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i DAVID J. MICLEAN (SBN 115098)
SAN MATEO
ILECODUNTY
JUL 22 2019
Super Court
dmiclean@micleangleason.com Clerk of
DANIELLE M. MIHALKANIN (SBN 271442) CYAAB
By DEPUTY dit
dmihalkanin@micleangleason.com
MICLEAN GLEASON LLP
411 Borel Avenue, Suite 310
San Mateo, CA 94402
Telephone: (650) 684-1181
Facsimile: (650) 684-1182
Attorneys for Defendant and Cross-Complainant
Solomon Sha
SUPERIOR COURT OF THE STATE OF CALIFORNIA.
10 COUNTY OF SAN MATEO
Il
SWEET PRODUCTION, INC., a California Case No. 18-CIV-03110
12
Corporation,
13
Plaintiff, DEFENDANT SOLOMON SHA’S
14 MEMORANDUM OF POINTS AND
AUTHORITES IN SUPPORT OF MOTION
Vv. FOR DEFAULT JUDGMENT AGAINST
15
CROSS-DEFENDANTS SWEET
SOLOMON SHA, an individual; and DOES 1 to PRODUCTION, INC., A CALIFORNIA
16 CORPORATION; SWEET EXPRESS; MING
10, inclusive,
CHIN; AND DOREEN CHIN
17
Defendants.
18 SERIO 9
Date:
19
Time: 9:00 a.m
20 SOLOMON SHA, Department: Law & Motion
21 Cross-Complainant,
— _ — a=
22 Vv. 48.
WA oN 03110
& A \uthorities
23 we orandum of Points
‘An il
SWEET PRODUCTION, INC., a California 4955749
24 corporation; SWEET EXPRESS; MING CHIN;
DOREEN CHIN; and ROES 1 through 10
25 inclusive, -
26 Cross-Defendants.
27
28
MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110
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MEMORANDUM OF POINTS AND AUTHORITIES
I INTRODUCTION
Throughout the time this action has been pending, Plaintiff and Cross-Defendant Sweet
Production, Inc. (“SPI”) and Cross-Defendants Sweet Express (“Sweet Express”), Ming Chin
(“Ming”), and Doreen Chin (“Doreen”) (collectively, the “SPI Parties”) have refused to communicate
entirely and have stonewalled the efforts of Defendant and Cross-Complainant Solomon Sha (“Sha”) to
gain access to SPI’s accounting books and records to perform basic discovery. Prior to the filing of this
action by SPI, and throughout its year-long existence, Defendant and Cross-Complainant Sha has made
efforts to obtain an accounting of SPI’s financial documents; however, all attempts have been met with
10 no response.
11 The SPI Parties have been repeatedly and personally been served with process on Sha’s
12 pleadings and discovery requests; however, all such pleadings, discovery and communications have
13 been wholly ignored. Even when faced with default being entered against the SPI Parties on both the
14 original Cross-Complaint and the First Amended Cross-Complaint, the SPI Parties failed to respond or
1s otherwise move for relief. This is not the result of inadvertence or mistake, but a calculated strategy to
16 avoid production of financial documents and sandbag Sha at trial on SPI’s complaint.
17 The SPI Parties’ strategy to avoid Sha’s original demand for an accounting, file the instant
18 lawsuit (and then ignore it), disregard court pleadings, ignore discovery obligations, refuse to
19 communicate, avoid production of SPI’s financial records and accounting, and essentially go radio
20 silent has led to the entry of default against the SPI Parties and this motion for a default judgment.
21 Without the financial documents Sha has demanded in discovery, Sha is prevented from effectively
22 prosecuting his Cross-Complaint and defending against SPI’s claims in SPI’s own Complaint. The SPI
23 Parties did not answer or otherwise respond to the original Cross-Complaint or the First Amended
24 Cross-Complaint, and their time to do so has long expired. The SPI Parties have effectively shut Sha
25 out of the company he owns, refused to make any distributions to Sha, converted money owed to Sha
26 and concealed for years the financial records that could reveal such malfeasance. Under these
27 circumstances, Sha is entitled to a default judgment of $1.5 million on the First Amended Cross-
28 Complaint against the SPI Parties representing the distributions not made to him and his interest in SPI
1
MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO, 18-CIV-03110
which has been converted by the SPI Parties.!
Accordingly, and for the additional reasons explained below, Cross-Complainant Sha
respectfully requests that the Court now enter a default judgment in his favor.
0 FACTUAL AND PROCEDURAL BACKGROUND
A. Sha Discovered the Extent of the Chins’ Fraudulent Scheme to Gain Control and
Divert Revenues and Profits
Sha has worked in the bakery industry for over 20 years. [Declaration of Solomon Sha (“Sha
Decl.”), 1 3, and Exhibit (“Ex.”) 1 thereto.] Through the collective efforts of Sha, Ming, and Doreen,
SPI was founded in 2008. [Jd] At SPI’s onset, Sha owned 30% of SPI. [Sha Decl., § 4.] Over the
10 years, Sha was busy with the day-to day management of SPI and did not realize Ming and Doreen’s
ll fraudulent conduct and misappropriation of SPI funds. [Jd] Only upon recent examination of some of
12 the finances of SPI he had access to, did Sha realize both the extent of SPI profits and that he should
13 have been entitled to profit distributions from 2011. [Jd] Through further investigation, Sha
14 recognized unusual orders and payments made to Sweet Express, a company owned by Ming and
15 Doreen’s nephew, to divert revenue to themselves and bypass profit distributions to Sha. [Sha Decl., J
16 6.] When Sha began to suspect and question Ming and Doreen, Sha was suspended from employment
17 at SPL. [Sha Decl., [7]
18 On August 10, 2017, counsel for Sha sent a letter correspondence to SPI requesting an
19 inspection of SPI’s financial documents, as Sha was an officer of SPI and statutorily entitled to review
20 financial records. [Declaration of David J. Miclean (“Miclean Decl.”), 44, and Ex. 2 thereto.] Since
21 that time, SPI has remained noncompliant with Sha’s request to produce accounting and financial
22 records. [Miclean Decl., [8.] In retaliation for Sha’s demand, SPI filed a peremptory Complaint on
