Kim et al v. Yoo et al
Filing
104
OPINION: For the foregoing reasons, Defendants' motions for summary judgment, declaratory judgment, and in limine exclusion of document are denied, and as further set forth in this order. Motions terminated: 85 MOTION for Summary Judgment, filed by Sandra Yoo, Carolyn Yoo, Samuel D. Yoo, Ji Sung Yoo. (Signed by Judge Robert W. Sweet on 9/29/2017) (ap)
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·I
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UNITED STATES DISTRICT COURT
'
SOUTHERN DISTRICT OF NEW YORK
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TAE H. KIM, YOUNG M. CHOI, DONG M.
JU, HONG S. KIM, YOON C. KIM, CHUL G.
PARK, JIN H. PARK, EUTEMIO MORALES,
ZHE Y. SHEN, JONG H. SONG, and
R. JULIAN VENTURA,
15 Civ. 3110
OPINION
Plaintiffs,
-againstJI SUNG YOO a/k/a JISUNG YOO a/k/a
JI S. YOO a/k/a JAY YOO, SANDRA YOO
a/k/a SANDRA YEAR KUM YOO a/k/a
YEAR KUM YOO, SAMUEL D. YOO, and
CAROLYN YOO,
I
I:
L~
.
~
(
l
0 '
F'ILf:. );
Defendants.
-----------------------------------------x
A P P E A RA N C E S:
Attorneys for Plaintiffs
~~I~~d~~~R~~~~e~EGAL DEFENSE AND EDU I ATION FUND
New York, NY 10013
By:
Kenneth Kimerling, Esq.
LATINO JUSTICE/PRLDEF
99 Hudson Street
New York, NY 10013
SHEARMAN & STEARLING
599 Lexington Avenue
New York, NY 10002
By: Adam Goldstein, Esq.
Attorneys for Defendants
LARSEN ADVOCATES P.C.
104 l8T Place
Brooklyn, NY 11231
By:
Kristian Karl Larsen
'
-
.
Sweet, D.J.
Defendants Ji Sung Yoo ("J. Yoo"), Sandra Yoo ("S. Yoo"),
Samuel Yoo ("Samuel") and Carolyn Yoo ("Carolyn")
(collectively,
the " Yoes" or the "Defendants") have moved pursuant to Federal
Rule of Civil Procedure 56 for summary judgment to dismiss the
complaint of Plaintiffs Tae H. Kim ("T. Kim"), Young M. Choi
("Choi"), Dong M. Ju ("Ju"), Hong S. Kim ("Hong"), Yoon C. Kim
("Y. Kim"), Chul G. Park ("C. Park"), Jin H. Park ("J. Park"),
Eutemio Morales ("Morales"), Zhe Y. Shen
("She ~ "),
("Song") and R. Julian Ventura ("Ventura")
Jong H. Song
(co ~ lectively, the
"Plaintiffs"), which alleges fraudulent convey ~nces by J. Yoo.
Defendants have, in the alternative, also
soug~t
a declaratory
judgment and have moved in limine to exclude evidence related to
June Yoo Corp., Gum Gang Inc., and other evidence related to the
finances of non-parties under Federal Rules of Evidence 402 and
403.
Based on the facts and conclusions set fo j th below,
Defendants' motions are denied.
1
Prior Proceedings
This action was filed on April 21, 2015.
(Dkt. No. 1.)
Discovery has proceeded.
On September 15, 2015, Defendants moved to dismiss
Plaintiffs' Complaint,
January 19, 2016,
(Dkt. Nos. 28, 35), whidh was denied on
(Dkt. No. 57).
On June 20, 2017, Defendants moved for suJrnary judgment.
I
(Dkt. No. 85.) The instant motion was heard and marked fully
submitted on September 6, 2017 .
Facts
Plaintiffs are employees of restaurants o l ned and operated
by J . Yoo. Plaintiffs are also judgment credit 1 rs to J. Yoo as a
result of a $2.6 million judgment (the
"Judgrne ~t")
against J. Yoo, his restaurants, Kum Gang,
and Kum Kang, Inc.
Inc.
rendered
("Kum Gang"),
("Kum Kang," and, together J ith Kum Gang, the
"Restaurants"), and others in a 2015 Fair Labor Standards Act
("FLSA") action in Kirn v. Kum Gang Inc., 12 Civ. 5244
(S.D.N.Y.)
(the "Restaurant Case"). Additional background on this case can
2
be found in the Honorable Michael H. Dolinger's Restaurant Case
opinion, see Kim v. Kum Gang, Inc., No. 12 Civ.
