IIG Wireless, Inc. v. Yi

• Decision Date: 27 March 2018
• Docket Number: G053393
• Citation: 231 Cal.Rptr.3d 771,22 Cal.App.5th 630
• Court: California Court of Appeals Court of Appeals
• Parties: IIG WIRELESS, INC., Plaintiff, Cross-defendant and Appellant, v. John YI, Defendant, Cross-complainant and Appellant; Lauren Kim, Defendant and Respondent.

22 Cal.App.5th 630

231 Cal.Rptr.3d 771

IIG WIRELESS, INC., Plaintiff, Cross-defendant and Appellant,

v. John YI, Defendant, Cross-complainant and Appellant;Lauren Kim, Defendant and Respondent.

G053393

Court of Appeal, Fourth District, Division 3, California.

Filed March 27, 2018

Eanet, Matthew L. Eanet, Los Angeles and Laine Mervis for Plaintiff, Cross-defendant and Appellant.

The Hall Law Corporation and Laurence C. Hall, Los Angeles for Defendant, Cross-complainant and Appellant John Yi, and for Defendant and Respondent Lauren Kim.

OPINION

MOORE, J.

The parties appeal and cross-appeal a judgment after a jury trial in this business dispute. Plaintiff and cross-defendant IIG Wireless, Inc. (IIG) obtained a judgment of $401,860 against defendant and cross-complainant John Yi. IIG also sued Lauren Kim, Yi's fiancée, who moved for and was granted a nonsuit during trial. Yi obtained a judgment on his cross-complaint for $122,000, resulting in a final judgment of $279,860 in IIG's favor.

Yi appeals the judgment and the court's denial of his motion for judgment notwithstanding the verdict (JNOV). In sum, he argues there was no substantial evidence to support the verdict, the court made numerous errors with respect to the introduction of evidence and its conduct of the trial, and the damage award of $122,000 on his cross-complaint was inadequate.

IIG argues there was substantial evidence to support the verdict, the JNOV was properly denied, and the damage award on the cross-complaint should be reduced. In its cross-appeal, IIG argues the court should not have granted nonsuit as to Kim. Further, IIG contends the trial court erred by denying its motion to amend the complaint and to admit certain expert testimony.

We conclude that neither the appeal nor the cross-appeal have any merit, and we therefore affirm the judgment in its entirety.

IFACTS

A. Underlying Facts

IIG was formed in June 2007, and known under its name at the time, Unlimited PCS, Inc.¹ It is a distributor and retailer for cellular phones, equipment and plans for MetroPCS, a national carrier. The company has over 96 stores in southern California and in several other states, and operates stores both directly and under a dealer program with MetroPCS.

Before IIG's official formation, Yi had been doing business with MetroPCS and was the owner of several out-of-state dealers. Yi, Jimmy Hu, and Seung Lee founded IIG to become another dealer for MetroPCS with stores in southern California. Neither Hu nor Lee had experience in the industry.

Yi, Hu, and Lee were IIG's three founding shareholders. Lee provided $400,000 in investment capital, Hu was general manager of IIG, and Yi was chief executive officer (CEO) and chairman of the board.

Between June 2007, when IIG was formed, and the end of 2008, the company opened 30 stores. Yi signed personal guarantees with MetroPCS for product to sell, as well as the leases for the retail locations, while Hu and Lee did not.

The distribution of stock shares in the company is a major point of dispute. IIG claims that it initially issued 100,000 common shares of stock, with 20,000 going to Yi, and 40,000 each to Hu and Lee. A stock ledger and unsigned stock certificates dated June 14, 2007, show this distribution, as does an IRS form signed by each shareholder and attested to by Yi. Hu and Lee also testified to this at trial.

Yi testified that initial discussions had set forth a 40/40/20 allocation of shares, as IIG asserts, but because Yi was required to personally guarantee all leases, Yi requested and an agreement was reached that the share distribution would be 30,000 each to Hu and Lee and 40,000 to Yi. A September 27, 2007 document entitled "Shareholder Agreement of Unlimited PCS, Inc." (the 2007 agreement), is part of the record. The first paragraph states the agreement "dated September 27, 2007, is among John Yi, Jimmy Hu, and Seung Lee each holding 40 %, 30 %, and 30 % shares of stock ...." Each page includes three sets of initials, and what appears to be the signature of each individual.

Hu testified that he and Yi met with MetroPCS in November 2007, at which point the company had opened three stores. Hu was concerned about expanding quickly, and specifically, about where the funding would come from. Lee was initially opposed to any expansion. Yi and Hu discussed bringing in an additional investor. Hu and Lee testified that Yi told them that MetroPCS wanted Yi to be a majority shareholder in order to expand and launch new stores. Yi denied making such a statement, testifying that nobody at MetroPCS ever told him that.

