Opinion
Index No. 650490/2023
06-20-2023
Easy Rent Corporation and NESTOP LLC F/K/A EASYRENT REALTY LLC, Plaintiffs, v. Yue Yu, ZIHUI CATHY HUANG, and ACRE NY REALTY INC., Defendants.
Littler Mendelson, P.C., New York, NY (Kevin K. Yam of counsel), for plaintiffs. Jia Law Group, P.C., New York, NY (Thomas Hsien Chih Kung and Richard A. Stern of counsel), for defendants.
Unpublished Opinion
Littler Mendelson, P.C., New York, NY (Kevin K. Yam of counsel), for plaintiffs.
Jia Law Group, P.C., New York, NY (Thomas Hsien Chih Kung and Richard A. Stern of counsel), for defendants.
GERALD LEBOVITS, J.
In this action, plaintiffs Easy Rent Corporation and Nestop LLC have brought claims against defendants Yue Yu, Zihui Huang, and Acre NY Realty Inc. Plaintiffs have alleged that Yu improperly diverted plaintiffs' clients and client information to defendant Acre at the instigation of defendant Huang (a principal of Acre).
In March 2023, plaintiffs filed this motion under CPLR 3215 for default judgment against defendants. (NYSCEF No. 6.) The day after plaintiffs moved for default judgment, defendants filed an answer and counterclaimed (NYSCEF No. 16); plaintiffs promptly served a notice of rejection of the answer (NYSCEF No. 17). Defendants then cross-moved under CPLR 3012 (d) to compel plaintiffs to accept their answer and counterclaim. (NYSCEF No. 18.)
Plaintiffs' default-judgment motion is denied; defendants' cross-motion is granted in part and denied in part as academic.
1. Plaintiffs have not established an entitlement to default judgment against defendant Huang, because she was not in default when plaintiffs filed their motion. Plaintiffs' affidavit of service on Huang reflects that she was served by the leave-and-mail method of CPLR 308 (2). (See NYSCEF No. 3.) When service is made by leave-and-mail, a defendant has 30 days from the completion of service to appear and respond. (CPLR 320 [a].) Service is complete 10 days from the filing of the affidavit of service-not 10 days from delivery or mailing, as plaintiffs suggest. (See CPLR 308 [2].) Plaintiffs filed their affidavit of service on Huang on February 10, 2023. (NYSCEF No. 3.) The earliest Huang could be required to appear and respond was April 1, 2023. Huang's answer, filed March 10, 2023, was timely.
Plaintiffs' request for default judgment as against Huang is denied. Defendants' cross-motion to compel plaintiffs to accept that answer notwithstanding its (asserted) untimeliness is denied as academic.
2. With respect to defendant Yu, plaintiffs have established that she was in default at the time of the motion. Yu was served by personal delivery under CPLR 308 (1). (See NYSCEF No. 1.) When service is made by that method, a defendant has 20 days from delivery to appear and respond. Delivery was made to Yu on January 30, 2023. (NYSCEF No. 2.) Because the last day of the 20-day period, February 19, was a Sunday, and the next day, February 20, was a holiday, her deadline to appear and respond was February 21, 2023. (See General Construction Law §§ 24, 25-a.) She did not answer until March 10.
In addition to demonstrating proper service on Yu and her default, plaintiffs must also provide proof of the facts constituting their claims against Yu. (See CPLR 3215 [f].) Plaintiffs rely on the affidavit of one of their officers, Huijie Lyu. (See NYSCEF No. 14.) The representations made in that affidavit are sufficient proof of the facts constituting plaintiffs' claims, considered in isolation.
The question, therefore, is whether Yu has established a basis under CPLR 3012 (d) for this court nonetheless to require plaintiffs to accept her untimely answer. A court considering a CPLR 3012 (d) application should weigh factors such as "the length of the delay, the excuse offered, the extent to which the delay was willful, the possibility of prejudice to adverse parties, and the potential merits of any defense." (Emigrant Bank v Rosabianca, 156 A.D.3d 468, 472-473 [1st Dept 2017]; accord Gordon Law Firm, P.C. v Premier DNA Corp., 205 A.D.3d 416, 417 [1st Dept 2022] [same].)
