Preview
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SUPREME COURT OF THE STATE OF NEW YORK.
COUNTY OF NEW YORK
penne ene een n eee enn ee. jenn nn nen e anne enna nnn n ene,
In the matter of the Application of
NU Media Holdings LLC, Linyu (Ada) Hu, More
Views Inc., and Dawei (David) Zhao,
Index No. 650788/2023
Petitioners,
ATTORNEY AFFIRMATION OF
For an Order, Pursuant to Articles 63 and 75 of the JAMES C. BERGER, ESQ. IN
CPLR, in Support of Petitioners’ Order to Show Cause SUPPORT OF PETITIONERS’
Granting Preliminary Injunction and Related Urgent ORDER TO SHOW CAUSE
Relief GRANTING PRELIMINARY
INJUNCTION AND RELATED
-against- URGENT RELIEF
Universal Processing LLC,
Respondent.
eeene nen eeenenenne,
I, James C. Berger, an attorney duly admitted to practice before the Courts of the State of
New York, hereby affirms the following under penalty of perjury pursuant to Section 2106 of the
Civil Practice Law and Rules (“CPLR”).
PRELIMINARY STATEMENT.
1 Since at least April 2022, Respondent, Universal Processing, LLC (“UP”), has been
pursuing accelerating and interconnected unlawful tactics against Petitioners’ company, NU
Media, LLC (“NU Media”), including but not limited to at least twenty-four specific breaches of
the Parties’ Non-Compete and Non-Solicitation agreements, breach of fiduciary duty, and
theft/misuse of NU Media’s intellectual property — all of which is backed up by extensive
testimonial and documentary evidence annexed to this Affirmation. Earlier — in large part due to
Petitioners’ reasonable expectation of trust between themselves and UP — it was difficult for NU
Media to precisely assess the scope and intention of UP’s actions. Petitioners acted in cautious
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good faith. Today, such doubts no longer pertain. Internal company research and legal analysis
show all signs pointing to an intentional plan. This deliberate dismantling of NU Media for UP’s
benefit must be stopped, and time is of the essence.
2 To shelter NU Media’s business from incurring more irreparable harm, Petitioners
seek urgent relief in the form of a preliminary injunction and some form of remunerative damages
to allow for continuing operations and ensure the possibility that any final determination against
UP would be enforceable (several theories are presented based on equity/specific performance and
contract). Respondent’s campaign to undermine a business in which it STILL holds a 43.75%
membership interest, STILL has unique status as a “Managing Member,” and STILL possesses an
unbridled ability to misuse its privileged position for nefarious objectives, is 100% contrary to
New York’s foundational values.
3 We recognize that, in most circumstances, describing a case or controversy as
“shocking the conscience” would risk inviting accusations of hyperbole and cliche. This is not that
case. Indeed, if UP’s audacious self-dealing at the expense of NU Media fails to inspire anything
but profound concern — both for the specific victims and similarly situated businesses across the
Empire State — hyperbole and cliché are the least of our problems.
4 It would be bad enough if Respondent were merely stealing and lying. It is the
combination of these transgressions with willful disregard for legally recognized duties of loyalty
that necessitates swift and effective repudiation (as outlined in the annexed Proposed Order).
Petitioners cannot passively stand by and wait while their company, customers, and brand remain
hostage to UP’s deceit. There ought to be nothing controversial about enforcing valid contractual
terms, enjoining illegality, preventing breach of fiduciary duty, cracking down on intellectual
property theft, and taking prudent steps to limit harm where it cannot wholesale be eliminated.
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Therefore, after addressing several threshold issues concerning procedural posture, e.g., the recent
disqualification of counsel, the underlying arbitration, and NU Media’s continuing Article 75 right
to jurisdiction in Supreme Court, this Affirmation places the relevant facts into context, explaining
how and why they support the requested preliminary relief.
5 In sum, this Court will be fully justified in ordering that Respondent show cause
why they (and only they) should not be required to conduct business fairly within the bounds of
law and equity.
BACKGROUND, PROCEDURAL HISTORY, AND JURISDICTION
I THE PARTIES
6. Petitioner, NU Media Holdings, LLC, is an international public relations and digital
marketing agency formed under the laws of the State of New York with its principal place of
business in New York City.
7. Petitioner, Linyu (Ada) Hu, is the CEO of NU Media and a 7.5% equity member in
the entity.
8 Petitioner, MoreViews Inc., is a provider of online promotional and marketing
services company incorporated under the laws of the State of New York, with its principal place
of business in New York City, and is a 43.75% Member of NU Media.
9. Petitioner, Dawei (David) Zhao, is a Managing Member of NU Media and the CEO
of NU Media Member, MoreViews, Inc.
10. Respondent Universal Processing, LLC, is (ostensibly) a credit card processing
business formed under the laws of the State of New York, with its principal place of business in
New York City, and is a 43.75% member of NU Media.
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ll. Ms. Yihua (Eva) Jiang (“Ms. Jiang”), who provided the supporting factual
affirmation (the “Jiang Aff.”), is an officer and Managing Member of NU Media whose
employment responsibilities include ensuring NU Media’s team can consistently deliver a broad
array of social and digital marketing products to diverse clients. See Jiang Affirmation (“Jiang
Aff.”) at 91-11; 916-24. She is additionally tasked with performing competitor research and
market research for Nu Media and its clients. Prior to, and concurrent with, Ms. Jiang’s role as an
officer of NU Media, she also served as Marketing Director for UP. See id.
Il. THE UNDERLYING ARBITRATION:
12. UP filed the underlying arbitration action (referenced in the above caption) with the
AAA on September 12, 2022, initially seeking damages in the amount of three and a half million
dollars despite a glaring lack of substance. Instead of presenting a cohesive case, Respondent’s
conclusory legal claims about two of the Nu Media Petitioners, Ms. Hu and Mr. Zhao, were
simultaneously too contrived to comprehend yet too far-reaching to be ignored. See Id. at 410.
Consider the sheer number of redundant accusations: conversion of profits, contractual breach,
unjust enrichment, tortious interference, embezzlement, misappropriation of corporate assets,
breach of fiduciary duty, civil fraud, aiding and abetting civil fraud, and civil conspiracy. See id.
13. Petitioners steadfastly opted for the high road, responding with a good faith
roadmap toward amicable separation. See Id. at 11. The Parties attended two mediation sessions
but were ultimately not able to reach an agreement.
Ill. THE DISQUALIFICATION OF UP’S COUNSEL
14. Upon learning the identity of UP’s arbitration counsel, a law firm called Brinen &
Associates, LLC (“Brinen’”), Petitioners found themselves even more perplexed. It was hardly a
secret that UP’s “new” lawyers had previously represented NU Media, itself. See Id. at ¢§10-11,
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4/12, Exhibit A, at Section 9.13 (“All members have been advised and hereby acknowledge that
the law firm of Brinen & Associates, LLC and Joshua D. Brinen, Esq., represents NU Media
Holdings, LLC, and does not represent the individual members”). NU Media asked for Brinen’s
voluntary recusal on grounds of actual and apparent conflict of interest. UP categorically refused.
There could be no turning back. On February 9, 2023, battle was joined with NU Media filing an
Article 75 petition to disqualify counsel and stay the arbitration. (Dkt. Nos. 1-42).
15. On September 15, 2023, this Court entered an Order disqualifying Brinen from
representing UP (the “Disqualification Order”) (Dkt. No. 33).
