Jes Solar Co., Ltd. v. Matinee Energy Inc. ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS OCT 1 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JES SOLAR COMPANY LIMITED, a No. 19-16748
South Korean Corporation; et al.,
D.C. No. 4:12-cv-00626-DCB
Plaintiffs-Appellants,
v. MEMORANDUM*
MATINEE ENERGY INCORPORATED, a
Nevada Corporation; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Arizona
David C. Bury, District Judge, Presiding
Argued and Submitted September 15, 2020
San Francisco, California
Before: WATFORD, FRIEDLAND, and MILLER, Circuit Judges.
Jes Solar Co., Ltd., Airpark Co., Ltd., and Hankook Technology, Inc.
(collectively, the contractors) appeal from the district court’s order granting
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
summary judgment to S. Chin Kim and Tong Soo Chung on the contractors’
claims for civil conspiracy and personal liability under an alter ego theory for fraud
perpetrated by Matinee Energy, Inc. The contractors also appeal the denial of their
motion for reconsideration under Federal Rule of Civil Procedure 59(e). We have
jurisdiction under 28 U.S.C. § 1291, and we affirm.
1. We review the district court’s order granting summary judgment de
novo, Szajer v. City of Los Angeles, 632 F.3d 607, 610 (9th Cir. 2011), and we
view the evidence in the light most favorable to the non-moving party, see Olsen v.
Idaho State Bd. of Med., 363 F.3d 916, 922 (9th Cir. 2004). We discern no error in
the district court’s grant of Kim’s and Chung’s motions for summary judgment on
the civil conspiracy claim.
We agree with the district court that the contractors bore the burden of
establishing that Kim and Chung knew that the Matinee project was fraudulent. See
Wells Fargo Bank v. Arizona Laborers, Teamsters & Cement Masons Local No.
395 Pension Tr. Fund, 38 P.3d 12, 36–37 (Ariz. 2002). To prevail on a civil
conspiracy claim under Arizona law, “a plaintiff must show by clear and
convincing evidence that the defendant and at least one other person agreed to
accomplish an unlawful purpose or a lawful purpose by unlawful means.”
Dawson v. Withycombe, 163 P.3d 1034, 1053 (Ariz. Ct. App. 2007). Mere
assistance with a tortious act does not prove an agreement to accomplish an
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unlawful purpose; instead, the plaintiff must show that the defendant knew of the
illicit design and agreed to help further it. Id. Thus, once Kim and Chung met their
initial burden at summary judgment to show the lack of evidence on the knowledge
element, the contractors bore the ultimate burden of producing sufficient evidence
for a reasonable jury to conclude, by clear and convincing evidence, that Kim and
Chung had knowledge of the fraudulent nature of the Matinee enterprise. See
Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Nissan Fire & Marine Ins.
Co. v. Fritz Cos., 210 F.3d 1099, 1106 (9th Cir. 2000).
The district court correctly determined that the contractors lacked evidence
that Kim and Chung were knowingly involved in the Matinee scheme rather than
unwittingly relaying the false statements of others. The contractors seek to impute
knowledge to Kim and Chung based on their status as CEOs of Matinee Energy,
but in the absence of specific evidence of knowledge, that status is insufficient to
carry the contractors’ burden. See, e.g., Dawson, 163 P.3d at 1054–55 (finding
insufficient evidence that a board member had knowledge of a corporate
conspiracy). In the case of Kim, the contractors principally rely on a report of a
suspicious dinner conversation that was overheard from behind a closed door and
an ambiguous statement in an otherwise unremarkable email that “no one will
question” Matinee Energy’s affiliate LuxChange. Under a clear-and-convincing
standard, a reasonable jury could not find that evidence sufficient to determine that
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Kim had knowledge of the Matinee fraud. The same is true of Chung, as to whom
the contractors presented even less evidence of knowledge.
2. The district court also did not err in granting summary judgment to
Kim and Chung on the alter ego theory of personal liability. Under Arizona law,
shareholders are directly liable for torts committed by a corporation only “when
the corporation is, in fact, the alter ego of one or a few individuals and when the
observance of the corporate form would sanction a fraud or promote injustice.”
Employer’s Liab. Assurance Corp. v. Lunt, 313 P.2d 393, 395 (Ariz. 1957). That is
a demanding standard under which there must be “such unity of interest and
ownership that the separate personalities of the corporation and owners cease to
exist.” Dietel v. Day, 492 P.2d 455, 457 (Ariz. Ct. App. 1972); see also Ize Nantan
Bagowa, Ltd. v. Scalia, 577 P.2d 725, 729 (Ariz. Ct. App. 1978) (requiring “a
complete or almost complete assimilation of the two identities” before imposing
personal liability (internal quotation marks and citation omitted)).
The evidence here did not satisfy that test. For Kim, the contractors
presented evidence that he was the CEO of Matinee Energy, that he appointed
Kyung Kim as an officer of Matinee Energy and authorized her access to key bank
accounts, and that he may be considered a shareholder of a Matinee affiliate. For
Chung, the contractors pointed to his position as CEO of the Asia Pacific Region,
as well as his use of Matinee funds to pay for his hotel room at a groundbreaking
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ceremony. But merely exercising the power of a corporate officer and shareholder,
or enjoying the benefits that accompany those positions, is not sufficient to show
an identity of ownership with the corporation. See Ize Nantan Bagowa, 577 P.2d at729–30.
3. We review the court’s denial of the motion for reconsideration for
abuse of discretion. School Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1262 (9th
Cir. 1993). Because the district court did not err in granting summary judgment in
favor of Kim and Chung, it did not abuse its discretion in denying reconsideration
of its order.
AFFIRMED.
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