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EWED
Smi-S 114111;: COUNTY
DAVID J. MICLEAN (SBN 115098)
dmiclean@micleangleason.com
CARMEN M. AVILES (SBN 251993)
caviles@micleangleason.com
MICLEAN GLEASON LLP
411 Borel Avenue, Suite 310
San Mateo, CA 94402
\OOO\]O\U‘I-hUOI\->
Telephone: (650) 684-1 181
Facsimile: (650) 684-1182
Attorneys for Defendant and Cross—Complainant
Solomon Sha
811a
SUPERIOR COURT OF THE STATE OF CALIFORNIA
53
xed
COUNTY OF SAN MATEO
10
11
12 SWEET PRODUCTION, INC., 21 California Case No. l8-CIV—03l 10
Corporation,
13
SOLOMON SHA’S CROSS-COMPLAINT
14 Plaintiff, FOR:
15 V. 1. Breach of Fiduciary Duty
_ _
2. Accounting
16 SOLOMON SHA, an 1nd1vidual; and DOES 1 3, Fraud
to 10, inclusive, 4. Conversion
17 5. Unjust Enrichment
18 Defendants.
JURY TRIAL DEMANDED
19
20 SOLOMON SHA, Complaint Filed: June 18, 2018
Trial Date: TBD
21 Cross-Complainant,
" _ __ _
22 V. I/113_—1:11/—1Ja_1iu
-
cP .
23 SWEET PRODUCTION, INC., a California :
$£3§§e°a°mmm
corporation; SWEET EXPRESS; MING CHIN; .'
24 DOREEN CHIN; and ROES 1 through 20,
inclusive, 1\ l 1H1 11111111111111111
25 _1
Cross-Defendants.
26
27
28
CROSS-COMPLAINT CASE No. 18—CIV-03 1 10
MF'
6981..
Pursuant to the California Code of Civil Procedure § 428.10, Cross—Complainant
SOLOMON SHA (“Sha” or “Cross-Complainant”) cross-complains and alleges the following:
PARTIES
1. Cross—Complainant Sha is an individual residing in San Mateo County,
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California.
2. Cross-Defendant SWEET PRODUCTION, INC. (“SPI” or “Cross-Defendan ”)
is a California Corporation doing business in San Mateo County, California.
3. Cross-Defendant SWEET EXPRESS (“Sweet Express” or “Cross—Defendant”) is
\D believed to be a business entity operating in San Mateo County, California.
10 4. Cross—Defendant Ming Chin (a.k.a. “Terry” Chin) is an individual residing in
ll San Mateo County, California.
12 5. Cross-Defendant Doreen Chin is an individual residing in San Mateo County,
13 California.
14 6. The true names and capacities of Cross—Defendants Roes 1-20, Whether
15 individual, corporate, or otherwise, are unknown to Cross—Complainant at this time, and Cross-
16 Complainant therefore sues these Cross-Defendants by such fictitious names. When the true
17 names and capacities of the fictitiously named Cross-Defendants are ascertained, Cross;
18 Complainant will amend the complaint to reflect their true names. Cross—Complainant is
19 informed and believes and thereon alleges that each of the fictitiously named Cross—Defendants
20 is indebted to Cross-Complainant as hereinafter alleged, as agents of or alter-egos of the other
21 Cross—Defendants, and that Cross-Complainant’s rights against such fictitiously named
22 defendants arise from such indebtedness.
23 7. All Cross-Defendants including ROES 1—20 are referred to herein as “Cross-
24 Defendants.”
25 JURISDICTION AND VENUE
26 8. Sha is a resident of San Mateo County, California.
27 9. Cross-Defendant SPI has filed a Complaint against Sha in San Mateo County.
28 10. Cross-Complainant is informed and believes and, on that basis, alleges that at all
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CROSS— COMPLAINT CASE NO. 18-CIV-03 l 10
times referenced in this Cross-Complaint, Cross—Defendants entered into agreements and
conducted business in the County of San Mateo, California.
11. As a result, this Court has jurisdiction over the parties and venue is proper in San
A Mateo County pursuant to California Code of Civil Procedure Section 395(a).
FACTUAL ALLEGATIONS
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A. Sha and the Chins Form a Long-Term Close Relationship
12. Sha met Ming (a.k.a. “Terry”) Chin and Doreen Chin (collectively, the “Chins”)
in 1987 while working at their restaurant in San Francisco. Sha became very close to, and
trusting of, the Chins. Sha eventually left the Chins’ restaurant business to begin his career in
10 the bakery industry in 1998 at San Francisco Fine Bakery (“SFFB”). In 2006, the Chins lost
11 their lease in their restaurant and started working at SFFB, but the business relationship between
12 them and SFFB’s owner quickly soured. In late 2007, the Chins left SFFB. In 2008, the Chins
13 and Sha started SPI. SPI was initially based in South San Francisco, but eventually the bakery
14 business moved to its current location of San Carlos.
