# Chen v. Wow Restaurant TH, LLC

> District Court, M.D. Florida · May 6, 2024

URL: https://www.frixlaw.com/law-library/cases/10116019

## Case

- **Court:** District Court, M.D. Florida
- **Decided:** May 6, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10116019

## How later opinions describe it (automated extraction)

- reversing a district court’s dismissal of a claim under Section 7434 when Plaintiffs had alleged underreporting of income on W-2 forms “to reduce the business’s tax obligations under” two federal laws

## Opinion text

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

YANHONG CHEN and LUTONG YANG,
on behalf of themselves
and others similarly situated,

Plaintiffs,

v. Case No. 8:23-cv-1602-VMC-UAM

WOW RESTAURANT TH, LLC,
and TRINH HUYNH,

Defendants.
______________________________/

ORDER
This matter comes before the Court upon consideration of
Defendants Wow Restaurant TH, LLC, and Trinh Huynh’s Motion
to Dismiss (Doc. # 29), filed on October 10, 2023. Plaintiffs
Yanhong Chen and Lutong Yang responded on October 31, 2023.
(Doc. # 30). For the reasons that follow, the Motion is
denied.
I. Background
Plaintiffs initiated this 26 U.S.C. § 7434 action on
July 17, 2023, asserting civil tax fraud against their former
employers. (Doc. # 1). After the Court granted Defendant’s
Motion to Dismiss (Doc. # 22), Plaintiffs filed an amended
complaint on October 5, 2023. (Doc. # 26).
Plaintiffs worked at Wow Restaurant TH, LLC (“Wow”),
which does business as Yaki Sushi Grill BBQ, between 2019 and
2022. (Id. at ¶¶ 7-8). At various times, Chen worked as a
waitress, kitchen helper, hostess, and cashier. (Id. at ¶ 7).
Yang worked on the renovation of the restaurant in 2019-2020
and as a sushi chef in 2020-2022. (Id. at ¶ 8).
Huynh was “the day-to-day, on-site, hands-on manager of

Yaki Sushi Grill BBQ, who hired Plaintiffs and other
employees, supervised Plaintiffs and other employees, gave
Plaintiffs and other employees their assignments and changed
Chen’s assignments from time to time, determined Plaintiffs’
and other employees’ schedules, determined Plaintiffs’ and
other employees’ salaries, prepared and kept records of the
employee payroll, and sent the employee payroll to an
accountant.” (Id. at ¶ 21). Huynh is “the sole member,
manager, and financial controller of Wow who dominated and
controlled Wow.” (Id. at ¶¶ 2, 19).
Wow also made several loans to Huynh. “According to its

2020, 2021, and 2022 Form 1120-S Schedule Ls, Wow loaned a
total of $27,938.00 to Huynh in 2020[,] $192,438.00 in 2021,
and $146,809.00 in 2022.” (Id. at ¶ 22). Allegedly, Huynh
also “used company credit cards for personal expenses,
including to make payments towards a home equity loan, to
make payments towards leases of automobiles she put to
personal use, and to purchase food and drinks for herself
from Starbucks and McDonalds.” (Id. at ¶ 23).
Plaintiffs allege that, “[i]n about August 2020, Huynh
told Plaintiffs that she needed them to accept . . . W-2s
because all of Wow’s employees were working off the books and
being paid under the table in cash, and that she needed some

on-the-books employees in order to apply for government
grants and/or loans.” (Id. at ¶ 25). Allegedly, Huynh
transmitted false records of payments to Chen and Yang to
accountants to prepare information returns, including “Form
W-2s, Form 1120-S’s, quarterly Forms 941, and Form 940s.”
(Id. at ¶ 29).
Chen was required to accept W-2s that overstated her
income for 2020, 2021, and 2022. Her 2020 income was reported
as $29,147.90 in wages and $1,851.00 in tips. (Id. at ¶
24(a)(i)). Her 2021 income was reported as $45,226.15 in wages
and $1,397.37 in tips. (Id. at ¶ 24(a)(ii)). Her 2022 income

was reported as $9,500.00 in wages. (Id. at ¶ 24(a)(iii)).
These values far exceeded Chen’s actual compensation for
these years. Chen was paid “between $6,000.00 and $10,000.00
in wages throughout the entirety of her employment,” and was
provided “lodging in a company dormitory valued at about
$250.00 per month, for 21 months (amounting to about
$5,250.00).” (Id. at ¶ 13).
Yang was similarly required to accept W-2s that
overstated his income from 2020 to 2022. Yang’s 2020 income
was reported as $32,000, his 2021 income was reported as
$75,000, and his 2022 income was reported as $21,500. (Id. at
¶ 24(b)(i)-(iii)). However, in reality, Yang was paid no wages