23 June 18, 2018 against Sha to scare him off from seeking a full accounting of SPI’s financial records.
24 Ud]
25
26 1 Cross-Defendants had expressly disavowed any intention of appearing in this case on the original
27 Cross-Complaint, for which the clerk of the Court entered their default. They have now reconfirmed
their intention of nonappearance by failing to answer once again on Sha’s First Amended Cross-
28 Complaint, and again, the Court has entered their default.
2
MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO, 18-CIV-03110
B. Despite Sha’s Many Service Attempts, the SPI Parties Have Still Refused to
Respond to the Cross-Complaint or Participate in Litigation and Are in Default
On August 9, 2018, Sha’s first set of discovery requests were personally served on each of the
Cross-Defendants. [Declaration of Douglas D. Collins (“Collins Decl.”), J 6.] Further, deposition
notices were personally served on Ming and Doreen. [Collins Decl., {7.] These requests and notices
were also met with no response, and Ming and Doreen did not show up for deposition after they had to
be taken off calendar because of the Cross-Defendants’ refusal to produce documents and financial
records. Moreover, none of the SPI Parties responded to Sha’s courtesy notice of Default on the Cross-
Complaint and personally-served notice of Request for Entry of Default. [Miclean Decl., 7 12; Collins
10 Decl. { 8.]
il When Default had been entered against all the SPI Parties on the Cross-Complaint, counsel for
12 SPI finally made contact on the topic of settlement negotiations. [Miclean Decl., J 13.] But, consistent
13 with their pattern of nonresponse, when Sha sought SPI financial records to make an informed decision
14 on potential settlement proposals, the SPI Parties yet again went radio silent and responded no further.
15 [Miclean Deel., § 15.]
16 On April 4, 2019, Sha filed his First Amended Cross-Complaint to include a specific claim for
17 at least $1.5 million in profit distributions and lost value of his ownership interest in SPI. [Miclean
18 Decl., | 18.] Sha’s First Amended Cross~Complaint was personally served on Cross-Defendants SPI,
19 Sweet Express, Ming, and Doreen. [Collins Decl., | 12.] Accordingly, the SPI Parties had up to and
20 including May 16, 2019 to answer or otherwise respond to Sha’s First Amended Cross-Complaint.
21 [Miclean Decl., { 18.] The First Amended Cross-Complaint was again ignored by all the Cross-
22 Defendants, and no Cross-Defendant filed a responsive pleading. [Jd.] Instead of providing any
23 relevant response to Sha’s First Amended Cross-Complaint, counsel for SPI filed a Notice of Change of
24 Address for this matter with the Court. [Miclean Decl., ] 19.] This is the only direct contact counsel for
25 SPI made with our firm from October 15, 2018, until June 4, 2019, a day before the parties’ Mandatory
26 Settlement Conference — a period of over 7 months. [Id.]
27 Entirely in character, the SPI Parties have not made a response of any kind in regard to Sha’s
28 Amended Cross-Complaint. Below is a table depicting the non-exhaustive chronology of nonresponse
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MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110
by Cross-Defendants SPI, Sweet Express, Ming, and Doreen:
Ee G 3 sas aps i
Sha’s first set ofdiscovery Personal Service® None Collins Decl. 14
07/27/2018 on SPI served (including on SPI
Requests for Production of
Documents, Special
Interrogatories, Form
Interrogatories, and a
Demand for Inspection of
Real Property)
Sha’s original Cross- Personal Service None Collins Decl., | 5
07/30/2018 Complaint filed on All Cross-
Defendants
10 Sha’s first set of discovery Personal Service None Collins Decl., ] 6
08/09/2018 to Ming and Doreen on Cross-
11
(including Requests for Defendants Ming
12 Production of Documents, Chin and Doreen
Special Interrogatories, and Chin
13 Form Interrogatories)
Deposition Notices served Personal Service None Collins Decl., ] 7
14 08/23/2018 by Sha for depositions of on Cross-
15 Ming and Doreen Defendants Ming
and Doreen
16 Courtesy notice of Mail/email on None Miclean Decl., Ex.
09/04/2018 impending default SPI’s counsel; 10
17 personal service
on Ming; Doreen
18
Sha files Request for Entry Personal Service ‘None Collins Decl., { 8
09/12/2018 of Default on All Cross-
19
Defendants
20 Sha files Amended Request Personal Service None Collins Decl., | 10
10/04/2018 for Entry of Default on Cross-
21 Defendant SPI
22
Court enters default on original Cross-Complaint as to all Miclean Decl.,
10/09/2018 Cross-Defendants 4 12; Collins Decl.,
23 qu
Sha’s First Amended Personal Service None Collins Decl., | 12
24 04/10/2019 Cross-Complaint filed on Cross-
(stating claim for $1.5 Defendants Sweet
25 Express, Ming
million)
26 Chin, and Doreen
27
? All instances of personal service were effected by this firm’s usual attorney service and process server,
28 First Legal of San Francisco, California. [Collins Decl., 4 3]
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MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110
Chin
Sha’s First Amended Personal Service None Collins Decl., § 12
04/16/2019 Cross-Complaint served on on Cross-
SPI Defendant SPI
Sha’s Request for Entry of Personal Service ‘None Collins Decl., 4 15
05/21/2019 Default filed as to All on All Cross-
Cross-Defendants [as to Defendants
Sha’s First Amended
Cross-Complaint]
Court enters default on First Amended Cross-Complaint as to Wiclean Decl.,
06/05/2019 all Cross-Defendants { 21; Collins Decl.,
qi6
As of this motion, neither any Cross-Defendant nor SPI’s attorney has responded in any way to
any of the items served as described. [Collins Decl., 17.] These nonresponses, taken in their entirety,
10
demonstrate the SPI Parties’ total disregard of Sha’s Cross-Complaint and this litigation and their
11
intentional determination to ignore Sha’s attempts to conduct meaningful discovery and obtain financial
12
documents and information so he can get the money owed him.