16. Just under a month later, on October 12, 2023, UP insisted on a second (and
possibly third) bite at the proverbial apple, filing a Motion to Reconsider the Disqualification
Order, as well as a yet-to-be perfected Notice of Appeal with the First Department. (Dkt. Nos. 35-
38)
17. On January 9, 2024, this Court denied UP’s Motion to Reconsider. (Dkt. No. 42)
Iv. THIS COURT’S JURISDICTION PURSUANT TO CPLR ARTICLE 75
18. Upon information and belief, on or about January 12, 2024, UP, represented by new
counsel', informed the Arbitrators that it plans to withdraw its Notice of Appeal. However, as of
the date of this Affirmation, there are no records on this Court’s docket to indicate the Notice of
Appeal has been withdrawn. (See Dkt.).
19. Although the Stay technically remains an open question (as Respondent’s Notice
of Appeal has not yet been withdrawn), Petitioners assert there is another more persuasive rationale
for this Court’s retention of jurisdiction.
' UP’s is now represented by new counsel, Matthew J. Ross, Esq. of Battie Padovano LLC in the Arbitration.
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20. CPLR 7502(c) provides in pertinent part: “that the court may entertain an
application for an order of attachment or for a preliminary injunction in connection with an
arbitration... but only upon the ground that the award to which the applicant may be entitled
may be rendered ineffectual without such provisional relief.” (emphasis added)
21. Section 9 of the Amended OA (addressing dispute resolution) contains two
potentially unreconcilable clauses. See Jiang Aff., Exhibit A. First, Section 9.5 mandates: “Any
ctions commenced under this Agreement shall be venued in either the United States District
Court for the District of New York or in the Supreme Court of the State of New York, New
York County.” See Id. (emphasis added). Confusingly, a mere three paragraphs down the page,
Section 9.8 declares: “If any dispute, difference, or disagreement shall arise upon or in respect
of this Agreement, or with respect to the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon by the parties
Id.
22. Most relevant to this filing is that Section 9.8 does not expressly provide arbitrators
the power and authority to grant injunctive relief, and it is silent on the availability of provisional
remedies in arbitration. See Jiang Aff., Exhibit A.
23. Several compelling reasons support Petitioners’ assertion of jurisdiction under
CPLR 7502(c). First, per the remainder of this Affirmation’s discussion, Petitioners are already
incurring irreparable harm stemming from Respondent’s breaches of the Amended OA and related
misconduct. NU Media cannot afford the corresponding uncertainty and potential lost time that
might otherwise result from motion practice in arbitration and an arbitral decision on whether their
power extends to injunctive remedies without an explicit contractual grant. Second, the present
circumstance would seem to be precisely the type of scenario for which 7502(c) was created. As
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the Court can surely understand following a year of delayed process caused by Respondent’s
stubborn refusal to replace an obviously conflicted counsel, Petitioners would be foolhardy not to
consider how Respondent might weaponize Section 9’s ambiguity in the context of arbitration.
24. Here, CPLR 7502(c) is properly applied because Petitioners are urgently requesting
“an order . . . for a preliminary injunction in connection with an arbitration . . . [that] may be
rendered ineffectual.”
25. Finally, when this Court’s familiarity with the Parties and unquestioned ability to
order equitable remedies are weighed against the significant risks that would almost certainly arise
during the opening stages of an already convoluted arbitration (now stayed for nearly one full
year), principles of fairness and judicial economy favor Petitioners’ reasoning.
STATEMENT OF FACTS
26. Petitioners respectfully refer the Court to the accompanying Jiang Affirmation and
its attached exhibits for a detailed factual statement, all of which are hereby incorporated by
reference herein.
LEGAL ARGUMENT.
27. The facts and law support granting Petitioners’ proposed urgent relief order
containing: (a) a preliminary injunction to halt UP’s ongoing breach of its contractual non-compete
and non-solicitation obligations; (b) related equitable remedies for harms being caused by UP’s
derelictions of fiduciary duty and misuse of NU Media’s intellectual property; as well as (c) any
other available relief, whether derived from specific performance or the Court’s exercise of
discretion to prevent fraudulent transfers of ill-gotten gains. See Destiny v. Citigroup Global, 69
AD3d 212, 216 (4th Dept 2009) ("A motion for a preliminary injunction is addressed to the sound
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discretion of the trial court, and the decision of the trial court on such a motion will not be disturbed
on appeal, unless there is a showing of an abuse of discretion.")
I PETITIONERS ARE ENTITLED TO A PRELIMINARY INJUNCTION
28. To prevail on a motion for a preliminary injunction, the movant must establish a
probability of success on the merits, danger of irreparable injury in the absence of an injunction,
and a balance of equities in its favor. See Atl. Specialty Ins. Co. v Landmark Unlimited, Inc., 214
AD3d 472, 472 (1st Dept 2023).
29. While there may be questions of fact to be determined at trial, this “does not
preclude the court from exercising its discretion in granting an injunction.” See Moy v Umeki, 10
A.D. 3d 604, 781 N.Y.S.2d 684 (2nd Dep’t 2004).
30. A preliminary injunction functions to “maintain the status quo until there can be a
full hearing on the merits.” Clinton v. 695 Jefferson, LLC, 2016 NY Slip Op 31561(U) at *5 (Sup.
Ct. 2016) citing Wellbilt Equip Corp. v Red Eye Grill, 765 N.Y.S.2d 490 (1st Dep’t 2003).
31. Because Petitioners’ supporting evidence either meets or exceeds the above
standards, this Court should order injunctive relief sufficient to halt UP’s ongoing irreparable harm
to Nu Media’s core business interests and misappropriation of intellectual property.
A. Petitioners are Likely to Succeed on the Merits.
32. In Barbes Rest. Inc. v ASRR Suzer 218, LLC, 2016 NY Slip Op 4331 at *1-2 (1st
Dept 2016), the First Department held that, "[a] prima facie showing of a reasonable probability
of success is sufficient; actual proof of the petitioner's claims should be left to a full hearing on the
merits" (referencing Weissman v Kubasek, 112 AD2d 1086, 1086 (2d Dept 1985); Demartini v
Chatham Green, 169 AD2d 689 (1st Dept 1991)). A likelihood of success on the merits may be
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sufficiently established even where the facts are in dispute and the evidence need not be conclusive.
See Four Times Sq. Assoc., L. L. C. v Cigna Invs., 306 AD2d 4, 5 (1st Dept 2003).
33. Petitioners have clear evidence of at least twenty-four instances in which UP has
acted contrary to its non-compete and non-solicitation agreements. The actual number is clearly
higher, however, based on the information uPanda, etc. See Jiang Aff. at (919-55.
34. Both the Jiang Affirmation’s sworn statements and its 30 attached exhibits go well
beyond the “prima facie showing of a reasonable probability of success” that the First Department
sees as the basic threshold to establish likelihood of success. See Barbes Rest. Inc., 2016 NY Slip
Op 4331 at *1-2 (1st Dept 2016) (citations omitted). A partial list of notable examples (detailed
more fully in the Jiang Affirmation with corroborating exhibits) includes:
* UP’s flagrant advertising of services identical to those provided by NU Media
on two proprietary websites as well as through third parties. See Id. at §26, 27,
131, 33, 136, 739-46, 9947-52, 955.
& UP’s postings on various job platforms seeking employees to fill the same
functions as those performed by NU Media employees. Id. at 25, §27, 429,
432, 935-39, 953.