WL 2222438, at *2-*22
6344
(MHD), 2 015
(S.D.N.Y. Mar. 19, 2015), and in the
previous opinion of this Court, see Kim v. Yoo, No. 15 Civ. 3110
(RWS), 2016 WL 258642, at *2 (S.D.N.Y. Jan. 20, 2016).
The following is a brief recitation of the facts,
drawn
from Defendants' Rule 56.1 Statement ("Defs.' 56.1"),
Plaintiffs' Responses to Defendants' Rule 56.1 Statement (Pls.'
56.1 Reply"),
Plaintiffs' Statement of Additionla l Material Facts
("Pls.' 56.1"), and the incorporated exhibits referenced
therein, as necessary to resolve the instant
to materiality and as otherwise noted below,
m~ion.
Other than
following facts
are not in dispute.
On January 2 8, 2010, the New York State Deipartment of Labor
("DOL") began an investigation into J. Yoo and the Restaurants.
Between 2010 and 2011, during the investigation, J. Yoo
transferred interests in three pieces of real
~roperty (the
"Properties") to his wife, S. Yoo, and their two adult children,
Samuel and Carolyn. These conveyances form the bases of present
action's claims. The three pieces of real prop1 rty were: a Fifth
Avenue condominium in Manhattan (the "Condominium" or the
3
"Condo"); a home in Little Neck, Queens (the "Home"); and a
commercial property located in Sheepshead Bay, Brooklyn (the
"Brooklyn Property").
On March 10, 2010 J. Yoo and Carolyn
equal interests in the Condominium to
tran~ferred
themselv ~ s
their
and S. Yoo in
equal parts, by deed, for no consideration. As of February 2,
2010, the Condo was appraised at $1,275,000
J. Yoo and S. Yoo owned the Home as husband and wife in a
tenancy by the entirety. On or about November ~ 5, 2011, J. Yoo
transferred his interest to S. Yoo and Samuel. On or about
February 2, 2012, S. Yoo and Samuel transferred their equal
interests to themselves and Carolyn equally. As of December 21,
2 011, the appraised value of the Home was $770,000. On or about
May 1, 2012, the the Home was mortgaged for $5 j 0,000. Plaintiffs
note that this deed transfer reflected no cons ' deration. J. Yoo
continues to reside in the Home.
On or about November 16, 2011, J. Yoo tra l sferred the
Brooklyn Property, for which he was a full own , r, to S. Yoo and
Samuel. On or about January 18, 2013, Brooklyn Property was
mortgaged for $450,000. Plaintiffs note that
4
t~is
deed transfer
also reflected no consideration paid. As of July 27, 2012, the
assessed value of the Brooklyn Property was $1,100,000.
On or about February 2011, the DOL assess 1 d a penalty
against J. Yoo and the Restaurants for a total of $1,176,208.30,
which at some point later was lowered to $942,126.89, and then
lowered again to $727,318.91. The parties agree that at that
time of the fine,
only $581,855.02 of the fine was based on
unpaid wages. The calculations also included a 200 % civil
penalty for previous violations of New York Labor Law.
parties dispute whether the DOL lowered the
1
The
amount further.
On April 22, 2011, because the Restaurants failed to pay
the DOL penalty within ten days, the DOL assessed an additional
civil penalty, raising the total DOL penalty to $1,950,992.84.
Plaintiffs point to several pieces of evidence to contend
the conveyance of the Properties was motivated by the DOL
investigation. Plaintiffs note that J. Yoo cre J ted false time
records presented them to the DOL following the start of the DOL
investigation. Plaintiffs also point to testim1 ny from S. Yoo
indicating that she was aware of the Restauran tj s' growing debts
1
J. Yoo and his Restaurants was previously !investigated and
fined by the DOL for New York Labor Law violations in 2007.
5
and that if the names on the deeds did not change, the
Properties might be lost. Plaintiffs also state that monies
given by S. Yoo to the Restaurants were written up as loans and
that, over that same period, S. Yoo's Gum Gang,
Inc.
("Gum
Gang"), a separate restaurant owned solely by S. Yoo, received
more money from the Restaurants than Gum Gang µ rovided to them. 2
According to Plaintiff, by the end of December 2009, J. Yoo owed
Plaintiffs $1,674,976.60 in accrued unpaid wages and, as of the
week of October 31, 2011, J. Yoo owed
I
Plaintif ~ s
$1,991,140.53.
