Opinion
Index No. 651190/2022
08-21-2023
LOUISE CHAZEN, Plaintiff v. 7THONLINE, INC., Defendant
Unpublished Opinion
DECISION AND ORDER
LUCY BILLINGS, J.S.C.
I. BACKGROUND
In this action plaintiff Chazen sues her former employer, defendant 7th0nline, Inc., for breach of her employment contract, violations of the New York Labor Law, quantum meruit, and unjust . enrichment due to nonpayment of $202,000 in past wages. Disclosure is complete or nearly complete.
In a second action Chazen and a co-plaintiff derivatively on . behalf of 7thOnline, Inc., sue its Chief Executive Officer (CEO), his former wife, and two members- of its board of directors for breach, of the covenant of good faith and fair dealing implied in CEO Ma's employment contract, breach of their fiduciary duties to the corporation, diversion of the corporation's assets, and unjust enrichment. Chazen v. Ma, Index No. 656954/2022 (Sup. Ct. N.Y. Co.). Plaintiffs in the second action seek $10,000,000, claiming the following broad range of fraudulent conduct and mismanagement perpetrated on 7thOnline. Ma transferred a i subsidiary of the corporation to his brother in China without the required authorization by the board and for less than fair market value, followed by unauthorized payments to the transferred. entity for less than fair market value. Ma used corporate assets to pay his former wife, defendant Yin, wages and benefits, when she performed no work for the corporation. He made disbursements without the required approval from plaintiffs, the corporation's former President and board Chairman, which further dissipated corporate assets. Ma and defendants Maasbach and Hong falsified . corporate records to conceal these transgressions, subjected the corporation to liability for violations of law, wrongfully-terminated Chazen as President and her co-plaintiff as Chairman, and installed Maasbach as a board member without the required approval from the shareholders.
Plaintiffs claim one instance of the falsification of records was erasure of the corporation's debt to Chazen. Based primarily on this claim, defendant in this action moves to consolidate the second action with this one dr for joint disclosure and a joint trial. C.P.L.R. § 602(a).
II. CONSOLIDATION
In this first action for past wages, Chazen does not sue for her termination as President and needs to show only that 7thOnline owes her wages due before the termination. If she succeeds, that result may support defendants' false manipulation' of 7thOnline's records to erase, the debt, to her and-may preclude a contrary finding in the second action, Pinnacle Consultants v. Leucadia Natl. Corp., 94 N.Y.2d 426, 432-33 (2000); Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 349 (1999); Simmons-Grant v. Quinn Emanuel Urquhart & Sullivan, LLP, 116 A.D.3d 134, 139 (1st Dep't 2014); Sanders v. Grenadier Realty, Inc., 102 A.D.3d 460, 461 (1st Dep't 2013), but she need not show, any false manipulation of records to establish that the corporation owes her past wages. In no other way do the two actions share common factual or legal issues. C.P.L.R. § 602(a); McGinty v. Structure-Tone, 140 A.D.3d 465, 466 (1st Dep't 2016); Simens v. Darwish, 105 A.D.3d 686, 687 (1st Dep't 2013). See High Definition MRI, P.C. v. Liberty Mut. Holding Co., Inc., 148 A.D.3d 470, 471 (1st Dep't 2017). Chazen and 7thOnline are parties in both actions, but will not be subject to any duplicative litigation.
In the second action, moreover, disclosure is far from . complete and likely will involve depositions in China, a time consuming process. Therefore the procedural stage of that action, which is far from ready for trial, in contrast to this action, also militates against consolidation. McGinty v. Structure-Tone, 140 A.D.3d at 466; Suckishvili v. Visiting Nurse Serv. of N.Y., 74 A. D. '3d 433, 433 (1st Dep't 2010); Ahmed v. C.D. Kobsons, Inc., 73 A.D.3d 440, 441 (1st Dep't 2010). No sound reason suggests that consolidating the two actions will accomplish any useful objective, rather than unnecessarily bogging down the first action. McGinty v. Structure-Tone, 140 . A.D.3d at 466; Suckishvili v. Visiting Nurse Serv, of N.Y., 74 A.D.3d at 433. See Imbriale v. Richter & Radner Contracting Corp., 103 A.D.3d 478, 479 (1st Dep't 2013). Although plaintiffs delayed commencing disclosure in the second action, so did defendants, and their motion to dismiss that action delayed disclosure far longer. Nothing indicates that plaintiffs deliberately delayed disclosure to' thwart consolidation. The fact remains that that more complex action has fallen well behind this one.
Finally, plaintiffs in both actions agree that they and their witnesses will appear a second time for their depositions in the derivative action. To the extent any further disclosure remains to be conducted in the first action, the parties are of course free to agree to joint disclosure in the two actions. Otherwise, for the reasons explained above, the court denies defendant's motion to consolidate Chazen v. Ma, Index No. 656954/2022 (Sup. Ct. N.Y. Co.), with this action or for joint disclosure or a joint trial. C.P.L.R. § 602(a).