S UP’s efforts to compete with NU Media in areas constituting the heart of NU
Media’s business model. Id. at §§23-26, §31, §33, 949, 9951-55.
&oe UP’s shift to describing itself as a “Full Service Digital Marketing Company”
— a stark contrast with its original identity upon becoming a Member of NU
Media — that is, as a “Credit Card Processing Company.” Id. at 5, 454.
% UP’s establishment of a subsidiary company for the specific purpose of selling
the same services as NU Media, e.g., “social media management, public
relations, professional photography, professional videography, website design,
website management, digital marketing, and paid ads.” Id. at 36, 45.
* UP’s misuse (and potential misuse) of its privileges as an NU Member,
including its ongoing ability to access onboarding data, banking information,
and client lists, as well as other valuable NU Media intellectual property, for
purposes contrary to NU Media’s interests. Id. at 24, §33, 937, 1947-49
%° UP’s solicitation of NU Media customers and employees as well as interference
with valuable NU Media business relationships. Id. at 39-46.
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35. Petitioners are also likely to succeed on the merits due to UP’s brazen violations of
the Amended OA, to which both UP and Petitioners are signatories.
“ In Section 5.4.4(a) of the Amended OA (the “Non-Solicitation”), UP’s
Member’s “agree not to solicit [NU Media] customers or suppliers on behalfof
himself or any other person, firm, company, or corporation.” Id. at 413.
&% In Section 5.4.4(b) of the Amended OA (the “Non-Compete”) UP’s Members
agree they “shall not, directly or indirectly, own, manage, operate, join, control,
be employed or participate in the ownership, management, operation or control
of or be connected in any manner with any business of the type and character
of business engaged in by the Company.” Id. at 14.
36. The evidence contained in this Affirmation, the Jiang Affirmation, and the Jiang
Affirmation’s exhibits, overwhelmingly establishes UP’s ongoing breaches of the Amended OA
including: (a) conducting business substantially like that of NU Media — i.e., prohibited
competition; (b) soliciting business in the same field as NU Media; and (c) improperly accessing
Nu Media’s client lists and financial data and other valuable intellectual property for purposes
expressly prohibited by the Amended OA’s terms.
37. New York courts routinely grant preliminary injunctions in situations where a party
violates a contractually binding non-compete provision. See Chrome Corporate Mgmt. Gr., LLC
v Pfeil, 2009 NY Slip Op 31217 (N.Y. Sup. Ct. 2009) (former owners of corporate travel agency
enjoined from violating a non-compete in a travel marketing agreement); See also ASAPP, Inc. v
Rowbotham, 2022 NY Slip Op 30696 (N.Y. Sup. Ct. 2022) (preliminary injunction granted
enjoining former employee defendant from violating non-compete with plaintiff); D&A
Woodlands Enter., Inc. v Sinatra, 2019 NY Slip Op 31533 (N.Y. Sup. Ct. 2019) (preliminary
injunction granted enjoining former business owner defendant from competing with business he
sold to plaintiff).
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38. Combined with the facts and law addressed earlier in this section, UP’s blatant
contractual breaches further demonstrate Petitioners’ likelihood of success on the merits.
B. Without a Preliminary Injunction, Petitioners Will Continue to Accrue
Irreparable Harm.
39. Petitioners’ evidence shows they have been suffering — and will continue to suffer
— irreparable harm If UP is not preliminarily enjoined from its egregious misconduct. This is
particularly true insofar as UP’s directly competing activities have been draining NU Media’s
revenue and causing long-term reputational damage. See Jiang Aff. at 4919-22, 946.
40. See Walbaum Inc. v Fifth Ave. of Long Is. Realty Assoc., 85 NY2d 600, 607 (1995)
(forfeiture of "valuable improvements" and the good will built up by the plaintiff at the store
location warranted a preliminary injunction); Second on Second Café, Inc. v Hing Sing Trading.
Inc., 66 AD3d 255, 272-273 (1st Dept 2009) ("the loss of the goodwill of a viable ongoing
business" constitutes "irreparable harm warranting the grant of preliminary injunctive relief"); FTI
Consulting, Inc. v PricewaterhouseCoopers LLP, 8 AD3d 145, 146 (1st Dept 2004) (loss of
goodwill constitutes irreparable harm because it is not "readily quantifiable").
41. Here, interpreting the facts in proper context reveals its malicious and egregious
nature. First, UP’s wrongful conduct is being committed in the identical digital marketing space
where NU Media operates. Second, and equally crucial, is the ease with which UP currently can
obtain and improperly use NU Media’s data: “Because it is a Member of Nu Media, UP has
unrestricted access to NU Media’s client-related files, including client names, contact information,
marketing strategies, bank accounts, research files, and other sensitive intellectual property
intended solely for the benefit of NU Media.” See Jiang Aff. at §17.
42. Ms. Jiang further notes that: “[u]pon information and belief (based on my long-
term involvement with both companies and my present position aa NU Media), UP’s simultaneous
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real-time access to the NU Media IP and the Financial Data is not only capable of facilitating UP’s
ability to violate the Non-Compete but could dramatically increase the harms caused by such
violations.” See Jiang Aff. at 419, Fn2. Therefore, because the damage being caused to NU Media:
(a) encompasses injuries to reputation, intellectual property, and other intangible assets (e.g., good
will and opportunity cost) for which no alternative legal remedies exist; and (b) is both accelerating
and worsening, Petitioners have established “irreparability” for purposes of provisional relief
analysis. See e.g., Destiny, 69 AD3d at 222 (4th Dept 2009) (“Harm to business reputation is harm
for which money damages are insufficient and for which injunctive relief may be appropriate”
(internal citations omitted).
Cc. The Balance of Equities Strongly Favors Petitioners.
43. The equities prong requires the Court to determine the relative prejudice to each
party ensuing from a grant or denial of the requested relief. See Shau Thi Ma v Xuan T. Lien, 198
AD2d 186 (1st Dept 1993). This final factor is often framed as follows: “The court should be able
to conclude that the harm to the moving party without the injunction will be greater than the harm
to the opposing party if the injunction is granted.” Clinton, 2016 NY Slip Op 31561(U), at *6
(N.Y. Sup. Ct.) (internal citations omitted). In the current instance, the factual record is weighted
heavily toward NU Media.
44, First, NU Media has dedicated years to innovating and investing, emerging with a
strong base of digital media clients, valuable relationships throughout the sector, and a high level
of institutional knowledge. UP’s digital marketing subsidiary, UPanda, (launched approximately
in April 2022), is essentially a digital media start-up, unfairly profiting from their creation by a
NU Media Managing Member while usurping NU Media’s business, goodwill, opportunities,
knowledge, intellectual property, and clients. See Jiang Aff. at §]44. UP itself is not only a
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newcomer to the digital marketing field but had originally painted itselfas a “credit card processing
company.” Moreover, UP’s original opportunity to acquire an ownership stake in NU Media was
premised on perceived strengths in areas other than digital media. See Jiang Aff. at §5 fnl, 423.
45. UP’s contractual breaches throw these distinctions into even sharper relief. New
York Courts have consistently ruled that — when considering the applicability of provisional
remedies — breaching a contractual non-compete weighs heavily in favor of the party asserting the
breach. See D&A Woodlands Enter., Inc., 2019 NY Slip Op 31533 (N.Y. Sup. Ct. 2019); See
generally Rejwan v First Essentials Corp., 2022 NY Slip Op 31977 (N.Y. Sup. Ct. 2022). In the
instant matter, far more than “a breach” exists. If anything, UP appears to be accelerating its
violative behavior. See Jiang Aff. at {952-53.
