Court Opinion

ID: 6331244
Source: CourtListenerOpinion
Date Created: 2022-04-13 20:00:30.831919+00
Date Added: 2024-06-11T09:23:09.485745
License: Public Domain

NOT FOR PUBLICATION                           FILED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

                                           4                                    21-16015
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

                                           5                                     21-16015
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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