Jes Solar Company Limited v. Matinee Energy Incorporated ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 13 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JES SOLAR COMPANY LIMITED, a South No. 21-16015
Korean Corporation; AIRPARK COMPANY
LIMITED, a South Korean Corporation; D.C. No. 4:12-cv-00626-DCB
HANKOOK TECHNOLOGY
INCORPORATED, a South Korean
Corporation, MEMORANDUM*
Plaintiffs-Appellants,
v.
S. CHIN KIM, husband and TONG
SOO CHUNG, husband
Defendants-Appellees,
and
MATINEE ENERGY INCORPORATED, a
Nevada Corporation; SAMSUN LLC, a
Virginia limited liability company; KIM,
First Name Unknown; named as Jane Doe
Kim, wife; JOHN S. LEE, husband; LEE,
First Name Unknown; named as Jane Doe
Lee, wife; KIM, First Name Unknown;
named as Jane Doe Kim, wife; PAUL
JEOUNG, husband; JEOUNG, First Name
Unknown; named as Jane Doe Jeoung, wife;
CHUNG, First Name Unknown; named as
Jane Doe Chung, wife; UNKNOWN
PARTIES, named as John Does I-V; Jane
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Does I-V; Black Partnerships I-V; and White
Corporations I-V; CHUN RAE KIM,
husband
Defendants.
Appeal from the United States District Court
for the District of Arizona
David C. Bury, Senior District Judge, Presiding
Submitted April 11, 2022**
San Francisco, California
Before: BYBEE and R. NELSON, Circuit Judges, and MORRIS,*** District Judge.
Plaintiffs-Appellants JES Solar Company, Ltd., Airpark Company, Ltd., and
Hankook Technology, Inc., (collectively, “Contractors”) appeal the district court’s
decision to award attorneys’ fees for Defendants-Appellees S. Chin Kim (“Kim”)
and Tong Soo Chung (“Chung”). Contractors also appeal the district court’s decision
to deny Contractors’ motion for a stay of that award. Because the facts of this case
are known to the parties, we repeat them only as necessary to explain our decision.
We review de novo any elements of legal analysis and statutory interpretation
in the district court’s award of attorneys’ fees. Barrios v. Cal. Interscholastic Fed’n,
277 F.3d 1128, 1133 (9th Cir. 2002). We review findings of fact related to the award
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Brian M. Morris, United States District Judge for the
District of Montana, sitting by designation.
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of attorneys’ fees for clear error. Id. We review for abuse of discretion the district
court’s decision to deny Contractors’ motion to stay. United Steelworkers of Am. v.
Ret. Income Plan for Hourly-Rated Emps., 512 F.3d 555, 563 (9th Cir. 2008).
1. The district court correctly concluded that Kim and Chung were eligible for
an award of attorneys’ fees under Arizona law. Arizona law provides that “[i]n any
contested action arising out of a contract, express or implied, the court may award
the successful party reasonable attorney fees.” Ariz. Rev. Stat. § 12-341.01(A). An
action in tort may give rise to an award of attorneys’ fees if the tort action could not
exist “but for” the breach of the contract. Sparks v. Republic Nat’l Life Ins. Co., 647
P.2d 1127, 1141 (Ariz. 1982). A claim of fraudulent inducement to a contract will
satisfy the “but for” test when the cause of action “could not have existed but for the
fraudulently induced contract.” Marcus v. Fox, 723 P.2d 682, 685 (Ariz. 1986).
The district court correctly applied the legal standard under Sparks and
Marcus. We agree that Contractors’ alter ego claim against Kim and Chung arose
under contract. As was the case in Marcus, the tort of fraudulent inducement alleged
by Contractors could not have existed but for the creation of contracts between
Contractors and Matinee Energy, Inc. Contractors’ efforts to pierce the corporate
veil through their alter ego claim against Kim and Chung sought to hold Kim and
Chung financially liable for fraudulent inducement of a contract and breach of
contract. Piercing the corporate veil is not itself an independent action but a
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procedural means of allowing liability on a substantive claim. See, e.g., Dietel v.
Day, 492 P.2d 455, 457 (Ariz. App. 1972). Contractors’ alter ego claim sought to
hold Kim and Chung accountable for claims arising from contract. We affirm the
district court’s holding that Kim and Chung were eligible for attorneys’ fees under
Arizona law.
2. The district court did not abuse its discretion in awarding fees to Kim and
Chung. An award of attorneys’ fees under Ariz. Rev. Stat. § 12-341.01 is
discretionary. Fulton Homes Corp. v. BBP Concrete, 155 P.3d 1090, 1093 (Ariz.
App. 2007). Trial courts consider the following factors when awarding fees under
Ariz. Rev. Stat. § 12-341.01: 1) the merits of the claim of the unsuccessful party; 2)
whether litigation could have been avoided or settled and the successful party’s
efforts were superfluous in achieving the result; 3) whether assessing fees imposes
extreme hardship on the unsuccessful party; 4) whether the successful party
prevailed with respect to all of the relief sought; 5) the novelty of the legal question
presented, and whether such claim of defense had previously been adjudicated in
this jurisdiction; and 6) whether an award would discourage other parties with
tenable claims or defenses from litigating or defending legitimate contract issues for
fear of incurring liability for substantial attorneys’ fees. Assoc. Indem. Corp. v.
Warner, 694 P.2d 1181, 1184 (Ariz. 1985).
The district court properly concluded that the above factors weigh in favor of
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granting attorneys’ fees to Kim and Chung. Contractors pursued alter ego claims
against Kim and Chung despite failing to provide evidence demonstrating Kim’s or
Chung’s involvement, and Kim and Chung prevailed on all claims. The district court
reasonably concluded that an award would not discourage tenable claims, but may
discourage plaintiffs from pursuing frivolous claims after having had a full and fair
opportunity to discover that their claims lack merit. It also noted that Kim and Chung
experienced significant hardship from this litigation.
The district court also correctly determined that attorneys’ fees need not be
apportioned between claims because the conspiracy and alter ego claims were so
intertwined that no need existed to apportion attorneys’ fees. We agree that the legal
work required to defend either claim consisted of proving or disproving whether
evidence existed to show Kim and Chung knew of the fraudulent conduct perpetrated
by Matinee and either controlled those activities or promoted them. Kim’s and
Chung’s appeal of the district court’s default judgment in favor of Contractors was
a necessary condition for Kim and Chung to defend themselves against Contractors’
alter ego claim. We affirm the district court’s decision to grant attorneys’ fees
without apportionment.
3. Finally, the district court did not abuse its discretion in denying Contractors’
motion to stay the award of attorneys’ fees until after the conclusion of criminal
proceedings against Matinee Energy’s former-CEO Paul Jeoung and any South
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Korean proceedings that might shed light on the role Kim and Chung played with
Matinee Energy. A trial court may enter a stay of an action before it, pending
resolution of independent proceedings which bear upon the case. Leyva v. Certified
Grocers of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 1979). The best evidence available
to the district court strongly suggests that Kim and Chung were not Jeoung’s co-
conspirators. The United States government had notified Kim and Chung that they
were considered victims and entitled to restitution in Jeoung’s criminal case.
“Where it is proposed that a pending proceeding be stayed, the competing
interests which will be affected by the granting or refusal to grant a stay must be
weighed.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). Among those
competing interests are the hardship or inequity that a party may suffer in being
required to go forward. Id. As discussed above, the district court considered the
hardships imposed upon Kim and Chung by this litigation. Thus, we affirm the
district court’s determination that Contractors’ motion for a stay was not warranted.
AFFIRMED.
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