46. In sum, NU Media’s vast factual back-up demonstrating likelihood of success on
the merits, ongoing irreparable harm, and a balance of equities in its favor, provide ample
justification to grant Petitioners’ urgent request for a preliminary injunction.
IL. UP’s BREACHES OF FIDUCIARY DUTIES OWED TO NU MEDIA REQUIRE
URGENT REMEDIATION
47. UP’s fiduciary obligations to NU Media and its Members arise from its 47.8%
membership stake and its role as Managing Member. See Jiang Aff. at §5.
48. “[T]he members ofan LLC may stand in a fiduciary relationship to each other and
the LLC,” See Jones v Voskresenskaya, 125 AD3d 532, 533 (Ist Dept 2015); accord Pokoik v
Pokoik, 115 AD3d 428, 429 (1st Dept 2014). The First Department does not hesitate to describe
the importance of fiduciary duty in the strongest of terms. See e.g., Tzolis v. Wolff, 39 A.D.3d
138, 146, 829 N.Y.S.2d 488 (Ist Dept.2007) (“[I]t is elemental that a fiduciary owes a duty of
undivided and undiluted loyalty to those whose interests the fiduciary is to protect. This is a
sensitive _and_ inflexible rule of fidelity, barring not only blatant self-dealing, but also
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requiring avoidance of situations in which a fiduciary's personal interest possibly conflicts
with the interest of those owed a fiduciary duty”) (internal citations omitted) (emphasis added).
49. Even without the powerful contractual language in the Amended OA, it is equally
well established that: “Current employees and owners of a corporation may not actively engage in
competition at the expense of that corporation” See Rejwan v. First Essentials Corp., 2022 NY
Slip Op 31977 at *8-9 (N.Y. Sup. Ct. 2022) (finding breach of fiduciary duty and enjoining
business’s co-owner from competing with business he owned) accord In re Xerox Corp. Consol.
S‘holder Litig., 76 NYS3d 759 (N.Y. Sup. Ct. 2018).
50. Applying these principles to UP’s misconduct, little question exists that the this
most “sensitive and inflexible rule of fidelity” was trampled at NU Media’s expense. New York
courts have repeatedly held that, “[T]he doctrine of ‘corporate opportunity,’ based on a duty of
loyalty...provides that corporate fiduciaries and employees cannot, without consent, divert and
exploit for their own benefit an opportunity that should be deemed an asset of the corporation. See
Alexander & Alexander, Inc. v. Fritzen, 147 A.D.2d 241, 246 (1st Dep’t 1989) (internal quotation
omitted).
Sl. Finally, and for obvious reasons, the State of New York maintains an enormous
public interest when it comes to enforcing rules against corporate self-dealing, abuse of investors,
and misuse of the corporate form. As such, UP’s singularly egregious fiduciary failure should
promptly be remedied in a manner that: (a) limits further harm to NU Media (including on a
provisional basis); and (b) sends a strong message of deterrence to anyone who would follow in
their footsteps.
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il. PETITIONERS ARE ALSO ENTITLED TO INJUNCTIVE AND FINANCIAL
RELIEF PURSUANT TO UNAMBIGUOUS LANGUAGE IN THE AMENDED
OA.
52. Section 5.4.5 of the Amended OA explains that compliance with the Non-Compete
and Non-Solicitation are, “necessary to protect the business and good will of the company [and]
that a breach will irreparably and continually damage the Company, for which money damages
may not be adequate . .. Consequently, each Member agrees that, in the event that he breaches
or threatens to breach any of these covenants, the Company shall be entitled to both: (1) a
preliminary or permanent injunction in order to prevent the continuation of such harm; and
(2) money damages insofar as they can be determined.” See Jiang Aff. at {13 (emphasis added)
53. Crucially, however, the Amended OA does not stop there:
“> “Nothing in this Agreement, however, shall be construed to prohibit the
Company from also pursuing any other remedy, the parties having agreed
that all remedies shall be cumulative. b. Each Member agrees that in the event
of a violation by any Member of any covenant contained in Section 5.4.4.
of this Agreement, that such Member will pay as liquidated damages to
Company the sum of one thousand dollars ($1,000.00) per day, for each
day or part thereof that Member continues to so violate the Agreement. It
is recognized and agreed that damages in such event are difficult to ascertain
though great and irreparable, and that this agreement with respect to
liquidated damages shall in no event disentitle the Company to injunctive
relief.” (emphasis added)
54, The importance of Section 5.4.5.’s plain language cannot be overstated. The
Parties’ unmistakable original intent upon executing the Amended OA was that violations of the
Non-Compete and Non-Solicitation are so essential for the business model’s success, robust and
immediate corrective measures are warranted to alleviate and disincentivize non-conforming
behavior.
5S. First, Petitioners’ arguments for a preliminary injunction — already strong under
New York’s three prong test — become iron-clad.
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56. Second, Petitioners are concurrently entitled to monetary and/or supplementary
equitable relief (and not solely under the liquidated damages formula described above).
57. Third, the contract’s remedies are not limited to “breach” but instead extend even
‘o “threats.” Such language could not have been accidental. At least when the Amended OA was
negotiated, the Parties shared a mutual understanding that NU Media’s future would depend on
nothing less.
58. Whether its damages provisions are awarded preliminarily or in some other fashion,
Section 5.4.5 remains an indispensable lens for evaluating the “what?” “when on? and “how much?”
aspects of the requested relief. After all, Petitioners are experiencing the precise situation
contemplated by the clause. Any suggestion that NU media deserves something other than the
maximum permissible benefit of its original bargain would be nonsensical.
CONCLUSION
59. For the foregoing reasons, Petitioners request that the Court issue a Preliminary
Injunction forthwith, barring Respondent from violating the Non-Compete and Non-Solicitation,
as well as denying Respondent continued access to NU Media’s intellectual property (at least
pending final resolution of this dispute). Additionally, Plaintiffs ask that the Court — based UP’s
extraordinary departure from the norms of good faith and fair dealing — award monetary damages
in whatever amount it deems just, necessary, and proper — a remedy that can be reached through
various routes including specific performance of the liquidated damages formula, effectuating the
public interest necessity of enforcing fiduciary obligations, and/or by reference to the Amended
OA’s emphasis on curing violations with a combined package of provisional relief and “money
damages.” In the alternative, should the Court decide monetary relief is premature or inappropriate
under Article 75 (or for some other reason), Petitioners ask that UP be ordered to deposit funds
16
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matching what would be owed under Section 5.4.5’s liquidated damages clause into a judicially
supervised escrow account pending a final determination on the merits. This type of equitable “safe
keeping” measure is especially appropriate here. Respondent’s well-known propensity to disregard
legal and ethical obligations is well established. Petitioners respectfully ask the Court to move
quickly,
[signature page and word count certification follow|
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FILED: NEW YORK COUNTY CLERK 01/20/2024 01:10 AM
NYSCEF DOC. NO. 44 RECEIVED NYSCEF 01/20/2024
Dated: January 20, 2024 Respectfully Submitted,
New York, New York
JIA LAW GROUP, P.C.
Attorneys for Petitioners
Thomas Hsien Chih Kung, Esq.