13
Consistent with the SPI Parties’ pattern of repeated refusal to communicate in any way to
14
participate in the action, the deadline to respond to Sha’s First Amended Cross-Complaint had passed
15
with no response. On May 21, 2019, given the SPI Parties’ lack of any response to Sha’s First
16
Amended Cross-Complaint, Sha filed a Request for Entry of Default on all Cross-Defendants as to
17
Sha’s First Amended Cross-Complaint. [Miclean Decl., ]21.]
18
On June 5, 2019, the MSC went forward in this case. SPI did not serve a timely MSC statement,
19
but Mr. Agtagma showed up with Cross-Defendants Meng and Doreen Chin on behalf of SPI. It was
20
evident that the SPI Parties deliberate strategy was to avoid discovery, avoid production of financial
21
documents and information requested by Sha, ignore defaults and try to sandbag Sha at trial. The entry
22
of two defaults on all the SPI Parties, as to both the first and amended complaint, was not a result of
23
inadvertence, mistake or defective service. It was an intentional strategy to make Sha spend money so
24
the SPI Parties could better their settlement leverage and avoid paying Mr. Sha his ownership interest
25
in SPI. The motion for default judgment should be granted in the amount of $1.5 million.
26
Til. STATEMENT OF LAW
27
“When a [Cross-Defendant] does not respond to a [Cross-Complainant]’s properly served
28
MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110
[Cross-]Complaint, the [Cross-Complainant] may seek the entry of default and, thereafter, a default
judgment.” Sass v. Cohen (2019) 32 Cal-App.S5th 1032, 1039-1040.
Generally, a Cross-Defendant in default “confesses the material allegations of the [Cross-
CJomplaint. Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 392. A Cross-Defendant in
default “admits only facts that are well pleaded.” Jd. Ifthe Cross-Complaint properly states a cause of
action, the only additional proof required for the judgment is that needed to establish the amount of
damages, if damages are sought. Jd. In an action arising upon contract or judgment for the recovery of
money or damages only, “if the [Cross-D]efendant has ... been served, other than by publication, and
no answer ... has been filed with the clerk of the court within the time specified in the summons, ... the
10 clerk, upon written application of the [Cross-Complainant], and proof of the service of summons, shall
Il enter the default of the [Cross-D]efendant ... so served, and immediately thereafter enter judgment for
12 the principal amount demanded in the complaint.” HSBC Bank Nevada, N.A. v. Aguilar (2012) 205
13 Cal.App.4th Supp. 6, 10.
14 Iv. ARGUMENT
15 A. Sha Is Entitled to a Default Judgment because Service of Process Has Been
16 Completed and Cross-Defendants Have Failed to Answer Once Again
17 Due process demands “notice of [a pending case] and [an] opportunityto meet it.” Today’s
18 Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal.4th 197, 212. If and only ifa
19 Cross-Defendant receives advance notice of the type and amount of relief sought can he make a “fair
20 and informed” decision whether to fight the pending case (and, in so doing, risk the possibility of a
23 judgment exceeding that relief) or to forgo that fight (and, in so doing, accept a judgment against him up
22 to, but not exceeding, that relief in an amount fixed by the trial court). Sass, supra, 32 Cal.App.5th at
23 1041.
24 At all relevant times, Sha has been diligent in bringing this case to judgment. Since the onset of
25 Sha’s original Cross-Complaint, Sha has served discovery requests, deposition notices, courtesy notices
26 of default, and default judgment notices to the SPI Parties; however, to no response. [Miclean Decl. {fj
27 8-21; Collins Decl. 4 5-17.] Not only did the SPI Parties have a full opportunity to respond before the
28 Entry of Default to the Cross-Complaint, the SPI Parties had a second chance when Sha filed his First
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MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110
Amended Cross-Complaint. In filing Sha’s First Amended Cross-~Complaint, Sha has met due process
requirements by providing ample notice and opportunity to the SPI Parties to respond to Sha’s First
Amended Cross-Complaint.
On April 4, 2019, Sha filed his First Amended Cross-Complaint. [Miclean Decl., | 9.] On April
10, 2019, Sha’s First Amended Cross-Complaint was served personally on Cross-Defendants Sweet
Express, Ming and Doreen. [Collins Decl., 12] And on April 16, 2019, Sha’s First Amended Cross-
Complaint was personally served on Cross-Defendant SPI. [Jd.] In light of the SPI Parties’
acknowledgement of service of process, the SPI Parties received adequate advance notice of the type
and amount of relief sought by Sha, Further, the SPI Parties were given the opportunity to make a “fair
10 and informed” decision on whether to fight the pending First Amended Cross-Complaint until May 16,
11 2019. But, staying consistent to the nonresponse that led to a default judgment entered against the SPI
12 Parties on the original Cross-Complaint, the SPI Parties again chose to forgo that fight (and, in so doing,
13 accept a judgment against them up to, but not exceeding, that relief in an amount fixed by the trial
14 court). Sass, supra, 32 Cal.App.Sth at 1041.
