Lee v Leifer 2026 NY Slip Op 30589(U) February 18, 2026 Supreme Court, New York County Docket Number: Index No. 159786/2020 Judge: Sabrina Kraus brings up the question of why anyone would not answer a complaint.

“Around 2004, Plaintiff and nonparty Eddie Choi formed a venture to operate a japanese restaurant named “Kyoto” in Flushing, Queens. Plaintiff owned a 75% stake in the business and handled daily operations, while Choi owned 25% of the business. The restaurant consisted of both a main area for regular customers and an adjacent building used as a private party venue.

Around 2006, Plaintiff and Choi formed an entity called “Kyoto Sushi, Inc.” to operate
the restaurant. The shareholder agreement provided that Plaintiff would own 75% of the corporation’s shares and Choi would own 25% (NYSCEF Doc No. 138). Around 2010, the two agreed that Choi, who was then living in China, would transfer his 25% ownership interest to his mother, Nancy Ng (“Ng”). The new shareholder agreement provided that Plaintiff would own 75% of the corporation’s shares and Ng would own 25% (NYSCEF Doc No. 91, Ex. G).
Around January 2013, Plaintiff formed a new entity, ESquared Group, Inc., to allegedly
take over the operations of the restaurant’s private party room (NYSCEF Doc No. 92). Plaintiff testified that he never got Ng’s approval for the creation (NYSCEF Doc No. 93, at 51). Around 2013, Plaintiff also formed an entity called ASquared, Inc., to allegedly take over the operations of the main area of the restaurant. Plaintiff testified that he did not give Ng a stock certificate with 25% of the company’s shares, nor did he notify her of the formation (id. at 51, 61).
Around 2014, Plaintiff dissolved several prior corporations connected to the restaurant
without notifying Ng (id. at 49–50).
Around February 2016, Choi requested a review of the company’s bank statements, and
Plaintiff allegedly refused. Around October 2016, Plaintiff sold ASquared, Inc. to an entity called Stella 153, Inc., which was owned by the girlfriend of Plaintiff’s father (id. at 56–57). Plaintiff did not give Ng a 25% interest in the sale proceeds.

The following information forms the basis of the current action and was admitted by
Defendants.
In August 2016, Plaintiff contacted defendant-attorney Max Leifer (“Leifer”) to seek help
with his business dispute with Ng. Plaintiff requested that Leifer contact Ng’s attorney and convey that he was willing to settle with her. Leifer then contacted Ng’s attorney and provided Ng’s attorney with tax records that were relevant to the dispute. Leifer also scheduled a meeting with Ng and her attorney in September 2016 to discuss a settlement; however, the meeting never materialized.
On November 28, 2016, Ng commenced the Prior Action by filing a Summons and
Complaint, alleging causes of action for breach of fiduciary duty among others (Ng v ASquared,
Inc. et al., Case No. 714168/2016). Plaintiff was required to file an answer to Ng’s complaint by
January 25, 2017 (see Case No. 714168/2016, NYSCEF Doc No. 7 [affidavit of service filed
onto NYSCEF on December 26, 2017]).
The parties dispute the following information.
Plaintiff alleges that after he was served with process, Leifer advised him that he would
not be liable for punitive damages such that if he failed to file an answer to Ng’s complaint, he would only be liable for the amount limited to the shareholder agreements. Plaintiff alleges that he had a meritorious defense to Ng’s request for punitive damages but that the failure to interpose an answer precluded him from asserting that defense.
Defendants allege that no such conversation between Leifer and Plaintiff occurred and
that Leifer advised Plaintiff that Leifer would file an answer for Plaintiff if his law firm formally entered into a retainer agreement with Plaintiff and Plaintiff paid a retainer fee of $5,000.00. Defendants allege that Leifer advised Plaintiff that failure to file an answer could result in a default judgment but that Plaintiff, seeking to avoid the legal fees, voluntarily decided not to retain Leifer and willfully chose not to file an answer.
Plaintiff did not file an answer in the Prior Action. On December 21, 2017, Ng moved for
a default judgment (NYSCEF Doc No. 122, at 2). On January 11, 2018, Leifer filed an affidavit in opposition to Ng’s motion for a default judgment in which he stated that he represented Plaintiff in the Prior Action (NYSCEF Doc No. 124).”

