On 03/01/2018 Cho filed an Other lawsuit against Kim, Consolidated With Case No 18CV340037. This case was filed in Santa Clara County Superior Courts, Downtown Superior Court located in Santa Clara, California. The Judge overseeing this case is Kuhnle, Thomas. The case status is Pending - Other Pending.
Pending - Other Pending
Santa Clara County Superior Courts
Downtown Superior Court
Santa Clara, California
Steve Lacombe Derivatively on behalf of Newco Materials Technology, Inc.
Newco Materials Technology, Inc.
Newco Materials Technology, Inc.
Quartz Materials CO. LTD.
Kumkang Quartz Co. LTD.
Quartz Materials CO. LTD.
Superior Court of California
Kumkang Quartz Co. LTD.
Newco Materials Technology, Inc.
Superior Court of California
Lisa, William S
O'Hara, Gregory Paul
Avilla, Paul S.
Tarvin, Nathaniel James
Schmadeka, Larry Robert
Tarvin, Nathaniel James
Schmadeka, Larry Robert
Lisa, William S
O'Hara, Gregory Paul
Superior Court of CA, County of Santa Clara
Avilla, Paul S.
Superior Court of CA, County of Santa Clara
Bostick, Mark Steven
Notice CMC 9-6-19 at 10am in D5: Comment: CMC set for 9/6/19 at 11am in D5
Joint CMC Statement: Comment: Joint Case Management Statament
Joint CMC Statement HRG 7-1-19: Comment: Joint CMC Statement HRG 7/1/19
Proposed Order HRG 6-14-19: Comment: Proposed Order
William S. Lisa Declaration HRG 6-14-19: Comment: Declaration of William S. Lisa ISO Plaintiff's Ex Parte Application for Order Lifting Discovery Stay and Shortening Defendant's Time to Respond
Ex Parte Application HRG 6-14-19: Comment: Plaintiff's Ex Parte Application for Order Lifting Discovery Stay and Shortening Defendants' Time to Respond
Motion Consolidate HRG 4-19-19: Memorandum of Points & Authorities HRG 4-19-19: William S. Lisa Declaration HRG 4-19-19: Proof of Service HRG 4-19-19: Minutes Non-Criminal: Order re Judicial Supervision Over Winding Up Corporation; Motion to Appoint Receiver: Supplemental Order re Supervision Over Winding Up Corporation; Mtn to Appoint Receiver: Judicial Officer: Kuhnle, Thomas; Hearing Time: 9:00 AM; Result: Heard: Granted; Comment: Motion by Plaintiffs/Respondents Howard Cho and Steven LaCombe to Consolidate Case No. 18CV340037 (In Re Newco Materials Technology, Inc.), with Case No. 18CV323993 (Cho, et al. v. Kim, et al.) and Appoint Case No. 18CV323993 as the Lead Case
Complaint (Unlimited) (Fee Applies): Chang-Kil Kim Declaration HRG 1-18-19: Young-Yup Kim Declaration HRG 1-18-19: Proof of Service: Motion Quash HRG 1-18-19: Reply ISO Mtn to Quash: Minutes Non-Criminal: Plaintiff Supplemental Brief in support of Opposition to Motion to Quash HRG 4-19-19: Howard Cho Supplemental Declaration HRG 4-19-19: Proof of Service HRG 4-19-19: Plaintiff Supplemental Brief in opposition to Motion to Quash HRG 4-19-19: Howard Cho Supplemental Declaration HRG 4-19-19: Proof of Service HRG 4-19-19: Order re Motion to Quash: Amended Order re Motion to Quash HRG 3-8-19: Judicial Officer: Kuhnle, Thomas; Hearing Time: 9:00 AM; Result: Held; Comment: Motion by Specially Appearing Defendants Kumkang Quartz Co., Ltd., Quartz Materials Co., Ltd., Chang-Kil Kim, and Young-Yup Kim to Quash Service of Summons for Lack of Personal Jurisdiction [set by the Court at the 11/9/18 hearing]
Civil Lawsuit Notice: Comment: 1st CMC set for 6/29/18 at 10am in D1; assigned to Hon. Thomas E. Kuhnle
Minutes Non-Criminal: Order re Judicial Supervision Over Winding Up Corporation; Motion to Appoint Receiver: Judicial Officer: Kuhnle, Thomas; Hearing Time: 11:00 AM; Result: Held; Comment: **Continued from 3-8-19**
Kumkang.pdf: Comment: Notice of Special Appearance
Proof of Service Summons DLR (Civil):
22860 Notice of Payment of Complex Fee.pdf: Comment: Notice of Payment for Complex Case Designation
