Trial BriefBriefCal. Super. - 4th Dist.August 14, 2017A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo ATKINSON, ANDELSON, LOYA, RUUD & ROMO A Professional Law Corporation Edward C. Ho EHo@aalrr.com Shawn M. Ogle SOgle @aalrr.com 12800 Center Court Drive South, Suite 300 Cerritos, California 90703-9364 Telephone: (562) 653-3200 Fax: (562) 653-3333 Attorneys for Defendants and Cross-Complainants JEAN CHONG and KOREY CHONG, State Bar No. 176144 State Bar No. 266259 ELECTROMICALLY FILED Superior Court of Califarnia, County of Orange 11/09/2018 at 04:00:00 PM Clerk of the Superior Court By & Clerk, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER BYONG W. YOO and HWA YOO, Plaintiffs, Vv. JEAN CHONG and KOREY CHONG, and DOES 1 through 25, inclusive, Defendants. JEAN CHONG and KOREY CHONG, Cross-Complainants, Ve PREMIER FOOD SAFETY CORPORATION, BYONG W. YOO, HWA YOO, DIRK YOO, DONALD YOO and ROES 1 through 20, inclusive, Cross-Defendants. Case No. 30-2017-00937524-CU-CO-CJC Assigned to Hon. Walter Schwarm Department C-19 SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION OF DEFENDANTS AND CROSS- COMPLAINANTS TO ENFORCE SETTLEMENT AGREEMENT November 27, 2018 1:30 p.m. C19 72872155 Hearing Date: Time: Dept: Reservation ID: Complaint Filed: August 14, 2017 SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo I. INTRODUCTION The Chongs’ Motion requests nothing more than to complete the documentation of the parties’ settlement through the execution of ancillary documents called for by the Settlement Agreement on the terms stated in the Agreement. The Chongs do not seek to enforce any of the remedies of the Settlement Agreement that are to be reflected in the Stipulated Judgment, Pledge Agreement, or any other ancillary document." It is not imminent that the Chongs will seek to enforce such remedies. And the Chongs do not ask for an order compelling Cross-Defendants to assent to provisions they have not already agreed to. The Chongs only seek to have Cross-Defendants sign the ancillary documents on the terms in the Settlement Agreement so that the Chongs obtain the convenience and expediency those documents are to provide should Cross-Defendants default. The parties bargained for such convenience and expediency to avoid burdensome and expensive legal proceedings in the future should there be a default. The relief sought is neither controversial nor improper under the law. (Mot. 7:5-22.) Despite freely signing the Settlement Agreement after lengthy mediation and only months after agreeing to settlement, Premier challenges the share transfer clause of the Settlement Agreement that is to be embodied in the Stipulated Judgment on the grounds that it is an unenforceable liquidated damages provision and thus a penalty or forfeiture. (Opp. 8:27-10:4.) As set forth in the Chongs’ reply, the issue is not ripe and even if it were the clause would be enforceable. (Reply 7:3-10:11.) As requested by the Court, the Chongs offer the following supplemental points and authorities. II. ARGUMENT A. Whether A Conforming Stipulated Judgment Would Be Enforceable Is Not Ripe The ripeness doctrine considers (1) if the issue is “appropriate for immediate judicial resolution” and (i1) if the party seeking resolution will suffer “hardship” absent resolution. Wilson & Wilson v. City Coun. of Redwood Cty, 191 Cal.App.4th 1559, 1582-84 (2011). Both elements are missing here.” 1. Resolution Is Inappropriate Absent Enforcement Of The Stipulated Judgment Immediate judicial resolution of whether the share transfer clause to be embodied in the "The three other ancillary documents-the Non-Compete Agreement, Spousal Consent, and Security Agreement-have not been signed by Cross-Defendants even though their substance is not in dispute. * The ripeness requirement applies to issues, not just claims for relief. Verdugo v. Target Corp., 59 Cal.4th 312, 316 n. 1 (2014); Liebler v. Point Loma Tennis Cl., 40 Cal. App.4th 1600, 1614 n. 8 (1995). ~ SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo Stipulated Judgment is a penalty or forfeiture as impermissible liquidated damages is not needed because the Chongs do not seek to enforce