15 B. The Establishment of Sweet Production, Inc. and the Start of the Chins’
Fraudulent Scheme to Gain Control and Divert Revenues and Profits
16
17 l3. Sha’s wife, Kitty Sha, began working at SPI in 2009 as an accountant. The
18 initial ownership shares for SP1 were the Chins (40%), Jenny Chea (30%), and Kitty/Solomon
19 Sha (30%). Kitty Sha worked as an accountant for SP1 until she was asked to leave by the
2o Chins. The Chins did not want Kitty Sha to see their financial and accounting records and
21 accordingly asked her to leave. The Chins have improperly tried to take over the SP1 business
22 and freeze out and not pay the other owners of the business.
23 In furtherance of their scheme to misappropriate company assets and funds, and gain
24 control over SPI, the Chins opened a bank account at East West Bank where, on information
25 and belief, certain SPI cash funds were continuously deposited but not accounted for on SPI’s
26 accounting books and records. On information and belief, the Chins falsified the accounting
27 records of SP1 to avoid paying co—owners, while improperly diverting SPI funds to themselves
28 for personal use.
CROSS—COMPLAINT CASE No. 18-CIV-03110
As part of their fraudulent scheme to take full control of SP1 for their own personal
benefit, the Chins unilaterally and fraudulently reduced Sha’s share ownership and increased
their own, in attempt to oust Jenny Chea, a 30% shareholder in SP1. The Chins reduced Sha’s
Ui-IAUJN
share ownership from 30% to 24.5% in 2011 to 14.5% in 2012. Sha did not uncover the Chins’
scheme to falsify books and misappropriate assets until much later. Sha eventually noticed that
his ownership share was decreasing significantly; when he approached the Chins about this
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impropriety, they promised to eventually return his shares, which they have not. The Chins
were also not paying company profit distributions to their partners, While taking them for
themselves.
10 More recently, Sha began noticing that certain invoices for a company called Sweet
11 Express, with the same address as SP1, and ostensibly run by a relative of the Chins, were issued
12 with unusual orders and payments. By this time, Sha was very familiar with SPI’s customers,
13 their orders, the pricing of items, and the general revenue for SPI. On information and belief,
14 the Chins were diverting certain SPI business to Sweet Express, and allowing Sweet Express to
15 use SPI assets (without recompense), so they could divert revenues to themselves and bypass
16 the other owners of SPI. Due to the unusual Sweet Express invoices, coupled with the East
17 West Bank account set-up and controlled by the Chins, Sha began to piece together the financial
18 irregularities and misappropriation of company funds by the Chins to the detriment of SPI’s
19 other shareholders. By this time, Sha had received little to no ownership profit distributions
20 despite SPI’s financial success.
21 Sha then began requesting the return of his ownership shares and profit distributions.
22 The Chins would respond with excuses as to why they could not return the shares or pay profit
23 distributions or ignored Sha’s requests altogether. In the last year, Sha sent several emails
24 requesting the return of his shares. Again, the Chins ignored his written requests. Realizing
25 that Sha was not going to back down from requesting the return of his shares and payment of his
26 distributions, and after Sha requested an accounting, the Chins began to plot against Sha to
27 remove him as an employee from SPI. While Sha was on vacation with his family, SPI’s
28 attorney on April 13, 2017, sent a letter correspondence to Sha stating that he was suspended
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CROSS—COMPLAINT CASE NO. 18-CIV—03 1 10
and could not return to SPI’s premises due to alleged improprieties. Sha knew that the
suspension was a pretense and being used to keep him away from SPI so that the Chins could
continue using SPI’s resources for their own personal benefit and avoid the accounting.
Sha retained current counsel to request an accounting of SPI’s books and records to
OOOQONMAUJNH
determine the distribution amounts owed to Sha. SPI produced a handful of documents that in
no way provided Sha an accurate financial accounting of SPI. In retaliation for Sha’s request
for his unpaid ownership share distributions, the Chins, using SP1 as their alter ego, filed a
Complaint against Sha.
ALTER EGO ALLEGATIONS
14. Sha is informed and believes and thereon alleges that the entities named as
Cross-Defendants herein, including but not limited to SP1 and Sweet Express, and Roes 1-20
(hereinafter collectively referred to as the “Alter Ego Entities”), and each of them, were at all
times relevant the alter ego entities of individual Cross—Defendants Terry and Doreen Chin by
reason of the following:
(a) Sha is informed and believes and thereon alleges that the individual Cross-
Defendants, at all time herein mentioned, dominated, influenced, and controlled each
NNNNNNNNP—‘D—‘P—‘P—‘HHP—‘r—il—IH
of the Alter Ego Entities and the officers thereof, as well as the business, property,
and affairs of each of said entities.
