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COMMONWEALTH OF MASSACHUSETTS
Worcester, ss SUPERIOR COURT DEPARTMENT
Wentao Huang, individually and derivatively | Civil Action No. JABS 1 Au A
on behalf of Baba & the Legacy Kitchen Inc.
Plaintiff,
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Weidong Wilson Wang, Tai Cheng, Laurel JUL 01 2024
Xie, Baba & the Legacy Kitchen Inc., Bolton
Baba LLC, Boston Holdings LLC
Defendants. OLE tl czsn
PLAINTIFF’S MEMORANDUM IN SUPPORT OF EX PARTE MOTIONS FOR
TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION
ENJOINING DEFENDANTS FROM DISSIPATING CORPORATE ASSETS
The Plaintiff, Wentao Huang (“Mr. Huang”) submits this Memorandum in Support of its
Ex Parte Motion for Temporary Restraining Order (“TRO”) and Motion for Preliminary
Injunction.
Mr. Huang owns stock and membership interest in the corporate defendants, two closely-
held companies, which operate a restaurant. Mr. Huang has been frozen out by the controlling
shareholder and officers. He suffers significantly by receiving no return for his investment in the
entire relevant time. Significantly, the defendants currently are trying to sell the restaurant to an
unknown third party by the individual defendants. The transaction is said to be closed any time
now.
Therefore, the Plaintiff urgently seeks a TRO, and after a hearing, a preliminary injunction
requesting that this court:
(1) order the Defendants to desist and refrain from selling the restaurant, Baba and The
Legacy Kitchen (“restaurant”) or any share of any entity that exercises control over the
restaurant in any way; and
(2) compel the individual defendants, Weidong Wilson Wang (“Wilson”), Tai Cheng and
Laurel Xie (“Laurel”) to disclose to Mr. Huang all relevant information and documents
about the proposed sale, including but not limited to identity of the potential buyer,
purchase price and payment terms.
RELEVAN’ CTS
Plaintiff repeats and relies on the verified facts stated from paragraph 1 to paragraph 59 in
the Verified Complaint, exhibited as Exhibit 1, as relevant facts for this motion. The definitions
and abbreviations are adopted herein from the Verified Complaint.
Moreover, Plaintiff supplements further facts as follows:
Mr. Huang owns 30% of Baba & the Legacy Kitchen Inc. (“Baba Corp”)!. Mr. Huang
made the largest capital contribution to Baba LLC in the sum of $350,000. Mr. Huang paid the
contribution by 2 checks - $200,000 on January 28, 2022? and $150,000 on January 24, 20223.
The $350,000 was used to pay for the down payment of the property located at 554
Wattaquadock Hill Road, Bolton, Massachusetts 01740 (“Property”)*. The total purchase price
was $1million?.
1 See Exhibit 2, Schedule K-1 of the 3 shareholders in the tax return of 2022 of Baba Corp.
2 See Exhibit 3, the check of $200,000 paid by Mr. Huang to Bolton Baba LLC on January 28, 2022.
3 See Exhibit 4, affidavit of Wentao Huang, para 3.
4 See Exhibit 5, the settlement statement of the mortgage loan from the seller of the Property.
5 See Exhibit 5, item 220.
Mr. Huang paid $70,000 to Baba LLC on February 15, 2022°. The money was transferred
from Baba LLC to Baba Corp as operation funds’.
Mr. Huang never received any other return of his investment apart from $4,808 dividends
paid in the first two months since the restaurant opened, despite of repeated demands by
Mr.Huang®
Since September 2023, Mr. Huang requested to withdraw from the business and asked
Wilson to repurchase Mr. Huang’s shares. Mr. Huang sent the draft share transfer agreement and
relevant documents to Wilson. Wilson reviewed the drafts but kept dragging the signing of them?
