Judge: Peter A. Hernandez, Case: 21PSCV01072, Date: 2022-09-26 Tentative Ruling

Case Number: 21PSCV01072    Hearing Date: September 26, 2022    Dept: O

1.         Defendants Jong Won Bok’s, TJ International Co. Ltd.’s and Taijn USA’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested and will require an offer of proof if so.

2.         Defendants Jong Won Bok’s, TJ International Co. Ltd.’s and Taijn USA’s Motion to Strike Portions of Plaintiff’s First Amended Complaint is DENIED as MOOT.

Background[1]

Case No. 21PSCV00336

Plaintiff Hyung Su Ryu dba Alex Ryu (“Ryu”) alleges as follows:

Ryu was forced out from his own company that he founded and built up, TeeHee Socks, Inc. (“TSI”). Ryu was fired and deprived of his salary and stock dividends. TSI is being relocated to Nevada.

On January 10, 2022, the court related this instant case to Case No. 21PSCV01072; this instant case was designated the lead case.

On April 12, 2022, the court sustained Defendants’ demurrer to the fourth and fifth causes of action in Plaintiff’s Third Amended Complaint without leave to amend.

On April 22, 2022, Ryu filed a Fourth Amended Complaint (“4AC”), asserting causes of action against Defendants Jong Won Bok (“Bok”), Taijin USA (“Taijin”), TJ International Co., Ltd. (“TJ International”), TSI and Does 1-100 for:

1.                  Breach of Contract—Stock Purchase Agreement

2.                  Breach of Contract—Salary Agreement

3.                  Fraud

4.                  Breach of Fiduciary Duty

5.                  Involuntary Dissolution

On May 19, 2022, the court related Case Nos. 21PSCV00336, 21PSCV01072 and 22PSCV00134; this instant case was designated the lead case.

On September 8, 2022, the court related this instant case to Case No. 22PSCV00901; this instant case was designated the lead case.

A Status Conference (Related Cases) is set for September 26, 2022.

Case No. 21PSCV01072

Plaintiff Soxnet, Inc. (“Soxnet”) alleges as follows:

In approximately January 2015, Soxnet began manufacturing, importing and selling socks at wholesale to TSI. TSI would sell said socks at retail and would then pay Soxnet for the inventory it had been sold. This pattern and practice continued into May 2019 when Bok, Taijin and TJ International acquired a majority stake in TSI and became involved in its management and operations. As of April 1, 2021, TSI stopped making payments for unpaid wholesale inventory; the balance owed is $197,555.91. TSI also discontinued using Soxnet as its wholesaler/supplier, which was shortly after TSI, Bok, Taijin and TJ International terminated Ryu from his officer and director positions at TSI.

Again, on January 10, 2022, the court related this instant case to Case No. 21PSCV00336; Case No. 21PSCV00336 was designated the lead case.

On April 22, 2022, Soxnet filed a First Amended Complaint (“FAC”), asserting causes of action against TSI, Bok, TJ International, Taijin and Does 1-10 for:

1.                  Account Stated

2.                  Open Book Account

3.                  Work, Labor, Services, and Materials Rendered

4.                  Breach of Contract

5.                  Intentional Interference with Contractual Relations

On May 19, 2022, the court related Case Nos. 21PSCV00336, 21PSCV01072 and 22PSCV00134; Case No. 21PSCV00336 was designated the lead case.

A Case Management Conference is set for September 26, 2022.

Case No. 22PSCV00134

TSI alleges as follows:

Ryu was the sole shareholder of TSI, as well as a director and officer, at the time of TSI’s January 13, 2015 incorporation. On or about May 10, 2019, Ryu agreed in writing to sell 51% of the outstanding shares of TSI to Taijin for $1,000,000.00; consequently, Ryu’s ownership interests in TSI was reduced to 49%. Ryu continued to act as TSI’s officer and director. Ryu was to be in charge of sales and inventory commencing June 1, 2019. On or about February 3, 2021, there was a dispute between TSI’s shareholders. Ryu has, within the last four years, misappropriated the sales of socks from TSI to Soxnet, which is a company wholly owned by Ryu and/or his wife, Miri P. Ryu (“M. Ryu”).

