Anderson & Anderson LLP - Guangzhou v. Lowinger

Background

The plaintiffs—Anderson & Anderson LLP Guangzhou, Guangdong Huatu Law Firm, and Beijing Kaiming Law Offices—alleged that North American-Foreign Trading Corp. retained them to help enforce a $22 million arbitration award against Chinese corporations. The plaintiffs alleged that the enforcement effort resulted in a Chinese court recognizing and enforcing the award, but that North American-Foreign Trading Corp. later settled for $11.2 million and refused to pay the plaintiffs an agreed contingent fee.

The parties had previously litigated related claims in New York state court. That court struck the plaintiffs’ complaint after they failed to comply with discovery orders and a conditional order requiring discovery and witness production. The Appellate Division, First Department affirmed the dismissal.

The plaintiffs later filed this federal action, asserting claims including breach of contract, quantum meruit, implied contract, and unjust enrichment. In the First Amended Complaint, they named only North American-Foreign Trading Corp. as a defendant. North American-Foreign Trading Corp. moved to dismiss, and the plaintiffs moved for more time to serve the complaint based on excusable neglect.

Diversity Jurisdiction

The court first considered whether it had diversity jurisdiction under 28 U.S.C. § 1332. North American-Foreign Trading Corp. argued that Anderson Guangzhou was a limited liability partnership whose partners might include United States citizens living abroad, which could defeat complete diversity. The plaintiffs instead presented evidence that Anderson Guangzhou was a Chinese corporate entity wholly owned by a Hong Kong corporation.

The court found that the plaintiffs had established diversity jurisdiction by a preponderance of the evidence. It accepted the evidence that Anderson Guangzhou was a wholly owned foreign entity with Chinese citizenship rather than a limited liability partnership with United States-citizen partners. The court therefore rejected the jurisdictional basis for dismissal.

New York Savings Statute and Timeliness

The plaintiffs acknowledged that their claims were subject to New York’s six-year limitations period for contract actions. They argued that New York Civil Practice Law and Rules § 205(a), known as the Savings Statute, allowed them to bring this action after the earlier state case ended.

The court held that the Savings Statute did not apply. By its terms, the statute excludes an action that was dismissed for neglect to prosecute. The court determined that the state court had dismissed the earlier action for that reason, based on the plaintiffs’ repeated failure to comply with discovery requirements, failure to produce documents and witnesses, failure to secure new counsel promptly, and failure to comply with the state court’s conditional order. Because the earlier action was dismissed for neglect to prosecute, the federal action was outside the Savings Statute and therefore untimely.

Other Arguments and Disposition

Because the action was untimely, the court did not reach North American-Foreign Trading Corp.’s alternative arguments that the action had been commenced by disqualified counsel or that the plaintiffs had failed to complete timely and effective service. The court stated that the case would be dismissed even if service had been completed within the relevant period.

Judge Ronnie Abrams granted North American-Foreign Trading Corp.’s motion to dismiss the First Amended Complaint. The court denied the plaintiffs’ motion for an extension of time to effect service as moot and directed the Clerk to terminate the motions and close the case.