15 Not only have the SPI Parties deliberately chosen not to respond to Sha’s First Amended Cross-
16 Complaint, they have refused to respond in any meaningful way with discovery and have become
17 largely radio silent in all forms of communication. [Miclean Decl., { 19; Collins Decl. § 17.] Under
18 these circumstances, the SPI Parties have demonstrated their willful intent to greatly hinder, if not
19 prevent, Sha’s ability to litigate this action and defend himself. Because the SPI Parties have not
20 responded to a Sha’s properly served First Amended Cross-Complaint, Sha had sought the entry of
21 default. Sha is now entitled to a default judgment. Accordingly, this Court should enter default of the
22 SPI Parties and admit the well pleaded material allegations in the Cross-Complaint as true.
23 B. Sha Is Entitled to $1.5 Million in Damages Pleaded in the Cross-Complaint
24 Code of Civil Procedure section 580(a) provides that “[t]he relief granted to the [Cross-
25 Complainant], if there is no answer, cannot exceed that demanded in the [Cross-C]omplaint [...] the
26 primary purpose of the section is the guarantee defaulting parties adequate notice of the maximum
27 judgment that may be assessed against them.” Code Civ. Proc. § 580; Los Defensores, Inc., supra, 223
28 Cal.App.4th at 398, citations omitted; Dhawan v. Biring (2015) 241 Cal.App.4th 963, 968-969.
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MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE No, 18-CIV-03110
The court has acknowledged that “a [Cross-Complainant] may be able to include in the [Cross-
Complaint] or prayer for relief an estimate of the amount due him, be willing to be bound by that
amount, and receive a default judgment limited to that amount.” Van Sickle v. Gilbert (2011) 196
Cal.App.4th 1495, 1523 (citing Ely v. Gray (1990) 224 Cal.App.3d 1257, 1262). Accordingly, “if the
[Cross-Complaint] states a cause of action for the recovery of general damages in a specified amount
alleged to have resulted from the defendant's breach [...] and the default of the defendant has been
entered, it is the duty of the clerk to enter judgment in accordance with the prayer of the [Cross-
Complaint]. HSBC Bank Nevada, N.A., supra, 205 Cal.App.4th at 11.
Sha’s First Amended Cross-Complaint specifies he sought $1.5 million in compensatory
10 damages [Miclean Decl., Ex. 18], and the allegations are sufficient to put all Cross-Defendants on notice
il that Sha would seek that much in damages.
12 Once the Court entered default on all the SPI Parties on the First Amended Cross-Complaint, the
13 SPI Parties are deemed to have admitted to the well-pleaded material allegations of the First Amended
14 Cross-Complaint. Sha’s First Amended Cross-Complaint properly sets forth facts showing the existence
15 of an actual controversy. [Miclean Decl., Ex. 18.] Sha brought an action against the SPI Parties for
16 breach of fiduciary duty, accounting, fraud, conversion, and unjust enrichment. Sha alleged despite SPI
17 profits of at least $1 million a year, Ming and Doreen continued to keep Sha’s shares of profit
18 distributions by implementing their financial and accounting scheme. [Declaration of Solomon Sha
19 (“Sha Decl.”), | 9.] Through Ming and Doreen’s misdeeds in management of SPI and diversion of
20 revenue, Sha has not received any profit distribution for the past 7 years. [Sha Decl., 14.]
21 Based on review of SPI’s Profit & Loss Statements from 2011 to 2017 which Sha demanded
22 prior to the litigation, and Sha’s knowledge of SPI’s business practices and the industry, Sha alleged
23 that in assessing his 30% ownership and fair share of profits, a reasonable conservative estimate owed to
24 him but not yet paid is over $1.5 million for the past 7 years. [Sha Decl., {{ 7, 10.] Because of the SPI
25 Parties’ noncompliance in discovery requests to provide full and accurate accounting of SPI’s books and
26 records, Sha has chosen to limit his estimate to his personal knowledge acquired from SPI’s financial
27 books and records during the time he was employed. [Sha Decl., J 10.] The $1.5 million in damages is
28 also supported by the expert testimony of Jeff Redman attached in support of this motion. Mr. Redman
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MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110
is a forensic financial expert and has reviewed some of the SPI financial documents and conducted other
evaluations of the valuation of SPI.
Sha has included in his First Amended Cross-Complaint and prayer for relief a demand for an
amount due him ($1.5 million). Despite the amount being a conservative estimate of his profit
distribution share and converted ownership value, Sha is willing to be bound by that amount, and receive
a default judgment limited to that amount. Further, Sha has met the due process requirement to give
notice to all Cross-Defendants before the default was entered. The SPI Parties had full notice of the
relief that Sha was seeking from them and the opportunity to decide not to appear and defend. Thus, the
allegations in the First Amended Cross-Complaint are sufficient to put the SPI Parties on notice.
10 Accordingly, because Sha’s First Amended Cross-Complaint states causes of action for the recovery of
11 $1.5 million in damages resulting from the SPI Parties misconduct, and since the default of the SPI
12 Parties has been entered, and because such judgment is supported by evidence, it is the duty of the Court
13 to enter judgment in accordance with the prayer of the First Amended Cross-Complaint in the amount of
14 $1.5 million.
