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Click Entertainment, Inc., A Hawaii Corporation v. Jyp Entertainment Company

May 31, 2012

CLICK ENTERTAINMENT, INC., A HAWAII CORPORATION,
PLAINTIFF(S),
v.
JYP ENTERTAINMENT COMPANY, LTD., A KOREAN LIMITED COMPANY; STAR M. ENTERTAINMENT, A KOREAN COMPANY;
BEOM CHANG KANG; REVOLUTION ENTERTAINMENT; SE HYUN YUN; JIHOON JEONG, AKA RAIN; JOHN
DOES 1-25; JANE DOES 1-25; DOE ENTITIES 1-20,
DEFENDANT(S).



The opinion of the court was delivered by: Alan C. Kay Sr. United States District Judge

ORDER ADOPTING MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION AS MODIFIED

BACKGROUND

The parties tried this breach of contract and tort action related to a cancelled concert in Honolulu, Hawaii, before a jury in March 2009. See Doc. Nos. 272-285. On March 19, 2009, the jury returned a verdict in favor of Plaintiff Click Entertainment, Inc. ("Click" or "Plaintiff") against, inter alia, JYP Entertainment Company, Ltd. ("JYP") and Ji-Hoon Jung ("Rain") (collectively, "Defendants"). Doc. No. 290. After the Court entered judgment, the parties entered into a written settlement agreement (the "Settlement Agreement"). Doc. No. 402. Pursuant to this agreement, the Court vacated the judgment against JYP and Rain. Id. The Settlement Agreement called for JYP and Rain to each make two payments to Click. See Doc. No. 395, ¶ 1. The parties made the first payment in accordance with the agreement. The Settlement Agreement required that the parties each pay the second payment of $500,000 by February 2, 2010. Id.

Meanwhile, in the District Court for the Central District of Seoul in the Republic of Korea (the "Korean Court"), Dae-Geun Park brought an action against Click. On July 20, 2009, the Korean Court issued a provisional seizure order (the "Provisional Seizure Order") that seized Click's right to receive the second payment from JYP and Rain on the grounds that Click was allegedly liable to Park in an amount greater than the combined amounts Defendants currently owe to Click. See Doc. No. 443, Ex. A.

In light of the Provisional Seizure Order, the parties negotiated supplemental agreements. JYP and Rain entered into separate agreements with Click, under which JYP and Rain agreed to pay $100,000 each of their remaining debt to Click's counsel personally as attorney fees, for JYP to hold its remaining $400,000 in an escrow account with the law firm Akin Gump Strauss Hauer & Feld LLP as escrow agent, and for Rain to deposit its remaining $400,000 with the Clerk of the Court. See Doc. No. 443 (the "JYP Stipulation"), at 2-3; Doc. No. 445 (the "Rain Stipulation"). On April 5, 2010, the Court issued orders approving both stipulations. Doc. Nos. 442 & 444.

The JYP stipulation requires Click's principal SeungSoo Lee, Click, Click's counsel, and JYP to "cooperate with each other so that JYP and the JYP Escrow Agent . . . shall be able to comply with an order or orders of a court or courts with jurisdiction over it/them." Doc. No. 443, at 4. The JYP Stipulation further provides that the Escrow Agent may disburse funds "pursuant to orders, which become final, binding and non-appealable, from this Court and the Korean Court." Id.

The Rain Stipulation required that Click use its best efforts to resolve the Korean claims that formed the basis of the Provisional Seizure Order. Doc. No. 445, at 2. In the event the claims were not resolved, the Rain Stipulation required the parties to work together to reach a stipulation that would control the payment of the remaining $400,000. Id. at 3.

The Korean Court resolved the Korean litigation, issuing three relevant orders. On December 13, 2011, the Korean Court approved a mediation statement between Park, Lee, and Click in which Lee and Click agreed that they shall pay KRW 3 billion plus simple interest at an annual interest rate of 20%. Doc. No. 459, Ex. A ("Mediation Statement"). The Mediation Statement resolved Park's claim related to his investment in the cancelled Hawaii concert that is the subject of this action. See Mediation Statement. On January 12, 2011, the Korean Court issued an order converting the Provisional Seizure Order into a permanent official seizure order. Doc. No. 459, Ex. B ("Official Seizure Order"). The Official Seizure Order seized approximately KRW 1 billion plus accrued interest. Id. The order further provided that Rain and JYP shall not pay the debt to Click, that Click shall not dispose of or receive the debt, and authorized Park to collect the debt. Id. On February 1, 2012, the Korean Court issued a judgment against JYP and Rain ordering them to each pay KRW 524,109,580 (over U.S. $450,000) plus interest to Park. Doc. No. 459, Ex. C ("Final Judgment"). This amount is greater than the $400,000 at issue that JYP has in escrow and the $400,000 at issue that Rain has deposited with the Clerk of Court. After Park acted upon the Official Seizure Order to attach real property belonging to Rain, Rain paid Park KRW 631,637,727 (which represents KRW 524,109,580 plus accrued interest). See Doc. No. 461, Declaration of Park Sung Girl ¶¶ 4-6; Doc. No. 459, Exs. D & E. Upon Click's request, Magistrate Judge Chang held a status conference on February 29, 2012, to discuss the resolution of the Korean litigation and the release of the funds deposited with the Court and in escrow. See Doc. Nos. 456-457. Thereafter, on March 13, 2012, Click's counsel moved for leave to withdraw as counsel. Doc. No. 458. As grounds for the withdrawal, Click's counsel stated that he was unable to verify Click's position that the Korean orders are either inaccurate or fraudulent and that he could not make a "credible" presentation to the Court on these issues. Id. at Declaration of Eric A. Seitz ¶¶ 7-8. Click's counsel further asserted that after advising Lee of his position, Lee "strongly expressed an opinion" that Click's counsel was not representing Click's interests aggressively enough, stated that he would seek other counsel in this matter, and stated that he intends to seek recourse from Click's counsel for any delays, costs and fees, or loss of settlement proceeds that may have resulted from or been related to Park's claims. Id. ¶ 9.