(b) Sha is informed and believes and thereon alleges that, at all times herein mentioned,
§\]O\LIILUJNF—‘OKDOO\IO\MJ>UJNHO
there existed and now exists a unity of interest and ownership between said
individual Cross—Defendants and each of the Alter Ego Entities; the individuality and
separateness of said individual Cross-Defendants and each of the Alter Ego Entities
have ceased.
(c) Sha is informed and believes and thereon alleges that, at all times since the
incorporation of each, each Alter Ego Entity has been and now is a mere shell for
each individual Cross-Defendant and used as a conduit for the conduct of their
personal business, property, and affairs.
(d) Sha is informed and believes and thereon alleges that, at all times herein mentioned,
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CROSS—COMPLAINT CASE No. 18-CIV-03 1 10
each of the Alter Ego Entities was created and continued pursuant to a fraudulent
plan, scheme, and device conceived and operated by the individual Cross-
Defendants, Terry and Doreen Chin, whereby the income, revenue, and profits of
each of the Alter Ego Entities were diverted by said individuals to themselves.
(e) Sha is informed and believes and thereon alleges that, at all times herein mentioned,
\DOOQQMAWN
each of the Alter Ego Entities was organized by said individual Cross-Defendants as
a device to avoid individual liability and for the purpose of substituting financially
irresponsible corporations in the place and stead of said individual Cross-
Defendants, and each of them, and accordingly, each Alter Ego Entity was formed
10 with capitalization totally inadequate for the business in which said corporation was
11' engaged.
12 (f) Sha is informed and believes and thereon alleges that each Alter Ego Entity is
13 insolvent because of Cross—Defendants’ fraudulent handling of the Alter Ego
14 Entities’ finances for each Cross-Defendant’s personal benefit.
15 (g) By virtue of the foregoing, adherence to the fiction of the separate corporate
16 existence of each of the Alter Ego Entities would, under the circumstances, sanction
17 a fraud and promote injustice in that Defendants would be unable to realize upon any
18 judgment in their favor.
19 15. Sha is informed and believes and thereon alleges that, at all times relevant
20 hereto, the individual Cross—Defendants Ming and Doreen Chin and the Alter Ego Entities acted
21 for each other in connection with the conduct hereinafter alleged, and that each of them
22 performed the acts complained of herein or breached the duties herein complained of as agents
23 of each other and each is therefore fully liable for the acts of the other.
24 FIRST CAUSE OF ACTION
25 (Against Cross-Defendants Sweet Production, Inc., Ming Chin, and Doreen Chin for
26 Breach of Fiduciary Duty)
27 16. Sha realleges and incorporates by reference the allegations contained in
28 paragraphs 1 through 15 above.
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CROSS-COMPLAINT CASE NO. 18-CIV-03 1 10
17. As directors of SPI, each of the Defendants owes fiduciary duties of care,
loyalty, and good faith to SPI’s stockholders, including Sha. Cross-Defendants’ fiduciary duties
.b-UJN
include obligations to exercise good business judgment, to act prudently in the operation of
SPI’s business, to discharge their actions in good faith, to act in the best interests of SPI and its
stockholders, and to put the interests of SPI before their own.
18. SP1 owes its owners and fellow directors the duty to pay each its fair share of
\OOO\IO\U1
profit distributions based on share ownership.
19. Cross—Defendants breached their fiduciary duties of loyalty and good faith,
among other things, by diverting SPI funds and business away from SPI, issuing themselves
10 additional equity in SP1, and failing to pay its stockholders their ownership share of
ll distributions based on equity share in SPI.
12 20. SP1 has breached its fiduciary duty to Sha when it failed to pay Sha his
13 ownership share of distributions in SP1 and cooked the financial books of SPI..
14 21. Sha has been damaged by Cross-Defendants’ breach of their fiduciary duties and
15 has suffered monetary loss and damages in an amount to be proven at trial.
16 SECOND CAUSE OF ACTION
17 (Against All Cross-Defendants for Accounting)
18 22. Sha realleges and incorporates by reference the allegations contained in
19 paragraph 1 through 21 above.
20 23. California Corporation Code § 1601 (a) provides: “The accounting books and
21 records and minutes of proceedings of the shareholders and the board and committees of the
22 board of any domestic corporation, and any foreign corporation keeping any such records in this
23 state or having its principal executive office in this state, shall be open to inspection on the
24 corporation of any shareholder or holder of a voting trust certificate at any reasonable time
25 during the usual business hours, for a purpose reasonably related to such holder’s interests as a
26 shareholder or as the holder of such voting trust certificate. The right of inspection created by
27 this subdivision shall extend to the records of each subsidiary of a corporation subject to this
28 subdivision.”