On May 9, 2024, the Plaintiff put Wilson, Tai Cheng and Baba Corp on notice through a
counsel’s letter stating that Mr. Huang objects to any sale or transfer of any assets, properties or
stock in either the Baba Corp or Baba LLC". Despite the express objection, the relevant defendants
still continue the sale in bad faith and breach of fiduciary duty. The transaction is said to be closed
any day now. The Plaintiff cannot afford to wait any longer, and hence has no other option but to
resort to the court for the requested TRO and Preliminary Injunction.
ARGUMENT
I.PLAINTIFFS WILL LIKELY SUCCEED ON THE MERITS OF THEIR CLAIMS
A Breach of Fiduciary Duty
Plaintiff Mr. Huang will likely succeed on the claim that individual Defendants breached
their fiduciary duty to a minority shareholder. In Massachusetts, courts established the principle
6 See Exhibit 6, the check of $70,000 for investment to Bolton on February 15, 2022.
7 See Exhibit 4, affidavit of Wentao Huang, para 4.
8 See Exhibit 8, wechat message from Mr. Huang to Wilson, Laurel and Tai Cheng chasing the monthly $2404
bonus for February, March and April 2023, dated April 16, 2023.
9° See Exhibit 9, wechat messages between Mr. Huang and Wilson about chasing the signing of the share transfer
agreements.
10 See Exhibit 7, letter from Lion’s Law, P.C. to Defendant’s counsel on May 9, 2024.
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that shareholders in closely held corporations must discharge their management and shareholder
responsibilities in conformity with the strict fiduciary standard of “utmost good faith and
loyalty”, they may not act out of avarice, expediency, or self-interest in derogation of this duty of
loyalty to the other shareholders and the corporation. Donahue v. Rodd Electrotype co. of New
England, Inc. 367 Mass. 578, 593 (1975). Actionable freeze-out includes (Business Torts In
Massachusetts, 2016 2" Ed, Chapter 3, section 3.3.5):
- refusing to declare dividends;
- draining off corporate earnings in the form of exorbitant salaries and bonuses to the
favored majority shareholders or officers;
- depriving minority shareholders of corporate offices or employment;
failure to share information about the status of business of the company;
failure to disclose important information in connection with a transaction.
The key issue in determining whether a freeze-out has occurred is whether “the majority
effectively frustrate[d] the minority stockholder’s purposes in entering on the corporate venture”
and “den[ied] the minority’s reasonable expectations of benefit.” O ‘Brien v. Pearson, 449 Mass.
at 386; moreover, as soon as one or more shareholders are not employed, the potential for abuse is
present if no dividends are declared and the nonemployee shareholder cannot obtain a return on
this investment. Wilkes v. Springside Nursing Home, Inc., 370 Mass. 842, 851-53 (1976).
Moreover, a partner's most prominent fiduciary duty is the obligation to share important
information regarding the enterprise with one’s partners. E.g., Meehan v. Shaughnessy, 404 Mass.
419, 436-37 (1989). The failure to disclose important information in connection with a transaction,
like the purchase and sale of stock, or any agreement that affects the value of stock and the decision
to hold the stock, will probably render that transaction voidable. See Lewenberg v. Del Regno, No.
CA-1999-5681-C, 2001 WL 1517571, at *2-3 (Middlesex Super. Ct. Oct. 24, 2001). This means
that sales of stock, and even releases in connection with a sale of stock, can be unwound,
sometimes many years later when the facts come out. E.g., Demoulas v. Demoulas Super Mkts.,
Inc., 424 Mass. 501, 517-24 (1997)
As a shareholder Mr. Huang is entitled to obtain return of his investment, access to
information about the operational status of the restaurant and participate in the management of the
restaurant.
However, Mr. Huang only obtained two (2) months of dividends in the amount of $4,808
from the period of December 2022 to January 2023. He was not paid any return for his investment
in either Baba Corp nor Baba LLC at time after January 2023.
