is respectfully requested to terminate the motion docketed
at ECF No. 41.

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SO ORDERED.

Dated:

New York, New York
June .;( 0 , 2017

~-Y~-r-r~~~

~

John F. Keenan
United States District Judge

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