Plaintiff adduces additional evidence that the conveyances
were not to support J. Yoo's Restaurants. First, mortgage
proceeds amounted to $950,000, but little the money was paid to
J. Yoo or the Restaurants. The $500,000 Home mJ rtgage was split
between Carolyn, who received $41,364.68, and
J.
Yoo, who
received $440,093.31. S. Yoo's $440,093.31 was deposited into a
Nara Bank Account on May 24, 2012, and was never conveyed to J.
Yoo or the Restaurants; rather, much of the Na l a Bank Account
I
2
Plaintiff present checks and additional d 9 cuments that
indicate the following. From 2012 to 2015, S. l oo wrote checks
for the Restaurants totaling $692,664.48. From ~ 2013 to 2015, the
Restaurants wrote checks to S. Yoo totaling $2 J 5,144.59. Over
2013 and 2014, Kum Gang wrote checks to Gum Gang totaling
1
$875.615.00, of which Gum Gang repaid $90,500.0lo. Plaintiffs
note that the Kum Gang checks to Gum Gang were off-set on the
Kum Gang books against monies labeled as "Loan from S. Yoo."
6
funds went to Gum Gang. The Brooklyn Property $450,000 mortgage
proceeds were deposited in S. Yoo's Flushing Bank account, which
issued a check to Kum Gang,
Inc. for $210,000. Plaintiffs also
note that J. Yoo's Gift Tax for 2011 listed the Home and
Brooklyn Properties as gifts to Samuel, specifically,
reporting
the gifts to Samuel as $390,000 for the Home and $390,000 for
the Brooklyn Property.
Defendants present additional evidence to indicate that
that the conv eyances were not fraudulent.
Defendants state that
the mortgage proceeds from the Home and the Br1 oklyn Property
were used to assist in the Restaurants' cash flow problems,
payments which were overseen by S. Yoo, contentions principally
supported by testimonial evidence. Moreover, D, fendants contend
that S. Yoo was in charge of authorizing other managers to make
electronic payments based solely on whether th1 Restaurant's
account showed sufficient funds, which she performed mostly from
Home, and that she was not aware or told about the Restaurant's
labor issues by J. Yoo.
In addition, the conve J ance of the Condo
was to take advantage of S. Yoo's good credit J ating and
refinance the existing mortgage, as J. Yoo's p o or credit was
preventing approval of a bank application.
7
The parties dispute other reasons that
cou~d
support
finding consideration for the conveyances. Defer dants state that
when J. Yoo and S. Yoo first immigrated to the United States, S.
Yoo's family gave over $1 million for J. Yoo to invest for the
Yoo 's children's future; however, according to Defendants'
affidavits and testimony, that money was ultimak ely spent on the
Restaurants, which continued to need additional infusions of
cash. According to Defendants, the transfers and general control
over the mortgage payments from the conveyances to S. Yoo were
in repayment to the earlier payments by S. Yoo's family.
Plaintiffs dispute that S. Yoo's family provided funds to start
J. Yoo's businesses but concur that the Restaurants were not
financially stable.
The parties generally dispute the
solvenc~
of the
Restaurants at and following the time of the D1 L investigation.
2010 tax returns list Kum Gang with an income of $101,722, Kum
Kang with a loss of $208,098, and J. Yoo with J ompensation of
approximately $50,000. 2011 tax returns list t ~e Restaurants'
combined assets at around $1.8 million accompa j ied by a similar
value of liabilities, Kum Kung with no stated income in 2011,
Kum Gang with an income of $22,616, and J. Yoo with compensation
of $19,997. 2012 tax returns show Kum Kang with an income loss
8
of $186,538, Kum Gang with an income loss of
$2 ~ ,9 29 ,
and J. Yoo
with compensation of $25,122.
Applicable Standards
Summary judgment is appropriate only where "there is no
genuine issue as to any material fact and
the moving party
is entitled to a judgment as a matter of law."
Fed. R. Civ. P.
56(c). A dispute is "genuine" if "the evidence is such that a
reasonable jury cou ld return a verdict for the
~onmoving
Anderson v . Liberty Lobby, Inc., 477 U.S. 242, 248
party."
(1986). The
relevant inquiry on application for summary judgment is "whether
the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one
party must prevail as a matter of law."
Id. at 251-52. A court
is not charged with weighing the evidence and 1 etermining its
truth, but with determining whether there is a genuine issue for
trial. Westinghouse Elec. Corp . v. N.Y.C. Transit Auth., 735 F.