Related to this, Wilson and the other defendants have maintained that the restaurant did not
make profit. Mr. Huang therefore had requested access to the accounting records and financial
reports of the Baba Enterprise. As a shareholder and member, Mr. Huang is entitled to access to
the company’s books and records. The Defendants continually refused to provide such information
and records to Mr. Huang.
Mr. Huang also was deprived of the opportunity to participate in the management of the
restaurant. As a successful businessman, he has good skills and experience monitoring the
accounting records of a business. Indeed, he did not join the business venture as a passive investor,
but rather to take an active role in managing the financials. He did this for a short period of time
from November 2022 to January 2023. In February 2023, Mr. Huang returned to China, so he
temporarily transferred the role to Wilson, by providing the books and records to Wilson. It was
understood by the parties that he would continue such responsibilities after his return to the U.S.
However, in August 2023, when Mr. Huang retumed to the U.S., Wilso refused to deliver the
books and records to Mr. Huang. It was at the same period, i.e. February 2023 onwards, that Wilson
declared that the restaurant did not make any profit. Mr. Huang was deprived of the opportunity
to participate in the management, as well as his lawful access to books and records. He has no way
to assess the profitability of the business.
The defendants further froze Huang out by frustrating the proposed sale of the shares of
Huang and withdrawal from the business after he returned to the U.S. in August 2023.
Lastly, while dragging Mr. Huang’s proposed sale and refusing his access to books and
records, Wilson plotted a scheme to conceal his unlawful actions by selling the restaurant to a
third-party buyer, thereby never giving Mr. Huang the opportunity to discover and get the damages
heis rightfully entitled to. The Defendants are actively selling the business, either by asset or stock
sale, to a third-party. An unknown potential buyer has viewed the restaurant on site twice. The
closing is said to occur anytime.
Because of the above, it is a square case that the defendants have breached their fiduciary
duty to Mr. Huang. Mr. Huang is very likely to succeed on the merits of his claims.
B. Derivative Action of Baba & the Legacy Kitchen Inc. for Misappropriation of
Corporate Assets
With respect to any entity in Massachusetts, to have standing to bring a derivative claim, a
plaintiff must have been a shareholder at the time of the alleged misconduct and must continue to
bea shareholder throughout the entirety of the derivative litigation. GL. c. 156D, § 7.41.
Derivative claims include wasting, mismanaging or misappropriating corporate assets, resulting
in a general diminution of the value of corporate stock, assets, or cash on hand. See Rubin v.
Murray, 79 Mass. App. Ct. 64, 80 (2011).
If during the pendency of the case, it is concerned that the defendant may eliminate the
Plaintiff's interest, preliminary injunctive relief to halt that transaction may be necessary. See
International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v Joseph M. Tucci
and others, 476 Mass 553. at 564 n.15.
As a shareholder of Baba & the Legacy Kitchen Inc., Mr. Huang has the standing to bring
a derivative action against Wilson and Tai Cheng (‘Derivative Defendants”). Derivative
Defendants wasted, mismanaged and misappropriated the corporate assets by:
- Using the corporate funds to purchase food supplies to be used by Wilson’s other
restaurants;
- paying excessive wages to purported employees, who do not actually work at the
restaurant;
- causing the company to incur large sums of debt beyond the company’s ability to repay.
In order to cover up their wrongdoing and deny the Plaintiff any recourse, the Derivative
Defendants are selling the restaurant to an unknown third party. To prevent the equity interest of
Mr. Huang, and thereby his standing to sue derivatively, from being eliminated, this injunctive
relief is urgently necessary.
Cc Conversion
Plaintiff Mr. Huang will most likely prevail on this claim because Defendants have denied
paying dividends to Mr. Huang, but used the revenue of the restaurant to benefit themselves, even
to the extent of using this revenue to pay high salaries to their family members who do not even
work in the restaurant.. In Massachusetts, three elements are required to prove conversion: (1)
plaintiff had possession, or a right to immediate possession of the personal property at the time
defendant committed the acts; (2) defendant converted plaintiff's personal property to his own use
by exercising a dominion over it which was inconsistent with plaintiff's rights; and (3) plaintiff
suffers damage. Grand Pacific Finance Corp. v. Brauer, 57 Mass.App.Ct. 407, 783 N.E. 2d 849
(2003).
