IN RE: EACHPOLE (2025)

Chapter 7

MEMORANDUM DECISION AFTER TRIAL ON THE MERITS OF THE SECOND AMENDED COMPLAINT

The Court conducted an eight-day trial ¹ in the adversary proceeding identified in the caption. At trial, a truly robust evidentiary record was developed regarding twenty-six of the twenty-seven causes of action ² pled in the Second Amended Complaint.³ Live testimony was received from a total of five witnesses, along with deposition testimony from four others.

Michael Rawlins, Esq., appeared at each day of trial on behalf of plaintiff, Linco, Inc. Aimee Cannon, Esq., also appeared on behalf of plaintiff Linco, Inc., on August 1, 2, 4, and 5, 2022. Ryan Works, Esq., appeared at each day on trial behalf of defendants LKimmy, Inc. and Hyunjune Kim. Carrie Hurtik, Esq., appeared at each day of trial on behalf of defendants Il Kim, Misook Kim, Chris Kim, Beauty Memory, and Synguru Corporation. Jonathan Patterson, Esq., appeared at each day of trial on behalf of defendant Bhasker Panchal.

When the trial was completed on August 30, 2022, the fully developed evidentiary record was closed by the Court. Trial transcripts were obtained by the parties in advance of post-trial briefing.⁴ After the transcripts were completed and docketed, the parties submitted timely post-trial briefs on October 28, 2022.  ⁵ The matter was then taken under submission by the Court for resolution.

The Court has considered the arguments of the parties presented at the July 5, 2022, Pretrial Conference, the fulsome evidentiary record developed during the trial, and all of the arguments advanced in the parties’ respective post-trial briefs. The Court is fully advised with respect to the issues pending before it for resolution. The Court now enters the following as its Findings of Fact and Conclusions of Law.⁶

I. FINDINGS OF FACT

The following is the Court's distillation of a chaotic factual record. The various individuals and entities involved in this litigation were part of a truly Byzantine set of relationships, both prior to and after the commencement of this adversary proceeding and the underlying bankruptcy case.

A. Synopsis of The Parties

1. The Kim Family of Individual Defendants

a. Defendant Il Kim 7

Kim is an individual residing in Clark County, Nevada. Kim appeared in court with counsel on the first day of trial. Kim did not subsequently appear, except through counsel, at any time during the remainder of the trial. Kim did not testify at trial, either live or via deposition.

b. Defendant Misook Kim 8

Misook is an individual residing in Clark County, Nevada. Misook is Kim's wife.  ⁹ Misook did not testify at trial, either live or via deposition.

c. Defendant Chris Kim 10

Chris is an individual residing in Los Angeles County, California. He is the son of Kim and Misook.¹¹ Chris did not appear, except through counsel, at any time during the trial. Chris did not testify at trial, either live or via deposition.

2. The Kim Family 12 Business Entity Defendants

Over the years preceding this adversary proceeding, the Kim Family created a group of business entities in California and Nevada. Those business entities are discussed below.

a. Debtor Top Lighting Corporation d/b/a eTop Lighting Corporation 13

TLC is a California corporation formed on April 5, 2007.¹⁴ On April 5, 2007, TLC filed an election with the Internal Revenue Service to be treated as a Subchapter S corporation for federal income tax purposes.¹⁵ When TLC was formed, Misook was identified as its initial agent for service of process.¹⁶

On April 17, 2017, a Statement of Information regarding TLC was filed with the California Secretary of State.¹⁷ The TLC Information Statement shows that TLC's principal Executive Office and Prinicpal Business Office in California were located at 9955 6th Street, Unit A, Rancho Cucamonga, California 91730.¹⁸ Misook is listed on the TLC Information Statement as TLC's Chief Executive Officer, Secretary, sole director, agent for service of process, and President.¹⁹

On September 20, 2017, TLC entered into a written loan agreement with Bank of America.²⁰ Pursuant to the BofA Loan, TLC was granted a line of credit with a $3 million credit limit, collateralized by a blanket security interest in favor of Bank of America against TLC's assets.²¹

On November 1, 2017, a Certificate of Amendment to TLC's Articles of Incorporation was filed with the California Secretary of State that changed TLC's name to eTop Lighting Corporation.²² The TLC/eTop Name Change was signed by Kim as the company's President and Secretary.²³

About a month later, on January 5, 2018, Articles of Incorporation creating a new Nevada corporation named eTop Lighting Corporation were filed with the Nevada Secretary of State.²⁴ The eTop Articles identified Kim as the company's incorporator, registered agent, and as a director.²⁵

Also on January 5, 2018, a (Profit) Initial/Annual List of Officers, Directors, and State Business License Application form for eTop Lighting Corporation (f/k/a/ TLC) was filed with the Nevada Secretary of State.²⁶ The eTop / TLC List identified Kim as the company's President, Secretary, and sole director.²⁷ The eTop / TLC List was signed by Kim in his capacity as the company's President.²⁸

On July 13, 2018, TLC provided an updated Borrowing Base Certificate to Bank of America in connection with the BofA Loan.²⁹ TLC failed to repay the balance due under the BofA Loan when it matured on September 30, 2018.³⁰

On August 8, 2019, another Certificate of Amendment to TLC's Articles of Incorporation was filed with the California Secretary of State, changing TLC's name from eTop Lighting Corporation back to TLC.³¹ The eTop / TLC Name Change was again signed by Kim as the company's President and Secretary.

TLC filed a voluntary Chapter 7 bankruptcy petition along with supporting schedules and statements ³² on October 8, 2019.³³ The TLC Petition shows that TLC had previously used the name “Etop Lighting Corporation” in conducting its business affairs.³⁴ The TLC Petition also shows that on the TLC Petition Date, the address of TLC's principal place of business was 10572 Acacia Street, #C-5, Rancho Cucamonga, California 91730.³⁵ The TLC Petition further shows that on the TLC Petition Date, TLC's principal assets were located at 5840 Donovan Way #101, Las Vegas, Nevada.³⁶ The bankruptcy schedules filed in support of the TLC Petition show that when the TLC Bankruptcy was filed, TLC had lighting and fixtures inventory with a retail value of $50,000.00, based on a physical inventory of December 31, 2018.³⁷ The Statement of Financial Affairs filed in support of the TLC Petition identifies Kim as TLC's President and as the holder of a 100% ownership interest in TLC.³⁸ The TLC Petition ³⁹ and the supporting Statement of Financial Affairs ⁴⁰ bear the electronic signature of defendant Il Kim in his capacity as TLC's President, with both signatures made under penalty of perjury.

On April 9, 2020, Bank of America filed a written proof of claim in the TLC Bankruptcy.⁴¹ The BofA Proof of Claim reflects that the unpaid balance of the secured debt under the BofA Loan was $2,149,396.45 when the TLC Bankruptcy was filed.⁴²

b. Debtor Eachpole, Inc. f/k/a Julius, Inc.

Julius, Inc.⁴³ is a California corporation formed on March 12, 2010.  ⁴⁴ On March 12, 2010, Julius filed an election with the Internal Revenue Service to be treated as a Subchapter S corporation for federal income tax purposes.⁴⁵

On May 10, 2017, a Statement of Information form regarding Julius was filed with the California Secretary of State.⁴⁶ The Julius Information Statement shows that the street address of Julius's Principal Executive Office, its mailing address, and the street address of its principal office in California, were all 9955 6th Street, Unit A, Rancho Cucamonga, California 91730.⁴⁷ The Julius Information Statement identifies Kim as Julius's Secretary sole director, and agent for service of process.⁴⁸ The Julius Information Statement identifies Chris as Julius's Chief Executive Officer.⁴⁹ Kim signed the Julius Information Statement in his capacity as Julius's Secretary.⁵⁰

On November 1, 2017, a Certificate of Amendment to Julius's Articles of Incorporation was filed with the California Secretary of State, changing Julius's name to Eachpole, Inc.⁵¹ The Julius/Eachpole Name Change was signed by Kim as the company's President and Secretary.⁵²

On November 12, 2018, Eachpole entered into a written Multi-Tenant Industrial Triple Net Lease with Gear Northgate 5, LLC, for the property described as 5840 Donovan Way, Suite 101, North Las Vegas, Nevada.⁵³ Kim signed the Donovan Way Lease in his capacity as Eachpole's President.⁵⁴ The commencement date of the Donovan Way Lease was March 1, 2019, with a lease term of approximately 84 months.⁵⁵

Eachpole filed a voluntary Chapter 7 bankruptcy petition along with supporting schedules and statements ⁵⁶ on February 20, 2020.⁵⁷ The Eachpole Petition confirms that Eachpole had previously done business under the name “Julius, Inc.”⁵⁸ The Eachpole Petition further shows that on the Eachpole Petition Date, the address of Eachpole's principal place of business was 7525 Java Sparrow Street, North Las Vegas, Nevada, 89084, and that Eachpole's principal assets were located there as well.⁵⁹ The Eachpole Petition identifies the TLC Bankruptcy as a pending bankruptcy case “filed by a business partner or an affiliate of [Eachpole].”⁶⁰ Bankruptcy schedules filed in support of the Eachpole Petition show that Eachpole had no inventory when the Eachpole Bankruptcy was filed.⁶¹ The Statement of Financial Affairs filed in support of the Eachpole Petition identifies Kim as Eachpole's President and as the holder of a 100% ownership interest in Eachpole.⁶²

c. Defendant Synguru Corporation

Two different corporations share the word “Synguru” as part of their corporate name. Synguru, Inc. is a California corporation formed at some point prior to November 3, 2016.⁶³ On November 3, 2016, a Statement of Information form regarding Synguru was filed with the California Secretary of State.⁶⁴ The Synguru Inc. Information Statement identified Kim as Chief Executive Officer and agent for service of process, and Misook as the sole director.⁶⁵

Synguru Corporation is a Nevada corporation formed on September 8, 2017.⁶⁶ Synguru Corporation is the named defendant in this adversary proceeding.⁶⁷ The most recent records filed by Synguru Corporation with the Nevada Secretary of State on August 7, 2019, identify Kim as the corporate President and sole director, and Misook as the corporate Secretary and Treasurer.⁶⁸ The address for Kim and Misook in their corporate roles for Synguru Corporation as shown in the Nevada Secretary of State's records is 3060 North Walnut Road #110, Las Vegas, Nevada 89131.⁶⁹

Synguru Corporation was designed to emulate the functionality of Amazon's software. It proved to be largely unsuccessful. Synguru Corporation was eventually dissolved in June 2019.⁷⁰

d. Defendant Beauty Memory 71

Beauty was formed as a non-profit corporation in Las Vegas, Nevada, on September 18, 2017.⁷² On September 14, 2018, a (Nonprofit) Initial/Annual List of Officers and Directors regarding Beauty was filed with the Nevada Secretary of State.⁷³

The Beauty List identified Kim as Beauty's President, with Misook shown as Beauty's Secretary, Treasurer, and sole director.  ⁷⁴ The Beauty List shows 4210 North Lamb Boulevard, Unit #120, Las Vegas, Nevada 89115,  ⁷⁵ as the address for Kim and Misook in their corporate capacities. Beauty never had any bank accounts and never operated.⁷⁶ Linco's expert testified that he never came across any documents or transfers relating to Beauty. 77

e. The Kim Family Companies Summarized

The following chart traces the creation of the Kim Family Companies, tracks subsequent modifications shown by publicly filed corporate documents, and presents a timeline as to certain other events of consequence leading up to the bankruptcy filings underpinning this adversary proceeding:

eTop Lighting TLC a/k/a eTop Lighting Corporation – Beauty Date Corporation – California Nevada Synguru Inc. and Julius n/k/a Eachpole Synguru Corp. 4/5/2007 Formed in California 78 3/12/2010 Formed in California 79 8/5/2015 TLC Files Patent Lawsuit Against Linco  80 11/3/2016 Synguru Inc. Formed in 9/8/2017 California 81 Synguru Corp. Formed in Nevada 82 9/18/2017 Formed in 11/1/2017 Name Changed to eTop Nevada 83 Name Changed to Eachpole, Lighting Corporation 84 Inc.85 1/5/2018 Formed in Nevada 86 7/17/2019 Synguru Corp. Dissolved in 8/8/2019 Name Changed Back from Nevada 87 eTop Lighting Corporation to TLC 88 8/26/2019 Final $991,028.79 Judgment Entered in Favor of Linco Against TLC in Patent Lawsuit 89 10/8/2019 Bankruptcy Petition Filed 90 2/20/2020 Bankruptcy Petition Filed 91

3. Defendant Bhasker Panchal 92

Panchal is an individual residing in California.⁹³ The record establishes that Panchal was involved in the business operations of the Kim Family Companies between May 2016 ⁹⁴ and November 2018.⁹⁵ The record evidence regarding the actual scope of Panchal's involvement in the business operations of the Kim Family Companies is somewhat uneven.

Various publicly filed documents relating to the organization of the Kim Family Companies were admitted into evidence. In the Synguru, Inc. Information Statement filed with the California Secretary of State of November 3, 2016, Panchal is identified as Synguru, Inc.’s Secretary and Chief Financial Officer.⁹⁶ In the TLC Information Statement filed with the California Secretary of State on April 17, 2017, Panchal is identified as TLC's Chief Financial Officer.⁹⁷ In the Julius Information Statement filed with the California Secretary of State on May 10, 2017, Panchal is identified as Julius's Chief Financial Officer.⁹⁸ In the eTop Articles filed with the Nevada Secretary of State on January 5, 2018, Panchal is identified as a director.⁹⁹ In the eTop / TLC List filed with the Nevada Secretary of State on January 5, 2018, Panchal is identified as the company's Treasurer.¹⁰⁰

Panchal's trial testimony was somewhat, but not entirely, consistent with the public filings discussed above.¹⁰¹ Panchal's testimony was to the effect that his involvement in the business of the Kim Family Companies was more limited than what those public filings would suggest.

Panchal testified that he was the in-house accountant for TLC and Eachpole.¹⁰² He testified that he did not handle payroll,¹⁰³ have access to bank accounts, make payments to vendors, or sign checks unless Kim was traveling.¹⁰⁴ Panchal testified that he was never the Treasurer for TLC,¹⁰⁵ and stated that he did not know that he had been named to the various positions within the Kim Family Companies discussed above.¹⁰⁶ Ultimately, Panchal testified credibly that Kim:

[W]as the lead person. You - - you could not move a chair without [Kim's] approval. [Kim] ran the show, and he employed capable - - what he thought were capable people in different places.107

Panchal also acknowledged, though, that he had submitted a sworn declaration in the Patent Lawsuit ¹⁰⁸ in which he stated under penalty of perjury that:

I am the Chief Financial Officer of Top Lighting Corporation. I'm responsible for financial and record keeping matters, among other things at Top Lighting.109

Panchal testified that he signed that declaration under oath but disavowed either drafting the contents of the declaration or even reading the declaration before signing it.¹¹⁰

Other internal documents created within the Kim Family Companies suggest that while Kim “ran the show,” Panchal was an important subordinate during his two-year tenure. Panchal acknowledged that when he “joined the company on day one” in May 2016, his job was to prepare “good accounting records” in connection with an anticipated sale of TLC and Eachpole.¹¹¹ A 2017-2018 internal organizational chart for TLC listed Panchal as TLC's Chief Financial Officer.¹¹² The reference to Panchal as TLC's Chief Financial Officer in 2017 – 2018 in that internal organizational chart is consistent with the information in TLC's public filings.¹¹³ A January 16, 2018, draft engagement letter from business broker Duff & Phelps LLC ¹¹⁴ regarding “sell side financial due diligence” was directed to Panchal as TLC's Chief Financial Officer.¹¹⁵ A February 13, 2018, Inventory Appraisal, prepared by Hilco Valuation Services ¹¹⁶ regarding TLC's inventory as of November 30, 2017,¹¹⁷ identified Panchal as TLC's Chief Financial Officer.¹¹⁸ A Management Representation Letter, submitted by TLC and Eachpole to Deloitte & Touche LLP ¹¹⁹ in connection with an April 30, 2018, audit report regarding their combined 2016 and 2017 financial statements, was signed by Panchal as Chief Financial Officer.¹²⁰ On July 13, 2018, Panchal signed a Borrowing Base Certificate as TLC's CFO in connection with a $3 million line of credit extended to TLC by Bank of America.  ¹²¹ On July 20, 2018, Duff & Phelps’ Managing Director Brian Little, wrote a letter to Martin Green, Business Development Director of The Vitec Group, plc, to confirm the scheduling of an August 2, 2018, Management Presentation in support of a potential sale of TLC to The Vitec Group US Holdings, Inc.¹²² That letter identified Panchal as TLC's Chief Financial Officer.¹²³

TLC and Eachpole spent approximately $4,000,000 on the sale materials, professionals, lawyers, investment bankers, and merger and acquisition consultants, culminating with the August 2, 2018, pitch meeting with Vitec.¹²⁴ According to Panchal, the spending that was being done to try to prepare to sell TLC to Vitec would “further deteriorate the revenue from the company.”¹²⁵

Panchal was among those in attendance at the August 2, 2018, Vitec pitch meeting,¹²⁶ but the presentation to Vitec did not generate a viable offer to buy TLC.¹²⁷ Approximately ten weeks later, in November 2018, Panchal's ¹²⁸ involvement with the Kim Family Companies came to an end.¹²⁹

The Court has carefully reviewed the trial record. Having conducted that review, the Court finds that the preponderance of the evidence established that Panchal was hired in May 2016 to develop adequate accounting records to support a contemplated sale of TLC and Eachpole; was designated in various publicly filed documents as the Chief Financial Officer of TLC, Eachpole, and Synguru Inc.; performed accounting and other services under Kim's direction to prepare for the contemplated sale of TLC and Eachpole; was aware from various documents generated in the attempt to sell TLC and Eachpole to Vitec that he had been designated as TLC's Chief Financial Officer; executed a sworn declaration in separate litigation confirming under oath that he served as Chief Financial Officer of TLC, and in that role was responsible for financial and record keeping matters among other things at TLC; and participated as TLC's designated Chief Financial Officer in an August 2, 2018, Management Presentation in support of a potential sale of TLC to Vitec. After the August 2018 effort to sell TLC to Vitec proved unsuccessful, his involvement with the Kim Family Companies ended in or around November 2018.

4. Defendant Hyunjune Kim 130

Hyunjune is an individual residing in Clark County, Nevada.¹³¹ While Hyunjune shares the Kim surname there is no familial relationship between Hyunjune on the one hand, and Kim, Misook, and/or Chris, on the other.

Hyunjune started working for TLC in 2015 as a graphic designer.¹³² In or about 2017, Hyunjune was promoted to a sales department manager position at TLC, working on TLC's Amazon wholesale account.¹³³ He would continue to work at TLC through mid-October of 2018, when, as discussed in more detail below, LKimmy was formed.

5. Defendant LKimmy, Inc.  134

As noted previously, Kim's efforts to sell TLC to Vitec fell through in or around August 2018.¹³⁵ Soon thereafter, and at Kim's direction, LKimmy was formed as a new Nevada corporation.¹³⁶

Specifically, on October 19, 2018, Articles of Incorporation forming LKimmy were filed with the Nevada Secretary of State.¹³⁷ Federal Form 1120 income tax returns filed with the Internal Revenue Service, as amended, show that LKimmy did not elect to be treated as a Subchapter S corporation for federal income tax purposes.¹³⁸ The LKimmy Articles identified Hyunjune as LKimmy's registered agent, sole director, and incorporator.¹³⁹ The street address provided for Hyunjune in the LKimmy Articles was 2872 Vigilante Court, North Las Vegas, Nevada 89081.¹⁴⁰ Hyunjune testified credibly that Kim allowed him to stay in the house situated on the Vigilante Court Property.

Also on October 19, 2018, a (Profit) Initial Annual List of Officers, Directors, and State Business License Application form was filed with the Nevada Secretary of State on behalf of LKimmy.¹⁴¹ The LKimmy List identified Hyunjune as LKimmy's President, Secretary, Treasurer, and sole director.¹⁴²

Hyunjune testified credibly that when LKimmy was created on October 19, 2018, he had very limited financial resources available to capitalize it.¹⁴³ Hyunjune testified further that when LKimmy was created, he contributed $1,000.00 of his own money and $9,450.00 borrowed from Kim in exchange for LKimmy's common stock.¹⁴⁴ He also stated that no one else provided any initial capital related to the organization of LKimmy.¹⁴⁵

With respect to the personnel needed to carry out LKimmy's business operations, Hyunjune was asked where LKimmy's primary employees came from.¹⁴⁶ Hyunjune testified credibly that Kim's executive assistant at TLC, TLC's human resources manager, TLC's warehouse manager, two TLC shipping clerks, and three Eachpole service representatives, all eventually became LKimmy employees.¹⁴⁷ LKimmy also shared computers with TLC and Eachpole.¹⁴⁸ When sending out emails, LKimmy employees decided which of two email addresses to use, one attributable to TLC or Eachpole, or the other attributable to LKimmy.¹⁴⁹

Regarding acquisition of the inventory LKimmy needed to carry out its business operations, Hyunjune testified credibly that LKimmy obtained its inventory from TLC.¹⁵⁰ He acknowledged that when LKimmy was created, LKimmy did not pay for the inventory provided by TLC upon receipt.¹⁵¹ LKimmy instead paid TLC for the inventory TLC provided to LKimmy only after the inventory was sold.¹⁵² During mid to late 2019, months after LKimmy acquired the inventory of TLC, LKimmy employees were sending updated and potentially revised invoices via email that may have been related to the earlier inventory purchases to TLC. Two such emails were sent on August 26, 2019.¹⁵³ The attachment to this email identifies the attachment as an updated wholesale transaction.¹⁵⁴ Linco did not provide the actual attachment as an exhibit at trial. Two more emails were sent on December 10, 2019. One of the two December 10, 2019, emails was asking for an updated amount as to three “COGS items,” totaling $2,621,752.53, with no further explanation.¹⁵⁵ The other email attached six pdf documents allegedly related to the TLC inventory purchase orders.¹⁵⁶ As with the August 26, 2019, email, Linco did not provide the actual attachment(s) from either of these two emails as an exhibit at trial. Hyunjune was asked about these emails and could not recall any invoices between TLC and LKimmy other than the numerous inventory invoices reflected in Plaintiff's Exhibit. 62.¹⁵⁷ Hyunjune had no explanation as to why the invoices were modified months after the inventory had been transferred to LKimmy.¹⁵⁸ At trial, LKimmy proffered an exhibit to show that it had in fact paid a total of $4,536,387.52 to TLC/Eachpole for the inventory, intellectual property, and other assets they had transferred to LKimmy.¹⁵⁹ But the information in that exhibit is lumped together, and does not clearly tie the payments made by LKimmy to specific invoices issued to it by TLC.¹⁶⁰

As to warehouse storage for the inventory LKimmy acquired from TLC and Eachpole, LKimmy's inventory was initially stored in a warehouse located on the North Lamb Property leased by TLC. Subsequently, on December 6, 2018, LKimmy and Eachpole entered into a written Standard Commercial Sublease for the Donovan Way Property.¹⁶¹ The Donovan Way Sublease provided for a commencement date of April 1, 2019, and a seven-year term ending on March 31, 2026.¹⁶² The Donovan Way Sublease was signed by Kim in his capacity as Eachpole's President, and by Hyunjune in his capacity as LKimmy's President.¹⁶³ The $54,203.63 monthly payments to be paid by LKimmy under the Donovan Way Sublease were sufficient to cover the base monthly base rent payments Eachpole was obligated to make under the Donovan Way Lease.¹⁶⁴ It is noteworthy, though, that the monthly payments to be paid by LKimmy under the Donovan Way Sublease were not enough to cover Eachpole's additional obligations for real property taxes, insurance, and other expenses, estimated in the Donovan Way Lease to total $20,567.75 per month.¹⁶⁵

In order to sell the inventory LKimmy received from TLC and Eachpole, LKimmy needed access to internet marketplace platforms where the inventory could be posted for sale.¹⁶⁶ To obtain that access, on November 10, 2018, LKimmy entered into two separate written Exclusive License Agreements, one with Eachpole ¹⁶⁷ and the other with TLC.¹⁶⁸ The License Agreements were signed by Kim in his capacity as President of Eachpole ¹⁶⁹ and TLC.¹⁷⁰ Hyunjune executed the License Agreements in his capacity as President of LKimmy.¹⁷¹ The Eachpole License authorized LKimmy to use two of Eachpole's existing trademarks ¹⁷² and three of its existing internet Market IDs.¹⁷³ The TLC License authorized LKimmy to use six of TLC's existing trademarks ¹⁷⁴ and three of its existing internet Market IDs.¹⁷⁵ In exchange for authorization to use Eachpole's existing trademarks and internet Market IDs under the Eachpole License, LKimmy agreed to pay Eachpole the initial sum of $70,542.00.¹⁷⁶ In exchange for authorization to use TLC's existing trademarks and internet Market IDs under the TLC License, LKimmy agreed to pay TLC the initial sum of $91,905.34.¹⁷⁷ Hyunjune testified credibly that access to the Eachpole and TLC trademarks and Market IDs under the License Agreements allowed LKimmy to immediately create an internet sales volume that would have otherwise taken three to five years to develop.¹⁷⁸

As to the initial location of LKimmy's business office, Hyunjune testified that prior to the filing of the LKimmy Articles on October 19, 2018,¹⁷⁹ his work related to LKimmy's creation and organization was carried out at TLC's offices in Rancho Cucamonga, California.¹⁸⁰ Even after the LKimmy Articles were filed with the Nevada Secretary of State on October 19, 2018,¹⁸¹ the Donovan Way Sublease was executed by LKimmy in December 2018,¹⁸² and Hyunjune had moved to Kim's Vigilante Court Property in Las Vegas, LKimmy was still in need of an office location in Nevada. That was true because the warehouse at the Donovan Way Property did not have an office.¹⁸³ Hyunjune testified that from January through the end of August or early September 2019, the office where he conducted LKimmy's business operations was located in the North Lamb Property leased by TLC.¹⁸⁴

Personal loans from Kim and Misook were a significant source of operational funding for LKimmy. As shown in the following table, between April 4, 2019, and September 23, 2019, Kim and Misook made a series of five loans to LKimmy totaling $703,000.00 ¹⁸⁵ :

Date Lender(s) Amount Total All Loans 4/4/2019 Misook $150,000 $150,000 4/26/2019 Misook $100,000 $250,000 6/7/2019 Misook $15,000 $265,000 8/7/2019 Kim and Misook $260,000 $525,000 9/23/2019 Kim and Misook $178,000 $703,000

6. Plaintiff Linco, Inc.186

Linco is a California corporation that holds patent rights in popular professional photography equipment.¹⁸⁷ Linco is a family business that has been selling photography studio equipment for three decades, with operations in both China and Southern California.¹⁸⁸ Linco's sales are primarily accomplished through ecommerce platforms, including Yahoo, Amazon, and eBay.¹⁸⁹ At trial via Zoom videoconferencing, Linco offered the testimony of its International Manager, Sue Mei Chen,  ¹⁹⁰ in support of Linco's claims in this adversary proceeding.

Ms. Chen testified that Linco's primary business was in selling photography lighting equipment to amateur photographers on the internet via Amazon, eBay, and Linco's own website.¹⁹¹ She indicated that in 2018, TLC was about ten times the size of Linco.¹⁹²

Ms. Chen testified that in or around 2014 or 2015, Linco discovered that TLC was selling Linco's patented products online via eBay, ultimately resulting in complaints by Linco to eBay, the filing of the Patent Lawsuit by TLC against Linco on August 5, 2015,¹⁹³ and the filing of a counterclaim by Linco against TLC.¹⁹⁴ Ms. Chen confirmed that she attended the Patent Lawsuit “from day one to the end,”¹⁹⁵ summarized the procedural history of the Patent Lawsuit, stated that Linco prevailed on its counterclaim, and testified that a jury verdict was entered in favor of Linco.¹⁹⁶ She acknowledged that the amount of actual damages awarded by the jury in the Patent Lawsuit was $138,633.00, the full amount of damages Linco had requested in its counterclaim against TLC.¹⁹⁷ She acknowledged that the jury in the Patent Lawsuit also trebled the damages awarded to Linco on its counterclaim, for a total of $415,089.00.¹⁹⁸ She also agreed that the jury in the Patent Lawsuit has awarded Linco attorneys’ fees totaling $496,123.90.¹⁹⁹ She testified that Linco spent more than $400,000.00 in additional attorney fees after obtaining the judgment, and that she believed the unpaid balance of the judgment was in excess of $1 million.²⁰⁰

Asked about her involvement in this adversary proceeding, Ms. Chen explained that she had reviewed all subpoenaed documents and materials, including sales invoices, tax returns, import documents, bank statements, and financial statements produced by the defendants, and had analyzed transactions between defendants TLC and Eachpole on the one hand, and defendant LKimmy on the other.²⁰¹

Ms. Chen testified that she had utilized a website known as ImportGenius in examining those transactions.²⁰² She explained that ImportGenius collects data from the United States Customs Service regarding import shipments to the United States, and in exchange for a subscription fee, provides access to its database.²⁰³ She testified that she had conducted searches on ImportGenius regarding the import histories for TLC, Eachpole, and LKimmy, to find out how many containers of products those companies had imported to the United States from China.²⁰⁴ She testified further that comparing search results generated by the ImportGenius database could be used to determine whether TLC and LKimmy had the same suppliers.²⁰⁵ Ms. Chen acknowledged that while the reports generated through the ImportGenius database would show how many containers were shipped from China to the United States for a specified time period, those reports would not provide substantial detail as to what items of inventory were actually in the containers.²⁰⁶

Ms. Chen was asked to review an ImportGenius report showing shipments to LKimmy during late 2018.²⁰⁷ She testified that the report showed that during late 2018, LKimmy had received 18 shipments totaling 25 containers from manufacturers and/or import/export companies in China.²⁰⁸ Ms. Chen stated further that her review of LKimmy's bank statements showed that LKimmy had paid Chinese vendors between $60,000.00 and $70,000.00 during 2018.²⁰⁹ She stated that in her view, it would have been impossible for LKimmy to import so many containers from China to the United States with so little money paid to the Chinese vendors.²¹⁰

Ms. Chen was next asked about TLC's import transactions from China and related payments.²¹¹ Ms. Chen testified that based upon her review of TLC's bank statements, between December 2018 and June 2019, TLC made payments to vendors in China totaling more than $3 million.²¹² She stated further that during the same time period, an ImportGenius report showed that TLC did not receive any containers in the United States that had been shipped from China.²¹³ More particularly, she explained that an ImportGenius report showed that the last shipment to TLC from China was received by TLC on November 23, 2018.²¹⁴

Ms. Chen testified that in her experience, Chinese vendors dealing with a new customer in the United States would typically require a prepayment of 30 to 50% to accept an order, and would require full payment before the order was shipped from China to the United States.²¹⁵ She testified that as a new vendor, LKimmy would have needed to submit its orders to China about 50 – 60 days in advance of shipment, and would have required approximately $1 million in funding in connection with the product shipments received from China between October 2018 and mid-January of 2019.²¹⁶ Asked whether the bank statements of TLC and LKimmy showed payments to common vendors in China, Ms. Chen testified that the bank statements of those companies did reflect wire transfers to common vendors.²¹⁷

Ms. Chen testified that at the time of trial, ImportGenius reports confirmed that both TLC and LKimmy were continuing to operate normally.²¹⁸ She stated that TLC and LKimmy had imported about 30 containers of products from China in 2021, and another 16 containers of products from China through July 2022, the month prior to trial.²¹⁹ Asked how the volume of product imported from China by TLC and LKimmy compared to Linco's product imports from China for the same period, Ms. Chen stated that “[i]t is about four or five times of Linco.”²²⁰ She testified further that LKimmy was one of the top ranked sellers of photography products via the Amazon online platform.²²¹

Asked about LKimmy's payment obligation under the Eachpole License, Ms. Chen stated that her review of LKimmy's bank statements showed one $70,542.00 payment, which is an amount equal to the monthly amount due under the Eachpole License.²²² She also stated that she could not determine whether the payment was attributable to LKimmy's payment obligation under the Eachpole License.

Ms. Chen was also asked about LKimmy's payment obligation under the TLC License.²²³ Ms. Chen stated that she did not find any $91,905.00 payments in LKimmy's bank account statements or other financial information that tied to LKimmy's payment obligation under the TLC License.²²⁴ She conceded, though, that a document provided by LKimmy's counsel did show a payment made by LKimmy that was consistent with the payment obligation under the TLC License.²²⁵

Ms. Chen was asked whether her review of LKimmy's bank statements and other financial information disclosed any payments made by LKimmy to TLC for rental of space at the North Lamb Property, the warehouse property situated in California, or to Eachpole for use of the Donovan Way Property.²²⁶ She testified that LKimmy had not paid TLC any rent in exchange for use of the North Lamb Property.²²⁷ She testified that LKimmy had not paid TLC any rent in exchange for use of warehouse space in California.²²⁸ She testified that LKimmy did provide a security deposit and paid some rent for use of the warehouse on the Donovan Way Property, explaining further that LKimmy paid the rent required under the Donovan Way Sublease directly to the landlord from April through September of 2019.²²⁹

Ms. Chen testified that she was aware that TLC issued invoices to LKimmy in connection with the purchase of inventory and other equipment, and that she had attempted to identify payments made by LKimmy to TLC or Eachpole that matched the amounts of those invoices.²³⁰ She testified she had been unable to find payments made by LKimmy that corresponded to the invoices issued to LKimmy by TLC.²³¹

Asked whether the License Agreements ²³² afforded LKimmy an immediate business advantage through the use of Amazon Marketplace identifiers previously established by TLC and Eachpole, Ms. Chen answered in the affirmative.²³³ She explained that LKimmy's sales volume in 2018 and 2019 came primarily from the Amazon Marketplace identifiers previously established by TLC and Eachpole.²³⁴ She opined that it would have been “virtually impossible” for LKimmy to have built up its sales volume so quickly without authority to use those Amazon Marketplace identifiers.²³⁵ She also noted that Linco had been using its own Amazon Marketplace identifiers for ten years, had invested between $3 million and $4 million in capital to build up its business, and still had not been able to reach the one-year sales volume realized by LKimmy.²³⁶ She testified further that the $3 to $4 million in capital invested by Linco in building up its business included the litigation expenses Linco incurred after TLC filed the Patent Lawsuit against Linco in 2015.²³⁷

Ms. Chen testified at some length regarding the costs incurred when inventory is purchased by a seller in China that is subsequently shipped to the United States.²³⁸ Ultimately, she stated that after reviewing more than 120 transactions involving inventory purchased by LKimmy in China subsequently shipped to the United States, the related costs were around 20 percent of the value of the inventory purchased.²³⁹

Asked about the rate at which the kind of inventory purchased by LKimmy became obsolete, Ms. Chen explained that the nature of the inventory - - photographic lighting, background supports, etc. - - did not quickly become obsolete with the passage of time.²⁴⁰ She stated that those types of products “can [be] put in the market for sale for ten years or even more.”²⁴¹

When shown a series of invoices issued by TLC to LKimmy,²⁴² Ms. Chen was asked whether various discounts shown on the invoices (10% for rent and storage; 10% for defective merchandise; 13.33% for service charges) were reasonable.²⁴³ She responded in the negative.²⁴⁴

As to the 10% rent and storage discount received by LKimmy, Ms. Chen noted that between December 2018 and January 2019, LKimmy did not have its own office or warehouse space and was utilizing space rented by TLC and Eachpole to store LKimmy's inventory, but instead of paying TLC and Eachpole for the inventory storage space, LKimmy was receiving a 10 percent discount on its invoiced inventory costs.²⁴⁵ With respect to the 10% discount for defective merchandise, Ms. Chen stated that such a discount should be determined when the buyer received the inventory, not when the related invoice was issued; and that in any event “the defective percentage is not that high.”²⁴⁶ Regarding the 13.33% service charge discount, she simply stated that she could not “think of any appropriate reason” for that discount.²⁴⁷

Asked whether Linco would benefit from putting LKimmy out of business, Ms. Chen answered in the negative, noting that there “are many other sellers in the market.”²⁴⁸ She stated that she was aware that Linco had purchased claims held by the bankruptcy estates of TLC and Eachpole, and the terms of the purchase provided for a portion of any recovery to go to the bankruptcy estates.²⁴⁹ She stated that Linco was aware that there were other creditors involved in the TLC bankruptcy estate, and that there were approximately $4 million in total claims against the TLC bankruptcy estate, including BofA's secured claim of about $2 million and Linco's claim under the judgment in the Patent Lawsuit of about $900,000.00.²⁵⁰

Asked whether Linco was seeking to have LKimmy turn over inventory to the TLC and Eachpole estates, Ms. Chen responded in the affirmative.²⁵¹ She reiterated that between December 2018 and January 2019, TLC and Eachpole had sold inventory to LKimmy at an invoiced value of approximately $4 million.²⁵² She acknowledged that while Linco had participated in inventory inspections over two days in 2021, Linco proved unable to fix a value on the inventory based on the inspections.²⁵³ She also testified that Linco would not take the inventory in lieu of further inspection because:

First of all, that belongs to the estate. It was not belong - - it does not belong to Linco. Second, the quality of the inventory was - - is too low, and the - - no, we don't want it.254

Ms. Chen testified that she believed that LKimmy had the ability to pay a $4 million judgment.²⁵⁵ She also acknowledged that TLC and Eachpole owed money to creditors, repayment of which was secured by their inventory.²⁵⁶

Asked if she disputed the fact that LKimmy had paid $4.536 million to TLC and Eachpole in exchange for inventory provided to LKimmy, Ms. Chen simply replied: “No.”²⁵⁷ She testified further, however, that LKimmy had benefitted from 33% in discounts that it should not have received, and that LKimmy should have also paid the discounted amounts to TLC and Eachpole.²⁵⁸ She conceded, though, that she had testified that the quality of the inventory held by LKimmy was of low quality, such that Linco did not want it.²⁵⁹ She further conceded that while Linco did not want the inventory held by LKimmy, it was in fact saleable.²⁶⁰ She also stated that the amounts LKimmy was required to pay under the License Agreements 261 were unreasonable, but did not testify as to why or what reasonable payments under the License Agreements would have been.²⁶²

When asked whether the import documents provided by LKimmy that she had reviewed ²⁶³ were prepared by parties other than LKimmy, Ms. Chen testified that there “are too many documents” such that she “really cannot answer [that] question.”²⁶⁴ Asked what injunctive relief Linco sought in this adversary proceeding, Ms. Chen testified generally that Linco sought to stop LKimmy and Hyunjune from moving the inventory LKimmy had acquired from TLC.²⁶⁵ She also testified that Linco had sought to obtain LKimmy's import documents from 2018, but had not received them yet.²⁶⁶

Asked whether she believed Kim had transferred assets to China, Ms. Chen stated that she knew money had been transferred to China but had no information as to whether Kim had a bank account in China where the money was received.²⁶⁷ As to whether she believed that after LKimmy paid $4.5 million to TLC and Eachpole for inventory, Kim took that money and transferred it to China, Ms. Chen responded in the affirmative.²⁶⁸ Ms. Chen testified further that when the $4.5 million paid by LKimmy for inventory was received by TLC and Eachpole, Kim “paid some of the monies to creditors in the U.S. and transferred some money into China. However, as far as the money owed to BOA, he has not paid a penny yet.”²⁶⁹

B. Synopsis of Live Testimony from Non-Party Witnesses

1. Larry Bertsch 270

At trial, Linco proffered Mr. Bertsch as an expert witness. Mr. Bertsch is a former Chapter 7 trustee, who handled over 8,000 cases during his 12 years as a trustee.²⁷¹ Linco's counsel successfully qualified him as an expert on issues of accounting and fraudulent conveyance.²⁷²

During the course of his trial testimony, Mr. Bertsch modified his expert opinions by dropping portions of those opinions in their entirety, specifically the third and fourth fraudulent transfers identified by Linco in its SAC.²⁷³ He also made changes to his expert report after discovery had closed and just days before the trial.²⁷⁴ Those changes included a substantial modification of his damage calculations related to the Seventh fraudulent transfer identified in the SAC:

Q: Hold on. Hold on. Hold on. Do you have any idea of what the number is now? Because your expert report says 11 million. This says 10,745,000.

A: Yeah, I don't know where this came from.

Q: You don't know where what came from?

A: The 10 million, because I had 11.

Q: Okay. So –

A: Now I have 20.

Q: You have 20 what?

A: Twenty million.

Q: Okay. Where is the $20 million figure calculated?

A: I made adjustments to this. I now believe it's $20 million.

Q: What changed?

A: What changed is Number 3, and I took out Number 4. But Number 7, I have put in there the royalty payments.

Q: The thing that you were just discussing with counsel that you were --

A: Yes. Uh-huh.

Q: Okay. So you changed your opinion today?

