Preview
FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020
NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
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---------------------------------------X
YOUNG S. CHUNG, individually and on behalf of
URBAN FRESH CORP. and 11 UM FOOD CORP.,
Index No.: 503139/2020
:
Plaintiffs,
VERIFIED ANSWER WITH
-against- COUNTERCLAIMS
COLIN K. XIE, BARBARA JANUS,
JUICEBROTHERS, LLC, and DOES 1-100
Defendant.
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Defendant Colin Xie, by and through counsel, answers the Plaintiff's Amended Verified
Complaint as follows:
1. Defendant denies each and every allegation contairied within paragraphs 1, 3, 4,
22, 23, 27, 28, 29, 31, 32, 34, 35, 36, 37, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 57, 59, 62,
63, 64, 67, 68, 70, 73, 74, 76, 77, 78, 80, 81, 82, 83, 85, 87, 88, 90, 91, 92, 93, 97, 98, 99, 103,
104, and 105 of the Amended Verified Complaint.
2. Defendant admits the allegations contained in paragraph 2 of the Amended
Verified Complaint, except clarifies that Mr. Xie is secretary, not treasurer, of the two
corporations.
3. Defendant lacks information and belief sufficient to form an opirdòñ as to the
truth or falsity of the allegations ceñtaiñêd within paragraphs 5, 9, 10, 11, 24, 25, 33, 69, and 86
of the Amended Verified Complaint.
4. Defendant admits the allegations contained in paragraphs 6, 7, 8, 14, 15, 16, 17,
19, 20, 21, 26, 30, 51, 66, 95, 96, 101, and 102 of the Amended Verified Complaint
38, 53, 55,
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5. Paragraphs 12, 13, 58, 61, and 72 of the Amended Verified Complaint contain
legal conclusions, rather than factual allegations a response. To the extent a
necessitating
response is required, Defendant denies each of those allegations.
6. Defendant admits the allegations contained in paragraph 18 of the Amended
Verified complaiñt, except for that Mr. Xie was the not the of the
clarifying secretary, treasurer,
two businesses.
7. Defendant admits the allegations contained in paragraph 52 of the Amended
Verified Complaint, except that Defendant denies that the funds were characterized as
properly
share"
"his of the debt.
8. With regards to paragraph 54 of the Amended Verified Complaint, Defendant
admits that funds in the amount of $136.47 were withdrawn in case, but clarifies those funds
were used to purchase a cashier's check to pay the IRS for a legitimate business expense.
9. Defendant admits the allegations contained in paragraph 56 of the Amêñded
Verified Complaint, but denies that the records were in any way altered or redacted.
10. In response to the incorporation lañgüâge contained in paragraphs 60, 65, 71, 75,
and 100 of the Amended Verified Complaint, Defendant re-answers and re-
79, 84, 89, 94,
responds to the incorporated allegations with the responses above, respectively.
AFFIRMATIVE DEFENSES
1. Plaintiff is barred from recovery based on his unclean hands and his own culpable
conduct, as more fully explained in the counterclaims section infra.
2. Plaintiff is estopped from alleging the impropriety of disbursements he previously
approved in his role as president of the corporations.
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3. The doctrine of laches precludes recovery by Plaintiff, who delayed
unreasonably
his objection to certain expenditures to the prejudice of Defendant.
4. Plaintiff has failed to state a cause of action upon which relief can be granted.
Without limiting the generality of the above defense, Defendant notes that there is no
specifically
legal basis for holding a güãrañtor personally liable to the borrower for failure to
primary
contribute to payments.
COUNTERCLAIMS
Defendant Colin Xie, individually, and on behalf of Urban Fresh Corp. and 11 Um Food
Corp., complaining of the Plaintiff Young Chung, alleges as follows:
1. Urban Fresh Corp. is a corporation existing under the laws of the State of New
York, with its principal place of business in Queens County
2. 11 Um Food Corp. is a corporation existing under the laws of the State of New
York, with its principal place of business in Kings County.
