Lin v. Grand Sichuan 74 st Inc. et al

Filing 276

MEMORANDUM OPINION & ORDER: re: 267 MOTION to Vacate 266 Clerk's Judgment (Vacate Default Judgment Pursuant to Rule 60(b) of FRCP) filed by Yong Li Li, Li Jiang, Yong Shu Li, 270 MOTION for Attorney Fees Notice of Cross Motion for At torneys' Fees and Opposition to Defendants' Motion to Vacate Default Judgment filed by Yong Jun Li, Li Weng, Wei Ting Zhao, Youmin Shen, Miao Wang, Yunjian Lin, Yuhai Zhu, Young Jun Li, Yaqiang Zhang, Wei Wei Ding. For the foregoi ng reasons, Defendants motion to vacate the default judgment is granted as to Defendants Yong Shu Li, Yong Li Li, and Li Jiang, and the claims against Yong Shu Li are further dismissed without prejudice pursuant to Fed. R. Civ. P. 4(m) and Fed. R. Ci v. P. 41(b). Plaintiffs' request for a conditional grant of attorneys' fees is denied. No later than ten days from today, Plaintiffs shall show cause by written submission as to why the Court should not take the two sua sponte steps it has said it is inclined to take. The Court will subsequently decide the status of the non-appearing Defendants and direct the parties to confer and propose a plan for the expeditious resumption of the litigation against the appearing Defendants. Accordin gly, the Clerk of Court is respectfully directed to (1) reopen this case; (2) vacate the entry of judgment only as to Defendants Yong Shu Li, Yong Li Li, and Li Jiang; (3) terminate Defendant Yong Shu Li; and (4) terminate the motions pending at Dkts. 267 and 270. SO ORDERED. (Signed by Judge Ronnie Abrams on 9/21/2021). *** Party Yong Shu Li terminated. (ama) Modified on 9/21/2021 (ama).

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
YUNJIAN LIN, YOUNG JUN LI, WEI WEI
DING, LI WENG, WEI TING ZHAO,
YUHAI ZHU, YOUMIN SHEN, and MIAO
WANG, on their own behalf and on behalf of
others similarly situated,
Plaintiffs,

USDC-SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:
DATE FILED: 09/21/2021

No. 15-CV-2950 (RA)

v.
GRAND SICHUAN 74 ST INC. d/b/a
GRAND SICHUAN 74, GRAND SICHUAN
75 ST. INC. d/b/a GRAND SICHUAN 74,
GRAND SICHUAN NY INC. d/b/a GRAND
SICHUAN NY, GUANG JUN LI, YONG
SHU LI, LI JIANG, YONG LI LI, GUANG
LI LI, CHENG CHEN,

MEMORANDUM
OPINION & ORDER

Defendants.
RONNIE ABRAMS, United States District Judge:
Defendants Yong Shu Li, Li Jiang, and Yong Li Li move pursuant to Fed. R. Civ. P. 60
to vacate the default judgment that was entered against them on February 12, 2021. See Dkts.
265, 266. For the reasons that follow, the motion is granted, and Plaintiffs’ request for an award
of attorneys’ fees, Dkt. 270, is denied.
BACKGROUND
The Court assumes the parties’ familiarity with the history of this litigation—an
unusually long and complex history given how little progress has been made in testing the merit
of Plaintiffs’ allegations—and recounts only what is necessary to explain the Court’s decision on

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the instant motions.1 In April 2015, Plaintiffs, former employees of a restaurant named Grand
Sichuan 74, commenced this action against the restaurant’s purported owners, operators, or
managers, seeking damages for alleged violations of the Fair Labor Standards Act (“FLSA”) and
New York Labor Law (“NYLL”), among other claims. The operative Second Amended
Complaint was filed in September 2016. Dkt. 79.
On July 29, 2019, the Court granted Plaintiffs’ motion for default judgment with respect
to the majority of their claims, and referred the matter to Magistrate Judge Fox for an inquest
into damages. See Dkts. 210, 211. Judge Fox initially recommended that no damages be awarded
due to deficiencies in Plaintiffs’ inquest submissions, and the Court adopted that
recommendation but gave Plaintiffs an opportunity to cure. See Dkts. 239, 240. Plaintiffs took
that opportunity, and Judge Fox subsequently recommended an award of damages and attorneys’
fees in an August 13, 2020 report and recommendation. Dkt. 248 (“the Report”).
According to the three moving Defendants, Yong Li Li, Yong Shu Li, and Li Jiang, it
was only then—in August 2020—that they learned that a default judgment had been awarded
against them, in particular when Yong Shu Li attempted to sell her home. See Affidavit of Yong
Shu Li, Dkt. 267-3 (“Yong Shu Li Aff.”), ¶¶ 48-49. They then claim to have “appeared in [the]