the clause and may never do so. It is also speculative that a default-the necessary predicate for entry of the Stipulated Judgment-will ever occur. As previously explained, Courts do not issue orders that merely provide “general guidance” or are based on “advising what the law would be upon” a speculative or hypothetical state of future facts. Pac. Legal Found. v. Cal. Coast. Com., 33 Cal.3d 158, 170-71 (1982); Metro. Water Dist. of S. Cal. v. Winograd, 24 Cal.App.5th 881, 893 (2018). As such, an issue is ripe only when the conduct that would give rise to the controversy has occurred or is about to occur. Stonehouse Homes v. City of Sierra Madre, 167 Cal.App.4th 531, 542 (2008) (noting for declaratory relief that claim is only justiciable if the party shows “it either has suffered or is about to suffer an injury of ‘sufficient magnitude’”). Issues are not justiciable if there is “no more than a conjecture or supposition [] that at some time in the future a controversy may arise.” Merkley v. Merkley, 12 Cal.2d 543, 547 (1939). Indeed, an issue is not ripe even if the conduct that would give rise to the controversy is “anticipated to occur in the future.” Brownfield v. Daniel Freeman Marina Hosp., 208 Cal. App.3d 405, 410 (1989); Stonehouse, 167 Cal. App.4th at 542 (“Courts may not render advisory opinions on disputes which the parties anticipate might arise but which do not presently exist”). Here, Premier seeks to violate these tenants by asking the Court to declare that the share transfer clause to be included in the Stipulated Judgment is unenforceable even though it is entirely hypothetical that the Chongs would ever seek to enforce the clause. The Stipulated Judgment can only be entered if there is a default. Premier, however, has thus far complied with its obligations under the settlement. There is also no indication (much less evidence in the record) that Premier is likely to default in the future. It is thus at best only conjectural that Premier will default, meaning that whether there will ever be occasion to enter the Stipulated Judgment “depends upon unpredictable future events.” Wilson, 191 Cal.App.4th at 1584 (reversing trial court and holding claim was not ripe). Even if it was certain default will occur, it is still speculative that the Chongs would remedy that default through submission of the Stipulated Judgment as opposed to the other means available to the Chongs to remedy a breach. Id. (claim seeking ruling that property could not be condemned was not ripe where the “City has taken no steps to acquire [landowner’s] property, and, indeed, it may never do so”). Hn SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo Cases concerning situations similar to those present here affirm that the enforceability of the Stipulated Judgment is not a ripe issue. In Merkley, 12 Cal.2d at 547, for example, the California Supreme Court ruled that a declaratory relief claim was not ripe where it was brought to ascertain the defendant’s property rights under a deed should he breach a separate obligation owed to the plaintiff. The plaintiff brought the claim to establish that under the deed her ex-husband owned an interest in certain farmland so that she would know whether she could place a lien on the property in the event her ex-husband breached his support obligations. Id. at 546. The ex-husband, however, had not breached any support obligations, and the Court ruled it was “obvious” the plaintiff had not stated a justiciable claim because there “is no more than a conjecture or supposition on her part that at some time in the future a controversy may arise wherein she might become interested in having adjudicated [her ex- husband’s] interest under [the deed].” Id. at 547. As in Merkley, Premier is asking the Court to declare what the effect would be of the Stipulated Judgment based on the hypothetical scenario that there is a default and the Chongs chose to remedy such default through the Stipulated Judgment. This reflects nothing more “than a conjecture or supposition [] that at some time in the future a controversy may arise wherein [it] might become” relevant to ascertain the parties’ respective