INNOAS, INC., ETC. VS. GENESIS BBQ USA, LLC (L-5667-16, BERGEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1039-19T1
INNOAS, INC. d/b/a ZIONPOS,
Plaintiff-Appellant,
v.
GENESIS BBQ USA, LLC,
GENESIS CO., LTD., JOSHUA
LEE, JAY PARK, and TK NA,
Defendants-Respondents.
___________________________
Argued September 22, 2020 – Decided November 12, 2020
Before Judges Gilson, Moynihan, and Gummer.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-5667-16.
Elliott Scott Joffe argued the cause for appellant (Kim
& Bae, P.C., attorneys; Eric Negri, on the briefs).
Michael M. Yi argued the cause for respondent Genesis
Co., Ltd. (Lee Anav Chung White Kim Ruger &
Richter, LLP, attorneys; Michael M. Yi, on the brief).
PER CURIAM
This appeal arises out of a commercial dispute concerning the
development of software for a restaurant chain. Plaintiff Innoas, Inc., which
does business under the name ZionPOS, entered into several agreements with
defendant Genesis BBQ USA, LLC (BBQ USA) to develop point-of-sales
software for BBQ USA restaurants located in the United States of America.
BBQ USA was a limited liability corporation. It was owned by
corporations organized and located in the Republic of Korea (South Korea).
This appeal involves plaintiff's efforts to sue the corporate parents of BBQ USA.
Plaintiff appeals from three orders: (1) a May 10, 2019 order denying its
motion to extend the discovery deadline so that it could take discovery
concerning Genesis BBQ Global Co. Ltd. (Genesis Global), which, since 2014,
had been the direct parent corporation of BBQ USA; (2) a June 25, 2019 order
denying its motion to name Genesis Global as a defendant; and (3) a September
27, 2019 order granting summary judgment and dismissing plaintiff's claims
against defendant Genesis Co. Ltd. (Genesis), which owns the majority of the
shares of Genesis Global and had been the ultimate corporate parent of BBQ
USA. We affirm all the orders because plaintiff did not establish that it could
pierce the corporate veils to impose liability on either Genesis Global or Genesis
for the alleged breaches, actions, and omissions of BBQ USA.
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I.
We discern the facts from the record developed on the three motions,
which includes information garnered during several years of discovery.
Initially, we identify the corporations involved because understanding the
corporate structure facilitates understanding the issues on this appeal.
The Corporations
Plaintiff is "an all-in-one service provider" for information technology
solutions and point-of-sales credit-card processing software. It is a New Jersey
corporation with its principal place of business in Palisades Park, New Jersey.
Genesis is a South Korean corporation with its principal place of business
in Seoul, South Korea. Genesis acts as a holding company, meaning it holds
stock in other corporations that engage in business. Genesis owns the
controlling shares of several Korean corporations, which operate a large number
of franchise restaurants that primarily sell chicken dishes. 1
Before June 2014, Genesis' principal South Korean subsidiary was
Genesis BBQ Co., Ltd. (Genesis BBQ). In June 2014, Genesis restructured its
South Korean subsidiary and created two subsidiaries: (1) Genesis BBQ Co.,
1
Prior to March 2011, Genesis was known as GNS Food Co., Ltd. At that time,
it owned stock in a corporation known as "Genesis Co. Ltd."
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Ltd. (Genesis Korea); and (2) Genesis Global. Genesis Korea is responsible for
operating the restaurant chain in Korea. Genesis Global is responsible for
operating restaurants outside of Korea.
BBQ USA was a limited liability corporation organized under New Jersey
law with its principal place of business in Fort Lee, New Jersey. Before June
2014, BBQ USA was a wholly owned subsidiary of Genesis BBQ, which in turn
was principally owned by Genesis. After June 2014, BBQ USA was owned by
Genesis Global, which in turn was principally owned by Genesis.
The Business Deal
Sometime prior to 2009, plaintiff was asked to develop a point-of-sales
computer system for use by BBQ USA in its restaurants in the United States. At
that time, BBQ USA was just starting to establish restaurants in the United States
but hoped to establish thousands of them. In May 2009, plaintiff and BBQ USA
entered a written contract defining the parties' agreement concerning the
development, use, and payment for the software (May 2009 Agreement).
Under the May 2009 Agreement, plaintiff agreed to develop and maintain
a point-of-sales computer system for each BBQ USA restaurant. BBQ USA
agreed to pay plaintiff the installation costs, an installation fee, and a monthly
maintenance fee for each restaurant.
