Judge: Robert B. Broadbelt, Case: 19STCV27188, Date: 2022-08-18 Tentative Ruling

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Case Number: 19STCV27188    Hearing Date: August 18, 2022    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Defendant, Nominal Defendant, and Cross-Complainant Elysian Group, Inc.

RESPONDING PARTY:       Unopposed

Motion to Approve Settlement

            The court considered the moving papers filed in connection with this motion.  No opposition papers were filed.

DISCUSSION

Defendant, nominal defendant, and cross-complainant Elysian Group, Inc. (“Elysian”) moves the court for an order approving the settlement of all claims in the operative complaint and cross-complaint filed in this action as set forth in the Mutual Settlement and Release Agreement (the “Settlement Agreement”) entered into by and between (1) plaintiffs William Htun and Forever Ever, LLC (the “Htun Plaintiffs”), (2) Elysian and Therafields, Inc. (the “Company”), and (3) defendants Michael Chang, Mark Nguyen, Mario Guzman, Jinkyu Hong, Brent Cox, Sung Chul Jung a/k/a Sam Jung, and Hithem Khraishi (the “Individual Defendants”) (collectively, the “Parties”).

Because shareholder derivative plaintiffs are considered trustees or guardians ad litem to the corporation’s right of action, a derivative action cannot be settled without court approval.  (Gaillard v. Natomas Co. (1985) 173 Cal.App.3d 410, 419, overruled in part on other grounds; Ensher v. Ensher, Alexander & Barsoom, Inc. (1960) 187 Cal.App.2d 407, 410 [“a stockholder bringing such a derivative suit is a trustee for the corporation’s cause of action and as such cannot dismiss the action without the consent of the trial court”].)  In an effort to aid the court in the determination of the fairness of the settlement, Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 244-245 (disapproved on other grounds), discusses factors that the court should consider when testing the reasonableness of a settlement.  “[A] presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”  (Id. at p. 245.)

The Settlement Agreement contains the following terms: (1) Htun Plaintiffs will convey a total of 7,800 shares of Elysian to the company Elysian intends to merge with while retaining their remaining 31,200 shares of common stock; (2) Htun Plaintiffs will vote their shares in favor of Elysian’s merger (which is expected to, in the opinion of Elysian’s CEO, greatly benefit its shareholders); (3) Htun Plaintiffs will transfer all ownership in Therafields to Elysian; (4) the Parties will bear their own attorney’s fees and costs; and (5) upon the court’s order granting approval of the Settlement, the Parties will file a joint stipulation requesting dismissal, with prejudice, of the complaint filed by Htun Plaintiffs and Therafields and the cross-complaint filed by Elysian.  (Kim Decl., ¶¶ 7-9; Kim Decl., Ex. A, Settlement Agreement, Sec. 1, subds. (c), (d), (g), (e), (b).)  Further, the Htun Plaintiffs agree to release all claims against the Company and the Individual Defendants, and the Company and the Individual Defendants agree to release all claims against the Htun Plaintiffs.  (Kim Decl., Ex. A, Settlement Agreement, Sec. 3, subds. (a), (b).)  The Settlement Agreement was reached following the exchange of formal and informal discovery, the filing of demurrers, and after engaging in a previous, unsuccessful mediation in December of 2020.  (Weston Decl., ¶¶ 2-6.)

Based on the arguments and evidence set forth in the motion and the declarations of Elysian’s counsel, Daniel Weston, and Elysian’s CEO, Stephen Kim, the court finds that the terms of the settlement set forth in the Parties’ Settlement Agreement are fair, adequate, and reasonable.

However, the court notes that the Settlement Agreement is not signed by all Parties.  Specifically, Elysian has not presented evidence to the court that individual defendant Hithem Khraishi has signed the Settlement Agreement.  The signature pages presented to the court include Khraishi’s signature line, but all are blank.

The court therefore exercises its discretion to continue the hearing on Elysian’s motion to give Elysian an opportunity to file a copy of the Mutual Settlement and Release Agreement that is executed by all parties.

ORDER

             The court orders that Elysian Group, Inc.’s motion to approve settlement is continued to September 6, 2022, at 10:00 a.m., in Department 53.

            The court orders that Elysian Group, Inc. may file a copy of the Mutual Settlement and Release Agreement that is fully executed by all parties no later than August 26, 2022.

IT IS SO ORDERED.

DATED:  August 18, 2022

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court