15 Vv. CONCLUSION
16 For the reasons set forth above, Cross-Complainant Sha respectfully requests that this Court
17 grant his motion for default judgment and enter judgment on the Cross-Complaint in favor of Cross-
18 Complainant Sha and against Cross-Defendants Sweet Production, Inc., Sweet Express, Ming Chin, and
19 Doreen Chin in the amount of $1.5 million.
20
21 Dated: July 22, 2019 Respectfully Submitted:
22 MICLEAN GLEASON LLP
23
24
David J. Miclean
25 Danielle M. Mihalkanin
Attorneys for Defendant and Cross-Complainant
26
SOLOMON SHA
27
28
MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110
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i DAVID J. MICLEAN (SBN 115098) SAN MATEO ILECODUNTY JUL 22 2019 Super Court dmiclean@micleangleason.com Clerk of DANIELLE M. MIHALKANIN (SBN 271442) CYAAB By DEPUTY dit dmihalkanin@micleangleason.com MICLEAN GLEASON LLP 411 Borel Avenue, Suite 310 San Mateo, CA 94402 Telephone: (650) 684-1181 Facsimile: (650) 684-1182 Attorneys for Defendant and Cross-Complainant Solomon Sha SUPERIOR COURT OF THE STATE OF CALIFORNIA. 10 COUNTY OF SAN MATEO Il SWEET PRODUCTION, INC., a California Case No. 18-CIV-03110 12 Corporation, 13 Plaintiff, DEFENDANT SOLOMON SHA’S 14 MEMORANDUM OF POINTS AND AUTHORITES IN SUPPORT OF MOTION Vv. FOR DEFAULT JUDGMENT AGAINST 15 CROSS-DEFENDANTS SWEET SOLOMON SHA, an individual; and DOES 1 to PRODUCTION, INC., A CALIFORNIA 16 CORPORATION; SWEET EXPRESS; MING 10, inclusive, CHIN; AND DOREEN CHIN 17 Defendants. 18 SERIO 9 Date: 19 Time: 9:00 a.m 20 SOLOMON SHA, Department: Law & Motion 21 Cross-Complainant, — _ — a= 22 Vv. 48. WA oN 03110 & A \uthorities 23 we orandum of Points ‘An il SWEET PRODUCTION, INC., a California 4955749 24 corporation; SWEET EXPRESS; MING CHIN; DOREEN CHIN; and ROES 1 through 10 25 inclusive, - 26 Cross-Defendants. 27 28 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110 ‘ ap ai Qe cev® % ws we aie CO osrk9, ATED MEMORANDUM OF POINTS AND AUTHORITIES I INTRODUCTION Throughout the time this action has been pending, Plaintiff and Cross-Defendant Sweet Production, Inc. (“SPI”) and Cross-Defendants Sweet Express (“Sweet Express”), Ming Chin (“Ming”), and Doreen Chin (“Doreen”) (collectively, the “SPI Parties”) have refused to communicate entirely and have stonewalled the efforts of Defendant and Cross-Complainant Solomon Sha (“Sha”) to gain access to SPI’s accounting books and records to perform basic discovery. Prior to the filing of this action by SPI, and throughout its year-long existence, Defendant and Cross-Complainant Sha has made efforts to obtain an accounting of SPI’s financial documents; however, all attempts have been met with 10 no response. 11 The SPI Parties have been repeatedly and personally been served with process on Sha’s 12 pleadings and discovery requests; however, all such pleadings, discovery and communications have 13 been wholly ignored. Even when faced with default being entered against the SPI Parties on both the 14 original Cross-Complaint and the First Amended Cross-Complaint, the SPI Parties failed to respond or 1s otherwise move for relief. This is not the result of inadvertence or mistake, but a calculated strategy to 16 avoid production of financial documents and sandbag Sha at trial on SPI’s complaint. 17 The SPI Parties’ strategy to avoid Sha’s original demand for an accounting, file the instant 18 lawsuit (and then ignore it), disregard court pleadings, ignore discovery obligations, refuse to 19 communicate, avoid production of SPI’s financial records and accounting, and essentially go radio 20 silent has led to the entry of default against the SPI Parties and this motion for a default judgment. 21 Without the financial documents Sha has demanded in discovery, Sha is prevented from effectively 22 prosecuting his Cross-Complaint and defending against SPI’s claims in SPI’s own Complaint. The SPI 23 Parties did not answer or otherwise respond to the original Cross-Complaint or the First Amended 24 Cross-Complaint, and their time to do so has long expired. The SPI Parties have effectively shut Sha 25 out of the company he owns, refused to make any distributions to Sha, converted money owed to Sha 26 and concealed for years the financial records that could reveal such malfeasance. Under these 27 circumstances, Sha is entitled to a default judgment of $1.5 million on the First Amended Cross- 28 Complaint against the SPI Parties representing the distributions not made to him and his interest in SPI 1 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO, 18-CIV-03110 which has been converted by the SPI Parties.! Accordingly, and for the additional reasons explained below, Cross-Complainant Sha respectfully requests that the Court now enter a default judgment in his favor. 0 FACTUAL AND PROCEDURAL BACKGROUND A. Sha Discovered the Extent of the Chins’ Fraudulent Scheme to Gain Control and Divert Revenues and Profits Sha has worked in the bakery industry for over 20 years. [Declaration of Solomon Sha (“Sha Decl.”), 1 3, and Exhibit (“Ex.”) 1 thereto.] Through the collective efforts of Sha, Ming, and Doreen, SPI was founded in 2008. [Jd] At SPI’s onset, Sha owned 30% of SPI. [Sha Decl., § 4.] Over the 10 years, Sha was busy with the day-to day management of SPI and did not realize Ming and Doreen’s ll fraudulent conduct and misappropriation of SPI funds. [Jd] Only upon recent examination of some of 12 the finances of SPI he had access to, did Sha realize both the extent of SPI profits and that he should 13 have been entitled to profit distributions from 2011. [Jd] Through further investigation, Sha 14 recognized unusual orders and payments made to Sweet Express, a company owned by Ming and 15 Doreen’s nephew, to divert revenue to themselves and bypass profit distributions to Sha. [Sha Decl., J 16 6.] When Sha began to suspect and question Ming and Doreen, Sha was suspended from employment 17 at SPL. [Sha Decl., [7] 18 On August 10, 2017, counsel for Sha sent a letter correspondence to SPI requesting an 19 inspection of SPI’s financial documents, as Sha was an officer of SPI and statutorily entitled to review 20 financial records. [Declaration of David J. Miclean (“Miclean Decl.”), 44, and Ex. 2 thereto.] Since 21 that time, SPI has remained noncompliant with Sha’s request to produce accounting and financial 22 records. [Miclean Decl., [8.] In retaliation for Sha’s demand, SPI filed a peremptory Complaint on 23 June 18, 2018 against Sha to scare him off from seeking a full accounting of SPI’s financial records. 