A: No, I changed it last week.275

* * * * *

Q: Take a moment. I'm just -- that's the most obvious of the changes. I haven't done the math on the fly here, but it appears to me that there's several categories that may have changed, including Category Number 6, where the number went from 2.4 million to 3.5 million.

A: Yeah, yeah.

Q: The licenses, though, remained the same, correct?

A: Right.

Q: Okay.

A: They all remained the same.

Q: So you, at the time of the deposition, had no other opinions than the opinion that 70,000 and 91,000, whether you look at Exhibit X, or Amended X, which are Exhibit 152 and 168, that those were the values of damages you were ascribing to my client, LKimmy, correct?

A: At that time.

Q: And while there may have been discussion about something at the deposition that related to potentially valuing that category of damages differently, you never amended your report further, right?

A: Well, I did. But –

Q: Okay.

A: -- we couldn't get it filed.

Q: Aside from what you –

A: Look, let me tell you something.

Q: Hold on.

A: I make mistakes.

Q: Hold on.

A: And I make a lot of them. I'm trying to correct them as we're holding this court hearing or what -- the court hearing. I'm trying to correct some of the mistakes I made. And I admit I've made mistakes.276

Ultimately, Linco never offered Mr. Bertsch's written expert report for admission into evidence at trial. For reasons and under authorities discussed in more detail below, the Court finds the testimony and expert opinions offered by Mr. Bertsch at trial to be of both modest credibility and little evidentiary value, particularly on the issues of inventory valuation and damages.

2. James Yu 277

Mr. Yu testified that he has been a Certified Public Accountant since 1988, providing professional services through a business known as Moon Jae Yu, CPA, Chartered, since 1991.²⁷⁸ He confirmed that he met at various times with Kim, Kim's assistant, Hyunjune, and Andrew in the process of creating LKimmy.²⁷⁹ Mr. Yu stated that there was discussion of whether LKimmy should be created as a C corporation or an S corporation for federal tax purposes. He testified that the decision was ultimately made to have LKimmy created as a C corporation.²⁸⁰

Mr. Yu explained that he assisted in getting a business license and federal tax ID number for LKimmy.²⁸¹ He stated that his impression was that Kim was the owner of LKimmy, qualifying that impression with “[b]ut, you know, I could be wrong.”²⁸² He conceded that in the LKimmy Articles and LKimmy List filed with the Nevada Secretary of State ²⁸³ Hyunjune was identified as the corporate president, treasurer, secretary and director, not Kim.²⁸⁴ He also acknowledged that Hyunjune signed a Modified Business Tax form prepared by Mr. Yu's office as LKimmy's president prior to filing with the Nevada Department of Taxation,²⁸⁵ and that the federal tax employer identification number application number for LKimmy identified Hyunjune as the “responsible party,” not Kim.²⁸⁶

Mr. Yu testified that in 2018, he received bank statements from LKimmy to assist in preparing financial statements. He testified further that he did in fact prepare financial statements for LKimmy. He also stated that he prepared quarterly federal tax returns and state unemployment reports for LKimmy and handled the payroll function for LKimmy.²⁸⁷

Asked about the dissolution of Synguru Corporation, Mr. Yu testified credibly that he was asked to assist in the dissolution process.²⁸⁸ He explained that his staff prepared and filed the papers dissolving Synguru Corporation with the Nevada Secretary of State.²⁸⁹

Questioning turned to the scope of work performed by Mr. Yu for LKimmy in 2018.²⁹⁰ Mr. Yu explained that while his office prepared financial statements for LKimmy, they did not prepare related 2018 tax returns.²⁹¹ He stated that the usual procedure in his office was to do accounting work for either a fiscal or calendar year, then meet with the owner to see if adjustments were necessary.²⁹² Mr. Yu testified that when LKimmy representatives reviewed the final drafts of the 2018 financial statements, a disagreement as to their content arose. He explained that after a series of back-and-forth discussions it was agreed that Mr. Yu would not prepare the 2018 tax returns and LKimmy would have them prepared elsewhere.²⁹³ Mr. Yu stated that his firm ceased performing accounting services for LKimmy at the end of calendar year 2018 but continued to provide payroll services for LKimmy through October or November 2019.²⁹⁴

C. Synopsis of Deposition Testimony from Non-Party Witnesses

1. Hyukjoon “Andrew” Kwon 295

It is noteworthy that at the outset of this adversary proceeding, Andrew was a named party defendant.²⁹⁶ On July 8, 2021, Linco voluntarily moved to dismiss Andrew as a defendant, contending that “the interests of justice would be better served by allowing Andrew to act as a witness in this matter, to secure his cooperation and full disclosure of his knowledge regarding the matters at issue.”²⁹⁷ Andrew was not called to testify in person at trial,²⁹⁸ but portions of his deposition were read into the record.²⁹⁹

Andrew started working with TLC in 2011.³⁰⁰ He was Vice President at TLC,³⁰¹ with responsibilities in sales and marketing, as well as human resources.³⁰² According to Hyunjune, Andrew did only human resources work, was not familiar with the inventory that TLC and Eachpole sold,³⁰³ and didn't know anything about outdated or bad inventory or products.  ³⁰⁴ Hyunjune acknowledged that he and Andrew did not get along.³⁰⁵ Andrew was, however, in attendance at the unsuccessful August 2, 2018, Vitec pitch meeting. In addition to Andrew, other attendees at the Vitec pitch meeting included Panchal, Kim, Hyunjune, Chris Choi, and the broker, Duff & Phelps.³⁰⁶

After Kim's efforts to sell TLC to Vitec in August 2018 proved unsuccessful, and after LKimmy was created at Kim's direction with Andrew's assistance in October 2018,³⁰⁷ Kim was desirous of moving LKimmy's business operations from Las Vegas back to California.³⁰⁸ More particularly, Kim wanted to move LKimmy's base of operations from Las Vegas to Ontario, California.³⁰⁹ Kim asked Andrew, not Hyunjune, for assistance in preparing for that relocation effort.³¹⁰

Andrew testified that he believed Kim was the owner of LKimmy and that he never took directions involving his work for LKimmy from Hyunjune.³¹¹ Andrew viewed TLC, Eachpole, and LKimmy as essentially one business that was owned and controlled by Kim.³¹² Andrew also testified via deposition that when LKimmy was formed in October 2018, Kim asked Andrew if Andrew was willing to be listed as the owner of LKimmy.³¹³ Andrew declined Kim's offer.³¹⁴ According to Andrew, Kim then directed that Hyunjune be listed as President of LKimmy.³¹⁵

Andrew was never employed by LKimmy. However, between February 2019 and May 2019, under Kim's direction,  ³¹⁶ Andrew performed a variety of services in anticipation of LKimmy's relocation to California while being paid for those services by TLC.³¹⁷ Specifically, Andrew was tasked by Kim with finding a certified public accountant in California;³¹⁸ registering LKimmy as a foreign corporation in the State of California; acquiring a California business license for LKimmy;³¹⁹ looking for available warehouse space in California that could accommodate LKimmy's business operations; creating a layout for the offices in the new warehouse;³²⁰ helping to arrange necessary utilities, telephone lines, internet access, and insurance for the new California warehouse; transferring TLC's Amazon accounts to LKimmy;³²¹ identifying and hiring a payroll service for LKimmy;³²² and ultimately preparing to move LKimmy's inventory from Las Vegas to California.³²³ Andrew did all of these tasks at the request and under the direction of Kim, not at the request or under the direction of Hyunjune.³²⁴ Hyunjune did not exercise control over the planned relocation of LKimmy's business operations, the timing of the relocation, or where LKimmy's business operations would be conducted after relocation. Those decisions were all made by Kim and/or Andrew.³²⁵

As noted previously, after efforts to sell TLC to Vitec proved unsuccessful and arrangements for relocation of LKimmy's business to California were well underway, Andrew's ³²⁶ employment at TLC was terminated.³²⁷ In July 2019, when Andrew was let go from TLC, his severance checks were paid by LKimmy.³²⁸ Andrew, prior to leaving TLC, gave a copy of his TLC computer hard drive, containing all his TLC files, to Hyunjune.³²⁹ Ultimately, Kwon opened a Tae Kwon Do studio in California after his employment at TLC came to an end.³³⁰

2. Paul S. Joo, CPA 331

Mr. Joo was deposed in this adversary proceeding on March 9, 2022.³³² He testified that he had been a licensed certified public accountant in California since 1996.³³³ He stated that he had operated his own accounting firm, Paul S. Joo, C.P.A., for 16 years.³³⁴

Mr. Joo testified that he had never met Kim.³³⁵ Mr. Joo explained that in September 2019, Hyunjune first contacted him about providing accounting services for LKimmy.³³⁶ Mr. Joo said that when he was first contacted in September 2019, LKimmy was moving its business operations from Nevada to California, and had already established a business location in Ontario, California.³³⁷ He said that his initial meeting was with Hyunjune and his assistant, Yoona Oh,³³⁸ at LKimmy's business location in Ontario.³³⁹ Asked if Andrew, Panchal, or any other persons who seemed to be senior management or decision makers for LKimmy were present, Mr. Joo answered in the negative.³⁴⁰ Mr. Joo stated that it was his understanding that Hyunjune was the owner and manager of LKimmy.³⁴¹

Mr. Joo was asked if he had ever heard of Kim or Misook, and answered in the negative.³⁴² He was asked if he had ever provided accounting services, for Eachpole, TLC, Julius, Kim, or Misook, and testified that he had not.³⁴³ He stated that he did not know who the in-house accountant for LKimmy was.³⁴⁴ He explained that if he needed documents or information in preparing LKimmy's tax returns, he would contact either Hyunjune or Yoona.³⁴⁵ Mr. Joo also stated that most communications related to accounting services his firm provided on behalf of LKimmy involved him or his accountant-in-charge.³⁴⁶ He testified that his accountantin-charge would collect the information needed to prepare LKimmy's tax returns from the client, draft the related tax return, and Mr. Joo would the “make the final decision” in the process of filing the return.³⁴⁷

Mr. Joo was questioned at some length about the documents that were produced to Linco's counsel in response to a subpoena issued in connection with his deposition.³⁴⁸ During that questioning, it became apparent that various documents related to the preparation of LKimmy's income and sales tax returns for the years 2018 through 2020, including emails between LKimmy and Mr. Joo's accountant-in-charge and staff, filed original (not amended) corporate tax returns for LKimmy, and related correspondence, had not been produced.³⁴⁹

Asked if he had assisted LKimmy in forming any business entities or trusts, Mr. Joo responded in the negative.³⁵⁰ He testified that he was unfamiliar with an entity affiliated with LKimmy by the name of Der Perso, Inc.³⁵¹ He stated that he was not familiar with Synguru or Beauty.³⁵² He also testified that he was not aware that the accounting firm of Kim & Chang had provided accounting services to TLC and Eachpole.³⁵³

With respect to the scope of his firm's work under its engagement letter with LKimmy, Mr. Joo stated that his firm did not prepare monthly profit and loss statements, nor did it perform monthly bank statement reconciliation reports.³⁵⁴ After conceding that his firm had not produced any bank statements received from LKimmy in performing tax preparation services, Mr. Joo confirmed that his firm received bank statements from LKimmy regularly but not monthly.³⁵⁵ Mr. Joo was, however, able to identify certain bank statements provided by Linco's counsel as documents used by Mr. Joo's firm in preparing tax returns for the 2018 and 2019 tax years.³⁵⁶

Mr. Joo testified that LKimmy was billed annually for accounting services rendered by his firm, and how the related invoices were generated.³⁵⁷ Asked about the preparation of LKimmy's 2018 tax returns, Mr. Joo explained that an Excel report of accounting work prepared by LKimmy's in-house staff was submitted to Mr. Joo's firm, which would then confirm that “the data is accurate and is valid to make sure it ties with the bank statements.”³⁵⁸

Mr. Joo was asked about payroll services his firm provided for LKimmy.³⁵⁹ He explained that his firm prepared necessary calculations, prepared paycheck stubs, sent the paycheck stubs to LKimmy in .pdf format, and LKimmy would prepare and issue physical paychecks at its offices.³⁶⁰ Asked whether Kim was ever identified as an LKimmy employee, Mr. Joo answered in the negative.³⁶¹

Asked whether his firm received sales reports generated by ecommerce sites from LKimmy in preparing LKimmy's tax returns, Mr. Joo answered in the affirmative.³⁶² He also conceded that those reports had not been produced in response to Linco's subpoena.³⁶³ Mr. Joo stated that when LKimmy's draft income tax returns were completed by his firm, they would be sent to Hyunjune for review and approval.³⁶⁴

Mr. Joo then testified at some length about the reasons for an amendment to LKimmy's 2018 income tax return.³⁶⁵ He explained that on the original 2018 return, the License Agreements ³⁶⁶ had been improperly reported as operational expenses when they should have been reported as intangible assets and amortized accordingly.³⁶⁷ Asked whether his firm had verified that the fees required under the License Agreements had actually been paid by LKimmy, Mr. Joo answered in the negative, stating that his firm had simply relied on the information contained in the original 2018 income tax return.³⁶⁸

Mr. Joo testified that a $1.3 million inventory figure and a separate $104,873 figure for “Other Assets” shown on the amended 2018 income tax return his firm had prepared for LKimmy were unverified figures provided by LKimmy.  ³⁶⁹ He testified that he did not know what comprised the “Other Assets” referenced in the amended 2018 income tax return because “[t]he other assets came from previous accountant data in their original [2018] tax return filing” that had been prepared by another accounting firm.³⁷⁰ Asked whether a $157,309.91 security deposit figure had been broken up so that a portion was reflected as an asset and the balance was reflected as a rental expense, Mr. Joo stated that he was uncertain “because these numbers, these numbers came to me through the original [LKimmy 2018 income tax] filing.”³⁷¹

Mr. Joo acknowledged that he did not know how the $1,000 in capital stock reported on LKimmy's amended 2018 income tax return had been contributed to LKimmy and conceded that he had not verified that figure.³⁷² He testified further that as to the approximately $1.5 million in accounts payable referenced on LKimmy's amended 2018 income tax return, he had accepted that figure from LKimmy, and did not have a list of the relevant accounts payable or to whom they were owed.³⁷³ As to inventory purchases totaling $2,645,071 shown on LKimmy's amended 2018 income tax return, Mr. Joo explained that “since my job was to report amortization costs relating to intangible assets, I didn't verify the purchase amount reported[.]”³⁷⁴

Mr. Joo testified that his firm also prepared an amended 2019 income tax return for LKimmy, amending the original 2019 income tax return his firm had prepared.³⁷⁵ He explained that the amendment was prepared in order to recharacterize $788,000 in packaging supply costs originally misidentified by LKimmy as operating expenses to accounts payable.³⁷⁶ He stated that the supporting documentation for the $1,198,652 ending inventory figure shown on LKimmy's amended 2019 income tax return was a “[c]lient memo.”³⁷⁷ With respect to $1,551,616 in accounts payable shown on the amended 2019 income tax return, Mr. Joo stated that he did not know who the accounts payable were owed to.³⁷⁸ Asked about the figure for mortgages, notes, and bonds payable, which had increased from $9,450 to over $724,550, Mr. Joo stated that he did not know who held those debts.³⁷⁹ Mr. Joo testified that he was unaware that Kim and Misook had made loans to LKimmy totaling over $700,000 during 2019.³⁸⁰ Asked to explain why LKimmy's amended 2019 income tax return showed imports from abroad of about $3.266 million and domestic imports of about $2.7 million for a total of about $5.9 million, but purchases of only $4,525,028, Mr. Joo said “[t]hat would be a tough one” that he would “have to produce another time.”³⁸¹ Asked if LKimmy's 2019 marketplace processing fees of $7 million on gross receipts of about $16 million struck him as high, Mr. Joo responded in the negative, noting that a vendor selling merchandise through online platforms could pay more money to the online platform than its own cost of goods sold.³⁸²

Mr. Joo was queried about a business interruption deduction of $1,217,791 related to inventory, a separate deduction of $171,600 for business interruption generally, and a third deduction of $231,558 for inventory loss in business operations, all shown on LKimmy's amended 2019 income tax return.³⁸³ He testified that the $1,217,791 figure would have to have been provided by LKimmy, and that his firm should have “some sort of client statement notifying us of that magnitude of loss” that he would produce later.³⁸⁴ He stated that the reported $171,600 loss from business interruption generally, $66,726 was attributable to warehouse supplies and $104,873 was from disposal of a security deposit.³⁸⁵ Mr. Joo acknowledged that if LKimmy lost a security deposit when it moved its business operations from Nevada to California, one way to account for the lost security deposit was to characterize it as a business interruption loss.³⁸⁶

Mr. Joo explained that his firm prepared LKimmy's 2020 income tax return in the same manner as it had prepared the amended returns for 2018 and 2019, and confirmed that the 2020 return had not been amended.³⁸⁷ Mr. Joo stated that the inventory information on the 2020 return had been provided by LKimmy.³⁸⁸ Mr. Joo confirmed that he was unaware of any loans to LKimmy by shareholders in 2018, 2019, or 2020.³⁸⁹ He conceded that LKimmy's 2018 income tax return showed buildings and other depreciable assets at $0, but noted that he could not “speak for what happened in 2018 when I was not the accountant. So I just have to take face value.”³⁹⁰ Asked if he could provide backup information for $69,047 in buildings and other depreciable assets shown on LKimmy's 2019 income tax return, Mr. Joo responded in the affirmative, and testified as to the six different assets comprising that sum.³⁹¹

Asked how the value of LKimmy's buildings and other depreciable assets had increased from $69,047 as shown on its 2019 income tax return to $116,547 as shown on its 2020 income tax return, Mr. Joo explained that the increase was attributable to LKimmy's acquisition of a 2020 Ram pickup truck valued at $47,500.00.³⁹² Mr. Joo stated further that the backup information for entries on LKimmy's 2020 income tax return for ending inventory of $1,581,744, and for accounts payable of $1,713,897, was in the form of summary statements provided to his firm by LKimmy.³⁹³ Mr. Joo testified that the increase in the line item for other current liabilities from $3 to $222,346 as shown on LKimmy's 2020 income tax return was attributable to a $31,000 credit card balance, an auto loan of $40,000, and an Economic Injury Disaster Loan obtained by LKimmy through the United States Small Business Administration.³⁹⁴ As to shipping costs of $1,548,492 shown on LKimmy's 2020 income tax return, nearly double the shipping costs shown on LKimmy's 2019 income tax return, Mr. Joo conceded that he did not ask for or receive any backup documentation from LKimmy.³⁹⁵

Mr. Joo was asked about a how a series of transfers made by Synguru to LKimmy in 2019 were accounted for in LKimmy's income tax return.³⁹⁶ He testified that the transfers would have been included as part of LKimmy's reported sales revenue, because “we treat all money deposit[s] as sale, unless the client provides us which was a loan to the corporation which it was not in this case.”³⁹⁷

Mr. Joo testified that he understood what an IRS Form 1045 was.³⁹⁸ Asked how much of a refund Kim and Misook would have received from an IRS Form 1045 form they had filed in January 2019,³⁹⁹ Mr. Joo testified that he did not know Kim and Misook, did not prepare the form, and could not tell how much of a refund they would have received after filing the form.⁴⁰⁰

3. Sun Ha Kim, CPA 401

Sun Ha was deposed in this adversary proceeding on March 31, 2022.⁴⁰² In response to a subpoena, and under Federal Rule of Civil Procedure 30(b)(6) as applicable in this adversary proceeding under Federal Rule of Bankruptcy Procedure 7036, Sun Ha was designated to testify on behalf of Jung Woo Kim CPA, Inc. Sun Ha testified generally and at some length about her efforts to produce the documents requested in the subpoena.⁴⁰³ She stated that after receiving the subpoena, she did not have any contact with Kim or any officers or directors at TLC or Eachpole.⁴⁰⁴

Sun Ha testified that she obtained a CPA certificate approximately five years prior to her deposition.⁴⁰⁵ She explained that she began working for Jung Woo Kim CPA, Inc., in 2015 or 2016, which was when she first encountered Kim.⁴⁰⁶ She testified that Jung Woo Kim CPA, Inc., had been requested to prepare the 2017 income tax returns for TLC and Eachpole.⁴⁰⁷ Sun Ha stated that Panchal made the request to prepare the 2017 income tax returns for TLC and Eachpole, and that the related work was performed in 2018.⁴⁰⁸ She said that she was unaware that TLC and Eachpole had asked Deloitte to audit their financial records in 2018.⁴⁰⁹ She confirmed that she had not been provided with any documents prepared in connection with, or resulting from, Deloitte's 2018 audit of the financial records of TLC and Eachpole.⁴¹⁰ She explained that while she had not performed any bookkeeping or other accounting work for TLC or Eachpole during 2017, she was asked by Panchal to prepare their 2017 income tax returns shortly before the September 15, 2018 filing deadline.⁴¹¹ She stated that she couldn't recall exactly how much was billed to TLC and Eachpole in connection with the preparation of the 2017 income tax returns.⁴¹²

Sun Ha testified that the last time she had communicated with Kim was in 2018, in connection with the preparation of the 2017 income tax returns for TLC and Eachpole.⁴¹³ While her conversations with Kim did not extend to LKimmy or moving the business operations of TLC and Eachpole to a new corporation, she was aware that they were moving their business operations to Las Vegas.⁴¹⁴

Sun Ha testified that she did not have any communications with Hyunjune.⁴¹⁵ She said that while Andrew was a personal client of the firm, she did not communicate with him about the 2017 income tax returns for TLC and Eachpole.⁴¹⁶ She reaffirmed that she had not had any communications with Kim or Panchal after 2018.⁴¹⁷

Asked whether TLC or Eachpole provided any bank statements, sales reports, check registers, inventory lists, or asset appraisals in connection with the preparation of their 2017 tax return, Sun Ha answered in the negative.⁴¹⁸ She confirmed that she had been provided with a list of assets which had been produced to Linco's counsel in connection with her deposition.⁴¹⁹ She testified further that Panchal had provided her with a balance sheet and a profit and loss statement for use in preparing Eachpole's 2017 tax return.⁴²⁰ Sun Ha observed that those documents were the most important documents she received in preparing Eachpole's 2017 tax return because she was asked to prepare that return only a few days before the filing deadline in September 2018.⁴²¹

Asked if the balance sheet Panchal had provided in connection with preparing Eachpole's 2017 income tax return showed any loans from shareholders, Sun Ha responded in the negative.⁴²² She also noted that the balance sheet showed affiliate loans from TLC to Eachpole totaling $603,000.00.⁴²³ She testified further that she did not receive any documents from which she could determine whether Eachpole paid any personal expenses of its shareholders in 2017.⁴²⁴

Sun Ha testified that she had been provided with a balance sheet, profit and loss statement, and transaction report for use in preparing TLC's 2017 income tax return.⁴²⁵ She said that she was uncertain whether a similar transaction report had been provided in connection with the preparation of Eachpole's 2017 income tax return.⁴²⁶ In reviewing the transaction report used in preparing TLC's 2017 income tax return, Sun Ha confirmed that certain credit card transactions involved Kim's personal expenses, and that TLC “didn't treat [them] as business expenses, and it was more like shareholder distribution.”⁴²⁷ She confirmed that transactions shown as license and permit expenses were shown as business expenses on TLC's 2017 income tax return.⁴²⁸ She acknowledged that without a similar transaction report for Eachpole, it would have been difficult to properly separate business expense transactions from shareholder distribution transactions in preparing Eachpole's 2017 income tax return.⁴²⁹

When asked whether she had been asked to do anything in the preparation of 2017 income tax returns for TLC and Eachpole that she was unwilling to do because she thought the request was inappropriate, Sun Ha responded in the negative.⁴³⁰ Asked whether TLC provided any bank statements, sales reports, check registers, inventory lists, or asset appraisals in connection with the preparation of their 2017 income tax return, Sun Ha answered in the negative.⁴³¹

Sun Ha testified that the balance sheet used in preparing TLC's 2017 income tax return did not show any loans from shareholders.⁴³² She stated that TLC's 2017 income tax return did show $603,000 in loans from TLC to Eachpole.⁴³³

Sun Ha acknowledged that she had prepared Kim's personal taxes for several years prior to and including the 2017 tax year, but did not do so after 2017.⁴³⁴ She testified that no one had spoken to her about this adversary proceeding prior to her deposition.⁴³⁵ She confirmed that bookkeeping services had also been provided for TLC and Eachpole prior to and including the 2015 tax year, but not thereafter.⁴³⁶ She testified that she was unaware that TLC was involved in patent litigation with Linco, and that no one from TLC indicated to her that TLC might need to file for bankruptcy relief.⁴³⁷

Sun Ha testified that she recognized a 2017 IRS Form 1045 Application for Tentative Refund ⁴³⁸ identifying Kim and Misook as the taxpayers on the related return.⁴³⁹ She acknowledged that form was prepared at the end of 2018, shortly after the 2017 income tax returns for TLC and Eachpole were prepared.⁴⁴⁰ She explained that the purpose of filing the 2017 IRS Form 1045 was to carry back a reported loss reported in 2017 to recover taxes that had been paid in 2015 and 2016.⁴⁴¹ Asked how much the tax refund generated by the filing of the 2017 IRS Form 1045 would have been, Sun Ha testified that she remembered it was “huge money” approximating $1.5 million.⁴⁴² She stated that while she wasn't certain whether the IRS actually issued refunds pursuant to the 2017 IRS Form 1045, she hadn't received any subsequent communications about it.⁴⁴³

Sun Ha testified that she understood that Kim was the 100% owner of TLC and Eachpole in 2017.⁴⁴⁴ Asked why the inventory figure reflected in the combined balance sheet for TLC and Eachpole found in the April 30, 2018, independent auditor's report prepared by Deloitte ($8,581,288) differed from the inventory figures shown on the 2017 income tax returns for TLC ($5,048,368) and Eachpole ($-0-) prepared in September 2018,⁴⁴⁵ Sun Ha said she did not know.⁴⁴⁶ She conceded that if a company undervalued its inventory, it would impact the cost of goods sold on their profit and loss statement, resulting in an understatement of income in the same amount.⁴⁴⁷ She testified further that she did not ask for or receive a complete 2017 general ledger for either TLC or Eachpole in preparing their 2017 income tax returns.⁴⁴⁸ She stated that she did not know why Deloitte had discounted the value of the inventory held by TLC and Eachpole in preparing its April 30, 2018, independent auditor's report.⁴⁴⁹ She acknowledged that in preparing the 2017 income tax returns she relied on inventory values provided by TLC and Eachpole without further analysis, and had not been provided with inventory valuation figures contained in the April 30, 2018, independent auditor's report prepared by Deloitte.⁴⁵⁰ Sun Ha was asked a series of questions related to the 2018 income tax returns for TLC and Eachpole, but stated that because she did not prepare them, she did not know anything about the specific financial information they contained.⁴⁵¹

Sun Ha testified that her firm had prepared individual income tax returns for Chris in years prior to 2017.⁴⁵² She stated that as far as she could remember, Chris was not involved with TLC or Eachpole.⁴⁵³ She acknowledged that in preparing the 2017 income tax returns for TLC and Eachpole she was informed that their business address had been changed to Nevada, but stated that she was not told why the business operations had moved to Nevada.⁴⁵⁴ She testified further that she was not familiar with Beauty or Andrew.⁴⁵⁵ Asked to reconcile various differences between dollar figures reflected in financial statements provided by TLC and related entries on TLC's 2017 income tax return, Sun Ha provided rational explanations for those differences.⁴⁵⁶ She stated that she was familiar with Mr. Joo only because they once had offices in the same building, indicating that she “[knew] his name, but I've never seen him before.”⁴⁵⁷

4. Jeong Mee Moon, CPA 458

Ms. Moon was deposed in this adversary proceeding on April 22, 2022.⁴⁵⁹ She testified that she had not spoken with anyone other than her attorney about her deposition, and had not reviewed any documents in preparation for it.⁴⁶⁰ She stated that she obtained her CPA license in 2013, that the official name of her professional business was Jeong Mee Moon, CPA, and that her professional offices were located in La Mirada, California.⁴⁶¹ She said that her CPA business had been in existence for 8 years, providing income and sales tax preparation services, payroll, and general accounting services.⁴⁶² She explained that her CPA business had one employee, an enrolled agent named Chloe.⁴⁶³

Ms. Moon testified that pursuant to subpoena she had appeared for a deposition in the TLC Bankruptcy in March 2020,  ⁴⁶⁴ had produced related documents, and was questioned about the documents she had produced.⁴⁶⁵ She stated that she had never provided accounting services for TLC, Eachpole, LKimmy, Kim, Hyunjune, Chris, or Andrew.⁴⁶⁶ She stated that she was not familiar with Beauty, Synguru Corp., or Synguru Inc.⁴⁶⁷ She reiterated that she had not spoken to anyone other than her attorney about this adversary proceeding between her prior testimony and her deposition in this adversary proceeding.⁴⁶⁸

Ms. Moon acknowledged that she had at some point prepared personal income tax returns for Kim and Misook, as well as an IRS Form 1045, but was uncertain whether the relevant tax year was 2018 or 2019.⁴⁶⁹ She stated that she did not have any 2018 or 2019 general ledgers for either TLC or Eachpole.⁴⁷⁰ She acknowledged that she had originally been contacted by Andrew to prepare income tax returns for TLC at some point, but was unsure whether the returns she was to prepare were for the 2018 or 2019 tax year.⁴⁷¹ She explained that her understanding was that Andrew was simply a TLC employee. She acknowledged that she also met with Kim in connection with the accounting work she performed.⁴⁷² She stated that the accounting services she performed for TLC included preparation of income tax returns and a sales tax report, but not any payroll services.⁴⁷³ She explained that her employee, Chloe, did most of the work related to the sales tax report.⁴⁷⁴

Asked if she had prepared Kim's 2018 personal income tax returns, Ms. Moon responded in the affirmative.⁴⁷⁵ Ms. Moon stated that in preparing Kim's 2018 personal income tax returns, Kim didn't advise her that he was closing down TLC and Eachpole, but Kim did tell her that they were moving their business operations to Las Vegas.⁴⁷⁶ She stated that Kim asked her to prepare tax returns and perform payroll services for LKimmy, but she declined.⁴⁷⁷ She confirmed that in the course of preparing Kim's 2018 personal income tax returns she communicated via email with office personnel from TLC and Eachpole.⁴⁷⁸ She confirmed that she was also asked to order checkbooks, but stated that when she was asked to order the checkbooks, TLC was not in the process of closing down.⁴⁷⁹ She stated that she was asked to make corrections in TLC's QuickBooks program regarding a rental expense and to reissue her invoice for accounting services in a different form.⁴⁸⁰ She stated that communications related to those matters came from Yoona and conceded that the related email indicated that Yoona was working with LKimmy.⁴⁸¹ She stated that it was her understanding that Kim was Yoona's boss.⁴⁸²

Asked whether she knew of any relationship between Kim and Hyunjune, Ms. Moon stated that she “never saw” Hyunjune.⁴⁸³ She acknowledged that at Yoona's request, she had prepared a paystub showing a payment from Eachpole to Kim to assist in Kim's effort to find a place to rent.⁴⁸⁴ She testified that she did not know if Eachpole actually paid money to Kim in the amount of the paystub.⁴⁸⁵ She acknowledged that her firm had also performed payroll services related to a TLC employee, noting that TLC and Eachpole were located in the same place at the time.⁴⁸⁶ Ms. Moon testified that the QuickBooks program maintained by TLC and Eachpole was operated by Yoona, and subsequently by an employee named Alice Jun.⁴⁸⁷

Ms. Moon was asked about an October 2019 email exchange with Ms. Jun, with Ms. Jun utilizing an LKimmy email address.⁴⁸⁸ Ms. Moon testified that the email exchange was about the TLC bankruptcy, with Ms. Jun requesting tax information and backup documents needed in connection with the TLC bankruptcy filing “because of that tax file [TLC] and LKimmy relationship between these two entities.”⁴⁸⁹ Ms. Moon stated that she did not recall how she first learned about the TLC Bankruptcy, but did recall that when she declined to prepare 2019 corporate tax returns for TLC she and Chloe had to suffer through about 10 minutes of being cursed at, and that her final invoice was not paid.⁴⁹⁰

Asked if she was involved with any discussions with bankruptcy attorneys for TLC or Eachpole, Ms. Moon said that she was not.⁴⁹¹ Shown a December 6, 2019, email to Ms. Jun at an LKimmy email address that contained a table of transactions under the heading “Wire To Import & Export,” Ms. Moon stated that the table “organized all the money transmissions that was prepared by Chloe.”⁴⁹² She stated that she did not think her firm had been doing any work for TLC in 2019 because she “didn't get paid at all,” and was unsure why Chloe was communicating with an LKimmy representative.⁴⁹³

Ms. Moon reaffirmed that she had prepared one personal income tax return for Kim.⁴⁹⁴ Asked what materials she needed from Kim to prepare that return, she responded, “personal supporting materials,” and W-2 forms she obtained from TLC and Eachpole.⁴⁹⁵

Ms. Moon confirmed that she prepared the 2018 federal income tax return for Eachpole.⁴⁹⁶ She agreed that Eachpole's total assets at the end of the 2018 tax year were shown at zero dollars on “Schedule L - Balance Sheets per Books” appended to that return.⁴⁹⁷ Ms. Moon explained that all information on that schedule to Eachpole's 2018 federal income tax return regarding the value of trademarks and internet marketplace identifiers was reported as it had been provided to her by Kim.⁴⁹⁸

Ms. Moon confirmed that she had also prepared the 2018 federal income tax return for TLC.⁴⁹⁹ She verified that “Schedule L - Balance Sheets per Books” appended to that return did not show any loans to shareholders.⁵⁰⁰ She testified that the information regarding shareholder loans had been provided to her by Kim, and that she hadn't taken any steps to verify it.⁵⁰¹ She stated that she did have some work-related meetings with Kim, the last being around June 2019.⁵⁰² She said that she did not have any discussions with TLC representatives about audit fees, and was unaware of a $1 million tax lien recorded against Kim in Riverside County, California.⁵⁰³

Asked if she was aware of any transactions between TLC and LKimmy, Ms. Moon stated that she did not know of any.⁵⁰⁴ With respect to the inventory values reflected on TLC's 2018 federal income tax return, Ms. Moon said that those values were provided to her by Kim, conceding that she had not taken any steps to reconcile or verify those inventory values.⁵⁰⁵ She observed that Kim had “many times” changed the inventory numbers provided for use in preparing the 2018 income tax returns for both TLC and Eachpole without explanation.⁵⁰⁶ Asked if it appeared that approximately $1.7 million of inventory disappeared during the 2018 year, Ms. Moon responded in the affirmative, noting that she didn't do the related inventory survey; that Kim had provided her the inventory value figures and assured her that he had a paper trail to support the inventory value figures; and that she hadn't independently reviewed that paper trail because Kim “said I should believe in him.”⁵⁰⁷ Ms. Moon stated that Kim never told her what happened to that inventory, and did not tell her that it had been sold to LKimmy.⁵⁰⁸

Ms. Moon testified that TLC's 2018 income tax return did not show the existence of any trademarks.⁵⁰⁹ She testified further that she was not aware of any bank accounts Kim maintained outside of the United States.⁵¹⁰

Asked if she had ever considered or evaluated Kim's stock basis in TLC or Eachpole, Ms. Moon stated that she understood Kim owned all of the stock in both entities.⁵¹¹ Ms. Moon said that in her last business meeting with Kim, Kim told her that he had liquidated TLC and Eachpole but didn't explain how the companies had been liquidated.⁵¹²

Asked whether she was aware of any relationship between Kim and LKimmy, Ms. Moon testified that “LKimmy is the new company established in Las Vegas by [Kim].”⁵¹³ She stated that she believed that Kim owned LKimmy, because “[w]ell, he mentioned that to me.”⁵¹⁴ She reiterated that she did not prepare 2019 or 2020 income tax returns for TLC or Eachpole.⁵¹⁵

Asked whether she had created balance sheets and profit and loss statements for TLC and Eachpole covering the time frame from January 1, 2019 through September 30, 2019, Ms. Moon answered in the affirmative.⁵¹⁶ She stated that she had utilized the QuickBooks accounting data maintained by TLC and Eachpole in creating those documents, but had not done anything to verify the accuracy of that data.⁵¹⁷ She conceded that the TLC balance sheet she had created showed no inventory as of September 30, 2019.⁵¹⁸ Asked if she had the impression that those documents had to do with a bankruptcy filing, Ms. Moon stated “I did not know at all.”⁵¹⁹

Ms. Moon testified that she was unaware that Kim had at one time considered a merger and acquisition transaction, and had only overheard that Kim actually closed down TLC and Eachpole.⁵²⁰ She testified that she did not know whether the closing of TLC and Eachpole had anything to do with a $98,000 debt owed to Duff & Phelps, the $2 million BofA Loan, or a $1 million judgment entered in favor of Linco in the Patent Lawsuit.⁵²¹

Ms. Moon testified that in preparing 2018 tax returns, she had direct access to the financial records of TLC and Eachpole through their QuickBooks accounting software.⁵²² She stated that Kim had provided her with online access to related bank statements, but noted that it was “[v]ery likely I didn't get it because there was not, you know, time to verify the bank records.”⁵²³ She stated that she did not recall ever having copies of TLC bank statements in her files.⁵²⁴

Ms. Moon stated that she was did not know whether TLC or Eachpole paid taxes to the IRS on behalf of Kim.⁵²⁵ She testified that she never reviewed the bank records of TLC or Eachpole in preparing their tax returns, as “everything was done through QuickBooks.”⁵²⁶ She stated that when Kim asked her to prepare tax returns, she was afforded a “very, very short” turnaround time, because he wanted the returns completed prior to his birthday, and because he was moving his personal residence to Las Vegas.⁵²⁷ She said that she did not review any credit card records for TLC or Eachpole.  ⁵²⁸ She acknowledged that TLC had “many” bank accounts, and as she was preparing the 2018 tax return “was wondering why that's so complex and so many accounts.”⁵²⁹ She said that she did not ask Kim why he had so many accounts.⁵³⁰ Asked about her last business dealings with Kim, Ms. Moon stated that she found Kim to be “very impolite” to the point where she decided not to do further work for him after completion of his 2018 tax returns.⁵³¹ She indicated that in preparing the 2018 tax returns “it was very strange to me to see [Kim] changing the number of that inventories and so on, which was very strange to me, I thought. That was very strange to me.”⁵³² Asked if it appeared Kim was not truthful with her, Ms. Moon testified that in retrospect “apparently he was not really honest with me,”⁵³³ later stating that she “never thought about [Kim] in a dishonest, per se, but his personality and taciturn was very difficult and hard to deal with.”⁵³⁴

Ms. Moon confirmed that she had prepared personal income tax returns for Kim in 2018.⁵³⁵ She acknowledged that Kim received a refund of close to $1 million, and stated that was “going to be his birthday gift.”⁵³⁶ Ms. Moon testified that Kim told her he had received the related refund, but was unsure if the refund was paid to Kim by check.⁵³⁷ Asked why Kim got such a large refund, Ms. Moon stated that Kim told her he had “overpaid tax many times.”⁵³⁸ Ms. Moon acknowledged that she had asked Kim to provide IRS Form 1045 in preparing his 2017 tax returns.⁵³⁹ She stated that she did not prepare the IRS Form 1045, the form was provided to her by Kim.⁵⁴⁰ She acknowledged that the purpose of the IRS Form 1045 was to get a refund for taxes that were overpaid in 2015 and 2016.⁵⁴¹ She conceded that it was the first time she had carried a loss forward and sought a refund for a client for overpaid taxes in prior years.⁵⁴² Ms. Moon stated that the IRS Form 1045 was in fact filed with the IRS, and that Kim advised her that he received the requested refund from the IRS.⁵⁴³

Ms. Moon stated that she hadn't spoken with Kim after she was deposed in 2020.⁵⁴⁴ She observed that Kim still owed her about $3,000 for her professional services.⁵⁴⁵

Ms. Moon was asked to review the contents of her 2018 personal tax file for Kim.⁵⁴⁶ She explained that that while it appeared that the second page of Kim's 2018 personal tax return was missing, it was due to the form having been modified.⁵⁴⁷ She indicated she would search to see whether an IRS Form 1045 had been prepared and filed in connection with Kim's 2018 personal tax return.⁵⁴⁸ She indicated that Kim was due a refund in connection with his personal 2018 tax return.⁵⁴⁹ Ms. Moon testified that if a company pays the personal tax liabilities of a shareholder, the result is income to the shareholder, both at the federal level and in California.⁵⁵⁰ She stated that in 2018, Kim received a $4,421 tax refund from the State of California, a refund from the IRS, and a separate refund for prior tax years pursuant to IRS Form 1045.⁵⁵¹

Asked if she had prepared personal tax returns for Kim in 2019, Ms. Moon answered in the negative.⁵⁵² She testified that she did not know anything about licensing agreements between LKimmy and Eachpole for the use of intellectual property rights.⁵⁵³ She testified further that Kim had never asked her to help him determine a value for a licensing fee.⁵⁵⁴

Ms. Moon was asked about QuickBooks reports marked up in red pencil.⁵⁵⁵ She stated that Kim had made the markups for use in preparing the 2018 tax returns for TLC and Eachpole, and that when Kim made changes to the QuickBooks reports, she simply relied on the revised numbers Kim provided.⁵⁵⁶ Asked about a payroll journal report for TLC dated January 18, 2019, Ms. Moon testified that the report was provided to her by TLC in connection with payroll services her firm provided.⁵⁵⁷ Asked if she knew Kim was planning on closing down TLC when the report was prepared, Ms. Moon said that “at this particular point, I don't think so, but later that he was talking about moving to Las Vegas and so on; so around that time they began to talk about that.”⁵⁵⁸

Asked to review her firm's invoices issued in March 2019, Ms. Moon stated that she had been asked to prepare a $5,000 invoice for LKimmy for an “Accounting Consultant Fee.”⁵⁵⁹ She testified further that in actuality, she never performed any accounting services for LKimmy, and was never paid pursuant to the invoice.⁵⁶⁰ After testifying about the payments she had received for professional services rendered for TLC and Eachpole, Ms. Moon was asked if she believed there was anything she felt was material that hadn't been covered through her testimony.⁵⁶¹ Ms. Moon said she did not.⁵⁶²

C. Chronological Summary

1. April 2007 – March 2010: TLC and Julius Are Created by the Kim Family

TLC was formed in California on April 5, 2007.⁵⁶³ An election to have TLC treated as a Subchapter S corporation for federal tax purposes was also filed on April 5, 2007.⁵⁶⁴ Misook was identified as TLC's initial registered agent.⁵⁶⁵

Julius ⁵⁶⁶ was formed in California on March 12, 2010.⁵⁶⁷ An election to have Julius treated as a Subchapter S corporation for federal tax purposes was also filed on March 12, 2010.⁵⁶⁸

2. April 2010 – May 2015: TLC and Julius Conduct Business Operations in Direct Competition with Linco

After TLC and Julius were created by the Kim Family, they engaged in the business of selling lighting and photographic equipment to the public via online sale platforms, including without limitation eBay and Amazon. The business operations of TLC and Julius were conducted in direct competition with Linco. The business competition between TLC and Linco was stiff and would ultimately turn contentious.

