Wang v. King

ANDREW WANG and SHOU-KUNG WANG,individually and derivatively on behalf of the Chi-Chuan Wang Revocable Trust, Plaintiffs, v. YIEN-KOO KING, KENNETH KING, RAYMOND KING,LYNN KING, JOSEPH SHIH-FAN KING, and DOES 1-10, Defendants.

No. 18 Civ. 8948 (JFK)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

April 22, 2019

OPINION & ORDER

APPEARANCES

FOR PLAINTIFFS ANDREW WANG AND SHOU-KUNG WANG

Mark P. Ressler

Kim Conroy

Thomas B. Kelly

KASOWITZ BENSON TORRES LLP

FOR DEFENDANTS YIEN-KOO KING, KENNETH KING, AND RAYMOND KING

Sam P. Israel

Timothy Savitsky

SAM P. ISRAEL, P.C.

JOHN F. KEENAN, United States District Judge:

Before the Court is a motion by Defendants Yien-Koo King ("Y.K. King"), Kenneth King ("K. King"), and Raymond King ("R. King") to dismiss the amended complaint filed by Plaintiffs Andrew Wang ("A. Wang") and Shou-Kung Wang ("S.K. Wang"). For the reasons set forth below, the Court grants Defendants' motion to dismiss.

I. Background

The Court takes the following relevant facts from the allegations in the amended complaint and, for the purposes of this motion, assumes they are true.

This action concerns a purported scheme to misappropriate artwork and assets belonging to S.K. Wang and the estate of the artist and collector Chi-Chuan Wang ("C.C. Wang"). (Am. Compl. ¶¶ 1, 16.) Plaintiffs are A. Wang, the grandson of C.C. Wang, and S.K. Wang, the son of C.C. Wang. (Id. ¶¶ 9-10.) Defendants are Y.K. King, the daughter of C.C. Wang; K. King, her husband; and R. King, Lynn King, and Joseph Shih-Fan King -- Y.K. King and K. King's children. (Id. ¶¶ 11-13.)

A. Wang and S.K. Wang are citizens of New York. (Id. ¶¶ 9-10.) Y.K. King and K. King are citizens of the United States domiciled in China. (Id. ¶¶ 11-12.) R. King is a citizen and resident of Oregon. (Id. ¶ 13.) The amended complaint contains no jurisdictional facts relating to Y.K. King and K. King's other children, and they have not appeared in this action.

Between 1979 and 1997, S.K. Wang assisted C.C. Wang in managing his business and assets, which included a world-class collection of ancient Chinese art (the "Classical Collection").(Id. ¶¶ 15-16.) The Classical Collection included artworks that C.C. Wang owned. It also, however, included artworks belonging to S.K. Wang and a non-party in this action, Hui Chen. (Id. ¶ 16.)

In 1997, Y.K. King objected to S.K. Wang acting as C.C. Wang's primary assistant. (Id. ¶ 15.) As a result, C.C. Wang relieved S.K. Wang from the role and installed Y.K. King. (Id.) Y.K. King used this newfound access to C.C. Wang's assets and the Classical Collection to defraud and loot, with the help of her family, C.C. Wang's estate (the "Estate"). (Id. ¶ 33.) Specifically, Plaintiffs claim that Defendants perpetrated the following offenses, which the Court will outline.

1. The Transfer of Assets. Between 1997 and 2003 when she managed C.C. Wang's affairs, Y.K. King, acting alone or in concert with her husband, orchestrated a series of fraudulent transactions in which a significant portion of C.C. Wang's financial assets were transferred to corporate entities she and her husband had formed. (Id. ¶¶ 19-21). Some funds were then distributed from these entities to K. King directly. (Id. at ¶¶ 20-21.) Y.K. King, K. King, and R. King are alleged to have used interstate wire transfers, telephone calls, and mailings to further their scheme to siphon off C.C. Wang's monetary assets and to transfer certain assets to their corporate entities. (Id. ¶¶ 23-24.)

2. The Purchase of C.C. Wang's Artwork. Between March 31, 1998 and September 6, 2000, Y.K. King and K. King used the financial assets they fraudulently obtained from C.C. Wang to purchase art from him, specifically forty-five pieces of classical Chinese art, at artificially low prices. (Id. ¶ 22.)

3. The Classical Collection Theft. From 1997 until 2003, Y.K. King transferred artwork from the Classical Collection from a safe deposit box in C.C. Wang's apartment building to storage spaces at Day & Meyer, Murray & Young Corp. ("Day & Meyer"). (Id. ¶ 28.) She then prohibited C.C. Wang from accessing those storage spaces. (Id. ¶¶ 27-28).

4. The Northwich Bearer-Share Theft. Y.K. King, in 2002, stole the bearer-share certificate to Northwich Investments, Ltd. ("Northwich"), a company holding certain assets belonging to C.C. Wang. (Id. ¶ 30.) She had the share certificate ultimately re-issued in her name. (Id. ¶¶ 30-33).