interests under a conforming Stipulated Judgment. Id. at 547. Other cases have similarly ruled that determining the validity of a legal instrument based on the possibility that it may be enforced in the future presents an unripe issue. (Reply 7:9-16 and n. 3.) In UACC Midwest, Inc. v. City of Santa Cruz, 2007 WL 174416, at *5 (N.D. Cal. Jan. 22, 2007), for instance, the court declined to rule on the enforceability of a “Stipulation and Consent Judgment” because there was no evidence that the petitioner would breach the judgment or that the adverse party would seek to enforce the judgment if there was to be a breach. Id. Likewise here, there is no evidence that a default is imminent or that the Chongs would remedy any default through a conforming Stipulated Judgment. “There is at most a ‘perhaps’ or ‘maybe’ chance that [the Stipulated Judgment] will be enforced [] in the future and that is not enough to” make the issue justiciable. Bowen v. First Fam. Fin. Servs., Inc., 233 F.3d 1331, 1340-41 (11th Cir. 2000). Also illustrative is Young v. Young, 100 Cal.App.2d 85, 86 (1950), where the courts would not entertain a suit to confirm the validity of a foreign judgment and property settlement absent allegations _4- SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo that the defendant had failed to comply with the judgment or settlement. Id. Like Young, Premier too is asking the Court to pass on the validity of the Stipulated Judgment absent any predicate breach that would even implicate the document or cause it to be submitted to the Court. 2. Cross-Defendants Will Not Suffer Hardship By Deferring Adjudication Courts should not decide unripe issues particularly “where the complaining party will have the opportunity to pursue appropriate legal remedies should the anticipated harm ever materialize.” Metro. Water Dist., 24 Cal.App.5th at 893. Cross-Defendants will have such an opportunity should the Chongs seek to enforce the Stipulated Judgment. For instance, insofar as Cross-Defendants maintain the share transfer clause would constitute a forfeiture if enforced, they have available potential relief under Civil Code section 3275. The section provides that a breaching party may have an equitable defense or an equitable claim against enforcement of a contract that would cause a forfeiture “by reason of his failure to comply with its provisions” if the breaching party makes “full compensation to the other party.” Civ. Code § 3275; Ridgley v. Topa Thrift and Loan Ass’n, 17 Cal.4th 970, 976 (1998). Adjudication of the defense, however, cannot occur now as section 3275 “presupposes” that there first is a breach of the underlying obligation and ability to repay. Conforti v. Dunmeyer, 209 Cal.App.2d 41, 47-48 (1962). Similarly, Premier raised the specter that the share transfer clause may cause Cross-Defendants to surrender shares upon a trivial breach, such as if the “outstanding obligation [on settlement] is $1 and the shares are worth $10 million.” (Opp. 1:23.) This scenario is implausible as explained below and elsewhere. But, even if it could occur, it does not make the issue ripe. Cross-Defendants would have the opportunity to argue at the time the Settlement Agreement is breached (and attempt to enforce the Stipulated Judgment is made) that such violation is too immaterial to trigger the share transfer clause of the Stipulated Judgment. Boston LLC v. Juarez, 245 Cal.App.4th 75, 87 (2016) (ruling that immaterial breach of contract could not justify forfeiture under contract); cf. Buttram v. Owens-Corning Fiberglas Corp., 16 Cal.4th 520, 531 n. 4 (1997) (“to be actionable, harm must constitute something more than 999 ‘nominal damages’”). The Court thus need not and should not decide the issue now, in the abstract, devoid of actual facts. If the Chongs should ever seek to enforce the Stipulated Judgment, Cross- Defendants can present the facts they believe render any breach of the settlement to be immaterial. Wilson, 191 Cal.App.4th at 1584-85 (party would not suffer hardship because it could pursue -5- SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo “appropriate legal remedies” when harm materialized). At