1

The background of this case has been documented previously by the Court and by Magistrate
Judge Fox. See Lin v. Grand Sichuan 74 St. Inc., 2019 WL 3409892 (S.D.N.Y. July 29, 2019)
(the Court’s opinion at Dkt. 210 granting Plaintiffs’ motion for default judgment and referring
the action to Judge Fox for an inquest into damages); Lin v. Grand Sichuan 74 St Inc., 2020 WL
5238601 (S.D.N.Y. May 12, 2020) (Judge Fox’s first report and recommendation at Dkt. 239
recommending that no damages be awarded); Lin v. Grand Sichuan 74 St Inc., 2020 WL
3072290 (S.D.N.Y. June 10, 2020) (order at Dkt. 240 adopting Judge Fox’s recommendation that
no damages be awarded); Lin v. Grand Sichuan 74 St Inc., 2020 WL 8733762 (S.D.N.Y. Aug.
13, 2020) (Judge Fox’s second report and recommendation at Dkt. 248 recommending an award
of damages and attorneys’ fees); Lin v. Grand Sichuan 74 St Inc., 2021 WL 509901 (S.D.N.Y.
Feb. 11, 2021) (order at Dkt. 265 adopting Judge Fox’s report and recommendation regarding
damages, and entering judgment for Plaintiffs).
2

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home office” of Attorney Eric Stern. See Declaration of Eric R. Stern, Dkt. 268 (“Stern Decl.”), ¶
3. On August 25, 2020, Mr. Stern entered a notice of appearance on behalf of those three
Defendants, and filed a letter seeking an extension of time in which to object to the
Report. See Dkt. 250. The letter also referenced “alarming discoveries” that, in those
Defendants’ view, provided a basis for vacatur of the default judgment. The letter alleged that
the three Defendants were unaware that the matter had still been pending against them, and that
they had not in fact been served with any documents since the withdrawal of Defendants’ prior
counsel, Yuan Zheng, in October 2016. Although the letter argued that “well-grounded reasons
exist[ed] for vacating the entirety of the Default Judgment in this matter,” they did not move at
the time to vacate the judgment. Id. The Court granted the three Defendants an extension of time
to file objections to the Report. Dkt. 251. When the Defendants did object to the Report, they
limited their submission to several specific objections to the R&R’s calculation of damages and
attorneys’ fees, while stating that they would be filing a separate motion to vacate the default
judgment “within the next few days.” See Dkt. 258. “The next few days” came and went—after
filing their specific objections to the damages calculations in September 2020, the three
Defendants filed nothing for the next five months, despite their pledge to file a motion to vacate
the default judgment.
On February 11, 2021, the Court adopted Judge Fox’s August 2020 report (with one
modification) and entered judgment for Plaintiffs. The Court “note[d] that, although Defendants
[had] argue[d] that there [was] a basis for vacating the default judgment entered against them,
and [had] indicated roughly five months ago that they intended move to vacate the judgment
‘within the next few days,’ they [had] not done so.” See Dkt. 265. The Court accordingly
“limit[ed] its analysis . . . to Defendants’ objections to the Report’s conclusions regarding the

3

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calculation of damages and attorneys’ fees,” and largely adopted the Report. Id. The case was
closed and judgment was entered for Plaintiffs.
Just days later, the three moving Defendants filed the instant motion to vacate. In an
accompanying declaration, Mr. Stern asserts that when first entering his notice of appearance in
August 2020, he had in fact intended to move expeditiously to set aside the default judgment
within days, but needed additional time to perform a “comprehensive review of the docket,”
including by ordering the transcripts of years-old conferences. See Stern Decl. ¶ 4. Having done
so, Defendants now contend that the default should be vacated due to service errors over the last
five years that prevented the three Defendants from receiving notice that the action was still
pending against them or that Plaintiffs had moved for default judgment. See Memorandum of
Law in Support of Defendants’ Motion to Vacate Default Judgment, Dkt. 269 (“Def. Mem.”).
The contentions of Yong Li Li and Li Jiang, on the one hand, and Yong Shu Li on the other are
somewhat different, so the Court will address the service issues with each in turn.
Yong Li Li and Li Jiang
Defendants Yong Li Li and Li Jiang maintain that all service to them since October 2016
was defective as it was directed to the office of their former counsel, Ms. Yuan Zheng, whose
motion to withdraw as counsel was granted by Judge Fox orally on September 29, 2016, see Dkt.
260 (transcript), and in a docketed order on October 3, 2016, see Dkt. 80. In the written order
granting Ms. Zheng’s withdrawal, Judge Fox ordered Defendants to “engage new counsel to
represent them in this action and have their new counsel file a notice of appearance . . .
expeditiously.” Id. Judge Fox ordered Ms. Zheng to serve a copy of his order on each Defendant
and to file proof of service on the docket. Id. Ms. Zheng subsequently certified that she had
caused Judge Fox’s order to be served “via personal delivery” on both Yong Li Li and Li Jiang at