Richard A. Stern, Esq.
88 Pine Street, 18th Floor
New York, NY 10005
Tel.: (347) 897-6199
james. berger@jiaesq.com
thomas.kung@jiaesq.com
Preview
iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF 01/20/2024 SUPREME COURT OF THE STATE OF NEW YORK. COUNTY OF NEW YORK penne ene een n eee enn ee. jenn nn nen e anne enna nnn n ene, In the matter of the Application of NU Media Holdings LLC, Linyu (Ada) Hu, More Views Inc., and Dawei (David) Zhao, Index No. 650788/2023 Petitioners, ATTORNEY AFFIRMATION OF For an Order, Pursuant to Articles 63 and 75 of the JAMES C. BERGER, ESQ. IN CPLR, in Support of Petitioners’ Order to Show Cause SUPPORT OF PETITIONERS’ Granting Preliminary Injunction and Related Urgent ORDER TO SHOW CAUSE Relief GRANTING PRELIMINARY INJUNCTION AND RELATED -against- URGENT RELIEF Universal Processing LLC, Respondent. eeene nen eeenenenne, I, James C. Berger, an attorney duly admitted to practice before the Courts of the State of New York, hereby affirms the following under penalty of perjury pursuant to Section 2106 of the Civil Practice Law and Rules (“CPLR”). PRELIMINARY STATEMENT. 1 Since at least April 2022, Respondent, Universal Processing, LLC (“UP”), has been pursuing accelerating and interconnected unlawful tactics against Petitioners’ company, NU Media, LLC (“NU Media”), including but not limited to at least twenty-four specific breaches of the Parties’ Non-Compete and Non-Solicitation agreements, breach of fiduciary duty, and theft/misuse of NU Media’s intellectual property — all of which is backed up by extensive testimonial and documentary evidence annexed to this Affirmation. Earlier — in large part due to Petitioners’ reasonable expectation of trust between themselves and UP — it was difficult for NU Media to precisely assess the scope and intention of UP’s actions. Petitioners acted in cautious 1 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 good faith. Today, such doubts no longer pertain. Internal company research and legal analysis show all signs pointing to an intentional plan. This deliberate dismantling of NU Media for UP’s benefit must be stopped, and time is of the essence. 2 To shelter NU Media’s business from incurring more irreparable harm, Petitioners seek urgent relief in the form of a preliminary injunction and some form of remunerative damages to allow for continuing operations and ensure the possibility that any final determination against UP would be enforceable (several theories are presented based on equity/specific performance and contract). Respondent’s campaign to undermine a business in which it STILL holds a 43.75% membership interest, STILL has unique status as a “Managing Member,” and STILL possesses an unbridled ability to misuse its privileged position for nefarious objectives, is 100% contrary to New York’s foundational values. 3 We recognize that, in most circumstances, describing a case or controversy as “shocking the conscience” would risk inviting accusations of hyperbole and cliche. This is not that case. Indeed, if UP’s audacious self-dealing at the expense of NU Media fails to inspire anything but profound concern — both for the specific victims and similarly situated businesses across the Empire State — hyperbole and cliché are the least of our problems. 4 It would be bad enough if Respondent were merely stealing and lying. It is the combination of these transgressions with willful disregard for legally recognized duties of loyalty that necessitates swift and effective repudiation (as outlined in the annexed Proposed Order). Petitioners cannot passively stand by and wait while their company, customers, and brand remain hostage to UP’s deceit. There ought to be nothing controversial about enforcing valid contractual terms, enjoining illegality, preventing breach of fiduciary duty, cracking down on intellectual property theft, and taking prudent steps to limit harm where it cannot wholesale be eliminated. 2 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 Therefore, after addressing several threshold issues concerning procedural posture, e.g., the recent disqualification of counsel, the underlying arbitration, and NU Media’s continuing Article 75 right to jurisdiction in Supreme Court, this Affirmation places the relevant facts into context, explaining how and why they support the requested preliminary relief. 5 In sum, this Court will be fully justified in ordering that Respondent show cause why they (and only they) should not be required to conduct business fairly within the bounds of law and equity. BACKGROUND, PROCEDURAL HISTORY, AND JURISDICTION I THE PARTIES 6. Petitioner, NU Media Holdings, LLC, is an international public relations and digital marketing agency formed under the laws of the State of New York with its principal place of business in New York City. 7. Petitioner, Linyu (Ada) Hu, is the CEO of NU Media and a 7.5% equity member in the entity. 8 Petitioner, MoreViews Inc., is a provider of online promotional and marketing services company incorporated under the laws of the State of New York, with its principal place of business in New York City, and is a 43.75% Member of NU Media. 9. Petitioner, Dawei (David) Zhao, is a Managing Member of NU Media and the CEO of NU Media Member, MoreViews, Inc. 10. Respondent Universal Processing, LLC, is (ostensibly) a credit card processing business formed under the laws of the State of New York, with its principal place of business in New York City, and is a 43.75% member of NU Media. 3 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 ll. Ms. Yihua (Eva) Jiang (“Ms. Jiang”), who provided the supporting factual affirmation (the “Jiang Aff.”), is an officer and Managing Member of NU Media whose employment responsibilities include ensuring NU Media’s team can consistently deliver a broad array of social and digital marketing products to diverse clients. See Jiang Affirmation (“Jiang Aff.”) at 91-11; 916-24. She is additionally tasked with performing competitor research and market research for Nu Media and its clients. Prior to, and concurrent with, Ms. Jiang’s role as an officer of NU Media, she also served as Marketing Director for UP. See id. Il. THE UNDERLYING ARBITRATION: 12. UP filed the underlying arbitration action (referenced in the above caption) with the AAA on September 12, 2022, initially seeking damages in the amount of three and a half million dollars despite a glaring lack of substance. Instead of presenting a cohesive case, Respondent’s conclusory legal claims about two of the Nu Media Petitioners, Ms. Hu and Mr. Zhao, were simultaneously too contrived to comprehend yet too far-reaching to be ignored. See Id. at 410. Consider the sheer number of redundant accusations: conversion of profits, contractual breach, unjust enrichment, tortious interference, embezzlement, misappropriation of corporate assets, breach of fiduciary duty, civil fraud, aiding and abetting civil fraud, and civil conspiracy. See id. 13. Petitioners steadfastly opted for the high road, responding with a good faith roadmap toward amicable separation. See Id. at 11. The Parties attended two mediation sessions but were ultimately not able to reach an agreement. Ill. THE DISQUALIFICATION OF UP’S COUNSEL 14. Upon learning the identity of UP’s arbitration counsel, a law firm called Brinen & Associates, LLC (“Brinen’”), Petitioners found themselves even more perplexed. It was hardly a secret that UP’s “new” lawyers had previously represented NU Media, itself. See Id. at ¢§10-11, 4 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 4/12, Exhibit A, at Section 9.13 (“All members have been advised and hereby acknowledge that the law firm of Brinen & Associates, LLC and Joshua D. Brinen, Esq., represents NU Media Holdings, LLC, and does not represent the individual members”). NU Media asked for Brinen’s voluntary recusal on grounds of actual and apparent conflict of interest. UP categorically refused. There could be no turning back. On February 9, 2023, battle was joined with NU Media filing an Article 75 petition to disqualify counsel and stay the arbitration. (Dkt. Nos. 1-42). 