3. Colin Xie is an individual residing in Nassau County. At all relevant times, he
was and is a 50% shareholder in both Urban Fresh Corp. and 11 Um Food Corp.
4. Defendant Young S. Chung is an individual residing in Nassau County. At all
relevant times, he was and is a 50% shareholder in both Urban Fresh Corp. and 11 Um Food
Corp.
5. At all relevant times, Defendant Young S. Chung was the president of both Urban
Fresh Corp. and 11 Um Food Corp., and had primary responsibility for the day-to-day
management of both businesses.
6. Both Urban Fresh Corp. and 11 Um Food Corp. operate grocery stores.
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.
7. In addition to these businesses, Young Chung owns, and/or a close family
member of Young Chung owns, a company known as Ryan Food Corp., a corporation exis6ng
under the laws of the State of New York.
8. In or around June 2011, Colin Xie and Young Chung opened Urban Fresh Corp.,
with each owning 50% of the shares.
outstsding
9. Young Chung, who had extensive experience in the industry, has served
grocery
as president since the of the and has been in charge of day-to-day
founding company, primarily
operations.
10. In or around July 2013, Colin Xie and Young Chung opeñêd 11 Um Food Corp.,
with each owning 50% of the shares.
outstanding
11. Young Chung has also served as president of 11 Um Food Corp. since its
founding, and has been primarily responsible for the day-to-day operations.
12. Colin Xie was responsible for purchasing goods for Urban Fresh Corp., while
Young Chung handled the finances, payroll, accounting, and bookkeeping.
13. Colin Xie was also responsible for purchasing goods for 11 Um Food Corp., and
Young Chung handled the finances, payroll, and accenting. For bookkeeping at 11 Um Food
Corp., Young Chung hired James Kim, his acemmtant's brother-in-law, and was solely
responsible for supervising him.
14. In 2015, Young Chung and Colin Xie partñêred with two outside investors in an
known as GJJC LLC, which owned two subsidiaries: 70 Cedar Pearl LLC, which operated
entity
a grocery store, and Jackson Q Plaza LLC, which will operate another grocery store after
construction.
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15. The business arrangement for GJJC LLC required to conduct the day-to-
Chung
day ñiañagemeñt of the 70 Cedar Pearl LLC business, while the outside investors only provided
financing.
16. Under the membership agreement for GJJC LLC, Young Chung and Colin Xie
were both required to dedicate their labors to the operation of the business operated by 70 Cedar
Pearl LLC.
17. However, Young Chung did not perform his obligations to 70 Cedar Pearl LLC
under the membership agreement, instead continuing to dedicate his time and efforts to 11 Um
Food Corp., Urban Fresh Corp., and Ryan Food Corp. to the exclusion of the third business.
18. As a result, the outside investors enforced their rights under the membership
out"
agreement, and effectively "kicked Young Chung from GJJC LLC, ending his participation
in the 70 Cedar Pearl LLC business, as well as his future interest in the Jackson Q Plaza LLC
business.
19. Colin Xie, who was performing under the GJJC LLC membersliip agreêñieñt,
remained a part of GJJC LLC and its subsidiaries.
20. When faced with the prospect of losing his role at the 70 Cedar Pearl LLC
business, Mr. Chung asked Colin Xie to falsely tell the investors that Young Chung was
at the store, when in fact Mr.. Chung visited the store only a handful of times
regularly working
per year. Mr. Xie refused.
21. This resulted in a business dispute between Xie and Chung, as Mr. Chung was
"cover"
resentful that Mr. Xie would not for him with the outside investors.
greatly
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22. Unable to defend his actions with regards to 70 Cedar Pearl LLC, Mr. Chung
instead raised allegadons that Mr. Xie had been misappropriating money at the other two
businesses, 11 Um Food Corp. and Urban Fresh Corp.
23. Those allegations were based on Mr. Xie's role as the primary purchaser for those
two businesses, and in letters through counsel Mr. Chung claimed that many purchases he had
previously authorized were in fact instances of corporate theft.
