Judge Upinder S. Kalra, Case Number: 21STCV33286, Date: 2025-05-08 Tentative Ruling

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1. An Order setting the valuation date of Los Coyotes Veterinary Practice, P.C. as the date the appraisers complete their appraisal;

3. An Order appointing appraisers to ascertain the fair value of shares to purchase from Plaintiff.

On September 9, 2021, Plaintiff Seonah Jo (“Plaintiff”) filed a complaint against Defendant Jinyeung Choi (“Defendant.”) The complaint alleged four causes of action: (1) Breach of Contract, (2) Breach of Fiduciary Duty, (3) Unjust Enrichment, and (4) Declaratory Relief. The complaint alleges that the parties entered into an oral agreement to operate a business partnership regarding the operation of Los Coyotes Veterinary Practice, P.C., agreeing to work equal time during the week, which was later reduced due to the Covid-19 pandemic. Plaintiff argues that Defendant refused to work the agreed upon hours per week. After an appraisal determined gthe value of Los Coyotes, the parties provided various offers to buy out the other party, but the parties have reached a deadlock. Plaintiff also alleges that Defendant received a third-party offer to merge Los Coyotes with the third party.

On November 1, 2021, Defendant filed a Demurrer with Motion to Strike which was OVERRULED.

On February 3, 2023, Plaintiff filed a Motion for Leave to Amend the Complaint, which was GRANTED.

On June 15, 2023, Plaintiff filed a Motion to Disqualify Counsel which the court GRANTED.

On April 17, 2024, Plaintiff filed a Motion to Disqualify Counsel which the court DENIED.

On September 19, 2024, Defendant Jinyeung Choi filed an Answer and Cross-Complaint.

On September 23, 2024, Defendant Los Coyotes Veterinary Practice, P.C. (LCVP) filed an Answer to the FAC.

On September 24, 2024, LCVP filed a Motion for Order Staying Dissolution and Ordering Appraisal. On January 22, 2025, Plaintiff filed an opposition. On February 3, 2025 LCVP filed a reply. On February 26, 2025, the court continued the hearing on this motion to May 8, 2025.

On February 3, 2025, LCVP filed a motion to set an alternative valuation date for buyout in lieu of dissolution. On April 25, 2025, Plaintiff filed an opposition. On May 1, 2025, LCVP filed a reply.

“Subject to any contrary provision in the articles, in any suit for involuntary dissolution, or in any proceeding for voluntary dissolution initiated by the vote of shareholders representing only 50 percent of the voting power, the corporation or, if it does not elect to purchase, the holders of 50 percent or more of the voting power of the corporation (the "purchasing parties") may avoid the dissolution of the corporation and the appointment of any receiver by purchasing for cash the shares owned by the plaintiffs or by the shareholders so initiating the proceeding (the "moving parties") at their fair value. The fair value shall be determined on the basis of the liquidation value as of the valuation date but taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation.”

“If the purchasing parties (1) elect to purchase the shares owned by the moving parties, and (2) are unable to agree with the moving parties upon the fair value of such shares, and (3) give bond with sufficient security to pay the estimated reasonable expenses (including attorneys' fees) of the moving parties if such expenses are recoverable under subdivision (c), the court upon application of the purchasing parties, either in the pending action or in a proceeding initiated in the superior court of the proper county by the purchasing parties in the case of a voluntary election to wind up and dissolve, shall stay the winding up and dissolution proceeding and shall proceed to ascertain and fix the fair value of the shares owned by the moving parties.”

“The court shall appoint three disinterested appraisers to appraise the fair value of the shares owned by the moving parties, and shall make an order referring the matter to the appraisers so appointed for the purpose of ascertaining such value. The order shall prescribe the time and manner of producing evidence, if evidence is required. The award of the appraisers or of a majority of them, when confirmed by the court, shall be final and conclusive upon all parties. The court shall enter a decree which shall provide in the alternative for winding up and dissolution of the corporation unless payment is made for the shares within the time specified by the decree. If the purchasing parties do not make payment for the shares within the time specified, judgment shall be entered against them and the surety or sureties on the bond for the amount of the expenses (including attorneys' fees) of the moving parties. Any shareholder aggrieved by the action of the court may appeal therefrom.”

LCVP contends that the court must reset the valuation date to be when the appraisers complete their appraisal instead of the date Plaintiff filed this dissolution action because of material changes to the business, namely, Plaintiff’s resignation as an employee which directly impacted LCVP’s revenue stream and the uncertainty concerning LCVP’s lease renewal.

Plaintiff argues there is no good cause to change the valuation date because Defendant self-imposed business changes that depressed valuation after Plaintiff filed this action and resigned from the practice.[1] Plaintiff further argues the valuation must reflect historical and normal operational capacity, not temporary, speculative, post-filing conditions.

LCVP replies that Plaintiff did not address the risk of losing the lease, that Plaintiff’s actions impacted LCVP’s value not Dr. Choi’s, and recently received accounting records show 18% downturn in profits instead of 50% anticipated decrease.

