Lin v. Grand Sichuan 74 st Inc. et al

Filing 279

MEMORANDUM OPINION & ORDER: For the foregoing reasons, the default judgments against Defendants Guang Jun Li and Cheng Chen are vacated. Plaintiffs are ordered to serve Guang Jun Li and Cheng Chen with the complaint and summons in compliance with Rule 4 within 30 days or else the claims against them will be dismissed without prejudice. The Clerk of Court is respectfully directed to vacate the entry of final judgment as to all Defendants. (Signed by Judge Ronnie Abrams on 1/21/2022) (ate)

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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,
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, LI JIANG,
YONG LI LI, GUANG LI LI, CHENG
CHEN,

No. 15-CV-2950 (RA)
MEMORANDUM
OPINION & ORDER

Defendants.
RONNIE ABRAMS, United States District Judge:
In its September 21, 2021 opinion granting certain Defendants’ motion to vacate default
judgment, the Court separately ordered Plaintiffs to show cause why it should not sua sponte (1)
vacate the default judgments against Defendants Guang Jun Li and Cheng Chen and dismiss the
claims against them without prejudice for lack of service; and (2) vacate the order entering final
judgment as to all Defendants pursuant to Frow v. De La Vega, 82 U.S. 552 (1872) and its
progeny. Dkt. 276. Plaintiffs filed their response to the Court’s order to show cause on October
1, 2021. Dkt. 277. For the reasons that follow, the default judgments against Guang Jun Li and
Cheng Chen are set aside and the entry of final judgment with respect to all Defendants is
vacated.

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BACKGROUND
The Court assumes the parties’ familiarity with the long and complex history of this
litigation and recounts only what is necessary to explain its instant decision.
Plaintiffs, former employees of two restaurants named Grand Sichuan and Grand Sichuan
74, commenced this action in April 2015 against the restaurants’ purported owners and
operators, alleging violations of the Fair Labor Standards Act and New York Labor Law, among
other claims. The operative Second Amended Complaint was filed in September 2016. Dkt. 79
(“SAC”).
Four former Defendants1 who allegedly took over Grand Sichuan 74 on April 30, 2015,
SAC ¶ 67, settled the claims against them in July 2018. Dkt. 155. The Court then authorized
Plaintiffs to move for default judgment against the nine remaining Defendants.2 They did so on
October 4, 2018. Dkt. 165. 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. Dkts. 210, 211. Judge Fox ultimately recommended an award
of damages and attorneys’ fees in his August 13, 2020 report and recommendation. Dkt. 248.
On February 11, 2021, the Court adopted Judge Fox’s report (with one modification), entered
judgment for Plaintiffs, and closed the case. Dkt. 265.
A few days later, Defendants Yong Shu Li, Yong Li Li, and Li Jiang moved to vacate the
default judgments that had just been entered against them. Dkt. 267. They contended that
vacatur was warranted due to service errors over the last five years that prevented them from
receiving notice that the action was still pending against them or that Plaintiffs had moved for

Aidi JC LLC, Aidi Xu, Jian Chen, and Yong Ming Chen.
Three corporate Defendants: Grand Sichuan 74 St. Inc., Grand Sichuan 75 St. Inc., Grand Sichuan NY Inc.;
and six individual Defendants: Li Jiang, Yong Li Li, Yong Shu Li, Guang Li Li, Guang Jun Li, and Cheng Chen.
1
2

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default judgment. On September 21, 2021, the Court granted their motion and set aside the
default judgments against Yong Shu Li, Yong Li Li, and Li Jiang under Federal Rule of Civil
Procedure 60(b) and further dismissed Yong Shu Li from the action. Dkt. 276. At the same
time, the Court also indicated that it was “inclined to take two steps, sua sponte, with respect to
the other Defendants” in light of its discovery that Guang Jun Li and Cheng Chen, like Yong Shu
Li, may not have been properly served with the complaint and summons pursuant to Federal
Rule of Civil Procedure 4(m). Id. at 16. Specifically, the Court noted that it was inclined to “(1)
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.” Id. at 21. Before doing so, however, the
Court gave Plaintiffs an opportunity to be heard, and on October 1, 2021, Plaintiffs’ counsel
submitted a letter articulating his position that the Court should not take those two steps. The
Court has considered Plaintiffs’ submission in reaching its decision here.
History of Service Errors
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, 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—Guang Jun Li, Yong Shu Li and Cheng Chen—service was required to
“meet the stricter requirements of Rule 4 [of the Federal Rules of Civil Procedure] as opposed to
Rule 5.” Dkt. 268-1 (transcript) at 3. Plaintiffs contended that these three Defendants were
served on December 27, 2016 through “nail and mail” at their purported dwelling places after
two prior unsuccessful attempts at service. Id.; see Dkts. 86-88. The Court explained that while