24. In preparing to respond to these allegations, Mr. Xie reviewed the corporate
payroll and financial records of 11 Um Food Corp. and Urban Fresh Corp.
25. This review uncovered many troubling, deceptive, and illegal practices that
Young Chung was using to secret away millions of dollars in corporate revenue, without
accounting for it to the taxing authorities, or his own business partner, Mr. Xie.
26. As the president of 11 Um Food Corp. and Urban Fresh Corp., Mr. Chung owes a
fiduciary duty to the corporations, particularly with respect to his handling of corporate finances.
27. Reviewing the sales records from 11 Um Food Corp. and Urban Fresh Corp., Mr.
Xie leamed that Mr. Chung has been systematically underreporting the revenues received by
both businesses.
28. Additionally, Mr. Chung has made large, unexplained transfers from those
businesses to himself, and to Ryan Food Corp., an unrelated business in which Mr. Chung has a
financial stake and/or his close family member(s) have a financial stake.
29. A review of the payroll records shows that Mr. Chung has been paying employees
in cash, an opportunity for him to siphon cash funds out of the business without the
creating
knowledge of his business partners or the taxing authorities.
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30. Moreover, the weekly payroll records raise a strong inference that Mr. Chung has
not been properly withholding state and federal taxes or SSI withholdings from the payroll,
contrary to federal and state law.
31. The financial records, when compared to the business tax retums prepared,
approved, and filed by Mr. Chung, give rise to a strong inference that Mr. Chung has been
underreporting revenues to both the state and federal taxing authorities, creating a huge potential
liability for the corporations.
32. Additionally, this has likely resulted in a failure to pay the
underreporting
appropriate amount of sales tax to the state taxing authority. As sales taxes are held in trust by
the businesses that receive them, this creates potentially devastating liability for the business and
for all managers involved in the theft.
33. After a dispute arose between Mr. Xie and Mr. Chung, financial records show that
he accelerated the transfer of money from 11 Um Food Corp. to himself and to Ryan Food Corp.,
with no apparent consideration.
34. Coupled with his vengeful efforts to accuse Mr. Xie of financial wrongdoing, this
malfeasañce by Mr. Chung appears aimed at pushing Mr. Xie out of the businesses, so that Mr.
can continue to siphon large amounts of misappropriated money out of the grocery stores.
Chung
35. Mr. Xie also learned that in or around 2015, Mr. Chung built himself a mansion in
Nassau County. On information and belief, the construction costs far exceed his lawfully earned
income, and a large portion of those costs were paid by cash misappropriated from 11 Um Food
Corp. and Urban Fresh Corp.
36. Mr. Xie discovered several checks from both businesses that purport
Additionally,
to bear his (Mr. but those signatures are forgeries. On informanen and belief,
Xie's) signature,
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Mr. Chung directed store employees to forge Mr. Xie's signature on checks to make it appear
that he authorized certain payments.
37. The full extent of the funds misappropriated by Mr. Chung from 11 Um Food
Corp. and Urban Fresh Corp. is unknown, and will remain unknown until a full audit of the
business is conducted. However, based on the records already available, the misappropriated
funds appear to exceed two million dollars.
38. On information and belief, when Mr. became aware that Mr. Xie was
Chung
investigating the financial operations of the business, he instructed the manager at Urban Fresh
to tell all of the employees that Mr. Xie is no longer allowed on the business premises. That
action was designed to conceal Mr. Chung's financial malfeasance.
39. Additionally, on information and belief, Mr. Chung directed employees to tell
third party vendors that Colin Xie is no longer a part of the business, and cannot place orders on
its behalf.
40. This action is brought as a derivative action because any effort to request action
by the corporations would be futile, as Mr. Chung- the tortfeasor- is the only other shareholder of
11 Um Food Corp. and Urban Fresh Corp. His participation would be required for the
corporations to authorize the instant lawsuit, rendering such a demand futile.