Supp. 1205, 1212 (S .D.N.Y. 1990)
(quoting Anderson, 477 U.S. at
I
249) . "[T]he mere existence of some alleged factual dispute
between the parties will not def eat an otherwise properly
supported motion for summary judgment; the req1 irement is that
9
there be no genuine issue of material fact." Anperson,
at 247-48
477 U.S.
(emphasis in original)
Federal Rule of Evidence 402 provides that "evidence that
is not relevant is not admissible." Fed. R. Evict. 402. Federal
Rule of Evidence 403 provides, "[a]lthough relevant, evidence
may be excluded if its probative value is substantially
outweighed by the danger of unfair prejudice, confusion of the
issues, or misleading the jury, or by considerations of undue
delay, waste of time, or needless presentation of cumulative
evidence." Fed. R. Evict. 403.
Defendants' Motion for Summary Judgment is
Den~ed
Defendants have moved for summary judgment against
Plaintiffs' claims for constructive and intentional fraudulent
I
conveyance under New York Debtor and Creditor Law ("NY DCL")
Sections 273, 275, and 276, contending that as a matter of law
the transfers of the Properties were legitimate, owned by Yoo
family members other than J. Yoo, the Judgment debtor, and
therefore outside the reach of Plaintiffs, the Judgment
10
creditors. 3 As material issues of fact exist as to each of the
conveyances and as to each of Plaintiffs' claims, Defendants'
motion is denied.
Tacked onto Defendants' summary judgment ~otion is a
request for a declaratory judgment and order "declaring and
clarifying that Plaintiffs fail to state a cause of action for
1
individual money judgments against Defendants s andra Yoo, Samuel
Yoo and Carolyn Yoo or any non-parties." (Dkt. No. 85.) The
Court was clear in its earlier opinion: Plaint~ffs' do not seek
to S. Yoo, Samuel, or Carolyn "personally liab ~ e for the FLSA
violations at Yoo's restaurant" but only "to reverse the
allegedly fraudulent conveyances of Yoo's propelrty to them;" put
another way, the "conveyance action is not an attempt to recover
assets from Sandra, Samuel, and Carolyn Yoo to satisfy the
underlying judgment (to which they are, of course, not subject);
it is an attempt to recover [J. Yoo's] assets to satisfy the
judgment against him, even though those assets have allegedly
been hidden away under the care of others." Ki~, 2016 WL 258642,
at *4 (citation omitted). Whether the conveyan d es were or were
not fraudulent remains to be determined by a finder of fact.
Should a finder of fact ultimately conclude fr~ud transpired,
however, New York law permits that if a "transferee has disposed
of the property or has damaged it, the [creditor] should have
personal judgment against the transferee for t ~e value . . .
where the grantee has disposed of the wrongful ~ y conveyed
property or depreciated it." United States v. Bushlow, 832 F.
Supp. 574, 583 (E.D.N.Y. 1993) (internal citat ~ ons omitted); see
also Citibank, N.A. v. Benedict, No. 97 Civ. 9541 (AGS), 2000 WL
322785, at *15 (S.D.N.Y. Mar. 28, 2000) (holding that
"transferee has disposed of the property or ha J damaged it, the
[creditor] should have personal judgment against the transferee
for value" and collecting cases). Such relief d s not imposing
the underlying Judgment itself onto anyone other than J. Yoo. To
the e x tent that Defendants seek a declarator y judgment further
on the matter, it is denied.
I
3
1
11
a.
The Section 273 and 275 Claims
Section 273 provides that: "Every conveyance made and every
obligation incurred by a person who is or will be thereby
rendered insolvent is fraudulent as to creditors without regard
to his actual intent if the conveyance is made or the obligation
is incurred without a fair consideration." NY 9cL
§
273. The
Second Circuit has instructed that a conveyance is "deemed
constructively fraudulent" under Section 273 only if "two
separate elements are satisfied: first,
it is made without 'fair
consideration,' and second, the transferor is insolvent or will
be rendered insolvent by the transfer in question." United
States v. Watts, 786 F.3d 152, 164
quotation marks omitted)
(2d Cir. 2015)
(internal
(quoting In re Sharp Int'l Corp.,
403
F.3d 43, 53 (2d Cir. 2005)) . 4 Section 275 is related and provides
that, "Every conveyance made and every obligation incurred
without fair consideration when the person making the conveyance
I
or entering into the obligation intends or believes that he will
incur debts beyond his ability to pay as they mature, is
4
Courts will sometimes also state a third l equirement for
Section 273 and 275 claims, that there be proof of a transfer.
