Samjungcast Co. v. Expway Corp. CA6 ( 2023 )

Filed 3/10/23 Samjungcast Co. v. Expway Corp. CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
SAMJUNGCAST CO., LTD., H048862
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. 19CV345248)
v.
EXPWAY CORPORATION,
Defendant and Respondent.
Samjungcast Co., Ltd. (Samjungcast) first sued Expway Corporation (Expway) in
New York, alleging contractual and tort claims arising out of the parties’ business
relationship in South Korea. After the New York state court dismissed the action on
forum non conveniens grounds, Samjungcast brought this action. The trial court
dismissed the case on Expway’s demurrer, concluding that each cause of action was time-
barred. We uphold the trial court’s determination with respect to the tort causes of
action. Because we read the operative complaint as stating a timely contractual claim
under at least one legal theory, however, we reverse as to Samjungcast’s first and fifth
causes of action.
I. BACKGROUND1
Expway is a Delaware corporation headed by Claude Seyrat with offices in South
Korea, France, Delaware, and California. Expway provides broadcast multicasting
service (BMS), a system that facilitates high-quality video streaming to large numbers of
subscribers. Moon-Ki Jeong is the director of Expway’s South Korean offices.
Samjungcast is a South Korean business organization headed by Choong Woon
Moon2 and authorized to do business in California.
In 2014, Jeong told Moon that Expway, the only entity providing BMS, was
looking for a distributor to cultivate business in Asia. After “a series of meetings and
discussions,” the two reached “a verbal agreement for ‘Expway’s exclusive South Korea
distributorship’ with opportunity to develop other Asian markets.” The verbal agreement
was “partially” reflected by a written agreement executed on December 10, 2014.
Notwithstanding the written agreement, the parties contemplated that “certain core issues
would be [addressed] ‘later.’ ”
The written agreement was a “Value Added Reseller Agreement” (VAR
Agreement).3 Through the agreement, Expway granted “Reseller” Samjungcast “a non-
exclusive right and license to distribute, market, resell to End-Users, maintain and
support” specified software in South Korea, Samjungcast’s assigned sales area.
We take the facts from Samjungcast’s operative first amended complaint (FAC)
1
and materials the trial court judicially noticed in ruling on the demurrer. (See Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 (Yvanova).)
2
Of the different ways Samjungcast spelled Moon’s name in the operative FAC
and its attachments, we adopt the spelling from the typewritten signature block of a
contract Moon signed on Samjungcast’s behalf.
3
On its face, the VAR Agreement identifies Samjungcast and “Expway S.A.” as
the counterparties. Expway has not contested Samjungcast’s allegation that the contract
binds the parties to this litigation. To the contrary, Expway has asserted the written
contract’s existence as a defense to Samjungcast’s oral contract claims.
2
Under the VAR Agreement, Samjungcast would pay Expway for its software and
resell the software to third parties at prices approved by Expway. The VAR Agreement
had a 12-month term, subject to a one-time automatic renewal for an additional
12 months. The VAR Agreement contained an integration clause: “The Agreement sets
out the entire agreement between the Parties in relation to its subject matter. It
supersedes all prior documents or agreements between the Parties and may only be
modified by an instrument signed by the relevant Parties.” The VAR Agreement also had
a choice-of-law provision and a forum-selection clause: “This Agreement is subject to
the laws of the State of California, United States. . . . [¶] In the event of a dispute
between the Parties resulting from the interpretation, application and/or performance of
this agreement, . . . exclusive jurisdiction shall be granted to the applicable courts of the
State of California, United States, notwithstanding multiple defendants or third[-]party
claims even for emergency proceedings and protective procedures.”
Before the parties entered the contract, Jeong told Moon that Expway had three
specific customers who were committed to signing contracts for licenses, and who would
within three months provide a revenue stream for Samjungcast. At some point,
Samjungcast learned that Jeong’s representations conflicted with Expway’s internal
assessment that a South Korean reseller would need to spend approximately $500,000 to
$1 million over two to four years before realizing a revenue stream.
At some point, Jeong told Moon that Expway would pay Samjungcast a
commission of 20 to 30 percent of gross revenues for all South Korean accounts—
including an account with Samsung Electronics that Expway had already developed—
plus hourly fees for local customer servicing and support work. After the parties
executed the VAR Agreement, through March 2015, Jeong continued to assure Moon that
Samjungcast would take over the Samsung contract.