Order Deeming Case Complex, Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEK
Summons Issued Filed:
Civil Case Cover Sheet.pdf:
Complaint (Unlimited) (Fee Applies):
Conference: Case Management - Judicial Officer: Kuhnle, Thomas; Hearing Time: 11:00 AM; Comment: Also: (further continued from 7/1/19) Ex Parte Application by Plaintiffs to Lift Discovery Stay and Shorten Defendants' Time to RespondRead MoreRead Less
Order - Amended Order re Motion to Quash HRG 3-8-19: Comment: Amended Order re Motion to Quash HRG 3/8/19 - signed/TEKRead MoreRead Less
Notice - Notice CMC 9-6-19 at 10am in D5: Comment: CMC set for 9/6/19 at 11am in D5Read MoreRead Less
Conference: Case Management - Order re Judicial Supervision Over Winding Up Corporation; Motion to Appoint Receiver: Supplemental Order re Supervision Over Winding Up Corporation; Mtn to Appoint Receiver: Joint CMC Statement HRG 7-1-19: Minutes Non-Criminal: Judicial Officer: Kuhnle, Thomas; Hearing Time: 10:00 AM; Result: Held; Comment: Mohamed Poonja appointed as Receiver; Order issued 4/22/19; Supplemental Order issued 5/3/19. Also: Continued (from 6/14/19) Ex Parte Application by Plaintiffs to Lift Discovery Stay and Shorten Defendants' Time to RespondRead MoreRead Less
Minute Order - Minutes Non-Criminal:Read MoreRead Less
Advance jury fee (Nonrefundable) - Comment: Specially-Appearing Defendants' Notice of Posting Jury FeesRead MoreRead Less
Statement: Case Management Conference - Joint CMC Statement: Comment: Joint Case Management StatamentRead MoreRead Less
Statement: Case Management Conference - Joint CMC Statement HRG 7-1-19: Comment: Joint CMC Statement HRG 7/1/19Read MoreRead Less
Hearing: Exparte Application - Ex Parte Application HRG 6-14-19: William S. Lisa Declaration HRG 6-14-19: Proposed Order HRG 6-14-19: Opposition to Ex Parte Application HRG 6-14-19: Minutes Non-Criminal: Judicial Officer: Kuhnle, Thomas; Hearing Time: 2:00 PM; Result: Held; Comment: Plaintiff's Ex Parte Application to Lift Discovery Stay and Shorten Defendants' Time to Respond (Atty William Lisa)Read MoreRead Less
Minute Order - Minutes Non-Criminal:Read MoreRead Less
Notice - Kumkang.pdf: Comment: Notice of Special AppearanceRead MoreRead Less
Default Pending - Comment: BasicRead MoreRead Less
Proof of Service: Summons DLR (Civil) - Proof of Service Summons DLR (Civil):Read MoreRead Less
Proof of Service: Summons DLR (Civil) - Comment: Proof of Service of Summons/ComplaintRead MoreRead Less
Notice - 22860 Notice of Payment of Complex Fee.pdf: Comment: Notice of Payment for Complex Case DesignationRead MoreRead Less
Order: Deeming Case Complex - Order Deeming Case Complex, Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEKRead MoreRead Less
Civil Lawsuit Notice - Civil Lawsuit Notice: Comment: 1st CMC set for 6/29/18 at 10am in D1; assigned to Hon. Thomas E. KuhnleRead MoreRead Less
Summons: Issued/Filed - Summons Issued Filed:Read MoreRead Less
Civil Case Cover Sheet - Civil Case Cover Sheet.pdf:Read MoreRead Less
Complaint (Unlimited) (Fee Applies) - Complaint (Unlimited) (Fee Applies):Read MoreRead Less
3/1/2018 12:52 PM
GREGORY P. O'HARA (SBN 131963) Clerk of Court . i County of Santa Clara email@example.com 18CV323993 NIXON PEABODY LLP . _ One Embarcadero Center, 18 Floor Reviewed By: R. Walker
San Francisco, CA 94111 Tel: 415-984-8200 Fax: 415-984-8300
Attomeys for Plaintiffs HOWARD CHO, STEVE LACOMBE
HOWARD CHO, an individuel; STEVE Case No. 18CV323993 I ACOMBE, an individual;
Derivatively On Behalf of NEWCO (Derivative Action)
MATERIALS TECHNOLOGY, INC,;
VS. DEMAND FOR JURY TRIAL
CHANG-KIL KIM; YOUNG-Y UP K1Vj; KUMKANG QUARTZ CO., LTD,; QUARTZ MATERIALS CO.,, LTD.; and DOES 1-20
inclusive, Defendants, and NEWCO MATERIALS TECHNOLOGY, INC,, Nominal Defendant.