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“nail and mail” service is indeed authorized by Rule 4(e)(1) when service through other methods
“cannot be made with due diligence,” CPLR 308, there is “substantial authority for the
proposition that three attempts at residential service don’t satisfy the due diligence requirement
of New York law where the process server made no attempt to serve the defendant at his actual
place of business; in particular, where the place of business was known.” Dkt. 268-1 at 4; see
Sartor v. Toussaint, 70 F. App’x 11, 14 (2d Cir. 2002) (citing cases). When the Court asked
Plaintiffs’ counsel to confirm that he “didn’t mail the documents to defendants’ place of business
even though the complaint establishes that plaintiffs were aware of the place of business of the
defendants,” Plaintiffs’ counsel responded: “I don’t have the proofs of service in front of me. To
my recollection, that is right.” Dkt. 268-1 at 5. The Court thus stated that “in [its] view, service
as to Defendants Guang Jun Li, Yong Shu Li and Cheng Chen was not proper,” but nevertheless
gave Plaintiffs’ counsel an opportunity to write the Court a letter to persuade it otherwise. Id.
(“If you want to write me a letter because you don’t have the information in front of you, you can
do that, if you think I’m wrong with respect to service here of the second amended complaint,
you’ll let me know.”). Notably, Plaintiffs’ counsel did not submit any letter.
The Court subsequently ordered Plaintiffs to serve the Second Amended Complaint on
Guang Jun Li, Yong Shu Li, and Cheng Chen 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 affidavits of service—duplicates of those already filed at Dkts. 173, 174, and
176 prior to the show-cause hearing—stating that they had previously served those Defendants in
December 2018. See Dkts. 185, 186, 189. These affidavits were inadequate in light of the
Court’s prior determination that service up until the show-cause hearing had not been proper.

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See Dkt. 254 (transcript) 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 April 11, 2019 during which it informed Plaintiffs
that they “still [had not] properly served [Guang Jun Li, Yong Shu Li, and Cheng Chen] with the
Second Amended Complaint” and warned that the action would be dismissed for failure to
prosecute if service was not completed by April 26, 2019. Id. at 3-5. It was then that Plaintiffs’
counsel asserted for the first time that Defendants’ place of business was not actually known to
Plaintiffs. See id. at 5 (“The place of business is no longer the defendants’ actual place of
business . . . That being the case, I can only foresee that service will ultimately end up being by
mail and nail at the last known addresses where they resided pursuant to CPLR 308-4.”). Given
this, the Court directed Plaintiffs to “[c]onsult the law, review the provisions, and then once you
serve, lay all of that out in your affidavit of service as to what you did and why.” Id.; see also
Dkt. 200 (“No later than April 26, 2019, Plaintiffs shall either: (1) file a letter articulating the
legal basis on which they think they have already properly served Defendants; or (2) serve
Defendants in compliance with Fed. R. Civ. P. 4, and file proof of such service on the docket by
May 3, 2019.”). Again, no letter was filed.
On May 3, 2019, Plaintiffs filed affidavits of service stating that they had served Guang
Jun Li, Yong Shu Li, and Cheng Chen with their “Notice of Motion for Default Judgment” on
April 30, 2019. Dkts. 204, 205, 208. But contrary to the Court’s instructions, they did not file
proofs of service of the Second Amended Complaint on the three Defendants. And no
accompanying explanation was contained in or filed alongside those affidavits. See id.
The Court subsequently granted Plaintiffs’ motion for default judgment on July 29, 2019.
Dkt. 210. In doing so, the Court appears to have relied on the mistaken assumption that the