during his employment, though he was provided “lodging in a
company dormitory valued at about $250.00 per month, for 34
months (amounting to about $8,500.00).” (Id. at ¶ 14).
According to the amended complaint, Wow “willfully filed
fraudulent tax information forms with the [IRS].” (Id. at ¶¶
1, 104).
“Wow’s 2020[, 2021, and 2022] Forms 1120-S, 940, and
941s, as well as Chen’s [and Yang’s] W-2[s], were all
information returns filed with the IRS that contained false
and fraudulent information about Chen’s [and Yang’s]
compensation.” (Id. at ¶¶ 43, 51, 58, 68, 77, 84). Chen and

Yang allege that the reporting of higher income between 2020
and 2022 subjected them to increased federal income tax,
Social Security payroll tax, and Medicare payroll tax. (Id.
at ¶¶ 44, 52, 59, 70, 78, 85). Plaintiffs have provided
redacted copies of Chen’s and Yang’s respective 2020, 2021,
and 2022 W-2 Forms. (Doc. # 1-1; Doc. # 1-2).
Now, Defendants move to dismiss the amended complaint.
(Doc. # 29). Plaintiffs have responded (Doc. # 30), and the
Motion is ripe for review.
II. Legal Standard
On a motion to dismiss pursuant to Rule 12(b)(6), this

Court accepts as true all the allegations in the complaint
and construes them in the light most favorable to the
plaintiff. Jackson v. Bellsouth Telecomms., 372 F.3d 1250,
1262 (11th Cir. 2004). Further, the Court favors the plaintiff
with all reasonable inferences from the allegations in the
complaint. Stephens v. Dep’t of Health & Human Servs., 901
F.2d 1571, 1573 (11th Cir. 1990). But,
[w]hile a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide
the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action
will not do. Factual allegations must be enough to
raise a right to relief above the speculative
level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
citations omitted). Courts are not “bound to accept as true
a legal conclusion couched as a factual allegation.” Papasan
v. Allain, 478 U.S. 265, 286 (1986). The Court must limit its
consideration to well-pleaded factual allegations, documents
central to or referenced in the complaint, and matters
judicially noticed. La Grasta v. First Union Sec., Inc., 358
F.3d 840, 845 (11th Cir. 2004).
Rule 9(b) of the Federal Rules of Civil Procedure imposes
more stringent pleading requirements on fraud claims. Clausen
v. Lab’y Corp. of Am., Inc., 290 F.3d 1301, 1305 (11th Cir.

2002). The complaint must allege “facts as to time, place,
and substance of the defendant’s alleged fraud, specifically
the details of the defendant[’s] allegedly fraudulent acts,
when they occurred, and who engaged in them.” Hopper v. Solvay
Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009) (citation
and internal quotation marks omitted). “Malice, intent,
knowledge, and other conditions of a person’s mind may be
alleged generally.” Fed. R. Civ. P. 9(b).
III. Analysis
As mentioned previously, Plaintiffs assert a claim under
Section 7434(a) against Defendants. (Doc. # 26 at 25—26).

“Section 7434(a) provides a cause of action against a ‘person
[who] willfully files a fraudulent information return with
respect to payments purported to be made to any other person,’
and Section 7434(b) permits damages for the greater of $5,000
or actual damages.” Tran v. Tran, 239 F. Supp. 3d 1296, 1296–
97 (M.D. Fla. 2017) (quoting 26 U.S.C. § 7434(a)). “To state
a claim under 26 U.S.C. § 7434, a plaintiff must allege: (1)
defendant issued an information return; (2) the information
return was fraudulent; and (3) [d]efendant willfully issued
such a fraudulent return.” Elliott v. Barbeque Integrated,
Inc., No. 19-62426-CIV-SINGHAL, 2020 WL 3451576, at *2 (S.D.
Fla. May 29, 2020) (quoting 26 U.S.C. § 7434(a)). “[T]o state

a claim for civil tax fraud under § 7434(a), the plaintiff
must allege that the defendant willfully filed information
returns that misrepresent the amount of payments made.”
Sokoloff v. Bio World Merch., Inc., No. 3:22-CV-12 (CDL),
2022 WL 16857008, at *3 (M.D. Ga. Nov. 10, 2022).
Defendants raise multiple arguments for dismissal. The
Court will address each argument in turn.
A. Grouping of Corporate and Individual Defendants
First, Defendants argue that Plaintiffs have
impermissibly “merge[d] the individual and corporate
defendants by incorporating all the general allegations into