15. On September 15, 2023, this Court entered an Order disqualifying Brinen from representing UP (the “Disqualification Order”) (Dkt. No. 33). 16. Just under a month later, on October 12, 2023, UP insisted on a second (and possibly third) bite at the proverbial apple, filing a Motion to Reconsider the Disqualification Order, as well as a yet-to-be perfected Notice of Appeal with the First Department. (Dkt. Nos. 35- 38) 17. On January 9, 2024, this Court denied UP’s Motion to Reconsider. (Dkt. No. 42) Iv. THIS COURT’S JURISDICTION PURSUANT TO CPLR ARTICLE 75 18. Upon information and belief, on or about January 12, 2024, UP, represented by new counsel', informed the Arbitrators that it plans to withdraw its Notice of Appeal. However, as of the date of this Affirmation, there are no records on this Court’s docket to indicate the Notice of Appeal has been withdrawn. (See Dkt.). 19. Although the Stay technically remains an open question (as Respondent’s Notice of Appeal has not yet been withdrawn), Petitioners assert there is another more persuasive rationale for this Court’s retention of jurisdiction. ' UP’s is now represented by new counsel, Matthew J. Ross, Esq. of Battie Padovano LLC in the Arbitration. 5 5 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 20. CPLR 7502(c) provides in pertinent part: “that the court may entertain an application for an order of attachment or for a preliminary injunction in connection with an arbitration... but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief.” (emphasis added) 21. Section 9 of the Amended OA (addressing dispute resolution) contains two potentially unreconcilable clauses. See Jiang Aff., Exhibit A. First, Section 9.5 mandates: “Any ctions commenced under this Agreement shall be venued in either the United States District Court for the District of New York or in the Supreme Court of the State of New York, New York County.” See Id. (emphasis added). Confusingly, a mere three paragraphs down the page, Section 9.8 declares: “If any dispute, difference, or disagreement shall arise upon or in respect of this Agreement, or with respect to the meaning and construction hereof, every such dispute, difference, and disagreement shall be referred to a single arbiter agreed upon by the parties Id. 22. Most relevant to this filing is that Section 9.8 does not expressly provide arbitrators the power and authority to grant injunctive relief, and it is silent on the availability of provisional remedies in arbitration. See Jiang Aff., Exhibit A. 23. Several compelling reasons support Petitioners’ assertion of jurisdiction under CPLR 7502(c). First, per the remainder of this Affirmation’s discussion, Petitioners are already incurring irreparable harm stemming from Respondent’s breaches of the Amended OA and related misconduct. NU Media cannot afford the corresponding uncertainty and potential lost time that might otherwise result from motion practice in arbitration and an arbitral decision on whether their power extends to injunctive remedies without an explicit contractual grant. Second, the present circumstance would seem to be precisely the type of scenario for which 7502(c) was created. As 6 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 the Court can surely understand following a year of delayed process caused by Respondent’s stubborn refusal to replace an obviously conflicted counsel, Petitioners would be foolhardy not to consider how Respondent might weaponize Section 9’s ambiguity in the context of arbitration. 24. Here, CPLR 7502(c) is properly applied because Petitioners are urgently requesting “an order . . . for a preliminary injunction in connection with an arbitration . . . [that] may be rendered ineffectual.” 25. Finally, when this Court’s familiarity with the Parties and unquestioned ability to order equitable remedies are weighed against the significant risks that would almost certainly arise during the opening stages of an already convoluted arbitration (now stayed for nearly one full year), principles of fairness and judicial economy favor Petitioners’ reasoning. STATEMENT OF FACTS 26. Petitioners respectfully refer the Court to the accompanying Jiang Affirmation and its attached exhibits for a detailed factual statement, all of which are hereby incorporated by reference herein. LEGAL ARGUMENT. 27. The facts and law support granting Petitioners’ proposed urgent relief order containing: (a) a preliminary injunction to halt UP’s ongoing breach of its contractual non-compete and non-solicitation obligations; (b) related equitable remedies for harms being caused by UP’s derelictions of fiduciary duty and misuse of NU Media’s intellectual property; as well as (c) any other available relief, whether derived from specific performance or the Court’s exercise of discretion to prevent fraudulent transfers of ill-gotten gains. See Destiny v. Citigroup Global, 69 AD3d 212, 216 (4th Dept 2009) ("A motion for a preliminary injunction is addressed to the sound 7 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 discretion of the trial court, and the decision of the trial court on such a motion will not be disturbed on appeal, unless there is a showing of an abuse of discretion.") I PETITIONERS ARE ENTITLED TO A PRELIMINARY INJUNCTION 28. To prevail on a motion for a preliminary injunction, the movant must establish a probability of success on the merits, danger of irreparable injury in the absence of an injunction, and a balance of equities in its favor. See Atl. Specialty Ins. Co. v Landmark Unlimited, Inc., 214 AD3d 472, 472 (1st Dept 2023). 29. While there may be questions of fact to be determined at trial, this “does not preclude the court from exercising its discretion in granting an injunction.” See Moy v Umeki, 10 A.D. 3d 604, 781 N.Y.S.2d 684 (2nd Dep’t 2004). 30. A preliminary injunction functions to “maintain the status quo until there can be a full hearing on the merits.” Clinton v. 695 Jefferson, LLC, 2016 NY Slip Op 31561(U) at *5 (Sup. Ct. 2016) citing Wellbilt Equip Corp. v Red Eye Grill, 765 N.Y.S.2d 490 (1st Dep’t 2003). 31. Because Petitioners’ supporting evidence either meets or exceeds the above standards, this Court should order injunctive relief sufficient to halt UP’s ongoing irreparable harm to Nu Media’s core business interests and misappropriation of intellectual property. A. Petitioners are Likely to Succeed on the Merits. 32. In Barbes Rest. Inc. v ASRR Suzer 218, LLC, 2016 NY Slip Op 4331 at *1-2 (1st Dept 2016), the First Department held that, "[a] prima facie showing of a reasonable probability of success is sufficient; actual proof of the petitioner's claims should be left to a full hearing on the merits" (referencing Weissman v Kubasek, 112 AD2d 1086, 1086 (2d Dept 1985); Demartini v Chatham Green, 169 AD2d 689 (1st Dept 1991)). A likelihood of success on the merits may be 8 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 sufficiently established even where the facts are in dispute and the evidence need not be conclusive. See Four Times Sq. Assoc., L. L. C. v Cigna Invs., 306 AD2d 4, 5 (1st Dept 2003). 33. Petitioners have clear evidence of at least twenty-four instances in which UP has acted contrary to its non-compete and non-solicitation agreements. The actual number is clearly higher, however, based on the information uPanda, etc. See Jiang Aff. at (919-55. 