1. This is a shareholder derivative action on behalf of Newco Materials Technology, Inc. (“Newco” or the “Company”) and against certain of its directors seeking to remedy Defendants’ violations of state law, including breaches of fiduciary duties, fraud, interference with prospective economic advantage, waste of corporate assets, and unjust enrichment that occurred
between March, 2017 and the present (the “Relevant Period”). 2. Plaintiff brings this derivative action on behalf of and for the benefit of Newco. Defendants Mr. Young-Yup Kim and Mr. Chang-kil Kim (collectively the “Individual Defendants”) acted intentionally or recklessly and in bad faith in breaching their fiduciary duties and abusing their control positions at the Company and using proprietary Comparly infornmation to, inter alia, convert and obfuscate corporate opportunity from Newco to Defendants” own businesses, manipulating the wholly-owned subsidiary of Newco and its employees to conceal illegitimate business transactions, hidden commissions and Kickbacks, misrepresent the financial statements of the subsidiary, and interfere with the prospective economic relationships of the subsidiary.
3. As controlling members of the Company’s Board of Directors (the “Board”), the Individual Defendants have breached their fiduciary obligations of due care, loyalty and diligence in exercising oversight over the management and administration of the affairs of the Company, as well as the use and preservation of its property and assets. The Individual Defendants were required to act in the best interests of the Company and its members and not in the furtherance of their personal interests or those of Defendants’ other businesses.
4, Since the Individual Defendants have failed to act to protect the Company under these circumstances, Plaintiff brings this action on behalf of Newco to, inter alia, recover damages for the harm the Individual Defendants have inflicted on the Company; to prevent the Individual Defendants from continuing their wasteful, reckless and wrongful course of conduct; to oust Defendants Changrkil Kim, and Young-Yup Kim as directors of the Company for failure to propery discharge their fiduciary duties; and to reform Newco’ s corporate govemance policies and Bylaws to protect it and its shareholders from Defendants’ misconduct in the future.
D. This Court has jurisdiction because Newco conducts business in Califormia and has its principal place of business in PO Box 60309, Palo Alto, California 94306. Thus, Newco is a resident and citizen of Califormia. Plaintiff Cho is also a resident and citizen of California.
7. Plaintiff Howard Cho (“Cho”) is a member of Newoo and has been at all relevant times hereto. Cho is also a director of Newco. Plaintiff Cho has an 8.4% equity ownership in Newco.
8. Plaintiff Steve LaCombe (“LaCombe”) is a member of Newoco and has been at all relevant times hereto. LaCombe is the Director of Applications Engineenng of Newco and has a 4.8% equity interest in Newco.
9. The Plaintiffs together own 13.2% of the equity interest of Newco.
10. Nominal Defendant Newco Materials Technology, Inc. (“Newco”) is a corporation organized and existing under the laws of the State of California with its principal place of business located at PO Box 60309, Palo Alto, Califormia 94306. Newco was formed on December 23, 2011.