On February 9, 2022, TSI filed a complaint, asserting causes of action against Ryu and Does 1-100 for:

1.                  Breach of Duty of Loyalty

2.                  Intentional Interference with Prospective Economic Advantage

3.                  Negligent Interference with Prospective Economic Advantage

4.                  Unfair Business Practices

On May 19, 2022, the court related Case Nos. 21PSCV00336, 21PSCV01072 and 22PSCV00134; Case No. 21PSCV00336 was designated the lead case.

On July 7, 2022, M. Ryu filed a cross-complaint, asserting causes of action against TSI, Bok, TJ International, Taijin and Roes 1-100 for:

1.                  Determination of Status and of Fair Market Value for Dissenting Shares, and Appointment of Appraiser

2.                  Failure to Produce Employment Records Under Labor Code § 226(b)

3.                  Failure to Produce Personnel Records Under Labor Code § 1198.5

4.                  Trademark Infringement Under 15 U.S.C. § 1114(1)

5.                  False Designation of Origin Under 15 U.S.C. § 1125(a)

6.                  Unfair Competition Under Bus. & Prof. Code § 17200 et seq.

7.                  Common Law Trademark Infringement

8.                  Common Law Unfair Competition

On August 22, 2022, M. Ryu dismissed the fourth through eighth causes of action in her cross-complaint, without prejudice.

On August 22, 2022, Ryu filed a First Amended Cross-Complaint, alleging causes of action against TSI, Bok, TJ International, Taijin and Roes 1-100 for:

1.                  Determination of Status and of Fair Market Value for Dissenting Shares, and Appointment of Appraiser

2.                  Failure to Produce Employment Records Under Labor Code § 226(b)

A Case Management Conference is set for September 26, 2022.

1.         Demurrer to FAC

Legal Standard

A demurrer may be made on grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action and/or is uncertain. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

Bok, TJ International and Taijin demur, pursuant to Code of Civil Procedure § 430.10, subdivisions (e) and (f), to the fifth cause of action in Soxnet’s FAC, on the basis that it fails to state facts sufficient to constitute a cause of action and is uncertain.

The fifth cause of action in Soxnet’s FAC is for Intentional Interference with Contractual Relations. “The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

“The tort duty not to interfere with the contract falls only on strangers—interlopers who have no legitimate interest in the scope or course of the contract's performance.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4^th 503, 514.) “[O]ne . . . who is not a party to the contract or an agent of a party to the contract is a “stranger” for purpose of the tort of intentional interference with contract.” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1003 [disapproved of on other grounds in Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1139].)

Soxnet has identified the underlying contract as an implied-in-fact agreement between TSI and Soxnet “wherein Soxnet would manufacture, import, and sell socks wholesale to [TSI], while [TSI] would in turn sell those socks at retail and repay Soxnet for said inventory.” (FAC, ¶ 29.) Soxnet previously alleged that in May 2019, Bok, TJ International and Taijin “acquired a majority stake in Teehee and became involved in the ownership, management, and operations of [TSI]” and that “[s]tarting June 1, 2019, Bok began acting as CEO and as a director of [TSI], while Taijin and TJ [International] took over the manufacturing and importing of socks for [TSI].” (Id., ¶ 10.)

Soxnet argues that “claims for intentional interference with contractual relations are permitted against officers, directors, and owners, including shareholders, of the company whose contract is the subject of the litigation” and cite to Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344 in support thereof. (FAC, ¶ 34.) Woods involved alleged interference by a major shareholder in a contract between the corporation whose shares it owned and some other entity. In Mintz v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1604, footnote 3, the Court of Appeal noted that “Woods merely concludes that a shareholder is not automatically immune from liability for interfering with the contractual obligations of the company in which it holds shares; Woods does not stand for the proposition that the agent of a contracting party may be liable for interference with its principal's contract.” (Emphasis added.)

Here, however, Soxnet has alleged that Taijin, TJ and Bok were not merely shareholders but were actively involved in the “ownership, management and operations of [TSI].” (FAC, ¶ 10.)

Bok, TJ International and Taijin’s demurrer is sustained.

2.         Motion to Strike

Based upon the ruling made on the demurrer, the motion to strike is denied as moot.