Keawsri v. Ramen-ya Inc.

Background

This action involves claims by former employees of Ramen-Ya Inc. and Y&S International Corp. d/b/a Ramen-Ya under the Fair Labor Standards Act (FLSA) and related New York Labor Law provisions. The plaintiffs sought leave to file a Third Amended Complaint. The proposed complaint would add Yasuko Negita as a defendant to the existing FLSA and New York Labor Law claims and would add two claims under sections 273-A and 276 of New York’s Debtor and Creditor Law concerning alleged transfers of assets.

The plaintiffs also sought an order of attachment against Masahiko Negita and Toshihito Kobayashi. Attachment is a remedy that can temporarily secure property to help ensure that a future judgment can be collected. The plaintiffs argued that the defendants might not have enough assets in New York and might not honor a future judgment.

Motion to Amend

Federal Rule of Civil Procedure 15 generally requires courts to freely allow amendments when justice requires. Because the case had a scheduling order, the court also considered whether the plaintiffs had shown good cause and diligence under Rule 16. The court found no undue delay or bad faith. The plaintiffs began investigating Yasuko Negita after receiving tax records showing substantial payments to her, and discovery concerning her was delayed. The court also found no undue prejudice to the existing defendants or to Yasuko Negita.

The court therefore allowed the proposed amendment adding Yasuko Negita to the existing FLSA and New York Labor Law claims. The defendants had not argued that those proposed claims against her were futile.

The court reached a different conclusion about the proposed eighth and ninth claims. It treated futility as whether those claims could survive a motion to dismiss for failure to state a claim.

For the proposed claim under section 273 of New York’s Debtor and Creditor Law, the plaintiffs needed to allege facts showing, among other things, a transfer without fair consideration and insolvency or that the transfer caused insolvency. The court found that the complaint did not adequately allege either requirement. The allegations that Yasuko Negita was an employer and manager conflicted with the allegation that she provided no services for the compensation she received, and the complaint did not plead facts showing that Ramen-Ya Inc. or Y&S could not pay its debts.

For the proposed claim under section 276, the plaintiffs needed to plead actual intent to hinder, delay, or defraud creditors with particularity. The court found that this claim failed for the same reasons and that the plaintiffs had not adequately pleaded fraud or recognized indicators of fraudulent transfers.

The court thus granted the motion for leave to amend in part, to add Yasuko Negita as a defendant, and denied it in part, to the extent it sought to add the eighth and ninth claims. The plaintiffs were directed to file the proposed complaint without those two claims within fourteen days.

Motion for Attachment

Under Federal Rule of Civil Procedure 64, the court applied New York law. New York law requires a plaintiff seeking attachment to show a valid cause of action, probable success on the merits, a statutory ground for attachment, and that the amount sought exceeds known counterclaims. The requirements are cumulative.

The plaintiffs relied on a statutory ground involving a nonresident defendant. The court stated that because Masahiko Negita and Kobayashi had consented to New York jurisdiction, the plaintiffs also had to make an additional showing that the defendants’ finances or conduct created a real risk that a future judgment would not be enforced.

The court found that the plaintiffs’ assertions about the defendants’ assets and finances were too conclusory. The evidence described a diligent search but did not explain what steps had been taken, and the plaintiffs had not shown that the defendants could not satisfy a judgment. The court also noted that adding Yasuko Negita made the plaintiffs’ argument about transfers to her moot because she would become a party and her assets could potentially help satisfy a judgment.

Because the plaintiffs had not shown a statutory ground for attachment, the court denied the motion for an order of attachment. It did not decide whether the plaintiffs were likely to succeed on the merits because the requirements for attachment were cumulative.

Disposition

Judge Ona T. Wang granted in part and denied in part the motion for leave to file a Third Amended Complaint, allowing Yasuko Negita to be added but excluding the proposed eighth and ninth claims. The court denied the motion for an order of attachment. The order also directed the parties to participate in a later telephone status conference and directed the Clerk to close the docket entries for the two motions and the motion to amend.