Samjungcast Co. v. Expway Corp.

1

SAMJUNGCAST CO., LTD., Plaintiff and Appellant, v. EXPWAY CORPORATION, Defendant and Respondent.

H048862

California Court of Appeals, Sixth District

March 10, 2023

NOT TO BE PUBLISHED

Santa Clara County Super. Ct. No. 19CV345248

LIE J.

Samjungcast Co., Ltd. (Samjungcast) first sued Expway Corporation (Expway) in New York, alleging contractual and tort claims arising out of the parties' business relationship in South Korea. After the New York state court dismissed the action on forum non conveniens grounds, Samjungcast brought this action. The trial court dismissed the case on Expway's demurrer, concluding that each cause of action was time-barred. We uphold the trial court's determination with respect to the tort causes of action. Because we read the operative complaint as stating a timely contractual claim under at least one legal theory, however we reverse as to Samjungcast's first and fifth causes of action.

I. BACKGROUND^[1]

Expway is a Delaware corporation headed by Claude Seyrat with offices in South Korea, France, Delaware, and California. Expway provides broadcast multicasting service (BMS), a system that facilitates high-quality video streaming to large numbers of subscribers. Moon-Ki Jeong is the director of Expway's South Korean offices.

Samjungcast is a South Korean business organization headed by Choong Woon Moon^[2] and authorized to do business in California.

In 2014, Jeong told Moon that Expway, the only entity providing BMS, was looking for a distributor to cultivate business in Asia. After "a series of meetings and discussions," the two reached "a verbal agreement for 'Expway's exclusive South Korea distributorship' with opportunity to develop other Asian markets." The verbal agreement was "partially" reflected by a written agreement executed on December 10, 2014. Notwithstanding the written agreement, the parties contemplated that "certain core issues would be [addressed] 'later.' "

The written agreement was a "Value Added Reseller Agreement" (VAR Agreement).^[3] Through the agreement Expway granted "Reseller" Samjungcast "a nonexclusive right and license to distribute, market, resell to End-Users, maintain and support" specified software in South Korea, Samjungcast's assigned sales area.

Under the VAR Agreement, Samjungcast would pay Expway for its software and resell the software to third parties at prices approved by Expway. The VAR Agreement had a 12-month term, subject to a one-time automatic renewal for an additional 12 months. The VAR Agreement contained an integration clause: "The Agreement sets out the entire agreement between the Parties in relation to its subject matter. It supersedes all prior documents or agreements between the Parties and may only be modified by an instrument signed by the relevant Parties." The VAR Agreement also had a choice-of-law provision and a forum-selection clause: "This Agreement is subject to the laws of the State of California, United States.... [¶] In the event of a dispute between the Parties resulting from the interpretation, application and/or performance of this agreement, . . . exclusive jurisdiction shall be granted to the applicable courts of the State of California, United States, notwithstanding multiple defendants or third[-]party claims even for emergency proceedings and protective procedures."

Before the parties entered the contract, Jeong told Moon that Expway had three specific customers who were committed to signing contracts for licenses, and who would within three months provide a revenue stream for Samjungcast. At some point, Samjungcast learned that Jeong's representations conflicted with Expway's internal assessment that a South Korean reseller would need to spend approximately $500,000 to $1 million over two to four years before realizing a revenue stream.

At some point, Jeong told Moon that Expway would pay Samjungcast a commission of 20 to 30 percent of gross revenues for all South Korean accounts- including an account with Samsung Electronics that Expway had already developed- plus hourly fees for local customer servicing and support work. After the parties executed the VAR Agreement, through March 2015, Jeong continued to assure Moon that Samjungcast would take over the Samsung contract.

In December 2014, Samjungcast acquired an office, hired engineering and support staff, and began providing customer support to Samsung. When Expway did not pay Samjungcast for servicing the Samsung account, Samjungcast repeatedly complained throughout 2015. Expway initially told Samjungcast that "such issues" would be addressed by Jeong, but by late 2015 and early 2016, Expway and Jeong began telling Samjungcast that they had" 'never promised'" the revenue shares Samjungcast claimed.