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affidavits of service filed at Dkts. 204, 205, and 208 were affidavits attesting to service of the
complaint and summons—in addition to the default judgment papers—on Guang Jun Li, Cheng
Chen, and Yong Shu Li. See Dkt. 210 at 4 (“Plaintiffs served Defendants Cheng Chen [and]
Guang Jun Li . . . with the Summons and Complaint, and default papers, on April 29th and 30th,
by leaving the documents with a person of suitable age and discretion at their homes . . . or at
their actual places of business followed by delivery there via first class mail”); id. at 5
(“Plaintiffs’ most recent affidavit of service with respect to Defendant [Yong] Shu Li indicates
that the process server attempted to serve [her] at [her] ‘dwelling place’ or ‘usual place of bode’
on three occasions . . . Moreover, in 2016, Plaintiffs also served Yong Shu Li by nail-and-mail—
after having attempted an additional three times to serve [her] at [her] residence.” (citing Dkts.
86, 208)).
In her motion to vacate default judgment, Yong Shu Li brought to the Court’s attention
that the filing at Dkt. 208 was not in fact an affidavit of service of the complaint and summons,
but rather, of the default judgment papers. Dkt. 269. Because the Court found that Yong Shu Li
had thus never been properly served with the Second Amended Complaint, the first complaint to
name her as a defendant., it vacated the entry of default judgment against her and dismissed her
from the case without prejudice. Dkt. 276. It further indicated that it was inclined to do the
same with Guang Jun Li and Cheng Chen on the exact same bases: (1) the Court’s repeated
findings in January through April of 2019 that they had still not been served with the Second
Amended Complaint, which was the first complaint to name them as defendants, see Dkt. 268-1
at 6 (January 10, 2019), Dkt. 179 (January 22, 2019), Dkt. 180 (February 26, 2019), Dkt. 200
(April 11, 2019); and (2) the fact that the affidavits filed in May 2019, on which the Court later

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relied to conclude that service was proper, were not in fact proofs of service as to the Second
Amended Complaint but only as to the default judgment motion, Dkts. 204, 205.
In Plaintiffs’ response to the Court’s order to show cause, Plaintiffs’ counsel asserts—just
as he did with Yong Shu Li—that service as to Guang Jun Li and Cheng Chen was proper as of
December 27, 2016. See Dkt. 277 at 1-2. Specifically, Plaintiffs argue that (1) “the process
server demonstrated diligence” with respect to Guang Jun Li because “[Guang Jun Li’s] actual
place of employment at the time of service could not be found”; and (2) “Cheng Chen would
have received the same notice [Aidi JC LLC] did” in December 2016 since he “kept working at
[Grand Sichuan 74] until at least April 2016.” Id. at 2. However, the Court has already made
clear multiple times, as recently as April 11, 2019, that Guang Jun Li and Cheng Chen had not
yet been properly served with the summons and complaint prior to the show-cause hearing. See
Dkts. 200, 254 (transcript). The only attempt at service made after the show-cause hearing was
the one described at Dkts. 204 and 205—namely, service of the default judgment papers.
LEGAL STANDARDS3
Rule 60(b) 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
Unless otherwise indicated, case quotations omit all internal citations, quotations, footnotes, and
alterations.
3

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judgment that has been reversed or vacated; or applying it prospectively is no longer
equitable; or
(6) any other reason that justifies relief.”
Fed. R. Civ. P. 60(b). “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). 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.”).
In Frow v. De La Vega, the Supreme Court held that when “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). However, the Second Circuit has cast some doubt on Frow’s continued
applicability in light of the adoption of Federal Rule of Civil Procedure 54(b). See Int’l Controls
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Corp. v. Vesco, 535 F.2d 742, 746 n. 4 (2d Cir. 1976) (“We think it is most unlikely that Frow
retains any force subsequent to the adoption of Rule 54(b).”). Rule 54(b) 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).
DISCUSSION
Having reviewed Plaintiffs’ order to show cause submission, the Court nevertheless
concludes that it must vacate the default judgments against Guang Jun Li and Cheng Chen; it
will, however, give Plaintiffs one more opportunity to serve Li and Chen before dismissing them
from the case. Additionally, the order entering final judgment as to all Defendants must be
vacated as well.
I.

The Default Judgments Against Guang Jun Li and Cheng Chen Are Void
Vacatur
The Court first concludes that Guang Jun Li and Cheng Chen were never properly served