See, e.g., In re Khan, No. 10 Civ. 46901 (ESS), 2014 WL 10474969,
at *12 (E.D.N.Y. Dec. 2 4, 2014). However, as the parties do not
dispute that the transfers of the Properties c 6 nstitute
conveyances under the NY DCL, that element is already met here.
See NY DCL § 270.
12
fraudulent as to both present and future creditors." NY DCL
§
275.
Defendants contend that there is no genuine dispute of fact
that fair consideration was provided between J. Yoo and the
members of his family for each conveyance or that, at the time
of each conveyance, J. Yoo was not, would not, and did not
~ ransfers.
believe he would be rendered insolvent by the
Each
will be addressed in turn.
"'Fair consideration' is defined in DCL
§
272(a) as
existing '[w]hen in exchange for such propert y , or obligation,
as a fair equivalent therefor, and in good faith, property is
conve yed or an antecedent debt is satisfied.'" Integrity Elecs.,
Inc. v. Garden State Distribs., Inc., No. 14 Civ. 3197
2016 WL 3637004, at *8
§
(E.D.N.Y. June 30, 2016)
(BMC),
(quoting DCL
272(a))). "The fair consideration test 'is pnofitably analyzed
as follows:
( 1)
the recipient of the debtor's property[ ]
must either (a) convey property in exchange or (b) discharge an
antecedent debt in exchange; and (2) such exchange must be a
'fair equivalent' o f the property received; and
(3) such
exchange must be 'in good faith.'" In re Sharp Int'l Corp.,
F.3d at 53-54
(quoting HBE Leasing Corp. v. Frank,
13
403
61 F.3d 1054,
1058-59 (2d Cir. 1995)). Under Section 273, the question of good
faith is applied to the transferee, not transferor. See HBE
Leasing Corp., 61 F.3d at 1059 n.5. As here, "when an intrafamily transaction is at issue
New York law places a
h eavy burden on the transferee t o show that there has been fair
consideration for the transfer." United States v. Scharfman, No.
79 Civ. 4224
(JMC), 1981 WL 1855, at *6 (S.D.N.Y. Aug. 14,
1981); see also MFS/Sun Life Trust-High Yield Series v . Van
Dusen Airport Servs. Co., 910 F. Supp. 913, 937
(S.D.N.Y. 1995)
(holding that when "information concerning the va lue of indirect
benefits received .
. is within the control of the defendants"
it is "appr opriate to shift to [defendants] the burden of coming
forward with supporting evidence").
The thrust of Defendants' argument is that agreements made
by the Yoos to use mortgages on some of the propertiespresumably the Home and the Brooklyn Property-to get loans and
make payments in support of the Restaurants constitutes fair
consideration.
(See Defs.' Mem. in Supp.
("Defs.' Mem.") at 151
16.) As a matter of law, payments made to third parties, like J.
Yoo's Restaurants, can constitute fair consideration; however,
such evidence needs to be "'fairly concrete' to constitute
'reas onab l y equivalent va lue . '" In re Gonzalez ) 342 B.R. 165,
14
173 n.7
(Bankr. S.D.N.Y. 2006)
re Nirvana Rest.
(citation omitted); see also In
Inc., 337 B.R. 495, 502 (Bankr. S.D.N.Y. 2006)
(quoting Rubin v. Mfrs. Hanover Trust Co.,
(2d Cir. 1981))
661 F.2d 979,
991-92
("A debtor can receive 'fair consideration'
indirectl y through a benefit conferred on a third party provided
that 'the value of the benefit received by the debtor
approximates the value of the property or obligation he has
given up.'"). The payments must to occur, however; "promises of
future support do not constitute fair consideration." Scharfman,
1981 WL 1855, at *6 (S.D.N.Y. Aug. 14, 1981)
(collecting cases);
see also Gavenda v. Orleans Cnty., No. 95 Civ. 251E (SC), 2002
WL 31974390, at *2 (W.D.N.Y. Dec. 12, 2002)
(collecting cases).