CROSS-COMPLAINT CASE NO. 18-CIV-03 l 10
24. Sha, who is a shareholder and officer of SPI, requested to review the accounting
books and records of SPI. Sha has never received a complete and/or detailed accounting from
Cross-Defendants as to where and how SPI funds and corporate revenues have been spent,
despite the accounting request. The sole means of ascertaining such information and
documentation are within the control of Cross-Defendants.
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25. Sha cannot determine the amount of money due him without a full and complete
accounting from Cross—Defendants, and each of them.
THIRD CAUSE OF ACTION
\O (Against Cross—Defendants Ming Chin and Doreen Chin for Fraud)
10 26. Sha realleges and incorporates by references the allegations contained in
11 paragraphs 1 through 25 above.
12 27. Sha has personally known Cross-Defendants the Chins for over twenty years and
13 wholly trusted them as family. The Chins embarked on a scheme to take full control of SPI for
14 their own personal benefit. The Chins represented to Sha that they needed to reduce his
15 ownership share and increase their own in an attempt to oust Jenny Chea, a 30% shareholder in
16 SPI. They promised to return his ownership percentage share after they ousted Chea. The
17 Chins were not able to oust Chea and never returned Sha’s ownership percentage. The Chins
18 made such a plan to take full control of SPI for their own personal financial benefit.
19 28. In reliance on the representations, Sha agreed to slightly reduce his ownership
20 share with the agreement that it would be returned to him.
21 29. Unbeknownst to Sha, the Chins reduced Sha’s share ownership from 30% to
22 24.5% in 2011 to 14.5% in 2012.
23 30. At the time of the misrepresentations and omissions referenced herein, Cross—
24 Defendants were aware that such misrepresentations and omissions were taking place and
25 allowed them to take place because, as directors and alter—egos of SPI, the Chins benefited from
26 the misrepresentations and omissions set forth herein.
27 31. The Chins also intentionally misrepresented that SPI was not making enough
28 profit to provide owner profit distributions to their fellow owners, while, on information and
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CROSS—COMPLAINT CASE NO. 18—CIV—03 l 10
belief, paying themselves distributions from SPI revenue, and siphoning. off SPI business and
N revenues to their separate corporation Sweet Express.
32. By reason of said misrepresentations and fraudulent concealment as alleged
herein, Sha has been damaged in an amount presently unascertained due to Cross-Defendants’
misdeeds in management of SPI.
KOOOQONU‘I-bw
FOURTH CAUSE OF ACTION
(Against All Defendants for Conversion)
33. Sha realleges and incorporates by references the allegations contained in
paragraphs 1 through 32 above.
10 34. Sha is entitled to his ownership share of SPI revenues and profits. On
11 information and belief, through the Chins’ unlawful efforts to seize control of SPI, unilaterally
12 and fraudulently changing ownership percentages, falsifying SPI’s financial records and books,
13 paying themselves profit distributions but not their co-owners, siphoning off SPI business to
14 their separate entity Sweet Express, allowing Sweet Express to utilize SPI assets without
15 payment to SP1, and controlling bank accounts to hide SPI revenues and profits, the Cross-
16 Defendants have wrongfully converted the assets of SPI and the profits that are owned by and
17 should have been paid to Sha.
18 35. By reason of said conversion and fraud as alleged herein, Sha has been damaged
19 in an amount presently unascertained due to Cross-Defendants’ misdeeds in management of
20 SPI.
21 FIFTH CAUSE OF ACTION
22 (Against All Defendants for Unjust Enrichment)
23 36. Sha realleges and incorporates by references the allegations contained in
24 paragraphs 1 through 35 above.
25 37. By reason of the acts claimed herein, and the misappropriation of SPI assets and
26 profits to themselves in breach of their fiduciary duties to their co-owners, the Cross-Defendants
27 were unjustly enriched at the expense of Sha and the other owner of SPI.
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CROSS-COMPLAINT CASE No. 18-CIV-03110
PRAYER FOR RELIEF
WHEREAS, Cross-Complainant prays that judgment be entered against Cross—
AWN Defendants as follows:
a. Judgment be entered in favor of Mr. Sha;
b. Mr. Sha be awarded his costs of suit, including reasonable attorney’s fees;
0. For damages in an amount to be specified at trial, but no less than the
\OOO\]O\U1
jurisdictional amount of this Court; ‘
d. For an accounting of SPI financial records, assets and profits;
e. For disgorgement of profits and revenues unlawfully misappropriated by
10 defendants; and
11 f. For such other relief as the Court may deem just and proper.
12 JURY DEMAND
13 Cross-Complainant Solomon Sha, by and through his undersigned counsel, hereby
14 requests a trial by jury on all above claims triable to a jury.