24 Ud] 25 26 1 Cross-Defendants had expressly disavowed any intention of appearing in this case on the original 27 Cross-Complaint, for which the clerk of the Court entered their default. They have now reconfirmed their intention of nonappearance by failing to answer once again on Sha’s First Amended Cross- 28 Complaint, and again, the Court has entered their default. 2 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO, 18-CIV-03110 B. Despite Sha’s Many Service Attempts, the SPI Parties Have Still Refused to Respond to the Cross-Complaint or Participate in Litigation and Are in Default On August 9, 2018, Sha’s first set of discovery requests were personally served on each of the Cross-Defendants. [Declaration of Douglas D. Collins (“Collins Decl.”), J 6.] Further, deposition notices were personally served on Ming and Doreen. [Collins Decl., {7.] These requests and notices were also met with no response, and Ming and Doreen did not show up for deposition after they had to be taken off calendar because of the Cross-Defendants’ refusal to produce documents and financial records. Moreover, none of the SPI Parties responded to Sha’s courtesy notice of Default on the Cross- Complaint and personally-served notice of Request for Entry of Default. [Miclean Decl., 7 12; Collins 10 Decl. { 8.] il When Default had been entered against all the SPI Parties on the Cross-Complaint, counsel for 12 SPI finally made contact on the topic of settlement negotiations. [Miclean Decl., J 13.] But, consistent 13 with their pattern of nonresponse, when Sha sought SPI financial records to make an informed decision 14 on potential settlement proposals, the SPI Parties yet again went radio silent and responded no further. 15 [Miclean Deel., § 15.] 16 On April 4, 2019, Sha filed his First Amended Cross-Complaint to include a specific claim for 17 at least $1.5 million in profit distributions and lost value of his ownership interest in SPI. [Miclean 18 Decl., | 18.] Sha’s First Amended Cross~Complaint was personally served on Cross-Defendants SPI, 19 Sweet Express, Ming, and Doreen. [Collins Decl., | 12.] Accordingly, the SPI Parties had up to and 20 including May 16, 2019 to answer or otherwise respond to Sha’s First Amended Cross-Complaint. 21 [Miclean Decl., { 18.] The First Amended Cross-Complaint was again ignored by all the Cross- 22 Defendants, and no Cross-Defendant filed a responsive pleading. [Jd.] Instead of providing any 23 relevant response to Sha’s First Amended Cross-Complaint, counsel for SPI filed a Notice of Change of 24 Address for this matter with the Court. [Miclean Decl., ] 19.] This is the only direct contact counsel for 25 SPI made with our firm from October 15, 2018, until June 4, 2019, a day before the parties’ Mandatory 26 Settlement Conference — a period of over 7 months. [Id.] 27 Entirely in character, the SPI Parties have not made a response of any kind in regard to Sha’s 28 Amended Cross-Complaint. Below is a table depicting the non-exhaustive chronology of nonresponse 3 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110 by Cross-Defendants SPI, Sweet Express, Ming, and Doreen: Ee G 3 sas aps i Sha’s first set ofdiscovery Personal Service® None Collins Decl. 14 07/27/2018 on SPI served (including on SPI Requests for Production of Documents, Special Interrogatories, Form Interrogatories, and a Demand for Inspection of Real Property) Sha’s original Cross- Personal Service None Collins Decl., | 5 07/30/2018 Complaint filed on All Cross- Defendants 10 Sha’s first set of discovery Personal Service None Collins Decl., ] 6 08/09/2018 to Ming and Doreen on Cross- 11 (including Requests for Defendants Ming 12 Production of Documents, Chin and Doreen Special Interrogatories, and Chin 13 Form Interrogatories) Deposition Notices served Personal Service None Collins Decl., ] 7 14 08/23/2018 by Sha for depositions of on Cross- 15 Ming and Doreen Defendants Ming and Doreen 16 Courtesy notice of Mail/email on None Miclean Decl., Ex. 09/04/2018 impending default SPI’s counsel; 10 17 personal service on Ming; Doreen 18 Sha files Request for Entry Personal Service ‘None Collins Decl., { 8 09/12/2018 of Default on All Cross- 19 Defendants 20 Sha files Amended Request Personal Service None Collins Decl., | 10 10/04/2018 for Entry of Default on Cross- 21 Defendant SPI 22 Court enters default on original Cross-Complaint as to all Miclean Decl., 10/09/2018 Cross-Defendants 4 12; Collins Decl., 23 qu Sha’s First Amended Personal Service None Collins Decl., | 12 24 04/10/2019 Cross-Complaint filed on Cross- (stating claim for $1.5 Defendants Sweet 25 Express, Ming million) 26 Chin, and Doreen 27 ? All instances of personal service were effected by this firm’s usual attorney service and process server, 28 First Legal of San Francisco, California. [Collins Decl., 4 3] 4 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110 Chin Sha’s First Amended Personal Service None Collins Decl., § 12 04/16/2019 Cross-Complaint served on on Cross- SPI Defendant SPI Sha’s Request for Entry of Personal Service ‘None Collins Decl., 4 15 05/21/2019 Default filed as to All on All Cross- Cross-Defendants [as to Defendants Sha’s First Amended Cross-Complaint] Court enters default on First Amended Cross-Complaint as to Wiclean Decl., 06/05/2019 all Cross-Defendants { 21; Collins Decl., qi6 As of