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the following address: 136-56 39th Avenue, Suite 307, Flushing, NY 11354. (She served the
other defendants by mail.) See Dkt. 81.
This is where the problem arose: the 136-56 39th Avenue address—where Yong Li Li and
Li Jiang were purportedly served via personal delivery with notice of Ms. Zheng’s withdrawal as
counsel—was Ms. Zheng’s law firm address. It was not a business or personal address for either
Defendant. Indeed, the two are not related and have never lived together, see Affidavit of Li
Jiang, Dkt. 267-1 (“Li Jiang Aff.”), ¶ 56. Nonetheless, apparently on the basis of that
certification by Ms. Zheng, Plaintiffs subsequently made all service in this case to that address.
See Dkts. 94, 158-1, 172, 184, 193, 209, 220, 235 (Li Jiang); Dkts. 94, 158-1, 175, 187, 196,
207, 219, 236 (Yong Li Li). As a result, Li Jiang and Yong Li Li claim that they did not receive a
single “order, notice, letter, motion or any other filing in this matter” between October 2016 and
August 2020. See Li Jiang Aff. ¶¶ 61-64. 2
Of particular relevance to this motion to vacate, there is no evidence that Yong Li Li and
Li Jiang received notice of the 2018 motion for default judgment that resulted in the judgment
they now seek to vacate. See Dkts. 184, 187, 207, 209 (indicating that Yong Li Li and Li Jiang
were served the default judgment application papers only at Ms. Zheng’s address on 39th
Avenue). The April 30, 2019 “affidavits of service” at Dkts. 207 and 209 themselves reveal that
service was unsuccessful: the process server wrote on the affidavit “Lawyers office states they no
longer represent Yong Li Li” (Dkt. 207) and “Lawyers office states they no longer represent Li

2

Li Jiang and Yong Li Li further assert that they never received service of the Second Amended
Complaint, because it was filed via ECF on September 30, 2016—the day after Judge Fox orally
granted Ms. Zheng’s motion to withdraw as counsel, but several days before the October 3, 2016
order formally terminating Ms. Zheng as counsel of record. See Li Jiang Decl. ¶ 59. Subsequent
affidavits of service of the Second Amended Complaint all use the 39th Avenue address. See id.
¶¶ 68-70.
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Jiang” (Dkt. 209). Photographs appended to the affidavits of service clearly show that the papers
were served at “Yuan Zheng & Associates.” Id. Although the affidavits purport to demonstrate
that Yong Li Li and Li Jiang were served at their “actual place of business,” a closer examination
of the affidavits reveals that not to have been the case.
Regrettably, and in the Court’s view inexcusably, these details were not brought to the
Court’s attention by Plaintiffs’ counsel. After Plaintiffs filed the affidavits of service without any
accompanying submission, the Court proceeded to grant the motion for default judgment on July
29, 2019. In granting the motion, the Court discussed a string of improper service attempts but
then stated that “at long last” Plaintiffs had served Defendants (including Yong Li Li and Li
Jiang) “with the Summons and Complaint, and default papers, on April 29th and 30th [2019], by
leaving the documents with a person of suitable age and discretion at their homes, see Rule
4(e)(2), or at their actual places of business followed by delivery there via first class
mail, see C.P.L.R. § 308(2).” See Dkt. 210 at 4. It is now clear, however, that the Court was
mistaken about this fact with respect to Yong Li Li and Li Jiang—they were “served” only at
their former counsel’s address, which was not their home or actual place of business.
In opposing the instant motion to vacate, Plaintiffs do not dispute that Li Jiang and Yong
Li Li were served the default judgment papers only at the 39th Avenue address—what Plaintiffs’
counsel describes as their “last-known address in the care of Yuan Zheng.” See Declaration of
John Troy in Opposition to Defendants’ Motion to Vacate Default Judgment, Dkt. 271 (“Troy
Decl.”), ¶¶ 31-32. They instead argue that any problems that stemmed from such service are
attributable to Ms. Zheng’s “willful certification that her office is the proper office where
subsequent service should be effectuated” and is in any event the fault of Defendants, who
“fail[ed] to abide by the court order to ‘engage new counsel to represent them.’” See

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Memorandum of Law in Opposition to Motion to Vacate, Dkt. 272 (“Pl. Mem.”), at 3.
Yong Shu Li
For her part, Yong Shu Li contends that she was never served with the Second Amended
Complaint, which was the first complaint to name her as a defendant. See Yong Shu Li Aff. ¶¶
21-23; see also Li Jiang Aff. ¶ 49. Although the Court concluded otherwise in its order entering
default judgment, Dkt. 210, it now appears to the Court that proper service of process was never
made.
As noted earlier, the operative Second Amended Complaint was filed on September 30,
2016. Dkt. 79. Following Plaintiffs’ October 2018 motion for default judgment, Dkt. 165, the
Court scheduled a show-cause hearing for January 10, 2019, see Dkt. 168. At the January 10,
2019 hearing, the Court noted that for the Defendants who were sued for the first time in the
Second Amended Complaint—a group that includes Yong Shu Li—service was required to
“meet the stricter requirements of Rule 4 [of the Federal Rules of Civil Procedure] as opposed to
Rule 5.” See Dkt. 268-1 at 4. The Court stated that “in [its] view, service as to Defendants Guang
Jun Li, Yong Shu Li, and Cheng Chen was not proper.” Id. at 6. See also Yong Shu Li Aff. ¶ 24.
The Court subsequently ordered Plaintiffs to serve the Second Amended Complaint on Yong Shu
Li by February 11, 2019, Dkt. 179, and when Plaintiffs did not respond to that order, directed
them to do so again by March 3, 2019, warning that absent proof of service the Court would
dismiss the case against those Defendants, Dkt. 180. Plaintiffs then filed an affidavit of service
stating that they had previously served Yong Shu Li in December 2018, see Dkt. 186, which was
inadequate in light of the Court’s already expressed views that service up until that date had not
been adequate. See Dkt. 254 at 3 (“On March 4th, [2019] you filed the same affidavits of service
that you filed before the order to show cause hearing.”). The Court convened a conference on