In December 2014, Samjungcast acquired an office, hired engineering and support
staff, and began providing customer support to Samsung. When Expway did not pay
3
Samjungcast for servicing the Samsung account, Samjungcast repeatedly complained
throughout 2015. Expway initially told Samjungcast that “such issues” would be
addressed by Jeong, but by late 2015 and early 2016, Expway and Jeong began telling
Samjungcast that they had “ ‘never promised’ ” the revenue shares Samjungcast claimed.
From January to March 2015, Jeong solicited a kickback agreement, telling Moon
that Samjungcast had to “ ‘pay to play’ ”—that is, Samjungcast had to agree to pay
Jeong, personally, sizable kickbacks from any Samjungcast revenue generated by
Expway licenses. Samjungcast refused to do so. In retaliation, Jeong interfered with
Samjungcast’s efforts to sell licenses for Expway’s software.
The three specific customers that Jeong had told Moon were committed to signing
contracts for licenses never materialized. Samjungcast would later conclude that the
claimed customers never existed. Samjungcast never succeeded in signing contracts with
any new customers.
In mid-2015, Moon discovered that Jeong was using a Samjungcast corporate
credit card for personal expenses, but Jeong refused to surrender the card for several
months after Moon asked him to do so. Expway has refused to take action against Jeong
for his use of Samjungcast’s corporate credit card.
In November 2015, Samjungcast developed a lead with a potential customer. To
secure the sale, Samjungcast requested demo software from Expway. Expway insisted on
advance nonrefundable payment of $60,000 or 50,000 euros for the demo software, with
the intention of diverting the customer away from Samjungcast so that Expway could
unilaterally develop the account.
In December 2015, Samjungcast’s chief engineer resigned after Samjungcast had
invested significant effort training him, in particular to service Expway’s Samsung
account. Three weeks later, Expway hired the chief engineer. This enabled Expway to
directly service the Samsung account without Samjungcast. Samjungcast, after
4
investigating, concluded that Expway conducted “industrial espionage” against it with the
assistance of Samjungcast’s chief engineer, while he was still employed by Samjungcast.
By February 2016, Moon was having difficulty contacting Expway: Expway had
instructed him to work through Jeong, but Jeong was avoiding him due to the credit card
dispute. That month, Moon wrote to Seyrat alleging that Expway had broken a
contractual promise by failing to pay 20 to 30 percent of Samsung’s license fee to
Samjungcast and had improperly retained Samjungcast’s chief engineer.
In April 2016, Moon provided Seyrat a more comprehensive written list of
grievances, including Expway’s alleged failure to pay invoices for Samjungcast’s hourly
services, Expway’s alleged failure to pay appropriate commissions on the Samsung
account, Jeong’s alleged false promise of three customers, Jeong’s alleged embezzlement
of Samjungcast funds, Jeong’s alleged successful effort to persuade a Samjungcast
engineer to leave the company in favor of Expway, and other unspecified breaches of the
implied covenant of good faith and fair dealing. In the letter, Samjungcast asked Expway
to agree to arbitrate the dispute.
On April 29, 2016, Samjungcast filed a complaint against Expway and Jeong in
New York state court. Samjungcast alleged in the complaint that Expway and Jeong
induced it to enter a contract by falsely representing that there were three or four
customers with impending contracts, breached a revenue-sharing agreement relating to
the Samsung account, attempted to secure kickbacks through Jeong, diverted a potential
client away from Samjungcast by insisting on a $60,000 fee for demo software,
embezzled Samjungcast funds through Jeong’s use of the corporate credit card, and
tampered with Samjungcast’s engineering staff to access Samjungcast’s proprietary
information. Samjungcast alleged claims for fraud in the inducement, tortious
interference with prospective advantage, tortious interference with business relations,
prima facie tort, breach of the implied covenant of good faith and fair dealing, and breach
of verbal agreement.
5
On November 17, 2016, the New York trial court dismissed Samjungcast’s
complaint on forum non conveniens grounds. Samjungcast appealed the order of
dismissal, but the appellate court dismissed the appeal as untimely. On March 16, 2018,
Expway served notice of the adverse appellate ruling on Samjungcast.
Samjungcast initiated the present action against Expway and Jeong on
March 27, 2019. In the operative FAC, filed July 16, 2020, Samjungcast alleged causes
of action for breach of contract, fraud in the inducement, tortious interference with
prospective advantage, tortious interference with business relations, and breach of the
covenant of good faith and fair dealing. The next month, Samjungcast voluntarily
dismissed its claims against Jeong without prejudice.
Expway successfully demurred to the FAC. The trial court entered judgment in
favor of Expway and against Samjungcast on January 25, 2021. Samjungcast timely
appealed.