AS AND FOR A FIRST CAUSE OF ACTION:
AN ACCOUNTING
41. Defendant repeats, re-alleges, and incorporates by reference all preceding
paragraphs as though fully set forth herein.
42. As president of 11 Um Food Corp. and Urban Fresh Corp., Young Chung has an
obligation to provide an accounting to the shareholders, including Mr. Xie, the only other
shareholder of those companies.
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43. In order to ascertain the damage caused by Mr. Chung's misappropriation, Mr.
Xie urgently requires access to the full corporate books and cash tax
records, including ledgers,
retums, inventory lists, vendor contracts, payroll records, text and bank
emails, messages,
statements.
44. Accordingly, this Court should direct Mr. to promptly provide those
Chung
records to Mr. Xie and to the corporations.
AS AND FOR A SECOND CAUSE OF ACTION:
CONVERSION
45. Defendant repeats, re-alleges, and incorporates by reference all preceding
paragraphs as though fully set forth herein.
46. In his role as president of 11 Um Food Corp. and Urban Fresh Corp., Mr. Chung
had broad, unrestricted access to the corporate finances.
47. As discussed more fully above, Mr. Chung used this access to enrich himself and
another business he or his close family members own.
48. The large discrepancies between the sales receipts and the revenues reported give
rise to the inference that Mr. Chung took large amounts of money for his personal use; in any
case, that money is unaccounted for.
49. exercising dominion and control over money belonging to the corporations,
By
Mr. Chung converted those funds for his personal use.
50. As a result, should be held liable for conversion in an amount to be
Young Chung
determined the but in all respects its jurisdictional requirements.
by Court, exceeding
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AS AND FOR A THIRD CAUSE OF ACTION:
BREACH OF FIDUCIARY DUTY
51. Defendant repeats, re-alleges, and incorporates by reference all preceding
paragraphs as though fully set forth herein.
52. As president of 11 Um Food Corp. and Urban Fresh Corp., Young Chung has a
corporations'
fiduciary duty to the corporations. That duty includes satisfying the fiñañcial
obligations and truthfully accounting for its operations.
53. On information and belief, Mr. not only misappropriated large sums of
Chung
money from those corporations: he also understated their revenues on tax returns, creating
tremendous risk and liability to the companies.
54. Additionally, on information and belief, Mr. Chung operated the payroll "under
table,"
the paying cash without withhnidings Those actions create tremendous potential liability
for the corporation.
55. Finally, on information and belief, Mr. Chung understates the number of
workers'
employees, and does not properly fumish compensation or üñêmployment insurance,
creating potential liability under state and federal law for the corporation.
56. Those actions, together with the misappropriation of funds, constitute a breach of
Mr. Chung's fiduciary duty to 11 Um Food Corp. and Urban Fresh Corp.
57. Consequently, Young Chung is liable for breach of fiduciary duty, in an amount
to be determined by the Court, but in all respects exceeding its jurisdictional requirements.
AS AND FOR A FOURTH CAUSE OF ACTION:
UNJUST ENRICHMENT
58. Defendant repeats, re-alleges, and incorporates by reference all preceding
paragraphs as though fully set forth herein.
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59. As disenssed in more detail above, Young Chung has been greatly enriched. On
information and belief, he has skimmed money and removed merchandise from 11 Um Food
Corp. and Urban Fresh Corp.; he used much of that money to construct a mansion for his
personal use; he has benefitted directly from revenues he took in but did not deposit or report; he
wrote himself checks, made large cash withdrawals, and sent money and inventory to other
businesses he owns, or are owned by his immediate family. There can be no question that he has
been enriched.
60. That enrichment came at the direct expense of 11 Um Food Corp. and Urban
Fresh Corp., as those misappropriated funds belonged to them.
61. It is against and good conscience to permit Mr. to retain his ill-
equity Chung
gotten enrichment, while the company is deprived of those funds.
62. As a result, Young Chung should be held liable for unjust enrichment, in an
amount to be determined by the Court, but in all cases exceeding its jurisdictional requirements.