7

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April 11, 2019 in which it informed Plaintiffs that they “still [had not] properly served [Yong
Shu Li] with the Second Amended Complaint,” id. at 3; see also Dkt. 200 (April 11, 2019 Order
confirming the Court’s view that “Plaintiffs have not established that they have properly served .
. . the Second Amended Complaint on Defendant[] . . . Yong Shu Li,” and warning that the
action would be dismissed for failure to prosecute if service was not completed by May 3, 2019).
On May 3, 2019, Plaintiffs filed an affidavit of service stating that they had served Yong
Shu Li on April 30, 2019. Dkt. 208. Contrary to the Court’s instructions, however, the affidavit
makes clear that it was not the complaint and summons that was served on Yong Shu Li on that
date, but rather the “Notice of Motion for Default Judgment.” Id. Plaintiffs filed no
accompanying explanation or filing along with that affidavit.
The Court subsequently granted Plaintiffs’ motion for default judgment on July 29, 2019.
See Dkt. 210. In doing so, the Court appears to have relied on the assumption that the affidavit of
service as to Yong Shu Li filed at Dkt. 208 was—in accordance with its clear and oft-repeated
directions to Plaintiffs’ counsel—an affidavit of service of the complaint and summons. In
concluding that “Defendant Yong Shu Li . . . has . . . been properly served under Rule 4,” the
Court wrote that “Plaintiffs' most recent affidavit of service with respect to Defendant [Yong]
Shu Li indicates that the process-server attempted to serve him at his ‘dwelling place’ or ‘usual
place of bode’ on three occasions.” See Dkt. 210 at 5 (citing the affidavit of service at Dkt.
208). But as has now been pointed out by Defendants’ counsel, the April 30, 2019 affidavit of
service at Dkt. 208 that led the Court to conclude that Yong Shu Li was properly served was not
service of the summons and complaint but of the default judgment papers. See Yong Shu Li Aff.
¶¶ 35-39.

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Accordingly, the Court appears to have been mistaken in concluding that Yong Shu Li
was properly served with the Second Amended Complaint, the first complaint to name her as a
defendant. Although Plaintiffs’ counsel now asserts, in his affidavit opposing the instant motion,
that Yong Shu Li was served with the summons and complaint on December 27, 2016, see Troy
Decl. ¶ 23, the Court has already made clear multiple times, as recently as April 11, 2019, that
Yong Shu Li had not yet been properly served with the summons and complaint prior to that
date. See Dkt. 200, 254. The only attempt at service made after that date was the one described at
Dkt. 208—namely, service of the default judgment papers.
LEGAL STANDARDS 3
Rule 60(b) of the Federal Rules of Civil Procedure authorizes a district court to “relieve a
party or its legal representative from a final judgment, order, or proceeding for the following
reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could not have been
discovered in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or
misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; it is based on an earlier
judgment that has been reversed or vacated; or applying it prospectively is no longer
equitable; or
(6) any other reason that justifies relief.”

3

Unless otherwise indicated, case quotations omit all internal citations, quotations, footnotes,
and alterations.
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“When a district court decides a motion to vacate a default judgment pursuant to the provisions
of Rule 60(b), the court's determination must be guided by three principal factors: (1) whether
the default was willful, (2) whether the defendant demonstrates the existence of a meritorious
defense, and (3) whether, and to what extent, vacating the default will cause the nondefaulting
party prejudice.” New York v. Green, 420 F.3d 99, 108 (2d Cir. 2005). This standard reflects the
Second Circuit’s “strong preference for resolving disputes on the merits.” Id. at 104. “Since
default judgments are generally disfavored and are reserved for rare occasions, the criteria for
vacating a default judgment pursuant to Rule 60 should be construed generously.” Byrnes v.
Yeats Constr. Mgmt., Inc., No. 12-CV-05355 (NSR), 2017 WL 4045484, at *2 (S.D.N.Y. Sept.
11, 2017).
Additionally, when a party has not been properly served with process, the default
judgment is considered void and must be set aside pursuant to Rule 60(b)(4). See Tuqui Tuqui
Dominicana, S.R.L. v. Castillo, No. 19 CIV. 108 (NRB), 2020 WL 1689763, at *2 (S.D.N.Y.
Apr. 7, 2020) (“Because effective service of process is a prerequisite for the Court’s exercise of
personal jurisdiction over defendant Castillo, a default judgment entered against him should be
vacated as void under Rule 60(b)(4) if service on him was defective.”).
DISCUSSION
Having reviewed the parties’ submissions, the Court concludes that the default judgment
made final in February 2021 must now be vacated and the case reopened. It does so reluctantly—
this action was filed more than six years ago, with very little to show for it. On both sides of this
litigation, frequent and unexplained delays, sloppy work, and failure to comply with court orders
have prevented Plaintiffs’ claims from being heard on the merits in an expeditious manner.
Largely due to failures of service, the Court is compelled to find that the three moving

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Defendants’ defaults are either void (and therefore must be set aside pursuant to Rule 60(b)(4))
or otherwise deserving of being set aside pursuant to the familiar Rule 60(b) standard. 4
I.