11. Defendant Mr. Chang-kil Kim (“Chang-kil Kim”) currently serves as both the Chair of the Board of Directors of Newco. He has been a director since January 11, 2012. Chang-kil Kim is the majority and controlling owner of Kumkang Quartz Co., Ltd., as well as its Chief Executive Officer. Correspondingly, Chang-kil Kim is also the majority and controlling owner of Kumkang Quartz Co., Ltd.’s fully owned subsidiary Quartz Materials Co., Ltd. Quartz Materials Co., Lid. and Kumkang Quartz Co., Ltd. each own 35% of Newco, and collectively comprise the majority and controlling owners of Newco, owning 70% of Newco’s outstanding shares. subsidiary Quartz Materials Co., Ltd. for the personal benefit of Chang-kil Kim and Y oung-Y up Kim, and not for the benetit of Newco, or for the collective benefit of the shareholders as a group.
13. Defendant Kumkang Quartz, Lid. is an entity formed under the laws of South Korea and together with its subsidiary Defendant Quartz Materials Co., Ltd., also formed under the laws of South Kores, (collectively “KKQ”) owns a controlling interest in Newco and controls the board of directors of Newco.
14. Defendant Quartz Materials Co., Ltd. is an entity fonmed under the laws of South Korea and together with its parent Defendant Kumkang Quartz, Lid., also formed under the laws of South Kores, (collectively “KKQ”) owns a controlling interest in Newco and controls the board of directors of Newco.
15. By reason of their positions as directors and fiduciaries of Newoco and because of their ability to control the business and corporate affairs of Newoo, the Individual Defendants owed the Company and its shareholders fiduciary obligations of good faith, loyalty, and candor, and were and are required to use their utmost ability to control and manage Newco in a fair; just, honest, and equitable mamner. The Individual Defendants were and are required to act in furtherance of the best interests of the Company and its shareholders so as to benetit all shareholders equally and not in furtherance of their personal interest or benefit. Each director and officer of the Company owes to Newco and its shareholders the fiduciary duty to exercise good faith and diligence in the administration of the affairs of the Companypreservation of its property and assets, and the highest obligations of fair dealing. (a) Exertise good faith to ensure that the affairs of the Company were conducted in an efficient, business-like manner;
(b) Manage, conduct, supervise and direct the Company’s business affairs in accordance with applicable laws, rules and regulations;
(c) Neither violate nor permit any officer, director, agent, or employee of the Company to violate applicable laws, rules, and regulations;
(d) Establish and maintain systematic and accurate books and records of the business and affairs of the Company and procedures for the reporting of the business and affairs;
() Maintain and implement an adequate and functioning system of intemal financial and accounting controls, such that the Company’s financial statements and infonmation would be accurate; and
() Remain informed as to how the Company conducted its operations, and, upon receipt of notice or information of imprudent or unsound conditions or practices, to make reasonable inquiry in connection therewith, and to take steps to correct such conditions or practices and make such disclosures as are necessary to comply with the applicable federal and state corporation and/or securities laws.
17. Each Individual Defendant, by virtue of his or her position as a director and/or officer, owed to the Company and to its shareholders the fiduciary duties of loyalty, good faith and the exercise of due care and diligence in the management and administration of the affairs of the Compary, as wellpreservation of its property and assets. The conduct of the Individual Defendants complained of herein involves a knowing and culpable violation of their obligations as directors and officers of the Company, the absence of good faith on their part, and a reckless disregard for their duties to the Company and its shareholders that the Individual Defendants were actually aware or should have been aware posed a serious injury to the Company.
18. Newco was formed in late 2011 by agreement of four individuals, including Cho
and LaCombe, all of whom had vast experience in the business of quartz, silicon and CVD SiC Chang-kil Kim expressed an interest in entering into a business venture with Newco. At the time, Kumkang Quartz Co., Ltd. and its partially owned subsidiary, SungRim Co., Ltd., conducted business in Korea in both the diffusion and etch markets. Upon information and belief, in 2015, following a govemmental investigation into SungRim Co., Ltd. for fraud and conuption, and industry backlash against Kumkang Quartz Co. Ltd., Kumkang Quartz Co., Lid. acquired the remaining 45% of SungRim, ousted the former CEO and changed the name to Quartz Materials Co., Lid. Both Kumkang Quartz Co., Ltd. and Quartz Materials Co. Ltd. are controlled by Changr kil Kim; herein, Kumkang Quartz Co., Lid.,, and Quartz Matenals Co., Ltd., along with its predecessor SungRim Co., Lid., will be refenred to collectively as “KKQ,” unless otherwise indicated.
