Judge: Peter A. Hernandez, Case: 22PSCV00134, Date: 2022-09-26 Tentative Ruling
Case Number: 22PSCV00134 Hearing Date: September 26, 2022 Dept: O
1. Defendant Hyung Su
Ryu aka Alex Ryu’s Demurrer to the Complaint of Plaintiff Teehee Socks, Inc. is
SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave
to amend is requested, and as to which cause(s) of action, and will require an
offer of proof if so.
2. Defendant Hyung Su Ryu aka Alex Ryu’s Motion to Strike Portions of the Complaint of Plaintiff Teehee Socks, Inc. is DENIED as MOOT.
Background
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
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
Ryu demurs, pursuant to Code of Civil Procedure § 430.10, to the first through fourth causes of action in TSI’s complaint, on the basis that they each fail to state facts sufficient to constitute causes of action and are uncertain.
Request for Judicial Notice
The court rules on Ryu’s Request for Judicial Notice as follows: Denied as to Exhibit B.
First Cause of Action (i.e., Breach of Duty of Loyalty)
“The elements of a cause of action for breach of a duty of loyalty, by analogy to a claim for breach of fiduciary duty, are as follows: (1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach.” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410.)
TSI, without more, alleges in a conclusory fashion, that Ryu has “misdirected and/or misappropriated the sales of socks” from TSI to Soxnet. (Complaint, ¶ 14.) TSI does not explain how such “misdirection” or “misappropriation” was undertaken and provides no instances of Ryu engaging in the alleged misconduct.
Ryu’s demurrer to the first cause of action is sustained.
Second and Third Causes of Action (i.e., Intentional Interference with Prospective Economic Advantage and Negligent Interference with Prospective Economic Advantage, Respectively)
“The five elements for intentional interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Youst v. Longo (1987) 43 Cal.3d 64, 71, fn. 6.)
“The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.)
The tort of interference with prospective economic advantage “protects the expectation that the relationship [with some third party] eventually will yield the desired benefit, not necessarily the more speculative expectation that a potentially beneficial relationship will arise.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1164 [internal quotations and citation omitted].)
TSI vaguely alleges that it had business relationships with its “customers” and “purchasers,” without providing any specific named of customers or purchasers from whom business was allegedly misappropriated or diverted. (Complaint, ¶ 20.) This is insufficient.
Ryu’s demurrer to the second and third causes of action is sustained.
Fourth Cause of Action (i.e., Unfair Business Practices)
TSI’s fourth cause of action vaguely alleges, without more, that 17200 prohibits any “unlawful, unfair or fraudulent business act or practice” and that “[b]y engaging in the acts described above, Defendant has engaged in and continue[s] to engage in an unlawful, unfair and/or fraudulent business act or practice.” (Complaint, ¶¶ 30 and 31.) TSI’s cause of action is comprised of conclusory allegations devoid of factual support.
Ryu’s demurrer to the fourth cause of action is sustained.
2. Motion to Strike
Based upon the ruling made on the demurrer, the motion to strike is denied as moot.