The Default Judgment Against Yong Shu Li is Void, and the Claims Against Her
Are Dismissed
The Court first concludes that Yong Shu Li was never properly served with the complaint

and summons, and therefore that the judgment against her is “void ab initio and must be set aside
as a matter of law.” Howard Johnson Int'l, Inc. v. Wang, 7 F. Supp. 2d 336, 339 (S.D.N.Y.
1998), aff'd, 181 F.3d 82 (2d Cir. 1999). “Plaintiff has the burden of demonstrating that service
was proper.” Id. As described above, when Plaintiffs moved for default judgment, the Court
initially found on several occasions that Yong Shu Li had not been properly served with the
Second Amended Complaint, which was the first complaint to assert claims against her. See Dkt.
200 (“For the reasons provided on the record at the telephone conference on April 11, 2019,
Plaintiffs have not established that they have properly served . . . the Second Amended
Complaint on . . . Yong Shu Li.”); Dkt. 180 (finding the same on February 26, 2019); Dkt. 179
(finding the same on January 22, 2019); Dkt. 268-1 at 6 (finding the same on January 10, 2019).
On April 11, 2019, the Court gave Plaintiffs a final opportunity to serve Yong Shu Li in
compliance with Fed. R. Civ. P. 4 and to file proof of such service on the docket, and warned
that failure to do so would result in dismissal for failure to prosecute pursuant to Fed. R. Civ. P.

4

The judgment may also be set aside pursuant to Rule 60(b)(1) on account of “a material mistake
that changed the outcome of the court's judgment.” Matura v. United States, 189 F.R.D. 86, 89
(S.D.N.Y. 1999). Such mistake can be the court’s own mistake of law or fact in entering judgment.
In re 310 Assocs., 346 F.3d 31, 35 (2d Cir. 2003). In hindsight, the Court would not have granted
Plaintiffs’ motion for default judgment had it not made the erroneous assumption that the affidavit
of service at Dkt. 208 established proper service of the complaint and summons as to Yong Shu
Li, and had Plaintiffs drawn the Court’s attention to the language in the affidavits of service at 207
and 209 which made clear that Yong Li Li and Li Jiang were served only at their former lawyer’s
office. The default judgment may also accordingly be set aside pursuant to Rule 60(b)(1).
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41(b). Dkt. 200. Plaintiffs did not do so. Taking the subsequent affidavit of service at face value,
see Dkt. 208, Plaintiffs on April 30, 2019 proceeded to serve Yong Shu Li not with the complaint
and summons as ordered by the Court, but instead with the Notice of Motion for Default
Judgment. As far as the Court is concerned, then, despite its earlier conclusion to the contrary,
see Dkt. 210, there is no evidence that Yong Shu Li was ever properly served with the complaint
and summons pursuant to Fed. R. Civ. P. 4(m).
“Because effective service of process is a prerequisite for the Court’s exercise of personal
jurisdiction over [a] defendant,” Tuqui Tuqui, 2020 WL 1689763, at *2, “a default judgment
obtained by way of defective service is void for lack of personal jurisdiction and must be set
aside as a matter of law.” NextEra Energy Mktg., LLC v. E. Coast Power & Gas, LLC, No. 20CV-7075 (JPO), 2021 WL 3173173, at *2 (S.D.N.Y. July 26, 2021); see also Restoration
Hardware, Inc. v. Lighting Design Wholesalers, Inc., No. 17 CIV. 5553 (LGS), 2020 WL
7093592, at *3 (S.D.N.Y. Dec. 4, 2020) (“A default judgment entered against a defendant should
be vacated as void under Rule 60(b)(4) if service on defendant was defective.”); City of New
York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 132 (2d Cir. 2011) (“A default judgment may
be considered void if the judgment has been entered in a manner inconsistent with due process of
law.”). Because the Court finds that adequate service of process was never established as to
Yong Shu Li, the default judgment against her is void, and the Court hereby sets it aside pursuant
to Fed. R. Civ. P. 60(b)(4). “Because the judgment is set aside as void pursuant to Rule 60(b)(4),
it is unnecessary to examine the discretionary factors applicable to motions for relief under Rules
60(b)(1) and 60(b)(6).” China Mariners Assur. Corp. v. M.T. W.M. Vacy Ash, No. 96 CIV. 9553
(PKL), 1999 WL 126921, at *8 (S.D.N.Y. Mar. 9, 1999).

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Defendants also argue that the claims against Yong Shu Li should be dismissed for
failure to timely effectuate service. The Court agrees.
“The plaintiff is responsible for having the summons and complaint served within the
time allowed by Rule 4(m).” Fed R. Civ. P. 4(c)(1). “If a defendant is not served within 90 days
after the complaint is filed, the court—on motion or on its own after notice to the plaintiff—must
dismiss the action without prejudice against that defendant or order that service be made within a
specified time.” Fed. R. Civ. P. 4(m). “If the plaintiff shows good cause for the failure, the court
must extend the time for service for an appropriate period.” Id.
Here, the Second Amended Complaint was filed in October 2016. The Court first noted
problems with the service of Yong Shu Li on January 10, 2019. The Court gave Plaintiffs
multiple opportunities to correct those errors: on January 22, 2019; on February 26, 2019; and
finally on April 11, 2019. Despite multiple warnings and clear instructions from the Court,
Plaintiffs continued to fail to serve Yong Shu Li. Although the Court relied on the affidavit of
service at Dkt. 208 as establishing the propriety of service, it is now clear that the affidavit
establishes only that the default judgment papers were served. Although the Court on multiple
occasions “order[ed] that service be made within a specified time,” Fed. R. Civ. P. 4(m), and
warned of the possibility of dismissal, proper service of process was not made. Because Plaintiffs
have failed to “advance some colorable excuse for [their] neglect,” Meilleur v. Strong, 682 F.3d
56, 61 (2d Cir. 2012), the claims against Yong Shu Li are now dismissed without prejudice.
II.