Hu and Lee testified that based on the representation that MetroPCS required him to be majority shareholder, they agreed to each contribute 5,000 shares to Yi, and another 5,000 shares to IIG. Thus, the split among the shareholders would be 30 percent each, with 10 percent held by IIG as treasury shares.² Hu and Lee testified, however, that due to MetroPCS's purported requirement that Yi was to be the majority shareholder, they agreed to put the 10,000 shares of treasury stock in his possession. Hu testified that Yi said he would return the treasury stock when he stepped down as CEO; that he would return the stock when other shareholders requested he do so; and that he would return the stock to future key employees. Lee testified similarly. Hu also testified that Yi understood any dividends on the 10,000 treasury shares would also be held in treasury.

The record includes another shareholder agreement, this one dated January 1, 2008 (the 2008 agreement). It names Yi, Hu, and Lee, as well as an additional individual, new investor Ho Hyun Chung. The agreement and the signature page state the percentage of interest held by each shareholder: 41 percent to Yi, 10 percent to Hu, 25 percent to Lee, and 24 percent to Chung, who made a $400,000 investment. Prior to the execution of this agreement, Yi, Hu, and Lee had various conversations about where Chung's shares should come from. Hu eventually offered 20,000 shares to Chung, but was concerned about his financial benefit if the company was successful. Hu testified Yi told him he would compensate Hu for the shares. In addition to Hu's shares, 4,000 of Lee's shares went to Chung. Hu and Lee also transferred 500 shares each to Yi.

IIG's controller, Luke Cheon, also testified that Yi told him that he held 10,000 treasury stock shares that Yi could transfer to key employees. A 2010 e-mail from Chung, the new investor, to Cheon, Yi, Hu, and Lee was about proposed language for a written recap of a video meeting. One of the items addressed was the "10% reserved shares," and stated in part that Yi "stated and it was fully acknowledged by the shareholders that [Yi] has every right of the reserved shares distribution for the company when necessary under his discretion."

For his part, Yi testified that no treasury stock existed, and he replied to Chung's e-mail saying so. He testified the changes to the allocation of shares were in light of the personal guarantees he had to execute.

In 2009, an amendment (the 2009 amendment) to the shareholder agreement was executed, bringing in another new investor, Seung Hee Ko. Ko invested $400,000 in return for 21,951 shares, which came from Yi, Hu, and Lee. After the amendment, Yi owned 33.6 percent of the shares; Hu 8.2 percent; Lee 20.5 percent; Chung 19.7 percent; and Ko 18 percent. There was no mention of treasury shares or reserved shares in the 2009 amendment.

In February 2010, Chung, the 2008 investor, sent an e-mail to Yi which addressed several issues. This e-mail was copied to numerous others. One of the issues addressed was the alleged treasury shares. Chung stated, under the heading "10% share contribution to [IIG]" as follows: "This was a promise from CEO [Yi] and we would like to ask you to make the contribution in QI 2010. This is because we believe it is fair for the company to take & accumulate the dividend for future use. We do not believe it was a misheard or misunderstanding, and accepted it as a promise of CEO. Please let us remind you that the investments and personal loans were made based on your promises and this was one of them. In addition as an investor I questioned about how the shares were divided and two reasons were heard. One was that it is better for the company that you have majority share for the relationship with Metro PCS—as CEO of UPCS—to bring in better, favorable deals and the other was that you would contribute 10% to the company In a few years and you would not really care about the %."

According to IIG, Yi did not respond, but eventually transferred 4,166 of what IIG claimed was treasury stock to Cheon, the controller. Yi continued to hold, IIG alleged, 5,834 shares of treasury stock.

Shortly thereafter, in the first quarter of 2010, Chung sold his shares to IIG in return for his $400,000 investment. There was a disagreement about the disposition of the shares between Lee, Hu, and Yi. Eventually they agreed to transfer sufficient shares to Hu so that he would once again own 20,000 shares, as he had before the 2009 amendment. At a shareholder meeting in December of that year, a lengthy discussion was held about the status of the stock. An agreement was eventually reached that made no mention of treasury shares. Subsequent board actions, meetings, and tax returns also make no mention of treasury shares.

IIG claims Yi committed numerous other misdeeds during his time as CEO, including directing IIG to issue payments of $48,000 to Kim, who was his girlfriend at the time (and was his fiancée at the time of briefing). IIG claimed Kim did not perform any work for IIG and was not an employee, but stated that Yi directed Cheon, the controller, to direct IIG's payroll company to "convert" Yi's dividend payments to Kim's name. According to IIG, it had to pay withholding taxes on behalf of Kim in excess of $5,000. IIG also claimed Yi caused IIG to pay rent on an apartment after IIG had specifically terminated such...