this motion, neither any Cross-Defendant nor SPI’s attorney has responded in any way to any of the items served as described. [Collins Decl., 17.] These nonresponses, taken in their entirety, 10 demonstrate the SPI Parties’ total disregard of Sha’s Cross-Complaint and this litigation and their 11 intentional determination to ignore Sha’s attempts to conduct meaningful discovery and obtain financial 12 documents and information so he can get the money owed him. 13 Consistent with the SPI Parties’ pattern of repeated refusal to communicate in any way to 14 participate in the action, the deadline to respond to Sha’s First Amended Cross-Complaint had passed 15 with no response. On May 21, 2019, given the SPI Parties’ lack of any response to Sha’s First 16 Amended Cross-Complaint, Sha filed a Request for Entry of Default on all Cross-Defendants as to 17 Sha’s First Amended Cross-Complaint. [Miclean Decl., ]21.] 18 On June 5, 2019, the MSC went forward in this case. SPI did not serve a timely MSC statement, 19 but Mr. Agtagma showed up with Cross-Defendants Meng and Doreen Chin on behalf of SPI. It was 20 evident that the SPI Parties deliberate strategy was to avoid discovery, avoid production of financial 21 documents and information requested by Sha, ignore defaults and try to sandbag Sha at trial. The entry 22 of two defaults on all the SPI Parties, as to both the first and amended complaint, was not a result of 23 inadvertence, mistake or defective service. It was an intentional strategy to make Sha spend money so 24 the SPI Parties could better their settlement leverage and avoid paying Mr. Sha his ownership interest 25 in SPI. The motion for default judgment should be granted in the amount of $1.5 million. 26 Til. STATEMENT OF LAW 27 “When a [Cross-Defendant] does not respond to a [Cross-Complainant]’s properly served 28 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE NO. 18-CIV-03110 [Cross-]Complaint, the [Cross-Complainant] may seek the entry of default and, thereafter, a default judgment.” Sass v. Cohen (2019) 32 Cal-App.S5th 1032, 1039-1040. Generally, a Cross-Defendant in default “confesses the material allegations of the [Cross- CJomplaint. Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 392. A Cross-Defendant in default “admits only facts that are well pleaded.” Jd. Ifthe Cross-Complaint properly states a cause of action, the only additional proof required for the judgment is that needed to establish the amount of damages, if damages are sought. Jd. In an action arising upon contract or judgment for the recovery of money or damages only, “if the [Cross-D]efendant has ... been served, other than by publication, and no answer ... has been filed with the clerk of the court within the time specified in the summons, ... the 10 clerk, upon written application of the [Cross-Complainant], and proof of the service of summons, shall Il enter the default of the [Cross-D]efendant ... so served, and immediately thereafter enter judgment for 12 the principal amount demanded in the complaint.” HSBC Bank Nevada, N.A. v. Aguilar (2012) 205 13 Cal.App.4th Supp. 6, 10. 14 Iv. ARGUMENT 15 A. Sha Is Entitled to a Default Judgment because Service of Process Has Been 16 Completed and Cross-Defendants Have Failed to Answer Once Again 17 Due process demands “notice of [a pending case] and [an] opportunityto meet it.” Today’s 18 Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal.4th 197, 212. If and only ifa 19 Cross-Defendant receives advance notice of the type and amount of relief sought can he make a “fair 20 and informed” decision whether to fight the pending case (and, in so doing, risk the possibility of a 23 judgment exceeding that relief) or to forgo that fight (and, in so doing, accept a judgment against him up 22 to, but not exceeding, that relief in an amount fixed by the trial court). Sass, supra, 32 Cal.App.5th at 23 1041. 24 At all relevant times, Sha has been diligent in bringing this case to judgment. Since the onset of 25 Sha’s original Cross-Complaint, Sha has served discovery requests, deposition notices, courtesy notices 26 of default, and default judgment notices to the SPI Parties; however, to no response. [Miclean Decl. {fj 27 8-21; Collins Decl. 4 5-17.] Not only did the SPI Parties have a full opportunity to respond before the 28 Entry of Default to the Cross-Complaint, the SPI Parties had a second chance when Sha filed his First 6 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110 Amended Cross-Complaint. In filing Sha’s First Amended Cross-~Complaint, Sha has met due process requirements by providing ample notice and opportunity to the SPI Parties to respond to Sha’s First Amended Cross-Complaint. On April 4, 2019, Sha filed his First Amended Cross-Complaint. [Miclean Decl., | 9.] On April 10, 2019, Sha’s First Amended Cross-Complaint was served personally on Cross-Defendants Sweet Express, Ming and Doreen. [Collins Decl., 12] And on April 16, 2019, Sha’s First Amended Cross- Complaint was personally served on Cross-Defendant SPI. [Jd.] In light of the SPI Parties’ acknowledgement of service of process, the SPI Parties received adequate advance notice of the type and amount of relief sought by Sha, Further, the SPI Parties were given the opportunity to make a “fair 10 and informed” decision on whether to fight the pending First Amended Cross-Complaint until May 16, 11 2019. But, staying consistent to the nonresponse that led to a default judgment entered against the SPI 12 Parties on the original Cross-Complaint, the SPI Parties again chose to forgo that fight (and, in so doing, 13 accept a judgment against them up to, but not exceeding, that relief in an amount fixed by the trial 14 court). Sass, supra, 32 Cal.App.Sth at 1041. 