The Default Judgment Against Yong Li Li and Li Jiang is Set Aside
The Court next concludes that the default judgment against Yong Li Li and Li Jiang,

assuming it was not per se void for improper service, should be set aside pursuant to Rule 60(b).

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First, the record does not establish that Defendants’ defaults were willful, particularly in
light of the many failures of service outlined above. It is true, as Plaintiffs argue, that these
Defendants were to some extent on notice about the existence of the lawsuit. Li Jiang and Yong
Li Li should have acted more diligently to obtain new counsel when Ms. Zheng withdrew. And
Mr. Stern should have moved to vacate the default judgment more expeditiously, rather than wait
until after the Court adopted Judge Fox’s August 2020 Report and entered final judgment for
Plaintiffs. But the Court is unwilling to sustain a default judgment—“the most severe sanction
which the court may apply,” Green, 420 F.3d at 104—when the record demonstrates that Li
Jiang and Yong Li Li received no notice of any filings in this action, including the motions for
default judgment, from October 2016 to August 2020. The Court is particularly unwilling to do
so when Plaintiffs’ counsel either knew or should have known, based on the affidavits of service
that they themselves filed, that the 39th Avenue address where Li Jiang and Yong Li Li were
being delivered papers was their former lawyer’s address. See Dkt. 207 (“Lawyers office states
they no longer represent Yong Li Li”); Dkt. 209 (“Lawyers office states they no longer represent
Li Jiang”); see id. (showing that the location where the service was made was the office of
“Yuan Zheng & Associates”). “Willfulness in the context of a judgment by default requires
something more than mere negligence, such as egregious or deliberate conduct.” Green, 420
F.3d at 108. Because the record is devoid of evidence of such conduct, and because the mix-up
involving Ms. Zheng’s withdrawal and the subsequent service to her address provide a plausible
explanation for Yong Li Li and Li Jiang’s failure to litigate in this case, the Court finds that their
default was not willful.
Second, Defendants have adequately shown that they can raise a meritorious defense. “To
satisfy the criterion of a ‘meritorious defense,’ the defense need not be ultimately persuasive at

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this stage. A defense is meritorious if it is good at law so as to give the factfinder some
determination to make.” Am. All. Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996)
(district court erred in requiring “conclusive evidence” from party seeking to vacate default
judgment). Li Jiang and Yong Li Li have attested under oath that they maintained accurate timekeeping records for all employees, paid Plaintiffs proper minimum wage and overtime wages and
that they are prepared to produce such records in defending against Plaintiffs’ claims. See Li
Jiang Aff. ¶ 4; Yong Li Li Aff. ¶ 10. Nothing more is required of them at this stage. See S.E.C. v.
McNulty, 137 F.3d 732, 740 (2d Cir. 1998) (“In order to make a sufficient showing of a
meritorious defense in connection with a motion to vacate a default judgment, the defendant
need not establish his defense conclusively, but he must present evidence of facts that, if proven
at trial, would constitute a complete defense.”).
Finally, the Court finds that Plaintiffs would not be unduly prejudiced by having to
litigate the claims against Yong Li Li and Li Jiang on the merits. Delay on its own is insufficient
to establish prejudice; rather, “it must be shown that delay will result in the loss of evidence,
create increased difficulties of discovery, or provide greater opportunity for fraud and
collusion.” Davis v. Musler, 713 F.2d 907, 916 (2d Cir. 1983). There is no indication that any of
those factors apply here. Although Plaintiffs assert that they would be prejudiced if the defaults
were set aside because “Defendants state that their business is failing,” Pl. Mem. at 4, the Court
sees Plaintiffs’ own errors as at least partially responsible for the long delays in adjudicating
their claims. Indeed, based on the affidavits of service at Dkts. 207 and 209, the Court is of the
view that Plaintiffs’ counsel either was or should have been aware of the fact that service of
papers to Li Jiang and Yong Li Li was for several years being directed to their former lawyer’s
address. But Plaintiffs did not draw the Court’s attention to that fact. That omission, among

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others, is in part to blame for the Court’s erroneous entry of the default judgment in the first
instance. The Court accordingly concludes that vacatur of default would not be unduly
prejudicial to Plaintiffs. 5 The entries of judgment as to Yong Li Li and Li Jiang are accordingly
set aside pursuant to Rule 60(b).
III.