15
16 DATED: July 19, 2018
Respectfully submitted,
17 MICLEAN GLEASON LLP
18
19
2o
/ David J. Miclean
Carmen M. Aviles
21 Attorneys for Defendant and Cross-Complainant
Solomon Sha
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CROSS—COMPLAINT CASE NO. 18-CIV—03 1 10
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EWED Smi-S 114111;: COUNTY DAVID J. MICLEAN (SBN 115098) dmiclean@micleangleason.com CARMEN M. AVILES (SBN 251993) caviles@micleangleason.com MICLEAN GLEASON LLP 411 Borel Avenue, Suite 310 San Mateo, CA 94402 \OOO\]O\U‘I-hUOI\-> Telephone: (650) 684-1 181 Facsimile: (650) 684-1182 Attorneys for Defendant and Cross—Complainant Solomon Sha 811a SUPERIOR COURT OF THE STATE OF CALIFORNIA 53 xed COUNTY OF SAN MATEO 10 11 12 SWEET PRODUCTION, INC., 21 California Case No. l8-CIV—03l 10 Corporation, 13 SOLOMON SHA’S CROSS-COMPLAINT 14 Plaintiff, FOR: 15 V. 1. Breach of Fiduciary Duty _ _ 2. Accounting 16 SOLOMON SHA, an 1nd1vidual; and DOES 1 3, Fraud to 10, inclusive, 4. Conversion 17 5. Unjust Enrichment 18 Defendants. JURY TRIAL DEMANDED 19 20 SOLOMON SHA, Complaint Filed: June 18, 2018 Trial Date: TBD 21 Cross-Complainant, " _ __ _ 22 V. I/113_—1:11/—1Ja_1iu - cP . 23 SWEET PRODUCTION, INC., a California : $£3§§e°a°mmm corporation; SWEET EXPRESS; MING CHIN; .' 24 DOREEN CHIN; and ROES 1 through 20, inclusive, 1\ l 1H1 11111111111111111 25 _1 Cross-Defendants. 26 27 28 CROSS-COMPLAINT CASE No. 18—CIV-03 1 10 MF' 6981.. Pursuant to the California Code of Civil Procedure § 428.10, Cross—Complainant SOLOMON SHA (“Sha” or “Cross-Complainant”) cross-complains and alleges the following: PARTIES 1. Cross—Complainant Sha is an individual residing in San Mateo County, OO\IO\UIAUJN California. 2. Cross-Defendant SWEET PRODUCTION, INC. (“SPI” or “Cross-Defendan ”) is a California Corporation doing business in San Mateo County, California. 3. Cross-Defendant SWEET EXPRESS (“Sweet Express” or “Cross—Defendant”) is \D believed to be a business entity operating in San Mateo County, California. 10 4. Cross—Defendant Ming Chin (a.k.a. “Terry” Chin) is an individual residing in ll San Mateo County, California. 12 5. Cross-Defendant Doreen Chin is an individual residing in San Mateo County, 13 California. 14 6. The true names and capacities of Cross—Defendants Roes 1-20, Whether 15 individual, corporate, or otherwise, are unknown to Cross—Complainant at this time, and Cross- 16 Complainant therefore sues these Cross-Defendants by such fictitious names. When the true 17 names and capacities of the fictitiously named Cross-Defendants are ascertained, Cross; 18 Complainant will amend the complaint to reflect their true names. Cross—Complainant is 19 informed and believes and thereon alleges that each of the fictitiously named Cross—Defendants 20 is indebted to Cross-Complainant as hereinafter alleged, as agents of or alter-egos of the other 21 Cross—Defendants, and that Cross-Complainant’s rights against such fictitiously named 22 defendants arise from such indebtedness. 23 7. All Cross-Defendants including ROES 1—20 are referred to herein as “Cross- 24 Defendants.” 25 JURISDICTION AND VENUE 26 8. Sha is a resident of San Mateo County, California. 27 9. Cross-Defendant SPI has filed a Complaint against Sha in San Mateo County. 28 10. Cross-Complainant is informed and believes and, on that basis, alleges that at all 1 CROSS— COMPLAINT CASE NO. 18-CIV-03 l 10 times referenced in this Cross-Complaint, Cross—Defendants entered into agreements and conducted business in the County of San Mateo, California. 11. As a result, this Court has jurisdiction over the parties and venue is proper in San A Mateo County pursuant to California Code of Civil Procedure Section 395(a). FACTUAL ALLEGATIONS \]O\U‘I A. Sha and the Chins Form a Long-Term Close Relationship 12. Sha met Ming (a.k.a. “Terry”) Chin and Doreen Chin (collectively, the “Chins”) in 1987 while working at their restaurant in San Francisco. Sha became very close to, and trusting of, the Chins. Sha eventually left the Chins’ restaurant business to begin his career in 10 the bakery industry in 1998 at San Francisco Fine Bakery (“SFFB”). In 2006, the Chins lost 11 their lease in their restaurant and started working at SFFB, but the business relationship between 12 them and SFFB’s owner quickly soured. In late 2007, the Chins left SFFB. In 2008, the Chins 13 and Sha started SPI. SPI was initially based in South San Francisco, but eventually the bakery 14 business moved to its current location of San Carlos. 15 B. The Establishment of Sweet Production, Inc. and the Start of the Chins’ Fraudulent Scheme to Gain Control and Divert Revenues and Profits 16 17 l3. Sha’s wife, Kitty Sha, began working at SPI in 2009 as an accountant. The 18 initial ownership shares for SP1 were the Chins (40%), Jenny Chea (30%), and Kitty/Solomon 19 Sha (30%). Kitty Sha worked as an accountant for SP1 until she was asked to leave by the 2o Chins. The Chins did not want Kitty Sha to see their financial and accounting records and 21 accordingly asked her to leave. The Chins have improperly tried to take over the SP1 business 22 and freeze out and not pay the other owners of the business. 