Plaintiff, as a shareholder, has the right to possession of the corporate money. Defendants
have not only exercised dominion control of these monies by blocking Mr. Huang’s access to the
bank account, denying any return to Mr. Huang’s investment, but also misappropriated monies for
their personal benefits by transferring significant amounts of money to Wilson’s family members.
Mr. Huang has suffered damage.
D. Access to Corporate Books and Records
As a shareholder and member, Mr. Huang has a statutory right to access corporate books
and records. It is indisputable that Wilson steadfastly refused to provide the documents despite
multiple demands by Mr. Huang and his counsel.
ILPLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT INJUNCTIVE RELIEF
“Irreparable injury” in preliminary injunction context means injury that cannot adequately
be compensated for either by later-issued permanent injunction, after full adjudication on merits,
or by later-issued damages remedy.” Baer v. National Bd. Of Medical Examiners, D.Mass.2005,
392 F.Supp.2d 42. Monetary loss still may constitute irreparable harm even if the monetary loss is
recoverable, where the loss threatens the very existence of the movant’s business. See Wisconsin
Gas Co. v. Federal Energy Regulatory Comm'n, 758 F.2d 669, 674 (D.C.Cir.1985). The
apprehended danger that entitles the movant to an injunctive relief is one so near as at least to be
“reasonably imminent.” Shaw v. Harding (1940) 28 N.E.2d 469, 306 Mass. 441.
If the restaurant is sold to an unknown buyer, Defendants will not pay Mr. Huang his value
of the shares. Mr. Huang will completely lose his equity interest in the restaurant to fulfill his
purpose of investment. Indeed, the very existence of the business will be gone. Not to mention that
without any information of the transaction disclosed by the Defendants, Mr. Huang will be
completely deprived of any recourse to retrieve his investment and the dividends he is entitled to.
It is a serious harm that the Plaintiff seeks the honorable court’s help to prevent.
Moreover, once the restaurant is sold, Mr. Huang will no longer be a shareholder, causing
him to lose his standing to sue the Defendants derivatively on behalf of Baba Corp. Therefore,
from many perspectives, the court should allow this injunctive relief.
IILHARM TO PLAINTIFF WOULD HAVE OUTWEIGHED THE BURDEN TO
DEFENDANTS TO COMPLY WITH THE INJUNCTION
To stop the Defendants from selling the restaurant does not impose a great risk on them.
The restaurant can always be sold judging by how quickly the defendants were able to secure a
buyer to potentially close the transaction soon. However, the Plaintiff will suffer larger harm
because if the restaurant is sold, all the evidence, financial information and accounting records will
be lost. Gone together is the Plaintiff's standing to sue derivatively. Therefore, the harm to the
Plaintiff would outweigh the burden to the Defendants to comply with the injunction.
CONCLUSION
For the reasons set forth herein, plaintiffs respectfully request that this honorable court
grant their motion for preliminary injunction.
DATED: July 1, 2024 Plaintiff, Wentao Huang,
By his Attorneys,
___/s/ Connie Dai
Connie C. Dai (BBO# 683330)
Yun Cheng (BBO# 707028)
Shuyao Wang (Pro Hac Vice pending, New York Bar
Registration Number 5906227)
Lion’s Law, P.C.
154 Wells Ave
Newton, Massachusetts 02459
(617) 682 7111 Telephone
(617) 307 3515 Facsimile
CERTIFICATE OF SERVICE
Thereby certify that on this July 1, 2024 a copy of the foregoing document is served upon the
defendants via Electronic Mail.
___/s/ Connie Dai
Connie Dai
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