Status of the Other Defendants
Only Yong Shu Li, Yong Li Li, and Li Jiang have moved to vacate the default judgments

against them, and for the reasons detailed above, that motion is granted. In addition, the Court is
inclined to take two steps, sua sponte, with respect to the other Defendants. As explained below,
however, it will give Plaintiffs the opportunity to be heard before effectuating these sua sponte
next steps.
First, the Court is inclined to treat the claims against Defendants Guang Jun Li and Cheng
Chen in the same manner as it has treated the claims against Yong Shu Li—namely to vacate the
default judgments against them and to dismiss the claims without prejudice pursuant to Fed. R.
Civ. P. 4(m) and Fed. R. Civ. P. 41(b). As detailed above, the Court is vacating the default
judgment against Yong Shu Li as void for lack of proper service of the complaint and summons,
based on (1) the Court’s repeated findings in January through April of 2019 that Yong Shu Li
had still not been served with the Second Amended Complaint, which was the first complaint to
name her as a defendant, see Dkt. 268-1 at 6 (January 10, 2019), Dkt. 179 (January 22, 2019),

5

For similar reasons, Plaintiffs’ request for an award of attorneys’ fees is denied. Although “a
district court has inherent power to impose a reasonable condition on the vacatur [of a default
judgment] in order to avoid undue prejudice to the opposing party,” Powerserve Int'l, Inc. v.
Lavi, 239 F.3d 508, 515 (2d Cir. 2001), the Court does not find that Plaintiffs will be “undu[ly]
prejudice[d]” by vacatur in light of the fact that their own litigation conduct is in significant part
responsible for creating the present situation. The Court thus declines to exercise its discretion to
condition vacatur on Plaintiffs’ recovery of attorneys’ fees. See id. (“Not every case will warrant
conditioning vacatur.”).
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Dkt. 180 (February 26, 2019), Dkt. 200 (April 11, 2019); and (2) the fact that the affidavit of
service filed in April 2019 (Dkt. 208), on which the Court relied in later concluding that service
was proper (Dkt. 210 at 5), was not in fact an affidavit of service as to the Second Amended
Complaint but only as to the default judgment motion. The same exact things could be said for
Guang Jun Li and Cheng Chen. As with Yong Shu Li, the Court made clear its view in January,
February, and April 2019 that Plaintiffs had not established proper service of the Second
Amended Complaint as to Guang Jun Li and Cheng Chen, who were also named as Defendants
for the first time in that complaint. See Dkt. 268-1 at 6 (January 10, 2019), Dkt. 179 (January 22,
2019), Dkt. 180 (February 26, 2019), Dkt. 200 (April 11, 2019). Similarly, the April 2019
affidavits of service (Dkts. 204, 205) upon which the Court relied in concluding that Guang Jun
Li and Cheng Chen had been properly served (Dkt. 210 at 4) also documented service only of the
default judgment motion and not the Second Amended Complaint. It appears to the Court, then,
that despite multiple warnings and clear directions, Guang Jun Li and Cheng Chen were never
served with process. As with Yong Shu Li, the Court is inclined to find the default judgments as
to Guang Jun Li and Cheng Chen to be void, to vacate them, and to dismiss the claims against
them without prejudice for failure to timely effectuate service or to prosecute the action. See
Cambria Co., LLC v. Pental Granite & Marble, Inc., No. CIV. 12-228 JRT/AJB, 2013 WL
1249216, at *9 (D. Minn. Mar. 27, 2013) (“Insufficient service is a proper basis for voiding an
entry of default sua sponte because it deprives a court of proper jurisdiction.”).
Second, the Court is inclined to sua sponte vacate the entirety of its February 11, 2021
entry of final judgment as to all Defendants. If it did so, it would continue to adhere to its finding
that the remaining non-appearing Defendants, with the exception of Guang Jun Li and Cheng
Chen as explained in the previous paragraph, are in default and therefore have admitted liability

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as set forth in in its July 29, 2019 order granting Plaintiffs’ motion for default judgment. See
Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974) (“While a default judgment constitutes an
admission of liability, the quantum of damages remains to be established by proof unless the
amount is liquidated or susceptible of mathematical computation.”). But because of the risk of
inconsistent judgments and awards of damages, the Court is disposed to take the view that the
entry of final judgment as to the defaulting Defendants will have to await the entry of final
judgment with respect to the appearing Defendants, and that the judgments should thus be
vacated. See Frow v. De La Vega, 82 U.S. 552, 554 (1872) (“A final decree on the merits against
[a] defaulting defendant alone, pending the continuance of the cause, would be incongruous and
illegal.”).
To begin with, Rule 54(b) of the Federal Rules of Civil Procedure provides that when an
action involves multiple parties, “the court may direct entry of a final judgment as to one or
more, but fewer than all, claims or parties only if the court expressly determines that there is no
just reason for delay. Otherwise, any order or other decision, however designated, that
adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does
not end the action as to any of the claims or parties and may be revised at any time before the
entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.” Fed. R.
Civ. P. 54(b) (emphasis added). A district court’s authority to enter final judgment for some
defendants but not others should “be exercised sparingly” so as not to undermine the general
policy against piecemeal appeals, and any such decision must be accompanied by a reasoned
explanation. O’Bert ex rel. Est. of O'Bert v. Vargo, 331 F.3d 29, 41 (2d Cir. 2003).
Moreover, in the specific context of default judgments, “as a general rule . . . , when one
of several defendants who is alleged to be jointly liable defaults, judgment should not be entered