In a suit to dissolve a corporation, the valuation date “shall be (1) in the case of a suit for involuntary dissolution . . . the date upon which that action was commenced, or (2) in the case of a proceeding for voluntary dissolution initiated by the vote of shareholders representing only 50 percent of the voting power, the date upon which that proceeding was initiated.” (Corps. Code § 2000(f).) “However, in either case the court may, upon the hearing of a motion by any party, and for good cause shown, designate some other date as the valuation date.” (Ibid.; Trahan v. Trahan (2002) 99 Cal.App.4th 62, 73-74, 76-77 (Trahan); see also Crane v. R. R. Crane Investment Corp. (2022) 82 Cal.App.5th 748, 758 fn. 7; Mart v. Severson (2002) 95 Cal.App.4th 521, 544 fn. 2 (Mart).)

Here, there is no good cause to change the valuation date from March 2, 2023 to a floating future date. First, the court is persuaded by Plaintiff’s argument that LCVP’s current staffing model, despite being prompted by Plaintiff’s quitting the veterinary practice, is not the new normal.[2] (See Opp. 23-6:8.) While it is clear to the court that LCVP is operating differently now than when Plaintiff sought dissolution in March 2023, LCVP provided evidence that the “clinic has been extremely busy.” (Choi Supp. Decl. ¶ 7.) Additionally, Dr. Choi “found the best possible staffing solution, ” has been working hard “to cover the appointment load of two doctors as much as possible,” and is not in a position now to bring another veterinarian associate while a dissolution may be pending. (Choi Supp. Decl. ¶¶ 3, 5, 6.) What is more, LCVP indicates (without attaching the P&L’s) that due to Dr. Choi’s efforts, LCVP only experienced an 18% drop in profits in this first quarter without Dr. Jo’s work. (Choi Supp. Decl. ¶ 2.) Taken together, and while noting Dr. Jo’s impact on LCVP by quitting, there is simply no good cause to continue the valuation date.[3]

Accordingly, the court DENIES LCVP’s motion for alternative valuation date.

LCVP contends they are entitled under Corp. Code § 2000 to buyout Plaintiff’s shares in lieu of the dissolution with a corresponding stay of proceedings pending the buyout. LCVP proposes an appraiser selection schedule with three total to value the business, that the business should be valued on the basis of its liquidation value and the possibility of a sale of the business as a going concern, proposes a valuation date of March 2, 2023 (when Plaintiff filed this action), and proposes posting a $20,000 bond.

Plaintiff opposes the motion as Defendant Choi’s backdoor way to undervalue Plaintiff’s shares and to purchase the business at an unfair discount. Plaintiff further argues that the bond is significantly underfunded and suggests a $120,000 bond. Alternatively, Plaintiff requests the court impose various conditions when granting the motion.

LCVP replies it did include goodwill in the valuation price and that Plaintiff’s bond amount is ridiculous.[4] LCVP also indicates that Plaintiff’s recent resignation from the business impacts the valuation and valuation date.[5]

Here, the relief sought by LCVP is warranted. First, LCVP has demonstrated that the parties do not agree about the fair value of Plaintiff’s shares and that LCVP owns 50% of the shares not held by Plaintiff. Plaintiff does not dispute this. Nothing more is required for the court to grant LCVP’s motion pursuant to Corps. Code § 2000. Second, LCVP did contemplate including the goodwill, if any, in the valuation. This is also provided for per code. (Corps. Code § 2000(a) [“The fair value shall be determined on the basis of the liquidation value as of the valuation date but taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation.”]) The court is therefore unpersuaded by Plaintiff’s argument and declines to develop it further.

Accordingly, the court GRANTS LCVP’s motion for stay and ordering appraisal to determine fair value of shares.

[1] Plaintiff identifies Dr. Choi’s failure to hire an associate veterinarian, refusal to allow Plaintiff access to LCVP’s records despite her remaining a shareholder, and Dr. Choi’s refusal to allow Dr. Jo to come back to help with operations.

[2] The court otherwise rejects Plaintiff’s arguments concerning piecemeal valuation as premature and inapplicable to whether LCVP showed good cause to move the date. Indeed, Mart, on which Plaintiff relies, does not address the court’s ability to change the valuation date. Instead, Mart discusses how to calculate the business’s fair value. (See, generally, Mart, supra, 95 Cal.App.4th at pp. 530-533.)

[3] After all, “once the fair value is set . . . the purchasing parties have the right, but no corresponding obligation to purchase the moving parties’ shares at the fair value price.” (Mart, supra, 95 Cal.App.4th at p. 525 [citing Corps. Code § 2000(d).]) It does not escape the court that LCVP’s request has baked in at least an 18% discount to Dr. Jo’s shares and that nothing is stopping Dr. Choi from hiring an associate veterinarian when this case concludes.

[4] LCVP further argues that Plaintiff engaged in a smear campaign against counsel. The court notes this but declines to develop it further.

[5] The court addressed this issue above.