II. DISCUSSION
“In reviewing an order sustaining a demurrer, we examine the operative complaint
de novo to determine whether it alleges facts sufficient to state a cause of action under
any legal theory.” (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.)
In the exercise of our independent judgment, “we accept the truth of material facts
properly pleaded in the operative complaint, but not contentions, deductions, or
conclusions of fact or law. We may also consider matters subject to judicial notice.”
(Yvanova, supra, 62 Cal.4th at p. 924.) “We are not limited to plaintiffs’ theory of
recovery or ‘ “form of action” ’ pled in testing the sufficiency of the complaint.” (City of
Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 870; Gutierrez v. Carmax Auto
Superstores Cal. (2018) 19 Cal.App.5th 1234, 1244-1245 (Gutierrez).) When a demurrer
is sustained without leave to amend, “we decide whether there is a reasonable possibility
that the defect can be cured by amendment[,]” but “[t]he burden of proving such
6
reasonable possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d
311, 318.)
Where the basis for a demurrer is the statute of limitations, the untimeliness of the
action “ ‘ “ ‘ “must clearly and affirmatively appear on the face of the complaint; it is not
enough that the complaint shows that the action may be barred.” ’ ” ’ ” (Raja
Development Co., Inc. v. Napa Sanitary Dist. (2022) 85 Cal.App.5th 85,92; see also
Committee for Sound Water & Land Development v. City of Seaside (2022) 79
Cal.App.5th 389, 400.)
A. Equitable Tolling
Samjungcast argues that the applicable limitations periods should be equitably
tolled from the date it initiated suit in New York through the dismissal of its unsuccessful
appeal.4 The trial court concluded that equitable tolling did not apply. For the reasons
that follow, we agree with the result the trial court reached.
1. Legal Principles
“[E]quitable tolling . . . allows courts to exercise their inherent equitable powers
to excuse parties’ failure to comply with technical deadlines when justice so requires.”
(Saint Francis Memorial Hospital v. State Dept. of Public Health (2020) 9 Cal.5th 710,
730 (Saint Francis I).) Where applicable, the judicially created doctrine “will ‘suspend
or extend a statute of limitations as necessary to ensure fundamental practicality and
fairness.’ ” (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th
88, 99 (McDonald).) The doctrine emerged from three lines of cases affording relief
4
Samjungcast also claims an ongoing entitlement to statutory tolling based on its
assertion that Expway’s being “based overseas or out of state” makes it “absent from the
state” within the meaning of Code of Civil Procedure section 351. But this claim is
fatally undermined by Samjungcast’s allegation that Expway—the only defendant
implicated in this appeal—maintains an office in Sunnyvale, California, and the absence
of any indication that Samjungcast could amend its complaint to allege this office did not
exist at any relevant time.
7
from the statute of limitations (1) where “a plaintiff was already involved in one lawsuit,
and filed a subsequent case that could lessen the damage or harm that would otherwise
have to be remedied through a separate case”; (2) “where a plaintiff was required to
pursue, and did indeed pursue, an administrative remedy before filing a civil action”; and
(3) “ ‘ “to serve the ends of justice where technical forfeitures would unjustifiably
prevent a trial on the merits.” ’ ” (Saint Francis I, supra, 9 Cal.5th at p. 724.) Equitable
tolling stops the limitations period from running for the duration of the tolling event.
(Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 370-371.) But “equitable tolling is a
narrow remedy that applies to toll statutes of limitation only ‘occasionally and in special
situations.’ ” (Saint Francis I, supra, 9 Cal.5th at p. 724).)
To secure equitable tolling, a plaintiff must show “three elements: ‘timely notice,
and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part
of the plaintiff.’ ” (McDonald, supra, 45 Cal.4th at p. 102; Saint Francis I, supra, 9
Cal.5th at p. 717.) Where the asserted basis for equitable tolling is the plaintiff’s pursuit
of an alternative remedy, the plaintiff’s pursuit of that alternative must be both
objectively reasonable and subjectively in good faith, whether or not the remedy sought
was in fact viable. (Saint Francis I, supra, 9 Cal.5th at pp. 728-730; Saint Francis
Memorial Hospital v. State Dept. of Public Health (2021) 59 Cal.App.5th 965, 979-980
(Saint Francis II).) And “[w]here a claim is time-barred on its face, the plaintiff must
specifically plead facts that would support equitable tolling.” (Long v. Forty Niners
Football Co., LLC (2019) 33 Cal.App.5th 550, 555; see also Mitchell v. State Dept. of
Public Health (2016) 1 Cal.App.5th 1000, 1011; Mojica v. 4311 Wilshire, LLC (2005)
131 Cal.App.4th 1069, 1073-1074.)5
5
We reject Expway’s contention that Thomas v. Gilliland (2002) 95 Cal.App.4th
427 (Thomas) supports substantial evidence review of the trial court’s determination that
equitable tolling does not apply. On appeal, the Thomas court was reviewing factual
determinations the trial court made on an evidentiary record—competing declarations of
counsel going to the reasonableness and good faith of the decision by plaintiff’s counsel
8
2. Application
The FAC and the complaint Samjungcast filed in New York turn on the same
operative facts and put forward a closely similar set of substantive theories. Accordingly,
we assume that Samjungcast’s New York complaint gave Expway notice of the claims
that Samjungcast included in the FAC, allowing Expway to protect itself from prejudice
by preparing its defense. (See McDonald, supra, 45 Cal.4th at p. 102.) But Samjungcast
has neither supplied factual allegations supporting an inference that its decision to file in
New York was reasonable nor identified additional facts that it would allege if given
leave to do so.