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against that defendant until the matter has been adjudicated with regard to all defendants, or all
defendants have defaulted.” See Wright & Miller, Default Judgments in Actions Involving
Several Defendants, 10A Fed. Prac. & Proc. Civ. § 2690 (4th ed.). “More than 125 years ago, the
Supreme Court held [in Frow v. De La Vega] that when,” as here, “a defendant defaults in an
action asserting joint liability, judgment should not be entered against the defaulting defendant
until the matter has been resolved against the other defendants.” RSM Prod. Corp. v. Fridman,
643 F. Supp. 2d 382, 414 (S.D.N.Y. 2009), aff'd, 387 F. App'x 72 (2d Cir. 2010) (citing Frow, 82
U.S. at 554). Although the Second Circuit has not clarified exactly how the adoption of Rule
54(b) affected the Frow precedent, Frow continues to “‘control[] in situations where the liability
of one defendant necessarily depends upon the liability of the others,’ i.e., where liability is
joint.” Id. (quoting Int'l Controls Corp. v. Vesco, 535 F.2d 742, 746 n.4 (2d Cir.1976). The rule
of Frow also “probably can be extended to situations in which joint liability is not at issue but
several defendants have closely related defenses.” Wright & Miller, 10A Fed. Prac. & Proc. Civ.
§ 2690 (4th ed.). See also Diarama Trading Co. Inc. v. J. Walter Thompson U.S.A., Inc., No. 01
CIV. 2950 (DAB), 2002 WL 31545845, at *4 (S.D.N.Y. Nov. 13, 2002) (declining to enter final
judgment only against the defaulting defendants but not the appearing defendants when “the
liability of one defendant is . . . likely to depend upon whether others are ultimately found to be
liable”); Farberware v. Groben, No. 89-CV-6240 (PKL), 1991 WL 123964, at *3 n.4 (S.D.N.Y.
Jul. 3, 1991) (endorsing, as “sound policy,” extension of the Frow rule to cases “even when
defendants are similarly situated, but not jointly liable”).
This is a case in which joint and several liability is alleged, and in particular a case in
which each of the appearing Defendants is alleged to be jointly and severally liable with at least
one of the defaulting Defendants. See Compl. ¶¶ 31, 34, 36, 39, 42, 44. The parties would also

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likely assert closely related defenses. “While the full extent of the relationship between and
among Defendants is not yet clear to the Court, it is apparent that the Defaulting and Appearing
Defendants are similarly situated and their cases closely related.” Diarama Trading, 2002 WL
31545845, at *4. It thus may be inappropriate for the Court to allow the final judgment to stand
against the defaulting Defendants while “the potential liability of the Appearing Defendants is
still unresolved.” Id.
Accordingly, the Court is inclined to vacate its February 11, 2021 order entering final
judgment against all the parties. Because a default constitutes admission as to liability, the
Court’s July 29, 2019 order granting Plaintiffs’ motion for default judgment would remain valid
as to the liability of the defaulting Defendants. But if the Court takes this step as intended, the
Court’s entry of final judgment and its award of damages to the defaulting Defendants would be
vacated pursuant to Frow and its progeny. See Montcalm Pub. Corp. v. Ryan, 807 F. Supp. 975,
978 (S.D.N.Y. 1992) (where “some but not all defendants have defaulted, the courts have
consistently held that it is appropriate to enter judgment solely as to liability and not as to the
amount of damages to be assessed against the defaulting party, since a separate determination of
damages would pose the prospect of inconsistent judgments”). As Judge Motley noted in
Montcalm, allowing the final award of damages to stand as against the defaulting Defendants
could “risk the possibility of disparate damage judgments, since,” having vacated the judgment
as against Yong Shu Li, Yong Li Li, and Li Jiang, “the court may not presently address the issue
of damages as to” those three Defendants. See id. at 978 (noting that “the proper procedure is to
consolidate the inquest to determine the level of damages as to the Defaulting Defendants with
the damages aspect of the trial against the non-defaulting defendants”).

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No later than ten days from the date of this order, Plaintiffs are directed to show cause by
letter brief why the Court should not take the above two steps, namely (1) to vacate the default
judgments and to further dismiss the claims against Guang Jun Li and Cheng Chen without
prejudice for lack of service; and (2) to vacate the order entering final judgment as to all
defendants pursuant to Frow and its progeny. The appearing Defendants may be heard on this
question as well.
CONCLUSION
For the foregoing reasons, Defendants’ motion to vacate the default judgment is granted
as to Defendants Yong Shu Li, Yong Li Li, and Li Jiang, and the claims against Yong Shu Li are
further dismissed without prejudice pursuant to Fed. R. Civ. P. 4(m) and Fed. R. Civ. P. 41(b).
Plaintiffs’ request for a conditional grant of attorneys’ fees is denied.
No later than ten days from today, Plaintiffs shall show cause by written submission as to
why the Court should not take the two sua sponte steps it has said it is inclined to take. The
Court will subsequently decide the status of the non-appearing Defendants and direct the parties
to confer and propose a plan for the expeditious resumption of the litigation against the
appearing Defendants.
Accordingly, the Clerk of Court is respectfully directed to (1) reopen this case; (2) vacate
the entry of judgment only as to Defendants Yong Shu Li, Yong Li Li, and Li Jiang; (3)
terminate Defendant Yong Shu Li; and (4) terminate the motions pending at Dkts. 267 and 270.
SO ORDERED.
Dated:
September 21, 2021
New York, New York
Ronnie Abrams
United States District Judge

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