that point the facts would have “congealed to permit an intelligent and useful decision to be made.” Metro. Water Dist., 24 Cal. App.5th at 893. Finally, Premier cannot re-cast the issue as being about whether Cross-Defendants can be compelled to agree to terms in a Stipulated Judgment that they have not assented to. Cross-Defendants already agreed in the Settlement Agreement to the obligations to be set-forth in the Stipulated Judgment, and the Chongs would be able to seek enforcement of those obligations without an executed Stipulated Judgment. The purpose of an executed Stipulated Judgment is to afford the Chongs the bargained-for convenience and expediency the Stipulated Judgment is to provide upon default.” If, as Premier urges, the Court can decide the validity of the share transfer clause of the Settlement Agreement (and to be included in the Stipulated Judgment) even though the Chongs are not seeking to enforce it, then by implication the Court would have the general power to decide the propriety of any provision of the Settlement Agreement even if none are at issue. Courts, however, lack such power. Otay Land Co. v. Royal Ind. Co., 169 Cal.App.4th 556, 563 (2008). That Premier and the Chongs may disagree over the potential validity of the clause does not make the issue ripe. Pac. Legal Found., 33 Cal.3d at 170 (courts do not issue orders that merely resolve “differences of legal opinion”); Stonehouse, 167 Cal.App.4th at 542 (that the parties “disagree over the resolution’s meaning and application does not create a justiciable controversy”). B. A Conforming Stipulated Judgment Would Be Enforceable Even if the issue were ripe, Premier has not proved that the share transfer clause of a conforming Stipulated Judgment would be a penalty or forfeiture in the form of unenforceable liquidated damages. (Opp. 8:27-10:4.)" To the contrary, the only evidence presented-which was offered by the Chongs-shows that a 51% stake in Premier is reasonably connected to the damages the R Upon breach the Chongs can submit the Stipulated Judgment to the Court ex parte on 72 hours’ notice (Ex. 1 to Ho Decl. §3.D.), versus more cumbersome and costly methods of trying to enforce the Settlement Agreement such as a further motion under Code of Civil Procedure section 664.6 or a new action, for instance. This is no small benefit. One of the purposes of liquidated damages is precisely to avoid burdensome legal process. Hong v. Somerset Assoc., 161 Cal.App.3d 111, 114 (1984); Radisson Hotels Int., Inc. v. Majestic Towers, Inc., 488 F.Supp.2d 953, 963 (C.D. Cal. 2007). The Stipulated Judgment, if entered, would also allow the Chongs to quickly assume control of Premier and promptly try to save the company from the circumstances that would have caused it to default in the first place. * A valid liquidated damages provision would not be an unenforceable penalty or forfeiture. Ridgley, 17 Cal.4th at 976-77; In re Premier Golf Prop., LP, 564 B.R. 660, 682 (Bkrtcy. S.D. Cal. 2016). -6- SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo Chongs would likely suffer upon default, if not one favoring Cross-Defendants. 1. Premier Must Prove A Conforming Stipulated Judgment Would Be Unreasonable California law presumes the “validity of a liquidated damages clause, and places the burden on the party who seeks invalidation to show that the provision was unreasonable under the circumstances existing at the time the contract was made.” Weber, Lipshie & Co. v. Christian, 52 Cal.App.4th 645, 654 (1997). Prior law was different; but, “[d]eparting radically from the former law, on July 1, 1978, the Legislature repealed Civil Code section 1670, and amended section 1671 in order to express a new policy favoring the enforcement of liquidated damage provisions” except in cases not relevant here, such as consumer cases. McGuire v. More-Gas Inv., LLC, 220 Cal.App.4th 512, 522 (2013). The Legislature amended the law specifically to adopt “a new general rule favoring the enforcement of liquidated damages provisions.” Civ. Code § 1671 (Law Rev. Comm. Cmnts.). It intended to give the contracting parties “considerable leeway” in crafting such