Count I and [by combining] the prayer of relief [for
Defendants], without differentiating each defendant’s
liability based on the distinct factual pattern.” (Doc. # 29
at 3).
A plaintiff fails to comply with the pleading standards
in Federal Rule of Civil Procedure 8 if “the complaint
indiscriminately groups the defendants together.” Joseph v.
Bernstein, 612 F. App’x 551, 555 (11th Cir. 2015). This Court
previously dismissed Plaintiffs’ complaint on this ground,
among others. (Doc. # 22).
However, in the amended complaint, Plaintiffs have

corrected this deficiency. While Plaintiffs reallege and
incorporate by reference all factual allegations in Count I
(Doc. # 26 at ¶ 102), Plaintiffs no longer refer to Defendants
together. Instead, Plaintiffs allege that “Wow willfully
filed fraudulent information returns with respect to payments
purported to be made to Plaintiffs and the [Internal Revenue
Code (IRC)] Class” and that this violation of Section 7434
entitles Plaintiffs and the IRC Class to damages and
attorney’s fees and costs. (Id. at ¶¶ 104, 105). Plaintiffs
then state that Hunyh should be held liable for this conduct
because of her control over Wow, abuse of the corporate form,

and other actions, as alleged previously in the amended
complaint. (Id. at ¶ 106). Therefore, Plaintiffs do not
impermissibly lump Defendants together and Defendants have
received sufficient notice of the allegations and theory of
liability against them.
B. Claim against Huynh
Next, Defendants argue that the claim against Huynh
should be dismissed because Plaintiffs have not sufficiently
pled that the corporate veil should be pierced. “Under Florida
law, the corporate veil will only be pierced to prevent fraud
or injustice.” Eckhardt v. United States, 463 F. App’x 852,
855 (11th Cir. 2012) (citing Dania Jai-Alai Palace, Inc. v.

Sykes, 450 So. 2d 1114, 1121 (Fla 1984)). Use of this theory
of liability is proper if “the corporation ‘is a mere device
or sham to accomplish some ulterior purpose, or is a mere
instrumentality or agent of another corporation or individual
owning all or most of its stock, or where the purpose is to
evade some statute or to accomplish some fraud or illegal
purpose.’” Id. (quoting Aztec Motel, Inc. v. Faircloth, 251
So. 2d 849, 852 (Fla. 1971)). To pierce the corporate veil,
the plaintiff must prove that:
(1) the shareholder dominated and controlled the
corporation to such an extent that the
corporation’s independent existence, was in fact
non-existent and the shareholders were in fact
alter egos of the corporation;

(2) the corporate form must have been used
fraudulently or for an improper purpose; and

(3) the fraudulent or improper use of the corporate
form caused injury to the claimant.
Molinos Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330,
1349 (11th Cir. 2011) (quoting Gasparini v. Pordomingo, 972
So. 2d 1053, 1055 (Fla. 3d DCA 2008)) (emphasis omitted).
Determining whether a shareholder is a corporation’s
alter ego is a fact-specific analysis. Eckhardt, 463 F. App’x
at 856. “One important factor relevant to whether an
individual dominates the corporation to such an extent as to

negate its separate identity is whether corporate funds were
used for the individual’s benefit.” Id.
However, “[m]ere ownership of a corporation by one
shareholder is insufficient to pierce the corporate veil.”
Id. (citing Gasparini, 972 So. 2d at 1055). Instead, a
plaintiff must also show that “the corporation [was] formed
or used for some illegal, fraudulent or other unjust purpose
which justifies piercing the corporate veil.” Id. (quoting
Sykes, 450 So. 2d at 1121). “Improper conduct exists where a
corporation is used ‘as a subterfuge to mislead or defraud
creditors, to hide assets, to evade the requirements of a