WHEREFORE, Plaintiffs respectfully demand judgment as follows:
A. On the first cause of action, Defendant deman
Preview
FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ----- --------- ---------------------------------------X YOUNG S. CHUNG, individually and on behalf of URBAN FRESH CORP. and 11 UM FOOD CORP., Index No.: 503139/2020 : Plaintiffs, VERIFIED ANSWER WITH -against- COUNTERCLAIMS COLIN K. XIE, BARBARA JANUS, JUICEBROTHERS, LLC, and DOES 1-100 Defendant. --------------------------------------------------------------------X Defendant Colin Xie, by and through counsel, answers the Plaintiff's Amended Verified Complaint as follows: 1. Defendant denies each and every allegation contairied within paragraphs 1, 3, 4, 22, 23, 27, 28, 29, 31, 32, 34, 35, 36, 37, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 57, 59, 62, 63, 64, 67, 68, 70, 73, 74, 76, 77, 78, 80, 81, 82, 83, 85, 87, 88, 90, 91, 92, 93, 97, 98, 99, 103, 104, and 105 of the Amended Verified Complaint. 2. Defendant admits the allegations contained in paragraph 2 of the Amended Verified Complaint, except clarifies that Mr. Xie is secretary, not treasurer, of the two corporations. 3. Defendant lacks information and belief sufficient to form an opirdòñ as to the truth or falsity of the allegations ceñtaiñêd within paragraphs 5, 9, 10, 11, 24, 25, 33, 69, and 86 of the Amended Verified Complaint. 4. Defendant admits the allegations contained in paragraphs 6, 7, 8, 14, 15, 16, 17, 19, 20, 21, 26, 30, 51, 66, 95, 96, 101, and 102 of the Amended Verified Complaint 38, 53, 55, 1 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 5. Paragraphs 12, 13, 58, 61, and 72 of the Amended Verified Complaint contain legal conclusions, rather than factual allegations a response. To the extent a necessitating response is required, Defendant denies each of those allegations. 6. Defendant admits the allegations contained in paragraph 18 of the Amended Verified complaiñt, except for that Mr. Xie was the not the of the clarifying secretary, treasurer, two businesses. 7. Defendant admits the allegations contained in paragraph 52 of the Amended Verified Complaint, except that Defendant denies that the funds were characterized as properly share" "his of the debt. 8. With regards to paragraph 54 of the Amended Verified Complaint, Defendant admits that funds in the amount of $136.47 were withdrawn in case, but clarifies those funds were used to purchase a cashier's check to pay the IRS for a legitimate business expense. 9. Defendant admits the allegations contained in paragraph 56 of the Amêñded Verified Complaint, but denies that the records were in any way altered or redacted. 10. In response to the incorporation lañgüâge contained in paragraphs 60, 65, 71, 75, and 100 of the Amended Verified Complaint, Defendant re-answers and re- 79, 84, 89, 94, responds to the incorporated allegations with the responses above, respectively. AFFIRMATIVE DEFENSES 1. Plaintiff is barred from recovery based on his unclean hands and his own culpable conduct, as more fully explained in the counterclaims section infra. 2. Plaintiff is estopped from alleging the impropriety of disbursements he previously approved in his role as president of the corporations. 2 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 3. The doctrine of laches precludes recovery by Plaintiff, who delayed unreasonably his objection to certain expenditures to the prejudice of Defendant. 4. Plaintiff has failed to state a cause of action upon which relief can be granted. Without limiting the generality of the above defense, Defendant notes that there is no specifically legal basis for holding a güãrañtor personally liable to the borrower for failure to primary contribute to payments. COUNTERCLAIMS Defendant Colin Xie, individually, and on behalf of Urban Fresh Corp. and 11 Um Food Corp., complaining of the Plaintiff Young Chung, alleges as follows: 1. Urban Fresh Corp. is a corporation existing under the laws of the State of New York, with its principal place of business in Queens County 2. 11 Um Food Corp. is a corporation existing under the laws of the State of New York, with its principal place of business in Kings County. 