Also on March 13, 2012, JYP and Rain filed a motion for release of funds held in escrow so that they could satisfy the Korean Court judgment ("Defendants' Release Motion"). Doc. No. 459. Defendants simultaneously filed an ex parte motion to shorten the time to hear their motion. Doc. No. 460. On March 15, 2012, non-party KBFD-TV filed a notice of lien on any settlement or judgment in this matter for advertising that it provided to Click in connection with the cancelled Hawaii concert, in the amount of $7,958.10. Doc. No. 465.

Magistrate Judge Chang granted the motion to shorten time and set Defendants' Release Motion for hearing on March 22, 2012. Doc. No. 464. On March 19, 2012, Click filed an ex parte motion to continue the hearing on Defendants' Release Motion to enable Click to obtain new counsel and non-party Lee (Click's principal) to make arrangements to attend the hearing. Doc. No. 467. On March 20, 2012, Magistrate Judge Chang held a status conference regarding the scheduling of Defendants' Release Motion and the motion to withdraw by Click's counsel. Doc. No. 471. Counsel for JYP, Rain, and Click participated in the status conference. See id. After considering the comments of counsel at the conference, Magistrate Judge Chang continued the hearing for Defendants' Release Motion and the motion to withdraw by Click's counsel to March 28, 2012. Id. Magistrate Judge Chang ordered that any documents or other evidence and any opposition to Defendants' Release Motion be filed by March 26, 2012. Id. Click did not file an opposition nor any other documents before the hearing.

On March 28, 2012, Magistrate Judge Chang granted Click's counsel motion to withdraw subject to Plaintiff obtaining new counsel no later than April 4, 2012.*fn1 Doc. No. 473. On March 29, 2012, Magistrate Judge Chang issued a findings and recommendation (the "F&R") to grant Defendants' Release Motion. Doc. No. 475. Magistrate Judge Chang found that pursuant to a valid, final, non-appealable and binding judgment by the Korean Court, JYP and Rain are obligated to pay Park an amount in excess of the $400,000 that each has placed in escrow or with this Court, in lieu of payment to Click. F&R at 10. He further found that the Korean orders are entitled to recognition by the Court as a matter of comity and JYP and Rain are entitled to the relief requested in their motion. Id. at 11. Particularly, by paying in excess of $400,000 to Park in satisfaction of the Korean judgment, JYP shall have discharged in full its debt to Click under the Settlement agreement and by paying in excess of $400,000 to Park in satisfaction of the Korean judgment, Rain has discharged its debt in full under the Settlement Agreement. Id. Accordingly, he recommended that (1) JYP's escrow agent (Akin Gump, Strauss Hauer & Feld LLP) be authorized to release to Park so much of the $400,000 held in escrow that is necessary to satisfy JYP's obligation to Park and that the remainder be released to JYP, and (2) that the Clerk of Court release the $400,000 held for Rain, plus any accrued interest, to Rain.*fn2 Id. at 12.

On April 2, 2012, non-party KBFD-TV filed an objection the F&R ("KBFD-TV's Objection"). Doc. No. 476. On April 11, 2012, Click filed an objection to the F&R ("Click's Objection"). Doc. No. 477. On April 13, 2012, KBFD-TV filed a joinder to Click's Objection. Doc. No. 478. On April 19, 2012, Defendants filed a response to KBFD-TV's Objection ("Defs.' Response to KBFD-TV"). Doc. No. 479. On April 30, 2012, Defendants filed a response to Click's Objection ("Defs.' Response to Click"). Doc. No. 480. In Defendants' Response to Click's Objection, JYP stated that after Magistrate Judge Chang issued the F&R, JYP paid Park in full. Defs.' Resp. to Click at 3 n.1. The Court issued an order stating that it needed verification from JYP of the amount of JYP's payment to Park and whether it constitutes payment in full satisfaction of the Korean Court orders before the Court issues an order releasing the escrow funds. Doc. No. 481. JYP has not yet filed such verification.

STANDARD OF REVIEW

A district court reviews de novo those portions of a magistrate judge's findings and recommendation to which an objection is made and may accept, reject, or modify, in whole or in part, the findings and recommendation made by the magistrate judge. 28 U.S.C. ยง 636(b)(1); Fed. R. Civ. P. 72(b); D. Haw. Local Rule 74.2. The district court may accept those portions of the findings and recommendation that are not objected to if it is satisfied ...


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