FILED: NEW YORK COUNTY CLERK 01/14/2013 INDEX NO /2010 NYSCEF DOC. NO. 104 RECEIVED NYSCEF: 01/14/2013

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1 FILED: NEW YORK COUNTY CLERK 01/14/2013 INDEX NO /2010 NYSCEF DOC. NO. 104 RECEIVED NYSCEF: 01/14/2013 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x TYT EAST CORP., JIN HUA RESTAURANT INC., Index No.: /10 FEN ZHENG, YI QIU LIN, LU HUI QIU, QIU LIN, HANG ZHU, and HUI SHENG LIN, individually and Hon. Shirley Werner Konreich, J.S.C. representing 73.33% of the shareholders of TYT East Corp. and Jin Hua Restaurant Inc., PREARGUMENT STATEMENT Plaintiffs, -against- MICHAEL LAM, DAVID GAO, CHEN HUA, JOHN DOE # 1-10, JANE DOE # 1-10, and XYZ CORPORATION # 1-10, all names being fictitious and presently unknown, Defendants x DAVID GAO and CHEN HUA a/k/a HUA CHEN, individually and derivatively as derivatively as shareholders of TYT EAST CORP., and JIN HUA RESTAURANT, INC., Third-Party Complaint Third-Party Plaintiffs, -against- JI XIONG NI a/k/a JIXIONG NI a/k/a NI JI XIONG, LILI NI a/k/a LI LI NI, YAN ZHUANG a/k/a ZHUANG YAN, NEW MONEY LINK, INC., HONG XING MANAGEMENT CORP., TYT EAST BROADWAY INC. d/b/a YUMMY YUMMY BAKERY, HONG WEI INTERNATIONAL MONEY TRANSFER CORP., PARK REGENT LLC, NEW EAST OCEAN INC., XIN HUI LIU, YAN YU LIU, CONNIE CHEN, JOHN DOE# 1-10, JANE DOE #1-10, and XYZ CORPORATION #1-10, names being fictitious and presently unknown, Third-Party Defendants x - 1 -

2 Plaintiffs in the above-captioned direct action, TYT EAST CORP., JIN HUA RESTAURANT INC., FEN ZHENG, YI QIU LIN, LU HUI QIU, QIU LIN, HANG ZHU, and HUI SHENG LIN, individually and representing 73.33% of the shareholders of TYT East Corp. and Jin Hua Restaurant Inc., by and through their undersigned attorneys, respectfully submit this Preargument Statement pursuant to 22 N.Y.C.R.R (b) as follows: 1. Title of the action: As fully set forth in the caption above. 2. Full names of original parties and any change in the parties: As fully set forth in the caption above, without change. 3. Name, address and telephone number of counsel for appellant: Bing Li, Esq. LAW OFFICES OF BING LI, LLC 980 Avenue of the Americas, Suite 405 New York, NY (212) Name, address and telephone number of counsel for respondent;: Gallet Dreyer & Berkey, LLP 845 Third Avenue, 8th Floor New York, NY (212) Attention: Morrell I. Berkowitz, Esq. Attorneys for Defendant/Third-Party Plaintiff David Gao 5. Court and county, or administrative body from which the appeal is taken: Supreme Court of the State of New York, County of New York 6. Nature and object of the cause of action or special proceeding: The underlying main action was commenced in April 2010 and is against defendant Michael Lam ( Lam ), who was, during the time period in question, the Chief Executive Officer of a restaurant known as Jin Hua Restaurant Inc. ( JHR ), primarily for breach of an employment agreement between TYT and Lam and for breach of fiduciary duty in connection with the mismanagement and demise of the restaurant. Co-Defendants David Gao ( Gao ) and Hua Chen ( Chen ) are two shareholders of TYT, who plaintiffs allege breached their fiduciary duties owed to their co-shareholders and aided and abetted the breach of fiduciary duties by Lam