All inventory used in the business operations of TLC and Julius was purchased and imported from China by TLC for subsequent sale on the internet sales platforms Ebay and Amazon. Kim controlled TLC's inventory orders from China.⁵⁶⁹ If an item of inventory purchased by TLC was imported from China and subsequently sold on the Ebay online platform, the related sale was credited to TLC. If an item of inventory purchased by TLC was imported from China and subsequently sold on the Amazon online platform, the related sale was credited to Julius. The tax returns for 2015 reflect that TLC and Julius both made a profit that year.⁵⁷⁰

3. June 2015 – August 2015: The Patent Lawsuit Between TLC and Linco Commences

In June 2015, Linco wrote TLC, asserting that TLC was infringing on a patent owned by Linco. TLC denied Linco's claims of patent infringement. After Linco advised Ebay of its patent infringement claims, Ebay removed of a number of TLC's products from the Ebay online platform.

On August 8, 2015, TLC filed the Patent Lawsuit.⁵⁷¹ Through the Patent Lawsuit, TLC sought a declaratory judgment that TLC had not infringed on Linco's patent and that Linco's patent was invalid. TLC also sought an injunction prohibiting Linco from asserting that TLC had infringed upon Linco's patent.⁵⁷² The only parties to the Patent Lawsuit were TLC and Linco. Julius was never named as a party in the Patent Lawsuit.

Linco subsequently filed a counterclaim against TLC in the Patent Lawsuit. The Patent Lawsuit between TLC and Linco would remain pending for nearly four years, until it was tried to a jury on May 21, 2019.⁵⁷³

4. September 2015 – December 2017: While the Patent Lawsuit is Pending, Panchal is Hired; Deloitte is Retained and Prepares 2016 Tax Returns for TLC and Julius; Non-Party Synguru Inc. is Formed in California; Defendants Synguru Corp. and Beauty are Formed in Nevada; TLC Begins Making Tax Prepayments; TLC Takes Out a $3 Million Secured Loan from Bank of America; TLC and Julius Change Their Corporate Names; and Inventory Appraisals are Conducted

While the Patent Lawsuit was pending, Kim devised a plan to sell TLC and Julius. Kim had initiated the process of selling TLC and Julius even before Panchal was retained in May 2016.⁵⁷⁴ According to Panchal's credible testimony, Kim had related a story to Panchal that a competitor had sold his company for $185 million and was living on an island.⁵⁷⁵ Kim wanted to live on an island, too.⁵⁷⁶

Panchal testified credibly that when he was hired in May 2016, about nine months after the Patent Lawsuit was filed, his job was to prepare “good accounting records” in connection with an anticipated sale of TLC and Julius.⁵⁷⁷ Consistent with that goal, Deloitte was retained to prepare 2016 state and federal income tax returns for TLC and Julius.⁵⁷⁸ In a 2016 promotional brochure prepared in anticipation of a corporate sale, Panchal was identified as the Chief Financial Officer of eTop Lighting Corporation - - a company that didn't yet exist.⁵⁷⁹

For reasons not entirely clear from the record given the absence of testimony from Kim and Misook, and while the Patent Lawsuit was pending, non-party entity Synguru Inc. was formed in California at some point prior to November 3, 2016.⁵⁸⁰ On November 3, 2016, a Statement of Information form regarding Synguru Inc. was filed with the California Secretary of State.⁵⁸¹ The Synguru Inc. Information Statement identified Kim as Chief Executive Officer and agent for service of process, and Misook as the sole director.⁵⁸²

Beginning in January 2017, and while the Patent Lawsuit was pending, TLC began making a series of sizeable payments to the Internal Revenue Service ⁵⁸³ and to the California Franchise Tax Board ⁵⁸⁴ on approximately a monthly basis.⁵⁸⁵ Those payments to the Taxing Authorities would eventually total $1,731,325.96, with $1,160,325.96 of that total being made during the two years prior to the bankruptcy filings of TLC and Eachpole.⁵⁸⁶

On September 8, 2017, while the Patent Lawsuit was pending, defendant Synguru Corp. was formed in Nevada.⁵⁸⁷ Synguru Corp. is the named defendant in this adversary proceeding.⁵⁸⁸ Records filed by Synguru Corp. with the Nevada Secretary of State on August 7, 2019, identify Kim as the corporate President and sole director, and Misook as the corporate Secretary and Treasurer.⁵⁸⁹ Without testimony from either Kim or Misook, the reasons why two separate entities with the “Synguru” moniker were formed in two separate states about 10 months apart while the Patent Lawsuit was pending are enigmatic.

On September 13, 2017, while the Patent Lawsuit was pending, Troy Varenchick, a tax partner with Deloitte, sent completed 2016 tax returns for TLC and Julius to Panchal in his capacity as TLC's Chief Financial Officer.⁵⁹⁰ Five days later, on September 18, 2017, defendant Beauty was formed in Nevada as a non-profit corporation.⁵⁹¹ The Beauty List identified Kim as Beauty's President, with Misook shown as Beauty's Secretary, Treasurer, and sole director.  ⁵⁹² The trial record indicates that Beauty never had any bank accounts, and never operated.⁵⁹³ Without any testimony from Kim or Misook, the reasons why Beauty was created at all, much less while the Patent Lawsuit was pending, are inscrutable.

On September 20, 2017, while the Patent Lawsuit was pending, TLC and Julius executed papers memorializing the BofA Loan.⁵⁹⁴ Under the BofA Loan, TLC and Julius borrowed the principal sum of $3 million dollars and provided BofA with a blanket security interest in all of the assets of TLC and Julius as security for repayment.⁵⁹⁵ The documents memorializing the BofA Loan were signed by Kim as TLC's President/Chief Executive Officer and by Misook as TLC's Secretary.⁵⁹⁶

About six weeks later, on November 1, 2017, while the Patent Lawsuit was pending, the TLC/eTop Name Change was filed with the California Secretary of State, changing TLC's corporate name to eTop Lighting Corporation.⁵⁹⁷ The TLC/eTop Name Change had been signed by Kim as the company's President and Secretary.⁵⁹⁸ On that same day, November 1, 2017, the Julius/Eachpole Name Change was filed with the California Secretary of State, changing Julius’ corporate name to Eachpole.⁵⁹⁹ The Julius/Eachpole Name Change was signed by Kim as the company's President and Secretary.⁶⁰⁰

To summarize, while the Patent Lawsuit was pending,⁶⁰¹ TLC was making a series of large payments to taxing authorities,⁶⁰² and just 42 days after Kim and Misook had signed documents memorializing a $3 million secured loan to TLC and Julius under the BofA Loan,⁶⁰³ Kim signed and caused to be filed with the California Secretary of State documents changing TLC's name to eTop Lighting Corporation,⁶⁰⁴ and Julius's name to Eachpole.⁶⁰⁵ Absent from the record is any evidence that TLC's name change to eTop Lighting Corporation was ever disclosed in the Patent Lawsuit. That is true even though TLC filed the Patent Lawsuit,⁶⁰⁶ was the named plaintiff in the Patent Lawsuit,⁶⁰⁷ and despite the fact that the Patent Lawsuit been pending for just over two years when the TLC/eTop Name Change was filed on November 1, 2017.⁶⁰⁸

Meanwhile, on December 5, 2017, Ellen Wu, an Audit and Assurance Assistant at Deloitte, issued a memorandum providing guidance for “performing the Top Lighting Corp & Julius Inc. inventory observations.”⁶⁰⁹ The inventory observations by Deloitte representatives were scheduled for December 31, 2017, at two warehouses located in Rancho Cucamonga, California, with access to the warehouse locations provided by a representative from TLC and Julius named Nick Barragan, identified in the notes following Deloitte's inventory observations as “Financial Assets Manager.”  ⁶¹⁰ Although Ms. Wu's memorandum was dated December 5, 2017, the following note was subsequently added:

Note: Keisuke Ebihara and Monique Ortiz visited the second warehouse [at 9805 6th Street, Suite 101, Rancho Cucamonga, California 91730] on December 21, 2017, and toured the facility. Based on our interview with CFO and warehouse manager corroborated by our observation, the items stored at the second warehouse are either (1) returned goods from customers which the Company values at zero, or (2) items that are not in sellable conditions (damaged / packages are opened etc.). The Company plans to close the facility and sub-lease to a third party during 2018, and therefore, we concluded that we do not need to perform an observation for the second warehouse location. We also verified that no items stored in the second warehouses [sic] were recorded in the Company's book or perpetual inventory through our reconciliation of count sheets to compilation. Also, during PY audit, we verified that these items were stored in the back of the Company's main warehouse, but they wrote them off from the book.⁶¹¹ The notes following Ms. Wu's December 5, 2017, memorandum reflect a total inventory valuation following Deloitte's December 31, 2017, inventory observation of $7,735,946.26.⁶¹²

4. January 2018 – September 2018: The Patent Lawsuit Continues; a New Nevada Corporation Named eTop Lighting is Formed; Business Broker Duff & Phelps is Retained to Assist in the Sale of eTop Lighting Corporation (Formerly TLC) and Eachpole (Formerly Julius); Deloitte Issues Audited 2017 Financial Statements; Panchal Signs a Borrowing Base Certificate for the BofA Loan; and a Potential Sale of eTop Lighting Corporation (Formerly TLC) and Eachpole (Formerly Julius) Fails to Close

As the calendar page flipped to the year 2018, and while the Patent Lawsuit remained pending, Kim continued pursuing his plan to sell eTop Lighting Corporation (formerly TLC) and Eachpole (formerly Julius). Although the TLC/eTop Name Change had just been signed by Kim as the company's President and Secretary and filed with the California Secretary of State on November 1, 2017,⁶¹³ just over two months later, on January 5, 2018, Articles of Incorporation for a new corporation with the same name - - eTop Lighting Corporation - - were filed with the Nevada Secretary of State.⁶¹⁴ The Articles of Incorporation filed with the Nevada Secretary of State identify Kim as the registered agent, a director, and the incorporator, and are signed by Kim as the company's incorporator.⁶¹⁵ Panchal was also identified as a director of the newly formed Nevada iteration of eTop Lighting Corporation.⁶¹⁶ Without testimony from Kim, the reasons why a new corporation under the name “eTop Lighting Corporation” was formed in Nevada just 2 months after TLC's name had been changed to “eTop Lighting Corporation” in California, all while the Patent Lawsuit was pending, are sphinxlike.

On January 15, 2018, Raphael Newman, a Managing Director at business broker Duff & Phelps, sent a draft engagement letter to Panchal in his capacity as “Chief Financial Officer” of eTop Lighting Corporation (formerly TLC) at TLC's office in Rancho Cucamonga, California.⁶¹⁷ That letter provided in part:

This letter confirms that we, Duff & Phelps, LLC, (“D&P”) have been retained by you, Top Lighting Corporation and Julius, Inc. (dba eTop Lighting Corporation) (collectively the “Company”) to provide the services (the “Services”) set out below in connection with your proposed sale of the Company, collectively this arrangement is the “Engagement.”

It is understood that the Services to be provided will be used to assist the Company in performing sell-side financial due diligence. The results of our Services should not be used for any other purpose.

[․]

We understand that the scope of our Engagement will be to assist the Company in their due diligence of the business. The Services we will perform in this Engagement are outlined in Attachment A.

Our work will not result in an opinion of the Fair Market Value of the Company or any recommendation as to the merits of the Transaction. [․]618

During January 2018, Hilco conducted an appraisal of TLC's inventory.⁶¹⁹ On February 13, 2018, Hilco issued its written inventory appraisal report, indicating that Panchal had been Hilco's primary contact.⁶²⁰ The Hilco Inventory Report identified Linco and The Exit Light Co., Inc., as TLC's competitors.⁶²¹ The appraisal approach utilized in preparing the Hilco Inventory Report was “Net Orderly Liquidation Value,” the inventory valuation was calculated as of November 30, 2017, and “[a]t the request of the Lender, inventory consigned to Amazon was not included in the appraisal.”⁶²² The Hilco Inventory Report stated that “Hilco visited the Company's Rancho Cucamonga, California, facility on December 12, 2017, and found no significant changes since its last visit in December 2016.”⁶²³ Hilco noted that at “the request of auditors, [TLC] completed a write-off of $2.6 million in slow moving inventory in 2016.”⁶²⁴ The Hilco Inventory Report revealed that “the Company [TLC] does not maintain slow-moving reserves, and Hilco included slow-moving inventory as eligible at the request of the Lender[,]”⁶²⁵ that there “were no material variances between Hilco's calculations and the borrowing base[,]”⁶²⁶ and concluded that “[e]ligible inventory as of November 30, 2017, totaled $8.1 million, representing an increase of $200 thousand, or 2.5%, compared to $7.9 million as of December 31, 2016.”⁶²⁷

On April 30, 2018, Deloitte issued Combined Financial Statements for eTop Lighting Corporation (formerly TLC) and Eachpole, Inc. (formerly Julius) as of and for the Years Ended December 31, 2017 and 2016, and a related Independent Auditor's Report.⁶²⁸ The Independent Auditor's Report portion of the Deloitte Audited Financials reads in part:

To the Board of Directors of E-Top Lighting Corporation and Eachpole, Inc. Rancho Cucamonga, California

We have audited the accompanying combined financial statements of E-Top Lighting Corporation and Eachpole, Inc. (collectively the “Companies”), both of which are under common ownership and common management, which comprise the combined balance sheets as of December 31, 2017 and 2016, and the related combined statements of income, shareholders equity, and cash flows for the years then ended, and the related notes to the combined financial statements.

[․]

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Companies as of December 31, 2017 and 2016, and the result of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.629

Among many other things, the Deloitte Audited Financials contained the following information:⁶³⁰

Year End Year End Item 12/31/2016 12/31/2017 Inventories $9,476,766 $8,581,288 Total Assets $9,995,348 $9,974,955 Total Liabilities $6,198,779 $7,024,812 Total Shareholders’ Equity $3,796,569 $2,950,143 Net Sales $30,360,846 $38,683,529 Cost of Sales $22,935,031 $33,023,933 Gross Profit $7,425,815 $5,659,596 Income from Operations $2,499,386 $173,225 Income Before Income Taxes $2,458,489 $60,992 Income Taxes $800 $800 Net Income $2,457,689 $60,192

With respect to the organization, business, and control of eTop Lighting Corporation (formerly TLC) and Eachpole (formerly Julius), the notes to the Deloitte Audited Financials explained:⁶³¹

I. ORGANIZATION AND BUSINESS

Effective November 1, 2017, the Top Lighting Corporation and Julius, Inc. filed a certificate of amendment to its [sic] articles of incorporation with the State of California and changed their names from “Top Lighting Corporation” to “E-Top Lighting Corporation” and from “Julius, Inc.” to Eachpole, Inc.,” respectively.

E-Top Lighting Corporation was established in California on April 5, 2007. E-Top Lighting Corporation operate [sic] as an e-commerce retailer (“marketplace”) of photo and video equipment, exit signs and emergency lighting, and trend products. The majority of the lighting products are sourced directly from manufacturers in China. The products are designed and developed by E-Top Lighting Corporation, and sold directly to consumers via third-party online marketplaces.

Eachpole, Inc. was established and registered as a California corporation on February 24, 2010, with the purpose of distributing E-Top Lighting Corporation's products through an online marketplace. Eachpole, Inc. purchases all of its products from E-Top Lighting Corporation, and distributes to consumers through the marketplace.

E-Top Lighting Corporation and Eachpole, Inc. (the “Companies”) have common ownership with the same controlling interests in each, and therefore as a controlled group of independent companies, their financial statements are presented on a combined basis.

The notes to the Deloitte Audited Financials issued on April 30, 2018, do not mention the creation of the Nevada corporation named eTop Lighting Corporation three months earlier on January 5, 2018.

Under the heading “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” the notes to the Deloitte Audited Financials explained that the inventory figures “are stated at the lower of cost (moving-average cost method) or net realizable value, and consists of finished goods. The finished goods are purchased from third party vendors.”⁶³² No reference was made to defective or obsolete inventory or how defective or obsolete inventory impacted inventory values contained in the Deloitte Audited Financials.⁶³³ As to the issue of litigation, the notes to the Deloitte Audited Financials stated that the “Companies, from time to time, are involved in certain matters of litigation arising in the ordinary course of business. In the opinion of management, the outcome of such litigation will not have a material impact on the Companies’ combined financial statements.”⁶³⁴ There is no reference to the Patent Lawsuit that had been pending for nearly three years in the Deloitte Audited Financials.⁶³⁵ As to ownership and control of the companies, the notes to the Deloitte Audited Financials state that the “Companies have essentially the same owners, with identical controlling interests in each, and the structure of the owners’ interests are the same for both companies.”⁶³⁶

On July 13, 2018, Panchal executed a Borrowing Base Certificate in connection with the BofA Loan.⁶³⁷ The Borrowing Base Certificate showed the company name as “Top Lighting Corporation”⁶³⁸ despite the fact that TLC had changed its name to eTop Lighting Corporation through filings with the California Secretary of State on November 1, 2017,⁶³⁹ and that Kim had created a Nevada corporation named “eTop Lighting Corporation” on January 5, 2018.⁶⁴⁰ The signature line on the Borrowing Base Certificate identifies “Bhasker B Panchal (CFO)” as having provided the “Authorized Signature” below this legend:⁶⁴¹

The company named in the box above labeled “Company Name” (The “Company”) by its duly authorized officer signing below, hereby certifies that (a) the information set forth in this certificate and in the accompanying supporting documentation is true, complete, and correct as of the date(s) indicated herein and (b) the Company is in compliance with all terms and provisions contained in (1) the loan or other agreement between the Company and Bank of America pursuant to which this certificate is delivered (the “Agreement”) and (2) any and all documents, instruments and agreements evidencing, governing, or securing the Agreement or otherwise executed in connection therewith.

The July 13, 2018 Borrowing Base Certificate signed by Panchal in connection with the BofA Loan showed gross inventory of a value of $8,326,462.⁶⁴² Of that amount, $46,604 was shown as “Ineligible Inventory” defined as “[c]onsigned inventory, in-transit, offsite, slow-moving, obsolete, unsalable, damaged, discontinued, display items, work-in-process, parts, samples, packing and shipping materials, etc.”⁶⁴³ Eligible inventory shown on the Borrowing Base Certificate was $8,277,849.00.⁶⁴⁴

Also on July 13, 2018, Kim's efforts to sell eTop Lighting Corporation (formerly TLC) and Eachpole (formerly Julius) gained a bit of traction. On that date, Vitec sent a letter to Duff & Phelps referencing a “Potential Acquisition of E-top Corporation.”⁶⁴⁵ The Vitec Letter stated among many other things:⁶⁴⁶

This indication of interest sets forth the terms under which [Vitec] would be prepared to proceed with a proposed acquisition of the entire common stock of E-Top from the various shareholders of the Company (the “Sellers”), subject to the agreement and signing by the parties of a detailed legally binding stock purchase agreement (“SPA”)(the “Transaction”).

[․]

1. Purchase Price. Subject to due diligence, the proposed purchase price payable by [Vitec] is a range between $13 million and $17 million based on a 6-8x multiple of average adjusted EBITDA for FY 16 – 18 EBITDA of $2.2m. The purchase price assumes the transaction will be on a cash and debt free basis.

The Vitec Letter was soon followed by a meeting between the parties. More particularly, on July 20, 2018, Duff & Phelps wrote a letter to Vitec scheduling a “Management Presentation” regarding the potential stock sale to Vitec.⁶⁴⁷ The details of the meeting were laid out in the July 20, 2018, letter as follows:⁶⁴⁸

Management Presentation:

Date & Time: Thursday, August 2, 2018 at 9:00 AM PDT

Location: Duff & Phelps Los Angeles Offices – Century City 10100 Santa Monica Blvd Floor 11, Los Angeles, CA 90067

Attire: Business casual

Management Presentation Attendees:

eTop Lighting: Il Kim, Owner and Chief Executive Officer Bhasker Panchal, Chief Financial Officer Andrew Kwon, Chief Operating Officer Chris Choi, VP of Sales (Head of Walmart Sales Team) June Kim,  649 VP of Sales (Head of Amazon Sales Team)

Duff & Phelps: Brian Little, Managing Director Jared Brenner, Vice President

The Vitec Group: Martin Green, Business Development Director Marco Pezzana, Divisional Chief Executive (Vitec Imaging Solutions) Fabrizio Grimoldi, Vice President, Sales & Marketing

In summary, the preponderance of the evidence at trial established that while the Patent Lawsuit was pending, TLC and Eachpole spent approximately $4,000,000 on sale materials, professionals, lawyers, investment bankers, and merger and acquisition consultants, culminating in the August 2, 2018, Management Presentation meeting with Vitec.⁶⁵⁰ The preponderance of the evidence at trial also established that those efforts did not generate a sale transaction to Vitec or any other prospective buyer. With no sale transaction on the horizon, with the Patent Lawsuit entering its final phases, and to avoid the cost attendant to tax return preparation by Deloitte, Panchal asked Sun Ha ⁶⁵¹ to prepare the 2017 income tax returns for eTop Lighting Corporation (formerly TLC)⁶⁵² and Eachpole (formerly Julius)⁶⁵³ shortly before the September 15, 2018 filing deadline.⁶⁵⁴ After those 2017 income tax returns were prepared and filed, there was a distinct pivot in Kim's approach to the future of those companies. Attempts to sell the companies ended, and an effort to transition their business operations from California to Las Vegas, Nevada, ensued.

5. October 2018 – August 2019: LKimmy is Formed in Nevada; eTop Lighting Corporation (Formerly TLC) and Eachpole (Formerly Julius) Grant LKimmy Exclusive License Agreements for the Use of Their Trademarks and Internet Market IDs; TLC Transfers its Inventory to LKimmy; Eachpole Leases the Donovan Way Property in Las Vegas; LKimmy Subleases the Donovan Way Property from Eachpole; Kim Files IRS Form 1045 – Application for Tentative Refund for 2015 and 2016 Tax Years Seeking a Total Refund of $1,364,944.00; LKimmy Obtains a Series of Loans from Kim and Misook Totaling $703,000.00; LKimmy Also Receives $300,249.26 from Synguru Corp. Prior to Synguru Corp.’s Dissolution; eTop Lighting Corporation Files Papers in California Changing its Name Back to TLC; and a $991,028.79 Judgment is Entered in Favor of Linco Against TLC in the Patent Lawsuit.

On October 19, 2018, Articles of Incorporation forming LKimmy were filed with the Nevada Secretary of State.⁶⁵⁵ The LKimmy Articles identified Hyunjune as LKimmy's registered agent, sole director, and incorporator.⁶⁵⁶ The street address provided for Hyunjune in the LKimmy Articles was the Vigilante Court Property.⁶⁵⁷ Hyunjune testified credibly that Kim allowed him to stay in the house situated on the Vigilante Court Property.

The LKimmy List was filed with the Nevada Secretary of State on October 19, 2018, too.⁶⁵⁸ The LKimmy List also identified Hyunjune as LKimmy's President, Secretary, Treasurer, and sole director.⁶⁵⁹ About two months before LKimmy was incorporated and applied for a business license in Nevada on October 19, 2018, Hyunjune had participated in the August 2, 2018 Management Presentation to Vitec as “VP of Sales (Head of Amazon Sales Team)” for eTop Lighting Corporation (formerly TLC).⁶⁶⁰

When LKimmy was created on October 19, 2018, Hyunjune acknowledged that he had very limited financial resources available to capitalize it.⁶⁶¹ While living in the house Kim made available to him on the Vigilante Court Property, Hyunjune contributed $1,000.00 of his own money and $9,450.00 borrowed from Kim as the initial capital for LKimmy's common stock.⁶⁶² Hyunjune testified that no one else provided any initial capital related to the organization of LKimmy.⁶⁶³ But the preponderance of the record evidence showed that LKimmy's initial trademarks and internet Market IDs, inventory, warehouse facilities, business office, personnel, and operating loans, were all obtained through arrangements with familiar sources: Kim, Misook, TLC, and Eachpole.

As a newly created company, LKimmy needed trademarks and internet Market IDs to gain access to, and effectively market its inventory through, established internet marketplace platforms. On November 10, 2018 - - only 22 days after LKimmy was incorporated in Nevada - LKimmy entered into the License Agreements with TLC ⁶⁶⁴ and Eachpole.⁶⁶⁵ The License Agreements were signed by Kim in his capacity as President of Eachpole ⁶⁶⁶ and TLC.⁶⁶⁷ Hyunjune executed the License Agreements in his capacity as President of LKimmy.⁶⁶⁸ At trial, Hyunjune acknowledged that access to the Eachpole and TLC trademarks and Market IDs under the License Agreements was quite favorable to LKimmy, and allowed LKimmy to immediately create an internet sales volume that would have otherwise taken three to five years to develop.⁶⁶⁹ The use of those market IDs allowed LKimmy to immediately generate/book sales of over $1,000,000 a month.⁶⁷⁰

As a newly created company, in order to generate business income, LKimmy needed to obtain inventory for sale to customers via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁶⁷¹ and Eachpole.⁶⁷² LKimmy did not, however, have sufficient capital to purchase significant levels of inventory from an unrelated source. So, LKimmy instead made favorable arrangements to obtain its inventory from TLC.⁶⁷³ In fact, Hyunjune credibly testified that when LKimmy was created, LKimmy did not pay for the inventory provided by TLC upon receipt.⁶⁷⁴ LKimmy instead paid TLC for the inventory only after the inventory was sold.⁶⁷⁵ A summary of the record evidence regarding the value of that inventory is summarized in the table below:

Valuation Valuation Method Reported Valuation Date Source Inventory Value Hilco Inventory Net Orderly Liquidation November 30, 2017 Report 676 Value $8,100,000.00 Lower of cost (moving-Deloitte Audited average cost method) or net December 31, 2017 Financials 677 realizable value $8,581,288.00 Bank of America Borrowing Base Gross Inventory Less July 13, 2018 Certificate 678 “Ineligible Inventory” $8,277,849.00 Average – All Sources $8,319,712.33

When LKimmy did receive invoices for its inventory, LKimmy was afforded substantial discounts, including reductions of 10% for rent and storage, 10% for defective inventory, and for a 13% service charge for a total reduction of 33.33%.⁶⁷⁹ Ultimately, after those discounts, the preponderance of the evidence established that LKimmy paid $4,536,000.00 in exchange for the inventory TLC transferred to LKimmy. When asked if she disputed the fact that LKimmy had paid $4,536,000.00 in exchange for the inventory TLC transferred to LKimmy, Linco's witness, Ms. Chen, simply replied: “No.”⁶⁸⁰ The difference between the average inventory value established by the preponderance of the evidence ($8,319,712.33) and the amount LKimmy actually paid TLC in exchange for that inventory ($4,536,000.00) is $3,783,712.33 (a 45.48% price reduction).

As a newly created company, LKimmy also needed a warehouse facility in Nevada to store the inventory it had obtained from TLC and planned to sell via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁶⁸¹ and Eachpole.⁶⁸² But LKimmy did not directly negotiate and enter into a warehouse lease with an unrelated commercial landlord in Nevada. Instead, LKimmy's inventory was initially stored in a warehouse located on the North Lamb Property leased by TLC. Meanwhile, on November 12, 2018 - - just 24 days after LKimmy was incorporated and only two days after LKimmy entered into the License Agreements with TLC ⁶⁸³ and Eachpole ⁶⁸⁴ - - Eachpole entered into the Donovan Way Lease,⁶⁸⁵ with Kim signing as Eachpole's President.⁶⁸⁶ Less than a month later, on December 6, 2018, the Donovan Way Sublease was signed by Kim in his capacity as Eachpole's President, and by Hyunjune in his capacity as LKimmy's President.⁶⁸⁷ Put simply, the warehouse space LKimmy needed to store the inventory it had obtained from TLC, and planned to sell via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁶⁸⁸ and Eachpole,⁶⁸⁹ was subleased by LKimmy from Eachpole with Kim's assistance.⁶⁹⁰

As President of the newly created LKimmy, Hyunjune also needed an office to oversee LKimmy's business operations. Prior to incorporation of LKimmy, Hyunjune's work related to the creation and organization of LKimmy had been carried out at TLC's offices in Rancho Cucamonga, California.⁶⁹¹ Even after the LKimmy Articles were filed with the Nevada Secretary of State on October 19, 2018,⁶⁹² after the Donovan Way Lease was executed by Kim as Eachpole's President on November 12, 2018,⁶⁹³ after the Donovan Way Sublease was executed by Kim as Eachpole's President and by Hyunjune as LKimmy's President on December 6 2018,⁶⁹⁴ and after Hyunjune had moved to Kim's Vigilante Court Property in Las Vegas, LKimmy still needed an office location in Nevada. That was true because the warehouse facility at the Donovan Way Property did not have an office.⁶⁹⁵ Hyunjune testified that from January 2019, through the end of August or early September 2019, the office where he conducted LKimmy's business operations was located in the North Lamb Property leased by TLC.⁶⁹⁶

As a newly created company, LKimmy also needed employees to manage the inventory it had obtained from TLC and stored at the warehouse on the Donovan Way Property under the Donovan Way Sublease with Eachpole, and to sell that inventory via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁶⁹⁷ and Eachpole.⁶⁹⁸ Asked where LKimmy's employees came from, Hyunjune testified credibly that Kim's executive assistant at TLC, TLC's human resources manager, TLC's warehouse manager, two TLC shipping clerks, and three Eachpole service representatives, all eventually became LKimmy employees.⁶⁹⁹ LKimmy also shared computers with TLC and Eachpole.⁷⁰⁰ When sending out emails, LKimmy employees decided which of two email addresses to use, one attributable to TLC or Eachpole, or the other attributable to LKimmy.⁷⁰¹

It would take some time before LKimmy personnel could sell enough of the inventory obtained from TLC and Eachpole via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁷⁰² and Eachpole ⁷⁰³ to generate income levels sufficient to sustain LKimmy's business operations. LKimmy unsuccessfully sought alternative business funding from a bank.⁷⁰⁴ LKimmy was told “[o]ur financial documents weren't healthy enough to - - to get the funds.”⁷⁰⁵

On January 2, 2019, Sun Ha prepared and filed an IRS Form 1045 – Application for Tentative Refund for Kim and Misook, seeking refunds of $638,966.00 for the 2015 tax year and $725,978.00 for the 2016 tax year, for a total refund request of $1,364,944.00.⁷⁰⁶ Three months later, on April 4, 2019, LKimmy took out a $150,000.00 loan from Misook. That was the first in a series of loans made to LKimmy by Misook and Kim over the next 6 months totaling $703,000.00,⁷⁰⁷ as summarized in the table below:

Date Borrower Lender(s) Principal Interest Term April 4, 2019 LKimmy Misook $150,000.00 5% 5 years April 26, 2019 LKimmy Misook $100,000.00 5% 3 years June 7, 2019 LKimmy Misook $ 15,000.00 5% 5 years August 7, 2019 LKimmy Kim and Misook $260,000.00 5% 6 years September 23, 2019 LKimmy Kim and Misook $178,000.00 5% 7 years Total: $703,000.00

All of the promissory notes memorializing those loans from Kim and Misook to LKimmy were signed by Hyunjune in his capacity as LKimmy's President.⁷⁰⁸ None of the promissory notes required installment payments prior to maturity.⁷⁰⁹ Hyunjune acknowledged that without the discounted pricing and delayed payment arrangements when TLC transferred its inventory to LKimmy, and the unsecured loans from Kim and Misook, it would have been very difficult for LKimmy to operate.⁷¹⁰

In addition, between February 1, 2019, and June 24, 2019, LKimmy received a total of $300,249.26 from Synguru Corp.⁷¹¹ Included in that net sum was a payment of $13,000.00 from LKimmy back to Synguru Corp. on June 26, 2019.⁷¹² Hyunjune testified that LKimmy's PayPal account wasn't functioning during that time frame. LKimmy had been provided with access to Synguru Corp.’s PayPal account and was therefore obligated to reimburse Synguru Corp.⁷¹³ In June 2019, Mr. Yu prepared the requisite papers to dissolve the corporate existence of defendant Synguru Corp.⁷¹⁴ The papers dissolving Synguru Corp. were subsequently filed with the Nevada Secretary of State on July 17, 2019.⁷¹⁵

Curiously, on August 8, 2019, eTop Lighting Corporation filed papers with the California Secretary of State changing its corporate name back to TLC.⁷¹⁶ Without testimony from Kim, the reasons for changing the company's name back to TLC at that particular point in time are enigmatic.

Meanwhile, the Patent Lawsuit filed by TLC against Linco in August 2015 was nearing its conclusion. Following a jury trial in the Patent Lawsuit, on August 26, 2019, judgment was entered in favor of Linco against TLC in the principal sum of $991,028.79.⁷¹⁷

6. September 2019 – August 2020: TLC and Eachpole File Voluntary Chapter 7 Bankruptcy Petitions; Linco Acquires Litigation Claims from Their Bankruptcy Estates

With no sale of TLC and/or Eachpole in prospect despite a $4 million investment in promotion of such a sale, with substantially all of TLC's inventory having been transferred to LKimmy, stored by LKimmy at the warehouse on the Donovan Way Property under the Donovan Way Sublease with Eachpole, and with LKimmy postured to sell that inventory via established internet marketplace platforms with the benefit of the License Agreements obtained from TLC ⁷¹⁸ and Eachpole ⁷¹⁹ using personnel previously employed by TLC, and with over $700,00.00 in operating loans having been advanced to LKimmy by Kim and Misook, TLC and Eachpole filed separate voluntary petitions seeking bankruptcy relief under Chapter 7 of the Bankruptcy Code.

a. The TLC Bankruptcy

The TLC Petition was filed on October 8, 2019. The TLC Petition correctly reflected that TLC had used the name “Etop Lighting Corporation” during the 8 year period prior to filing.⁷²⁰ The TLC Petition reflected estimated assets of $50,001 - $100,000, estimated liabilities of $1,000,001 - $10 million, and that after payment of administrative expenses, no money would be available for distribution to unsecured creditors.⁷²¹ The related Summary of Assets and Liabilities for Non-Individuals filed in support of the TLC Petition reflected total assets of $70,000.00, and total liabilities of $3,303,720.75.⁷²²

The bankruptcy schedules filed in support of the TLC Petition showed the following assets held by TLC on the TLC Petition Date:

Asset Description Scheduled Value Checking, Savings, Money Market, or Financial Brokerage Accounts $2,500.00 Inventory, Excluding Agricultural Assets $50,000.00 Office Equipment $2,500.00 Machinery, Equipment, and Vehicles $15,000.00 723 TOTAL $70,000.00

As relevant here, the bankruptcy schedules filed in support of the TLC Petition showed the following liabilities owed by TLC on the TLC Petition Date:⁷²⁴

Creditor Name Type of Claim Amount of Claim Bank of America Secured $2,000,000.00 Deloitte Touche, LLP Nonpriority Unsecured $ 57,001.03 Nonpriority Unsecured Linco, Inc. “Patent Claim” $ 910,000.00

The bankruptcy schedules filed in support of the TLC Petition reported that TLC was a party to only one executory contract or unexpired lease on the TLC Petition Date.⁷²⁵ That lease was for a storage unit at a Public Storage location in Rancho Cucamonga, California.⁷²⁶ There is no reference to the TLC License with LKimmy 727 that had been executed less than a year earlier on November 10, 2018. The only co-debtor identified in TLC's bankruptcy schedules was Kim.⁷²⁸

The Statement of Financial Affairs filed in support of the TLC Petition showed that TLC had gross revenue of $19,736,885.00 in calendar year 2018, and $2,598,000.00 in gross revenue during 2019 up to the October 8, 2019 TLC Petition Date.⁷²⁹ No payments or transfers of property to an insider within one year prior before the TLC Petition Date were disclosed.⁷³⁰ Despite the fact that a $991,028.79 judgment had been entered in favor of Linco against TLC in the Patent Lawsuit about two month earlier, TLC's Statement of Financial Affairs listed the Patent Lawsuit as “Pending” as opposed to “On appeal” or “Concluded.”⁷³¹ TLC reported that it had not made any “transfers of money or other property - - by sale, trade, or any other means - - [․] within 2 years before the filing of this case to another person, other than property transferred in the ordinary course of [TLC's] business or financial affairs” other than those listed in the Statement of Financial Affairs.⁷³² No previous addresses for TLC within the three-year period prior to the TLC Petition Date were listed.⁷³³ TLC's Statement of Financial Affairs disclosed that on the TLC Petition Date, TLC's remaining inventory of “lighting fixtures and supplies” was located at the Donovan Way Property, which Eachpole had subleased to LKimmy.⁷³⁴ That inventory was listed at a $500,000.00 market value as of December 31, 2018, according to an inventory conducted by an unnamed “inside employee.”⁷³⁵ Kim was listed as TLC's President, holding a 100% ownership interest in TLC on the TLC Petition Date.⁷³⁶ The TLC Petition, and all supporting schedules and statements, were signed under oath by Kim as TLC's President prior to filing with the Court.⁷³⁷

On January 9, 2020, TLC filed an amendment to the bankruptcy schedules and Statement of Financial Affairs it had originally filed about 90 days earlier.⁷³⁸ The amended information regarding TLC's scheduled assets is summarized in the following table:

Original Amended Asset Description Scheduled Scheduled Difference Value Value Checking, Savings, Money Market, or $2,500.00 $2,500.00 $ - 0 - Financial Brokerage Accounts Inventory, Excluding Agricultural Assets $50,000.00 $579,131.31 $529,131.31 Office Equipment $2,500.00 $ - 0 - <-$2,500.00> Machinery, Equipment, and Vehicles $15,000.00 $15,000.00 $ - 0 - Real Property: Buildings or Improved Real $ - 0 - $242,500.00 $242,500.00 Estate in Which [Eachpole] Has an Interest TOTAL $70,000.00 $839,131.31 $769,131.31

The real property asset, which had been completely omitted from TLC's sworn bankruptcy schedules as originally filed along with the TLC Petition, is identified in a cryptic “attachment” to the amended schedules.  ⁷³⁹ The “attachment” to the amended schedules shows TLC as the holder of a “Tenancy in Common” interest in the North Lamb Property with a value of $242,500.00 based on the “[m]ost recent offer on the Property” from an undisclosed potential purchaser.⁷⁴⁰ There is no reference to Eachpole, or any other person or entity, as the other tenant(s) in common with TLC that held an interest in the North Lamb Property.⁷⁴¹