23 In furtherance of their scheme to misappropriate company assets and funds, and gain 24 control over SPI, the Chins opened a bank account at East West Bank where, on information 25 and belief, certain SPI cash funds were continuously deposited but not accounted for on SPI’s 26 accounting books and records. On information and belief, the Chins falsified the accounting 27 records of SP1 to avoid paying co—owners, while improperly diverting SPI funds to themselves 28 for personal use. CROSS—COMPLAINT CASE No. 18-CIV-03110 As part of their fraudulent scheme to take full control of SP1 for their own personal benefit, the Chins unilaterally and fraudulently reduced Sha’s share ownership and increased their own, in attempt to oust Jenny Chea, a 30% shareholder in SP1. The Chins reduced Sha’s Ui-IAUJN share ownership from 30% to 24.5% in 2011 to 14.5% in 2012. Sha did not uncover the Chins’ scheme to falsify books and misappropriate assets until much later. Sha eventually noticed that his ownership share was decreasing significantly; when he approached the Chins about this \IO\ impropriety, they promised to eventually return his shares, which they have not. The Chins were also not paying company profit distributions to their partners, While taking them for themselves. 10 More recently, Sha began noticing that certain invoices for a company called Sweet 11 Express, with the same address as SP1, and ostensibly run by a relative of the Chins, were issued 12 with unusual orders and payments. By this time, Sha was very familiar with SPI’s customers, 13 their orders, the pricing of items, and the general revenue for SPI. On information and belief, 14 the Chins were diverting certain SPI business to Sweet Express, and allowing Sweet Express to 15 use SPI assets (without recompense), so they could divert revenues to themselves and bypass 16 the other owners of SPI. Due to the unusual Sweet Express invoices, coupled with the East 17 West Bank account set-up and controlled by the Chins, Sha began to piece together the financial 18 irregularities and misappropriation of company funds by the Chins to the detriment of SPI’s 19 other shareholders. By this time, Sha had received little to no ownership profit distributions 20 despite SPI’s financial success. 21 Sha then began requesting the return of his ownership shares and profit distributions. 22 The Chins would respond with excuses as to why they could not return the shares or pay profit 23 distributions or ignored Sha’s requests altogether. In the last year, Sha sent several emails 24 requesting the return of his shares. Again, the Chins ignored his written requests. Realizing 25 that Sha was not going to back down from requesting the return of his shares and payment of his 26 distributions, and after Sha requested an accounting, the Chins began to plot against Sha to 27 remove him as an employee from SPI. While Sha was on vacation with his family, SPI’s 28 attorney on April 13, 2017, sent a letter correspondence to Sha stating that he was suspended 3 CROSS—COMPLAINT CASE NO. 18-CIV—03 1 10 and could not return to SPI’s premises due to alleged improprieties. Sha knew that the suspension was a pretense and being used to keep him away from SPI so that the Chins could continue using SPI’s resources for their own personal benefit and avoid the accounting. Sha retained current counsel to request an accounting of SPI’s books and records to OOOQONMAUJNH determine the distribution amounts owed to Sha. SPI produced a handful of documents that in no way provided Sha an accurate financial accounting of SPI. In retaliation for Sha’s request for his unpaid ownership share distributions, the Chins, using SP1 as their alter ego, filed a Complaint against Sha. ALTER EGO ALLEGATIONS 14. Sha is informed and believes and thereon alleges that the entities named as Cross-Defendants herein, including but not limited to SP1 and Sweet Express, and Roes 1-20 (hereinafter collectively referred to as the “Alter Ego Entities”), and each of them, were at all times relevant the alter ego entities of individual Cross—Defendants Terry and Doreen Chin by reason of the following: (a) Sha is informed and believes and thereon alleges that the individual Cross- Defendants, at all time herein mentioned, dominated, influenced, and controlled each NNNNNNNNP—‘D—‘P—‘P—‘HHP—‘r—il—IH of the Alter Ego Entities and the officers thereof, as well as the business, property, and affairs of each of said entities. (b) Sha is informed and believes and thereon alleges that, at all times herein mentioned, §\]O\LIILUJNF—‘OKDOO\IO\MJ>UJNHO there existed and now exists a unity of interest and ownership between said individual Cross—Defendants and each of the Alter Ego Entities; the individuality and separateness