19. KKQ had abusiness relationship in Taiwan with L] Tech, a company formed under the laws of Taiwan and controlled by Young-Yup Kim. L] Tech is a commissioned sales entity acting on behalf of KKQ in Taiwan. L] Tech marketed the diffusion business for KKQ in Taiwan. KKQ was technically weak in the etch business and wanted to leverage Newco’s expertise in etch to break into the U.S., Taiwan, and Singapore markets for etch with such stalwart customers as the Taiwan Semiconductor Manufacturing Company (“I'SMC”), Global Foundry and Micron.
20. KKQ proposed that it would invest in Newco in exchange for a 70% stake in Newco, and that the proceeds would be used to form “Newco Taiwan,” a wholly owned subsidiary of Newco that would consist of a Taiwarbased quartz part manufacturing facility for consumable spare parts used in semiconductor manufacturing equipment. It was agreed that Y oung-Y up Kim could continue selling in the diffusion market on behalf of KKQ in Taiwan, but that all etch business developed in Taiwan would be for the sole benefit of Newco and Newco Taiwan. It was agreed that Newco would conduct all research and development and get parts qualified with potential customers, and then Newco Taiwan or another subcontractor would manufacture the approved parts forsale.
21. Newco and KKQ consummated their agreement, Newco Taiwan was formed and the Newco Taiwan factory was established. Newco then spent the next several years to develop Singapore (GFS). Newco also spent that time investing millions of dollars in devel oping technology and proprietary trade secrets and manufacturing processes to qualify parts with various potential customers and building out the Newco Taiwan factory. The qualification process takes many months, if not years, to complete; once successtully completed the qualification of a part or parts conmmonly results in tens of millions of dollars in business for the company to manufacture the parts for the customer.
22. Young-Y up Kimwas appointed to the board of directors of Newco by KKQin 2015, following Plaintiffs efforts at business development and qualification of parts with potential customers, and he was appointed president of Newco Taiwan by Cho acting as president of Newco, the parent company of Newco Taiwan.,
23. InFebruary of 2016, Y oung-Y up Kim reported to the board of Newco that business was proceeding on track and that Newco Taiwan would be profitable by the third quarter of 2016 because of the developing relationship and part qualification with TSMC, one of the world' s largest semiconductor manufacturers. By early 2016, Newco was experiencing successful qualification tests with customers including Micron Taiwan. The business prospects for Newco and Newco "Taiwan looked very bright and the companies were preparing to ramp up for productions of millions of parts for TSMC, Micron and others.
24. By Marchof 2017, Y oung-Y up Kim was reporting to the board of Newco that there was “no hope” for success and that Newoo Taiwan should be shut down - an apparent reversal of fortunes for a company on the cusp of great business and financial success. In truth, Y oung-Y up Kim had been conspiring to divert the TSMC, GFS and Micron business to KKQ. In other words, now that Newco had developed various qualified parts and Newco Taiwan was gearing up for manufacturing, Y oung-Y up Kim and Chang-kil Kim were attempting to divert the business to KKQ for their own personal gain.
25. In 2016, Cho and LaCombe were also developing a relationship with GES to promote the business of Newco with this new potential customer. Cho and LaCombe had several contacts within GFS that allowed Newco an audience with Key personnel at GFS. Cho informed board meeting held in March of 2017. Cho prepared and presented to Chang-kil Kim and Y oungr Y up Kim a detailed business plan explaining how to obtain and service a new relationship with GFS.
