Wang v. Leo Chuliya, LTD
- Nelson Roman
- 7:23-cv-02463
- U.S. District Court · Southern District of New York
- 7
In Wang v. Leo Chuliya, Judge Roman granted defendants’ dismissal motion because Wang did not plausibly allege intentional wrongdoing, but allowed him to amend.
Bin Wang’s Section 7434 claim, including his proposed claims on behalf of similarly situated workers, was dismissed without prejudice. The defendants obtained dismissal of the complaint but were required to respond if Wang filed an amended complaint.
What happened
In Wang v. Leo Chuliya, Bin Wang alleged that the defendants paid some wages in cash, left those payments off his 2020 tax form, and filed false information with the Internal Revenue Service. He brought the claim for himself and a proposed group of similarly situated workers.
The court ruled that Wang had not provided enough specific facts to plausibly show that the defendants intentionally filed a false tax form. The court granted the defendants’ motion to dismiss under Rule 12(b)(6) and dismissed Wang’s only claim without prejudice, meaning he could try to correct it. The court granted him until June 6, 2024, to file an amended complaint.
Judge Nelson S. Roman explained that the tax statute requires allegations showing a voluntary and intentional violation of a legal duty. Because the complaint did not provide facts about the defendants’ intent, motive, or circumstances surrounding the alleged fraud, Judge Roman dismissed the claim without prejudice and allowed amendment.
The detailed version
- Wang v. Leo Chuliya, LTD · No. 7:23-cv-02463
- Nelson Roman
- May 16, 2024
Background
Bin Wang filed a proposed class action against Leo Chuliya, Ltd., doing business as Fantasy Cuisine; Dumpling Plus Corp., doing business as Dumpling + Noodle; Austin Chu; and Iwen Chen. The opinion states that Chu and Chen were officers or agents of the two businesses. Wang alleged that he worked for the defendants as a Dim Sum Chef from about September 8, 2019, through October 3, 2022, and that from about January 2020 through October 22, 2020, he was paid partly by check and partly in cash.
According to the complaint, the check payments included federal, state, and local tax withholdings, while the cash payments did not. Wang alleged that the defendants filed a 2020 Form W-2 reporting only the wages paid by check. He claimed that this violated 26 U.S.C. § 7434, which allows a person to seek damages when someone willfully files a fraudulent information return concerning payments made to that person. Wang brought the claim for himself and a proposed class of people employed by the defendants during the relevant limitation period.
Motion and legal standard
The defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court treated well-pleaded factual allegations as true but did not have to accept legal conclusions or unsupported statements.
The court explained that a Section 7434 claim requires allegations that the defendant issued an information return, that the return was fraudulent, and that the defendant willfully issued it. The court adopted its prior interpretation that willfulness requires a voluntary and intentional violation of a legal duty. The complaint therefore needed specific facts supporting a plausible inference that the defendants knowingly filed a false information return.
Court’s analysis
The court concluded that Wang did not adequately plead willfulness. The complaint stated that the defendants willfully filed fraudulent information returns, but the court characterized that allegation as conclusory. It did not include specific facts showing that the defendants intentionally engaged in wrongdoing, deliberately misclassified Wang on the tax forms, acted as part of a plan to defraud tax authorities, or had a motive such as business difficulties. The court also found that the complaint was silent about the defendants’ intent, motive, and the circumstances surrounding the alleged fraud.
The court rejected Wang’s reliance on a different case involving similar allegations about partial cash payments and a Form W-2. That earlier case involved a default judgment after the defendants failed to appear. Here, the defendants appeared and argued for dismissal, so the court required factual allegations sufficient to support willfulness.
Disposition
The court granted the defendants’ motion to dismiss. It dismissed Wang’s sole Section 7434 claim without prejudice, meaning the dismissal did not immediately bar him from attempting to replead the claim. The court granted Wang leave to file an amended complaint by June 6, 2024, and directed the defendants to answer or otherwise respond by June 27, 2024. If Wang did not timely amend and could not show good cause for the delay, claims dismissed without prejudice would be deemed dismissed with prejudice. The clerk was directed to terminate the dismissal motion.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.