of said individual Cross-Defendants and each of the Alter Ego Entities have ceased. (c) Sha is informed and believes and thereon alleges that, at all times since the incorporation of each, each Alter Ego Entity has been and now is a mere shell for each individual Cross-Defendant and used as a conduit for the conduct of their personal business, property, and affairs. (d) Sha is informed and believes and thereon alleges that, at all times herein mentioned, 4 CROSS—COMPLAINT CASE No. 18-CIV-03 1 10 each of the Alter Ego Entities was created and continued pursuant to a fraudulent plan, scheme, and device conceived and operated by the individual Cross- Defendants, Terry and Doreen Chin, whereby the income, revenue, and profits of each of the Alter Ego Entities were diverted by said individuals to themselves. (e) Sha is informed and believes and thereon alleges that, at all times herein mentioned, \DOOQQMAWN each of the Alter Ego Entities was organized by said individual Cross-Defendants as a device to avoid individual liability and for the purpose of substituting financially irresponsible corporations in the place and stead of said individual Cross- Defendants, and each of them, and accordingly, each Alter Ego Entity was formed 10 with capitalization totally inadequate for the business in which said corporation was 11' engaged. 12 (f) Sha is informed and believes and thereon alleges that each Alter Ego Entity is 13 insolvent because of Cross—Defendants’ fraudulent handling of the Alter Ego 14 Entities’ finances for each Cross-Defendant’s personal benefit. 15 (g) By virtue of the foregoing, adherence to the fiction of the separate corporate 16 existence of each of the Alter Ego Entities would, under the circumstances, sanction 17 a fraud and promote injustice in that Defendants would be unable to realize upon any 18 judgment in their favor. 19 15. Sha is informed and believes and thereon alleges that, at all times relevant 20 hereto, the individual Cross—Defendants Ming and Doreen Chin and the Alter Ego Entities acted 21 for each other in connection with the conduct hereinafter alleged, and that each of them 22 performed the acts complained of herein or breached the duties herein complained of as agents 23 of each other and each is therefore fully liable for the acts of the other. 24 FIRST CAUSE OF ACTION 25 (Against Cross-Defendants Sweet Production, Inc., Ming Chin, and Doreen Chin for 26 Breach of Fiduciary Duty) 27 16. Sha realleges and incorporates by reference the allegations contained in 28 paragraphs 1 through 15 above. 5 CROSS-COMPLAINT CASE NO. 18-CIV-03 1 10 17. As directors of SPI, each of the Defendants owes fiduciary duties of care, loyalty, and good faith to SPI’s stockholders, including Sha. Cross-Defendants’ fiduciary duties .b-UJN include obligations to exercise good business judgment, to act prudently in the operation of SPI’s business, to discharge their actions in good faith, to act in the best interests of SPI and its stockholders, and to put the interests of SPI before their own. 18. SP1 owes its owners and fellow directors the duty to pay each its fair share of \OOO\IO\U1 profit distributions based on share ownership. 19. Cross—Defendants breached their fiduciary duties of loyalty and good faith, among other things, by diverting SPI funds and business away from SPI, issuing themselves 10 additional equity in SP1, and failing to pay its stockholders their ownership share of ll distributions based on equity share in SPI. 12 20. SP1 has breached its fiduciary duty to Sha when it failed to pay Sha his 13 ownership share of distributions in SP1 and cooked the financial books of SPI.. 14 21. Sha has been damaged by Cross-Defendants’ breach of their fiduciary duties and 15 has suffered monetary loss and damages in an amount to be proven at trial. 16 SECOND CAUSE OF ACTION 17 (Against All Cross-Defendants for Accounting) 18 22. Sha realleges and incorporates by reference the allegations contained in 19 paragraph 1 through 21 above. 20 23. California Corporation Code § 1601 (a) provides: “The accounting books and 21 records and minutes of proceedings of the shareholders and the board and committees of the 22 board of any domestic corporation, and any foreign corporation keeping any such records in this 23 state or having its principal executive office in this state, shall be open to inspection on the 24 corporation of any shareholder or holder of a voting trust certificate at any reasonable time 25 during the usual business hours, for a purpose reasonably related to such holder’s interests as a 26 shareholder or as the holder of such voting trust certificate. The right of inspection created by 27 this subdivision shall extend to the records of each subsidiary of a corporation subject to this 28 subdivision.” CROSS-COMPLAINT CASE NO. 18-CIV-03 l 10 24. Sha, who is a shareholder and officer of SPI, requested to review the accounting books and records of SPI. Sha has never received a complete and/or detailed accounting from Cross-Defendants as to where and how SPI funds and corporate revenues have been spent, despite the accounting request. The sole means of ascertaining such information and documentation are within the control of Cross-Defendants. OO\]O\UI-l>- 25. Sha cannot determine the amount of money due him without a full and complete accounting from Cross—Defendants, and each of them. THIRD CAUSE OF ACTION \O (Against Cross—Defendants Ming Chin and Doreen Chin for Fraud) 10 26. Sha realleges and incorporates by references the allegations contained in 11 paragraphs 1 through 25 above. 