with the complaint and summons, and therefore that the judgment against them 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, after Plaintiffs moved for
default judgment, the Court pointed out to Plaintiffs on four separate occasions that Guang Jun
Li and Cheng Chen had never been properly served with the Second Amended Complaint, which
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was the first complaint to assert claims against them. 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 . . . Defendants Guang Jun Li . . .
and Cheng Chen.”); Dkt. 180 (finding the same on February 26, 2019); Dkt. 179 (finding the
same on January 22, 2019); Dkt. 268-1 (finding the same on January 10, 2019).
On April 11, 2019, the Court gave Plaintiffs a final opportunity to serve Guang Jun Li
and Cheng Chen in compliance with Rule 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 Rule
41(b). Dkt. 200. Plaintiffs did not do so. Instead, on April 30, 2019, Plaintiffs served Guang
Jun Li and Cheng Chen not with the complaint and summons as ordered by the Court, but instead
with the Notice of Motion for Default Judgment. See Dkts. 204, 205. As far as the Court is
concerned, then, despite its earlier (mistaken) conclusion to the contrary, see Dkt. 210, there is
no evidence that these two Defendants were ever properly served with the complaint and
summons pursuant to Rule 4(m).
Plaintiffs argue now that Guang Jun Li and Cheng Chen were properly served as of
December 27, 2016 through “nail and mail.” See Dkt. 277 at 1-2. But the Court made clear its
view that “nail and mail” service upon these two Defendants was not proper because the
requisite due diligence standard was not met “where the process-server made no attempt to serve
the defendant at his actual place of business, in particular where the place of business was
known.” Sartor, 70 F. App’x at 14. Indeed, at the show-cause hearing, Plaintiffs’ counsel even
agreed with the Court’s assessment. Dkt. 268-1 at 5 (“To my recollection, that is right.”).
Moreover, Plaintiffs were given at least two chances, in January and April 2019, to formally
make the argument they make now—that Defendants’ place of business was not known at the

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time of service because Grand Sichuan was no longer in business. Dkt. 277 at 2. Both times,
Plaintiffs were invited to write a letter to the Court justifying their view that service on
December 27, 2016 was indeed proper. They took neither of those opportunities and cannot now
assert, for the first time in writing, that service on Guang Jun Li and Cheng Chen in December
2016 was proper by virtue of a fact that has been known or should have been known to Plaintiffs
for years—namely, that Grand Sichuan NY was “dissolved on September 19, 2016.” Id.
As to Defendant Cheng Chen, Plaintiffs make the additional argument that because
former Defendant Aidi JC LLC appeared in the action after being served at 307 Amsterdam
Avenue on December 22, 2016, and because “Cheng Chen kept working there until at least April
2016,” he “would have received the same notice the corporation did.” Id. Plaintiffs do not
explain the basis of their belief that Cheng Chen would have necessarily received notice of this
action at his former place of work, eight months after he stopped working at the restaurant, and
the Court does not discern any basis to so infer. Moreover, “[a]ctual notice does not cure a
defect in service or confer personal jurisdiction on the court.” Kaszovitz v. Weiszman, 493
N.Y.S.2d 335, 338 (N.Y. App. Div. 1985). In Raschel v. Rish, the New York Court of Appeals
rejected the argument that both a hospital and doctor were properly served when the process
server left a single copy of the complaint with a hospital administrator who could have
conceivably acted as a representative to both defendants. See 69 N.Y.2d 694, 697 (1986). It
clarified that “[w]hen the requirements for service of process have not been met, it is irrelevant
that [the] defendant may have actually received the documents.” Id. The Court similarly finds
here that there is no basis to conclude that Cheng Chen received proper service of process in
December 2016 at 307 Amsterdam Avenue just because former Defendant Aidi JC LLC was
successfully served there.

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“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
Guang Jun Li and Cheng Chen, the default judgments against them are void, and the Court sets
them aside pursuant to Rule 60(b)(4). When a default 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).
Dismissal
The Court also indicated that it was inclined to sua sponte dismiss Guang Jun Li and
Cheng Chen from the action. “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 fails to prosecute or to comply with these rules or a court
order, a defendant may move to dismiss the action or any claim against it.” Fed. R. Civ. P.

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41(b). Plaintiffs urge the Court not to exercise its discretion to dismiss Guang Jun Li and Cheng
Chen from the case, although—beyond asserting that service upon them was proper in the first
place—they do not explain why.
To be clear, the Court is of the view that it has every right to dismiss Guang Jun Li and
Cheng Chen from the action at this time, given Plaintiffs’ repeated failures to effect proper
service under Rule 4(m) and to comply with court orders under Rule 41(b). The record is replete
with examples of the Court providing Plaintiffs with opportunity after opportunity to address
their service deficiencies or to “advance some colorable excuse for [their] neglect.” Meilleur v.
Strong, 682 F.3d 56, 61 (2d Cir. 2012). That said, in recognition of the Court’s own error in
granting default judgment on the assumption that service was complete, and particularly in light
of potential statute of limitations issues, the Court offers Plaintiffs one last opportunity to serve
Guang Jun Li and Cheng Chen in accordance with Rule 4. If Plaintiffs do not properly serve Li
and Chen within 30 days from the date of this order, the claims against them will be dismissed
without prejudice.
II.