Here, the delay (17 days) was brief, and there is no indication of prejudice to plaintiffs from that delay. Defendants' counsel represents that the delay resulted from a brief period of miscommunication among defendants themselves and the two sets of lawyers representing them on different matters about who would be responding to the complaint in this action; and that counsel contacted plaintiffs' counsel to request an extension a week before plaintiff moved for default judgment. (See NYSCEF No. 21 at ¶¶ 13-14; see also NYSCEF No. 24 at 3 [email request].) And defendants' answer raises the potentially meritorious defense that plaintiffs' claims against her in this court are barred by claim preclusion because those claims were required to have been asserted instead as compulsory counterclaims in a pending federal wage-and-hour action brought by Yu against plaintiffs. (See NYSCEF No. 16 at 9-10 [answer]; Fed Rules Civ Pro 13 [a] [compulsory-counterclaim requirement]; Paramount Pictures Corp. v Allianz Risk Transfer AG, 141 A.D.3d 464, 467-468 [1st Dept 2016] [discussing federal compulsory-counterclaim rule], affd 31 N.Y.3d 64 [2018].) Taking these factors into account, Yu's CPLR 3012 cross-motion is granted; plaintiff's default-judgment motion is denied.
3. With respect to defendant Acre NY Realty, plaintiffs have shown proper service and Acre's default. Plaintiff served Acre by delivery to the Secretary of State under Business Corporation Law § 306 (b). (See NYSCEF No. 5.) Acre had 30 days from delivery to appear and respond (see CPLR 320 [a]); because the 30th day of that period, February 26, 2023, was a Sunday, the deadline was extended to February 27. Acre did not answer until March 10.
Plaintiffs have not, however, provided proof of the facts constituting its claims against Acre NY Realty. Those claims sound in unjust enrichment, unfair competition, and misappropriation of trade secrets. (See NYSCEF No. 1 at 8-11.) But the Lyu affidavit referenced above does not represent that Acre induced Yu's diversion of clients (and associated revenue) from plaintiffs to Acre, or that Acre was even aware of that diversion. (See NYSCEF No. 14.) Given the absence of allegations of a connection between plaintiffs and Acre, or Acre's awareness of Yu's (alleged) diversion of business, no claim for unjust enrichment lies against Acre. (See Georgia Malone & Co., Inc. v Rieder, 19 N.Y.3d 511, 517-519 [2012].) Nor does the Lyu affidavit allege any other facts that might support claims against Acre for unfair competition or misappropriation of trade secrets.
Plaintiffs' complaint does contain allegations of that kind. (See NYSCEF No. 1 at 8-11.) Although the complaint is not verified, as required under CPLR 3215 (f) to support a default-judgment motion, Lyu states in her affidavit that she is both verifying and incorporating by reference the allegations of the complaint. (NYSCEF No. 14 at ¶ 2.) Verifying a complaint in this manner, although irregular, is permissible. (See Matter of Shankman v. Axelrod, 137 A.D.2d 255, 257 [3d Dept 1988].) But verification of a complaint, or a party affidavit, still must be made by someone "with personal knowledge of the facts asserted in the complaint." (Beltre v Babau, 32 A.D.3d 722, 724 [1st Dept 2006].) Lyu's affidavit states only that she is "fully familiar with the facts and circumstances set forth below"-not what the basis of her knowledge is. (NYSCEF No. 14 at ¶ 1.) Absent "some first-hand confirmation of the facts" alleged, plaintiffs have not met their burden to obtain default judgment against Acre Realty. (Joosten v Gale, 129 A.D.2d 531, 535 [1st Dept 1987].)
Taking into account that plaintiffs have not shown entitlement to default judgment against Acre, and that Acre's 11-day delay in answering was both brief and nonprejudicial, this court concludes that plaintiffs should be required to accept Acre's untimely answer, so that this matter may be litigated on its merits.
Accordingly, it is
ORDERED that the branch of plaintiffs' motion seeking default judgment against defendant Huang is denied; and it is further
ORDERED that the branch of defendants' cross-motion seeking to compel plaintiffs to accept defendant Huang's answer is denied as academic; and it is further
ORDERED that the branches of plaintiffs' motion seeking default judgment against defendants Yu and Acre Realty are denied; and it is further
ORDERED that the branches of defendants' cross-motion seeking to compel plaintiffs to accept defendants Yu and Acre Realty's answer are granted; and it is further
ORDERED that the answer-and-counterclaims filed at NYSCEF No. 16 is deemed the operative pleading in this action, and plaintiffs must respond to the counterclaims asserted in that document within 20 days of entry of this order.