The principal events giving rise to Samjungcast’s claims occurred in South Korea,
primarily between Moon and Jeong. Samjungcast is a South Korean business entity
authorized to do business in California. Expway is a corporation with a footprint on at
least three continents and its principal offices in California, Delaware, and France. The
VAR Agreement was, by its plain terms, “subject to the laws of the State of California”
and required the parties to submit disputes “resulting from the interpretation, application
and/or performance of [that] agreement” to the exclusive jurisdiction of California state
courts.
The only reason the record discloses for Samjungcast’s decision to bring suit in
New York, as opposed to any other forum, is that Expway has done “extensive[]”
business in New York and Samjungcast is also licensed to do business there. But
jurisdiction aside, Samjungcast’s New York suit was dismissed on the ground that New
York was an unsuitable forum. New York courts “are not required to add to their
financial and administrative burdens by entertaining litigation which does not have any
to dismiss and refile plaintiff’s complaint—rather than the allegations of the pleadings or
judicially noticeable facts; substantial evidence review was therefore warranted. (Id. at
pp. 433-437.) Here, we review only the sufficiency of Samjungcast’s allegations. We do
so de novo.
9
connection with th[e] State.” (Islamic Republic of Iran v. Pahlavi (1984) 62 N.Y.2d 474,
478 (Islamic Republic).) New York courts may stay or dismiss actions that “would be
better adjudicated elsewhere,” considering factors including “the burden on New York
courts, the potential hardship to the defendant, and the unavailability of an alternative
forum in which plaintiff may bring suit [citations]. The court may also consider that both
parties to the action are nonresidents [citation] and that the transaction out of which the
cause of action arose occurred primarily in a foreign jurisdiction [citation].” (Id. at
p. 479.)
Neither in the trial court nor on appeal has Samjungcast articulated a theory by
which it might reasonably have believed that New York was a proper forum for its
claims. The operative pleading certainly reflects no connection between Expway’s New
York business and the present dispute. As the New York trial court explained—
according to the transcript Samjungcast appended to its FAC—Samjungcast even in
responding to the forum non conveniens motion “failed to allege . . . that New York was
a residency of any of the parties, that any witnesses to th[e] action [we]re in New York,
. . . that any of the events in the Complaint occurred in New York, or that defendants[’]
agents were in New York when they negotiated the agreement.”
Even considering the “flexibility” of the forum non conveniens doctrine (Islamic
Republic, supra, 478 N.Y.2d at p. 479) and mindful of the liberal application of the
equitable tolling doctrine where notice of the claims has been timely provided
(McDonald, supra, 45 Cal.4th at p. 102), Samjungcast has not identified facts disclosing
any connection between New York and the present lawsuit from which a represented
party could reasonably believe that a New York court would accept the burden of
managing the litigation between parties who had agreed to be bound by California law in
California courts. (See Saint Francis II, supra, 59 Cal.App.5th at p. 977 [requiring that
represented party’s counsel act reasonably and in good faith].) Thus, we are unable to
10
infer from the demurrer record that Samjungcast’s decision to pursue relief from the New
York courts was objectively reasonable. Equitable tolling is not available.
We accordingly evaluate Samjungcast’s various causes of action and whether the
allegations pleaded are sufficient to state, under “any legal theory,” claims not barred by
the running of the applicable limitations period.