provisions. Id. Thus, the modern form of California’s liquidated damages statute favors liquidated damages clauses, presumes their validity, and places the burden of proving that a clause is unreasonable on the party challenging it. A liquidated damages clause need only be “reasonabl[y] relat[ed] to the range of harm that might reasonably be anticipated” to be enforceable. Weber, 52 Cal.App.4th at 656. Stated differently, a clause becomes an unenforceable penalty of forfeiture only “if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from the breach.” Ridgley, 17 Cal.4th at 977 (1998). Moreover, a “liquidated damages provision is not invalid merely because it is intended to encourage a party to perform.” Weber, 52 Cal. App.4th at 656. Indeed, 25° even if a party intended the clause to “‘impose a money penalty’ for breach, or if the clause “‘is not < designed for economic purposes’ but rather to be a “‘punitive kind of imposition,” it is still enforceable so long as it is reasonably related to the potential damages from breach. Id. 2. Premier Has Not Met Its Burden As It Failed To Offer Any Pertinent Evidence Premier has not met its burden that the share transfer clause would be an unenforceable penalty for the threshold reason that it offered no supporting evidence. To overcome the presumption in favor of enforcement Premier was required to establish “that the provision was unreasonable under the circumstances existing at the time the contract was made.” Civ. Code § 1671(b). The core inquiry eT SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo considers the value of the property transferred by the liquidated damages clause to the range of potential harm from breach. Grand Prospect Part., L.P. v. Ross Dress for Less, Inc., 232 Cal.App.4th 1332, 1358 (2015). This standard required Premier to have presented evidence that the clause was disproportionate and unreasonable when made. Krechuniak v. Noorzoy, 11 Cal. App.5th 713, 721, 723 (2017) (the “1977 amendment shifted the evidentiary burden”; determining the reasonableness of a provision for liquidated damages “is essentially a factual question”). Premier did not even try to meet its evidentiary burden. Its opposition papers presented no evidence (or even argument) setting forth the value of a 51% stake in Premier, much less evidence that such value was grossly disproportionate to the range of potential harm from default. Premier has thus given the Court no factual basis that would allow the Court to find that the share transfer provision is unreasonable, and, having offered no evidence, Premier has necessarily not met its burden to overcome the presumption that the provision is enforceable even if the issue were ripe. El Centro Mall, LLC v. Payless ShoeSource, Inc., 174 Cal. App.4th 58, 65 (2009) (party did not meet burden because it failed to present sufficient evidence); Roodenburg v. Pavestone Co., L.P., 171 Cal.App.4th 185, 195 (2009) (defendant failed to meet burden where defendant made no argument that clause “is unreasonable under the circumstances and presented no evidence to the trial court in this regard”). 3. A Conforming Stipulated Judgment Would Be Enforceable In Any Event Even if Premier’s failure to meet its evidentiary burden could be ignored, the Chongs’ evidence-though they have no burden-shows that the share transfer clause is reasonable. A 51% stake in Premier is worth approximately $1.5-$1.75M based on a 2014 third-party valuation of the company that Premier commissioned. (Ho Reply Decl. 2 and Ex. 1 thereto [company valued at $3.0- $3.5M].) At settlement, the potential range of damages the Chongs could suffer from a default during the life of the Settlement Agreement ranged from $1M to $3.4M.