12 27. Sha has personally known Cross-Defendants the Chins for over twenty years and 13 wholly trusted them as family. The Chins embarked on a scheme to take full control of SPI for 14 their own personal benefit. The Chins represented to Sha that they needed to reduce his 15 ownership share and increase their own in an attempt to oust Jenny Chea, a 30% shareholder in 16 SPI. They promised to return his ownership percentage share after they ousted Chea. The 17 Chins were not able to oust Chea and never returned Sha’s ownership percentage. The Chins 18 made such a plan to take full control of SPI for their own personal financial benefit. 19 28. In reliance on the representations, Sha agreed to slightly reduce his ownership 20 share with the agreement that it would be returned to him. 21 29. Unbeknownst to Sha, the Chins reduced Sha’s share ownership from 30% to 22 24.5% in 2011 to 14.5% in 2012. 23 30. At the time of the misrepresentations and omissions referenced herein, Cross— 24 Defendants were aware that such misrepresentations and omissions were taking place and 25 allowed them to take place because, as directors and alter—egos of SPI, the Chins benefited from 26 the misrepresentations and omissions set forth herein. 27 31. The Chins also intentionally misrepresented that SPI was not making enough 28 profit to provide owner profit distributions to their fellow owners, while, on information and 7 CROSS—COMPLAINT CASE NO. 18—CIV—03 l 10 belief, paying themselves distributions from SPI revenue, and siphoning. off SPI business and N revenues to their separate corporation Sweet Express. 32. By reason of said misrepresentations and fraudulent concealment as alleged herein, Sha has been damaged in an amount presently unascertained due to Cross-Defendants’ misdeeds in management of SPI. KOOOQONU‘I-bw FOURTH CAUSE OF ACTION (Against All Defendants for Conversion) 33. Sha realleges and incorporates by references the allegations contained in paragraphs 1 through 32 above. 10 34. Sha is entitled to his ownership share of SPI revenues and profits. On 11 information and belief, through the Chins’ unlawful efforts to seize control of SPI, unilaterally 12 and fraudulently changing ownership percentages, falsifying SPI’s financial records and books, 13 paying themselves profit distributions but not their co-owners, siphoning off SPI business to 14 their separate entity Sweet Express, allowing Sweet Express to utilize SPI assets without 15 payment to SP1, and controlling bank accounts to hide SPI revenues and profits, the Cross- 16 Defendants have wrongfully converted the assets of SPI and the profits that are owned by and 17 should have been paid to Sha. 18 35. By reason of said conversion and fraud as alleged herein, Sha has been damaged 19 in an amount presently unascertained due to Cross-Defendants’ misdeeds in management of 20 SPI. 21 FIFTH CAUSE OF ACTION 22 (Against All Defendants for Unjust Enrichment) 23 36. Sha realleges and incorporates by references the allegations contained in 24 paragraphs 1 through 35 above. 25 37. By reason of the acts claimed herein, and the misappropriation of SPI assets and 26 profits to themselves in breach of their fiduciary duties to their co-owners, the Cross-Defendants 27 were unjustly enriched at the expense of Sha and the other owner of SPI. 28 7 CROSS-COMPLAINT CASE No. 18-CIV-03110 PRAYER FOR RELIEF WHEREAS, Cross-Complainant prays that judgment be entered against Cross— AWN Defendants as follows: a. Judgment be entered in favor of Mr. Sha; b. Mr. Sha be awarded his costs of suit, including reasonable attorney’s fees; 0. For damages in an amount to be specified at trial, but no less than the \OOO\]O\U1 jurisdictional amount of this Court; ‘ d. For an accounting of SPI financial records, assets and profits; e. For disgorgement of profits and revenues unlawfully misappropriated by 10 defendants; and 11 f. For such other relief as the Court may deem just and proper. 12 JURY DEMAND 13 Cross-Complainant Solomon Sha, by and through his undersigned counsel, hereby 14 requests a trial by jury on all above claims triable to a jury. 15 16 DATED: July 19, 2018 Respectfully submitted, 17 MICLEAN GLEASON LLP 18 19 2o / David J. Miclean Carmen M. Aviles 21 Attorneys for Defendant and Cross-Complainant Solomon Sha 22 23 24 25 26 27 28 CROSS—COMPLAINT CASE NO. 18-CIV—03 1 10