With the evidence before the Court today,
Defendants have
not established that fair consideration is beyond genuine
dispute to permit summary judgment. None of the conveyance
papers for the Properties indicate that any consideration was
paid to J. Yoo for the transfers. Evidence regarding S. Yoo's
knowledge of the financial situation of the Restaurants and the
impact the DOL investigation on the Yoos' property raises
questions about the Yoos' good faith in the conveyances. Other
than submitted affidavits sworn by J. Yoo and S. Yoo, no other
evidence presented undisputedly establishes that refinancing of
15
the Properties provided the Yoos money that would, and in fact
did, go to support the Restaurants; to the extent that
Defendants' have demonstrated that S. Yoo and Gum Gang provided
money over the years to the Restaurants, Plaintiffs' evidence of
repayments and bookkeeping labeling raises a triable issue as to
whether those payments were loans or consideration for the
conveyances.
A question of fact also exists as to J. Yoo's insolvency at
the time of the conveyances. The NY DCL provides that a person
is insolvent "when the present fair salable value of his assets
is less than the amount that will be required to pay his
probable liability on his existing debts as they become absolute
and matured." NY DCL § 271(1). "Assets" is defined as property
that is "not exempt from liability for
debts." NY DCL
§
270.
"To determine insolvency, courts apply a 'balance sheet' testi. e., whether the debtor's debt exceeds his salable assets." In
re Chin, 492 B.R. 117, 127 (Bankr. E.D.N.Y. 2013)
O'Toole v. Karnani (In re Trinsum Group, Inc.),
(citing
460 B.R. 379,
392 (Bankr. S.D.N.Y. 2011)). "[T]he operative reference point
for determining insolvency is the time at which the transfer
took place and insolvency of the transferor .
. cannot be
presumed from subsequent insolvency at a later point in time."
16
Id.
(internal quotation marks and citations omitted). "Only
assets with a present salable value are taken into consideration
in determining insolvency. Claims that are inchoate, uncertain,
and contested have no present value and cannot be considered an
asset of the [transferor]." McCarthy v. Estate of McCarthy, 145
F. Supp. 3d 278, 286 (S.D.N.Y. 2015)
(alternation in original)
(quoting First Keystone Consultants,
Inc. v. Schlesinger Elec.
Contractors, Inc., 871 F. Supp. 2d 103, 120 (E.D.N.Y. 2012)).
Where, as here, there is an absence of established fair
consideration, the burden "shifts to the transferee to prove
continued solvency after the transaction." Capital Distributions
Servs., Ltd. v. Ducor Exp. Airlines, Inc., 440 F. Supp. 2d 195,
203 (E.D.N.Y. 2006)
(citing RTC Mortgage Trust 1995-S/Nl v.
Sopher, 171 F. Supp. 2d 192, 199 (S.D.N.Y. 2001)); see also
United States v. Mazzeo, 245 B.R. 435, 440
(E.D.N.Y. 1999)
("Courts view intrafamily transfers made witho u t any signs of
tangible consideration as presumptively fraudulent.")
Defendants contend that at the time of each conveyance, J.
Yoo both possessed and believed he possessed the requisite
assets to render him solvent, particularly given that his past
experience with the DOL would have led him to believe that any
final penalty would result in an almost two million dollar fine.
17
(See Defs.' Mem. at 18-20, 22-24.)
Plaintiffs contend that, as
wage damages that J. Yoo had accrued, unpaid wage damages about
which he knew, amounted to debt that exceeded his assets by the
time of the conveyances. 5 (See Pls.' Mem. in Opp.
("Pls.' Opp.")
at 15.)
Based on the evidence presented, it is a triable question
of fact whether J. Yoo's assets exceeded his "probable
liability" at the time of the conveyances. Plaintiffs have put
forward evidence to support the position that by January 2010,
J. Yoo had probable liability for over $1.6 million in accrued
back pay damages as explained in Plaintiffs' FLSA action and
over $1.5 million in total DOL fines and penalties stemming from
In support, Plaintiffs cite to two provisions. First,
Plaintiffs note DCL Section 270, which provides that a
"creditor" is "a person having any claim, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or
contingent." NY DCL § 270. Second, Plaintiffs highlight New York
Labor Law Section 191 (1) (a), which provides that: "A manual
worker shall be paid weekly and not later than seven calendar
days after the end of the week in which the wages are earned .
. " N.Y. Lab. Law§ 191(1) (a). "A claim for unpaid wages
accrues on the date on which the employee should have been paid
for services rendered but was not." Lanzetta v. Floria's
Enterprises, Inc., 763 F. Supp. 2d 615, 622 (S.D.N.Y. 2011).
Accordingly, unpaid wage damages owed by J. Yoo at the time of
each conveyance are considerable in assessing the debt side of
his "balance sheet."