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The May 2009 Agreement identified the parties to the agreement as
plaintiff and BBQ USA. It also stated that the agreement will be binding "on
any successor or assigns" of plaintiff or BBQ USA. The May 2009 Agreement
was signed by Joy Park of "Phoenix USA Corporation" (Phoenix) on behalf of
BBQ USA. The parties do not dispute that Park and Phoenix acted as agents for
BBQ USA in signing the May 2009 Agreement. Plaintiff claims that Park and
Phoenix were also acting as agents for Genesis. Genesis disputes that claim.
BBQ USA failed to pay all the costs and fees due to plaintiff under the
May 2009 Agreement. To address that situation, in March 2013, plaintiff and
BBQ USA entered into a "Supplemental Agreement" (the March 2013
Agreement).2 The March 2013 Agreement stated that BBQ USA owed plaintiff
over $109,000, but plaintiff would allow BBQ USA to settle that balance by
paying $24,000 if the payment was made in March 2013. The March 2013
Agreement also provided that if BBQ USA failed to pay the $24,000, then all
agreements between plaintiff and BBQ USA would be terminated and BBQ USA
"shall not only be liable to the plaintiff of any and all balances, but shall also be
2
BBQ USA and plaintiff also entered into a supplemental agreement dated
November 2, 2011.
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liable for collection costs, attorney's fees and any other fees incurred by
[plaintiff] during the collection process."
The March 2013 Agreement was between plaintiff and BBQ USA and it
does not identify any other party. Like the May 2009 Agreement, the March
2013 Agreement stated that it was governed by "the laws of the State of New
Jersey."
Plaintiff asserts that BBQ USA breached the March 2013 Agreement by
failing to make the $24,000 payment. Three years later, plaintiff filed suit.
The Procedural History
In August 2016, plaintiff sued BBQ USA and Genesis. It asserted six
causes of action: (1) breach of the May 2009 Agreement; (2) breach of the March
2013 Agreement; (3) promissory estoppel; (4) unjust enrichment; (5) fraud; and
(6) negligent misrepresentation.
Plaintiff also initially sued three individuals who had worked for Phoenix.
Those individuals never responded, and in January 2018 they were dismissed
for lack of prosecution.
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BBQ USA also failed to respond or file an answer because it filed for
bankruptcy under the U.S. Bankruptcy Code. 11 U.S.C. § 101 - 1195. Plaintiff
did not file a claim against BBQ USA in the bankruptcy action. 3
Consequently, the only active defendant has been Genesis. Genesis was
served with the complaint in January 2017. It initially disputed personal
jurisdiction, but following a motion and jurisdictional discovery, Genesis
consented to personal jurisdiction in New Jersey in this action. In May 2018,
plaintiff's complaint in this action was dismissed for lack of prosecution.
Thereafter, plaintiff moved to reinstate its complaint, naming only Genesis as a
defendant. In August 2018, Genesis filed its answer to the complaint.
Genesis represents that since December 2017, it, through its counsel,
informed plaintiff that "any claim of liability against a company as a shareholder
of [BBQ USA] must be directed to [Genesis Global] not [Genesis]." Plaintiff
admits that that representation was correct. In its answer filed in August 2018,
3
The bankruptcy proceedings involving BBQ USA concluded in 2019, when
the federal bankruptcy court issued an order, dated April 30, 2019, approving
the trustees' final report and account under Chapter 7 of the Bankruptcy Code.
The parties have not provided us with any additional information concerning the
bankruptcy proceeding, and they make no arguments concerning any preclusive
effect of the bankruptcy proceeding. Accordingly, we do not address that issue.
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Genesis identified itself as "defendant Genesis BBQ Global Co., Ltd. (sued
herein as Genesis Co. Ltd.)."
After August 2018, plaintiff and Genesis engaged in discovery related to
plaintiff's claims. In October 2018, the court scheduled the trial for January 7,
2019. At plaintiff's request, that trial date was adjourned, and the court ordered
discovery to be completed by June 28, 2019.
In April 2019, plaintiff moved to extend the discovery deadline from June
28, 2019, to September 30, 2019. The trial court denied that motion in an order
dated May 10, 2019. In an accompanying written "Rider," the court explained
that it was denying the extension for several reasons, including that the case was
then almost three years old and the discovery deadline had been extended three
times. The court also noted that when plaintiff filed its complaint, it identified
the case as a non-complex contract matter under Track II, which, under court
rules, allows for 300 days of discovery. 4
In May 2019, plaintiff moved to amend its complaint to add Genesis
Global as a defendant. In its proposed amended complaint, plaintiff alleged that
4
In its Rider, the court noted that it would not oppose a stipulation between the
parties, under which the pending action would be dismissed without prejudice
and a new action could be instituted. Because no issue is presented to us
concerning the proposed stipulation, we do not comment on the propriety of the
court suggesting it would allow that stipulation.