B. Contractual Causes of Action
In its first cause of action, Samjungcast alleged that Expway breached its
contractual obligations, including obligations under oral contracts, written contracts,
implied contracts, and the “duty” of good faith and fair dealing. In its fifth cause of
action, Samjungcast alleged that Expway breached the “covenant” of good faith and fair
dealing. Reasoning that the contractual theories depended on oral contracts, the trial
court ruled that both causes of action were subject to a two-year statute of limitations and,
consequently, untimely. Liberally construed, however, the allegations supporting the first
and fifth causes of action disclose an implied covenant theory based on a written contract,
which is timely pursuant to a four-year statute of limitations.
1. Legal Principles
An express contract may be oral or written. (See generally Varni Bros. Corp. v.
Wine World, Inc. (1995) 35 Cal.App.4th 880, 888-889.) “To state a cause of action for
breach of contract, a party must plead the existence of a contract, his or her performance
of the contract or excuse for nonperformance, the defendant’s breach and resulting
damage.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In an
action based on a written contract, a plaintiff may plead the legal effect of the contract,
plead its precise language, or attach a copy of the contract to the complaint to be
incorporated by reference. (See Construction Protective Servs., Inc. v. TIG Specialty Ins.
Co. (2002) 29 Cal.4th 189, 198-199 (Construction); Miles v. Deutsche Bank National
Trust Co. (2015) 236 Cal.App.4th 394, 401-402 (Miles).)
11
Under California law, every contract includes an implied covenant of good faith
and fair dealing. (Carma Developers (Cal.), Inc. v. Marathon Development California,
Inc. (1992) 2 Cal.4th 342, 371.) The covenant “exists merely to prevent one contracting
party from unfairly frustrating the other party’s right to receive the benefits of the
agreement actually made.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349, italics
omitted.) “[A] breach of the implied covenant is necessarily a breach of contract.”
(Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th
873, 885, fn. omitted.)
The statute of limitations for a contractual implied covenant claim based on a
written contract is four years. (§ 337;6 Archdale v. American Internat. Specialty Lines
Ins. Co. (2007) 154 Cal.App.4th 449, 471-472 (Archdale); Ladd v. Warner Bros.
Entertainment, Inc. (2010) 184 Cal.App.4th 1298, 1309, fn. 7.) The statute of limitations
for a claim based on an oral contract and a tort implied covenant claim is two years. (See
§ 339; Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1120; Mullins v. Rockwell
Internat. Corp. (1997) 15 Cal.4th 731, 736; Archdale, supra, 154 Cal.App.4th at pp. 472-
473.) “A cause of action for breach of contract does not accrue before the time of
breach.” (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 488 (Romano).)
2. Written Contract—Implied Covenant7
Samjungcast alleged that Expway breached the implied covenant of good faith and
fair dealing by frustrating Samjungcast’s expectation of revenue and profit from their
6
Undesignated statutory references are to the Code of Civil Procedure.
7
Because this theory is sufficient to support each cause of action, we need not
address whether Samjungcast has articulated a timely oral contract theory based on the
same course of conduct. (See, generally, Fremont Indemnity Co. v. Fremont General
Corp. (2007) 148 Cal.App.4th 97, 119 [demurrer must dispose of entire cause of action to
be sustained]; People ex rel. State Farm Mutual Automobile Ins. Co. v. Rubin (2021) 72
Cal.App.5th 753, 779; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002)
108 Cal.App.4th 1028, 1047.)
12
bargain. The trial court, in disposing of any theory of liability based on a written
contract, reasoned that the references in the FAC to the written contract constituted a
sham pleading intended to evade the limitations bar and that Samjungcast had not
identified a specific breach of the written agreement or explained why it had failed to
articulate in its initial complaint a theory based on the written agreement. The “sham
pleading doctrine” precludes plaintiffs from amending complaints to omit harmful
allegations and permits courts to disregard factual allegations in an amended complaint
that are inconsistent with factual allegations in a prior complaint. (Larson v. UHS of
Rancho Springs, Inc. (2014) 230 Cal.App.4th 336, 343-344.) But while Samjungcast in
the FAC may have articulated a different legal theory of recovery, it neither proffered
factual allegations inconsistent with those in its prior complaint nor omitted harmful
allegations. We are accordingly bound to consider Samjungcast’s claim that Expway
breached the written agreement between the parties, based on the facts that were properly
alleged. (See Gutierrez, supra, 19 Cal.App.5th at p. 1244; Bichai v. Dignity Health
(2021) 61 Cal.App.5th 869, 876-877.)