15 Not only have the SPI Parties deliberately chosen not to respond to Sha’s First Amended Cross- 16 Complaint, they have refused to respond in any meaningful way with discovery and have become 17 largely radio silent in all forms of communication. [Miclean Decl., { 19; Collins Decl. § 17.] Under 18 these circumstances, the SPI Parties have demonstrated their willful intent to greatly hinder, if not 19 prevent, Sha’s ability to litigate this action and defend himself. Because the SPI Parties have not 20 responded to a Sha’s properly served First Amended Cross-Complaint, Sha had sought the entry of 21 default. Sha is now entitled to a default judgment. Accordingly, this Court should enter default of the 22 SPI Parties and admit the well pleaded material allegations in the Cross-Complaint as true. 23 B. Sha Is Entitled to $1.5 Million in Damages Pleaded in the Cross-Complaint 24 Code of Civil Procedure section 580(a) provides that “[t]he relief granted to the [Cross- 25 Complainant], if there is no answer, cannot exceed that demanded in the [Cross-C]omplaint [...] the 26 primary purpose of the section is the guarantee defaulting parties adequate notice of the maximum 27 judgment that may be assessed against them.” Code Civ. Proc. § 580; Los Defensores, Inc., supra, 223 28 Cal.App.4th at 398, citations omitted; Dhawan v. Biring (2015) 241 Cal.App.4th 963, 968-969. 7 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT CASE No, 18-CIV-03110 The court has acknowledged that “a [Cross-Complainant] may be able to include in the [Cross- Complaint] or prayer for relief an estimate of the amount due him, be willing to be bound by that amount, and receive a default judgment limited to that amount.” Van Sickle v. Gilbert (2011) 196 Cal.App.4th 1495, 1523 (citing Ely v. Gray (1990) 224 Cal.App.3d 1257, 1262). Accordingly, “if the [Cross-Complaint] states a cause of action for the recovery of general damages in a specified amount alleged to have resulted from the defendant's breach [...] and the default of the defendant has been entered, it is the duty of the clerk to enter judgment in accordance with the prayer of the [Cross- Complaint]. HSBC Bank Nevada, N.A., supra, 205 Cal.App.4th at 11. Sha’s First Amended Cross-Complaint specifies he sought $1.5 million in compensatory 10 damages [Miclean Decl., Ex. 18], and the allegations are sufficient to put all Cross-Defendants on notice il that Sha would seek that much in damages. 12 Once the Court entered default on all the SPI Parties on the First Amended Cross-Complaint, the 13 SPI Parties are deemed to have admitted to the well-pleaded material allegations of the First Amended 14 Cross-Complaint. Sha’s First Amended Cross-Complaint properly sets forth facts showing the existence 15 of an actual controversy. [Miclean Decl., Ex. 18.] Sha brought an action against the SPI Parties for 16 breach of fiduciary duty, accounting, fraud, conversion, and unjust enrichment. Sha alleged despite SPI 17 profits of at least $1 million a year, Ming and Doreen continued to keep Sha’s shares of profit 18 distributions by implementing their financial and accounting scheme. [Declaration of Solomon Sha 19 (“Sha Decl.”), | 9.] Through Ming and Doreen’s misdeeds in management of SPI and diversion of 20 revenue, Sha has not received any profit distribution for the past 7 years. [Sha Decl., 14.] 21 Based on review of SPI’s Profit & Loss Statements from 2011 to 2017 which Sha demanded 22 prior to the litigation, and Sha’s knowledge of SPI’s business practices and the industry, Sha alleged 23 that in assessing his 30% ownership and fair share of profits, a reasonable conservative estimate owed to 24 him but not yet paid is over $1.5 million for the past 7 years. [Sha Decl., {{ 7, 10.] Because of the SPI 25 Parties’ noncompliance in discovery requests to provide full and accurate accounting of SPI’s books and 26 records, Sha has chosen to limit his estimate to his personal knowledge acquired from SPI’s financial 27 books and records during the time he was employed. [Sha Decl., J 10.] The $1.5 million in damages is 28 also supported by the expert testimony of Jeff Redman attached in support of this motion. Mr. Redman 8 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110 is a forensic financial expert and has reviewed some of the SPI financial documents and conducted other evaluations of the valuation of SPI. Sha has included in his First Amended Cross-Complaint and prayer for relief a demand for an amount due him ($1.5 million). Despite the amount being a conservative estimate of his profit distribution share and converted ownership value, Sha is willing to be bound by that amount, and receive a default judgment limited to that amount. Further, Sha has met the due process requirement to give notice to all Cross-Defendants before the default was entered. The SPI Parties had full notice of the relief that Sha was seeking from them and the opportunity to decide not to appear and defend. Thus, the allegations in the First Amended Cross-Complaint are sufficient to put the SPI Parties on notice. 10 Accordingly, because Sha’s First Amended Cross-Complaint states causes of action for the recovery of 11 $1.5 million in damages resulting from the SPI Parties misconduct, and since the default of the SPI 12 Parties has been entered, and because such judgment is supported by evidence, it is the duty of the Court 13 to enter judgment in accordance with the prayer of the First Amended Cross-Complaint in the amount of 14 $1.5 million. 15 Vv. CONCLUSION 16 For the reasons set forth above, Cross-Complainant Sha respectfully requests that this Court 17 grant his motion for default judgment and enter judgment on the Cross-Complaint in favor of Cross- 18 Complainant Sha and against Cross-Defendants Sweet Production, Inc., Sweet Express, Ming Chin, and 19 Doreen Chin in the amount of $1.5 million. 20 21 Dated: July 22, 2019 Respectfully Submitted: 22 MICLEAN GLEASON LLP 23 24 David J. Miclean 25 Danielle M. Mihalkanin Attorneys for Defendant and Cross-Complainant 26 SOLOMON SHA 27 28 MPA ISO SHA MOTION FOR DEFAULT JUDGMENT. CASE NO. 18-CIV-03110