From January to March 2015, Jeong solicited a kickback agreement, telling Moon that Samjungcast had to" 'pay to play' "-that is, Samjungcast had to agree to pay Jeong, personally, sizable kickbacks from any Samjungcast revenue generated by Expway licenses. Samjungcast refused to do so. In retaliation, Jeong interfered with Samjungcast's efforts to sell licenses for Expway's software.

The three specific customers that Jeong had told Moon were committed to signing contracts for licenses never materialized. Samjungcast would later conclude that the claimed customers never existed. Samjungcast never succeeded in signing contracts with any new customers.

In mid-2015, Moon discovered that Jeong was using a Samjungcast corporate credit card for personal expenses, but Jeong refused to surrender the card for several months after Moon asked him to do so. Expway has refused to take action against Jeong for his use of Samjungcast's corporate credit card.

In November 2015, Samjungcast developed a lead with a potential customer. To secure the sale, Samjungcast requested demo software from Expway. Expway insisted on advance nonrefundable payment of $60,000 or 50,000 euros for the demo software, with the intention of diverting the customer away from Samjungcast so that Expway could unilaterally develop the account.

In December 2015, Samjungcast's chief engineer resigned after Samjungcast had invested significant effort training him, in particular to service Expway's Samsung account. Three weeks later, Expway hired the chief engineer. This enabled Expway to directly service the Samsung account without Samjungcast. Samjungcast, after investigating, concluded that Expway conducted "industrial espionage" against it with the assistance of Samjungcast's chief engineer, while he was still employed by Samjungcast.

By February 2016, Moon was having difficulty contacting Expway: Expway had instructed him to work through Jeong, but Jeong was avoiding him due to the credit card dispute. That month, Moon wrote to Seyrat alleging that Expway had broken a contractual promise by failing to pay 20 to 30 percent of Samsung's license fee to Samjungcast and had improperly retained Samjungcast's chief engineer.

In April 2016, Moon provided Seyrat a more comprehensive written list of grievances, including Expway's alleged failure to pay invoices for Samjungcast's hourly services, Expway's alleged failure to pay appropriate commissions on the Samsung account, Jeong's alleged false promise of three customers, Jeong's alleged embezzlement of Samjungcast funds, Jeong's alleged successful effort to persuade a Samjungcast engineer to leave the company in favor of Expway, and other unspecified breaches of the implied covenant of good faith and fair dealing. In the letter, Samjungcast asked Expway to agree to arbitrate the dispute.

On April 29, 2016, Samjungcast filed a complaint against Expway and Jeong in New York state court. Samjungcast alleged in the complaint that Expway and Jeong induced it to enter a contract by falsely representing that there were three or four customers with impending contracts, breached a revenue-sharing agreement relating to the Samsung account, attempted to secure kickbacks through Jeong, diverted a potential client away from Samjungcast by insisting on a $60,000 fee for demo software, embezzled Samjungcast funds through Jeong's use of the corporate credit card, and tampered with Samjungcast's engineering staff to access Samjungcast's proprietary information. Samjungcast alleged claims for fraud in the inducement, tortious interference with prospective advantage, tortious interference with business relations, prima facie tort, breach of the implied covenant of good faith and fair dealing, and breach of verbal agreement.

On November 17, 2016, the New York trial court dismissed Samjungcast's complaint on forum non conveniens grounds. Samjungcast appealed the order of dismissal, but the appellate court dismissed the appeal as untimely. On March 16, 2018, Expway served notice of the adverse appellate ruling on Samjungcast.

Samjungcast initiated the present action against Expway and Jeong on March 27, 2019. In the operative FAC, filed July 16, 2020, Samjungcast alleged causes of action for breach of contract, fraud in the inducement, tortious interference with prospective advantage, tortious interference with business relations, and breach of the covenant of good faith and fair dealing. The next month, Samjungcast voluntarily dismissed its claims against Jeong without prejudice.

Expway successfully demurred to the FAC. The trial court entered judgment in favor of Expway and against Samjungcast on January 25, 2021. Samjungcast timely appealed.

II. DISCUSSION

"In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory." (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.) In the exercise of our independent...