The Default Judgment Against All Defendants Is Set Aside
At the time of the Court’s entry of default judgment on February 11, 2021, there

remained no active litigants in the action. That, however, is no longer the case. Defendants Li
Jiang and Yong Li Li have since appeared and indicated that they intend to defend against
Plaintiffs’ claims on the merits. Under these circumstances, the Court concludes that its
February 11, 2021 entry of default judgment against all Defendants should be set aside pursuant
to Rule 54(b). In doing so, it continues to adhere to its finding, as set forth in its July 29, 2019
order granting Plaintiffs’ motion for default judgment, that the four remaining non-appearing

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Defendants4 are in default and therefore have admitted liability. 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 due to the risk of inconsistent judgments and
damages awards, the Court finds 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,5 and that
the judgments should thus be vacated. See Frow, 82 U.S. at 554 (“A final decree on the merits
against [a] defaulting defendant alone, pending the continuance of the cause, would be
incongruous and illegal.”).
“More than 125 years ago, the Supreme Court held [in Frow] 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., 643 F. Supp. 2d at 414 (citing Frow, 82 U.S. at 554). Additionally, Rule 54(b)
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.” 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).
Plaintiffs argue that the Court should not vacate the default judgments against the nonappearing Defendants because Plaintiffs allege a theory of joint and several, as opposed to pure
4
5

Grand Sichuan 74 St. Inc., Grand Sichuan 75 St. Inc., Grand Sichuan NY Inc., and Guang Li Li.
Li Jiang and Yong Li Li.

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joint, liability. See Dkt. 277 at 3. The Second Circuit has not definitively ruled on how the
adoption of Rule 54(b) affects the Frow principle and in particular, whether Frow applies in
cases of joint and several liability. In Int’l Controls Corp. v. Vesco, it took the position that “‘at
most, Frow controls in situations where the liability of one defendant necessarily depends upon
the liability of the others,’ i.e., where liability is joint.” RSM, 643 F. Supp. 2d at 414 (citing
Vesco, 535 F.2d at 746 n.4). Some district courts have held that 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
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) (“Decisions in this Circuit subsequent to Vesco
support extension of Frow to cases in which defendants are merely ‘similarly situated.’”).
Others have held that “if the liability sought to be imposed is joint and several rather than joint
. . . the rationale of Frow does not directly apply, since it would not be inconsistent to hold some
but not all defendants liable.” Lite-Up Corp. v. Sony Music Ent., Inc., No. 97 CIV. 1546 (KTD)
(MHD), 1999 WL 436563, at *2 (S.D.N.Y. June 24, 1999).
Regardless of whether or not Frow directly applies to cases asserting joint and several
liability, at the very least, courts have been “near-uniform” in holding that “where Plaintiffs’
theory is at least joint and several liability (if not true joint liability), a court should not enter
final judgment as to damages until after conclusion of the merits-phase of the proceedings
against the actively litigating defendants.” Knowles-Carter v. Feyonce, Inc., No. 16-CV-2532
(AJN), 2017 WL 11567528, at *5 (S.D.N.Y. Sept. 23, 2017) (citing cases); Lite-Up Corp., 1999
WL 436563, at *2 (“Nonetheless, even if the liability is joint and several and thus a default
judgment may be entered, it is appropriate to enter judgment solely as to liability and not as to

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Case 1:15-cv-02950-RA-KNF Document 279 Filed 01/21/22 Page 16 of 16

the amount of damages to be assessed against the defaulting party, since a separate determination
of damages would pose the prospect of inconsistent judgments.”). The Court finds that the risk
of inconsistent damages awards presents a “just reason” to delay the entry of final judgment in
this case as to the defaulting Defendants.
Accordingly, the Court vacates its February 11, 2021 order entering final judgment
against all the Defendants. Because a default constitutes an admission as to liability, the Court’s
July 29, 2019 order granting Plaintiffs’ motion for default judgment remains valid as to the
liability of the defaulting Defendants. But the entry of final judgment as to the non-appearing
Defendants will have to await the entry of final judgment as to the appearing Defendants—Yong
Li Li and Li Jiang—who are now actively litigating the case. See Montcalm Pub. Corp. v. Ryan,
807 F. Supp. 975, 978 (S.D.N.Y. 1992) (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”).
CONCLUSION
For the foregoing reasons, the default judgments against Defendants Guang Jun Li and
Cheng Chen are vacated. Plaintiffs are ordered to serve Guang Jun Li and Cheng Chen with the
complaint and summons in compliance with Rule 4 within 30 days or else the claims against
them will be dismissed without prejudice. The Clerk of Court is respectfully directed to vacate
the entry of final judgment as to all Defendants.
SO ORDERED.
Dated:

January 21, 2022
New York, New York
Ronnie Abrams
United States District Judge

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