Chen v. WMK 89th Street LLC

Background

Plaintiffs brought this action under the Fair Labor Standards Act and New York Labor Law. After the defendants who had appeared were dismissed at summary judgment, plaintiffs sought default judgments against defendants who had not appeared. To support those requests, John Troy, the owner and managing partner of Troy Law, signed affirmations stating that various defendants had been properly served.

A defendant, Victor Kasner, appeared before the scheduled default hearing and challenged service. Troy Law then acknowledged that Kasner had been served at the former location of a restaurant that had closed in 2012. The firm also conceded that service on Anthony Mazzola, 2425 Broadway Chao Restaurant, and Cho Kam Sze was ineffective because those defendants had been served at former restaurant locations.

The court separately examined service on C.C. Wang. Troy Law had served Wang in 2016 at the former restaurant location and in 2019 by attaching and mailing the papers to an address in Flushing, Queens. The firm knew that Wang had left the United States for Taiwan in 2015. It had no evidence that he had returned to the United States or maintained a living space at the Queens address. The firm relied primarily on the fact that the Queens address was Wang’s last known address and that a judgment had previously been entered there.

Legal standards

Federal Rule of Civil Procedure 11 permits sanctions for frivolous filings and arguments, including positions made without a reasonable factual or legal inquiry. Because the court initiated the sanctions process after the opportunity to correct the challenged filings had passed, the court applied a bad-faith standard. The court also relied on its inherent authority to sanction conduct undertaken in bad faith or for oppressive reasons.

Under New York law, service may be made at a person’s actual place of business, dwelling place, or usual place of abode, but the requirements must be followed strictly. A location used as a usual place of abode must have sufficient signs of permanence. Simply obtaining a copy of the summons and complaint does not establish effective service.

Court’s analysis

The court found that Troy Law repeatedly asserted under oath that Wang had been properly served at his usual place of abode even though the firm knew he had fled to Taiwan. The court concluded that the firm had done little to determine whether the Queens address qualified as Wang’s usual place of abode. Troy Law had not shown that Wang maintained a residence, living space, belongings, mail, or other connection to that address.

The court also emphasized that John Troy admitted he could not find legal authority supporting the firm’s theory that a person who had been outside the country since 2015 could be served at a last known address merely because the person might someday return. Despite that admission, Troy Law continued to present the service as valid and sought a default judgment in an application where no opposing party was present to challenge the claim.

The court determined that these assertions were frivolous under Rule 11 and were also made in bad faith under the court’s inherent authority. It found that Troy Law had repeatedly presented unsupported service claims concerning multiple defendants and had failed to correct or adequately investigate those claims after receiving warnings about service problems.

Ruling and disposition

Judge Gregory H. Woods ordered Troy Law to pay a $5,000 sanction to the court. The court stated that the payment was intended to deter similar misrepresentations in future applications made without an opposing party present. Troy Law was ordered to pay the sanction within three weeks and file proof of payment within four weeks.

The court also stated that plaintiffs could pursue a new request for a default-judgment hearing against defendants remaining in the litigation. Separately, because C.C. Wang was not properly served within the period required by Rule 4(m), and no request had been made to extend that period, the court dismissed the claims against Wang and directed the clerk to remove his name from the case caption. The opinion does not state a separate disposition in this order for every other defendant.