5
18
other back pay damages.6 (See Pls.' Mem. at 5 & n.6.) At the time
of the transfer of the Condo, J. Yoo owned a half interest in
the Condo, had a tenancy by the entirety interest in the Home,
and full interest in the Brooklyn Property; based on the
evidence adduced assessing the value of the Properties generally
around the time of the conveyances, totaled approximately
$637,500, $385,000, and $1.1 million, respectively.
7
Even
6
The accrued back pay, interest, liquidated damages, and
additional civil penalty were probable given J. Yoo's knowledge
of the unpaid wages and previous DOL interactions; such damages
are not "entirely speculative" as not to count as existing debt.
Shelly v . Doe, 249 A.D.2d 756, 757, 671 N.Y.S.2d 803, 806
(1998). The April 2011 fine from failing to pay the DOL penalty
within the proscribed number of days, however, is too
"hypothetical" to be considered part of J. Yoo's accrued debt.
Lippe v. Bairnco Corp., 99 F. App'x 274 , 282 (2d Cir. 2004) .
Moreover, while Defendants reference prior experience with the
DOL and the DOL's inclination to lower fines le vied , no evidence
has been adduced either in support of that claim or in support
of its applicability to the DOL investigations occurring at the
time of the conveyances.
7
The parties dispute how to calculate the salab le value of
J. Yoo's interest in the Home, and neither party cited authority
to support a proposed valuation. When parties own a property in
the tenancy by the entirety, the "separate interest of one
spouse is subject to rights of the co-owner .
[therefore] we
must value the debtor's interest at something less that the
interest of a single owner in fee simple absolute." In re
Bradigan, 501 B.R. 151, 154 (Bankr. W.D.N.Y. 2013). Accordingly,
J. Yoo's salable asset in the Home is calculated at 50 % of the
Home's assessed value for present purposes.
As to the precise valuation of the Properties at the time
of each conveyance, the parties ha ve submitted many different
documents that put the exact worth of the Properties at
different values. Such lack of clarity further militates away
19
combining these with J. Yoo's stated income at the time and
assets tied up in the Restaurants-Restaurants which, together,
were generating a net loss of revenue and had about as much
liability as assets and for which Defendants have not submitted
evidence to establish their salable value-does not equal the
amount of probable liability J. Yoo possessed at the time of the
conveyance of the Condo. As to the subsequent conveyances of the
Horne and the Brooklyn Property, at which point J. Yoo's assets,
with less ownership in property, were lesser and his accrued
debts, with additional unpaid wages accrued, even greater,
Defendants have not rebutted the presumption of insolvency to
merit summary judgment. a
Lastly, Plaintiffs have put forward sufficient evidence to
raise a triable issue as to whether J. Yoo had an "awareness
. that, as result of the conveyance, he [would] not be able to
from summary judgment. Nevertheless, for the sake of determining
the present motion, the Properties' appraisals are used because
they appear to be the documents relied on by both parties in
their motion papers and, therefore, least disputed. (See Pls.'
56.1 !! 14-16; Defs.'Reply in Further Supp. ("Defs.' Replyu) at
6 n.1.)
8
Defendants contend that the value of the Restaurants were
"valuable and increasing in valueu during the relevant time
period. (See Defs.' Mern. at 23-24.) No evidence was cited, and
no documentary evidence appears to have been submitted, in
support.
20
.
.
pay present and future debts." Ostashko v.
7162
Ostashko~
No. 00 Civ.
(ARR), 2002 WL 32068357, at *26 (E.D.N.Y. Dec. 12, 2002),
aff'd sub nom. Ostashko v. Zuritta-Teks, Ltd., 79 F. App'x 492
(2d Cir. 2003)
(citation omitted)
(analyzing NY DCL
§
275
claim). Plaintiffs have put forward deposition transcripts which
indicate the J. Yoo was aware of the potential magnitude of his
fines,
supported by the fact that J. Yoo created false time
records in the face of the 2010 DOL investigation, and the
consequence it might have with regard to his real property
assets, as exhibited by the rapidity with which J. Yoo began
conveying each of the Properties following the start of the DOL
investigation. In sum, it is genuinely contestable that J. Yoo
possessed the requisite awareness of his insolvent financial
state at the time of the conveyances, at least to the point to
make summary judgment inappropriate.
Accordingly, Defendants' motion for summary judgment with
respect to Plaintiffs' Section 273 and 275 claims is denied.
