Cortes v. Juquila Mexican Cuisine Corp.
1:17-cv-03942
| E.D.N.Y | Mar 31, 2022Background
- Plaintiffs obtained a final judgment (Apr. 5, 2021) against Juquila Mexican Cuisine Corp. for wage violations and later served an information subpoena and restraining notice on non-party Santa Catarina, Inc. (Nov. 19, 2021) seeking Juquila assets.
- Santa Catarina was incorporated Jan. 3, 2019 (addressed to the Juquila premises). Juquila surrendered its lease to the landlord on Feb. 18, 2019 to satisfy unpaid rent; Santa Catarina signed a new lease for the same premises on Mar. 7, 2019 and soon resumed restaurant operations.
- Plaintiffs allege Juquila’s assets (fixtures, equipment, leasehold value) were fraudulently conveyed to Santa Catarina (a transferee controlled or influenced by Juquila’s principals) to evade the judgment, and moved under Fed. R. Civ. P. 69(a) and CPLR § 5225(b) for turnover.
- Santa Catarina opposed, arguing there was no direct transfer from Juquila (two separate transactions with the landlord), that it was a good-faith purchaser for value, and it moved to quash or obtain a protective order for the subpoena.
- The magistrate judge held he had ancillary jurisdiction and personal jurisdiction over Santa Catarina, denied summary turnover because disputed factual issues (knowledge, intent, consideration, interfamily links, and transaction substance) precluded resolution on the papers, and denied the quash/protective-order motion as the subpoena was narrowly tailored.
- The court ordered Santa Catarina to comply with the information subpoena by April 29, 2022, and set a schedule for the parties to identify agreed facts, disputed issues, needed discovery, and a status conference (June 1, 2022) — preserving Plaintiffs’ ability to pursue a turnover after an evidentiary hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ancillary jurisdiction to adjudicate turnover proceedings against non-party | Federal court may exercise ancillary jurisdiction to enforce its judgment and void fraudulent transfers | (Implicit) ancillary jurisdiction not barred; no separate plenary action needed | Court: Ancillary jurisdiction exists; magistrate may preside on consent |
| Personal jurisdiction over Santa Catarina | Santa Catarina is a NY-incorporated entity with NY principal place of business and was properly served via NY Secretary of State | Santa Catarina did not contest in substance | Court: Personal jurisdiction and service were proper |
| Entitlement to turnover based on constructive fraudulent conveyance (CPLR § 5225(b) / D&C § 273‑a) | Juquila conveyed assets without fair consideration; badges of fraud (family transfer, retained involvement, timings, fixtures left "as is") show lack of good faith and knowledge by transferee | No direct transfer from Juquila to Santa Catarina; two independent transactions with landlord; Santa Catarina paid rent and was a good-faith purchaser for value | Court: Denied turnover on summary judgment — genuine disputes of material fact require evidentiary hearing |
| Motion to quash information subpoena / protective order | Subpoena seeks narrowly tailored post-judgment discovery relevant to locate Juquila assets and transferee identities | Subpoena is overbroad, invasive, and seeks confidential information; warrants quash/protection | Court: Denied cross-motion; subpoena upheld and Santa Catarina ordered to respond |
Key Cases Cited
- CSX Transportation, Inc. v. Island Rail Terminal, Inc., 879 F.3d 462 (2d Cir.) (Rule 69 turnover may proceed by motion against non-party garnishee if court has personal jurisdiction)
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (ancillary jurisdiction recognized for matters incidental to a court's core jurisdiction)
- Peacock v. Thomas, 516 U.S. 349 (1996) (ancillary jurisdiction permits federal courts to resolve claims factually interdependent with matters before them)
- Daimler AG v. Bauman, 571 U.S. 117 (2014) (standards for general personal jurisdiction over corporations)
- Beauvais v. Allegiance Sec., Inc., 942 F.2d 838 (2d Cir.) (two-step test under CPLR § 5225(b): judgment debtor must have an interest in the property or creditor’s rights be superior)
- HBE Leasing Corp. v. Frank, 48 F.3d 623 (2d Cir.) (transaction "collapse" doctrine and transferee knowledge requirement)
- Epperson v. Entertainment Express, Inc., 242 F.3d 100 (2d Cir.) (ancillary enforcement jurisdiction to void fraudulent conveyances to collect existing judgment)
- Mitchell v. Garrison Protective Servs., Inc., 819 F.3d 636 (2d Cir.) (requirements for a constructive fraudulent conveyance under New York law)