20. In May, 2017, Chang-kil Kim invited Cho and YoungYup Kim to the KKQ headquarters in Korea to discuss how to develop the GFS etch business in Singapore. At that meeting, instead of discussing how to develop business for Newco and Newco Taiwan, Chang-kil Kim and Y oung-Y up Kim informed Cho that they wanted to drive the business to KKQ instead of Newco. At the same meeting, Y oung-Y up Kim informed the Newco board of directors that Micron Taiwan had been increasing its volume of orders from Newco Taiwan almost ten-fold due to the proven superior quality of Newco-made parts. Y oung-Y up Kim reported that Micron had informed Y oung-Y up Kim that Newco’s quality was better than any in the market. At that point, Chang-kil Kim stated that he wanted to change the name of Newco to “KKQ US” and change the name of Newco Taiwan to “KKQ Taiwan.” In reaction to this blatant attempt to begin steering Newco business to KKQ, Cho informed Chang-kil Kim and Y oung-Y up Kim that any such changes in the business amrangement between KKQ and Newco and changes in corporate govemance should be properly noticed and conducted in accordance with the goveming corporate documents and the laws of the goveming jurisdiction.
27. On]July 7, 2017, Chang-kil Kim convened a meeting of the board of directors of Newco in Koreg, attended by Young-Yup Kim and Cho. Chang-kil Kim circulated an agenda including: (1) Chang-Kil Kim's proposal to change the name of the companychange the name of the wholly-owned subsidiary to KKQ Taiwan; and (2) transferring customers such as GFS and Micron to KKQ in Korea. Cho informed the board that both proposals were an illegitimate attempt to divert business away from Newco, a breach of fiduciary obligations to minority shareholders and a breach of the business venture agreed between Newco and KKQ. Changrkil Kim “tabled” the agenda itens.
28. Afterthe board meeting on July 7, 2017, Chang-kil Kim asked Cho to attend a sales meeting of KKQ sales people. At that sales meeting, Chang-kil Kim began plotting with his sales Kim that Cho, as the CEO of Newco, would not sit in the meeting any longer because Chang-kil Kim and Y oung-Y up Kim were committing a breach of fiduciary duty and fraud.
29. On]July 9, 2017, LaCombe was asked to meet privately with the VP, Sr. Manager, and Assistant Manager of KKQ at Semicon West in San Francisco outside the presence of Cho. LaCombe informed Cho of the private meeting request and Cho encouraged LaCombe to take the meeting. Cho informed LaCombe of the attempt by Chang-kil Kim and Y oung-Y up Kim to divert Newoco business to KKQ.
30. LaCombe had previously worked with a global procurement manager from Micron to schedule a meeting on July 11, 2017, at the Maniot Marquis during the Semicon West Trade show, which Newco participates in annually. While LaCombe had initially invited KKQ to join in on that meeting, as Micron had always been aware of the working relationship between Newco and KKQ, KKQ's conduct and increasingly provocative posturing in the days preceding the meeting made clear that KKQ was unwilling to present a united front at a critical customer meeting, which would be detrimental to Newco. Accordingly, LaCombe called KKQ and instructed KKQ not to attend the Micron meeting. On the phone call, KKQ personnel said that they still planned to attend. Subsequently, KKQ ignored LaCombe’s calls and texts, prompting him to reach out to Cho. Cho was eventually able to contact KKQ and was ultimately able to convince them to stay away. 32. On September 13, 2017, Micron held a workshop for etch and other segments of consumable parts vendors at Semicon Taiwan, even though it was agreed that the Micron etch business would go to Newco and Newco Taiwan. KKQ Sr. Manager, Mr. JY Lee, attended the workshop along with Young-Yup Kim and again attempted to develop a business relationship between Micron and KKQ for the etch business, in direct contravention of the agreement and in breach of KKQ’s fiduciary obligations.
33. On September 14, 2017, LaCombe and Cho, who had travelled to Singapore earlier that week, decided to stop by the Semicon Taiwan trade show. While there, LaCombe and Cho stopped by the KKQ booth to catch up, but the conversation quickly tumed to Micron. Mr. JY Lee continued trying to convince LaCombe that KKQ would be better at handling Micron business and customer service in Asia because they were more proximate, and several times requested that LaCombe copy KKQ personnel onall e-mail discussions with Micron contacts. LaCombe infonmed Lee that despite KKQ's closer proximity, KKQ had never established any meaningful etch parts business outside of Korea while Newco had created positive momentum by securing an increasing number of new business opportunities and purchase orders with Micron sites in Taiwan, Japan and Singapore. Lee tried to get contact information for Micron engineers and buyers, which he had attempted to do at other times in the preceding months, but LaCombe made it clear that Newco would not abdicate control over any aspects of Newco’s relationship with Micron and would not include KKQ personnel in e-mail dialogue with Micron or any other customers where it was not relevant to do so.