3. Colin Xie is an individual residing in Nassau County. At all relevant times, he was and is a 50% shareholder in both Urban Fresh Corp. and 11 Um Food Corp. 4. Defendant Young S. Chung is an individual residing in Nassau County. At all relevant times, he was and is a 50% shareholder in both Urban Fresh Corp. and 11 Um Food Corp. 5. At all relevant times, Defendant Young S. Chung was the president of both Urban Fresh Corp. and 11 Um Food Corp., and had primary responsibility for the day-to-day management of both businesses. 6. Both Urban Fresh Corp. and 11 Um Food Corp. operate grocery stores. 3 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 . 7. In addition to these businesses, Young Chung owns, and/or a close family member of Young Chung owns, a company known as Ryan Food Corp., a corporation exis6ng under the laws of the State of New York. 8. In or around June 2011, Colin Xie and Young Chung opened Urban Fresh Corp., with each owning 50% of the shares. outstsding 9. Young Chung, who had extensive experience in the industry, has served grocery as president since the of the and has been in charge of day-to-day founding company, primarily operations. 10. In or around July 2013, Colin Xie and Young Chung opeñêd 11 Um Food Corp., with each owning 50% of the shares. outstanding 11. Young Chung has also served as president of 11 Um Food Corp. since its founding, and has been primarily responsible for the day-to-day operations. 12. Colin Xie was responsible for purchasing goods for Urban Fresh Corp., while Young Chung handled the finances, payroll, accounting, and bookkeeping. 13. Colin Xie was also responsible for purchasing goods for 11 Um Food Corp., and Young Chung handled the finances, payroll, and accenting. For bookkeeping at 11 Um Food Corp., Young Chung hired James Kim, his acemmtant's brother-in-law, and was solely responsible for supervising him. 14. In 2015, Young Chung and Colin Xie partñêred with two outside investors in an known as GJJC LLC, which owned two subsidiaries: 70 Cedar Pearl LLC, which operated entity a grocery store, and Jackson Q Plaza LLC, which will operate another grocery store after construction. 4 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 15. The business arrangement for GJJC LLC required to conduct the day-to- Chung day ñiañagemeñt of the 70 Cedar Pearl LLC business, while the outside investors only provided financing. 16. Under the membership agreement for GJJC LLC, Young Chung and Colin Xie were both required to dedicate their labors to the operation of the business operated by 70 Cedar Pearl LLC. 17. However, Young Chung did not perform his obligations to 70 Cedar Pearl LLC under the membership agreement, instead continuing to dedicate his time and efforts to 11 Um Food Corp., Urban Fresh Corp., and Ryan Food Corp. to the exclusion of the third business. 18. As a result, the outside investors enforced their rights under the membership out" agreement, and effectively "kicked Young Chung from GJJC LLC, ending his participation in the 70 Cedar Pearl LLC business, as well as his future interest in the Jackson Q Plaza LLC business. 19. Colin Xie, who was performing under the GJJC LLC membersliip agreêñieñt, remained a part of GJJC LLC and its subsidiaries. 20. When faced with the prospect of losing his role at the 70 Cedar Pearl LLC business, Mr. Chung asked Colin Xie to falsely tell the investors that Young Chung was at the store, when in fact Mr.. Chung visited the store only a handful of times regularly working per year. Mr. Xie refused. 21. This resulted in a business dispute between Xie and Chung, as Mr. Chung was "cover" resentful that Mr. Xie would not for him with the outside investors. greatly 5 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 22. Unable to defend his actions with regards to 70 Cedar Pearl LLC, Mr. Chung instead raised allegadons that Mr. Xie had been misappropriating money at the other two businesses, 11 Um Food Corp. and Urban Fresh Corp. 23. Those allegations were based on Mr. Xie's role as the primary purchaser for those two businesses, and in letters through counsel Mr. Chung claimed that many purchases he had previously authorized were in fact instances of corporate theft. 24. In preparing to respond to these allegations, Mr. Xie reviewed the corporate payroll and financial records of 11 Um Food Corp. and Urban Fresh Corp. 25. This review uncovered many troubling, deceptive, and illegal practices that Young Chung was using to secret away millions of dollars in corporate revenue, without accounting for it to the taxing authorities, or his own business partner, Mr. Xie. 26. As the president of 11 Um Food Corp. and Urban Fresh Corp., Mr. Chung owes a fiduciary duty to the corporations, particularly with respect to his handling of corporate finances. 