The liabilities listed in TLC's amended bankruptcy schedules also differ substantially from the liabilities listed in TLC's bankruptcy schedules as originally filed. In addition to the $2 million secured claim held by Bank of America, the amended schedules disclosed additional secured claims owed to Bank of the West ($237,012.39), and the United States Small Business Administration ($190,640.19).⁷⁴² Put another way, TLC's amended bankruptcy schedules listed additional secured debt of $427,652.58 that was completely omitted from its original bankruptcy schedules filed just three months earlier.⁷⁴³ TLC's amended bankruptcy schedules also added nine creditors holding nonpriority unsecured claims that were not listed in its original bankruptcy schedules: ADLI Law Group ($51,793.15), Duff & Phelps ($98,809.00), ITAB ($12,000.00), Kim & Chang Tax & Accounting ($7,290.00), Southwest Mobile Storage ($1,054.87), TDC International Express ($78,561.76), Top Rack Materials ($17,553.10), United Merchant Services ($595.10), and United Parcel Service ($18,916.82).⁷⁴⁴ The nine nonpriority unsecured debts omitted from TLC's original bankruptcy schedules that were added in the amended schedules filed three months later totaled $286,573.80.⁷⁴⁵ Kim and Eachpole were both listed as TLC's codebtors, whereas only Kim had been identified as a co-debtor on TLC's bankruptcy schedules as originally filed.⁷⁴⁶

TLC's amended Statement of Financial Affairs contained substantially the same information as the Statement of Financial Affairs originally filed along with the TLC Petition, with one significant exception. In the Statement of Financial Affairs as originally filed, TLC reported that it had not made “any transfers of money or other property - - by sale, trade, or any other means - - [․] within 2 years before the filing of this case to another person, other than property transferred in the ordinary course of [TLC's] business or financial affairs” other than those listed.⁷⁴⁷ In TLC's amended Statement of Financial Affairs, TLC reported that it had in fact transferred inventory to LKimmy on January 1, 2019, indicating that there was no relationship between TLC and LKimmy.⁷⁴⁸ Under the heading “Total amount or value” of the inventory TLC had transferred to LKimmy on January 1, 2019, only the text “$See” appears.⁷⁴⁹

TLC's amended bankruptcy schedules and Statement of Financial Affairs were signed under oath by Kim as TLC's President prior to filing with the Court.⁷⁵⁰

b. The Eachpole Bankruptcy Filing

The Eachpole Petition was filed on February 20, 2020. The Eachpole Petition reflected estimated assets of $100,001 - $500,000, estimated liabilities of $1,000,001 - $10 million, and that after payment of administrative expenses, no money would be available for distribution to unsecured creditors.⁷⁵¹ The related Summary of Assets and Liabilities for Non-Individuals filed in support of the Eachpole Petition reflected total assets of $242,981.36, and total liabilities of $2,430,741.18.⁷⁵²

The bankruptcy schedules filed in support of the Eachpole Petition showed the following assets held by Eachpole on the Eachpole Petition Date:⁷⁵³

Asset Description Scheduled Value Checking, Savings, Money Market, or Financial Brokerage Accounts $481.36 Inventory, Excluding Agricultural Assets $ - 0 - Office Equipment $ - 0 - Machinery, Equipment, and Vehicles $ - 0 - Real Property: Buildings or Improved Real Estate in Which [Eachpole] Has an Interest $242,500.00 TOTAL $242,981.36

The real property asset referenced in Eachpole's bankruptcy schedules was an interest in the North Lamb Property, ostensibly held by Eachpole as “50% tenants in common with [TLC]” with a purported value of $242,500.00 based on the “[m]ost recent offer on the Property” from an undisclosed potential purchaser.⁷⁵⁴

The bankruptcy schedules filed in support of the Eachpole Petition showed a total of four liabilities owed by Eachpole to its creditors on the Eachpole Petition Date:⁷⁵⁵

Creditor Name Type of Claim Amount of Claim Bank of America Secured $2,000,000.00 Bank of the West Secured $237,021.00 United States Small Secured $190,640.00 Business Administration Amazon Nonpriority Unsecured $ 3,080.18 TOTAL $2,430,741.18

The bankruptcy schedules filed in support of the Eachpole Petition reported that Eachpole was not a party to any executory contracts or unexpired leases on the Eachpole Petition Date.⁷⁵⁶ Eachpole's bankruptcy schedules make no reference to the Eachpole License with LKimmy executed on November 10, 2018.⁷⁵⁷ Neither the Donovan Way Lease executed by Eachpole on November 12, 2018,⁷⁵⁸ nor the Donovan Way Sublease executed by Eachpole in favor of LKimmy on December 6, 2018,⁷⁵⁹ are disclosed in Eachpole's bankruptcy schedules.⁷⁶⁰ The only co-debtor identified in Eachpole's bankruptcy schedules is TLC.⁷⁶¹

The Statement of Financial Affairs filed in support of the Eachpole Petition showed that Eachpole had gross revenue of $28,212,000.00 in calendar year 2018, $119,847.00 in gross revenue in calendar year 2019, and no revenue of any kind in 2020 up to the February 20, 2020, Eachpole Petition Date.⁷⁶² No payments or transfers of property to an insider within one year prior before the Eachpole Petition Date were disclosed.⁷⁶³ A “pending” collection lawsuit filed by Bank of America against Eachpole was the only lawsuit reported.⁷⁶⁴ No previous addresses for Eachpole within the three year period prior to the Eachpole Petition Date were listed.⁷⁶⁵ As to property Eachpole held for another, the Statement of Financial Affairs reported “None.”⁷⁶⁶ Kim was listed as Eachpole's President, holding a 100% ownership interest in Eachpole on the Eachpole Petition Date.⁷⁶⁷ The Eachpole Petition, and all supporting schedules and statements, were signed under oath by Kim as Eachpole's President prior to filing with the Court.⁷⁶⁸

c. Linco's Acquisition of Litigation Claims from the TLC and Eachpole Bankruptcy Estates

Perhaps unsurprisingly, Linco took action to advance its interests in both the TLC Bankruptcy and the Eachpole Bankruptcy. On April 9, 2020, Linco filed a $1,024,431.03 claim against the TLC bankruptcy estate based on the judgment Linco had obtained against TLC in the Patent Lawsuit.⁷⁶⁹ Despite the fact that Linco's judgment in the Patent Lawsuit had only been entered against TLC, and the fact that Eachpole was not a party to the Patent Lawsuit, on September 4, 2020, Linco filed a claim against the Eachpole bankruptcy estate citing the judgment entered against TLC in the Patent Lawsuit.⁷⁷⁰ No objection to Linco's claim was ever filed in the Eachpole Bankruptcy. After filing proofs of claim in the TLC Bankruptcy and the Eachpole Bankruptcy, Linco pressed on.

On June 19, 2020, the Chapter 7 trustee in the TLC Bankruptcy filed a Motion to Sell Causes of Action Free and Clear of All Claims, Encumbrances, and Interests.⁷⁷¹ Through the TLC Sale Motion, the Chapter 7 trustee sought to sell all litigation claims held by the TLC bankruptcy estate to Linco.⁷⁷² No objection to the TLC Sale Motion was filed.⁷⁷³ Following a hearing, the Court's order granting the TLC Sale Motion was docketed on August 28, 2020.⁷⁷⁴

On June 22, 2020, the Chapter 7 trustee in the Eachpole Bankruptcy filed a Motion to Sell Causes of Action Free and Clear of All Claims, Encumbrances, and Interests.⁷⁷⁵ Through the Eachpole Sale Motion, the Chapter 7 trustee sought to sell all litigation claims held by the Eachpole bankruptcy estate to Linco.⁷⁷⁶ No objection to the Eachpole Sale Motion was filed.⁷⁷⁷ Following a hearing, the Court's order granting the Eachpole Sale Motion was docketed on August 3, 2020.⁷⁷⁸

Having filed a proof of claim in the TLC Bankruptcy and the Eachpole Bankruptcy, and having acquired all of the litigation claims originally held by the TLC and Eachpole bankruptcy estates, Linco pursued the litigation claims it had acquired. On October 8, 2020, as successor in interest to the bankruptcy estates of TLC and Eachpole, Linco filed the adversary complaint commencing this adversary proceeding.

7. September 2020 – July 2022: Litigation in this Adversary Proceeding Commences; Kim and Misook Personally File for Bankruptcy Relief; Linco Files an Adversary Proceeding to Deny Kim and Misook a Bankruptcy Discharge; and Linco Obtains Relief from the Automatic Stay

On October 8, 2020, Linco filed the complaint commencing this Adversary Proceeding,⁷⁷⁹ and immediately filed an Ex Parte Emergency Motion for Temporary Restraining Order ⁷⁸⁰ seeking, among other things, to prohibit the defendants from transferring property without prior approval from the Court.⁷⁸¹ Following a hearing, the Court granted the TRO Motion, and docketed the related order on October 14, 2020.⁷⁸² Following a series of stipulations amongst the parties, the Court entered orders converting the TRO to a preliminary injunction.⁷⁸³ On March 23, 2021, Linco filed a Motion for Order Holding LKimmy in Contempt for Intentionally and Willfully Violating Orders and to Modify Preliminary Injunction,⁷⁸⁴ asserting that LKimmy was, among other things, failing to make its books and records available for inspection, attempting to make transfers of inventory without Court approval.⁷⁸⁵ LKimmy opposed and moved to strike the Contempt Motion.⁷⁸⁶ Following a hearing, on June 17, 2021, the Court denied the Contempt Motion.⁷⁸⁷

After Linco commenced this Adversary Proceeding and was pursuing the related claims, on June 29, 2021, Kim and Misook personally and jointly filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code.⁷⁸⁸ The Chapter 7 petition filed by Kim and Misook in the Kim Bankruptcy disclosed that their debts were primarily business debts, estimated assets of $100,001 - $500,000, estimated liabilities of $1,000,001 - $10 million, and that after exclusion of exempt property and payment of administrative expenses, no money would be available for distribution to unsecured creditors.⁷⁸⁹ The related Summary of Your Assets and Liabilities and Certain Statistical Information filed in the Kim Bankruptcy reflected total assets of $293,075.32, and total liabilities, all in the form of nonpriority unsecured claims, of $6,243,135.24.⁷⁹⁰ That summary also showed that Kim and Misook had combined monthly income of $1,020.50, and monthly expenses totaling $1,022.00.⁷⁹¹

Schedule A/B: Property, and Schedule C: The Property You Claim as Exempt, as filed by Kim and Misook in the Kim Bankruptcy ⁷⁹² reported the information summarized in the following table:

Asset Scheduled Exemption Non-Exempt Value Claimed Equity Condominium – 8985 S. Durango $195,000.00 $195,000.00 $ - 0 - Drive, Unit 1187 Las Vegas, NV 89113 2021 Honda Accord Hybrid $29,278.00 $29,278.00 $ - 0 - Household Goods and Furnishings $ 1,500.00 $ 1,500.00 $ - 0 - Electronics $ 920.00 $ 920.00 $ - 0 - Clothing $ 1,000.00 $ 1,000.00 $ - 0 - Cash $ 50.00 $ 50.00 $ - 0 - Deposits of Money [Two Chase $ 2,157.32 $ 2,157.32 $ - 0 - Bank Checking Accounts] Interests in Insurance Policies $ 63,170.00 $ 63,170.00 $ - 0 - [Surrender Value] TOTALS $293,075.32 $293,075.32 $ - 0 -

The bankruptcy schedules filed in the Kim Bankruptcy showed that Kim and Misook owed no secured debt or priority unsecured debt.⁷⁹³ A total of seven unsecured creditors were listed, as summarized in the chart below ⁷⁹⁴ :

Scheduled Creditor Nature of Claim Claim Amount ADLI Law Group Attorney Fees $ 51,793.00 Bank of America Judgment on Loan Personal $2,195,673.34 Guarantee Cc Collection service Property Management Fee $ 1,202.00 Eachpole Inc. Adversary Proceeding Unknown Linco Inc. Judgment Against [TLC] “Business $ 910,000.00 owned by debtor previously” LKimmy, Inc. Lawsuit $3,000,000.00 Small Business Association [sic] Loan Personal Guarantee $ 84,466.90 TOTAL $6,243,135.24

The bankruptcy schedules filed in the Kim Bankruptcy further showed that Kim and Misook had no executory contracts, unexpired leases, or codebtors.⁷⁹⁵ Schedule I: Your Income, bankruptcy schedules filed in the Kim Bankruptcy reported that Kim was “unemployed/disabled” and that Misook was employed providing demonstration services, yielding combined monthly income of $1,020.50.⁷⁹⁶ Schedule J: Your Expenses showed monthly expenses totaling $1,022.00, yielding monthly net income of <-$1.50>.⁷⁹⁷

The Statement of Financial Affairs filed in the Kim Bankruptcy showed that in calendar year 2019, Kim made no money at all from operating a business, and that Misook made a total of $4,492.00 in the form of “wages, commissions, bonuses, and tips.”⁷⁹⁸ The Statement of Financial Affairs filed in the Kim Bankruptcy also reflected that in calendar year 2020, Kim made no money from any source, and that Misook made a total of $4,492.00 in the form of “wages, commissions, bonuses, and tips.”⁷⁹⁹ For calendar year 2021 until the Kim Bankruptcy was filed, the Statement of Financial Affairs filed in the Kim Bankruptcy showed that neither Kim nor Misook made any money at all,⁸⁰⁰ but acknowledged that that Kim had received $18,262.00 in unemployment compensation during 2020.⁸⁰¹

With respect to litigation pending within the year before the Kim Bankruptcy was filed, the Statement of Financial Affairs identified three lawsuits.⁸⁰² The first suit had been filed in the Nevada District Court for Clark County by Bank of America, N.A. against Eachpole, Kim, and Misook, and a writ of garnishment had been issued had been issued in that case.⁸⁰³ The second suit had been filed by LKimmy against Bank of America and Kim in Nevada state court had been removed to the United States District Court for the District of Nevada, and was shown as “Pending.”⁸⁰⁴ The third suit had been filed by ADLI Law Group in California state court against TLC and Kim for the collection of attorney fees, in which judgment had been entered.⁸⁰⁵

The Statement of Financial Affairs filed in the Kim Bankruptcy also showed that Kim and Misook had apparently endorsed $703,000.00 in promissory notes - - the exact amount of loans they had personally made to LKimmy - - and attempted to tender them to Bank of America.⁸⁰⁶ Perhaps unsurprisingly, the Statement of Financial Affairs also reported that Bank of America “returned the notes.”⁸⁰⁷ The Statement of Financial Affairs further showed that in the four years prior to their bankruptcy filing, Kim and Misook had connections as an “officer, director, or managing executive” to Eachpole, TLC, Synguru Inc., and Beauty.⁸⁰⁸ Kim and Misook had signed their bankruptcy petition, bankruptcy schedules, and the Statement of Financial Affairs, under oath prior to filing them with the Court.⁸⁰⁹

On November 5, 2021, Linco commenced an adversary proceeding in the Kim Bankruptcy.⁸¹⁰ In the adversary complaint commencing the Kim Discharge Adversary, Linco alleged claims seeking to deny Kim and Misook a bankruptcy discharge under Sections 727(a)(2)(A), 727(a)(4)(A), 727(a)(4)(B), and 727(a)(5).⁸¹¹

On February 7, 2022, Linco filed a Motion for Relief from the Automatic Stay in the Kim Bankruptcy, seeking stay relief to allow Linco to move forward with litigation against Kim and Misook in this adversary proceeding.⁸¹² The Chapter 7 trustee in the Kim Bankruptcy opposed stay relief,⁸¹³ as did Kim and Misook.⁸¹⁴ Linco replied to both oppositions.⁸¹⁵ Following a hearing held on March 1 and 17, 2022,  ⁸¹⁶ an order was entered in the Kim Bankruptcy on April 12, 2022, granting Linco relief from the automatic stay “as to any claims for damages to permit Linco to liquidate its claims against the debtors.”⁸¹⁷ After the April 12, 2022, order granting Linco relief from the automatic stay was entered in the Kim Bankruptcy, litigation in this Adversary Proceeding proceeded apace.

On March 15, 2022, Linco filed its Second Amended Complaint in this Adversary Proceeding.⁸¹⁸ On April 29, 2022, LKimmy filed a Motion for Partial Summary Judgment on certain claims advanced by Linco in the SAC, including Linco's claim for substantive consolidation.⁸¹⁹ Linco opposed.⁸²⁰ LKimmy replied.⁸²¹ Following a July 29, 2022 hearing, on August 9, 2022, the Court entered its Order Granting in Part and Denying in Part LKimmy's Motion for Summary Judgment.⁸²² The Court granted LKimmy's motion for partial summary judgment as to Linco's claim for substantive consolidation, but denied it in all other respects.⁸²³

On July 1, 2022, with trial just a month away, Linco filed, then amended, a Motion for Declaration of Contempt and to Enforce Temporary Restraining Order, asserting again that LKimmy had transferred property without Court approval.⁸²⁴ LKimmy opposed.⁸²⁵ On the first day of trial, August 1, 2022, the Court took Linco's motion under submission for resolution along with the rest of the issues pending between the parties.

8. August 2022 – Present: Trial in this Adversary Proceeding is Held But Neither Kim nor Misook Testify; Post-Trial Briefs are Submitted; and the Issues Presented are Ripe for Decision

As noted previously, this trial was conducted over eight days between August 1 and August 30, 2022. During trial, Misook was never called as a witness to testify on her own behalf, or to testify on behalf of any other party.

During trial, Linco became concerned because Kim had not been deposed and had not appeared in court after the first day of trial. During trial, on August 26, 2022, Linco filed a Motion to Compel Attendance at Trial; or, in the Alternative, to Strike the Answer of Il Kim and Enter Default Judgment Against him.⁸²⁶ The Court heard argument on the Kim Motion to Compel from counsel for Linco and Kim's attorney.⁸²⁷ After hearing argument, on August 29, 2022, the Court entered its written order granting in part and denying in part the Kim Motion to Compel,⁸²⁸ which provided in relevant part:

IT IS ORDERED that the Motion is GRANTED IN PART AND DENIED IN PART as follows:

1. The Motion is GRANTED to the extent that it seeks to compel Defendant Il Kim to attend the trial and testify. If Defendant Il Kim desires to present evidence in support of his case in chief as a defendant in the trial of the adversary proceeding identified in the caption, HE MUST AND SHALL APPEAR IN PERSON AT 9:30 a.m. on TUESDAY, AUGUST 30, 2022, at the Foley Federal Building, 300 Las Vegas Boulevard South, Third Floor, Courtroom #1. If Defendant Il Kim fails to appear in accordance with this Order, all issues raised in the adversary proceeding identified in the caption will be deemed submitted and decided on the merits without further notice or opportunity for Defendant Il Kim to be heard.

2. The Motion is DENIED to the extent that it seeks entry of a default against Defendant Il Kim, to strike the answer filed by defendant Il Kim, and/or to have judgment entered by default against Defendant Il Kim.

IT IS SO ORDERED.

On August 30, 2022, counsel for Kim confirmed that Kim was aware of the Court's August 29, 2022, Order on the Kim Motion to Compel, but would not be present to testify.⁸²⁹ To ameliorate any resultant prejudice to Linco, the Court allowed Linco the opportunity to offer exhibits into evidence that would have required foundation in the form of Kim's testimony, subject to objection on other grounds.⁸³⁰

Trial transcripts were obtained by the parties.⁸³¹ Post-trial briefs were submitted timely.⁸³² The Court has carefully considered all the facts in this extensive trial record, and the issues before the Court in this adversary proceeding are now ripe for decision.

CONCLUSIONS OF LAW

I. Jurisdiction; Venue; Core Proceedings

A. Jurisdiction

The Court has jurisdiction over the TLC Bankruptcy and the Eachpole Bankruptcy under 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and LR 1001(b)(1). The Court has jurisdiction over this Adversary Proceeding under 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and LR 1001(b)(1).

B. Venue

The District of Nevada is a proper venue for the TLC Bankruptcy and the Eachpole Bankruptcy under 28 U.S.C. § 1408(1). Venue of this Adversary Proceeding is appropriate in the District of Nevada under 28 U.S.C. § 1409(a).

C. Core Proceedings Analysis

The core proceedings analysis begins with the text of 28 U.S.C. § 157(b)(3):

§ 157. Procedures

[․]

(b)

[․]

(3) The bankruptcy judge shall determine, on the judge's own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11. A determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law.”

The United States Supreme Court has expressly held that “[i]t is the bankruptcy court's responsibility to determine whether each claim before it is core or non-core. § 157(b)(3); cf. Fed. Rule Bkrtcy. Proc. 7012.”⁸³³

Determining whether claims are core or non-core involves a two-step analytical approach ⁸³⁴ :

1. Do the claims pending before the bankruptcy court for resolution meet Congress’ definition of a core proceeding under 28 U.S.C. § 157(b); and if so,

2. Do the claims pending before the bankruptcy court for resolution also fall within the bankruptcy court's “arising under” or “arising in” jurisdictional grant?

In the SAC, Linco alleges twenty-seven claims for relief that fall into twelve general categories, as summarized in Table 1 below:

TABLE 1: SUMMARY OF CLAIMS FOR RELIEF PLED IN THE SAC Claim Category Cause of Action Claims for Relief Pled in the SAC Avoidance and Recovery of Constructive First through Seventh Claims for Relief, ECF 1 Fraudulent Transfers Under 11 U.S.C. §§ No. 199, pp. 11 – 18 of 39 548(a)(1)(B)(ii)(I) and 550 Avoidance and Recovery of Constructive Eighth through Fourteenth Claims for Relief, 2 Fraudulent Transfers Under 11 U.S.C. §§ ECF No. 199, pp. 18 – 26 of 39 548(a)(1)(B)(ii)(II) and 550 3 Breach of Fiduciary Duty Fifteenth and Sixteenth Claims for Relief, ECF No. 199, pp. 26 – 30 of 39 4 Conversion Seventeenth through Nineteenth Claims for Relief, ECF No. 199, pp. 30 – 31 of 39 5 Conspiracy to Commit Constructive Fraud Twentieth Claim for Relief, ECF No. 199, pp. Pursuant to 11 U.S.C. § 548(a)(1)(B)(ii)(I) 31 – 32 of 39 6 Conspiracy to Commit Constructive Fraud Twenty-First Claim for Relief; ECF No. 199, p. Pursuant to 11 U.S.C. § 548(a)(1)(B)(ii)(II) 32 of 39 7 Conspiracy of Conversion Twenty-Second Claim for Relief; ECF No. 199, pp. 32 – 33 of 39 8 Turnover of Property of the Estate Twenty-Third Claim for Relief; ECF No. 199, p. 33 of 39 9 Substantive Consolidation Twenty-Fourth Claim for Relief; ECF No. 199, pp. 33 – 34 of 39 10 Injunctive Relief Twenty-Fifth Claim for Relief; ECF No. 199, pp. 34 – 35 of 39 11 Avoidance and Recovery of an Actual Intent Twenty-Sixth Claim for Relief; ECF No. 199, Fraudulent Transfer under 11 U.S.C. §§ pp. 35 – 36 of 39 548(a)(1)(A) and 550 12 Successor Liability Twenty-Seventh Claim for Relief; ECF No. 199, pp. 36 – 37 of 39

1. All Claims Pled in the SAC Meet Congress’ Statutory Definition of a Core Proceeding under 28 U.S.C. § 157(b)(2).

In determining whether pending claims constitute core proceedings, bankruptcy courts look first to the non-inclusive list of core proceedings set forth in 28 U.S.C. § 157(b)(2)(A)-(P). As the Ninth Circuit Court of Appeals has explained ⁸³⁵ :

Congress non-exhaustively enumerated what constitutes a “core” proceeding in 28 U.S.C. § 157(b)(2). The proceedings listed include matters affecting the administration of the estate, determination of the validity, extent, or priority of liens, and other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor creditor relationship. § 157(b)(2)(A), (K), (O). “[The] section, however, does not enumerate examples of, or define what constitutes, ‘non-core’ proceedings.” Dunmore v. United States, 358 F.3d 1107, 1114 (9th Cir. 2004). We have addressed this question, holding proceedings to be “non-core” “if they do not depend on the Bankruptcy Code for their existence and they could proceed in another court.” Id. (internal citation omitted). In another articulation, we stated a core proceeding is one that “invokes a substantive right provided by title 11 or ․ a proceeding that, by its nature, could arise only in the context of a bankruptcy case.” Gruntz v. County of L.A. (In re Gruntz), 202 F.3d 1074, 1081 (9th Cir. 2000) (internal quotation marks omitted).

None of the claims for relief pled by Linco in the SAC involve estimation, allowance, or disallowance of claims against a bankruptcy estate or exemptions from it; counterclaims by a bankruptcy estate against persons filing claims against the estate; seek an order in respect to obtaining credit; seek to determine, avoid, or recover a preferential transfer; seek termination, annulment, or modification of the automatic stay; request a determination as to the dischargeability of a particular debt; object to discharge; determine the validity, extent, or priority of any liens; request confirmation of a plan; seek approval to use or lease estate property or cash collateral; seek approval of the sale of property; or ask for court recognition of a foreign proceeding under Chapter 15 of the Bankruptcy Code. As a result, none of the claims pled by Linco in the SAC are statutorily core proceedings under 28 U.S.C. § 157(b)(2)(B) through (D) inclusive, (F), (G), (I) through (N) inclusive, or (P).

The SAC does request entry of an order requiring turnover of property of the Eachpole bankruptcy estate,⁸³⁶ and a plethora of claims seeking to determine, avoid, and recover alleged fraudulent conveyances.⁸³⁷ Such claims fall comfortably within the scope of the statutory definition of core proceedings under 28 U.S.C. §§ 157(b)(2)(E) and (H).

The remainder of the claims alleged in the SAC ⁸³⁸ do not depend on the Bankruptcy Code for their existence and could proceed in another court. Linco did, however, acquire all of those claims from the bankruptcy trustees in the course of the administration of the TLC Bankruptcy and the Eachpole Bankruptcy.⁸³⁹ Resultantly, the Court concludes that the preponderance of the evidence establishes that all of the claims pled by Linco in the SAC are matters “concerning the administration of the estate” in the context of 28 U.S.C. § 157(b)(2)(A), and “other proceedings affecting the liquidation of the assets of the estate” in the context of 28 U.S.C. § 157(b)(2)(O).

Ultimately, the Court concludes that all of the claims alleged in the SAC meet Congress’ statutory definition of a core proceeding under 28 U.S.C. § 157(b)(2). The rationale underpinning the Court's conclusion is summarized in Table 2 below:

TABLE 2: SUMMARY ANALYSIS: ALL CLAIMS FOR RELIEF PLED IN THE SAC ARE STATUTORILY CORE PROCEEDINGS Claim Claims for Relief as Pled in Are Claims for Relief Category Cause of Action the Second Amended Statutorily Core Under Complaint 28 U.S.C. § 157(b)(2)? Avoidance and Recovery of First through Seventh Claims Yes. Under 28 U.S.C. 1 Constructive Fraudulent Transfers for Relief, ECF No. 199, pp. 11 § 157(b)(2)(H). Also, as Under 11 U.S.C. §§ – 18 of 39 an estate litigation claim 548(a)(1)(B)(ii)(I) and 550 acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). Avoidance and Recovery of Eighth through Fourteenth Yes. Under 28 U.S.C. 2 Constructive Fraudulent Transfers Claims for Relief, ECF No. 199, § 157(b)(2)(H). Also, as an Under 11 U.S.C. §§ pp. 18 – 25 of 39 estate litigation claim 548(a)(1)(B)(ii)(II) and 550 acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 3 Breach of Fiduciary Duty Fifteenth and Sixteenth Claims Yes. As an estate litigation for Relief, ECF No. 199, pp. 26 claim acquired by Linco – 30 of 39 from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 4 Conversion Seventeenth through Nineteenth Yes. As an estate litigation Claims for Relief, ECF No. 199, claim acquired by Linco pp. 30 – 31 of 39 from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 5 Conspiracy to Commit Twentieth Claim for Relief, Yes. Under 28 U.S.C. Constructive Fraud Pursuant to 11 ECF No. 199, pp. 31 – 32 of 39 § 157(b)(2)(H). Also, as U.S.C. § 548(a)(1)(B)(ii)(I) an estate litigation claim acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 6 Conspiracy to Commit Twenty-First Claim for Relief; Yes. Under 28 U.S.C. Constructive Fraud Pursuant to 11 ECF No. 199, p. 32 of 39 § 157(b)(2)(H). Also, as U.S.C. § 548(a)(1)(B)(ii)(II) an estate litigation claim acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 7 Conspiracy of Conversion Twenty-Second Claim for Yes. As an estate litigation Relief; ECF No. 199, pp. 32 – claim acquired by Linco 33 of 39 from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 8 Turnover of Property of the Estate Twenty-Third Claim for Relief; Yes. Under 28 U.S.C. ECF No. 199, p. 33 of 39 § 157(b)(2)(H). 9 Substantive Consolidation Twenty-Fourth Claim for Relief; Yes. As an estate litigation ECF No. 199, pp. 33 – 34 of 39 claim acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 10 Injunctive Relief Twenty-Fifth Claim for Relief; Yes. As an estate litigation ECF No. 199, pp. 34 – 35 of 39 claim acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 11 Avoidance and Recovery of an Twenty-Sixth Claim for Relief; Yes. Under 28 U.S.C. Actual Intent Fraudulent Transfer ECF No. 199, pp. 35 – 36 of 39 § 157(b)(2)(H). Also, as under 11 U.S.C. §§ 548(a)(1)(A) an estate litigation claim and 550 acquired by Linco from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O). 12 Successor Liability Twenty-Seventh Claim for Yes. As an estate litigation Relief; ECF No. 199, pp. 36 – claim acquired by Linco 37 of 39 from Chapter 7 trustee during case administration. 28 U.S.C. §§ 157(b)(2)(A) and (O).

2. Some, But Not All, Claims Pled in the SAC Fall Within the Court's “Arising Under” or “Arising In” Jurisdictional Grant.

The terms “arising under” and “arising in” as used in defining the parameters of bankruptcy court jurisdiction are not expressly defined in the Bankruptcy Code. Case law, however, provides meaningful guidance ⁸⁴⁰ :

The terms “arising under title 11” and “arising in a case under title 11” are terms of art which the courts have defined. [ ․] A proceeding “arises under” title 11 if it presents claims for relief created or controlled by title 11. In contrast, the claims for relief in a proceeding “arising in” a title 11 case are not explicitly created or controlled by title 11, but such claims nonetheless would have no existence outside of a bankruptcy case.

Applying that definitional framework to the facts of this case, the Court concludes that some, but not all, of the claims for relief pled in the SAC either “arise under” the Bankruptcy Code, or “arise in” a Title 11 case. Table 3 below summarizes the rationale for the Court's conclusion:

TABLE 3: SUMMARY ANALYSIS: NOT ALL CLAIMS FOR RELIEF PLED IN THE SAC “ARISE UNDER” THE BANKRUPTCY CODE OR “ARISE IN” A BANKRUPTCY CASE Claim Claims for Relief as Pled in Do the Claims “Arise Category Cause of Action the Second Amended Under” the Bankruptcy Complaint Code or “Arise In” a Bankruptcy Case? Avoidance and Recovery of First through Seventh Claims Yes. These constructive 1 Constructive Fraudulent Transfers for Relief, ECF No. 199, pp. 11 fraudulent transfer claims Under 11 U.S.C. §§ – 18 of 39 as pled in the SAC are 548(a)(1)(B)(ii)(I) and 550 created and controlled by 11 U.S.C. §§ 548 and 550. They therefore “arise under” the Bankruptcy Code. Avoidance and Recovery of Eighth through Fourteenth Yes. These constructive 2 Constructive Fraudulent Transfers Claims for Relief, ECF No. 199, fraudulent transfer claims Under 11 U.S.C. §§ pp. 18 – 25 of 39 as pled in the SAC are 548(a)(1)(B)(ii)(II) and 550 created and controlled by 11 U.S.C. §§ 548 and 550. They therefore “arise under” the Bankruptcy Code. 3 Breach of Fiduciary Duty Fifteenth and Sixteenth Claims No. These breach of for Relief, ECF No. 199, pp. 26 fiduciary duty claims as – 30 of 39 pled in the SAC are neither created nor controlled by the Bankruptcy Code, so they do not “arise under” Title 11. These breach of fiduciary duty claims as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so they do not “arise in” a case under Title 11. 4 Conversion Seventeenth through Nineteenth No. These conversion Claims for Relief, ECF No. 199, claims as pled in the SAC pp. 30 – 31 of 39 are neither created nor controlled by the Bankruptcy Code, so they do not “arise under” Title 11. These conversion claims as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so they do not “arise in” a case under Title 11. 5 Conspiracy to Commit Twentieth Claim for Relief, Yes. This conspiracy Constructive Fraud Pursuant to 11 ECF No. 199, pp. 31 – 32 of 39 claim as alleged in the U.S.C. § 548(a)(1)(B)(ii)(I) SAC is not expressly created or controlled by the Bankruptcy Code, so it does not “arise under” Title 11. But because the alleged conspiracy is predicated on 11 U.S.C. § 548, it would not exist outside of a bankruptcy case. This conspiracy claim therefore “arises in” a case under Title 11. 6 Conspiracy to Commit Twenty-First Claim for Relief; Yes. This conspiracy Constructive Fraud Pursuant to 11 ECF No. 199, p. 32 of 39 claim as alleged in the U.S.C. § 548(a)(1)(B)(ii)(II) SAC is not expressly created or controlled by the Bankruptcy Code, so it does not “arise under” Title 11. But because the alleged conspiracy is predicated on 11 U.S.C. § 548, it would not exist outside of a bankruptcy case. This conspiracy claim therefore “arises in” a case under Title 11. 7 Conspiracy of Conversion Twenty-Second Claim for No. This conspiracy of Relief; ECF No. 199, pp. 32 – conversion claim as pled in 33 of 39 the SAC is neither created nor controlled by the Bankruptcy Code, so it does not “arise under” Title 11. This conspiracy of conversion claim as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so it does not “arise in” a case under Title 11. 8 Turnover of Property of the Estate Twenty-Third Claim for Relief; Yes. This claim for ECF No. 199, p. 33 of 39 turnover of estate property as pled in the SAC is created and controlled by 11 U.S.C. § 542. It therefore “arises under” the Bankruptcy Code. 9 Substantive Consolidation Twenty-Fourth Claim for Relief; No. This substantive ECF No. 199, pp. 33 – 34 of 39 consolidation claim as pled in the SAC is neither created nor controlled by the Bankruptcy Code, so it does not “arise under” Title 11. This substantive consolidation claim as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so it does not “arise in” a case under Title 11. 10 Injunctive Relief Twenty-Fifth Claim for Relief; No. This claim for ECF No. 199, pp. 34 – 35 of 39 injunctive relief as pled in the SAC is neither created nor controlled by the Bankruptcy Code, so it does not “arise under” Title 11. This claim for injunctive relief as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so it does not “arise in” a case under Title 11. 11 Avoidance and Recovery of an Twenty-Sixth Claim for Relief; Yes. This actual intent Actual Intent Fraudulent Transfer ECF No. 199, pp. 35 – 36 of 39 fraudulent transfer claim as under 11 U.S.C. §§ 548(a)(1)(A) pled in the SAC is created and 550 and controlled by 11 U.S.C. §§ 548 and 550. It therefore “arises under” the Bankruptcy Code. 12 Successor Liability Twenty-Seventh Claim for No. This successor Relief; ECF No. 199, pp. 36 – liability claim as pled in 37 of 39 the SAC is neither created nor controlled by the Bankruptcy Code, so it does not “arise under” Title 11. This successor liability claim as pled in the SAC would also exist under Nevada law outside of a bankruptcy case, so it does not “arise in” a case under Title 11.

In summary, and as reflected in the Table 4 below, some but not all of the claims pled in the SAC satisfy both prongs necessary to qualify as core proceedings in the jurisdictional calculus:

TABLE 4: SUMMARY ANALYSIS OF WHICH CLAIMS PLED IN THE SAC ARE CORE PROCEEDINGS Claims for Relief as Do the Claims for Relief Are the Claims Claim Cause of Action Pled in the Second Satisfy Both Prongs of the for Relief Core Category Amended Complaint Core Proceeding Test? Proceedings? Avoidance and First through Seventh 1 Recovery of Claims for Relief, ECF Constructive No. 199, pp. 11 – 18 of Yes. Yes. Fraudulent Transfers 39 Under 11 U.S.C. §§ 548(a)(1)(B)(ii)(I) and 550 Avoidance and Eighth through 2 Recovery of Fourteenth Claims for Constructive Relief, ECF No. 199, Fraudulent Transfers pp. 18 – 25 of 39 Yes. Yes. Under 11 U.S.C. §§ 548(a)(1)(B)(ii)(II) and 550 3 Breach of Fiduciary Fifteenth and Sixteenth Duty Claims for Relief, ECF No. No. No. 199, pp. 26 – 30 of 39 4 Conversion Seventeenth through Nineteenth Claims for No. No. Relief, ECF No. 199, pp. 30 – 31 of 39 5 Conspiracy to Commit Twentieth Claim for Constructive Fraud Relief, ECF No. 199, Yes. Yes. Pursuant to 11 U.S.C. pp. 31 – 32 of 39 § 548(a)(1)(B)(ii)(I) 6 Conspiracy to Commit Twenty-First Claim for Constructive Fraud Relief; ECF No. 199, p. Yes. Yes. Pursuant to 11 U.S.C. 32 of 39 § 548(a)(1)(B)(ii)(II) 7 Conspiracy of Twenty-Second Claim Conversion for Relief; ECF No. No. No. 199, pp. 32 – 33 of 39 8 Turnover of Property Twenty-Third Claim for of the Estate Relief; ECF No. 199, p. Yes. Yes. 33 of 39 9 Substantive Twenty-Fourth Claim Consolidation for Relief; ECF No. No. No. 199, pp. 33 – 34 of 39 10 Injunctive Relief Twenty-Fifth Claim for Relief; ECF No. 199, No. No. pp. 34 – 35 of 39 11 Avoidance and Twenty-Sixth Claim for Recovery of an Actual Relief; ECF No. 199, Intent Fraudulent pp. 35 – 36 of 39 Yes. Yes. Transfer under 11 U.S.C. §§ 548(a)(1)(A) and 550 12 Successor Liability Twenty-Seventh Claim for Relief; ECF No. No. No. 199, pp. 36 – 37 of 39

When an adversary complaint presents a mix of core and non-core matters, as this one does, further consideration of the proper scope of the bankruptcy court's jurisdiction is required.

3. All Non-Core Claims Alleged in the SAC are “Related to a Case Under Title 11”

The fact that some of the claims pled in the SAC are non-core does not automatically deprive this Court of jurisdiction. That is true because the statutory grant of jurisdiction to the bankruptcy courts extends beyond core proceedings and include proceedings “related to” bankruptcy cases. Specifically, the text of 28 U.S.C. § 157(a) reads:

157. Procedures

(a) Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district. [emphasis added]

The phrase “related to a case under title 11” as used in 28 U.S.C. § 157(a) is not defined by the Bankruptcy Code. The Ninth Circuit Court of Appeals has addressed meaning of that phrase, stating that a “bankruptcy court's ‘related to’ jurisdiction is very broad, including nearly every matter directly or indirectly related to the bankruptcy.”⁸⁴¹

Linco acquired all claims and causes of action held by the TLC Bankruptcy estate and the Eachpole Bankruptcy estate. In doing so, Linco agreed to share a portion of any recovery obtained with those bankruptcy estates. All claims alleged by Linco in the SAC are thus claims that were acquired from, and if successfully prosecuted will benefit, TLC Bankruptcy estate and the Eachpole Bankruptcy estate. The Court therefore concludes that all claims alleged by Linco in the SAC are “directly or indirectly related to the bankruptcy” of TLC and Eachpole, and fall within the ambit of the Court's “related to” jurisdictional grant.⁸⁴²

While the presence of non-core claims in the SAC that fall within the purview of the Court's “related to” jurisdiction under 28 U.S.C. § 157(a) does not deprive the court of jurisdiction, it does have a direct impact on the Court's ability to issue final orders and judgment on those claims. The presence of non-core claims in the SAC that fall within the purview of the Court's “related to” jurisdiction under 28 U.S.C. § 157(a) triggers 28 U.S.C. § 157(c), which provides:

§ 157. Procedures

[․]

(c) (1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

(2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all parties to the proceeding may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title. (Emphasis added)

As explained by the United States Supreme Court ⁸⁴³ :

As for “non-core” proceedings—i.e., proceedings that are “not ․ core” but are “otherwise related to a case under title 11”—the statute authorizes a bankruptcy court to “hear [the] proceeding,” and then “submit proposed findings of fact and conclusions of law to the district court.” § 157(c)(1). The district court must then review those proposed findings and conclusions de novo and enter any final orders or judgments. Ibid. There is one statutory exception to this rule: If all parties “consent,” the statute permits the bankruptcy judge “to hear and determine and to enter appropriate orders and judgments” as if the proceeding were core. § 157(c)(2).