“On February 21, 2018, the Queens County Supreme Court (Butler, J.S.C.) granted Ng’s
motion for a default judgment against Plaintiff for failure to file an answer (Case No.
714168/2016, NYSCEF Doc No. 26).
On March 17, 2020, after an inquest hearing, the Queens County Supreme Court
(Modica, J.S.C.) issued a decision granting Ng $700,000.00 in punitive damages, $135,208.98 in compensatory damages and $42,345.00 in legal fees together with interest (Case No. 714168/2016, NYSCEF Doc No. 46, at 22–23).”

“An attorney commits legal malpractice when (1) the attorney was negligent, (2) such
negligence was a proximate cause of plaintiff’s losses, and (3) the plaintiff sustained actual damages (Global Bus. Inst. v Rivkin Radler LLP, 101 AD3d 651, 651 [1st Dept 2012]). “[T]he failure to show proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent” (Wo Yee Hing Realty Corp. v Stern, 99 AD3d 58, 63 [1st Dept 2012] [internal quotation omitted]). A defendant meets their initial burden on proximate cause “by showing an absence of proximate cause” between the alleged negligence and plaintiff’s damages (Levine v Lacher & Lovell-Taylor, 256 AD2d 147, 151 [1st Dept 1998]).
Defendants argue that Plaintiff’s claim fails because the Queens County Supreme Court
ruled in the previous action that Plaintiff did not have a meritorious defense to Ng’s claims which negates Plaintiff’s proximate cause argument in this action. Plaintiff’s complaint specifically alleges that Plaintiff would have been able to defend against Ng’s punitive damages claim because:
[Plaintiff] did not steal the business, he never disputed Ms. Ng’s (and Mr. Choi’s)
25% ownership in the business. Throughout the operation of the business Plaintiff
shared 25% of the profits with Mr. Choi and Ms. Ng – when the business was
profitable – and continuously recognized and acknowledged Ms. Ng’s and Mr.
Choi’s ownership interest in the business. Even after various corporate
reorganizations, Mr. Lee continued to distribute to Ms. Ng (and Mr. Choi) 25% of
any distributable profits and, following the sale of the business, Mr. Lee did not
dispute that Ms. Ng (and Mr. Choi) were entitled to their respective share of the
proceeds . . . There was no quasi-criminal conduct that would have supported Ms.
Ng’s claims for punitive damages. (NYSCEF Doc No. 5, at 2–3).

Plaintiff argues that he would not have been liable for punitive damages had he asserted this defense as punitive damages are recoverable for breach of fiduciary duty where “it appears that the breach may demonstrate a high degree of ‘moral culpability’” (Stein v McDowell, 74 AD3d 1323, 1326 [2d Dept 2010], quoting Giblin v Murphy, 73 NY2d 769, 772 [1988]).
Defendants’ position ignore the First Department’s decision in this case affirming denial
of their CPLR § 3211. The First Department held:

Lee’s default required the court to accept as true all allegations against him as to
liability. While Lee had the opportunity to contest the punitive damages claim at
the subsequent damages inquest, he was not permitted to introduce evidence to
counter the underlying cause of action.
Although the inquest court rejected the substance of Lee’s purportedly meritorious
defense, it did so on a limited record. “[W]hile [defaulting] defendants are entitled
to present testimony and evidence and cross-examine the plaintiff’s witnesses at the
inquest on damages, they may not conduct discovery.” Because Lee, having
defaulted, forfeited the right to discovery, he was deprived of the opportunity to
amass a record on which the inquest court might have credited his defense to the
punitive damages claim.
(Lee v Leifer, 209 AD3d 531, 532 [1st Dept 2022] [emphasis added] [internal citations
omitted]).”

“Thus, giving Plaintiff the benefit of every reasonable inference, Defendants do not
establish a prima facie case of lack of causation as a matter of law or that Plaintiff would not have been able to defend against Ng’s punitive damages claim even if the Defendants filed an answer to her Complaint.”