27. Reviewing the sales records from 11 Um Food Corp. and Urban Fresh Corp., Mr. Xie leamed that Mr. Chung has been systematically underreporting the revenues received by both businesses. 28. Additionally, Mr. Chung has made large, unexplained transfers from those businesses to himself, and to Ryan Food Corp., an unrelated business in which Mr. Chung has a financial stake and/or his close family member(s) have a financial stake. 29. A review of the payroll records shows that Mr. Chung has been paying employees in cash, an opportunity for him to siphon cash funds out of the business without the creating knowledge of his business partners or the taxing authorities. 6 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 30. Moreover, the weekly payroll records raise a strong inference that Mr. Chung has not been properly withholding state and federal taxes or SSI withholdings from the payroll, contrary to federal and state law. 31. The financial records, when compared to the business tax retums prepared, approved, and filed by Mr. Chung, give rise to a strong inference that Mr. Chung has been underreporting revenues to both the state and federal taxing authorities, creating a huge potential liability for the corporations. 32. Additionally, this has likely resulted in a failure to pay the underreporting appropriate amount of sales tax to the state taxing authority. As sales taxes are held in trust by the businesses that receive them, this creates potentially devastating liability for the business and for all managers involved in the theft. 33. After a dispute arose between Mr. Xie and Mr. Chung, financial records show that he accelerated the transfer of money from 11 Um Food Corp. to himself and to Ryan Food Corp., with no apparent consideration. 34. Coupled with his vengeful efforts to accuse Mr. Xie of financial wrongdoing, this malfeasañce by Mr. Chung appears aimed at pushing Mr. Xie out of the businesses, so that Mr. can continue to siphon large amounts of misappropriated money out of the grocery stores. Chung 35. Mr. Xie also learned that in or around 2015, Mr. Chung built himself a mansion in Nassau County. On information and belief, the construction costs far exceed his lawfully earned income, and a large portion of those costs were paid by cash misappropriated from 11 Um Food Corp. and Urban Fresh Corp. 36. Mr. Xie discovered several checks from both businesses that purport Additionally, to bear his (Mr. but those signatures are forgeries. On informanen and belief, Xie's) signature, 7 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 Mr. Chung directed store employees to forge Mr. Xie's signature on checks to make it appear that he authorized certain payments. 37. The full extent of the funds misappropriated by Mr. Chung from 11 Um Food Corp. and Urban Fresh Corp. is unknown, and will remain unknown until a full audit of the business is conducted. However, based on the records already available, the misappropriated funds appear to exceed two million dollars. 38. On information and belief, when Mr. became aware that Mr. Xie was Chung investigating the financial operations of the business, he instructed the manager at Urban Fresh to tell all of the employees that Mr. Xie is no longer allowed on the business premises. That action was designed to conceal Mr. Chung's financial malfeasance. 39. Additionally, on information and belief, Mr. Chung directed employees to tell third party vendors that Colin Xie is no longer a part of the business, and cannot place orders on its behalf. 40. This action is brought as a derivative action because any effort to request action by the corporations would be futile, as Mr. Chung- the tortfeasor- is the only other shareholder of 11 Um Food Corp. and Urban Fresh Corp. His participation would be required for the corporations to authorize the instant lawsuit, rendering such a demand futile. AS AND FOR A FIRST CAUSE OF ACTION: AN ACCOUNTING 41. Defendant repeats, re-alleges, and incorporates by reference all preceding paragraphs as though fully set forth herein. 42. As president of 11 Um Food Corp. and Urban Fresh Corp., Young Chung has an obligation to provide an accounting to the shareholders, including Mr. Xie, the only other shareholder of those companies. 