Put simply: If a matter is core, the statute empowers the bankruptcy judge to enter final judgment on the claim, subject to appellate review by the district court. If a matter is non-core, and the parties have not consented to final adjudication by the bankruptcy court, the bankruptcy judge must propose findings of fact and conclusions of law. Then, the district court must review the proceeding de novo and enter final judgment.

The Court concludes that, under 28 U.S.C. §§ 157 (a), 157(b)(1), and LR 1001, it had jurisdiction to hear all of the core claims pled in the SAC. The Court further concludes that, under 28 U.S.C. §§ 157(a), 157(c)(1), and LR 1001, it had jurisdiction to hear all of the claims pled in the SAC that are non-core but are also related to the TLC Bankruptcy and the Eachpole Bankruptcy cases. But because some of the claims pled in the SAC are non-core claims within the purview of the Court's “related to” jurisdiction under 28 U.S.C. § 157(a), the following question remains under 28 U.S.C. § 157(c): Is this Court required to submit proposed findings of fact and conclusions of law for entry by the United States District Court for the District of Nevada under 28 U.S.C. § 157(c)(1), or did all of the parties to this Adversary Proceeding consent to entry of final orders and judgment by this Court as to all of the claims pled in the SAC?

The Court concludes that all of the parties to this Adversary Proceeding did in fact consent to entry of final orders and judgment by this Court as to all of the claims pled in the SAC. The facts underpinning that conclusion are summarized in Table 5 below:

TABLE 5: CONSENT ANALYSIS Party Supporting Record Consent: Yes or No Linco SAC, ECF No. 199, p. 3 of 39, para. Yes 11; Discovery Plan, ECF No. 96, p. 3 of 4, para. 7. Kim Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Misook Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Chris Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Panchal Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Andrew Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Beauty Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. Synguru Corp. Discovery Plan, ECF No. 96, p. 3 of 4, Yes para. 7. LKimmy Trial Statement, ECF No. 254, pp. 10 – Yes 11, Section III; Discovery Plan, ECF No. 96, p. 3 of 4, para. 7. Hyunjune Trial Statement, ECF No. 254, pp. 10 – Yes 11, Section III; Discovery Plan, ECF No. 96, p. 3 of 4, para. 7.

Because all parties to this Adversary Proceeding have expressly consented on the record to this Court's entry of final orders and judgment, the Court concludes that it may properly do so now by operation of 28 U.S.C. §§ 157(a), 157(c)(2), and LR 1001(b). The Court turns next to the merits of Linco's claims as pled in the SAC and tried to this Court.

II. ANALYSIS OF CLAIMS PLED IN THE SAC

A. First through Seventh Claims for Relief: Avoidance and Recovery of Constructive Fraudulent Transfers Under Sections 548(a)(1)(B)(ii)(I) and 550 Due to Insolvency

Although they are predicated on somewhat different facts, the first seven claims for relief pled by Linco in the SAC share a common legal theory for recovery. All seven of those claims seek to avoid and recover constructively fraudulent transfers under the same provisions of the Code: Sections 548(a)(1)(B)(ii)(I) and 550.⁸⁴⁴ The text of those Code sections provides the analytical starting point. When the statute's language is plain, the sole function of the courts - - at least where the disposition required by the text is not absurd - - is to enforce it according to its terms.⁸⁴⁵

1. Statutory Text

Section 548 of the Bankruptcy Code provides a mechanism for avoiding constructively fraudulent transfers. Section 548(a)(1)(B)(ii)(I), pled by Linco in support of the first seven claims for relief in the SAC, reads:

§ 548. Fraudulent transfers and obligations

(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily--

[․]

(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation[.]

Section 550 of the Bankruptcy Code provides the mechanism for recovery of a transfer avoided as fraudulent under Section 548(a)(1)(B)(ii)(I). The relevant text of Section 550 reads:

§ 550. Liability of transferee of avoided transfer

(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section [․] 548 [․] of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from--

(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or

(2) any immediate or mediate transferee of such initial transferee.

(b) The trustee may not recover under section (a)(2) of this section from--

(1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or

(2) any immediate or mediate good faith transferee of such transferee.

[․]

(d) The trustee is entitled to only a single satisfaction under subsection (a) of this section.

2. Essential Elements and Burden of Proof

The essential elements of a claim seeking to avoid a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(I), and the related burden of proof, have been summarized as follows ⁸⁴⁶ :

[T]o avoid a transfer under this provision, Plaintiff as trustee must show that a “transfer” of Debtors' property occurred within two years of the filing of the bankruptcy petition; that the debtor received less than “reasonably equivalent value in exchange for the transfer”; and that the transfer occurred either while the debtor was insolvent, or that the debtor was rendered insolvent as a result of the transfer. [․] Plaintiff bears the burden of proving all these elements by a preponderance of the evidence.

3. Legal Standards

a. Definition of “Transfer”

The term “transfer” is defined by the Bankruptcy Code to include “each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing or parting with property or an interest in property.”⁸⁴⁷ Federal law controls a determination of whether a transfer has occurred, but “Congress has generally left the determination of property rights in the assets of a bankrupt's estate to state law.”⁸⁴⁸ A debtor's payment of money to a creditor qualifies as a transfer under Section 548(a).⁸⁴⁹

b. When a “Transfer” Occurs

In the context of Section 548(a)(1), the date of a transfer is the date “when such transfer is so perfected that a bona fide purchaser from the debtor against who applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee[.]”⁸⁵⁰

c. What Constitutes “Reasonably Equivalent Value” in Exchange for a Transfer

The term “value” is generally defined in Section 548(d)(2)(A) to encompass “property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor.”⁸⁵¹ “A transfer is for value if one is the quid pro quo of the other.”⁸⁵² As observed by the Jordan court ⁸⁵³ :

Indirect benefits, as well as direct benefits, may constitute value if sufficiently concrete and identifiable. This Court has stated: “Beyond looking at what is exchanged in a quid pro quo transaction, it is important to examine the value of all benefits inuring to a debtor by virtue of the transaction in question, directly or indirectly.” Fox Bean Co., 287 B.R. at 281 (citing Richards & Conover Steel, 267 B.R. at 612–13).

The concept of reasonably equivalent value in the context of Section 548(a)(1)(B)(i) “is not particularly esoteric; a party receives reasonably equivalent value if it gets roughly the value it gave.”⁸⁵⁴ The reasonably equivalent value standard “does not require exact equality in value.”⁸⁵⁵ Whether a debtor received reasonably equivalent value in exchange for a transfer “is analyzed from the point of view of the debtor's creditors, because the function of this element is to allow avoidance of only those transfers that result in a diminution of a debtor's prepetition assets.”⁸⁵⁶

d. When the “Reasonably Equivalent Value” Determination is to be Made

The determination as to whether a debtor received reasonably equivalent value in exchange for a transfer is made as of the time of the transfer.⁸⁵⁷

e. What Constitutes Insolvency Under Section 548(a)(1)(B)(ii)(I)

The Code defines “insolvent” to mean a “financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation, exclusive of property transferred, concealed, or removed with intent to hider, delay, or defraud [the debtor's] creditors, and property that may be exempted from property of the estate under section 522” of the Code.⁸⁵⁸ As noted by the Ninth Circuit Court of Appeals, “[t]his definition of insolvency is the traditional bankruptcy balance sheet test of insolvency: whether debts are greater than assets, at a fair valuation, exclusive of exempted property.”⁸⁵⁹ The balance sheet test applies in the analytical calculus under Section 548(a).⁸⁶⁰

Under the balance sheet test, the court “must assign a value to a debtor's assets and liabilities and then determine whether the value of the assets exceeds the value of the debtor's liabilities.”⁸⁶¹ Also, “[b]ecause [a] fair valuation of assets contemplates a conversion of assets into cash during a reasonable period of time, asset valuation ․ should be reduced by the value of the assets not readily susceptible to liquidation and payments of debts.”⁸⁶²

4. Analysis of the SAC's First Claim for Relief: Avoidance and Recovery of TLC's Payments to Taxing Authorities as Constructively Fraudulent Transfers Due to Insolvency

Through the First Claim for Relief pled in the SAC, Linco seeks to avoid $1,015,000.00 in payments made by TLC to the Taxing Authorities under Section 548(a)(1)(B)(ii)(I).⁸⁶³ Linco then seeks to recover the avoided transfer from Kim and Misook under Section 550(a)(1).⁸⁶⁴

a. TLC's Property Was Transferred to the Taxing Authorities

The preponderance of the evidence at trial established that TLC did in fact make transfers of money on deposit in its bank accounts to the IRS ($707,325.96) and to the CFTB ($453,000.00) totaling $1,160,325.96.⁸⁶⁵ The Court concludes that TLC's monetary transfers to the Taxing Authorities referenced in the First Claim for Relief were transfers of TLC's property.

b. The Transfers of TLC's Property to the Taxing Authorities Were Made Within Two Years of the Filing of the TLC Petition

The preponderance of the evidence established that TLC's monetary transfers to the Taxing Authorities referenced in the First Claim for Relief occurred between October 16, 2017, and December 30, 2018.⁸⁶⁶ The TLC Petition Date is October 8, 2019. The Court concludes that each and all the transfers by TLC to the Taxing Authorities referenced in the First Claim for Relief were made during the two-year period prior to the filing of the TLC Petition.

c. TLC Received Less than Reasonably Equivalent Value in Exchange for the Property Transferred to the Taxing Authorities

The transfers referenced in the First Claim for Relief were received by two different taxing authorities: the IRS and the CFTB. Differences in the federal and California tax codes governing the taxation of income generated by Subchapter S corporations like TLC requires careful consideration in the fraudulent conveyance calculus under Section 548(a)(1)(B)(i).

i. TLC Did Not Receive Reasonably Equivalent Value in Exchange for the $707,325.96 Transferred to the IRS

The preponderance of the evidence established that TLC is a Subchapter S corporation. As a result, all income, losses, deductions, and tax credits generated by TLC's business operations flowed through to its shareholders without creating any related federal tax liability for TLC.⁸⁶⁷

Consistent with TLC's Subchapter S election, neither the 2016 TLC federal income tax return prepared by Deloitte,⁸⁶⁸ the 2017 TLC federal income tax return prepared by Sun Ha,⁸⁶⁹ nor the 2018 TLC federal income tax return prepared by Ms. Moon,⁸⁷⁰ showed that TLC owed or paid any federal income taxes at all during those tax years. TLC simply received nothing of value in exchange for the $707,325.96 it transferred to the IRS during the two-year period prior to the filing of the TLC Petition. The preponderance of the evidence established that the value of the transfers made by TLC to the IRS only benefitted TLC's shareholders.⁸⁷¹

Schedule K-1 to the 2016 TLC federal income tax return prepared by Deloitte reported that:

•Kim was the owner of 80% of TLC's shares and received ordinary business income resulting from TLC's operations totaling $2,435,037.00;872 and

•Misook was the owner of the remaining 20% of TLC's shares and received ordinary business income resulting from TLC's operations totaling $608,759.00.873

The 2017 TLC federal income tax return prepared by Sun Ha reflects that Kim was the owner of 100% of TLC's shares, and that an ordinary business loss from TLC's operations passed through to Kim in that year of <-$3,403,861.00>.⁸⁷⁴ The resultant and subsequently filed 2017 IRS Form 1045 Application for Tentative Refund, seeking to generate a $1,364,764.00 tax refund by carrying back and applying the ordinary business loss from TLC's 2017 operations to amounts paid in tax years 2015 and 2016, was filed by Kim and Misook individually - - not TLC.⁸⁷⁵

The 2018 TLC federal income tax return prepared by Ms. Moon identifies Kim as the owner of 100% of TLC's shares.⁸⁷⁶ It also shows that TLC suffered an ordinary loss from 2018 business operations passed through to Kim in the amount of <-$2,398,222.00>.⁸⁷⁷

The Court concludes that the preponderance of the evidence established that as a Subchapter S corporation, TLC did not receive any value - - much less reasonably equivalent value - - in exchange for the $707,325.96 it transferred to the IRS during the two-year period prior to the TLC Petition Date.

ii. TLC Did Not Receive Reasonably Equivalent Value in Exchange for the $453,000.00 Transferred to the CFTB

Federal taxes are not imposed on the income of Subchapter S corporations, but a California state tax is imposed on income earned by Subchapter S corporations.⁸⁷⁸ The CFTB taxes “every S corporation that has California source income 1.5%” with a “minimum franchise tax ($800) due the first quarter of each accounting period.”⁸⁷⁹

Deloitte prepared the 2016 Form 100S California S Corporation Franchise or Income Tax Return for TLC.⁸⁸⁰ Like TLC's 2016 federal tax return, Schedule K-1 (100S) to the 2016 California Return showed that:

•Kim was the owner of 80% of TLC's shares;881 and

•Misook was the owner of the remaining 20% of TLC's shares.882

The 2016 California Return reflects that TLC owed $44,702.00 in state income tax for the year, along with another $958.00 in underpayment penalties, for a total amount due of $45,660.00.⁸⁸³

Sun Ha prepared the 2017 Form 100S California S Corporation Franchise or Income Tax Return for TLC.⁸⁸⁴ The 2017 California Return showed that Kim owned 100% of TLC's shares.⁸⁸⁵ The 2017 California Return also showed that TLC owed $800.00 in state income tax for the year, and another $113.00 in penalties and interest, for a total amount due of $913.00.⁸⁸⁶

Ms. Moon prepared the 2018 Form 100S California S Corporation Franchise or Income Tax Return for TLC.⁸⁸⁷ The 2018 California Return showed that Kim owned 100% of TLC's shares.⁸⁸⁸ The 2018 California Return also showed that TLC owed $800.00 in income tax for the year, and another $31.00 in penalties and interest, for a total amount due of $831.00.⁸⁸⁹

In summary, the TLC Petition Date is October 9, 2019. During the two-year period prior to the TLC Petition Date, TLC transferred $453,000.00 to the CFTB. During that same two-year period, TLC incurred California state taxes of just $913.00 in 2017 ⁸⁹⁰ and $831.00 in 2018,⁸⁹¹ for a total of $1,744.00. After reducing the $453,000.00 paid to the CFTB by the $1,744.00 in California state taxes TLC owed in 2017 and 2018, the transfers to the CFTB reduced TLC's assets by $451,256.00, an amount that would otherwise have been available to satisfy claims held by TLC's creditors. The Court concludes that satisfaction of the $1,744.00 in California state tax obligations is not reasonably equivalent value in exchange for the $453,000.00 TLC paid to the CFTB during the two-year period prior to the TLC Petition Date, particularly when analyzed from the standpoint of TLC's creditors at the time the transfers were made.

d. Under the Balance Sheet Test, the Transfers of TLC's Property to the Taxing Authorities Occurred While TLC Was Insolvent

The preponderance of the evidence at trial as to whether TLC was insolvent from a balance sheet perspective during the two-year period prior to the October 9, 2019, TLC Petition Date is summarized in the following table:

Date Source Assets Liabilities Insolvent? 12/31/2016 TLC 2016 Federal Tax Return 892 $9,700,005.00 $5,705,140.00 No. Assets exceeded liabilities by $3,994,865.00. 12/31/2017 TLC 2017 Federal Tax Return 893 $6,763,894.00 $6,917,898.00 Yes. Liabilities exceeded assets by $154,004.00. 12/31/2018 TLC 2018 Federal Tax Return 894 $3,496,320.00 $6,382,373.00 Yes. Liabilities exceeded assets by $2,886,053.00.

In keeping with the table above, the Court first concludes that the preponderance of the evidence established that TLC was solvent as of December 31, 2016. But TLC's status as a solvent company would change in the following year.

On September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan.⁸⁹⁵ The Court concludes that the preponderance of the evidence established that the BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017.⁸⁹⁶ After September 20, 2017, and more particularly between October 16, 2017 and December 18, 2017, TLC made payments to the Internal Revenue Service ($100,325.96) and the California Franchise Tax Board ($45,000.00) totaling $145,325.96.⁸⁹⁷ The Court concludes that the preponderance of the evidence established that those transfers by TLC to the Taxing Authorities occurred during the 2-year period prior to the October 8, 2019 TLC Petition Date, and occurred while TLC was insolvent under the balance sheet test.

The preponderance of the evidence further established that TLC's insolvent status under the balance sheet test continued, and deepened significantly, during 2018. By December 31, 2018, TLC's total liabilities of $6,382,373.00 outstripped its asset holdings of $3,496,320.00, leaving TLC insolvent by the sum of $2,886,053.00. Between January 3, 2018, and December 30, 2018, TLC made payments to the IRS ($607,000.00) and the CFTB ($408,000.00) totaling $1,015,000.00.⁸⁹⁸ The Court concludes that the preponderance of the evidence established that those transfers by TLC to the Taxing Authorities occurred during the 2-year period prior to the October 8, 2019, TLC Petition Date, and occurred while TLC was insolvent under the balance sheet test.

e. Value of the Property Transferred

The value of TLC's property received by the Taxing Authorities through transfers made during the 2-year period prior to the TLC Petition Date while TLC was insolvent under the balance sheet test, as proven by the preponderance of the evidence at trial, is summarized in the table below:

Taxing Authority 2017 2018 Total Value IRS $100,325.96 $607,000.00 $707,325.96 CFTB $45,000.00 $408,000.00 $453,000.00 GRAND TOTAL $1,160,325.96

f. Summary: The Transfers of TLC's Property to the Taxing Authorities Identified in the First Claim for Relief Are All Avoidable as Constructively Fraudulent Transfers Under Section 548(a)(1)(B)(ii)(I)

The Court concludes that all elements required to establish that TLC's transfers to the Taxing Authorities as referenced in the SAC's First Claim for Relief are avoidable as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I) have been proven by a preponderance of the evidence. All the transfers to the Taxing Authorities were transfers of TLC's property. All the transfers of TLC's property to the Taxing Authorities occurred within two years of the TLC Petition Date.⁸⁹⁹ TLC received less than reasonably equivalent value in exchange for the transfers of its property to the Taxing Authorities. More specifically, since TLC is a Subchapter S corporation, it received nothing of value at all in exchange for its transfer of $707,325.96 to the IRS. In exchange for the $453,000.00 TLC transferred to the CFTB, TLC received satisfaction of $1,744.00 in California state tax obligations - - just 0.385% of the total transferred to the CFTB. The BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017, and TLC remained insolvent throughout 2018. Resultantly, all the payments to the Taxing Authorities referenced in the SAC's First Claim for Relief occurred while TLC was insolvent under the balance sheet test.

Therefore, the Court concludes that all the transfers of TLC's property to the Taxing Authorities referenced in the SAC's First Claim for Relief should be, and are hereby, avoided as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I). The amount of the transfers avoided is calculated as follows:

Gross Transfers by TLC to the Taxing Authorities: $1,160,325.96 Less: California State Tax Owed by TLC to the CFTB: $ 1,744.00 Total Transfers to the Taxing Authorities Avoided Under Section 548(a)(1)(B)(ii)(I): $1,158,581.96

The remaining issue is from whom the $1,158,581.96 in avoided transfers can be recovered.

g. Under Section 550(a)(1), TLC's Avoided Transfers to the Taxing Authorities are Recoverable from Kim, But Not From Misook

The Ninth Circuit Court of Appeals has held that “[i]f a transfer is voidable under § 548, the debtor's trustee [in this case, Linco as the successor to TLC's trustee] may recover from either: ‘(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transfer.’ ”⁹⁰⁰ As the Ninth Circuit has explained ⁹⁰¹ :

The structure of the statute separates initial transferees and beneficiaries, on the one hand, from immediate or mediate transferees, on the other. The implication is that the entity for whose benefit the transfer was made is different from a transferee, immediate or otherwise.

“A reading of subsection (a)(1) in conjunction with the remainder of section 550 leads to the conclusion that the phrase ‘or the entity for whose benefit such transfer was made’ refers to those who receive a benefit as a result of the initial transfer from the debtor – not as the result of a subsequent transfer.”⁹⁰² Under Section 550(a)(1), the right to recover an avoided transfer from the initial transferee of the debtor, or from the entity for whose benefit the initial transfer was made, is absolute.⁹⁰³ Recovery from subsequent transferees under Section 550(a)(2) is limited by Section 550(b) to those cases where the subsequent transferee “did not accept the transfer for value, in good faith, and without knowledge of the transfer's voidability. Thus, the ‘good faith’ exception, or safe harbor, is only available to subsequent transferees.”⁹⁰⁴

It is undisputed, and the preponderance of the evidence has established, that all the monetary transfers referenced in the First Claim for Relief were made by TLC to the Taxing Authorities, not to Kim and/or Misook.⁹⁰⁵ The Court therefore concludes that the Taxing Authorities were the “initial transferees” with respect to those transfers under Section 550(a)(1), not Kim and/or Misook. The remaining and ultimate issue is whether Kim and/or Misook were the entities for whose benefit TLC's payments to the Taxing Authorities were made. Resolution of that issue establishes whether Kim and/or Misook are liable for the value of those transfers under Section 550(a)(1).

Because TLC is a Subchapter S corporation, it received no benefit of any kind from transferring $707,325.96 to the IRS, particularly at a point in time when TLC was insolvent. TLC did receive satisfaction of $1,744.00 in California state tax obligations, but it received no benefit at all from the additional $451,256.00 it transferred to the CFTB while TLC was insolvent.

Since the $1,158,581.96 in overpayments TLC made to the Taxing Authorities as a Subchapter S corporation during the two-year period preceding the TLC Petition Date did not provide any benefit at all to TLC, the preponderance of the evidence established that TLC was not the entity for whose benefit those transfers were made in the context of Section 550(a)(1). Those overpayments to the Taxing Authorities did, however, confer very significant tax benefits upon TLC's shareholders: elimination of any personal tax liability for TLC's shareholders resulting from the pass-through of TLC's business income to them in years when TLC was profitable;⁹⁰⁶ in years when TLC suffered operating losses, the benefit of a loss carryback against taxes the shareholders had paid in prior years generating a related tax refund;⁹⁰⁷ and ultimately the availability of tax refunds directly attributable to the overpayment of TLC's tax obligations.

The preponderance of the evidence established that during 2017 ⁹⁰⁸ and 2018,  ⁹⁰⁹ Kim owned 100% of TLC's stock. The preponderance of the evidence further established that in 2017 and 2018, Kim had unquestioned control over TLC's business and financial operations.⁹¹⁰ While Kim was TLC's sole shareholder with total control over TLC's business operations, TLC experienced multi-million dollar losses from business operations over two consecutive tax years,⁹¹¹ and had simultaneously made $1,158,581.96 in overpayments to the Taxing Authorities while TLC was insolvent.⁹¹² That put Kim, as TLC's sole shareholder, in position to use the pass-through loss carrybacks and overpayments to the Taxing Authorities to generate sizable tax refunds for his own benefit going forward. Sun Ha had already prepared and filed a 2017 IRS Form 1045 to carry back TLC's reported loss in 2017 seeking a refund of $1,364,764 in taxes paid in 2015 and 2016.⁹¹³ Kim indicated to Ms. Moon that the refund was “going to be his birthday gift.”⁹¹⁴

As the Ninth Circuit Court of Appeals has observed, when a corporate principal [Kim] misdirects company funds [$1,158,581.96 in tax overpayments while TLC was insolvent] directly to a third party [the Taxing Authorities] for personal gain [generating large future tax refunds as the sole shareholder of TLC, a Subchapter S corporation], “the principal is not a transferee at all but, rather, is the party for whose benefit the transfer was made” in the context of Section 550(a)(1).⁹¹⁵ The Court therefore concludes that under Section 550(a)(1), Kim was and is the entity for whose benefit transfers were made while TLC was insolvent in the form of overpayments to the Taxing Authorities totaling $1,158,581.96. Kim's liability for the full $1,158,581.96 value of those transfers is absolute under Section 550(a)(1).⁹¹⁶ Judgment will enter against Kim accordingly.

As to the question of Misook's liability under Section 550(a)(1), the preponderance of the evidence established that she did not own any shares in TLC when the overpayments to the Taxing Authorities were made.⁹¹⁷ Since Misook was not a TLC shareholder when the overpayments to the Taxing Authorities occurred, no related tax benefits passed through to her from TLC. Nor did the preponderance of the evidence establish that Misook had any input or control over TLC's business operations when the overpayments to the Taxing Authorities were made. Since Misook was not a TLC shareholder and did not have substantive input or control over TLC's business operations when TLC made the $1,158,581.96 in overpayments to the Taxing Authorities during the two-year period prior to the TLC Petition Date, she was not an entity for whose benefit those transfers to the Taxing Authorities were made. Resultantly, Misook is not liable for the value of those transfers under Section 550(a)(1). Judgment dismissing the First Claim for Relief as against Misook will enter accordingly.

4. Analysis of the SAC's Second Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Credit Cards as Constructively Fraudulent Transfers Due to Insolvency

The Second Claim for Relief pled by Linco in the SAC alleges that between January 3, 2018, and May 23, 2019, TLC made transfers from its BofA corporate bank account ending in 5743 that were used to pay outstanding balances on Kim's personal credit card accounts.⁹¹⁸ In the Second Claim for Relief, Linco contends that those payments are avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).⁹¹⁹

a. TLC's Property Was Used to Make Payments on Credit Cards Issued to Kim

The preponderance of the evidence at trial established that TLC did in fact make transfers from TLC's BofA corporate bank account ending in 5743 in payment of outstanding balances on Kim's personal credit card accounts.⁹²⁰ The Court concludes that the monetary transfers made by TLC in payment of outstanding balances on Kim's personal credit cards as referenced in the Second Claim for Relief were transfers of TLC's property.

b. The Transfers of TLC's Property Used to Make Payments on Kim's Credit Cards Were Allegedly Made Within Two Years of the TLC Petition Date

The transfers made from TLC's BofA corporate bank account ending in 5743 in payment of outstanding balances on Kim's personal credit card accounts as referenced in the Second Claim for Relief allegedly occurred on or after January 3, 2018.⁹²¹ The TLC Petition Date is October 8, 2019. The transfers from TLC's BofA corporate bank account ending in 5743 in payment of outstanding balances on Kim's personal credit card accounts as referenced in the Second Claim for Relief were allegedly made during the two-year period before the TLC Petition Date.

c. TLC Did Receive Reasonably Equivalent Value in Exchange for the Payments TLC Made on Kim's Credit Cards

The preponderance of the evidence established that Kim used the credit cards referenced in the Second Claim for Relief primarily to make business-related purchases for TLC, and also for some personal expenses. Panchal testified credibly that when Kim's monthly credit card statements were received and presented to TLC personnel for review, business-related charges were posted to TLC's books as business expenses. If Kim made personal charges, those personal charges were posted to TLC's books as a distribution to Kim.⁹²² On cross-examination at trial, Linco's expert witness, Mr. Bertsch, proved unable to defend his opinion that the credit card payments referenced in the Second Claim for Relief constituted fraudulent conveyances.⁹²³

The preponderance of the evidence established that in exchange for the payments TLC made toward outstanding balances on Kim's credit cards as referenced in the Second Claim for Relief, TLC received value in the form of business-related purchases made by Kim. Stated another way, TLC's payments on Kim's credit cards were primarily to reimburse Kim for business-related items he had purchased for TLC's benefit. To the extent that Kim made personal charges using those credit cards, the charges were properly accounted for by TLC personnel as distributions by TLC to Kim. In summary, the preponderance of the evidence established that TLC received “roughly the value it gave,”⁹²⁴ and thus reasonably equivalent value, in exchange for the payments it made toward outstanding balances on Kim's credit cards as referenced in the Second Claim for Relief.

d. Under the Balance Sheet Test, TLC's Payments on Kim's Credit Cards Allegedly Occurred While TLC Was Insolvent

The Court has determined, and reiterates here, that the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent under the balance sheet test.⁹²⁵ The transfers from TLC's BofA corporate bank account ending in 5743 in payment of outstanding balances on Kim's personal credit card accounts as referenced in the Second Claim for Relief allegedly occurred on or after January 3, 2018.⁹²⁶ As a result, the transfers from TLC's BofA corporate bank account ending in 5743 in payment of outstanding balances on Kim's personal credit cards as referenced in the Second Claim for Relief allegedly occurred while TLC was insolvent.

e. Value of the Property Transferred

The transfers that are the subject of the Second Claim for Relief are transfers made from TLC's corporate account ending in 5743 and applied to outstanding balances on four different credit card accounts issued to Kim personally.⁹²⁷ The preponderance of the evidence established that the total value of TLC's property transferred in making those credit card payments was $219,417.51.⁹²⁸

f. Summary

The preponderance of the evidence established that TLC received reasonably equivalent value in exchange for the payments it made toward the outstanding balances on Kim's credit cards as referenced in the Second Claim for Relief. Resultantly, Linco failed to carry its burden of proving an essential element of its claim that those credit card payments were constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I). Linco's Second Claim for Relief therefore fails as a matter of law. Judgment dismissing the Second Claim for Relief will enter accordingly.

5. Analysis of the SAC's Third Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Credit Card as Constructively Fraudulent Transfers Due to Insolvency

Linco's Third Claim for Relief pled in the SAC asserts that between January 10, 2018, and July 26, 2019, TLC made transfers from its corporate bank account at Chase Bank ending in 1610 that were used to pay outstanding balances on Kim's personal credit card accounts.⁹²⁹ In the Third Claim for Relief, Linco asserted that those payments were avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).⁹³⁰

a. TLC's Property Was Used to Make Payments on Credit Cards Issued to Kim

The preponderance of the evidence at trial established that TLC did in fact make transfers from its corporate bank account at Chase Bank ending in 1610 in payment of outstanding balances on Kim's personal credit card accounts.⁹³¹ The Court concludes that the monetary transfers made by TLC in payment of Kim's personal credit card accounts referenced in the Third Claim for Relief were transfers of TLC's property.

b. The Transfers of TLC's Property Used to Make Payments on Kim's Credit Cards Occurred Within Two Years of the TLC Petition Date

The transfers made from TLC's corporate bank account at Chase Bank ending in 1610 in payment of balances due on Kim's personal credit card accounts as referenced in the Third Claim for Relief occurred on or after January 10, 2018.⁹³² The TLC Petition Date is October 8, 2019. The preponderance of the evidence established that the transfers from TLC's corporate bank account at Chase Bank ending in 1610 in payment of Kim's personal credit card accounts as referenced in the Third Claim for Relief were made during the two-year period prior to the TLC Petition Date.

c. TLC Did Receive Reasonably Equivalent Value in Exchange for the Property Transfers Resulting from TLC's Payments on Kim's Credit Cards

The preponderance of the evidence established that Kim used the credit cards referenced in the Third Claim for Relief primarily to make business-related purchases for TLC, and also for some personal expenses. Panchal testified credibly that when Kim's monthly credit card statements were received and presented to TLC personnel for review, business-related charges were posted to TLC's books as business expenses. If Kim had made personal charges, those personal charges were posted to TLC's books as a distribution to Kim.⁹³³ On cross-examination at trial, Linco's expert witness, Mr. Bertsch, conceded that it was no longer his opinion that the credit card payments referenced in the Third Claim for Relief constituted fraudulent conveyances.⁹³⁴

The preponderance of the evidence established that in exchange for the payments TLC made toward the balances due on Kim's credit cards as referenced in the Third Claim for Relief, TLC received value in the form of business-related purchases made by Kim. Stated another way, TLC's payments on Kim's credit cards were primarily to reimburse Kim for business-related items he had purchased for TLC's benefit. To the extent that Kim made personal charges using those credit cards, the charges were properly accounted for by TLC personnel as distributions by TLC to Kim. In summary, the Court concludes that the preponderance of the evidence established that TLC received “roughly the value it gave,”⁹³⁵ and thus reasonably equivalent value, in exchange for making the credit card payments referenced in the Third Claim for Relief.

d. Under the Balance Sheet Test, TLC's Payments on Kim's Credit Cards Occurred While TLC Was Insolvent

The Court has determined, and reiterates here, that the preponderance of the evidence established that the BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017.⁹³⁶ The transfers from TLC's corporate bank account at Chase Bank ending in 1610 in payment of outstanding balances on Kim's personal credit card accounts as referenced in the Third Claim for Relief occurred on or after January 10, 2018.⁹³⁷ As a result, the credit card payments referenced in the Third Claim for Relief occurred while TLC was insolvent.

e. Value of the Property Transferred

The transfers from TLC's corporate bank account at Chase Bank ending in 1610 referenced in the Third Claim for Relief were applied to outstanding balances on several credit card accounts issued to Kim.⁹³⁸ The evidence at trial did not establish the precise amount of those credit card payments.⁹³⁹

f. Summary

Because the preponderance of the evidence established that TLC received reasonably equivalent value in exchange for the payments it made toward outstanding balances due on Kim's credit cards as referenced in the Third Claim for Relief, Linco failed to carry its burden of proving an essential element of its claim that those credit card payments were constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I). Linco's Third Claim for Relief therefore fails as a matter of law. Judgment dismissing the Third Claim for Relief will enter accordingly.

6. Analysis of the SAC's Fourth Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Credit Card as Constructively Fraudulent Transfers Due to Insolvency

Linco's Fourth Claim for Relief pled in the SAC alleged that between December 14, 2018, and July 9, 2019, TLC made transfers from its BofA corporate bank account ending in 8850 that were used to pay outstanding balances on Kim's personal credit card accounts.⁹⁴⁰ In the Fourth Claim for Relief, Linco asserted that those payments were avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).⁹⁴¹

a. TLC's Property Was Used to Make Payments on Credit Cards Issued to Kim

The preponderance of the evidence at trial established that TLC did in fact make transfers from TLC's BofA corporate bank account ending in 8850 in payment of outstanding balances on Kim's personal credit card accounts.⁹⁴² The Court concludes that the monetary transfers made by TLC in payment of outstanding balances on Kim's personal credit card accounts as referenced in the Fourth Claim for Relief were transfers of TLC's property.

b. The Transfers of TLC's Property Used to Make Payments on Kim's Credit Cards Were Made Within Two Years of the TLC Petition Date

The transfers made from TLC's BofA corporate bank account ending in 8850 and applied to outstanding balances on Kim's personal credit card accounts as referenced in the Fourth Claim for Relief occurred on or after December 14, 2018.⁹⁴³ The TLC Petition Date is October 8, 2019. The transfers from TLC's BofA corporate bank account ending in 8850 and applied to outstanding balances on Kim's personal credit card accounts as referenced in the Fourth Claim for Relief occurred during the two-year period prior to the filing of the TLC Petition.

c. TLC Did Receive Reasonably Equivalent Value in Exchange for the Property Transfers Resulting from TLC's Payments on Kim's Credit Cards

The preponderance of the evidence established that Kim used the credit cards referenced in the Fourth Claim for Relief primarily to make business-related purchases for TLC, and also for some personal expenses. Panchal testified credibly that when Kim's monthly credit card statements were received and presented to TLC personnel for review, business-related charges were posted to TLC's books as business expenses, and if Kim had made personal charges, those personal charges were posted to TLC's books as a distribution to Kim.⁹⁴⁴ On cross-examination at trial, Linco's expert witness, Mr. Bertsch, conceded that it was no longer his opinion that the credit card payments referenced in the Fourth Claim for Relief constituted fraudulent transfers.⁹⁴⁵

The preponderance of the evidence established that in exchange for the payments TLC made toward outstanding balances due on Kim's credit cards as referenced in the Fourth Claim for Relief, TLC received value in the form of the business-related purchases made by Kim. Stated another way, TLC's payments on Kim's credit cards were primarily to reimburse Kim for business-related items he had purchased for TLC's benefit. To the extent that Kim made personal charges using those credit cards, the charges were properly accounted for by TLC personnel as distributions by TLC to Kim. In summary, the Court concludes that the preponderance of the evidence at trial established that TLC received “roughly the value it gave,”⁹⁴⁶ and thus reasonably equivalent value, in exchange for making the credit card payments referenced in the Fourth Claim for Relief.

d. Under the Balance Sheet Test, TLC's Payments on Kim's Credit Cards Occurred While TLC Was Insolvent

The Court has determined, and reiterates here, that the preponderance of the evidence established that the BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017.⁹⁴⁷ The transfers from TLC's BofA corporate bank account ending in 8850 that were applied to outstanding balances on Kim's personal credit card accounts as referenced in the Fourth Claim for Relief occurred on or after December 14, 2018.⁹⁴⁸ As a result, the credit card payments referenced in the Fourth Claim for Relief occurred while TLC was insolvent.

e. Value of the Property Transferred

The transfers from TLC's BofA corporate bank account ending in 8850 referenced in the Fourth Claim for Relief were applied to outstanding balances on several credit card accounts issued to Kim.⁹⁴⁹ The evidence at trial did not establish the precise amount of those credit card payments.⁹⁵⁰

f. Summary

Because TLC received reasonably equivalent value in exchange for the payments TLC made toward outstanding balances on Kim's credit cards as referenced in the Fourth Claim for Relief, Linco failed to carry its burden of proving an essential element of its claim that those credit card payments were constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I). The Court concludes that Linco's Fourth Claim for Relief therefore fails as a matter of law. Judgment dismissing the Fourth Claim for Relief will enter accordingly.

7. Analysis of the SAC's Fifth Claim for Relief: Avoidance and Recovery of Payments Made by TLC to Unknown ROE Defendant Chinese Entities as Constructively Fraudulent Transfers Due to Insolvency

Linco's Fifth Claim for Relief pled in the SAC asserts that between December 2018, and June 2019, TLC made outbound international wire transfers from its BofA corporate bank accounts “to various unknown Chinese entities” totaling $3,494,348.04.⁹⁵¹ In the Fifth Claim for Relief, Linco alleged that those payments were avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).

a. The Wire Transfers Referenced in the Fifth Claim for Relief Were Transfers of TLC's Property

The preponderance of the evidence at trial established that TLC did in fact make transfers in the form of outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 totaling $3,656,152.03.⁹⁵²

The Court concludes that the outgoing wires to China referenced in the Fifth Claim for Relief were transfers of TLC's property. The Court also notes that while the Fifth Claim for Relief suggests that TLC's outgoing wires to China were made “to various unknown Chinese entities[,]”⁹⁵³ the evidence presented at trial actually identifies the recipient of each of the 68 wire transfers by name. In fact, the recipients of the wire transfers are identified by name in Linco's post-trial brief.⁹⁵⁴

b. The Transfers of TLC's Property Resulting from the Wire Transfers Referenced in the Fifth Claim for Relief Occurred Within Two Years of the Filing of the TLC Petition

The preponderance of the evidence established that the 68 outbound international wire transfers to China from TLC's corporate BofA accounts ending in 5743 and 8850 referenced in the Fifth Claim for Relief occurred between November 20, 2018, and June 24, 2019.⁹⁵⁵ The TLC Petition Date is October 8, 2019. The Court concludes that each and all of the transfers resulting from the 68 outbound international wire transfers to China from TLC's corporate BofA accounts ending in 5743 and 8850 were made during the two year period prior to the filing of the TLC Petition.

c. TLC Received Less than Reasonably Equivalent Value in Exchange for the Property Transferred via the Wire Transfers Referenced in the Fifth Claim for Relief

The trial record plainly identifies the Chinese entities who received the 68 outbound international wire transfers to China from TLC's corporate BofA accounts ending in 5743 and 8850 referenced in the Fifth Claim for Relief.⁹⁵⁶ There is scant evidence, though, as to why those wire transfers totaling $3,656,152.03 were made, or what (if anything) TLC received in exchange.

Panchal testified that while he was employed at TLC, payments to China reflected on bank statements would routinely be posted as payments to vendors.⁹⁵⁷ He also conceded that the majority of the wire transfers to Chinese recipients referenced in the Fifth Claim for Relief occurred after his employment at TLC ended in November 2018.⁹⁵⁸

Linco's representative, Ms. Chen, testified credibly that while she was able to determine that TLC had transferred over $3 million to entities located in China between December 2018 and June 2019, she could not confirm whether or not the proceeds from those wire transfers had been paid to TLC's vendors.⁹⁵⁹ Ms. Chen noted that no containers of inventory were shipped to TLC from Chinese vendors during that time period.⁹⁶⁰ She also acknowledged that she had no information as to whether Kim had a bank account in China where the money sent by wire transfer might have been received.⁹⁶¹

The trial record suggests that Kim is the person most likely to know exactly why money was wired out of TLC's BofA corporate bank accounts on 68 different occasions between November 20, 2018, and June 24, 2019, in the total amount of $3,656,152.03, and what TLC received in exchange. But Kim was not deposed prior to trial. Nor did Kim testify at trial.