statute or some analogous betrayal of trust.’” Id. (quoting
Lipsig v. Ramlawi, 760 So. 2d 170, 187 (Fla. 3d DCA 2000)).
In the amended complaint, Plaintiffs have alleged
sufficient facts to maintain their claim against Hunyh.
First, Plaintiffs have provided facts suggesting that Huynh
was the alter ego of Wow. Among other allegations, Plaintiffs
allege that Wow loaned Huynh $367,185.00 between 2020 and
2022. (Doc. # 26 at ¶ 22). Additionally, Plaintiffs allege
that Huynh “used company credit cards for personal expenses,
including to make payments towards a home equity loan, to
make payments towards leases of automobiles she put to
personal use, and to purchase food and drinks for herself

from Starbucks and McDonalds.” (Id. at ¶ 23).
Second, Plaintiffs have pled that Wow was used for
improper conduct. Specifically, Plaintiffs assert that Wow
violated Section 7434 by improperly reporting Plaintiffs’
income to the IRS so that Wow could apply for government
grants and loans. (Id. at ¶¶ 1, 25-26, 104-06). They further
allege that this violation caused Plaintiffs financial harm
by requiring them to pay higher income taxes and payroll
taxes. (Id. at ¶¶ 44, 52, 59, 70, 78, 86). While Defendants
argue that Huynh’s use of Wow’s funds for personal expenses
and Wow’s loans to Huynh were legitimate such that they should

not justify piercing the corporate veil (Doc. # 29 at 5),
Plaintiffs have provided sufficient information at this stage
of the litigation.
Defendants further argue that the claim against Huynh
should be dismissed because she “was not the filer of the
alleged tax return.” (Id. at 9); see 26 U.S.C. § 7434(a)
(creating a civil action against “the person so filing such
[fraudulent] return”). Rather, it was Wow who, as Plaintiffs’
employer, issued Plaintiffs’ W-2s. According to Defendants,
“Plaintiffs’ attempt to pierce [the] corporate veil is futile
here as they did not allege any facts that [Huynh] was the
issuer of the W-2.” (Doc. # 29 at 6).

However, the fact that Huynh did not issue the W-2s does
not preclude Plaintiffs from seeking to hold Huynh liable for
Wow’s violation of Section 7434 by piercing the corporate
veil. To succeed under this theory, Plaintiffs need not show
that Huynh issued the W-2s, but only that she should be held
liable for Wow’s issuing of the W-2s that indicated incorrect
wages. See Tara Prods., Inc. v. Hollywood Gadgets, Inc., No.
09-CV-61436, 2010 WL 1531489, at *9 (S.D. Fla. Apr. 16, 2010)
(“Alter ego is not a separate cause of action for which relief
can be granted; rather, in this case, alter ego serves as a
theory to impose liability on an individual for the acts of

a corporate entity.”).
C. Particularity and Scienter
Next, Defendants contend that the amended complaint
fails to plead its claim with particularity under Rule 9(b).
(Doc. # 29 at 7-8). Additionally, they argue that
“Plaintiff[s] failed to plead any specific facts with regards
to the scienter of Defendants.” (Id. at 8).
“Rule 9(b)’s heightened pleading standard applies to
[Plaintiffs’] tax-fraud claim [under Section 7434(a)].”
Vandenheede v. Vecchio, 541 F. App’x 577, 579 (6th Cir. 2013).
The Court finds, however, that Plaintiffs have sufficiently
pled all elements of their claim. Importantly, Plaintiffs

have pleaded the “who, what, when, why [and] how surrounding
the actual filing of the returns,” see Leon v. Tapas & Tintos,
Inc., 51 F. Supp. 3d 1290, 1298 (S.D. Fla. 2014), by outlining
the false information returns at issue, the years in which
they were issued, how the returns were incorrect, and why
Defendants issued the false returns. See Diaz v. In Season
Distribs., LLC, No. 1:16-cv-21877-UU, 2016 U.S. Dist. LEXIS
111704, at *4-5 (S.D. Fla. Aug. 17, 2016) (denying a motion
to dismiss a claim under Section 7434 where Plaintiff’s
pleadings defined the information returns at issue, how the
returns were incorrect, and Defendants’ improper purpose for

filing false returns).
Regarding scienter, Section 7434(a) requires a willful
filing of a fraudulent information return. “[W]illfulness in
this context ‘connotes a voluntary, intentional violation of
a legal duty.’” Vandenheede, 541 F. App’x at 580 (citation
omitted). “Tax fraud typically requires ‘intentional
wrongdoing.’” Id.; see Tran, 239 F. Supp. 3d at 1298 (“To
prove willfulness, the plaintiff must show that the
defendants, aware of the duty purportedly imposed by Section
7434, specifically intended to flout the statute.”). “At the
motion to dismiss stage, then, the complaint must contain
specific allegations supporting a plausible inference that