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Genesis Global authorized or knew of the actions of BBQ USA and, therefore,
Genesis Global should be responsible for the alleged breaches, actions, and
omissions of BBQ USA.
After hearing oral arguments on June 25, 2019, the trial court denied the
motion to amend. The court found that counsel for Genesis had made it known
to plaintiff's counsel that Genesis Global was the direct parent of BBQ USA and
Genesis was a holding company. The court also found that plaintiff had waited
too long to seek to amend the complaint, noting that the original complaint had
been filed over three years earlier and discovery would close in a few days on
June 28, 2019.
Shortly thereafter, Genesis moved for summary judgment, arguing that it
was not the proper defendant. In opposition, plaintiff contended that Genesis
was the proper defendant because it had effectively admitted in its answer that
it was the parent of BBQ USA. Genesis disputed that contention and filed
certifications and a corporate organization chart to clarify its corporate structure.
The trial court heard oral arguments on the summary judgment motion on
September 27, 2019. That same day, the court entered an order granting
summary judgment to Genesis. Explaining the reasons for its ruling on the
record, the court found that Genesis Global was the direct parent of BBQ USA
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and Genesis was a holding company that owned the stock of Genesis Global.
The court also held that plaintiff's claims were all dependent on piercing the
corporate veil, but the evidence did not support piercing the corporate veil to
hold Genesis responsible for the actions and omissions of BBQ USA. In that
regard, the trial court found no clear and convincing evidence that Genes is
Global was a mere instrumentality of Genesis. The court also found no evidence
that Genesis perpetuated a fraud or injustice through Genesis Global. The court
also rejected plaintiff's argument that Genesis, in its answer, had admitted that
it was the parent of BBQ USA.
II.
As previously noted, plaintiff appeals from three orders: (1) the May 10,
2019 order denying its motion to extend discovery; (2) the June 25, 2019 order
denying its motion to amend the complaint; and (3) the September 27, 2019
order granting summary judgment to Genesis. Plaintiff presents three main
arguments, and each has sub-arguments. First, plaintiff contends that the trial
court erred in not extending discovery, and that refusal was fundamentally
unfair. Second, plaintiff argues that the trial court abused its discretion in not
allowing it to amend the complaint to add Genesis Global as a new defendant
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because such an amendment was not prejudicial or futile. Finally, plaintiff
asserts that it was an error to grant summary judgment to Genesis.
All the alleged errors depend on whether plaintiff had clear and
convincing evidence that either Genesis Global or Genesis was responsible for
the alleged breaches, actions, and omissions of BBQ USA. That contention, in
turn, depends on whether plaintiff can pierce the corporate veil of BBQ USA to
hold Genesis Global or Genesis responsible. Plaintiff has failed to present clear
and convincing evidence that it could pierce the corporate veil to reach either
the direct or indirect parent of BBQ USA. Moreover, after years of litigation,
plaintiff has not shown that further discovery would lead to such evidence.
Accordingly, we reject all of plaintiff's arguments and affirm all three orders.
Initially, we identify our well-established standards of review. We review
motions concerning discovery and motions to amend pleadings under an abuse
of discretion standard. Port Liberte II Condo. Ass'n, Inc. v. New Liberty
Residential Urb. Renewal Co., LLC, 435 N.J. Super. 51, 62 (App. Div. 2014)
(citing Kernan v. One Wash. Park Urb. Renewal Assocs., 154 N.J. 437, 457
(1998)); Leitner v. Toms River Reg'l Sch., 392 N.J. Super. 80, 87 (App. Div.
2007).
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We review the grant of summary judgment de novo, using the same
standard that governed the motion judge's determination. Caraballo v. City of
Jersey City Police Dep't, 237 N.J. 255, 264 (2019). We will uphold a grant of
summary judgment if "the pleadings, depositions, answers to interrogatories and
admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact challenged and that the moving party is
entitled to a judgment or order as a matter of law." Ibid. (quoting RSI Bank v.
Providence Mut. Fire Ins. Co., 234 N.J. 459, 472 (2018)); accord Brill v.
Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995).
A. Piercing the Corporate Veil
"To pierce the corporate veil of a parent corporation, a party must
establish two elements: (1) the subsidiary was dominated by the parent
corporation, and (2) adherence to the fiction of separate corporate existence
would perpetrate a fraud or injustice, or otherwise circumvent the law."