It is true that, in pleading the first and fifth causes of action, Samjungcast did not
specify the alleged conduct it contends violated the implied covenant; it instead
incorporated by reference all of its factual allegations. Nevertheless, because the trial
court sustained Expway’s general demurrer, we must independently determine whether
the operative complaint contains sufficient facts to constitute a cause of action pursuant
to any legal theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967 [“it is
error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action
under any possible legal theory”]; Gutierrez, supra, 19 Cal.App.5th at pp. 1244-1245; see
also Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 566 [distinguishing “ ‘general
demurrer’ ” challenging legal sufficiency of allegations from “ ‘special demurrer’ ”
challenging form in which claims were brought]; PGA West Residential Assn., Inc. v.
13
Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 176.) For the reasons that follow, we
conclude that it does.
First, Samjungcast identified a written contract between the parties—the VAR
Agreement—which it attached to the FAC. The VAR Agreement contemplated the
parties would mutually benefit: Samjungcast would assist Expway in expanding the
South Korean market for Expway’s software, and Samjungcast would reap a share of
revenues realized from its efforts.
Second, Samjungcast alleged that Expway frustrated Samjungcast’s ability to
make sales by charging Samjungcast an excessive price for demo software customarily
available for at most a nominal fee. The contract expressly contemplated that
Samjungcast would be able to “conduct[] demonstrations of the Software” to solicit sales.
Expway’s alleged refusal to provide demo software except at a prohibitive price, for the
purpose of poaching Samjungcast’s prospective customer, would violate the covenant of
good faith and fair dealing implied in the written contract by defeating Samjungcast’s
ability to realize its bargained-for benefit.8
In its supplemental brief, Expway argues that it did not breach the implied
covenant by charging for demo software because it did nothing more than exercise its
express contractual rights. (See Hewlett-Packard Co. v. Oracle Corp. (2021) 65
Cal.App.5th 506, 554 [implied covenant does not “ ‘prohibit a party from doing that
which is expressly permitted by the agreement itself’ ”].) Expway points out that the
VAR Agreement has contractual terms that allow it to charge Samjungcast for
“Software”—defined to mean “EXPWAY’s computer-programming code in machine-
readable form, as described in Attachment A, delivered with its Documentation,
including enhancements, adaptations, derivative works, Updates and Upgrades.” We
8
Although Expway reserved the right to sell its software directly within
Samjungcast’s sales area, Samjungcast has alleged interference, not merely competition.
14
assume for present purposes that the demo software at issue here satisfied the definition
of Software, such that Expway was contractually entitled to charge Samjungcast for its
use. But the wrong alleged by Samjungcast is Expway’s insistence upon a prohibitive
price, rather than its setting the price in good faith. Nothing in the contract, at least as
presented in the trial court, permitted Expway to insist upon a prohibitive price.
Expway contends that, for statute of limitations purposes, the implied covenant
claim should be considered only as a tort and not a contract claim because Samjungcast
did not articulate how charging it for the demo software interfered with its ability to
secure a benefit under the VAR Agreement. But Samjungcast alleged that Expway
prevented it from selling the software to third parties by effectively withholding access to
demo software and by then supplanting Samjungcast and selling directly to third parties.
The point of entering a reseller agreement being to sell software to third parties,
Samjungcast’s allegations, if true, go directly to the contractual benefit for which it
bargained.
In our focus on the pleadings, we express no opinion as to whether Samjungcast
can prove its allegation that the price charged was prohibitive or otherwise violative of
the implied covenant. To the extent that Expway argues that Attachment B to the VAR
Agreement would show that the allegedly prohibitive price itself was expressly
authorized by the contract, Attachment B is not part of the record that was presented to
the trial court.9 Accordingly, we are not in a position, reviewing the trial court’s order
sustaining Expway’s demurrer, to assess whether Attachment B disproves Samjungcast’s
theory that Expway breached the covenant of good faith and fair dealing implied in the
9
In the trial court, acknowledging that Samjungcast had “attache[d] the VAR
Agreement to its Amended Complaint,” Expway neither argued that Samjungcast failed
to adequately allege the terms of the VAR Agreement nor submitted the attachments to
the VAR Agreement. (See Miles, supra, 236 Cal.App.4th at pp. 401-402; Construction,
supra, 29 Cal.4th at pp. 198-199.)
15
VAR Agreement by charging an excessive price for demo software. (See Yvanova,
supra, 62 Cal.4th at p. 924 [considering the truth of material facts properly pleaded in the
complaint and matters subject to judicial notice]; see also In re Zeth S. (2003) 31 Cal.4th
396, 405 [reviewing “ ‘the correctness of a judgment as of the time of its rendition, upon
a record of matters which were before the trial court for its consideration’ ”].)