34. Both the Jiang Affirmation’s sworn statements and its 30 attached exhibits go well beyond the “prima facie showing of a reasonable probability of success” that the First Department sees as the basic threshold to establish likelihood of success. See Barbes Rest. Inc., 2016 NY Slip Op 4331 at *1-2 (1st Dept 2016) (citations omitted). A partial list of notable examples (detailed more fully in the Jiang Affirmation with corroborating exhibits) includes: * UP’s flagrant advertising of services identical to those provided by NU Media on two proprietary websites as well as through third parties. See Id. at §26, 27, 131, 33, 136, 739-46, 9947-52, 955. & UP’s postings on various job platforms seeking employees to fill the same functions as those performed by NU Media employees. Id. at 25, §27, 429, 432, 935-39, 953. S UP’s efforts to compete with NU Media in areas constituting the heart of NU Media’s business model. Id. at §§23-26, §31, §33, 949, 9951-55. &oe UP’s shift to describing itself as a “Full Service Digital Marketing Company” — a stark contrast with its original identity upon becoming a Member of NU Media — that is, as a “Credit Card Processing Company.” Id. at 5, 454. % UP’s establishment of a subsidiary company for the specific purpose of selling the same services as NU Media, e.g., “social media management, public relations, professional photography, professional videography, website design, website management, digital marketing, and paid ads.” Id. at 36, 45. * UP’s misuse (and potential misuse) of its privileges as an NU Member, including its ongoing ability to access onboarding data, banking information, and client lists, as well as other valuable NU Media intellectual property, for purposes contrary to NU Media’s interests. Id. at 24, §33, 937, 1947-49 %° UP’s solicitation of NU Media customers and employees as well as interference with valuable NU Media business relationships. Id. at 39-46. 9 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 35. Petitioners are also likely to succeed on the merits due to UP’s brazen violations of the Amended OA, to which both UP and Petitioners are signatories. “ In Section 5.4.4(a) of the Amended OA (the “Non-Solicitation”), UP’s Member’s “agree not to solicit [NU Media] customers or suppliers on behalfof himself or any other person, firm, company, or corporation.” Id. at 413. &% In Section 5.4.4(b) of the Amended OA (the “Non-Compete”) UP’s Members agree they “shall not, directly or indirectly, own, manage, operate, join, control, be employed or participate in the ownership, management, operation or control of or be connected in any manner with any business of the type and character of business engaged in by the Company.” Id. at 14. 36. The evidence contained in this Affirmation, the Jiang Affirmation, and the Jiang Affirmation’s exhibits, overwhelmingly establishes UP’s ongoing breaches of the Amended OA including: (a) conducting business substantially like that of NU Media — i.e., prohibited competition; (b) soliciting business in the same field as NU Media; and (c) improperly accessing Nu Media’s client lists and financial data and other valuable intellectual property for purposes expressly prohibited by the Amended OA’s terms. 37. New York courts routinely grant preliminary injunctions in situations where a party violates a contractually binding non-compete provision. See Chrome Corporate Mgmt. Gr., LLC v Pfeil, 2009 NY Slip Op 31217 (N.Y. Sup. Ct. 2009) (former owners of corporate travel agency enjoined from violating a non-compete in a travel marketing agreement); See also ASAPP, Inc. v Rowbotham, 2022 NY Slip Op 30696 (N.Y. Sup. Ct. 2022) (preliminary injunction granted enjoining former employee defendant from violating non-compete with plaintiff); D&A Woodlands Enter., Inc. v Sinatra, 2019 NY Slip Op 31533 (N.Y. Sup. Ct. 2019) (preliminary injunction granted enjoining former business owner defendant from competing with business he sold to plaintiff). 10 10 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 38. Combined with the facts and law addressed earlier in this section, UP’s blatant contractual breaches further demonstrate Petitioners’ likelihood of success on the merits. B. Without a Preliminary Injunction, Petitioners Will Continue to Accrue Irreparable Harm. 39. Petitioners’ evidence shows they have been suffering — and will continue to suffer — irreparable harm If UP is not preliminarily enjoined from its egregious misconduct. This is particularly true insofar as UP’s directly competing activities have been draining NU Media’s revenue and causing long-term reputational damage. See Jiang Aff. at 4919-22, 946. 40. See Walbaum Inc. v Fifth Ave. of Long Is. Realty Assoc., 85 NY2d 600, 607 (1995) (forfeiture of "valuable improvements" and the good will built up by the plaintiff at the store location warranted a preliminary injunction); Second on Second Café, Inc. v Hing Sing Trading. Inc., 66 AD3d 255, 272-273 (1st Dept 2009) ("the loss of the goodwill of a viable ongoing business" constitutes "irreparable harm warranting the grant of preliminary injunctive relief"); FTI Consulting, Inc. v PricewaterhouseCoopers LLP, 8 AD3d 145, 146 (1st Dept 2004) (loss of goodwill constitutes irreparable harm because it is not "readily quantifiable"). 41. Here, interpreting the facts in proper context reveals its malicious and egregious nature. First, UP’s wrongful conduct is being committed in the identical digital marketing space where NU Media operates. Second, and equally crucial, is the ease with which UP currently can obtain and improperly use NU Media’s data: “Because it is a Member of Nu Media, UP has unrestricted access to NU Media’s client-related files, including client names, contact information, marketing strategies, bank accounts, research files, and other sensitive intellectual property intended solely for the benefit of NU Media.” See Jiang Aff. at §17. 42. Ms. Jiang further notes that: “[u]pon information and belief (based on my long- term involvement with both companies and my present position aa NU Media), UP’s simultaneous 11 11 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 real-time access to the NU Media IP and the Financial Data is not only capable of facilitating UP’s ability to violate the Non-Compete but could dramatically increase the harms caused by such violations.” See Jiang Aff. at 419, Fn2. Therefore, because the damage being caused to NU Media: (a) encompasses injuries to reputation, intellectual property, and other intangible assets (e.g., good will and opportunity cost) for which no alternative legal remedies exist; and (b) is both accelerating and worsening, Petitioners have established “irreparability” for purposes of provisional relief analysis. See e.g., Destiny, 69 AD3d at 222 (4th Dept 2009) (“Harm to business reputation is harm for which money damages are insufficient and for which injunctive relief may be appropriate” (internal citations omitted). Cc. The Balance of Equities Strongly Favors Petitioners. 43. The equities prong requires the Court to determine the relative prejudice to each party ensuing from a grant or denial of the requested relief. See Shau Thi Ma v Xuan T. Lien, 198 AD2d 186 (1st Dept 1993). This final factor is often framed as follows: “The court should be able to conclude that the harm to the moving party without the injunction will be greater than the harm to the opposing party if the injunction is granted.” Clinton, 2016 NY Slip Op 31561(U), at *6 (N.Y. Sup. Ct.) (internal citations omitted). In the current instance, the factual record is weighted heavily toward NU Media. 44, First, NU Media has dedicated years to innovating and investing, emerging with a strong base of digital media clients, valuable relationships throughout the sector, and a high level of institutional knowledge. UP’s digital marketing subsidiary, UPanda, (launched approximately in April 2022), is essentially a digital media start-up, unfairly profiting from their creation by a NU Media Managing Member while usurping NU Media’s business, goodwill, opportunities, knowledge, intellectual property, and clients. See Jiang Aff. at §]44. UP itself is not only a 12 12 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 newcomer to the digital marketing field but had originally painted itselfas a “credit card processing company.” Moreover, UP’s original opportunity to acquire an ownership stake in NU Media was premised on perceived strengths in areas other than digital media. See Jiang Aff. at §5 fnl, 423. 45. UP’s contractual breaches throw these distinctions into even sharper relief. New York Courts have consistently ruled that — when considering the applicability of provisional remedies — breaching a contractual non-compete weighs heavily in favor of the party asserting the breach. See D&A Woodlands Enter., Inc., 2019 NY Slip Op 31533 (N.Y. Sup. Ct. 2019); See generally Rejwan v First Essentials Corp., 2022 NY Slip Op 31977 (N.Y. Sup. Ct. 2022). In the instant matter, far more than “a breach” exists. If anything, UP appears to be accelerating its violative behavior. See Jiang Aff. at {952-53. 