9
9
Defendants contend that, as a matter of law, the conveyance
of the Home cannot be fraudulent because J. Yoo's interest was a
tenancy by the entirety and therefore unavailable to satisfy the
Judgment. (See Defs.' Mem. at 19-21.) This argument is
unavailing. Under New York law, an interest in a property is
permitted to be used to pay creditors, "even where the interest
is that of a tenant by the entirety." Hall-Mark Elecs. Corp. v.
MGS Mktg., Inc., No. 86 Civ. 4346, 1987 WL 13211, at *7
(E.D.N.Y. June 29, 1987) (collecting cases).
21
r
..
b.
The Section 276 Claim
Section 276 of the NY DCL provides that "[e]very conveyance
made and every obligation incurred with actual intent
. to
hinder, delay, or defraud either present or future creditors, is
fraudulent as to both present and future creditors." NY DCL
§
276. Plaintiffs have the burden to prove actual intent "to
hinder delay, or defraud" by clear and convincing evidence. In
re Zerbo, 397 B.R. 642, 649 (Bankr. E.D.N.Y. 2008)
(citing
United States v. Mccombs, 30 F.3d 310, 328 (2d Cir. 1994)).
"Where actual intent to defraud creditors is proven, the
conveyance will be set aside regardless of the adequacy of
consideration given." In re Sharp Int'l Corp., 403 F.3d at 56
(quoting Mccombs, 30 F.3d at 328)
(alteration and internal
quotation marks omitted).
Because direct proof of fraudulent intent is difficult to
find, courts look for certain "badges" of fraud,
including:
( 1) the lack or inadequacy of consideration; ( 2) the
family,
friendship, or close associate relationship
between the parties; ( 3) the retention of possession,
benefit, or use of the property in question; (4) the
financial condition of the party sought to be charged
both before and after the transaction in question; (5)
the existence or cumulative effect of a pattern or
series of transactions or course of conduct after the
incurring of debt, onset of financial difficulties, or
22
pendency or threat of suits by creditors; and (6) the
general chronology of the events and transactions
under inquiry.
Ford Motor Credit Co. LLC v. Orton-Bruce, No. 14 Civ. 5382
(KMK), 2017 WL 1093906, at *9 (S.D.N.Y. Mar. 22 , 2017)
Sullivan v. Kodsi, 373 F . Supp. 2d 302, 306-07
(quoting
(S.D.N.Y. 2005)) .
"[T]he presence of multiple indicia will increase the strength
0£ the inference
[of actual fraudulent intent]." MFS/Sun Life
Trust-High Yield Servs., 910 F. Supp. at 935. "[T]he flip side
of these badges of fraud is that their absence-or evidence that
fair consideration was paid, the parties dealt at arm's-length,
the transferor was solvent, the transfer was not questionable or
suspicious, the transfer was made openly , or the transferor did
not retain control-would constitute evidence that there was no
intent to defraud." Lippe, 249 F. Supp. 2d at 375 .
Here, sufficient evidence has been put forward to make J.
Yoo's intent unresolvable on summary judgment. As described
above, whether there was fair consideration for the Properties
is unclear; the conveyances were all between members of the Yoo
family; J. Yoo continued to reside in the Home following its
transfer; and the close proximity of the conveyances following
the instigation of the DOL investigation and, with regard to the
Home and Brooklyn Property, to one another, al l raise questions
23
'
.
of
fact as to J. Yoo's intent. Defendants'
responses-that the
conveyances were not in performed in secret, that control over
the properties was taken away from J. Yoo upon transfer, and
that J. Yoo was in fact solvent at the time of the conveyancesare all legitimate arguments to make before a trier of fact.
They do not, however, at this time establish undisputed facts
that would render Plaintiffs' contentions non-genuine. See
Citizens Bank of Clearwater v. Hunt,
1991)
927 F.2d 707,
711
(2d Cir.
(noting that a person's intent "is purely a question of
fact" and "[o]rdinarily .
Accordingly,
for summary judgment") .
Defendants' motion for summary judgment with
respect to Plaintiffs' Section 276 claim is denied.
Defendants'
In Limine Motion is Denied
No basis or authorities to exclude the discovery materials
has been established by Defendants.
Issues with regard to the
relevancy of admitted evidence may be raised and shall be
determined at the time of trial. Accordingly,
limine motion is denied.
24
Defendants'
in
Conclusion
For the foregoing reasons, Defendants' motions for summary
judgment, declaratory judgment, and in limine exclusion of
document are denied.
It is so ordered.
New York, NY
September~, 2017
ROBERT W. SWEET
U.S.D.J.
25
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