Samjungcast identified only one written contract, alleged that everything Expway had
done breached the written contract and the implied covenant, and alleged that Expway
frustrated its ability to sell software to at least one third party by insisting on a prohibitive
price for demo software. It is reasonable to read the FAC as alleging that Expway
through that conduct breached the written contract and the implied covenant.
On the facts alleged, Expway breached the covenant of good faith and fair dealing
implied in the VAR Agreement less than four years before the present action was filed. 10
Expway relies on the date on which Samjungcast filed its original complaint for statute of
limitations purposes, implicitly conceding that the FAC relates back to the original
complaint. Its concession is well taken: “An amended complaint relates back to a timely
filed original complaint . . . if it rests on the same general set of facts and refers to the
same ‘ “offending instrumentalities” ’ as the original complaint.” (Medical Marijuana,
Inc. v. ProjectCBD.com (2020) 46 Cal.App.5th 869, 887; see also Barrington v. A.H.
Robins Co. (1985) 39 Cal.3d 146, 151.) Although Samjungcast, in amending its
complaint, restyled its oral contract claim as a more general contract claim, it appears
10
Samjungcast points in its briefing to another theory of breach—that Expway,
through Jeong, breached the implied covenant by insisting that Samjungcast “ ‘pay to
play’ ” by giving Jeong kickbacks from its revenues. Samjungcast appears to base this
theory on the “ ‘three existing customers’ ” ready to sign with Samjungcast whom Jeong
failed to refer because Samjungcast refused to “ ‘pay to play.’ ” Because this theory
conflicts with Samjungcast’s allegation that there were no such customers, we do not rely
on it. (See McAllister v. Los Angeles Unified School Dist. (2013) 216 Cal.App.4th 1198,
1206-1207 [“[a] plaintiff may not avoid demurrer by pleading facts or positions in an
amended complaint that contradict the facts pleaded in the original complaint’ ”].)
16
from the record that the original California complaint identified the written contract
between the parties and included an implied covenant cause of action. Accordingly, the
breach of covenant theory supports a timely cause of action for breach of contract
predicated on a written agreement. (See Romano, supra, 14 Cal.4th at p. 488.)
C. Fraud
1. Legal Principles
“ ‘The elements of fraud are (a) a misrepresentation (false representation,
concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to
induce reliance; (d) justifiable reliance; and (e) resulting damage. [Citations.] Fraud in
the inducement is a subset of the tort of fraud. It “occurs when ‘ “the promisor knows
what he is signing but his consent is induced by fraud, mutual assent is present and a
contract is formed, which, by reason of the fraud, is voidable.” ’ ” ’ ” (Dhital v. Nissan
North America, Inc. (2022) 84 Cal.App.5th 828 (Dhital).)
“The limitations period for a fraud cause of action is three years from accrual.”
(Doe v. Roman Catholic Bishop of Sacramento (2010) 189 Cal.App.4th 1423, 1430;
§ 338, subd. (d).) “The cause of action is not deemed to have accrued until the discovery,
by the aggrieved party, of the facts constituting the fraud or mistake.” (§ 338, subd. (d).)
But “to rely on the discovery rule to delay accrual of a cause of action, ‘[a] plaintiff
whose complaint shows on its face that his claim would be barred without the benefit of
the discovery rule must specifically plead facts to show (1) the time and manner of
discovery and (2) the inability to have made earlier discovery despite reasonable
diligence.’ ” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 (Fox).) The
plaintiff’s allegations must “ ‘show diligence;’ ‘conclusory allegations will not withstand
demurrer.’ ” (Ibid.)
2. Application
Samjungcast alleged that at least two of Jeong’s affirmative representations were
knowingly false: (1) Samjungcast would be stepping into a “ ‘pre-fabricated’ ” business
17
that would begin generating licensing revenue within three months of start-up because
there were three clients ready to sign formal contracts; and (2) Samsung, due to a
language barrier, could not be adequately serviced by Expway. Samjungcast alleged that
it was “induced . . . to rely on these false statements” by setting up and operating a
business that suffered financial losses.11 Taking these allegations together, we infer that
Samjungcast’s detrimental reliance on the alleged false representations included its
entering the VAR Agreement in December 2014, at which time all elements of
Samjungcast’s fraud claim were present.
Samjungcast did not initiate this action until more than four years after all
elements of its claim were present. It has neither pled sufficient facts to invoke the
discovery rule—and thereby delay accrual to at least March 27, 2016, three years before
the filing of this action—nor shown that it could plead such facts if given leave to amend.