46. In sum, NU Media’s vast factual back-up demonstrating likelihood of success on the merits, ongoing irreparable harm, and a balance of equities in its favor, provide ample justification to grant Petitioners’ urgent request for a preliminary injunction. IL. UP’s BREACHES OF FIDUCIARY DUTIES OWED TO NU MEDIA REQUIRE URGENT REMEDIATION 47. UP’s fiduciary obligations to NU Media and its Members arise from its 47.8% membership stake and its role as Managing Member. See Jiang Aff. at §5. 48. “[T]he members ofan LLC may stand in a fiduciary relationship to each other and the LLC,” See Jones v Voskresenskaya, 125 AD3d 532, 533 (Ist Dept 2015); accord Pokoik v Pokoik, 115 AD3d 428, 429 (1st Dept 2014). The First Department does not hesitate to describe the importance of fiduciary duty in the strongest of terms. See e.g., Tzolis v. Wolff, 39 A.D.3d 138, 146, 829 N.Y.S.2d 488 (Ist Dept.2007) (“[I]t is elemental that a fiduciary owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect. This is a sensitive _and_ inflexible rule of fidelity, barring not only blatant self-dealing, but also 13 13 of 19 iD: YORK OUN PK INDEX NO. 650788/2023 NYSCEF BOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 requiring avoidance of situations in which a fiduciary's personal interest possibly conflicts with the interest of those owed a fiduciary duty”) (internal citations omitted) (emphasis added). 49. Even without the powerful contractual language in the Amended OA, it is equally well established that: “Current employees and owners of a corporation may not actively engage in competition at the expense of that corporation” See Rejwan v. First Essentials Corp., 2022 NY Slip Op 31977 at *8-9 (N.Y. Sup. Ct. 2022) (finding breach of fiduciary duty and enjoining business’s co-owner from competing with business he owned) accord In re Xerox Corp. Consol. S‘holder Litig., 76 NYS3d 759 (N.Y. Sup. Ct. 2018). 50. Applying these principles to UP’s misconduct, little question exists that the this most “sensitive and inflexible rule of fidelity” was trampled at NU Media’s expense. New York courts have repeatedly held that, “[T]he doctrine of ‘corporate opportunity,’ based on a duty of loyalty...provides that corporate fiduciaries and employees cannot, without consent, divert and exploit for their own benefit an opportunity that should be deemed an asset of the corporation. See Alexander & Alexander, Inc. v. Fritzen, 147 A.D.2d 241, 246 (1st Dep’t 1989) (internal quotation omitted). Sl. Finally, and for obvious reasons, the State of New York maintains an enormous public interest when it comes to enforcing rules against corporate self-dealing, abuse of investors, and misuse of the corporate form. As such, UP’s singularly egregious fiduciary failure should promptly be remedied in a manner that: (a) limits further harm to NU Media (including on a provisional basis); and (b) sends a strong message of deterrence to anyone who would follow in their footsteps. 14 14 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 il. PETITIONERS ARE ALSO ENTITLED TO INJUNCTIVE AND FINANCIAL RELIEF PURSUANT TO UNAMBIGUOUS LANGUAGE IN THE AMENDED OA. 52. Section 5.4.5 of the Amended OA explains that compliance with the Non-Compete and Non-Solicitation are, “necessary to protect the business and good will of the company [and] that a breach will irreparably and continually damage the Company, for which money damages may not be adequate . .. Consequently, each Member agrees that, in the event that he breaches or threatens to breach any of these covenants, the Company shall be entitled to both: (1) a preliminary or permanent injunction in order to prevent the continuation of such harm; and (2) money damages insofar as they can be determined.” See Jiang Aff. at {13 (emphasis added) 53. Crucially, however, the Amended OA does not stop there: “> “Nothing in this Agreement, however, shall be construed to prohibit the Company from also pursuing any other remedy, the parties having agreed that all remedies shall be cumulative. b. Each Member agrees that in the event of a violation by any Member of any covenant contained in Section 5.4.4. of this Agreement, that such Member will pay as liquidated damages to Company the sum of one thousand dollars ($1,000.00) per day, for each day or part thereof that Member continues to so violate the Agreement. It is recognized and agreed that damages in such event are difficult to ascertain though great and irreparable, and that this agreement with respect to liquidated damages shall in no event disentitle the Company to injunctive relief.” (emphasis added) 54, The importance of Section 5.4.5.’s plain language cannot be overstated. The Parties’ unmistakable original intent upon executing the Amended OA was that violations of the Non-Compete and Non-Solicitation are so essential for the business model’s success, robust and immediate corrective measures are warranted to alleviate and disincentivize non-conforming behavior. 5S. First, Petitioners’ arguments for a preliminary injunction — already strong under New York’s three prong test — become iron-clad. 15 15 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 56. Second, Petitioners are concurrently entitled to monetary and/or supplementary equitable relief (and not solely under the liquidated damages formula described above). 57. Third, the contract’s remedies are not limited to “breach” but instead extend even ‘o “threats.” Such language could not have been accidental. At least when the Amended OA was negotiated, the Parties shared a mutual understanding that NU Media’s future would depend on nothing less. 58. Whether its damages provisions are awarded preliminarily or in some other fashion, Section 5.4.5 remains an indispensable lens for evaluating the “what?” “when on? and “how much?” aspects of the requested relief. After all, Petitioners are experiencing the precise situation contemplated by the clause. Any suggestion that NU media deserves something other than the maximum permissible benefit of its original bargain would be nonsensical. CONCLUSION 59. For the foregoing reasons, Petitioners request that the Court issue a Preliminary Injunction forthwith, barring Respondent from violating the Non-Compete and Non-Solicitation, as well as denying Respondent continued access to NU Media’s intellectual property (at least pending final resolution of this dispute). Additionally, Plaintiffs ask that the Court — based UP’s extraordinary departure from the norms of good faith and fair dealing — award monetary damages in whatever amount it deems just, necessary, and proper — a remedy that can be reached through various routes including specific performance of the liquidated damages formula, effectuating the public interest necessity of enforcing fiduciary obligations, and/or by reference to the Amended OA’s emphasis on curing violations with a combined package of provisional relief and “money damages.” In the alternative, should the Court decide monetary relief is premature or inappropriate under Article 75 (or for some other reason), Petitioners ask that UP be ordered to deposit funds 16 16 of 19 PK INDEX NO. 650788/2023 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 01/20/2024 matching what would be owed under Section 5.4.5’s liquidated damages clause into a judicially supervised escrow account pending a final determination on the merits. This type of equitable “safe keeping” measure is especially appropriate here. Respondent’s well-known propensity to disregard legal and ethical obligations is well established. Petitioners respectfully ask the Court to move quickly, [signature page and word count certification follow| 17 17 of 19 INDEX NO. 650788/2023 FILED: NEW YORK COUNTY CLERK 01/20/2024 01:10 AM NYSCEF DOC. NO. 44 RECEIVED NYSCEF 01/20/2024 Dated: January 20, 2024 Respectfully Submitted, New York, New York JIA LAW GROUP, P.C. Attorneys for Petitioners Thomas Hsien Chih Kung, Esq. Richard A. Stern, Esq. 88 Pine Street, 18th Floor New York, NY 10005 Tel.: (347) 897-6199 james. berger@jiaesq.com thomas.kung@jiaesq.com