° The clause is thus reasonably related to the range of potential damages because the value of the shares falls squarely within the range of such damages. Having presented no evidence, Premier has not demonstrated that the 2014 valuation is > The inquiry can become a question of law where the facts are undisputed. Id. This, however, would still require evidence to establish such facts. ® The initial settlement consideration is for $3.4M, culminating in a balloon payment of about $1M. (Ex. 1 to Ho Decl. §§2, 3; id. 43.) The minimum amount owed would thus never be less than $1M. -8- SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo unreasonable or that the company’s value has increased since 2014. But, even if Premier’s value had increased by the time of settlement, such increase may not be sustainable. Premier’s CEO at the time of settlement testified just before settlement that he had grave concerns about the company’s future. (Ex. 2 to Ho Reply Decl.) The 2014 valuation thus provides a rational basis from which to measure the value of the share block. Further, even if Premier had presented evidence of a higher valuation, that would only have reflected that differing estimates exist. This is insufficient to render the clause unreasonable. Weber, 52 Cal.App.4th at 655 (reversing trial court; liquidated damages clause was enforceable even though opposing party offered expert testimony that method to fix damages was improper as that did not show clause was unreasonable but only that different economists might have different opinions on the proper method). Regardless, the logical implications of default compel the inference that the value of a 51% stake in Premier would not unreasonably exceed the Chongs’ potential damages irrespective of the company’s worth at the time of settlement. As noted (Reply 9:2-9:18), a default would show that Premier can neither fund its settlement obligations nor obtain financing to meet them. This would reflect severe financial difficulty for the company and portend a low valuation-a 51% stake is simply unlikely to be worth much at default, and likely less than the minimum $1M damages the Chongs would suffer. The Settlement Agreement is thus not “without regard or reference to the actual damages.” (Opp. 9:11-12.) Rather, the share transfer clause is linked to the potential damages because the value of the shares is correlated to Premier’s ability or inability to meet its payment obligations. This sliding-scale method guarantees (or at least makes it highly probable) that the value of Premier’s shares would not disproportionally exceed the Chongs’ damages at default. At a minimum, the share transfer clause cannot be construed to have been an unreasonable attempt to link its remedy to the range of harm that might occur at breach. Cf. Ridgley, 17 Cal.4th at 981 (an improper penalty clause is one that is “designed to exceed substantially the damages suffered”) (citation omitted). Premier, in addition to not meeting its evidentiary burden, offered no persuasive argument that the provision it agreed to after extensive mediation is unreasonable. Premier argued that the clause may cause Cross-Defendants to surrender the shares upon a trivial breach. (Opp. 1:23.) Premier, however, offered no argument (or evidence) supporting that scenario (including that it is realistic a 51% share -9. SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN Un W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o [\ ®] N o No N o N o N o No - - - - - - -_ - -_ 3 lo ) Wn ~ w No -_ oO © 0 J AN Wn ~ 2 No [a DN oo block would be worth $10M [id.]). It is also economically implausible for Premier to have a high valuation, yet be unable to meet its settlement obligations as the latter would reflect insolvency. Black’s Law Dict. (10th ed. 2014) (insolvency is the “condition of being unable to pay debts as they fall due”). In any event, the final settlement payment is to be for approximately $1M. Thus, breach at any point during the life of the settlement would cause significant damages. (Moreover, even if Premier could immaterially default, such default may give rise to certain defenses against enforcement of a conforming Stipulated Judgment, which is an additional basis for why the issue is not ripe, as noted.) Premier also reasoned that the share transfer clause is unnecessary as “[d]etermining the amount of damages at any point in time is a simple calculation.” (Id. 9:25-27.) That is the wrong analysis. The relevant test is if “at the time the contract was made” the stipulation is proportionate to the range of anticipated damages upon breach. Civ. Code § 1671. Further, it is only in cases subject to subsection (d) of section 1671, such as consumer cases, that the ability to calculate actual damages is of prime significance.” For subsection (b) cases, like here, there is no requirement that the ability to fix damages be absent or even difficult for the clause to be valid. It is also of no moment that the Settlement Agreement does not recite that the clause represents “the parties’ anticipated range of damages” (Opp. 9:22-25), as the parties’ recitals are irrelevant to the analysis. Krechuniak, 11 Cal. App.5th at 722; Weber, 52 Cal.App.4th at 656 (even a clause deemed a “penalty” is valid if reasonable)” And none of the cases Premier relied upon support invalidation of a conforming Stipulated J udgment.” 7 Unlike subsection (b), subsection (d) retains the older presumption against liquidated damages and states that “a provision [] liquidating damages [] is void except that the parties to such a contract may agree therein upon an amount [if] it would be impracticable or extremely difficult to fix the actual damage.” Civ. Code § 1671(d); see also Krechuniak, 11 Cal. App.5th at 721. ® That so-called forfeiture clauses are to be strictly construed (Opp. 9:6-9), has no bearing here where the parties’ intent is clearly expressed. In re Kitchen, 192 Cal. 384, 389-90 (1923) (rule “means simply that no wider scope is to be given to the language employed than is plainly required” and rule does not allow person “plainly and palpably coming within the scope of the forfeiture clause [to] escape the penalty of forfeiture”); Troughton v. Eakle, 58 Cal. App. 161, 173 (1922) (Civil Code § 1442 does not allow courts to “make for the parties a different contract from what they have agreed upon or resort to a strained and unnatural construction to defeat or nullify their clearly expressed purpose or intention”). The Settlement Agreement directly states that Cross-Defendants agreed to execute a Stipulated Judgment that is to give the Chongs 51% of Premier stock upon default. (Ex. 1 to Ho Decl. §4.A.) ? In addition to the reasons already stated (Reply 10:20-28), Timney v. Lin, 106 Cal.App.4th 1121, 1126 (2003), is distinguishable because it was decided under Civil Code section 1675, which is inapplicable here, and, unlike section 1671(b), invalidates as a matter of law liquidated damages exceeding 3% of the purchase price in a real-estate sale. Id. n. 2. Freedman v. St. Mathias Parish, 37 Cal.2d 16, 21-23 (1951), is further inapt as it was decided under the repealed version of California’s -10 - SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u b p & R o m o A P R O F E S S I O N A L C O R P O R A T I O N A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 AN nn W N CE RR IT OS , CA LI FO RN IA 90 70 3- 93 64 N o D o N o Ne ) N o No N o NN -_- -_- -_- -_- - - -_ -_ -_ J AN Wn ES N Ww no - © \ O o o J ta ] Wn ES N Ww No - DN co Finally, other relevant considerations favor enforceability of the share transfer clause. Civ. Code § 1671 (Law Rev. Comm. Cmnts.). The parties had equal bargaining power when crafting and entering into the Settlement Agreement. The individual parties were at times each shareholders, managers, and directors of Premier, and thus had similar sophistication. The parties were represented by counsel, with Cross-Defendants collectively represented by three different sets of lawyers. A mediator presided over the negotiations. And the Settlement Agreement is not a form contract. Further, even if it were easy to determine the amount owed at default, a money judgment reflecting such amount would likely be nugatory as default by its nature would evince Premier’s inability to satisfy a monetary judgment. It was thus reasonable for the parties to have agreed upon a share transfer as opposed to a stipulated money judgment. The clause is also reasonable as it would allow the Chongs to assume control of Premier and attempt to remedy the conditions that caused it to default. In short, the clause would be valid if the Chongs ever seek to enforce it because it was economically reasonable when made, was arrived at in a procedurally fair manner, and comports