To the extent Samjungcast’s theory depends on the false representation that three
new clients were ready and waiting to sign contracts upon its execution of the VAR
Agreement, such that it would secure a revenue stream from those clients within the
ensuing three months, the failure of such revenue streams to timely materialize would
have been clear by April 2015. Samjungcast alleged that it was in March or April 2015
that “defendants ‘clarified’ ” that the terms of the “original business arrangement,”
including “contracting with the three impending licenses,” were contingent on
Samjungcast’s willingness to give Jeong kickbacks, which Samjungcast refused to do.
To the extent Samjungcast’s theory rests on false representations regarding
Expway’s ability to service Samsung, Samjungcast alleges that Moon “learn[ed] in early
2016” that Expway had been neglecting Samsung because it lacked personnel altogether,
11
Given this allegation, notwithstanding the nomenclature in the complaint, we
understand Samjungcast to be articulating a general fraud claim for damages, rather than
merely a fraud in the inducement claim to set aside a contract. (See Dhital, supra, 84
Cal.App.5th at p. 723.)
18
not because of a language barrier, as Samsung’s personnel were fluent in English and
French. This conclusory allegation is insufficient to delay accrual of Samjungcast’s fraud
claim. (See Fox, supra, 35 Cal.4th at p. 808.)
To the extent the fraud claim may encompass other theories based on
representations made over the course of the business relationship about prospective
revenue-sharing intended to encourage Samjungcast to continue investing resources in
support of Expway’s business, the FAC discloses insufficient facts to underpin any such
theory with specificity, and Samjungcast has given no indication that it could plead a
timely theory given leave to amend.
Notably, Samjungcast quotes a February 2016 communication Moon wrote to
Seyrat, more than one year after the parties entered the VAR Agreement yet more than
three years before the present suit was filed, asserting that Samjungcast’s protected
“revenue stream of at least 20%, and likely 30%, appears to be based upon distorted
assumptions that were not correctly provided to us at the outset.” In that communication,
Moon asked Expway to share revenues from the Samsung contract because that was the
only existing revenue stream. While the complaint details the subsequent
correspondence, ending with the filing of the New York action in April 2016,
Samjungcast does not identify any subsequent offer to make the Samsung revenue stream
available to it or to create any new revenue stream.
Accordingly, we see no reasonable possibility that Samjungcast would be able to
plead a fraud claim that accrued on or after March 27, 2016, as Samjungcast was harmed
by any fraudulent statements prior to that date and there is no indication that Samjungcast
can allege facts to support delayed discovery after that date.
D. Tortious Interference with Business Relations
Because Samjungcast alleges that Expway “intended to” interfere with its business
relations, we focus on the “intentional” version of the tort. “Intentional interference with
prospective economic advantage has five elements: (1) the existence, between the
19
plaintiff and some third party, of an economic relationship that contains the probability of
future economic benefit to the plaintiff; (2) the defendant’s knowledge of the
relationship; (3) intentionally wrongful acts designed to disrupt the relationship;
(4) actual disruption of the relationship; and (5) economic harm proximately caused by
the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc.
(2017) 2 Cal.5th 505, 512; see also Nelson v. Tucker Ellis, LLP (2020) 48 Cal.App.5th
827, 844, fn. 5.) Samjungcast’s tortious interference claim is barred by the applicable
two-year limitations period. (See § 339; Augusta v. United Service Automobile Assn.
(1993) 13 Cal.App.4th 4, 10.)
Samjungcast alleged that Expway interfered with its business relations with third
parties in two ways: (1) refusing to transfer the Samsung account to Samjungcast; and
(2) refusing to provide Samjungcast with demo software for prospective clients. Under
either theory, the interference tort was necessarily complete with all of its elements by
April 2016, if not sooner—more than two years before Samjungcast initiated this action.
This is because both theories depend on Samjungcast acting as a reseller of Expway’s
software, but, by April 2016, the business relationship between Samjungcast and Expway
had broken down.
Given the unavailability of equitable tolling as stated above, we affirm the trial
court’s determination that the fourth cause of action is barred by the statute of limitations.
III. DISPOSITION
We reverse the judgment of dismissal. The matter is remanded with directions to
the court to vacate its order sustaining Expway’s demurrer to the FAC and to enter a new
order (1) sustaining the demurrer to the second and fourth causes of action without leave
to amend; and (2) overruling the demurrer to the first and fifth causes of action. The
parties shall bear their own costs on appeal in the interest of justice.
20
____________________________
LIE, J.
WE CONCUR:
____________________________
GREENWOOD, P.J.
_____________________________
GROVER, J.
Samjungcast Co., Ltd. v. Expway Corporation
H048862