Beijing Haohan Tianyu Inv. Consulting Co., Ltd. v. ETAO Intl. Co., Ltd.

Beijing Haohan Tianyu Inv. Consulting Co., Ltd. v ETAO Intl. Co., Ltd. 2024 NY Slip Op 30915(U) March 19, 2024 Supreme Court, New York County Docket Number: Index No. 654056/2023 Judge: Andrea Masley Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

INDEX NO. 654056/2023 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 03/19/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48 ----------------------------------------------------------------------------------- X

BEIJING HAOHAN TIANYU INVESTMENT CONSUL TING INDEX NO. 654056/2023 CO., LTD.,

Plaintiff, MOTION DATE

- V - MOTION SEQ. NO. 001 ETAO INTERNATIONAL CO., LTD. and WENSHENG LIU, DECISION+ ORDER ON Defendants. MOTION

----------------------------------------------------------------------------------- X

HON. ANDREA MASLEY:

The following e-filed documents, listed by NYSCEF document number (Motion 001) 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,20,21,22,23,24,25,26 were read on this motion to/for JUDGMENT - DEFAULT

Upon the foregoing documents, it is

In motion seq. no. 001, plaintiff moves pursuant to CPLR 3215 for a default

judgment against defendants ETAO International Co. Ltd. (ETAO) and Wensheng Liu in

the amount of $30 million, jointly and severally. Plaintiff also seeks the imposition of a

constructive trust and punitive damages.

"On a motion for a default judgment under CPLR 3215 based upon a failure to

answer the complaint, a plaintiff demonstrates entitlement to a default judgment against

a defendant by submitting: (1) proof of service of the summons and complaint; (2) proof

of the facts constituting its claim; and (3) proof of the defendant's default in answering or

appearing." (Medina v Sheng Hui Realty LLC, 2018 N.Y. Misc. LEXIS 1789, *6-7, 2018

WL 2136441, *6-7 [Sup Ct, NY County 2018] [citations omitted].) "Some proof of liability

is also required to satisfy the court as to the prima facie validity of the uncontested

cause of action. The standard of proof is not stringent, amounting only to some 654056/2023 BEIJING HAOHAN TIANYU INVESTMENT CONSULTING CO., LTD. vs. ETAO Page 1 of 5 INTERNATIONAL CO., LTD. ET AL Motion No. 001

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INDEX NO. 654056/2023 NYSCEF DOC. NO. 27 RECEIVED NYSCEF: 03/19/2024

firsthand confirmation of the facts." (Feffer v Ma/peso, 210 AD2d 60, 61 [1st Dept 1994]

[citations omitted].)

CPLR 3215 (f) requires a plaintiff to submit "proof of the facts constituting the

claim, the default and the amount due ... by affidavit made by the party." "Where a

verified complaint has been served, it may be used as the affidavit of the facts

constituting the claim and the amount due; in such case, an affidavit as to the default

shall be made by the party's attorney." (CPLR 3215 [f].)

Proof of Service

Plaintiff submits proof of personal service of the summons and complaint on

defendants. (NYSCEF 11 & 12, Aff of Service.) Plaintiff also complied with the

additional service requirements of CPLR 3215 (g)(4)(i). (NYSCEF 13, Proof of

Additional Service.)

Proof of Claim

In its verified complaint, plaintiff asserts claims for breach of contract (against

ETAO), unjust enrichment (against ETAO), constructive trust (against ETAO), fraudulent

misrepresentation & fraudulent omission (against ETAO), fraudulent misrepresentation

& fraudulent omission (against Liu), conversion (against ETAO), and conversion

(against Liu). (NYSCEF 9, Verified Complaint ,i,i 38-155.)

CPLR 3215 (f) requires a plaintiff to submit "proof of the facts constituting the

claim, the default and the amount due ... by affidavit made by the party." However,

"[w]here a verified complaint has been served, it may be used as the affidavit of the

facts constituting the claim and the amount due; in such case, an affidavit as to the

default shall be made by the party's attorney." (CPLR 3215 [fj.) Here, plaintiff submits

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both the complaint verified by Tao Tian, plaintiff's managing partner (NYSCEF 9 &10)

and Tian's affidavit (NYSCEF 8, Tian aff).

Tian avers that, on December 20, 2021, Mountain Crest Acquisition Corp. Ill

(MCAE) and plaintiff entered into a M&A Advisory Agreement whereby plaintiff would

conduct due diligence for MCAE on ETAO and in exchange plaintiff would be paid a fee

"equivalent to 3% of the pre-money equity value of ETAO in shares of the post-

transaction combined company to be issued upon closing of the Transaction at $10 per

share." (NYSCEF 8, Tian aff ,i 1O; see also NYSCEF 15, SEC Form F-4 at 72, 110

["MCAE engaged [plaintiffj to act as its M&A Advisor to conduct local due diligence for

MCAE on ETAO by entering into the M&A Advisory Agreement on December 20, 2021.

Pursuant to the M&A Advisory Agreement, as amended, MCAE shall make a payment

to [plaintiffl of an aggregate M&A Fee (the 'M&A Fee') equivalent to 3% of the pre-

money equity value of ETAO in shares of the post-transaction combined company to be

issued upon closing of the Transaction at $10 per share"]; NYSCEF 17, SEC Form F-4

at 58.) The Merger Agreement, which included in its disclosure schedules the initial

Advisory Agreement, was approved by ETAO's board. (NYSCEF 8, Tian aff ,i 17.)

Despite being aware of it, defendants did not object to the M&A Advisory Agreement.

(Id. ,i 24.)

On February 17, 2023, the merger transaction was completed. (Id. ,i 27.)

Defendants failed to issue plaintiffs its shares at the Business Combination Closing,

depriving plaintiff of the opportunity to borrow against the shares and enter into other

types of stock loan agreements. (Id. ,i,i 28, 29.) Plaintiff sent a demand to no avail. (Id.

,I31.)

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Tain avers that plaintiff performed all its obligations under the Advisory

Agreement to defendants' benefit. (Id. ,i 32.) Tain further avers that defendants

defrauded plaintiff by making false representations in Form F-4A to induce plaintiff's

continued participation in the merger transaction. (Id. ,i,i 38-44, 51-62.)

The verified complaint (NYSCEF 9), Tain's affidavit (NYSCEF 8) and its

accompanying exhibits (NYSCEF 10-21) present sufficient proof of facts constituting the

claims and the amount due as required by CPLR 3215 (f).

However, to the extent that plaintiff seeks punitive damages, that portion of the

motion is denied. Even accepting the complaint's allegations as true, there is no basis

to award punitive damages. (CDR Creances S.A.S. v Cohen, 62 AD3d 576, 577 [1st

Dept 2009] [to award punitive damages, plaintiff must "present clear, unequivocal and

convincing evidence of willful conduct that was morally culpable or was actuated by evil

and reprehensible motives"].)

Proof of Default

Defendants have not answered plaintiff's summons and complaint or otherwise

appeared in the litigation. (NYSCEF 7, Lati aff ,i 8.)

Accordingly, it is

ORDERED that plaintiff's motion for a default judgment against ETAO

International Co. Ltd. (ETAO) and Wensheng Liu is granted, in part, and otherwise

denied as to an award of punitive damages; and it is further

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ORDERED that plaintiff shall submit a proposed judgment in MS Word via email

and e-file a copy within 5 days of the date of this order.

3/19/2024 DATE ANDREA MASLEY, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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