with the Legislature’s directive that parties must have “considerable leeway” in structuring liquidated damages clauses. /d. IIT. CONCLUSION The Chongs respectfully request that the Court grant their Motion. Dated: November 9, 2018 ATKINSON, A a LOYA, RUUD & ROMO By: "Edward C. Ho! Shawn M. Ogle Attorneys for JEAN CHONG and KOREY CHONG liquidated damages law, which, unlike now, presumed liquidated damages clauses were invalid. Under current law, the defining feature of an invalid clause tends to be that the liquidated damages when agreed upon unequivocally and dramatically exceeded the maximum damages the non-breaching party could suffer. Vitatech Int., Inc. v. Sporn, 16 Cal. App.5th 796, 802 (2017) (stipulated judgment when executed was in an amount more than two-times greater the amount owed under settlement agreement and when entered included additional interest and fees that made judgment more than four times greater); Greentree Fin. Grp., Inc. v. Execute Sports, Inc., 163 Cal. App.4th 495, 498 (2008) (stipulated judgment when entered more than two times greater amount owed under settlement). Here, the value of a 51% block in Premier is less than the initial settlement consideration based on the 2014 valuation and is likely to remain so if there were to be a default during the life of the Settlement Agreement. =11 = SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AGREEMENT A T K I N S O N , A N D E L S O N , L o y A , R u u p & R o m o 1 PROOF OF SERVICE 2 (CODE CIV. PROC. § 1013A(3)) 3 | STATE OF CALIFORNIA, COUNTY OF LOS ANGELES 4 I am employed in the County of Los Angeles, State of California. I am over the age of 18 years and am not a party to the within action; my business address is 12800 Center Court Drive 5 | South, Suite 300, Cerritos, California 90703-9364. 6 On November 9, 2018, I served the following document described as SUPPLEMENTAL BRIEF IN SUPPORT OF MOTION OF DEFENDANTS AND CROSS-COMPLAINANTS 7 | TO ENFORCE SETTLEMENT AGREEMENT 8 on the interested parties in this action as follows: 9 PLEASE SEE ATTACHED SERVICE LIST 10 MM BY ELECTRONIC SERVICE VIA ONE LEGAL: I caused a true and correct copy of . 11 the document(s) to be served through One Legal at www.onelegal.com addressed to the a parties shown herein appearing on the above-entitled case. The service transmission was 5 LE 12 reported as complete and a copy of One Legal’s Receipt/Confirmation Page will be 5 928 3 maintained with the original document in this office. £55870 = 5 253 14 I declare under penalty of perjury under the laws of the State of California that the Javecy s foregoing is true and correct. 2 5 ¢ i : z 16 Executed on November 9, 2018, at Cerrit alifornia. vl i 2 17 NU () C 1) / Ay - CRAIG FIELDS 19 20 21 22 23 24 25 26 27 28 015660.00011 21738628.3 -1- PROOF OF SERVICE 1 SERVICE LIST 2 Christopher J. Koorstad Attorneys for Plaintiffs and Cross-Defendants 31 1235 N. Harbor Blvd. BYONG W YOO and HWA YOO Suite 200 41 Fullerton, CA 92832 Tel. 714-871-1132 5 Fax 714-871-5620 Email: cjkoorslaw @aol.com 6 barbigrom @aol.com 7| Donald Yoo Defendant and Cross-Defendant 15102 Ocaso Avenue IN PRO PER 8 | LaMirada, CA 90638 9 Tel. 310-707-7222 Email: donaldyoo@yahoo.com 10 donnyyoo@ gmail.com. 111 Scott R. Albrecht Attorneys for Defendant and Cross-Defendant Samuels Green Steel LLP DIRK YOO 121" 19800 MacArthur Blvd. Suite 1000 Tel. 949-263-0004 131 Trvine, CA 92612 Fax 949-263-0005 14 Email: scott.albrecht@sgsattorneys.com salbrecht @sgsattorneys.com A T K I N S O N , A N D E L S O N , L o y A , R u u p & R o m o A T T O R N E Y S AT L A W 1 2 8 0 0 C E N T E R C O U R T D R I V E S O U T H , S U I T E 3 0 0 15 anat.pieter @sgsattorneys.com 16 jnguyen @sgsattorneys.com A P R O F E S S I O N A L L A W C O R P O R A T I O N C E R R I T O S , C A L I F O R N I A 9 0 7 0 3 - 9 3 6 4 T E L E P H O N E : (5 62 ) 6 5 3 - 3 2 0 0 FA X: (5 62 ) 6 5 3 - 3 3 3 3 Robert E. Adel Attorneys for PREMIER FOOD SAFETY 17 | Fortis, LLP CORPORATION 650 Town Center Drive 18 | suite 1530 Tel. (714) 839-3800 19 Costa Mesa, 92626 Fax (714) 795-2995 20 Email: radel @fortislaw.com 21 22 23 24 25 26 27 28 015660.00011 21738628.3 -2- PROOF OF SERVICE