34. From September 27-29, 2017, Micron held another workshop at one of their facilities in Taiwan to develop new potential vendors. This workshop was larger and more important than the first one held during Semicon Taiwan because Micron was specifically looking to develop its vendor base. Both JY Lee and Y oung-Y up Kim attended this workshop to promote KKQ'’s business at Micron.
35. Cho formally complained to Y oung-Y up Kim about his breach of fiduciary duty as a board member of Newco. Y oung-Y up Kim admitted that he was at the workshop with KKQ Sr. 30. By the Fall or 2017, Micron accounted for approximately 80% of the revenue for Newco Taiwan. Newco is a registered vendor for Micron and Newco had received approvalsubcontractors. Newco Taiwan, under the misguided stewardship of Y oung-Y up Kim, was then experiencing manufacturing problems in filling incoming orders from Micron and TSMC. To service Micron and keep the relationship, LaCombe reached out to KKQ and sent a request for quotation to KKQ to manufacture the parts for Newco to deliver to Micron. LaCombe was at first given a ridiculously high quotation, 50% to 100% higher than market price; then KKQ reneged and infonmed Newco that KKQ would not support Newco for Micron business. This was another step in KKQ'’s thinly-veiled scheme to drive business away from Newco and to KKQ.
37. In November of 2017, Cho spoke with a representative of KKQ who was inquiring about qualification parts for Micron in the etch business. The representative again admitted that KKQ participated in the workshops with Micron in order to obtain the business and that KKQ was actively seeking to divert the Micron etch business away from Newco and to KKQ.
38. OnNovember8, 2017, Y oungY up Kim sent Cho an e-mail, asking whether Newco received new etch part qualification orders from Micron, and in which Y oung-Y up Kim stated they were supposed to go to KKQ. Cho informed Y oung-Y up Kim that Y oung-Y up Kim, as a director of Newco and the president of Newco Taiwan, had a fiduciary duty to act in the best interest of Newco and Newco Taiwan and not for his personal benefit or that of L] Tech or KKQ.
39. On November 15, 2017, Cho visited Newco Taiwan to meet with Y oung-Y up Kim. Y oung-Y up Kim failed to attend the scheduled meeting. Cho asked the Newco Taiwan accountant to produce the company articles of incorporation and the by-laws. She informed Cho that Y oung- Y up Kim had instructed her and everyone else at the factory to refrain from sharing any company documents with Cho unless he, Young-Yup Kim, approved it in advance. Cho infonmed the accountant that it was his rightcompany documents without anybody’ s approval. Cho also leamed that Y oung-Y up Kim had instructed the Newoco Taiwan accountant to leave the premises and not to retum to work until after Cho left the country a few days later.
40. Cho discovered accounting improprieties in the Fall of 2017. Cho confronted with industry standards. Y oung-Y up Kim assured Cho that he would “convert” the accounting system to the proper accounting rules. After Cho visited Newco Taiwan in November, 2017, Cho called on the CPAs to inquire about the accounting conversion. In response, the senior representative from the CPA informed Cho that Y oung-Y up Kim instructed the CPA not to share any company data with Cho unless Y oung-Y up Kim approved it in advance. At the time,Chainman of Newco Talwan’s parent conpary.
41. Asaresult of KKQ's refusal to support Newco for Micron business, Newco began working with a new vendor VisionT'ech to service Micron. Newco decided to introduce VisionTech to Micron in 2017, and was invited to Micron’s Korea workshop in February of 2018 to formally introduce VisionT'ech to Micron’s global spare parts management team.