Having carefully examined the trial record, the Court concludes that the preponderance of the evidence establishes that 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 totaling $3,656,152.03 were sent to various recipients in China between November 20, 2018, and June 24, 2019.⁹⁶² But there is insufficient record evidence to establish that TLC actually received anything of value in exchange for those transfers, even when the record is viewed under the preponderance of the evidence standard. The Court concludes that, on the record developed by the parties who appeared at trial, the preponderance of the evidence shows that TLC did not receive reasonably equivalent value in exchange for the wire transfers detailed in the Fifth Claim for Relief.

d. Under the Balance Sheet Test, the Wire Transfers Referenced in the Fifth Claim for Relief Occurred While TLC Was Insolvent

The Court has previously determined, and reiterates here, that the preponderance of the evidence established that the BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017.⁹⁶³ The 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 totaling $3,656,152.03 were sent to various recipients in China between November 20, 2018, and June 24, 2019.⁹⁶⁴ As a result, the Court concludes that each and all of those wire transfers occurred while TLC was insolvent.

e. Value of the Property Transferred

The 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 that are the subject of the Fifth Claim for Relief pled in the SAC resulted in the transfer of money from TLC's BofA corporate accounts ending in in 8850 and 5743 to various recipients in China between November 20, 2018, and June 24, 2019. The value of the money transferred is $3,656,152.03.⁹⁶⁵

f. Summary: The Transfers of TLC's Property Resulting From Wire Transfers to Recipients in China as Referenced in the Fifth Claim for Relief Are Avoidable as Constructively Fraudulent Transfers Under Section 548(a)(1)(B)(ii)(I)

The elements required to establish that wire transfers referenced in the SAC's Fifth Claim for Relief are avoidable as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I) were borne out by a preponderance of the evidence, at least on the record developed by the parties who appeared at trial. All of those wire transfers were transfers of TLC's property. All of the wire transfers of TLC's property to the initial transferees in China occurred within two years of the TLC Petition Date of October 8, 2019.⁹⁶⁶ The trial record developed by the parties who appeared at trial suggests that TLC received less than reasonably equivalent value in exchange for the transfers of its property resulting from those wire transfers. The BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017, and TLC remained insolvent thereafter. Resultantly, all of the wire transfers referenced in the SAC's Fifth Claim for Relief occurred while TLC was insolvent under the balance sheet test. The Court therefore concludes that all of the transfers of TLC's property pursuant to the wire transfers referenced in the Fifth Claim for Relief are avoidable as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I), at least under the preponderance of the record evidence developed by the parties who appeared at trial.

The following table identifies the initial transferee as to each of the 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 that are the subject of the Fifth Claim for Relief pled in the SAC, and sets forth the amount each initial transferee received from TLC pursuant to those wire transfers during the two years prior to the TLC Petition Date ⁹⁶⁷ :

Amount(s) Total Amount Name of Initial TLC Date(s) of TLC Received by Initial Received by Transferee BofA Account # Transfers Transferee Initial Transferee WSFOTOS Co., Limited 5743 11/20/2018 $11,040.40 $11,040.40 Ningbo Joan Import and 5743 11/20/2018 $ 99,990.40 Export 5743 11/27/2018 $199,990.40 8850 12/11/2018 $299,990.40 8850 12/31/2018 $250,000.00 8850 1/7/2019 $149,990.40 8850 1/7/2019 $ 9,990.40 8850 2/4/2019 $ 49,990.40 8850 2/4/2019 $ 99,990.40 8850 2/19/2019 $169,990.40 8850 3/18/2019 $149,990.40 8850 4/1/2019 $149,990.40 8850 4/3/2019 $ 50,000.00 8850 4/16/2019 $199,990.40 8850 4/29/2019 $199,990.40 8850 5/13/2019 $189,990.40 8850 5/28/2019 $ 9,990.40 8850 6/10/2019 $ 99,990.40 8850 6/24/2019 $149,990.40 $2,529,846.40 Shangyu Shenghui 5743 11/20/2018 $49,990.40 Photograph 8850 12/12/2018 $49,990.40 8850 12/31/2018 $39,990.40 8850 5/13/2019 $19,990.40 8850 5/28/2019 $19,990.40 $179,952.00 Fu Wei 5743 11/20/2018 $782.79 $782.79 Fuan Yuzhneng Electric Motors 5743 11/26/2018 $7,990.40 $7,990.40 Chen Yunyue 5743 11/26/2018 $4,000.00 8850 12/27/2018 $10,000.00 8850 2/22/2019 $4,000.00 $18,000.00 Classic Quality Lighting 5743 11/26/2018 $14,990.40 8850 12/18/2018 $14,990.40 $29,980.80 Hong Kong Deeky 5743 11/27/2018 $29,990.40 International 8850 12/11/2018 $39,990.40 8850 12/14/2018 $29,990.40 $99,971.20 Changshou Foreign Trade Co. 5743 11/27/2018 $11,590.40 $11,590.40 Nantong Toptex Co., Ltd. 5743 11/27/2018 $29,990.40 8850 3/5/2019 $19,990.40 8850 4/2/2019 $19,990.40 5743 5/20/2019 $19,990.40 $89,961.60 LV Yanqiang 5743 11/28/2018 $3,770.40 $3,770.40 Lanxi City Wuxian 5743 12/3/2018 $49,990.40 Fengguan 8850 12/12/2018 $49,990.40 8850 1/7/2019 $39,990.40 8850 2/22/2019 $40,000.00 8850 4/29/2019 $39,990.40 8850 6/24/2019 $39,990.40 $259,952.00 Xiamen Jinmao Logistics 5743 12/3/2018 $9,990.40 Co. 8850 12/14/2018 $9,990.40 8850 2/4/2019 $9,990.40 8850 5/28/2019 $9,990.40 $39,961.60 Taizhou Longsheng 5743 12/3/2018 $24,990.40 Import 8850 2/4/2019 $24,990.40 8850 5/13/2019 $ 9,990.40 $59,971.20 Chi Lili 5743 12/5/2018 $4,000.00 8850 12/13/2018 $3,000.00 8850 12/18/2018 $3,000.00 8850 12/20/2018 $2,000.00 8850 1/4/2019 $3,000.00 $15,000.00 JLIP Group Co., Ltd. 5743 12/6/2018 $13,467.24 8850 12/28/2018 $ 9,990.40 $23,457.64 Puitan Duorong Optics 8850 12/13/2018 $49,990.40 Electrical 8850 12/31/2018 $39,990.40 8850 3/5/2019 $39,990.40 8850 3/20/2019 $49,990.40 8850 4/2/2019 $49,990.40 $229,952.00 Hangzhou Sky-Ing Group 8850 12/28/2018 $14,990.40 8850 4/8/2019 $19,990.40 $34,980.80 HK Classic Quality Lighting 8850 2/4/2019 $9,990.40 $9,990.40 TOTAL OF ALL WIRE TRANSFERS AVOIDABLE AS CONSTRUCTIVELY FRAUDULENT UNDER SECTION 548(a)(1) (B)(ii)(I) $3,656,152.03

The remaining issue is whether and from whom the $3,656,152.03 in wire transfers avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I) might be recovered.

g. TLC's Property, Transferred Out of TLC's Bank Accounts in the United States via Wire Transfers Originating in the United States and Avoidable as Constructively Fraudulent Transfers Under Section 548(a)(1)(B)(ii)(I), are Recoverable From the Initial Transferees in China Under Section 550(a)(1).

As noted previously, the Ninth Circuit Court of Appeals has held that “[i]f a transfer is voidable under § 548, the debtor's trustee [in this case, Linco as the successor to TLC's trustee] may recover [under § 550] from either: ‘(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transfer.’ ”⁹⁶⁸ In the Fifth Claim for Relief pled in the SAC, Linco seeks to recover the $3,656,152.03 in wire transfers made from TLC's corporate BofA accounts ending in 5743 and 8850 from the recipients of the proceeds of those wire transfers as initial transferees. Under Section 550(a)(1), the right to recover an avoided transfer from the initial transferee of the debtor, or from the entity for whose benefit the initial transfer was made, is absolute.⁹⁶⁹

Absolutes often bend toward exceptions.

All of the transfers referenced in the SAC's Fifth Claim for Relief, avoidable as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I), involved wire transfers from TLC's BofA bank accounts that originated in the United States with the initial transferees receiving the related proceeds in China.⁹⁷⁰ The Court must therefore consider whether extraterritorial application of Sections 548 and 550 is required if the proceeds from those wire transfers are to be recovered from the initial transferees in China.⁹⁷¹

“United States law governs domestically but does not rule the world.”⁹⁷² In the absence of a clearly expressed congressional intent to the contrary, “federal laws will be construed to have only domestic application.”⁹⁷³ Resultantly, the presumption against extraterritoriality bars non-domestic application of a statute unless “Congress has affirmatively and unmistakably instructed that the statute will do so.”⁹⁷⁴ “When a statute gives no clear indication of an extraterritorial application, it has none.”⁹⁷⁵ However, “an express statement of extraterritoriality is not essential” and “[c]ontext” has occasionally been “dispositive.”⁹⁷⁶

As explained by the court in Zetta Jet ⁹⁷⁷ :

The Supreme Court has adopted a “two-step framework for analyzing extraterritoriality issues.” Nabisco, 579 U.S. at 337. “At the first step, [courts] ask whether the presumption against extraterritoriality has been rebutted--that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.” Id. “If the statute is not extraterritorial, then at the second step [courts] determine whether the case involves a domestic application of the statute, and [courts] do this by looking to the statute's ‘focus.’ ” Id. “If the conduct relevant to the statute's focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.” Id.

As the Zetta Jet court discussed at length, in conducting the first step of the Nabisco analysis regarding extraterritoriality “courts have reached different outcomes as to whether § 548 applies extraterritorially.”⁹⁷⁸ This Court has carefully considered and adopts the Zetta Jet court's analysis under the first prong of the Nabisco extraterritoriality test. The presumption against extraterritoriality in the application of Sections 548 and 550 is a strong one, and as was the case in Zetta Jet, that presumption has not been rebutted by Linco in this adversary proceeding.

The second step in the Nabisco calculus regarding the extraterritorial application of Sections 548 and 550 is to determine whether this adversary proceeding truly “involves a domestic application of [Sections 548 and 550]”⁹⁷⁹ as opposed to an impermissible extraterritorial application of those statutory provisions. As explained by the court in Zetta Jet ⁹⁸⁰ :

If the statute is not extraterritorial, then at the second step [courts] determine whether the case involves a domestic application of the statute, and [courts] do this by looking to the statute's ‘focus.’ ” Nabisco, 579 U.S. at 337. “If the conduct relevant to the statute's focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.” Id. Of course, it is “a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States.” Morrison, 561 U.S. at 266. Accordingly, “the presumption against extraterritorial application” is not “a craven watchdog” that “retreat[s] to its kennel whenever some domestic activity is involved in the case.” Id.

The Zetta Jet court engaged in a thoughtful and thorough analysis of decisions considering whether and when the facts of a case present a domestic application of Sections 548 and 550 under the second prong of the Nabisco test ⁹⁸¹ :

In discussing these issues, the parties discuss two cases. First, in Arcapita, it was recognized that “the focus of the [Bankruptcy Code's] avoidance and recovery provisions is the initial transfer that depletes the property that would have become property of the estate.” In re Arcapita Bank B.S.C.(C), 575 B.R. 229, 244 (Bankr. S.D.N.Y. 2017), aff'd sub nom. In re Arcapita Bank B.S.C.(C), 640 B.R. 604 (S.D.N.Y. 2022) [․](quoting In re Ampal-Am., 562 B.R. 601, 613 (Bankr. S.D.N.Y. 2017)). [․]

Second, Picard held that “[t]he relevant conduct... is the debtor's fraudulent transfer of property, not the transferee's receipt of property.” Picard, 917 F.3d at 100.982 Thus, “[w]hen a domestic debtor commits fraud by transferring property from a U.S. bank account, the conduct that § 550(a) regulates takes place in the United States.” Id. Picard acknowledged that its holding relied on “two nexuses” between the relevant transactions and “the United States: (1) the debtor is a domestic entity, and (2) the alleged fraud occurred when the debtor transferred property from U.S. bank accounts.” Id. at 99 n.9. The Second Circuit did not address whether a transfer would be domestic if only one of these two factors was present. Id.

[․]

Because the focus of § 548 is on the debtor-transferor and the transfer it makes, it is determined that the use of U.S. correspondent banks does not make a transfer domestic for purposes of § 548 unless at least one of the Picard factors is present. In this context, either the debtor must be a United States entity, or the debtor must have transferred property from United States bank accounts. It is not necessary to address the question reserved in Picard, which was the status of a transfer where only one of the Picard factors was present. Here, neither factor is present.

The Court concludes that when the second prong of the Nabisco test is properly applied to the preponderance of the evidence developed by the parties who participated at trial in this adversary proceeding, the relief sought by Linco involves a permissible domestic application of Sections 548 and 550, not an impermissible extraterritorial application of those sections of the Code.

The focus of the statutory avoidance and recovery provisions of Sections 548 and 550 is the initial transfer that depletes the property that would have become property of the estate.⁹⁸³ As noted previously, the preponderance of the evidence, at least on the record developed by the parties who appeared at trial, showed that the 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 to initial transferees in China totaling $3,656,152.03 are avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).

The relevant conduct in the avoidance and recovery analysis under Sections 548 and 550 in this adversary proceeding is TLC's fraudulent transfer of $3,656,152.03 via 68 outbound international wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743, not the receipt of the proceeds from those wire transfers by the initial transferees in China.⁹⁸⁴ When a domestic debtor like TLC makes constructively fraudulent transfers of property from a bank account in the United States via wire transfer initiated in the United States, “the conduct that § 550(a) regulates takes place in the United States.”⁹⁸⁵ In this adversary proceeding, it is undisputed that TLC is a domestic entity. It is also undisputed that the alleged fraudulent conveyances referenced in the Fifth Claim for Relief occurred when TLC transferred $3,656,152.03 out of its BofA corporate bank accounts in the United States ending in 8850 and 5743 via wire transfers initiated in the United States directed to initial transferees in China. Both of the factual nexuses identified by the Second Circuit Court of Appeals as support for its decision in Picard are satisfied by the preponderance of the evidence developed in this adversary proceeding.⁹⁸⁶

The 68 wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 to initial transferees in China totaling $3,656,152.03 as detailed in the Fifth Claim for Relief were all domestic transfers under the second prong of the Nabisco test. Resultantly, the Court concludes that recovery of the value of those transfers from the initial transferees in China under Section 550(a)(1) is a permissible domestic application of that section of the Code.

But paragraph 33 of the SAC ⁹⁸⁷ reads:

33. The true names and capacities of ROE CORPORATIONS XI through XX, inclusive, are unknown to Plaintiff, who therefore sue such Defendants by these fictitious names. Plaintiff is informed and believes that each of these Defendants are responsible in some manner for the events and happenings referred to, and damages caused thereby to Plaintiff as alleged herein. Plaintiff will seek leave of this Court to amend its Complaint to insert true names and capacities when such Defendants have been ascertained to join such Defendants in this action.

This adversary commenced on October 8, 2020.⁹⁸⁸ Linco filed a discovery plan with the Court on April 2, 2021, setting the close of discovery for September 10, 2021.⁹⁸⁹ Subsequently, the Court entered an Order Regarding Pretrial and Trial Matters, extending the close of discovery to November 24, 2021.⁹⁹⁰ On November 5, 2021, Linco filed a motion to further extend the discovery cutoff,⁹⁹¹ which was granted by the Court by order dated December 3, 2021.⁹⁹² The discovery deadline was extended through April 1, 2022, with the Court's admonition that “[t]here will be no more extensions of the discovery periods in this proceeding absent exigent circumstances satisfactory to the Court.”⁹⁹³ The SAC was filed on March 1, 2022, when only 30 days remained before the discovery deadline.⁹⁹⁴

At some point during the discovery process, Linco obtained records relating to TLC's BofA corporate bank accounts ending in 8850 and 5743 from which the wire transfers to Chinese recipients were made.⁹⁹⁵ Those bank records contained summaries of all 68 of the wire transfers referenced in the Fifth Claim for Relief, including the name of the Chinese entity that received each wire transfer.⁹⁹⁶ Despite the representations made in paragraph 33 of the SAC, Linco never sought leave of the Court to further amend the SAC to insert true names and capacities of the Chinese entities who received the wire transfers as initial transferees. At no time prior to trial did Linco serve any of the Chinese entities who received the wire transfers as initial transferees with a copy of a summons and the SAC, alerting them to the fraudulent transfer claims advanced against them by Linco.⁹⁹⁷ The trial in this adversary proceeding was conducted without naming as parties the Chinese entities who received the wire transfers as initial transferees, without serving them with a summons and copy of the SAC, and without affording them any opportunity to appear and defend their interests by offering evidence of what value (if any) they provided to TLC in exchange for the wire transfer proceeds.

Viewed in a vacuum, this immense trial record might eke out a prima facie case for avoidance of the 68 wire transfers as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), and also for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1). But it is irrefutable that none of those Chinese entities were ever actually named as defendants in this adversary proceeding, served with notice, or otherwise afforded an opportunity to respond to the claims Linco lodged against them in the SAC. The United States Supreme Court has stated that it is “[b]eyond doubt [that] a prospective party cannot fairly be required to answer an amended pleading not yet permitted, framed, and served.”⁹⁹⁸ The Court is mindful that the liability of immediate transferees of fraudulent conveyances avoided under Section 548(a)(1)(B)(ii)(I) is “absolute” under Section 550(a)(1).⁹⁹⁹ But liability cannot be imposed upon the Chinese entities who received the wire transfers as initial transferees through the simple expedient of entering judgment avoiding and recovering the value of the wire transfers as constructively fraudulent conveyances now, and then amending the SAC to add the Chinese entities as parties to this adversary proceeding. The Supreme Court has plainly stated that when a defendant is not afforded a proper opportunity to respond to litigation claims, judgment against the defendant cannot be entered properly “the very first moment [their] personal liability was legally at issue. Procedure of this style has been questioned even in systems, real and imaginary, less concerned than ours with the right to due process.”¹⁰⁰⁰

As to the Fifth Claim for Relief, this Court concludes that entry of judgment avoiding the 68 wire transfers as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), and/or entry of judgment for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1), would violate the most fundamental tenet of due process of law: notice and the opportunity to be heard.¹⁰⁰¹ This Court will not be party to such a due process violation. Accordingly, judgment will enter dismissing the Fifth Claim for Relief.

8. Analysis of the SAC's Sixth Claim for Relief: Avoidance and Recovery of Inventory Transfers Made by TLC to LKimmy as Constructively Fraudulent Transfers Due to Insolvency

Linco's Sixth Claim for Relief pled in the SAC generally alleges that in and after January 2019, TLC “purportedly left $657, 822.00 in worthless inventory at its Acacia Warehouse in California” and transferred inventory worth $13,406,883.00 to LKimmy, in exchange for which TLC did not receive reasonably equivalent value. In the Sixth Claim for Relief, Linco asserted that those transfers of TLC's inventory assets to LKimmy were avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I).

a. The Inventory Transfers Referenced in the Sixth Claim for Relief Were Transfers of TLC's Property

The LKimmy Articles were filed with the Nevada Secretary of State on October 19, 2018.¹⁰⁰² The preponderance of the evidence also established that when the LKimmy Articles were filed, LKimmy lacked sufficient capital to finance the purchase of significant levels of inventory.¹⁰⁰³ Hyunjune testified credibly that TLC transferred “most or all” of its inventory assets to LKimmy for LKimmy's use in its business operations.¹⁰⁰⁴ The preponderance of the evidence showed that the inventory transferred to LKimmy was TLC's property.

b. The Transfers of TLC's Inventory Assets to LKimmy Referenced in the Sixth Claim for Relief Occurred Within Two Years Prior to the TLC Petition Date

LKimmy was created on October 19, 2018.¹⁰⁰⁵ The TLC Petition Date is October 8, 2019, less than a year after LKimmy was created. The preponderance of the evidence established that all transfers of TLC's inventory assets to LKimmy necessarily occurred within the two-year period prior to the TLC Petition Date.

c. TLC Received Less than Reasonably Equivalent Value From LKimmy in Exchange for the Inventory TLC Transferred to LKimmy During the Two Years Prior to the TLC Petition Date

The preponderance of the evidence at trial established that from LKimmy's creation on October 19, 2018, until sometime in November or December of 2018, LKimmy did not pay anything at all in exchange for the inventory transferred to it by TLC when that inventory was received by LKimmy.¹⁰⁰⁶ Hyunjune's credible testimony established that LKimmy did not pay anything at all in exchange for the inventory transferred to it by TLC until after the inventory was sold.¹⁰⁰⁷

The preponderance of the evidence further established that between LKimmy's incorporation on October 19, 2018, and mid-January 2019, TLC transferred inventory to LKimmy with a gross invoiced value of $5,919,239.06.¹⁰⁰⁸ The related inventory invoices issued by TLC to LKimmy afforded substantial discounts to LKimmy, with reductions of 10% for rent and storage, 10% for defective inventory, and for a 13% service charge for a total reduction of 33.33%.¹⁰⁰⁹ Those discounts total $1,973,079.68, leaving $3,946,159.38 as the net amount TLC charged for the inventory assets TLC transferred to LKimmy. The preponderance of the evidence revealed no commercially reasonable basis for any of those discounts.

Initially, the preponderance of the evidence established that there was no commercially reasonable basis for the 10% rent and storage discount. TLC had purchased the inventory, stored it at the Donovan Way Property, entered into the Donovan Way Sublease, then transferred title to the inventory to LKimmy without the need to relocate the inventory. LKimmy did not pay any related rent or storage charges to TLC.¹⁰¹⁰ Next, there was no substantial evidence to suggest that anywhere near 10% of the inventory TLC purchased and then transferred to LKimmy was defective. To the contrary, LKimmy's 2018 and 2019 income tax returns showed returns and allowance of “$0.”¹⁰¹¹ LKimmy's 2019 tax return reflects an inventory loss from business operations of $231,558.00,¹⁰¹² or just 1.5% of LKimmy's 2019 gross sales of $16,095,023.00.¹⁰¹³ Nor was there any credible evidence that TLC ever actually imposed a 13% “service charge” on the inventory it transferred to LKimmy, what the “service charge” was for, or why a related discount against the gross value of the inventory TLC transferred to LKimmy was warranted.

Based upon the evidence presented at trial, the Court concludes that the reasonable value of the inventory TLC transferred to LKimmy between LKimmy's creation on October 19, 2018, and the filing of the TLC Petition on October 8, 2019, is appropriately calculated as follows:

Average of Independent Prebankruptcy Inventory Valuations 1014: $8,319,712.33 Less: Inventory Reported Per TLC Bankruptcy 1015: $ 579,131.31 Net Value of Inventory Conveyed To LKimmy by TLC Prior to Bankruptcy: $7,740,581.02

The preponderance of the evidence established that LKimmy did remit some payments to TLC in exchange for the inventory LKimmy received from TLC.¹⁰¹⁶ The Court notes that the payments from LKimmy to TLC do not match up precisely with the invoices TLC issued to LKimmy. But the preponderance of the evidence established that LKimmy did pay a total of $4,216,630.27 in exchange for the inventory LKimmy received from TLC.¹⁰¹⁷ When asked if she disputed the fact that LKimmy had remitted that sum to TLC in exchange for the inventory provided to LKimmy, Linco's witness, Ms. Chen, simply replied: “No.”¹⁰¹⁸

The delta between the value of inventory TLC transferred to LKimmy prior to bankruptcy ($7,740,581.02) and the amount paid by LKimmy to TLC in exchange for that inventory ($4,216,630.27) is $3,523,950.75. Put another way, when TLC transferred its inventory assets to LKimmy during the two years prior to TLC's bankruptcy, LKimmy paid TLC just 54.47% of the fair value of the inventory LKimmy received.

When all of the circumstances surrounding TLC's inventory asset transfers to LKimmy during the two years prior to the TLC Petition Date are considered from the point of view of TLC's creditors at the time that the inventory transfers occurred, the Court concludes that TLC did not receive anything at all - - much less reasonably equivalent value - - from LKimmy in exchange for the inventory assets TLC gave up. Even when the payments TLC ultimately received from LKimmy well after the inventory transfers occurred are considered, TLC did not “get roughly the value it gave” in exchange for the inventory assets TLC transferred to LKimmy. TLC received only 54.47% of fair value in exchange for the inventory TLC conveyed to LKimmy, a shortfall of $3,523,950.75. The Court concludes that in the Section 548(a)(1)(B)(ii)(I) analytical calculus, the preponderance of the evidence established that TLC did not receive reasonably equivalent value from LKimmy in exchange for the inventory assets TLC transferred to LKimmy during the two years prior to the TLC Petition Date.

d. Under the Balance Sheet Test, the Transfers of TLC's Inventory Assets to LKimmy Occurred While TLC Was Insolvent

The Court has previously determined, and reiterates here, that the preponderance of the evidence established that the BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017, and remained insolvent thereafter.¹⁰¹⁹ LKimmy was created on October 19, 2018.¹⁰²⁰ The TLC Petition Date is October 8, 2019, less than a year after LKimmy was created. The preponderance of the evidence established that all transfers of TLC's inventory assets to LKimmy occurred while TLC was insolvent.

e. Value of the Inventory Assets TLC Transferred to LKimmy

The Court has previously fixed the value of the inventory TLC conveyed to LKimmy during the two year period prior to the TLC Petition Date at $7,740,581.02. The preponderance of the evidence further established that LKimmy subsequently paid TLC the sum of $4,216,630.27 in exchange for that inventory. From the point of view of TLC's creditors, the transfer of TLC's inventory assets to LKimmy diminished TLC's prepetition asset holdings by $3,523,950.75.

f. Summary

The Court concludes that the preponderance of the evidence established all elements required to render TLC's inventory asset transfers to LKimmy, as referenced in the SAC's Sixth Claim for Relief, avoidable as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I). All of those inventory transfers by TLC to LKimmy were transfers of TLC's property. Since LKimmy was first created on October 19, 2018,¹⁰²¹ all transfers of TLC's inventory assets to LKimmy necessarily occurred within two years of the TLC Petition Date of October 8, 2019. TLC received less than reasonably equivalent value in exchange for the transfers of its inventory assets to LKimmy. The BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017, and TLC remained insolvent thereafter. Resultantly, all transfers of TLC's inventory assets to LKimmy referenced in the SAC's Sixth Claim for Relief occurred while TLC was insolvent under the balance sheet test.

The Court therefore concludes that all of the transfers of TLC's inventory to LKimmy referenced in the SAC's Sixth Claim for Relief should be, and are hereby, avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I). The Court concludes that the amount of the constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I) resulting from inventory TLC conveyed to LKimmy is properly calculated as follows:

Average of Independent Prebankruptcy Inventory Valuations 1022: $8,319,712.33 Less: Inventory Reported Per TLC Bankruptcy 1023: $ 579,131.31 Net Value of Inventory Transferred by TLC To LKimmy Prior to TLC's Bankruptcy: $7,740,581.02 Less: Subsequent Payments for Inventory Made by LKimmy to TLC 1024: $4,216,630.27 Net Reduction in TLC's Prepetition Assets Avoided as Fraudulent Transfers Under Section 548(a)(1)(B)(ii)(I): $3,523,950.75

g. Under Section 550(a)(1), the $3,523,950.75 Value of the Avoided Transfers of Inventory Assets is Absolutely Recoverable from LKimmy as the Initial Transferee

Under Section 550(a)(1), the right to recover an avoided transfer from the initial transferee of the debtor, or from the entity for whose benefit the initial transfer was made, is absolute.¹⁰²⁵ The Court therefore concludes that under Section 550(a)(1), LKimmy is absolutely liable for the full $3,523,950.75 value of the inventory transfers referenced in the Sixth Claim for Relief and avoided herein as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I). Judgment will enter against LKimmy accordingly.

9. Analysis of the SAC's Seventh Claim for Relief: Avoidance and Recovery of the Transfer of Eachpole's Existing Trademarks and Market IDs to LKimmy Under the Eachpole License as a Constructively Fraudulent Transfer Due to Insolvency

Linco's Seventh Claim for Relief pled in the SAC generally alleges that on November 10, 2019, Eachpole entered into the Eachpole License ¹⁰²⁶ with LKimmy. The Eachpole License authorized LKimmy to use two of Eachpole's existing trademarks ¹⁰²⁷ and three of its existing internet Market IDs ¹⁰²⁸ for a 5-year period in exchange for a payment of $70,542.00.¹⁰²⁹ In the Seventh Claim for Relief, Linco asserted that Eachpole did not receive reasonably equivalent value in exchange for the transfer of its trademarks and internet Market IDs to LKimmy under the Eachpole License, rendering the Eachpole License avoidable as a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(I).¹⁰³⁰

a. The Eachpole License Referenced in the Seventh Claim for Relief Was a Transfer of Eachpole's Property in the Form of Eachpole's Existing Trademarks and Market IDs to LKimmy

The preponderance of the evidence established that the Eachpole License was signed by Kim in his capacity as President of Eachpole ¹⁰³¹ and by Hyunjune as President of LKimmy.¹⁰³² The Eachpole License plainly reflects that Eachpole was granting a license to LKimmy for the use of Eachpole's existing trademarks and internet Market IDs to LKimmy for a 5-year term with renewal options.¹⁰³³

b. The Transfer Under the Eachpole License, Authorizing LKimmy to Use Eachpole's Existing Trademarks and Market IDs, Occurred Within Two Years of the Eachpole Petition Date

LKimmy was created on October 19, 2018.¹⁰³⁴ The Eachpole License was executed on November 10, 2019.¹⁰³⁵ The Eachpole Petition Date is February 20, 2020, less than two years after LKimmy was created, and just over 3 months after the Eachpole License was signed. The preponderance of the evidence plainly established that the transfer under the Eachpole License, authorizing LKimmy to use Eachpole's existing trademarks and Market IDs, occurred within two years of the Eachpole Petition Date.

c. The Preponderance of the Evidence Failed to Establish that Eachpole Received Less than Reasonably Equivalent Value from LKimmy in Exchange for the Use of Eachpole's Existing Trademarks and Market IDs Under the Eachpole License

Although the trial record was somewhat muddled on this issue, the Court concludes that the preponderance of the evidence at trial established that LKimmy paid the sum of $70,542.00 to Eachpole in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License.¹⁰³⁶ That equates to $1,175.70 each month during the term of the Eachpole License. Linco offered expert testimony from Mr. Bertsch in an effort to satisfy its burden of proving that the $70,542.00 payment made by LKimmy to Eachpole under the Eachpole License was less than reasonably equivalent value in exchange for LKimmy's use of Eachpole's existing trademarks and Market IDs over a five-year term.¹⁰³⁷

At the time of trial,¹⁰³⁸ Federal Rule of Evidence 702 read:

Rule 702. Testimony by Expert Witness

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Mr. Bertsch was qualified as an expert witness on the accounting and fraudulent conveyance issues in this adversary proceeding without objection.¹⁰³⁹ Federal Rule of Evidence 702 grants “expert witnesses testimonial latitude unavailable to other witnesses on the ‘assumption that the expert's opinion will have a reliable basis in the knowledge and experience of his discipline.’ ”¹⁰⁴⁰ But that latitude is not without limits.

On direct examination, Mr. Bertsch testified that using a 4% royalty applied to gross sales averaging $29,500,000.00 over the 5-year term of the Eachpole License, LKimmy's use of Eachpole's existing trademarks and Market IDs under the Eachpole License had a value of $5,829,458.00.¹⁰⁴¹ He did so while testifying from a “schedule that [he] made up” that had not produced in discovery, identified in Linco's exhibit list, or admitted into evidence.¹⁰⁴²

On cross-examination, Mr. Bertsch was unable to identify any cases in which he had been qualified to testify as an expert on the valuation of a license agreement similar to the Eachpole License.¹⁰⁴³ He also acknowledged that he had not developed an opinion as to the value of the Eachpole License when he was deposed by counsel for LKimmy ¹⁰⁴⁴ :

Q: [by LKimmy Counsel] And you had no opinion of the values of these license agreements when I deposed you. Isn't that correct?

A: As we went to the deposition, it brought back my mind of the ones that I've worked on, and I felt that it was - - should be applied.

Q: Okay. But at your deposition you said “Kind of hard to put on, but they have good value.” Do you remember that?

A: I don't remember that, but I - - you have a good memory.

Q: And at that time, you hadn't analyzed the value that had been paid by LKimmy for the use of those identifiers - - those license agreements, correct?

A: I had not. I just realized that you can't buy them that cheap when your taking all - - it's like selling an - - a customer list.

Federal Rule of Evidence 702 applies to expert testimony offered in adversary proceedings, and thus to Mr. Bertsch's expert testimony.¹⁰⁴⁵ Also, “Daubert established that the trial court's obligation is to ‘ensur[e] that an expert's testimony rests on a reliable foundation and is relevant to the task at hand.’ Kumho Tire established that the trial judge's ‘gatekeeping’ function is not limited to ‘scientific’ expert testimony.”¹⁰⁴⁶ As the Smitty court observed, “[t]hese principles have been embraced in bankruptcy litigation.”¹⁰⁴⁷

“Often, expert testimony in bankruptcy court is based on experience and specialized knowledge, rather than ‘science’ per se. However, whenever a witness is qualified as an expert based on such experience or knowledge, the testimony must still meet the tests for reliability under Daubert and Kumho Tire.”¹⁰⁴⁸ Where an expert witness “is relying solely or primarily on experience, then the witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.”¹⁰⁴⁹ In analyzing proffered expert testimony, “[t]hese are requirements, not merely aspirations. The Rules, and Daubert, Kumho Tire and progeny, require that the expert show how experience or specialized knowledge is ‘reliably applied” to data, in a methodologically sound way, and that the conclusions are adequately and reliably supported.”¹⁰⁵⁰

Mr. Bertsch's testimony as an expert witness on the accounting and fraudulent conveyance issues in this adversary proceeding ¹⁰⁵¹ was predicated upon his professional experience and related specialized knowledge. But the preponderance of the evidence did not show how his experience provided a sufficient basis for his opinion regarding the value of the Eachpole License. He was unable to identify any cases in which he had been qualified to testify as an expert on the valuation of a license agreement similar to the Eachpole License.¹⁰⁵² In the absence of such experience, Mr. Bertsch could not, and did not, explain satisfactorily how his experience provided a sufficient basis for his opinion regarding the value of the Eachpole License or the related conclusions he reached. His testimony did not point to any reliable commercial or industry publications that were the source of, or offered any support for, his selection of a 4% royalty rate in making his calculations. He did not explain how he selected a 4% royalty rate in making his calculations, other than stating that he thought it was a conservative rate to use. He did not offer any testimony as to what methodology is most commonly used within the internet sales industry when placing a value on a license arrangement like the Eachpole License. Nor did he offer any explanation as to why his methodology was a reliable one when applied to the facts related to valuation of the Eachpole License.

An expert relying on his or her experience “must do more than aver conclusorily that his experience led to his opinion.”¹⁰⁵³ Under the reliability standard imposed by Federal Rule of Evidence 702 and the Supreme Court's holdings in Daubert, Kumho Tire, and their progeny, expert testimony should be excluded from the Court's decision making process when it is “speculative or conjectural” or “is connected to existing data only by the ipse dixit of the expert.”¹⁰⁵⁴ In cases where a trial court has been presented with only an expert's qualifications, conclusions, and assurances of reliability, the reliability standard is not met.

The Court concludes that Linco failed to show by a preponderance of the evidence that Mr. Bertsch's expert testimony regarding the valuation of the Eachpole License satisfied the reliability standard imposed by Federal Rule of Evidence 702 and the Supreme Court's holdings in Daubert, Kumho Tire, and their progeny. The Court will therefore exclude Mr. Bertsch's testimony regarding the value of the Eachpole License from its reasonably equivalent value analysis under § 548(a)(1)(B)(ii)(I).¹⁰⁵⁵

In summary, the preponderance of the evidence established that LKimmy paid $70,542.00 to Eachpole in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License. For purposes of the reasonably equivalent value calculus under § 548(a)(1)(B)(ii)(I), there is no reliable evidence of the value of the Eachpole License that could be compared to the $70,542.00 payment LKimmy made to Eachpole. The Court therefore concludes that Linco failed to satisfy its burden of proving that the $70,542.00 payment LKimmy made to Eachpole was less than reasonably equivalent value in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License. Because Linco failed to prove that essential element of its constructively fraudulent transfer claim under Section 548(a)(1)(B)(ii)(I), the Court concludes that Linco's Seventh Claim for Relief fails as a matter of law.

d. The Transfer of Eachpole's Existing Trademarks and Market IDs to LKimmy Under the Eachpole License Occurred While Eachpole Was Insolvent

The balance sheet portion of Eachpole's 2018 federal income tax return shows that at the end of the year, Eachpole had total assets of “$0.”¹⁰⁵⁶ That same balance sheet shows that at the end of 2018, Eachpole had “Other current liabilities” of $50,000.00. The preponderance of the evidence establishes that under the balance sheet test Eachpole was insolvent by the end of 2018.

The Eachpole Petition Date is February 20, 2020. The Summary of Assets and Liabilities for Non-Individuals filed in support of the Eachpole Petition reflects total assets of $242,981.36, and total liabilities of $2,430,741.18.¹⁰⁵⁷

The Eachpole License was executed on November 10, 2019.¹⁰⁵⁸ The preponderance of the evidence established that the transfer of Eachpole's existing trademarks and Market IDs to LKimmy under the Eachpole License occurred while Eachpole was insolvent.

e. LKimmy Was the Initial Transferee of Eachpole's Existing Trademarks and Market IDs Under the Eachpole License

The Eachpole License was signed by Kim in his capacity as President of Eachpole ¹⁰⁵⁹ and by Hyunjune as President of LKimmy.¹⁰⁶⁰ The Eachpole License plainly reflects that Eachpole was granting a license directly to LKimmy for the use of Eachpole's existing trademarks and internet Market IDs to LKimmy for a 5-year term with renewal options.¹⁰⁶¹ It is irrefragable that LKimmy was the initial transferee of Eachpole's existing trademarks and internet Market IDs under the Eachpole License.

f. Summary

Because the preponderance of the evidence failed to establish the value of Eachpole's existing trademarks and Market IDs that were transferred to LKimmy under the Eachpole License, or that Eachpole failed to receive reasonably equivalent value from LKimmy for those assets, Linco failed to carry its burden of proving all essential elements of its claim that the Eachpole License is a constructively fraudulent transfer avoidable under Section 548(a)(1)(B)(ii)(I). The Court concludes that Linco's Seventh Claim for Relief therefore fails as a matter of law. Judgment dismissing the Seventh Claim for Relief will enter accordingly.

B. Eighth Through Fourteenth Claims for Relief: Avoidance and Recovery of Constructively Fraudulent Transfers Under Sections 548(a)(1)(B)(ii)(II) and 550 Due to Undercapitalization

The Eighth through Fourteenth Claims for Relief pled in the SAC also seek avoidance and recovery of constructive fraudulent transfers, but under a different component of Section 548: Section 548(a)(1)(B)(ii)(II).¹⁰⁶² The text of that Code section provides the analytical starting point.¹⁰⁶³

1. Statutory Text

Section 548(a)(1)(B)(ii)(II) reads:

§ 548. Fraudulent transfers and obligations

(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily--

[․]

(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii)

[․]

(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital[.]

Section 550, quoted above, provides the mechanism for recovery of a transfer avoided as constructively fraudulent under Section 548(a) (a)(1)(B)(ii)(II).

2. Essential Elements and Burden of Proof

To avoid a transfer as constructively fraudulent under Section 548(a)(1)(B)(ii)(II), plaintiff “must prove that: (1) the transfer involved property of the debtor; (2) the transfer was made within [two years] of the bankruptcy filing; (3) the debtor did not receive reasonably equivalent value for the property transferred; and (4) the debtor was [․ ] operating or about to operate without sufficient capital[.]”¹⁰⁶⁴

The first three elements required to establish a prima facie claim for avoidance of a constructively fraudulent transfer are exactly the same under Sections 548(a)(1)(B)(ii)(I) and 548(a)(1)(B)(ii)(II). Only the last element is different. The final element of a prima facie claim for avoidance of a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(I) focuses on the debtor's insolvency under a balance sheet test at the time the challenged transfer occurred. In contrast, the final element of a claim for avoidance of a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(II) focuses on the adequacy of the debtor's capital at the time the challenged transfer occurred.

The plaintiff bears the burden of proof on all issues in pursuing a claim for avoidance of a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(II).¹⁰⁶⁵ The preponderance of the evidence standard applies.¹⁰⁶⁶

3. Legal Standard: What Constitutes Unreasonably Small Capital Under Section 548(a)(1)(B)(ii)(II)

The last element of a prima facie claim for avoidance of a constructively fraudulent transfer under Section 548(a)(1)(B)(ii)(II) requires the plaintiff to show by a preponderance of the evidence that, at the time of the transfer, the debtor was “engaged in a business or [was] about to engage in a business for which [its] remaining property was an unreasonably small capital.”¹⁰⁶⁷ The relevant test, colloquially known as the adequate capital test, “denotes a financial condition short of equitable or ‘cash flow’ insolvency. This test is ‘aimed at transferees that leave the transferor technically solvent but doomed to fail.’ ”¹⁰⁶⁸

In conducting the adequate capital test under Section 548(a)(1)(B)(ii)(II)  ¹⁰⁶⁹ :

courts generally examine cash flow to determine whether it was “reasonably foreseeable” that the transfer at issue would lead to the debtor's “inability to generate enough cash flow to sustain operations.” In a business setting, the aggregate amount of capital “should include ․ all reasonably anticipated sources of operating funds, which may include new equity infusions, cash from operations, or cash from secured or unsecured loans over the relevant time period.”