5. Will and Surrogate's Court Manipulation. Y.K. King manipulated C.C. Wang to execute a will in June 2000 (the "2000 Will") that provided Y.K. King with an outsize portion of the Estate relative to her siblings. (Id. ¶ 25.) In late 2002, C.C. Wang purportedly discovered Y.K. King's "misconduct in managing his affairs" and re-engaged S.K. Wang. (Id. ¶ 34.) C.C. Wang then modified the 2000 Will to disinherit Y.K. King. (Id. ¶ 35.) In 2003, he executed a new will (the "2003 Will") reinstatingthe testamentary scheme he had employed in his wills prior to 2000 and disinheriting Y.K. King. (Id.)

After C.C. Wang passed away in July 2004, S.K. Wang and A. Wang submitted the 2003 Will to Surrogate's Court in New York County for probate, an action which Y.K. King immediately challenged. (Id. ¶ 38.) Y.K. King contended that the 2003 Will was invalid because C.C. Wang lacked capacity at the time of execution. (Id. ¶ 49.) In an effort to invalidate the 2003 Will, Y.K. King (1) made false misrepresentations to a medical expert, Dr. Goldstein, who testified in Surrogate's Court about C.C. Wang's mental state at the time of the execution of the 2003 Will, and (2) forged a document that purported to show a settlement between A. Wang and Defendants by which Defendants returned forty-six artworks to A. Wang in exchange for an agreement, on the part of the Estate, to allow Defendants to retain certain other paintings already in their possession. (Id. ¶ 57-58.) In May 2017, the Surrogate's Court invalidated the 2003 Will, removed A. Wang as executor of the Estate, and replaced him with Y.K. King. (Id. ¶ 58.)

6. The Sale of Restrained Artwork. Upon commencement of its proceedings, the Surrogate's Court issued a restraining order (the "Restraining Order"), which prohibited A. Wang, S.K. Wang, Y.K. King, and K. King from selling any artwork that "is property of the Estate" or was "formerly owned by" C.C. Wang.(Id. ¶ 43.) A. Wang and an attorney for the New York State Office of the Public Administrator (the "Public Administrator") had compiled a list of such artwork (the "Appel Inventory") during the time they served as executors of the Estate. (Id. ¶ 39.) Defendants sold numerous artworks listed on the Appel Inventory that were subject to the Restraining Order in private sales in China, including six paintings collectively worth over $30 million. (Id. ¶ 45.) Plaintiffs, on December 8, 2018, discovered that a seventh artwork from the Appel Inventory was to be sold at an auction scheduled for late December 2018 in Beijing. (Id. ¶ 46.) They believe it sold for around $600,000. (Id.) They further believe Defendants funneled the funds derived from the sales of the restrained artwork through R.K. King's bank accounts. (Id. ¶ 48.)

7. The Theft of S.K. Wang's Assets. Defendants, in addition to "stealing assets of the Estate," stole a number of paintings personally owned by S.K. Wang. (Id. ¶ 59.) Defendants admitted in the Appel Inventory that they sold one of S.K. Wang's paintings and were in possession of two. (Id. ¶¶ 61-62.) Defendants attempted to sell a fourth painting at a private sale in China, although the amended complaint does not state when this sale occurred. (Id. ¶ 63.)

8. The Fraudulent Bankruptcy. Y.K. King and K. King committed fraud on the bankruptcy court when, in 2007, theydeclared bankruptcy and failed to disclose the full extent of their art holdings, failed to disclose their possession of the proceeds of illicit sales of restrained art, and failed to disclose their interests in their corporate entities. (Id. ¶ 64.) In 2012, based in part on Y.K. King and K. King's representations regarding the scope of their assets, the bankruptcy court issued an order of discharge to the Kings. (Id. ¶ 66.)

9. Fraud on the Court. Y.K. King committed fraud on the Court by filing an amended complaint in 2016 in a related RICO action, which contains false allegations against S.K. Wang and A. Wang. (Id. ¶ 67.) See First Am. Compl., King v. Wang, 14-cv-8948 (JFK) (S.D.N.Y. Sept. 27, 2016) (the "King Action"). Specifically, Y.K. King falsely alleged in her amended complaint that she did not discover the purported "straw men scheme" -- a scheme through which S.K. Wang and A. Wang allegedly re-sold artwork belonging to the Estate -- until 2013, when, in fact, she had discovered it in early November 2009 as she admitted in a 2010 affidavit. (Am. Compl. ¶ 68.)

Based on the aforementioned offenses, Plaintiffs in the amended complaint assert two claims premised on federal law: (1) violation of the Racketeer Influence and Corrupt Organizations Act ("RICO") and (2) conspiracy to commit a RICO violation. They also assert two state law claims for (1) breachof fiduciary duty against Y.K. King and (2) conversion. Plaintiffs contend that, pursuant to 28 U.S.C. § 1331, the Court has federal-question jurisdiction over their claims arising under RICO. (Id. ¶ 7.) They also ask that, pursuant to 28 U.S.C. § 1367(a), the Court exercise supplemental jurisdiction over their state law claims. (Id.) In response to Plaintiffs' amended complaint, Defendants have filed the instant motion to dismiss.

II. 12(b)(6) Legal Standard

To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Matson v. Bd. of Educ., 631 F. 3d...