8 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 43. In order to ascertain the damage caused by Mr. Chung's misappropriation, Mr. Xie urgently requires access to the full corporate books and cash tax records, including ledgers, retums, inventory lists, vendor contracts, payroll records, text and bank emails, messages, statements. 44. Accordingly, this Court should direct Mr. to promptly provide those Chung records to Mr. Xie and to the corporations. AS AND FOR A SECOND CAUSE OF ACTION: CONVERSION 45. Defendant repeats, re-alleges, and incorporates by reference all preceding paragraphs as though fully set forth herein. 46. In his role as president of 11 Um Food Corp. and Urban Fresh Corp., Mr. Chung had broad, unrestricted access to the corporate finances. 47. As discussed more fully above, Mr. Chung used this access to enrich himself and another business he or his close family members own. 48. The large discrepancies between the sales receipts and the revenues reported give rise to the inference that Mr. Chung took large amounts of money for his personal use; in any case, that money is unaccounted for. 49. exercising dominion and control over money belonging to the corporations, By Mr. Chung converted those funds for his personal use. 50. As a result, should be held liable for conversion in an amount to be Young Chung determined the but in all respects its jurisdictional requirements. by Court, exceeding 9 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 AS AND FOR A THIRD CAUSE OF ACTION: BREACH OF FIDUCIARY DUTY 51. Defendant repeats, re-alleges, and incorporates by reference all preceding paragraphs as though fully set forth herein. 52. As president of 11 Um Food Corp. and Urban Fresh Corp., Young Chung has a corporations' fiduciary duty to the corporations. That duty includes satisfying the fiñañcial obligations and truthfully accounting for its operations. 53. On information and belief, Mr. not only misappropriated large sums of Chung money from those corporations: he also understated their revenues on tax returns, creating tremendous risk and liability to the companies. 54. Additionally, on information and belief, Mr. Chung operated the payroll "under table," the paying cash without withhnidings Those actions create tremendous potential liability for the corporation. 55. Finally, on information and belief, Mr. Chung understates the number of workers' employees, and does not properly fumish compensation or üñêmployment insurance, creating potential liability under state and federal law for the corporation. 56. Those actions, together with the misappropriation of funds, constitute a breach of Mr. Chung's fiduciary duty to 11 Um Food Corp. and Urban Fresh Corp. 57. Consequently, Young Chung is liable for breach of fiduciary duty, in an amount to be determined by the Court, but in all respects exceeding its jurisdictional requirements. AS AND FOR A FOURTH CAUSE OF ACTION: UNJUST ENRICHMENT 58. Defendant repeats, re-alleges, and incorporates by reference all preceding paragraphs as though fully set forth herein. 10 of 14 FILED: KINGS COUNTY CLERK 06/26/2020 10:30 AM INDEX NO. 503139/2020 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 06/26/2020 59. As disenssed in more detail above, Young Chung has been greatly enriched. On information and belief, he has skimmed money and removed merchandise from 11 Um Food Corp. and Urban Fresh Corp.; he used much of that money to construct a mansion for his personal use; he has benefitted directly from revenues he took in but did not deposit or report; he wrote himself checks, made large cash withdrawals, and sent money and inventory to other businesses he owns, or are owned by his immediate family. There can be no question that he has been enriched. 60. That enrichment came at the direct expense of 11 Um Food Corp. and Urban Fresh Corp., as those misappropriated funds belonged to them. 61. It is against and good conscience to permit Mr. to retain his ill- equity Chung gotten enrichment, while the company is deprived of those funds. 62. As a result, Young Chung should be held liable for unjust enrichment, in an amount to be determined by the Court, but in all cases exceeding its jurisdictional requirements. WHEREFORE, Plaintiffs respectfully demand judgment as follows: A. On the first cause of action, Defendant deman