4. Analysis of the SAC's Eighth Claim for Relief: Avoidance and Recovery of TLC's Payments to Taxing Authorities as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Eighth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the First Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, all of the transfers to the Taxing Authorities were transfers of TLC's property. Second, all of the transfers of TLC's property to the Taxing Authorities occurred within two years of the TLC Petition Date.¹⁰⁷⁰ Third, TLC received less than reasonably equivalent value in exchange for the transfers of its property to the Taxing Authorities. More particularly, since TLC is a Subchapter S corporation, it received nothing of value at all in exchange for its transfer of $707,325.96 to the IRS. In exchange for the $453,000.00 TLC transferred to the CFTB, TLC received satisfaction of $1,744.00 in California state tax obligations — just .385% of the total transferred to the CFTB. The fourth and final element to be examined in resolving the Eighth Claim for Relief is whether the preponderance of the evidence established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when TLC made the transfers to the Taxing Authorities.

The preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, which rendered TLC insolvent.¹⁰⁷¹ From a cash flow perspective, after September 20, 2017 and during the two years before the TLC Petition Date, TLC made gross payments to the Taxing Authorities totaling $1,160,325.96,¹⁰⁷² while reporting ordinary business losses on its 2017 and 2018 federal tax returns of <-$3,403,861.00>¹⁰⁷³ and <-$2,398,222.00>¹⁰⁷⁴ respectively. While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹⁰⁷⁵ an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹⁰⁷⁶ But Kim did not reinvest the proceeds from that tax refund into TLC to shore up TLC's capital levels.¹⁰⁷⁷ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹⁰⁷⁸

Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹⁰⁷⁹ TLC conveyed its inventory holdings to LKimmy.¹⁰⁸⁰ On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹⁰⁸¹ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹⁰⁸² or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹⁰⁸³ Nor did TLC have any equity available to offer new lenders in exchange for new loans to support its business operations. When TLC made overpayments of $1,160,325.96 ¹⁰⁸⁴ to the Taxing Authorities as referenced in the Eighth Claim for Relief, it was reasonably foreseeable that those transfers to the Taxing Authorities would lead to TLC's inability to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹⁰⁸⁵

In summary, the preponderance of the evidence presented by Linco established that when the transfers to the Taxing Authorities took place, TLC “was engaged in business”¹⁰⁸⁶ or “a transaction”¹⁰⁸⁷ when it did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II). All elements required to avoid TLC's transfers to the Taxing Authorities as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II) have been proven by a preponderance of the evidence. The Court concludes that all of the transfers of TLC's property to the Taxing Authorities referenced in the Eighth Claim for Relief should be, and are hereby, avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II).

The amount of the transfers avoided under Section 548(a)(1)(B)(ii)(II) is calculated as follows:

Gross Transfers by TLC to the Taxing Authorities: $1,160,325.96 Less: California State Tax Owed by TLC to the CFTB: $ 1,744.00 Total Avoided Transfers to the Taxing Authorities: $1,158,581.96

Recovery of the value of the transfers to the Taxing Authorities referenced in the Eighth Claim for Relief and avoided under Section 548(a)(1)(B)(ii)(II) is analyzed in exactly the same way as recovery of the value of the transfers to the Taxing Authorities referenced in the First Claim for Relief and avoided under Section 548(a)(1)(B)(ii)(I). Section 550(a)(1) is the controlling statute. As the Ninth Circuit has observed, when a corporate principal [Kim] misdirects company funds [$1,158,581.96 in tax overpayments when TLC failed the adequate capital test] directly to a third party [the Taxing Authorities] for personal gain [generating large future tax refunds as the sole shareholder of TLC, a Subchapter S corporation], “the principal is not a transferee at all but, rather, is the party for whose benefit the transfer was made” in the context of Section 550(a)(1).¹⁰⁸⁸ The Court therefore concludes that under Section 550(a)(1), Kim was and is the entity for whose benefit transfers in the form of overpayments to the Taxing Authorities totaling $1,158,581.96 were made while TLC lacked adequate capital. Kim's liability for the full $1,158,581.96 value of those transfers is therefore absolute under Section 550(a)(1).¹⁰⁸⁹ Judgment will enter against Kim accordingly.¹⁰⁹⁰

As to the question of Misook's liability under Section 550(a)(1), the preponderance of the evidence established that she did not own any shares in TLC when the overpayments to the Taxing Authorities were made.¹⁰⁹¹ Since Misook was not a TLC shareholder when the overpayments to the Taxing Authorities occurred, no related tax benefits passed through to her from TLC. Nor did the preponderance of the evidence establish that Misook had any input or control over TLC's business operations when the overpayments to the Taxing Authorities were made. Since Misook was not a TLC shareholder and did not have substantive input or control over TLC's business operations when TLC made the $1,158,581.96 in overpayments to the Taxing Authorities during the two-year period prior to the TLC Petition Date, she was not an entity for whose benefit those transfers to the Taxing Authorities were made. Resultantly, Misook is not liable for the value of those transfers under Section 550(a)(1). Judgment dismissing the Eighth Claim for Relief as against Misook will enter accordingly.

5. Analysis of the SAC's Ninth Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Bank of America Credit Card as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Ninth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Second Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the monetary transfers made by TLC in payment of Kim's personal credit card accounts referenced in the Ninth Claim for Relief were transfers of TLC's property. Second, the transfers from TLC's BofA corporate bank account ending in 5743 to Kim's personal credit card accounts referenced in the Ninth Claim for Relief allegedly occurred on or after January 3, 2018, during the two-year period before the TLC Petition Date.¹⁰⁹² Third, the preponderance of the evidence at trial established that TLC received “roughly the value it gave,”¹⁰⁹³ and thus received reasonably equivalent value in exchange for, the credit card payments referenced in the Ninth Claim for Relief. On cross-examination at trial, Linco's expert witness, Mr. Bertsch, proved unable to defend his opinion that the credit card payments referenced in the Ninth Claim for Relief constituted fraudulent conveyances.¹⁰⁹⁴ The fourth and final element to be examined in resolving the Ninth Claim for Relief is whether the preponderance of the evidence established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when TLC made the credit card payments.

The Court has determined, and reiterates here, that the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent.¹⁰⁹⁵ From a cash flow perspective, the transfers from TLC's BofA corporate bank account ending in 5743 to Kim's personal credit card accounts referenced in the Ninth Claim for Relief allegedly occurred on or after January 3, 2018, during the two-year period before the TLC Petition Date.¹⁰⁹⁶ While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹⁰⁹⁷ an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹⁰⁹⁸ But Kim did not reinvest any of the proceeds from that tax refund to shore up TLC's capital levels.¹⁰⁹⁹ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹¹⁰⁰ Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹¹⁰¹ TLC conveyed its inventory holdings to LKimmy.¹¹⁰² On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹¹⁰³ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹¹⁰⁴ or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹¹⁰⁵ Nor did TLC have any equity available to offer new lenders in exchange for new loans to support its business operations.

The credit card payments referenced in the Ninth Claim for Relief allegedly occurred when it was reasonably foreseeable that TLC would be unable to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹¹⁰⁶ Thus, the credit card payments referenced in the Ninth Claim for Relief were alleged to have occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

Ultimately, the preponderance of the evidence established that TLC did receive reasonably equivalent value in exchange for the payments TLC made toward the balances due on Kim's credit cards as referenced in the Ninth Claim for Relief. Linco therefore failed to prove an essential element of its claim that those credit card payments were constructively fraudulent transfers avoidable under Section 548(a)(1)(B)(ii)(II). Resultantly, the Court concludes that Linco's Ninth Claim for Relief fails as a matter of law. Judgment dismissing the Ninth Claim for Relief will enter accordingly.

6. Analysis of the SAC's Tenth Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Credit Card as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Tenth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Third Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the monetary transfers made by TLC in payment of Kim's personal credit card accounts referenced in the Tenth Claim for Relief were transfers of TLC's property. Second, the transfers from TLC's corporate bank account at Chase Bank ending in 1610 to Kim's personal credit card accounts referenced in the Tenth Claim for Relief occurred on or after January 10, 2018, during the two-year period before the TLC Petition Date.¹¹⁰⁷ Third, the preponderance of the evidence at trial established that TLC received “roughly the value it gave,”¹¹⁰⁸ and thus received reasonably equivalent value in exchange for, the credit card payments referenced in the Tenth Claim for Relief. On cross-examination at trial, Linco's expert witness, Mr. Bertsch, conceded that it was no longer his opinion that the credit card payments referenced in the Tenth Claim for Relief constituted fraudulent conveyances.¹¹⁰⁹ The fourth and final element to be examined in resolving the Tenth Claim for Relief is whether the preponderance of the evidence established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when TLC made the credit card payments.

The Court has determined, and reiterates here, that the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent.¹¹¹⁰ From a cash flow perspective, the transfers from TLC's corporate bank account at Chase Bank ending in 1610 to Kim's personal credit card accounts referenced in the Tenth Claim for Relief occurred on or after January 10, 2018, during the two-year period before the TLC Petition Date.¹¹¹¹ While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹¹¹² an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹¹¹³ But Kim did not reinvest any of the proceeds from that tax refund to shore up TLC's capital levels.¹¹¹⁴ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹¹¹⁵

Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹¹¹⁶ TLC conveyed its inventory holdings to LKimmy.¹¹¹⁷ On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹¹¹⁸ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹¹¹⁹ or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹¹²⁰ Nor did TLC have any equity available to offer new lenders in exchange for new loans to support its business operations.

The credit card payments referenced in the Tenth Claim for Relief occurred when it was reasonably foreseeable that TLC would be unable to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹¹²¹ Thus, the credit card payments referenced in the Tenth Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

Ultimately, the preponderance of the evidence established that TLC did receive reasonably equivalent value in exchange for the payments TLC made toward the balances due on Kim's credit cards as referenced in the Tenth Claim for Relief. Linco therefore failed to prove an essential element of its claim that those credit card payments were constructively fraudulent transfers avoidable under Section 548(a)(1)(B)(ii)(II). Resultantly, the Court concludes that Linco's Tenth Claim for Relief fails as a matter of law. Judgment dismissing the Tenth Claim for Relief will enter accordingly.

7. Analysis of the SAC's Eleventh Claim for Relief: Avoidance and Recovery of Payments Made by TLC on Kim's Personal Credit Card as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Eleventh Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Fourth Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the monetary transfers made by TLC in payment of Kim's personal credit card accounts referenced in the Eleventh Claim for Relief were transfers of TLC's property. Second, the transfers from TLC's BofA corporate bank account ending in 8850 to Kim's personal credit card accounts referenced in the Eleventh Claim for Relief occurred on or after December 14, 2018, during the two-year period before the TLC Petition Date.¹¹²² Third, the preponderance of the evidence at trial established that TLC received “roughly the value it gave,”¹¹²³ and thus received reasonably equivalent value in exchange for, the credit card payments referenced in the Eleventh Claim for Relief. On cross-examination at trial, Linco's expert witness, Mr. Bertsch, conceded that it was no longer his opinion that the credit card payments referenced in the Eleventh Claim for Relief constituted fraudulent conveyances.¹¹²⁴ The fourth and final element to be examined in resolving the Eleventh Claim for Relief is whether the preponderance of the evidence established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when TLC made the credit card payments.

The Court has determined, and reiterates here, that the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent.¹¹²⁵ From a cash flow perspective, the transfers from TLC's BofA corporate bank account ending in 8850 to Kim's personal credit card accounts referenced in the Eleventh Claim for Relief occurred on or after December 14, 2018, during the two-year period before the TLC Petition Date.¹¹²⁶ While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹¹²⁷ an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹¹²⁸ But Kim did not reinvest any of the proceeds from that tax refund to shore up TLC's capital levels.¹¹²⁹ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹¹³⁰

Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹¹³¹ TLC conveyed its inventory holdings to LKimmy.¹¹³² On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹¹³³ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹¹³⁴ or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹¹³⁵ Nor did TLC have any equity available to offer new lenders in exchange for new loans to support its business operations.

The credit card payments referenced in the Eleventh Claim for Relief occurred when it was reasonably foreseeable that TLC would be unable to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹¹³⁶ Thus, the credit card payments referenced in the Eleventh Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

Ultimately, the preponderance of the evidence established that TLC did receive reasonably equivalent value in exchange for the payments TLC made toward the balances due on Kim's credit cards as referenced in the Eleventh Claim for Relief. Linco therefore failed to prove an essential element of its claim that those credit card payments were constructively fraudulent transfers avoidable under Section 548(a)(1)(B)(ii)(II). Resultantly, the Court concludes that Linco's Eleventh Claim for Relief fails as a matter of law. Judgment dismissing the Eleventh Claim for Relief will enter accordingly.

8. Analysis of the SAC's Twelfth Claim for Relief: Avoidance and Recovery of Payments Made by TLC to Unknown ROE Defendant Chinese Entities as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Twelfth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Fifth Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the 68 outbound international wire transfers from TLC's corporate BofA accounts ending in 5743 and 8850 to recipients in China referenced in the Twelfth Claim for Relief were transfers of TLC's property. Second, those wire transfers were made between November 20, 2018, and June 24, 2019,¹¹³⁷ during the two-year period before the TLC Petition Date. Third, the preponderance of the evidence, on the record developed by the parties who appeared at trial, established that TLC did not receive “roughly the value it gave,”¹¹³⁸ and thus did not receive reasonably equivalent value in exchange for, the $3,656,152.03 in wire transfers referenced in the Twelfth Claim for Relief. The fourth and final element to be examined in resolving the Twelfth Claim for Relief is whether the preponderance of the evidence, on the record developed by the parties who appeared at trial, established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when the wire transfers were made.

The Court has determined, and reiterates here, that on the record developed by the parties who appeared at trial, the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent.¹¹³⁹ From a cash flow perspective, the $3,656,152.03 in wire transfers referenced in the Twelfth Claim for Relief all occurred during the two-year period before the TLC Petition Date.¹¹⁴⁰ While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹¹⁴¹ an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹¹⁴² But Kim did not reinvest any of the proceeds from that tax refund to shore up TLC's capital levels.¹¹⁴³ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹¹⁴⁴

Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹¹⁴⁵ TLC conveyed its inventory holdings to LKimmy.¹¹⁴⁶ On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹¹⁴⁷ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹¹⁴⁸ or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹¹⁴⁹ Nor did TLC have any equity available to offer new lenders in exchange for new loans to support its business operations.

The Court concludes, on the record developed by the parties who appeared at trial, that the 68 outbound international wire transfers from TLC's corporate BofA accounts ending in 5743 and 8850, sent to initial transferees in China and totaling $3,656,152.03, were made when it was reasonably foreseeable that TLC would be unable to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹¹⁵⁰ Ultimately, on the record developed by the parties who appeared at trial, the preponderance of the evidence established that the wire transfers referenced in the Twelfth Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

In summary, the preponderance of the evidence, on the record developed by the parties who appeared at trial, established that the $3,656,152.03 in wire transfers sent from TLC's corporate BofA accounts ending in 5743 and 8850 to initial transferees in China as referenced in the Twelfth Claim for Relief are avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II). All of those wire transfers were transfers of TLC's property. All of those wire transfers of TLC's property sent to recipients in China occurred within two years of the TLC Petition Date of October 8, 2019.¹¹⁵¹ The preponderance of the evidence, on the record developed by the parties who appeared at trial, established that TLC received less than reasonably equivalent value in exchange for the transfers of its property resulting from those wire transfers. All of the wire transfers referenced in the Twelfth Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II). The Court therefore concludes that, on the record developed by the parties who appeared at trial, the transfers of TLC's property resulting from the wire transfers referenced in the Twelfth Claim for Relief are avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II).

The 68 wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 to initial transferees in China totaling $3,656,152.03 as detailed in the Twelfth Claim for Relief were all domestic transfers under the second prong of the Nabisco test. Resultantly, the Court concludes that recovery of the value of those transfers from the initial transferees in China under Section 550(a)(1) is a permissible domestic application of that section of the Code.

But as noted previously, paragraph 33 of the SAC ¹¹⁵² reads:

33. The true names and capacities of ROE CORPORATIONS XI through XX, inclusive, are unknown to Plaintiff, who therefore sue such Defendants by these fictitious names. Plaintiff is informed and believes that each of these Defendants are responsible in some manner for the events and happenings referred to, and damages caused thereby to Plaintiff as alleged herein. Plaintiff will seek leave of this Court to amend its Complaint to insert true names and capacities when such Defendants have been ascertained to join such Defendants in this action.

This adversary commenced on October 8, 2020.¹¹⁵³ Linco filed a discovery plan with the Court on April 2, 2021, setting the close of discovery for September 10, 2021.¹¹⁵⁴ Subsequently, the Court entered an Order Regarding Pretrial and Trial Matters, extending the close of discovery to November 24, 2021.¹¹⁵⁵ On November 5, 2021, Linco filed a motion to further extend the discovery cutoff,¹¹⁵⁶ which was granted by the Court by order dated December 3, 2021.¹¹⁵⁷ The discovery deadline was extended through April 1, 2022, with the Court's admonition that “[t]here will be no more extensions of the discovery periods in this proceeding absent exigent circumstances satisfactory to the Court.”¹¹⁵⁸ The SAC was filed on March 1, 2022, when only 30 days remained before the discovery deadline.¹¹⁵⁹

At some point during the discovery process, Linco obtained records relating to TLC's BofA corporate bank accounts ending in 8850 and 5743 from which the wire transfers to Chinese recipients were made.¹¹⁶⁰ Those bank records contained summaries of all 68 of the wire transfers referenced in the Twelfth Claim for Relief, including the name of the Chinese entity that received each wire transfer.¹¹⁶¹ Despite the representations made in paragraph 33 of the SAC, Linco never sought leave of the Court to further amend the SAC to insert true names and capacities of the Chinese entities who received the wire transfers as initial transferees. At no time prior to trial did Linco serve any of the Chinese entities who received the wire transfers as initial transferees with a copy of a summons and the SAC, alerting them to the fraudulent transfer claims advanced against them by Linco.¹¹⁶² The trial in this adversary proceeding was conducted without naming as parties the Chinese entities who received the wire transfers as initial transferees, without serving them with a summons and copy of the SAC, and without affording them any opportunity to appear and defend their interests by offering evidence of what value (if any) they provided to TLC in exchange for the wire transfer proceeds.

Viewed in a vacuum, this immense trial record might eke out a prima facie case for avoidance of the 68 wire transfers as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), and also for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1). But it is irrefutable that none of those Chinese entities were ever actually named as defendants in this adversary proceeding, served with notice, or otherwise afforded an opportunity to respond to the claims Linco lodged against them in the SAC. The United States Supreme Court has stated that it is “[b]eyond doubt [that] a prospective party cannot fairly be required to answer an amended pleading not yet permitted, framed, and served.”¹¹⁶³ The Court is mindful that the liability of immediate transferees of fraudulent conveyances avoided under Section 548(a)(1)(B)(ii)(I) is “absolute” under Section 550(a)(1).¹¹⁶⁴ But liability cannot be imposed upon the Chinese entities who received the wire transfers as initial transferees through the simple expedient of entering judgment avoiding and recovering the value of the wire transfers as constructively fraudulent conveyances now, and then amending the SAC to add the Chinese entities as parties to this adversary proceeding. The Supreme Court has plainly stated that when a defendant is not afforded a proper opportunity to respond to litigation claims, judgment against the defendant cannot be entered properly “the very first moment [their] personal liability was legally at issue. Procedure of this style has been questioned even in systems, real and imaginary, less concerned than ours with the right to due process.”¹¹⁶⁵

This Court concludes that entry of judgment avoiding the 68 wire transfers referenced in the Twelfth Claim for Relief as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), and/or entry of judgment for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1), would violate the most fundamental tenet of due process of law: notice and the opportunity to be heard.¹¹⁶⁶ This Court will not be party to such a due process violation. Accordingly, judgment will enter dismissing the Twelfth Claim for Relief.

9. Analysis of the SAC's Thirteenth Claim for Relief: Avoidance and Recovery of Inventory Transfers Made by TLC to LKimmy as Constructively Fraudulent Transfers Due to Undercapitalization

The Court's analysis of the first three elements of the Thirteenth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Sixth Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the transfers of TLC's inventory assets to LKimmy referenced in the Thirteenth Claim for Relief were transfers of TLC's property. Second, since LKimmy was created on October 19, 2018,¹¹⁶⁷ and the TLC Petition Date is October 8, 2019, all transfers of TLC's inventory assets to LKimmy referenced in the Thirteenth Claim for Relief necessarily occurred within the two-year period before the TLC Petition Date. Third, the preponderance of the evidence at trial established that TLC received nothing at all in exchange for the inventory assets it conveyed to LKimmy as referenced in the Thirteenth Claim for Relief when those inventory transfers were made. Even considering the payments TLC later received from LKimmy, TLC received only 54.47% of fair value in exchange for the inventory TLC conveyed to LKimmy, a shortfall of $3,523,950.75. That is not “roughly the value [TLC] gave”¹¹⁶⁸ when it transferred its inventory assets to LKimmy. TLC did not receive reasonably equivalent value from LKimmy in exchange for the inventory assets TLC transferred to LKimmy during the two years before the TLC Petition Date as referenced in the Thirteenth Claim for Relief. The fourth and final element to be examined in resolving the Thirteenth Claim for Relief is whether the preponderance of the evidence established that TLC was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with TLC was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when TLC transferred its inventory assets to LKimmy.

The Court has determined, and reiterates here, that the preponderance of the evidence established that on September 20, 2017, TLC incurred a $3 million liability when it took out the BofA Loan, rendering TLC insolvent.¹¹⁶⁹ Ms. Chen testified credibly that TLC's last import shipment from China was received by TLC on November 23, 2018.¹¹⁷⁰ From a cash flow perspective, TLC conveyed all of its inventory assets — the only source of future sales income for TLC and already subject to a lien in favor of BofA under the BofA Loan — to LKimmy during the two-year period before the TLC Petition Date. While TLC was under Kim's control, after TLC had suffered two consecutive years of ordinary business losses totaling <-$5,802,083.00>, and after TLC had overpaid the Taxing Authorities by $1,160,325.96,¹¹⁷¹ an IRS Form 1045 was filed on Kim's behalf in 2018 seeking a tax refund of $1,364,764.¹¹⁷² But Kim did not reinvest any of the proceeds from that tax refund to shore up TLC's capital levels.¹¹⁷³ He instead joined Misook in making five unsecured loans to LKimmy between April 4, 2019, and September 23, 2019, totaling $703,000.00.¹¹⁷⁴

On November 10, 2018, TLC conveyed the rights to use its existing trademarks and internet market IDs to LKimmy under the TLC Licensed in exchange for a one-time payment of $91,905.34.¹¹⁷⁵ Key employees at TLC were hired away by LKimmy. As amended, TLC's bankruptcy schedules showed that on the TLC Petition Date of October 8, 2019, TLC had inventory with a scheduled value of $579,131.31, and total assets of $839,131.31. TLC's remaining inventory and other assets were all subject to a lien in favor of BofA to secure repayment for the BofA Loan. After September 20, 2017, TLC simply had no equity available to service the secured BofA Loan scheduled at $2,000,000.00,¹¹⁷⁶ or its other liabilities (including the judgment Linco obtained in the Patent Lawsuit) scheduled at $1,590,294.55.¹¹⁷⁷ Nor did TLC have any equity available to offer new lenders in exchange for new loans in support of its business operations.

The Court that the inventory transfers referenced in the Thirteenth Claim for Relief occurred while it was reasonably foreseeable that TLC would be unable to generate enough cash flow to sustain its business operations, leaving TLC “doomed to fail.”  ¹¹⁷⁸ Ultimately, the preponderance of the evidence presented by Linco established that the inventory transfers from TLC to LKimmy referenced in the Thirteenth Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

In summary, the preponderance of the evidence established each essential element of Linco's claim that the inventory transfers from TLC to LKimmy referenced in the Thirteenth Claim for Relief are avoidable as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II). All of those inventory transfers were transfers of TLC's property. All of those inventory transfers occurred within two years of the TLC Petition Date of October 8, 2019.¹¹⁷⁹ TLC received less than reasonably equivalent value in exchange for the transfers of its inventory to LKimmy. All of the inventory transfers referenced in the Thirteenth Claim for Relief occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II). The Court therefore concludes that all of the transfers of TLC's inventory to LKimmy referenced in the Thirteenth Claim for Relief should be, and are hereby, avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II). The Court concludes that the value of TLC's constructively fraudulent inventory transfers to LKimmy, now avoided under Section 548(a)(1)(B)(ii)(II), is properly calculated as follows:

Average of Independent Prebankruptcy Inventory Valuations 1180: $8,319,712.33 Less: Inventory Reported Per TLC Bankruptcy 1181: $ 579,131.31 Net Value of Inventory Transferred by TLC To LKimmy Prior to TLC's Bankruptcy: $7,740,581.02 Less: Subsequent Payments for Inventory Made by LKimmy to TLC 1182: $4,216,630.27 Net Reduction in TLC's Prepetition Assets Avoided as Fraudulent Transfers Under Section 548(a)(1)(B)(ii)(II): $3,523,950.75

Under Section 550(a)(1), the right to recover an avoided transfer from the initial transferee of the debtor, or from the entity for whose benefit the initial transfer was made, is absolute.¹¹⁸³ The initial transferee of TLC's inventory transfers, now avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II), is LKimmy. The Court therefore concludes that under Section 550(a)(1), LKimmy is absolutely liable for the full $3,523,950.75 value of the inventory transfers referenced in the Thirteenth Claim for Relief and avoided herein as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II). Judgment will enter against LKimmy accordingly.¹¹⁸⁴

10. Analysis of the SAC's Fourteenth Claim for Relief: Avoidance and Recovery of the Transfer of Eachpole's Existing Trademarks and Market IDs to LKimmy Under the Eachpole License as a Constructively Fraudulent Transfer Due to Undercapitalization

The Court's analysis of the first three elements of the Fourteenth Claim for Relief under Section 548(a)(1)(B)(ii)(II) is identical to its analysis of the first three elements of the Seventh Claim for Relief under Section 548(a)(1)(B)(ii)(I). The Court reaches the same conclusions.

First, the Eachpole License reflects that Eachpole was granting a license to LKimmy for the use of Eachpole's existing trademarks and internet Market IDs to LKimmy for a 5-year term with renewal options.¹¹⁸⁵ Second, LKimmy was created on October 19, 2018.¹¹⁸⁶ The Eachpole License was executed on November 10, 2019.¹¹⁸⁷ The Eachpole Petition Date is February 20, 2020, less than two years after LKimmy was created. Third, the preponderance of the evidence established that LKimmy paid $70,542.00 to Eachpole in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License. For purposes of the reasonably equivalent value calculus under § 548(a)(1)(B)(ii)(I), there is no reliable evidence of the value of the Eachpole License that could be compared to the $70,542.00 payment LKimmy made to Eachpole. Linco thus failed to satisfy its burden of proving that the $70,542.00 payment LKimmy made to Eachpole was less than reasonably equivalent value in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License. The fourth and final element to be examined in resolving the Fourteenth Claim for Relief is whether the preponderance of the evidence established that Eachpole was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with Eachpole was “an unreasonably small capital” under the adequate capital test of Section 548(a)(1)(B)(ii)(II) when the Eachpole License was executed.

The balance sheet portion of Eachpole's 2018 federal income tax return shows that at the end of the year, Eachpole had no inventory at all, total assets of “$0,” and “Other current liabilities” of $50,000.00.¹¹⁸⁸ That same balance sheet shows that Eachpole had capital stock valued at $502.00 at the beginning of the year, but no capital stock at all by the end of the year.¹¹⁸⁹ With no inventory to sell, no assets to use in business operations or even to liquidate to meet operating expenses, and no capital stock at all by the end of 2018, Eachpole was in truly dire straits from an operations and cash flow perspective at the beginning of 2019. The Eachpole License was executed on November 10, 2019.¹¹⁹⁰ The Eachpole Petition Date is February 20, 2020. The Summary of Assets and Liabilities for Non-Individuals filed in support of the Eachpole Petition reflects total assets of $242,981.36, and total liabilities of $2,430,741.18.¹¹⁹¹ Put simply, the preponderance of the evidence established that the transfer of Eachpole's existing trademarks and Market IDs to LKimmy under the Eachpole License occurred when TLC did not pass the adequate capital test under Section 548(a)(1)(B)(ii)(II).

Ultimately, because the preponderance of the evidence failed to establish the value of Eachpole's existing trademarks and Market IDs that were transferred to LKimmy under the Eachpole License, or that Eachpole failed to receive reasonably equivalent value from LKimmy in exchange for those assets, Linco failed to carry its burden of proving an essential element of its claim that the Eachpole License is a constructively fraudulent transfer avoidable under Section 548(a)(1)(B)(ii)(II). Resultantly, Linco's Fourteenth Claim for Relief fails as a matter of law. Judgment dismissing the Fourteenth Claim for Relief will enter accordingly.

C. Fifteenth and Sixteenth Claims for Relief: Breach of Fiduciary Duty

The Fifteenth and Sixteenth Claims for Relief pled in the SAC seek recovery for alleged breaches of fiduciary duty. Specifically, the Fifteenth Claim for Relief seeks recovery from Kim and Panchal for breach of fiduciary duties owed to TLC.¹¹⁹² The Sixteenth Claim for Relief seeks recovery from Kim, Misook, and Chris for breach of fiduciary duties owed to Eachpole.¹¹⁹³ Such claims are not created or controlled by the Bankruptcy Code. Breach of fiduciary duty is, however, a cognizable legal theory for recovery under both Nevada and California state law.

1. Choice of Law Regarding Breach of Fiduciary Duty Claims

As explained by the United States District Court for the District of Nevada ¹¹⁹⁴ :

In a federal question action where the federal court is exercising supplemental jurisdiction over state law claims (such as the fiduciary claims here), the federal court applies the choice of law rules of the forum state. [․] § 309 of the Restatement states that the “local law of the state of incorporation will be applied to determine the existence and extent of a director's or officer's liability to the corporation...except where, with respect to the particular issue, some other state has a more significant relationship...to the parties and the transaction, in which event the local law of the other state will be applied.” RESTATEMENT (SECOND) OF CONFLICTS OF LAW § 309. Nevada also recognizes the “internal affairs doctrine,” which provides that the law of the state of incorporation governs liabilities of officers or directors to the corporation and its shareholders.

The preponderance of the evidence established that both TLC ¹¹⁹⁵ and Eachpole ¹¹⁹⁶ are California corporations. The Court has carefully considered the question of whether Nevada has a more significant relationship to the parties and transactions relevant to the question of whether fiduciary duties owed to TLC and/or Eachpole were breached. The Court concludes that it does not. California law therefore governs the breach of fiduciary duty claims advanced by Linco in the Fifteenth and Sixteenth Claims for Relief.

2. Essential Elements and the Burden of Proof as to the Breach of Fiduciary Duty Claims

“Under California law, a breach of fiduciary duty claim requires ‘the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.’ ”¹¹⁹⁷ “There must be an adequate showing of each of these elements” in order to prevail on a cause of action for breach of fiduciary duty.¹¹⁹⁸ “The absence of any one of those elements is fatal to a plaintiff's cause of action.”¹¹⁹⁹

3. The Scope of Fiduciary Duties Owed by Corporate Principals to the Corporation Under California Law

As explained by the United States District Court for the Northern District of California ¹²⁰⁰ :

Under California law, a fiduciary relationship is a special circumstance in which the fiduciary “assumes duties beyond those of mere fairness and honesty” and “must undertake to act on behalf of the beneficiary, giving priority to the best interest of the beneficiary.” Comm. On Children's Television, Inc. v. Gen. Foods Corp., 35 Cal. 3d 197, 222, 197 Cal. Rptr. 783, 673 P.2d 660 (1983). “The obligation to put the interests of the other party first is why a fiduciary relationship generally does not arise out of ordinary arms-length business dealings. In a typical business contract or relationship, one party does not commit to act in the other party's best interest rather than in its own.” World Surveillance Grp., Inc. v. La Jolla Cove Investors, Inc., 66 F. Supp. 3d 1233, 1235 (N.D. Cal. 2014). Thus, a fiduciary duty will be found only where an individual or entity has knowingly undertaken that high duty or when the law imposes the duty in special relationships such as agency, partnership, or joint venture. Id.

Almost sixty years ago, the California Supreme Court established a general rule as to the fiduciary duties owed by corporate directors and officers to their corporations,¹²⁰¹ stating:

The general rules applicable to the duties of a corporate officer have been frequently stated. In the leading case of Guth v. Loft (1939) 23 Del. ch. 255, 5 A.2d 503, 510, these obligations were cogently described as follows: ‘Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. A public policy, existing through the years, derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers.’ Section 820 of the Corporations Code provides that an officer must exercise his powers in good faith, with a view to the interests of the corporation.

Section 820 of the California Corporations Code, relied upon by the Bancroft-Whitney court in addressing the scope of the fiduciary duties owed by a corporate officer (as distinguished from a corporate director), was subsequently repealed by the California legislature effective January 1, 1977.¹²⁰²

At present, “[i]t is without dispute that in California, corporate directors owe a fiduciary duty to the corporation and its shareholders and now as set out by statute, must serve “in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders.”¹²⁰³ And as stated by the United States Supreme Court ¹²⁰⁴ :

A director is a fiduciary. Twin-Lick Oil Company v. Marbury, 91 U.S. 587, 588, 23 L. Ed. 328. So is a dominant or controlling stockholder or group of stockholders. Southern Pacific Company v. Bogert, 250 U.S. 483, 492, 39 S. Ct. 533, 537, 63 L. Ed. 1099. Their powers are powers in trust. See Jackson v. Ludeling, 21 Wall. 616, 624, 22 L. Ed. 492. Their dealings with the corporation are subjected to rigorous scrutiny and where any of their contracts or engagements with the corporation is challenged the burden is on the director or stockholder not only to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein. Geddes v. Anaconda Copper Mining Company, 254 U.S. 590, 599, 41 S. Ct. 209, 212, 65 L. Ed. 425. The essence of the test is whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain. If it does not, equity will set it aside. While normally that fiduciary obligation is enforceable directly by the corporation, or through a stockholder's derivative action, it is, in the event of bankruptcy of the corporation, enforceable by the trustee. For that standard of fiduciary obligation is designed for the protection of the entire community of interests in the corporation—creditors as well as stockholders.

As a general rule, “[a] corporation's directors and officers owe no fiduciary duty to creditors under California law until the corporation becomes insolvent.”¹²⁰⁵ But “[w]hen a corporation becomes insolvent, California's trust fund doctrine imposes an additional, albeit limited, fiduciary duty on the corporation's directors to avoid actions that divert, dissipate, or risk corporate assets that might otherwise be used to pay creditors’ claims, including acts that involve self-dealing or the preferential treatment of creditors.”¹²⁰⁶ Under California's trust fund doctrine, “the directors and officers of the insolvent corporation become fiduciaries whose obligations to the creditors is to protect the assets of the insolvent corporation to satisfy their claims.”¹²⁰⁷ Claims by creditors after corporate insolvency seeking recovery for breach of this limited fiduciary duty commonly pertain “to cases where the directors or officers of an insolvent corporation have diverted assets of the corporation ‘for the benefit of insiders or preferred creditors.’ ”¹²⁰⁸

3. Analysis of the Fifteenth Claim for Relief: Breach of a Fiduciary Duty Owed to TLC by Kim and/or Panchal

a. Existence of a Fiduciary Duty Owed to TLC and its Creditors

i. By Kim

The preponderance of the evidence established that Kim was both a dominant ¹²⁰⁹ and controlling ¹²¹⁰ TLC stockholder. He was also identified as a director for TLC in the Initial/Annual List of Officers, Directors, and State Business License Application TLC filed with the Nevada Secretary of State on January 5, 2018.¹²¹¹ Kim was afforded a full and fair opportunity to present countervailing evidence and testimony at trial. He did not do so. Further, when TLC was rendered insolvent with the execution of the BofA Loan on September 20, 2017,¹²¹² Kim became a fiduciary for TLC's creditors under California law, with attendant obligations to protect TLC's assets to satisfy their claims.¹²¹³

The Court concludes that the preponderance of the evidence established that Kim, as a director and dominant and controlling shareholder, owed a fiduciary duty to TLC at all points in time, and that his dealings with TLC are the subject of rigorous scrutiny.¹²¹⁴ The Court further concludes that from and after TLC's execution of the BofA Loan on September 20, 2017, TLC was insolvent, triggering a fiduciary duty owed by Kim to TLC's creditors under California law, and attendant obligations to protect TLC's assets to satisfy their claims.  ¹²¹⁵

ii. By Panchal

The trial record is bereft of any evidence that Panchal owned any stock at all in TLC. The preponderance of the evidence certainly did not establish that Panchal held a dominant or controlling ownership interest in TLC.

Panchal is identified as a director in the eTop Articles filed with the Nevada Secretary of State on January 5, 2018.¹²¹⁶ Panchal testified credibly, though, that he had never seen the eTop Articles before, and was not aware that he had been identified as a director therein.¹²¹⁷ The preponderance of the evidence established that Panchal did not knowingly undertake the high duty attendant to being a TLC director.¹²¹⁸

In the eTop / TLC List filed with the Nevada Secretary of State on January 5, 2018, Panchal is identified as the company's Treasurer.¹²¹⁹ Panchal testified credibly, though, that he had never seen the eTop / TLC List before and was not aware that he had been identified as TLC's Treasurer.¹²²⁰ The preponderance of the evidence established that Panchal did not knowingly undertake the high duty attendant to being TLC's Treasurer.¹²²¹ But that is not the end of the Court's analysis.

The preponderance of the evidence established that Panchal is identified as TLC's Chief Financial Officer in a variety of documents, and that he held himself out as TLC's Chief Financial Officer at various points key points in time. In the TLC Information Statement filed with the California Secretary of State on April 17, 2017, Panchal is identified as TLC's Chief Financial Officer.¹²²² Panchal also submitted a sworn declaration in the Patent Lawsuit ¹²²³ in which he stated under penalty of perjury that:

I am the Chief Financial Officer of Top Lighting Corporation. I'm responsible for financial and record keeping matters, among other things at Top Lighting.1224

Panchal testified that he signed that declaration under oath but disavowed either drafting the contents of the declaration or even reading the declaration before signing it.¹²²⁵ The Court finds Panchal's testimony in that respect lacking in credibility.