[Defendants] willfully filed false information returns.”
Vandenheede, 541 F. App’x at 580.
Here, Plaintiffs have pled that “Wow willfully filed
fraudulent tax information forms with the Internal Revenue
Service.” (Doc. # 26 at ¶¶ 1, 104). Plaintiffs further allege
that “Huynh is liable inasmuch as she completely dominated
Wow; abused the corporate form fraudulently to deceive
government and private creditors into giving Wow money by
falsely representing on information returns filed with the
IRS that it paid employees, including Plaintiffs, money it
did not pay; and caused Plaintiffs financial harm by doing so

inasmuch as they were overtaxed on income they were not
actually paid.” (Id. at ¶ 106). Additionally, Plaintiffs
outline specific allegations that Huynh knew that she was
filing incorrect W-2s. The amended complaint states that
“[i]n about August 2020, Huynh told Plaintiffs that she needed
them to accept these W-2s because all of Wow’s employees were
working off the books and being paid under the table in cash,
and that she needed some on-the-books employees in order to
apply for government grants and/or loans.” (Id. at ¶ 25). As
Huynh controls Wow (Id. at ¶ 2), her actions can be used to
show that Wow had the requisite scienter.
In short, even applying Rule 9(b), Plaintiffs have

sufficiently pled that Defendants did knowingly file
fraudulent W-2 forms.
D. Filing of W-2 Forms
Finally, Defendants argue that “Plaintiffs fail[ed] to
state a claim for relief because the ‘W-2’ forms alleged in
the Complaint are not ‘information returns’ as described in
the statute and in any event are not ‘filed’ with the IRS.”
(Doc. # 29 at 10).
This argument fails. The amended complaint clearly
alleges that W-2 forms are “information returns” that were
filed with the IRS. (Doc. # 26 at ¶¶ 15, 29). And the relevant

statutes support that W-2 forms qualify as “information
returns” for purposes of Section 7434(a). See 26 U.S.C. §
7434(f) (defining “information return” as “any statement
described in section 6724(d)(1)(A)”); Id. §
6724(d)(1)(A)(vii) (defining information returns to include
“any statement of the amount of payments to another person .
. . relating to information returns with respect to income
tax withheld”). Claims under Section 7434 for improper
reporting of income in W-2 forms have been recognized by many
courts. E.g., Caraballo v. Double L Enters., LLC, No. 8:15-
cv-2123-JDW-AEP, 2016 WL 1084809, at *3 (M.D. Fla. Feb. 25,
2016) (determining that Plaintiff’s allegations of

Defendant’s “willful failure to properly record, account for,
and report to the IRS on Caraballo’s W-2 Forms all of the
monies paid to [Plaintiff] during his employment . . .
established a substantive, sufficient basis for . . . damages
under 26 U.S.C. § 7434(b)”), report and recommendation
adopted, 8:15-cv-2123-JDW-AEP, 2016 WL 1108977 (M.D. Fla.
Mar. 18, 2016); Cuellar-Aguilar v. Deggeller Attractions,
Inc., 812 F.3d 614, 620 (8th Cir. 2015) (reversing a district
court’s dismissal of a claim under Section 7434 when
Plaintiffs had alleged underreporting of income on W-2 forms
“to reduce the business’s tax obligations under” two federal

laws); Elliott, 2020 U.S. Dist. LEXIS 95687, at *4 (“[T]he
parties must concede that the W-2 forms are information
returns.”).
While Defendants also dispute that the W-2s were filed
with the IRS (Doc. # 29 at 12), when deciding a motion to
dismiss, the Court accepts as true all the allegations in the
complaint and construes them in the light most favorable to
the plaintiff. Jackson, 372 F.3d at 1262. As Plaintiffs
specifically alleged that the W-2 forms were filed with the
IRS (Doc. # 26 at 1), Defendants’ argument fails.
Accordingly, it is now
ORDERED, ADJUDGED, and DECREED:
Defendants Wow Restaurant TH, LLC, and Trinh Huynh’s
Motion to Dismiss (Doc. # 29) is DENIED. Defendants are
directed to file their answer to the amended complaint within
14 days of the date of this Order.
DONE and ORDERED in Chambers in Tampa, Florida, this 6th
day of May, 2024.

VIRGINIA M. HERNANDEZ*COVINGTON
UNITED STATES DISTRICT JUDGE

17

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10116019. Public record. Not legal advice.