3 Defendants in May 2012 filed a third-party complaint against various third-party defendants individually and derivatively on behalf of TYT. By notice dated August 16, 2012, plaintiffs moved to dismiss the third-party complaint for failure to comply with BCL 626(c) and alternatively sever it from the main action. Defendant/Third-Party Plaintiff Gao cross-moved for summary judgment dismissing the main complaint as against him. 7. Result reached in the court or administrative body below: By Decision and Order dated January 8, 2013, the Supreme Court denied plaintiffs motion to dismiss and sever, and granted Gao s cross-motion to dismiss the complaint in its entirety. A copy of the Decision & Order is attached hereto as Exhibit A. 8. Grounds for seeking reversal, annulment or modification: (a) As regarding plaintiffs Motion: The lower court erred in denying plaintiffs motion to dismiss pursuant to BCL 626(c) by applying the third exception to the demand requirement set forth in Marx v. Akers, 88 N.Y.2d 189, 198 (1996). The lower court erred in denying plaintiffs motion to sever pursuant to CPLR 1007 sub silentio, and erred in denying the motion to sever pursuant to CPLR 1010 finding that plaintiffs rights will not be substantially prejudiced. (b) As regarding Gao s Cross-motion: The lower court erred by excusing Gao s non-compliance with the Commercial Division Rule 19-a requiring Statements of Material Facts and with its own individual practice rule requiring a joint statement of undisputed facts prior to the making of a summary judgment motion, causing plaintiffs prejudice. The lower court erred by disregarding and ignoring the material issues of facts as to Gao s breach of fiduciary duties and his aiding and abetting the breach of fiduciary duties by Lam. The lower court also erred by failing to search the record or consider the issues of material facts, including Gao s own admission that he did not follow the directors instructions to obtain from Lam the books and records of JHR and his refusal to consent to the sale of the restaurant to a third-party interested buyer because he was interested in acquiring the restaurant and operating it himself or through Lam

4 9. Where appropriate, the statement must indicate whether there is any related action or proceeding now pending in any court of this or any jurisdiction, and if so, the status of the case. If an additional appeal is pending in the same action, indicate the date of entry of the order or judgment and attach a copy of the notice of appeal of the preargument statement. There is no related action or proceeding pending in this Court. There are, however, upon information and belief, related actions now pending as follows: (a) Hui L. Chen, Guo Z. Wu, Tak S. Cheng, Bi X. Yang, Mei F. He, Xiu Y. Guo, Jian Z. Luo, Hui Lin, Yu J. Lin, Long Fang, Xiao H. Zheng, Zhong Li, Jun Zhang, Ming Ho, Xiuh. Jiang, Xiao Z. Zhang, Sky Wong, Wu C. Cao, Shou F. Lam, Oy K. Kwan, Zhen Z. Wu, Shao J. Ng, and Yan X. Lin v. TYT East Corp., Jin Hua Restaurant Inc., and Michael Lam, Case Number 10 Civ (PAC) (S.D.N.Y. filed July 12, 2010) (involving former JHR employees claim for unpaid minimum wages); (b) United States v. All Right, Title & Interest in the Real Property & Appurtenances Thereto Known as E. Broadway, N.Y., N.Y Listed as Block 280, Lot 42 in the Office of the Cnty. Clerk & Register of N.Y. Cnty., N.Y., No. 12 Civ (S.D.N.Y. filed May 22, 2012) (involving the U.S. government s civil action for forfeiture of the building of which TYT is the net lessee); (c) Won & Har Realty Corp. v. TYT E. Corp. (Suite 605), E. Broadway Entire Building N.Y., N.Y , L&T Index No /12 (Civ. Ct. N.Y. Cnty. filed June 23, 2012) (involving the landlord s action to repossess the building of which TYT is the net lessee). Dated: New York, New York January 14, 2013 LAW OFFICES OF BING LI, LLC ATTORNEYS FOR ALL PLAINTIFFS By:/s/ Bing Li Bing Li 980 Avenue of the Americas, Suite 405 New York, NY (212)

5 To: Via E-File Gallet Dreyer & Berkey, LLP 845 Third Avenue, 8th Floor New York, NY (212) Attention: Morrell I. Berkowitz, Esq. Attorneys for Defendant/Third-Party Plaintiff David Gao Anthony Cheh, Esq. 101 West 12th Street, #4B New York, New York Attorneys for Defendant/Third-Party Plaintiff Chen Hua Alfred S. Lui, Esq. Alfred S. Lui Law Offices 33 Bowery, New York, NY Attorneys for Defendant Michael Lam Thomas Gearon, Esq. Law Office of Thomas D. Gearon, P.C Prince Street, PHC Flushing, New York Attorneys for Third-Party Defendant Xin Hui Liu Winne Waiching Mok, Esq. 101 Lafayette Street, l0th Floor New York, New York Attorneys for Third-Party Defendant Park Regent LLC and Third-Party Defendant Yan Zhuang a/k/a Zhuang Yan Jonathan S. Gould, Esq. Jonathan S. Gould Attorney at Law 603 West I 15th Street Suite 198, New York, New York jgould@nyc.rr.com - 5 -

6 Attorneys for Third-Party Defendants Ji Xiong Ni a/k/a Jixiong Ni a/k/a Ni Ji Xiong, Lili Ni a/k/a Li Li Ni; New Money Link, Inc.; Hong Xing Management Corp.; TYT East Broadway Inc. d/b/a Yummy Yummy Bakery; Hong Wei International Money Transfer Corp.; New East Ocean Inc.; Xin Hui Liu; Yan Yu Liu; Connie Chen - 6 -

7 EXHIBIT A: Decision & Order dated January 8,