42. On February 6, 2018 VisionTech’'s Vice President, Mr. Ahn, called Cho and informed him that Changrkil Kim had spoken with VisionTech’s CEO and told him that KKQ would “pull the plug” on Newco shortly, and that VisionT'ech should therefore be leery of working with Newco. Cho again spoke with Ahn to confirm their earlier conversation on February 7, 2018. Ahn verified that he had spoken with VisionTech’'s CEO, and that VisionI'ech’s CEO confinmed that he had spoken with Changrkil Kim, and that Chang-kil Kim had told VisionTech’'s CEO that Changrkil Kim planned to shut down Newco shortly, and advised VisionT'ech not to work with Newco. Mr. Ahn also disclosed that VisionT'ech had a significant business relationship with both KKQ entities, as it is both a supplier of diffusion parts to Kumkang Quartz Co., Ltd., and a purchaser of quartz raw materials from Quartz Materials Co., Ltd. 44. Since May of 2017, Plaintiffs have repeatedly, and to no avail, wamed Defendants both verbally and in writing that their conduct with respect to Newco constituted a breach of fiduciary duty. Because of Defendants’ persistent refusal to heed Plaintiffs’ instructions, it is clear that only path forward is litigation, and any delay in bringing this action could result in inreversible damage to Newco. Accordingly, any further demands and/or notice to the Board of the Plaintiffs’ intent to bring this shareholder derivative complaint with a copy of same would be futile as the Individual Defendants control the Board and have already indicated repeatedly their refusal to honor their fiduciary obligations.
Agpinst the Defendants far Breach of Fidudary Duly for Abuse of Cantrol
45. Plaintiff incorporates by reference and realleges each and every allegation contained above, as though fully set forth herein.
46. The Individual Defendants’ misconduct alleged herein constituted an abuse of their ability to control and influence Newco, for which they are legally responsible.
47. As a direct and proximate result of the Individual Defendants’ abuse of control, Newco has sustained significant damages.
48. Asaresult of the misconduct alleged herein, the Individual Defendants are liable to Newco.
49. Plaintiffs on behalf of Newco have no adequate remedy at law.
Agpinst the Defendants far Breach of Fidudary Duly for Gross Mismanagement
50. Plaintiffs incorporate by reference and reallege each and every allegation contained above, as though fully set forth herein.
5l. By theiractions alleged herein, the Individual Defendants, either directly or through aiding and abetting, abandoned and abdicated their responsihilities and fiduciary duties with regard 52. Asadirect and proximate result of Newco's gross mismanagement and breaches of duty alleged herein, Newco has sustained significant damages in excess of millions of dollars.
53. As aresult of the misconduct and breaches of duty alleged herein, the Individual Defendants are liable to Newco.
54. Plaintiffs on behalf of Newco have no adequate remedy at law.
Against the Defendants for Waste of Carporale Assels
5d. Plaintiff incorporates by reference and realleges each and every allegation contained above, as though fully set forth herein.
50. As a result of the improper accounting and by failing to properly consider the interests of the Company, and its minority shareholders, by failing to conduct proper supervision, the Individual Defendants have caused Newco to waste valuable corporate assets.
57. Asaresult of the waste of corporate assets, the Individual Defendants are liable to the Newco.
58. Plaintiffs on behalf of Newco have no adequate remedy at law.
Against the Defendants for Unjust Enrichment
59. Plaintiff incorporates by reference and realleges each and every allegation set forth above, as though fully set forth herein.
60. By their wrongful acts and omissions, the Individual Defendants were unjustly enriched at the expense of and to the detriment of Newco.
6l. Plaintiffs, as shareholders and representatives of Newco, seek restitution from these defendants, and each of them, and seeks an order of this Court disgorging all profits, benefits and other compensation obtained by these defendants, and each of them, from their wrongful conduct and fiduciary breaches.
B. Against all the Defendants and in favor of Newco for the amount of damages sustained by the Company as a result of the Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment;
. Directing Newco to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect Newco and its shareholders from a reocurrence of the damaging events described herein;
D. Directing Newco to oust Defendants Chang-kil Kim and Young-Yup Kim as directors of Newco for their failure to properly discharge their fiduciary duties;
E. Awarding to Plaintiffs the costs and disbursements of the action, including reasonable attorneys’ fees, accounts’ and experts’ fees, costs and expenses; and
F. Granting such other and further relief as the Court deems just and proper.
Plaintiffs demand a trial by jury.
Dated: February 27,2018 NIXON PEABODY LLP
GREGORY P. O’HARA WILLIAM S. LISA
Attorneys for Plaintiffs
Howard Cho and Steve LaCombe
Get Deeper Insights on Court Cases