FDASmart, Inc. v. Dishman Pharms. & Chems. Ltd., 448 N.J. Super. 195, 203-
04 (App. Div. 2016) (citing Dep't of Env't Prot. v. Ventron Corp., 94 N.J. 473,
500-01 (1983)). That test must be satisfied "by clear and convincing evidence."
Canter v. Lakewood of Voorhees, 420 N.J. Super. 508, 519 (App. Div. 2011)
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(citing Trs. of Nat’l Elevator Indus. Pension, Health Benefit & Educ. Funds v.
Lutyk, 332 F.3d 188, 194 (3d Cir. 2003)).
In evaluating the first element, "courts consider whether 'the parent so
dominated the subsidiary that it had no separate existence but was merely a
conduit for the parent.'" Ibid. (quoting Verni ex rel. Burstein v. Harry M.
Stevens, Inc., 387 N.J. Super. 160, 200 (App. Div. 2006)). Accordingly, courts
consider factors such as common ownership, financial dependency, interference
with the subsidiary's selection of personnel, disregard of corporate formalities,
and control over a subsidiary's marketing and operational policies. FDASmart,
Inc., 448 N.J. Super. at 204.
In determining whether the second element has been satisfied, courts look
at whether the parent "has abused the privilege of incorporation by using the
subsidiary to perpetrate a fraud or injustice, or otherwise to circumvent the law."
Ventron, 94 N.J. at 501 (citations omitted). The "hallmarks" of such abuse are
"the engagement of the subsidiary in no independent business of its own but
exclusively the performance of a service for the parent and, even more
importantly, the undercapitalization of the subsidiary rendering it judgment-
proof." OTR Assocs. v. IBC Servs., Inc., 353 N.J. Super. 48, 52 (App. Div.
2002) (citing Ventron, 94 N.J. at 501).
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Plaintiff contends that both the direct and indirect parents of BBQ USA
completely dominated and controlled BBQ USA. In support of that contention,
plaintiff cites to the deposition of Hyun Wook Joo, who held different positions
at BBQ USA. Joo testified that BBQ USA needed its parent's approval for most
major decisions, including hiring and ordering supplies. Plaintiff also contends
that BBQ USA was undercapitalized, never made a profit, and required regular
financial support from its parent corporations.
The evidence plaintiff has collected lends some support to establishing the
first prong of piercing the corporate veil. Plaintiff, however, has presented no
evidence of the second prong. Plaintiff's claims are all based on allegations of
breach of contract and the related torts of fraud and negligent misrepresentation.
The May 2009 and March 2013 Agreements are clear in identifying that plaintiff
was dealing with BBQ USA. Plaintiff has presented no evidence that any parent
corporation of BBQ USA abused the privilege of incorporation to perpetuate a
fraud or injustice.
Instead, plaintiff is a sophisticated company that understood the
agreements that it entered. If plaintiff had wanted to protect itself, it could have
required a parent corporation to be part of the contract or to guarantee the
obligations of BBQ USA. See, e.g., Zeiger v. Wilf, 333 N.J. Super. 258, 277
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(App. Div. 2000) (declining to pierce the corporate veil in part because the party
seeking to pierce knowingly contracted with a corporate entity and never asked
the corporate principals to personally guarantee the contract).
Plaintiff argues that it should be given more time to develop evidence to
support piercing the corporate veils. We discern no abuse of discretion in the
trial court's decision not to extend discovery. On the motion for summary
judgment, plaintiff, through its counsel, acknowledged that Genesis had
informed it, through its counsel, that Genesis Global was the direct parent of
BBQ USA. Plaintiff, therefore, had over a year and a half to conduct discovery.
Just as important, the evidence of fraud or misrepresentation should have been
within the knowledge of plaintiff’s employees or representatives.
Plaintiff has also contended that Genesis or Genesis Global should be
liable for the conduct of BBQ USA under agency theories. An agency
relationship is created when a principal manifests assent to the agent's acts on
the principal's behalf. N.J. Laws. Fund for Client Prot. v. Stewart Title Guar.
Co., 203 N.J. 208, 220 (2010); Restatement (Third) of Agency §1.01 (Am. Law
Inst. 2006). Generally, an agent can bind the principal only for acts that are
within the agent's actual or apparent authority. Stewart Title, 203 N.J. at 220.
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Plaintiff has made no showing that BBQ USA had either actual or apparent
authority to bind Genesis or Genesis Global.
In summary, the record contains no evidence that plaintiff could pierce
the corporate veil to hold either Genesis Global or Genesis responsible for the
actions and omissions of BBQ USA. Consequently, the trial court did not err in
denying plaintiff's motion to amend the complaint, and it correctly granted
summary judgment to Genesis.
Affirmed.
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