A 2017-2018 internal organizational chart for TLC listed Panchal as TLC's Chief Financial Officer.¹²²⁶ A January 16, 2018, draft engagement letter from Duff & Phelps LLC regarding “sell side financial due diligence” was directed to Panchal as TLC's Chief Financial Officer.¹²²⁷ A February 13, 2018, Inventory Appraisal, prepared by Hilco regarding TLC's inventory as of November 30, 2017,¹²²⁸ identified Panchal as TLC's Chief Financial Officer.¹²²⁹ A Management Representation Letter, submitted by TLC and Eachpole to Deloitte in connection with an April 30, 2018, audit report regarding their combined 2016 and 2017 financial statements, was signed by Panchal as Chief Financial Officer.¹²³⁰ On July 13, 2018, Panchal signed a Borrowing Base Certificate as TLC's Chief Financial Officer in connection with the $3 million line of credit that had been extended to TLC by Bank of America on September 20, 2018, under the BofA Loan.  ¹²³¹ On July 20, 2018, Duff & Phelps’ Managing Director Brian Little, wrote a letter to Martin Green, Business Development Director at Vitec to confirm the scheduling of an August 2, 2018, Management Presentation in support of a potential sale of TLC to Vitec.¹²³² That letter identified Panchal as TLC's Chief Financial Officer,¹²³³ and Panchal was among those in attendance at the August 2, 2018, Vitec pitch meeting.¹²³⁴

The Court concludes that between the time Panchal was hired at TLC in May 2016, and the end of his TLC tenure in November 2018, he: (a) did not hold a dominant or controlling ownership interest in TLC; (b) did not knowingly undertake the high duty attendant to being a TLC director or TLC's Treasurer; but (c) was identified in various documents, and consistently held himself out, as TLC's Chief Financial Officer. Resultantly, when TLC was rendered insolvent with the execution of the BofA Loan on September 20, 2017 ¹²³⁵ and thereafter, Panchal owed a fiduciary to TLC and its creditors under California law, with attendant obligations to protect TLC's assets to satisfy their claims.¹²³⁶

b. Breach of a Fiduciary Duty Owed to TLC

i. By Kim

The Court, having concluded that the preponderance of the evidence established that Kim was a director and dominant and controlling shareholder who owed a fiduciary duty to TLC, turns next to the question of whether Kim breached that duty. In view of Kim's fiduciary duty to TLC, and under well-established California law, Kim was not permitted to use his position of trust and confidence at TLC to further his private interests.¹²³⁷ Kim's fiduciary duty to TLC under California law was not only to affirmatively to protect the interests of TLC, but also to refrain from doing anything that would work injury to TLC, or to deprive TLC of profit or advantage which his skill and ability might properly bring to TLC, or to enable TLC to make in the reasonable and lawful exercise of its powers.¹²³⁸

The preponderance of the evidence showed, and the Court concludes, that Kim did breach the fiduciary duty he always owed to TLC, and owed to its creditors upon TLC's insolvency, under California law. After unsuccessfully attempting to sell TLC to Vitec, Kim utilized his position of trust and confidence at TLC to further his private interests when he caused TLC, a Subchapter S corporation under his control, to:

(a) Enter into the BofA Loan on September 20, 2017, which rendered TLC insolvent;

(b) Use proceeds generated by TLC's business operations to make $1,158,581.96 in overpayments overpay the Taxing Authorities at points in time where TLC's tax returns showed multi-million dollar losses, thereby depriving TLC of desperately needed capital and putting himself in position to request that the Taxing Authorities refund the overpayments to himself personally; and

(c) Transfer substantially all of TLC's business inventory to LKimmy in exchange for approximately half of its fair value, depriving TLC of any potential for related profit and leaving TLC in a financial position where it was doomed to, and did, fail.

ii. By Panchal

TLC's insolvency resulting from the BofA Loan transaction on September 20, 2017, triggered a limited fiduciary duty owed by Panchal to TLC and its creditors under California law. Under California's trust fund doctrine, “officers of the insolvent corporation become fiduciaries whose obligation to the creditors is to protect the assets of the insolvent corporation to satisfy their claims.”¹²³⁹ Claims that this limited fiduciary duty has been breached commonly pertain “to cases where the directors or officers of an insolvent corporation have diverted assets of the corporation ‘for the benefit of insiders or preferred creditors.’ ”¹²⁴⁰ Panchal's limited fiduciary duty to TLC and its creditors existed until the termination of Panchal's employment with TLC in November 2018.

There is no evidence establishing that Panchal himself received or misappropriated any assets from TLC after TLC's insolvency on September 20, 2017. While the preponderance of the evidence at trial established that Panchal did serve and hold himself out as holding the title of TLC's CFO, he testified credibly that scope of the services he performed in that role did not include handling payroll,¹²⁴¹ any access to bank accounts, making payments to vendors, or signing checks unless Kim was traveling.¹²⁴² The preponderance of the evidence did not establish that Panchal aided Kim in arranging overpayments to the Taxing Authorities, or in transferring TLC's inventory assets to LKimmy. Panchal's credible testimony was that he was unaware of the overpayments to the Taxing Authorities until after the payments were made.¹²⁴³ The invoices memorializing inventory transfers by TLC to LKimmy are dated after Panchal's tenure with TLC ended in November 2018. The timing of the invoices indicates that Kim waited until after Panchal's departure to make the transfer of TLC's inventory assets to LKimmy, thereby avoiding any potential for objection by Panchal.¹²⁴⁴ The Court concludes that the preponderance of the evidence did not establish that Panchal breached the limited fiduciary duty he owed to TLC and its creditors subsequent to TLC's insolvency.

c. Damages Resulting from the Breach of the Fiduciary Duty Kim Owed to TLC

The preponderance of the evidence established that TLC suffered the following damages as the result of Kim's breach of the fiduciary duty he owed as the result of his status as a director and dominant and controlling shareholder of TLC:

•Overpayments to Taxing Authorities: $1,158,581.96 •Net Loss Due to Inventory Transfers to LKimmy: $3,523,950.75 Total Damages Due to Kim's Breach of Fiduciary Duty Owed to TLC: $4,682,532.71

d. Summary

With respect to the Fifteenth Claim for Relief, the preponderance of the evidence established each of the elements required to sustain Linco's claim for breach of fiduciary duty against Kim. The preponderance of the evidence established that Kim owed a fiduciary duty to TLC under California law. The preponderance of the evidence also established that Kim breached that duty, with resulting in damages totaling $4,682,532.71. Judgment will enter accordingly in favor of Linco and against Kim on the Fifteenth Claim for Relief.

The preponderance of the evidence also established that Panchal owed a limited fiduciary duty to TLC and its creditors under California's trust fund doctrine when, upon the September 20, 2017, closing of the BofA Loan transaction, TLC became insolvent. But there is no evidence establishing that Panchal himself received or misappropriated any assets from TLC after TLC's insolvency. The preponderance of the evidence failed to demonstrate that Panchal breached the limited fiduciary duty he owed to TLC and its creditors subsequent to TLC's insolvency. In the absence of a breach of the limited fiduciary duty Panchal owed to TLC and its creditors from and after TLC's insolvency, no damages resulted. Since the preponderance of the evidence did not establish each of the elements required to sustain Linco's claim for breach of fiduciary duty against Panchal, judgment will enter dismissing the Fifteenth Claim for Relief as against Panchal.

4. Analysis of the Sixteenth Claim for Relief: Breach of a Fiduciary Duty Owed to Eachpole by Kim, Misook, and/or Chris

The same legal principles under California law that governed the Court's analysis of the breach of fiduciary duty claim under the Fifteenth Claim for Relief apply in resolving the breach of fiduciary duty claims advanced in the Sixteenth Claim for Relief.

a. Existence of a Fiduciary Duty Owed to Eachpole (f/k/a Julius, Inc.) and its Creditors

i. By Kim

The Julius Information Statement identified Kim as Julius's Secretary, sole director, and agent for service of process.¹²⁴⁵ Kim signed the Julius Information Statement in his capacity as Julius's Secretary.¹²⁴⁶ On November 1, 2017, the Julius/Eachpole Name Change was filed with the California Secretary of State.¹²⁴⁷ The Julius/Eachpole Name Change was signed by Kim as the company's President and Secretary.¹²⁴⁸ Eachpole's 2017 federal tax return identifies Kim as the holder of 100% of Eachpole's stock.¹²⁴⁹ The Statement of Financial Affairs filed in support of the Eachpole Petition identifies Kim as Eachpole's President and as the holder of a 100% ownership interest in Eachpole.¹²⁵⁰

The balance sheet portion of Eachpole's 2018 federal income tax return shows that at the end of the year, Eachpole had total assets of “$0.”¹²⁵¹ That same balance sheet shows that at the end of 2018, Eachpole had “Other current liabilities” of $50,000.00. The preponderance of the evidence establishes that under the balance sheet test Eachpole was insolvent by the end of 2018.

The Court concludes that the preponderance of the evidence established that Kim, as a director and dominant and controlling shareholder, owed a fiduciary duty to Eachpole at all

points in time, and that his dealings with Eachpole are the subject of rigorous scrutiny.¹²⁵² The Court further concludes that from and after December 31, 2018, Eachpole was insolvent triggering a fiduciary duty owed by Kim to Eachpole's creditors under California law, and attendant obligations to protect Eachpole's assets to satisfy their claims.  ¹²⁵³

ii. By Misook

The Julius Information Statement makes no reference to Misook.¹²⁵⁴ Nor does the Julius/Eachpole Name Change filed with the California Secretary of State.¹²⁵⁵ Eachpole's 2017 federal tax return identifies Kim as the holder of 100% of Eachpole's stock, to the obvious exclusion of Misook as a shareholder.¹²⁵⁶ The Statement of Financial Affairs filed in support of the Eachpole Petition also identifies Kim, not Misook, as the holder of 100% of Eachpole's stock.¹²⁵⁷

The preponderance of the evidence did not establish that Misook was a controlling shareholder, director, or officer of Eachpole. In the absence of any evidence establishing that Misook was a controlling shareholder, director, or officer of Eachpole, the Court concludes that Misook did not owe a fiduciary duty to Eachpole under applicable California law.

iii. By Chris

The Julius Information Statement does identify Chris as Julius's Chief Executive Officer.¹²⁵⁸ The Julius Information Statement identified Kim as Eachpole's sole director, to the obvious exclusion of Chris in that capacity.  ¹²⁵⁹ Eachpole's 2017 federal tax return identifies Kim as the holder of 100% of Eachpole's stock, to the obvious exclusion of Chris as a shareholder.¹²⁶⁰ The Statement of Financial Affairs filed in support of the Eachpole Petition identifies Kim, not Chris, as the holder of 100% of Eachpole's stock.¹²⁶¹

The Court concludes that the preponderance of the evidence established that: (a) Chris did not hold any, much less a dominant or controlling, ownership interest in Eachpole; (b) Chris was not an Eachpole director; but (c) Chris was identified in the Julius Information Statement Eachpole's Chief Financial Officer. Resultantly, when Eachpole became insolvent at the end of 2018, and thereafter, Chris owed a fiduciary to Eachpole and its creditors under California law, with attendant obligations to protect Eachpole's assets to satisfy their claims.¹²⁶²

b. Breach of a Fiduciary Duty Owed to Eachpole

i. By Kim

The Court, having concluded that the preponderance of the evidence established that Kim was a director and dominant and controlling shareholder who owed a fiduciary duty to Eachpole, turns next to the question of whether Kim breached that duty. Kim's fiduciary duty to Eachpole under California law was not only to affirmatively to protect the interests of Eachpole, but also to refrain from doing anything that would work injury to Eachpole, or to deprive Eachpole of profit or advantage which his skill and ability might properly bring to Eachpole, or to enable Eachpole to make in the reasonable and lawful exercise of its powers.¹²⁶³

The preponderance of the evidence showed, and the Court concludes, that Kim did breach the fiduciary duty he always owed to Eachpole, and owed to Eachpole's creditors upon its insolvency, under California law. After unsuccessfully attempting to sell Eachpole to Vitec, Kim utilized his position of trust and confidence at Eachpole to transfer substantially all of Eachpole's remaining business inventory to LKimmy, depriving Eachpole of any potential for related profit and leaving Eachpole in a financial position where it was doomed to, and did, fail.

ii. By Misook

The Court has previously concluded that Misook did not owe a fiduciary duty to Eachpole. Since the existence of a fiduciary duty owed by Misook to Eachpole was not established by a preponderance of the evidence, it necessarily follows that Misook did not breach such a duty.

iii. By Chris

Eachpole's insolvency at the end of calendar year 2018 triggered a limited fiduciary duty owed by Chris as Eachpole's Chief Executive Officer to Eachpole and its creditors under California law. Under California's trust fund doctrine, “officers of the insolvent corporation become fiduciaries whose obligation to the creditors is to protect the assets of the insolvent corporation to satisfy their claims.”¹²⁶⁴ Claims that this limited fiduciary duty has been breached commonly pertain “to cases where the directors or officers of an insolvent corporation have diverted assets of the corporation ‘for the benefit of insiders or preferred creditors.’ ”¹²⁶⁵

There is no evidence establishing that Chris himself received or misappropriated any assets from Eachpole after it became insolvent at the end of calendar year 2018. Nor was any evidence presented at trial to demonstrate that Chris was involved in any manner in the transfer of any of Eachpole's assets to LKimmy. Chris was not deposed, nor was he called as a witness to testify at trial. The Court concludes that Linco simply failed to satisfy its burden of proving that Chris breached the limited fiduciary duty he owed as Eachpole's Chief Executive Officer to Eachpole and its creditors under California law after Eachpole became insolvent.

c. Evidence of Damages Resulting from Kim's Breach of the Fiduciary Duty He Owed to Eachpole

After unsuccessfully attempting to sell Eachpole to Vitec, Kim utilized his position of trust and confidence at Eachpole to transfer substantially all of Eachpole's remaining business inventory to LKimmy. That deprived Eachpole of any potential for future profits and left Eachpole in a financial position where it was doomed to, and did, fail. But the preponderance of the evidence did not establish the value of Eachpole's assets that were conveyed to LKimmy.¹²⁶⁶ Nor was any evidence or expert testimony presented to establish Eachpole's lost profits or any other business losses or damages suffered by Eachpole resulting from the transfer of Eachpole's assets to LKimmy. The preponderance of the evidence did not establish the amount of damages (if any) Eachpole suffered as the result of Kim's breach of the fiduciary duty he owed to Eachpole.

d. Summary

The preponderance of the evidence established that Kim, as a director and dominant and controlling shareholder, owed a fiduciary duty to Eachpole at all points in time, and upon Eachpole's insolvency on and after December 31, 2018, owed a fiduciary duty to Eachpole's creditors under California law, and attendant obligations to protect Eachpole's assets to satisfy their claims.  ¹²⁶⁷ The preponderance of the evidence also established that Kim did breach the fiduciary duty he always owed to Eachpole, and owed to Eachpole's creditors upon its insolvency, under California law. But the preponderance of the evidence did not establish the amount of damages (if any) Eachpole suffered as the result of Kim's breach of the fiduciary duty he owed to Eachpole. Because Linco failed to carry its burden of proving damages caused by Kim's breach of a fiduciary duty owed to Eachpole, the Sixteenth Claim for Relief fails as to Kim as a matter of law.¹²⁶⁸

Because the preponderance of the evidence failed to establish that Misook owed a fiduciary duty to Eachpole, there was no proof that such a duty had been breached by Misook, or that Eachpole suffered any resultant damages. Because Linco failed to carry its burden of proving each of the elements of its breach of fiduciary duty claim against Misook, the Sixteenth Claim for Relief against Misook fails as a matter of law.¹²⁶⁹

Finally, Eachpole's insolvency at the end of calendar year 2018 triggered a limited fiduciary duty owed by Chris as Eachpole's Chief Executive Officer to Eachpole and its creditors under California law. But the preponderance of the evidence failed to establish that Chris breached the limited fiduciary duty he owed as Eachpole's Chief Executive Officer to Eachpole and its creditors under California law after Eachpole became insolvent. In the absence of such a breach, there was no proof that Eachpole suffered resultant damages. Because Linco failed to carry its burden of proving each of the elements of its breach of fiduciary duty claim against Chris, the Sixteenth Claim for Relief against Chris fails as a matter of law.¹²⁷⁰

Ultimately, the Sixteenth Claim for Relief fails as a matter of law with respect to all parties to whom it was directed (i.e., Kim, Misook, and Chris). Accordingly, judgment will enter dismissing the Sixteenth Claim for Relief in its entirety.

D. Seventeenth Through Nineteenth Claims for Relief: Conversion

The Seventeenth through Nineteenth Claims for Relief pled by Linco in the SAC seek recovery on behalf of the TLC bankruptcy estate from various defendants for alleged conversion of TLC's assets.¹²⁷¹ Specifically, the Seventeenth Claim for Relief seeks recovery from Kim and Misook alleging a conversion claim.¹²⁷² The Eighteenth Claim for Relief seeks recovery from Kim predicated upon a claim of conversion.¹²⁷³ The Nineteenth Claim for Relief alleges that recovery from LKimmy is warranted under a conversion theory.¹²⁷⁴ Conversion claims are not created or controlled by the Bankruptcy Code. But conversion is a cognizable legal theory for recovery under both Nevada and California state law.

1. Choice of Law Regarding Conversion Claims

The conversion claims pled in the Seventeenth through Nineteenth Claims for Relief generally assert that Kim, Misook, and LKimmy converted assets belonging to TLC. As noted previously, the general rule under Nevada law is that the “internal affairs doctrine” applies such that the law of the state of incorporation governs liabilities of officers or directors to a corporation and its shareholders.¹²⁷⁵ Nevada recognizes an exception to the internal affairs doctrine “where with respect to the particular issue, some other state has a more significant relationship ․ to the parties and the transaction, in which event the local law of the other state will be applied.”¹²⁷⁶

The preponderance of the evidence established that TLC is a California corporation.¹²⁷⁷ The conversion claims pled in the Seventeenth and Eighteenth Claims for Relief relate to actions taken by Kim (a director and controlling shareholder of TLC), and Misook (Kim's wife) that allegedly deprived TLC of some of its assets. LKimmy is a Nevada corporation.¹²⁷⁸ The conversion claims pled in the Nineteenth Claim for Relief allege that LKimmy deprived TLC of some of its assets.

As to TLC's conversion claims pled in the Seventeenth and Eighteenth Claims for Relief against Kim, the Court concludes that the internal affairs doctrine applies, and that California law governing those conversion claims controls. As to TLC's conversion claims against Misook pled in the Eighteenth Claim for Relief, and against LKimmy pled in the Nineteenth Claim for Relief, the Court concludes that California has the most significant relationship with the parties and the underlying transactions, such that California law governs those conversion claims as well.

2. Essential Elements of a Conversion Claim Under California Law

Under California law, “[C]onversion is the unwarranted interference by defendant with the dominion over the property of the plaintiff from which injury to the latter results.”¹²⁷⁹ To prevail on a conversion claim under California law, a plaintiff must establish “(1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages[.]”¹²⁸⁰

3. Analysis of the Seventeenth Claim for Relief: Conversion of TLC's Property Through Overpayments to Taxing Authorities

a. By Kim

The preponderance of the evidence at trial established that TLC owned corporate bank accounts at Bank of America ending in 5743 and 2506, and that TLC had the right to possession of the money in those accounts.¹²⁸¹

Because TLC is a Subchapter S corporation, it had no federal tax liability in 2017 or 2018.¹²⁸² The preponderance of the evidence also showed that TLC had a total of just $1,744.00 in California state tax liability in 2017 and 2018.¹²⁸³

But the preponderance of the evidence established that while serving as a director and holding a controlling shareholder interest in TLC, Kim caused payments to be issued from TLC's bank accounts to the IRS in 2017 and 2018 totaling $1,157,325.96, of which $707,325.96 was paid to the IRS during the two year period prior to the TLC Petition Date.¹²⁸⁴ As a Subchapter S corporation, TLC received no value at all in exchange for those payments to the IRS. The preponderance of the evidence further showed that while serving as a director and holding a controlling shareholder interest in TLC, Kim caused payments to be issued from TLC's bank accounts to the CFTB in 2017 and 2018 totaling $574,000.00, of which $453,000.00 was paid to the CFTB during the two-year period prior to the TLC Petition Date. As a Subchapter S corporation, in exchange for those payments to the CFTB, TLC only received satisfaction of $1,744.00 in California state tax liability for the 2017 and 2018 tax years.

The preponderance of the evidence further established that in 2017 and 2018, as a director and holder of a controlling shareholder interest in TLC, Kim had unquestioned control over TLC's business and financial operations.¹²⁸⁵ While Kim was TLC's sole shareholder with firm control over TLC's business operations, TLC experienced multi-million dollar losses from business operations over two consecutive tax years,¹²⁸⁶ yet made $1,158,581.96 in overpayments to the Taxing Authorities while TLC was insolvent.¹²⁸⁷ That put Kim, as TLC's sole shareholder, in position to use the pass-through loss carrybacks and overpayments to the Taxing Authorities to generate sizable tax refunds for his own benefit going forward. Sun Ha had already prepared and filed a 2017 IRS Form 1045 to carry back TLC's reported loss in 2017 seeking a refund of $1,364,764 in taxes paid in 2015 and 2016.¹²⁸⁸ Kim indicated to Ms. Moon that the refund was “going to be his birthday gift.”¹²⁸⁹

The Court has previously held, and reaffirms here, that by causing TLC to make such massive overpayments from TLC's bank accounts to the Taxing Authorities, Kim acted wrongfully. The payments to the Taxing Authorities were constructively fraudulent under Section 548(a)(1)(B) and violated fiduciary duties Kim owed to TLC and its creditors under California law. The payments to the Taxing Authorities further deprived TLC of well over a million dollars in operating funds, leaving TLC in a financial condition where it was “doomed to fail.” It ultimately did.

The preponderance of the evidence established that by wrongfully causing TLC to make such massive overpayments from TLC's bank accounts to the Taxing Authorities for his personal benefit with no related benefit to TLC, Kim caused damage to TLC. Those damages are summarized in the following table ¹²⁹⁰ :

Taxing Authority 2017 Payments 2018 Payments Total TLC Damages IRS $550,325.96 $607,000.00 $1,157,325.96 CFTB $166,000.00 $408,000.00 $ 574,000.00 Subtotal: $1,731,325.96 Less: Satisfied 2017 and 2018 State Tax Liabilities <-$ 1,744.00> GRAND TOTAL $1,729,581.96

Judgment against Kim for conversion as alleged in the Seventeenth Claim for Relief will issue accordingly.

b. By Misook

As noted previously, the preponderance of the evidence at trial established that TLC owned corporate bank accounts at Bank of America ending in 5743 and 2506, and that TLC had the right to possession of the money in those accounts.¹²⁹¹ Again, because TLC is a Subchapter S corporation, it had no federal tax liability in 2017 or 2018.¹²⁹² The preponderance of the evidence also showed that TLC had a total of just $1,744.00 in California state tax liability in 2017 and 2018.¹²⁹³ And the preponderance of the evidence established that payments were made from TLC's bank accounts to the Taxing Authorities totaling $1,731,325.96.

But the preponderance of the evidence did not establish that Misook owned any shares in TLC when the overpayments to the Taxing Authorities were made.¹²⁹⁴ Since Misook was not a TLC shareholder when the overpayments to the Taxing Authorities occurred, no related tax benefits passed through to her from TLC. Nor did the preponderance of the evidence establish that Misook had any input or control over TLC's business operations when the overpayments to the Taxing Authorities occurred. Since Misook was not a TLC shareholder and did not have substantive input or control over TLC's business operations when the overpayments to the Taxing Authorities occurred, the preponderance of the evidence failed to establish that she acted wrongfully or caused the disposition of any property rights held by TLC. Because the preponderance of the evidence did not establish that Misook acted wrongfully or caused the disposition of any property rights held by TLC, she did not cause TLC to suffer damages. Put simply, the preponderance of the evidence failed to establish all of the elements required to support a conversion claim against Misook as alleged in the Seventeenth Claim for Relief under California law. Judgment dismissing the Seventeenth Claim for Relief as against Misook will enter accordingly.

3. Analysis of the SAC's Eighteenth Claim for Relief: Conversion of TLC's Property – Payment of Kim's Personal Credit Cards and Transfers Made to Unknown ROE Defendant Chinese Entities

The preponderance of the evidence at trial established that TLC owned corporate bank accounts at Bank of America ending in 5743 and 8850,¹²⁹⁵ as well as a corporate bank account at Chase Bank ending in 1610,¹²⁹⁶ and that TLC had the right to possession of the money in those accounts.

In the Eighteenth Claim for Relief, Linco initially asserts that Kim wrongfully caused TLC to make various payments from TLC's bank accounts to Kim's personal credit card accounts.¹²⁹⁷ But the preponderance of the evidence established that Kim used the credit cards referenced in the Eighteenth Claim for Relief primarily to make business-related purchases for TLC, and also for some personal expenses. Panchal testified credibly that when Kim's monthly credit card statements were received and presented to TLC personnel for review, business-related charges were posted to TLC's books as business expenses, and if Kim had made personal charges, those personal charges were posted to TLC's books as a distribution to Kim.¹²⁹⁸ On cross-examination at trial, Linco's expert witness, Mr. Bertsch, failed to substantiate any claims that the payments from TLC's bank accounts to Kim's personal credit cards constituted fraudulent conveyances.

The preponderance of the evidence failed to establish that Kim acted wrongfully in directing TLC to make payments on his personal credit cards as detailed in the Eighteenth Claim for Relief, or that TLC suffered any damages as a result of those payments. In summary, the preponderance of the evidence failed to establish all of the elements required to support a conversion claim against Kim with respect to the credit card payments referenced in the Eighteenth Claim for Relief under California law.

In the Eighteenth Claim for Relief, Linco further asserted that Kim acted wrongfully by causing 68 wire transfers to issue from TLC's BofA corporate bank accounts ending in 8850 and 5743 to initial transferees in China totaling $3,656,152.03. The preponderance of the evidence did not establish precisely what, if anything, TLC received in exchange for those wire transfers. Panchal testified that while he was employed at TLC, payments to China reflected on bank statements would routinely be posted as payments to vendors.¹²⁹⁹ Ms. Chen was able to determine that TLC had transferred over $3 million to entities located in China between December 2018 and June 2019, but could not confirm one way or the other whether the proceeds from those wire transfers had been paid to TLC's vendors.¹³⁰⁰ Ms. Chen did note, though, that no containers of inventory were shipped to TLC from Chinese vendors during that time period.¹³⁰¹ She also acknowledged that he was unable to identify any bank account in China maintained by Kim where the money sent by wire transfer might have been received.¹³⁰² Kim was not deposed prior to trial, nor did he testify at trial about the wire transfers to China, or as to any other issue. None of the recipients of the wire transfers were ever identified as parties in the SAC, served with notice, or afforded any opportunity to be heard or to explain what (if anything) they sent to TLC in exchange for the money they received via wire transfer.

The Court concludes that the preponderance of the evidence did establish that as TLC's director and controlling shareholder, Kim caused the 68 wire transfers from TLC's BofA corporate bank accounts ending in 8850 and 5743 to be issued to initial transferees in China totaling $3,656,152.03 at a point in time where TLC was insolvent and lacked adequate capital to sustain its operations. In the absence of testimony or any other evidence from Kim to establish why those transfers were made or what (if anything) TLC received in return, the Court concludes that the preponderance of the evidence established that the wire transfers issued while Kim was TLC's director and controlling shareholder were wrongful, as they violated fiduciary duties Kim owed to TLC and its creditors under California law, and resulted in damage to TLC in the amount of $3,656,152.03. Judgment against Kim for conversion in connection with the wire transfers referenced in the Eighteenth Claim for Relief will enter accordingly.

4. Analysis of the SAC's Nineteenth Claim for Relief: Conversion of TLC's Property – Inventory Transferred by TLC to LKimmy

The preponderance of the evidence established that prior to the TLC Petition Date, TLC owned inventory assets and had the right to possession of that inventory.

The preponderance of the evidence also established that TLC conveyed its inventory assets to LKimmy prior to the filing of the TLC Petition. Since LKimmy was first created on October 19, 2018,¹³⁰³ all transfers of TLC's inventory assets to LKimmy necessarily occurred within two years of the TLC Petition Date of October 8, 2019. The preponderance of the evidence also showed that TLC received less than reasonably equivalent value in exchange for the transfers of its inventory assets to LKimmy. The BofA Loan transaction rendered TLC insolvent under the balance sheet test as of September 20, 2017, and TLC remained insolvent thereafter. The transfers of TLC's inventory assets to LKimmy also occurred while TLC lacked adequate capital to support its business operations.

The Court acknowledges that the preponderance of the evidence did not establish that LKimmy somehow directed or controlled TLC's decision to transfer its inventory holdings to LKimmy. But the preponderance of the evidence did establish that LKimmy acted wrongfully by failing to remit reasonably equivalent value to TLC in exchange for the inventory, depriving TLC of the reasonable value of the inventory transferred to LKimmy and rendering the inventory transfers made by TLC to LKimmy constructively fraudulent under Section 548(a)(1)(B).

The resultant damages to TLC in conversion are properly calculated as follows:

Average of Independent Prebankruptcy Inventory Valuations 1304: $8,319,712.33 Less: Inventory Reported Per TLC Bankruptcy 1305: $ 579,131.31 Net Value of Inventory Transferred by TLC To LKimmy Prior to TLC's Bankruptcy: $7,740,581.02 Less: Subsequent Payments for Inventory Made by LKimmy to TLC 1306: $4,216,630.27 Damages to TLC Due to Inventory Transfers to LKimmy: $3,523,950.75

Judgment against LKimmy for conversion in connection with the inventory transfers referenced in the Nineteenth Claim for Relief will enter accordingly.

E. Twentieth Through Twenty-Second Claims for Relief: Civil Conspiracy

The Twentieth, Twenty-First, and Twenty-Second claims for relief pled in the SAC seek recovery predicated upon conspiracy.¹³⁰⁷ Specifically, the Twentieth Claim for Relief seeks recovery on behalf of the TLC estate from Kim and Misook, asserting that they engaged in conspiracy to commit constructive fraud under Section 548(a)(1)(B)(ii)(I). The Twenty-First Claim for Relief seeks recovery on behalf of the TLC estate from Kim and Misook, asserting that they engaged in conspiracy to commit constructive fraud under Section 548(a)(1)(B)(ii)(II). The Twenty-Second Claim for Relief seeks recovery on behalf of the TLC estate from Kim and Misook, asserting that they engaged in conspiracy to commit conversion of TLC's assets. Conspiracy claims are not created or controlled by the Bankruptcy Code. But civil conspiracy is a cognizable legal theory for recovery under both California and Nevada state law.

1. Choice of Law Regarding Conspiracy Claims

To the extent that the Twenty-Second Claim for Relief alleges that a conspiracy existed between Kim and Misook to convert TLC's property, the Court will apply the same state law applicable to the underlying tort of conversion. Since the Court has previously determined that California state law governs Linco's conversion claims, the Court will apply California law to the conversion claim underpinning the Twenty-Second Claim for Relief.

2. California Law Regarding Civil Conspiracy Claims

Under California law, “[c]onspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.”¹³⁰⁸ Since conspiracy is not an independent cause of action, dismissal of the Twentieth, Twenty-First, and Twenty Second Claims for Relief may be warranted on that basis.¹³⁰⁹ To ensure that the Court has given full and fair consideration to all issues pled in the SAC, though, the Court will continue its analysis.

Under California law, “[t]o prove a claim for civil conspiracy, [a plaintiff is] required to provide substantial evidence of three elements: (1) the formation and operation of the conspiracy, (2) wrongful conduct in furtherance of the conspiracy, and (3) damages arising from the wrongful conduct.”¹³¹⁰ To show the first element of conspiracy – the “formation and operation of the conspiracy” – a plaintiff must show “(i) knowledge of wrongful activity, (ii) agreement to join in the wrongful activity, and (iii) intent to aid in the wrongful activity.”¹³¹¹

2. Analysis of the Twentieth and Twenty-First Claims for Relief: Civil Conspiracy by Kim and Misook to Commit Constructive Fraud in the Transfer of TLC's Assets to the Taxing Authorities

The Court has previously concluded that:

• Transfers of $1,158,581.96 from TLC's corporate bank accounts to the Taxing Authorities made within the two years prior to the TLC Petition Date are avoided as constructively fraudulent transfers under both Section 548(a)(1)(B)(ii)(I)1312 and Section 548(a)(1)(B)(ii)(II)1313;

• As the party for whose benefit the avoided and constructively fraudulent transfers to the Taxing Authorities were made, Kim is liable for the value of those avoided transfers under Section 550(a)(1); and

• Because Misook was not a TLC shareholder and did not have substantive input or control over TLC's business operations when the overpayments to the Taxing Authorities occurred, she was neither an initial transferee nor the entity for whose benefit the transfers to the Taxing Authorities were made.

The issue presented by the conspiracy claims advanced in the Twentieth and Twenty-First Claims for Relief is whether substantial evidence established that Misook and Kim shared a common plan or design in perpetrating the avoided and constructively fraudulent transfers to the Taxing Authorities such that liability for those transfers should be imposed on Misook. As plaintiff, Linco was required to present “substantial evidence” of each of the elements of its conspiracy claims in order for liability to be imposed upon Misook for the avoided and constructively fraudulent transfers to the Taxing Authorities.¹³¹⁴ But neither Kim nor Misook testified at trial. Nor was any deposition testimony obtained from Kim or Misook offered into evidence at trial.

a. Conspiracy Formation and Operation

The trial record did not show through substantial evidence that Misook owned any shares in TLC when the overpayments to the Taxing Authorities were made during the two years prior to the TLC Petition Date.¹³¹⁵ The trial record did not contain substantial evidence establishing that Misook had any input or control over TLC's business operations when the overpayments to the Taxing Authorities occurred during the two years prior to the TLC Petition Date. There was no evidence of any communications between Kim and Misook in which they formulated a plan to cause TLC to make the overpayments to the Taxing Authorities before TLC the money was transferred to the Taxing Authorities during the two years before the TLC Petition Date. The trial record did not demonstrate through substantial evidence that Misook had any knowledge of the transfers of money from TLC's bank accounts to the Taxing Authorities when those transfers were made during the two years prior to the TLC Petition Date. The Taxing Authorities were the initial transferees with respect to TLC's overpayments, not Misook. Since Misook was not a TLC shareholder and did not have substantive input or control over TLC's business operations when the overpayments to the Taxing Authorities were made during the two years prior to the TLC Petition Date, she was not the entity for whose benefit the transfers to the Taxing Authorities were made. Nor was substantial evidence presented at trial establishing that Misook had any knowledge that the transfers to the Taxing Authorities were made while TLC was insolvent and/or had unreasonably small capital.

Substantial evidence did not establish that Misook knew that TLC made any of the transfers to the Taxing Authorities during the two years prior to the TLC Petition Date, or that she knew that TLC's transfers to the Taxing Authorities were wrongful when they were made. Substantial evidence did not establish that Misook somehow agreed to cause, or intended to join in an effort to cause, TLC to make the transfers to the Taxing Authorities during the two years prior to the TLC Petition Date. The Court concludes that Linco failed to prove through substantial evidence that Kim and Misook formed and operated a conspiracy to cause TLC to make constructively fraudulent transfers to the Taxing Authorities during the two years prior to the TLC Petition Date. This essential element of TLC's conspiracy claim as pled in the Twentieth and Twenty-First Claims for Relief is not supported by substantial evidence.

b. Wrongful Conduct in Furtherance of Conspiracy

The trial record did not demonstrate that Misook engaged in wrongful conduct, or frankly any conduct at all, related to TLC's payments to the Taxing Authorities during the two years prior to the TLC Petition Date when those payments to the Taxing Authorities were made.¹³¹⁶ The Court concludes that Linco failed to prove through substantial evidence that Misook engaged in wrongful conduct, or any conduct at all, in furtherance of a conspiracy to cause TLC to make constructively fraudulent transfers to the Taxing Authorities during the two years prior to the TLC Petition Date. This essential element of TLC's conspiracy claim as pled in the Twentieth and Twenty-First Claims for Relief is not supported by substantial evidence.

c. Damages

Substantial proof of the formation and operation of a conspiracy between Kim and Misook to cause TLC to make overpayments to the Taxing Authorities during the two years prior to the TLC Petition Date is lacking. Nor does substantial proof establish that Misook engaged in wrongful conduct, or any conduct at all, related to TLC's payments to the Taxing Authorities during the two years prior to the TLC Petition Date when those payments to the Taxing Authorities were made. It necessarily follows that TLC did not suffer any damages resulting from the conspiracy claims advanced in the Twentieth and Twenty-First Claims for Relief. This essential element of TLC's conspiracy claims as pled in the Twentieth and Twenty-First Claims for Relief is not supported by substantial evidence.

d. Summary

Linco failed to satisfy its burden of proving through substantial evidence that Misook was engaged with Kim in a common plan or design to cause TLC to make the avoided and constructively fraudulent transfers to the Taxing Authorities such that liability for those transfers should be imposed on Misook under a civil conspiracy theory. The civil conspiracy claims alleged in the Twentieth and Twenty-First Claims for Relief therefore fail as a matter of law. Judgment dismissing the Twentieth and Twenty-First Claims for Relief will enter accordingly.

3. Analysis of the Twenty-Second Claim for Relief: Civil Conspiracy by Kim and Misook to Convert TLC's Assets in Order to Pay Personal Taxes

The Court has previously concluded that:

• The preponderance of the evidence established that Kim converted TLC's assets by wrongfully causing TLC to make overpayments from TLC's bank accounts to the Taxing Authorities for his personal benefit with no related benefit to TLC; and

• Kim's conversion of TLC's assets caused damage to TLC in the amount of $1,729,581.96.

The issue presented by the conspiracy claim advanced in the Twenty-Second Claim for Relief is whether substantial evidence established that Misook and Kim shared a common plan or design to perpetrate the conversion of TLC's assets through payments to the Taxing Authorities such that liability for conversion should be imposed on Misook. As plaintiff, Linco was required to present “substantial evidence” of each of the elements of its conspiracy claim in order for liability to be imposed upon Misook for the conversion of TLC's assets through the payments made from TLC's corporate bank accounts to the Taxing Authorities.¹³¹⁷ But neither Kim nor Misook testified at trial. Nor was any deposition testimony obtained from Kim or Misook offered into evidence at trial.

a. Conspiracy Formation and Operation

The trial record did not show through substantial evidence that Misook owned any shares in TLC when the overpayments to the Taxing Authorities were made.¹³¹⁸ The trial record did not contain substantial evidence establishing that Misook had any input or control over TLC's business operations when the overpayments to the Taxing Authorities occurred. There was no evidence of any communications between Kim and Misook in which they formulated a plan to convert TLC's assets by making overpayments to the Taxing Authorities before the money was transferred from TLC's corporate bank accounts to the Taxing Authorities. The trial record did not demonstrate through substantial evidence that Misook had any knowledge of the transfers of money from TLC's bank accounts to the Taxing Authorities when those transfers were made. The Taxing Authorities were the initial transferees with respect to TLC's tax overpayments, not Misook.

Substantial evidence did not establish that Misook knew that TLC made any of the transfers to the Taxing Authorities, or that she knew that TLC's transfers to the Taxing Authorities were wrongful when they were made. Substantial evidence did not establish that Misook somehow agreed to cause, or intended to join in an effort to cause, conversion of TLC's assets through the transfers to the Taxing Authorities before those transfers were made. The Court concludes that Linco failed to prove through substantial evidence that Kim and Misook formed and operated a conspiracy to convert TLC's assets by making payments to the Taxing Authorities. This essential element of TLC's conspiracy claim as pled in the Twenty-Second Claim for Relief is not supported by substantial evidence.

b. Wrongful Conduct in Furtherance of Conspiracy

The trial record did not demonstrate that Misook engaged in wrongful conduct, or any conduct at all, related to TLC's payments to the Taxing Authorities when those payments to the Taxing Authorities were made.¹³¹⁹ The Court concludes that Linco failed to prove through substantial evidence that Misook engaged in wrongful conduct, or any conduct at all, in furtherance of a conspiracy to cause conversion of TLC's assets through the payments made from TLC's bank accounts to the Taxing Authorities. This essential element of TLC's conspiracy claim as pled in the Twenty-Second Claim for Relief is not supported by substantial evidence.

c. Damages

Substantial proof of the formation and operation of a conspiracy between Kim and Misook to convert TLC's assets by making overpayments to the Taxing Authorities is lacking. Nor does substantial proof establish that Misook engaged in wrongful conduct, or any conduct at all, related to TLC's payments to the Taxing Authorities. It necessarily follows that TLC did not suffer any damages resulting from the conspiracy claim advanced in the Twenty-Second Claim for Relief. This essential element of TLC's conspiracy claim as pled in the Twenty-Second Claim for Relief is not supported by substantial evidence.

d. Summary

Linco failed to satisfy its burden of proving through substantial evidence that Misook was engaged with Kim in a common plan or design to convert TLC's assets by making the transfers to the Taxing Authorities such that liability for those transfers should be imposed on Misook under a civil conspiracy theory. The civil conspiracy claim alleged in the Twenty-Second Claim for Relief therefore fails as a matter of law. Judgment dismissing the Twenty-Second Claim for Relief will enter accordingly.

F. Twenty-Third Claim for Relief: Turnover of Bankruptcy Estate Property

The Twenty-Third Claim for Relief pled in the SAC seeks turnover of property of the TLC Bankruptcy estate and the Eachpole Bankruptcy estate.¹³²⁰ Because this claim for relief is predicated upon Section 542 of the Code, the Court begins its analysis with the statutory text.¹³²¹

1. Statutory Text

Section 542 of the Code provides, in relevant part:

§ 542. Turnover of property to the estate

(a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.

(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.

2. Essential Elements of a Turnover Claim Under Section 542

To support a claim for turnover of estate property under Section 542, the plaintiff “has the burden of proof, by a preponderance of the evidence, to establish that: (1) the property is in the possession, custody or control of a noncustodial third party; (2) the property constitutes property of the estate; (3) the property is of the type that the trustee could use, sell or lease pursuant to section 363 or that the debtor could exempt under section 522, and (4) that the property is not of inconsequential value or benefit to the estate.”¹³²²

3. Analysis of the Turnover Claim

The claim for turnover of estate property advanced by Linco in the Twenty-Third Claim for Relief is directed to TLC's transfer of inventory, equipment, and accounts receivable to LKimmy.¹³²³ It is separately directed to Eachpole's transfer of inventory, equipment, and accounts receivable to LKimmy, as well as the transfer of its trademarks and Market IDs to LKimmy under the Eachpole License.¹³²⁴ The turnover claim made in the Twenty-Third Claim for Relief assumes that some or all of those asset transfers to LKimmy have been avoided.¹³²⁵

a. Property in Possession, Custody, or Control of a Non-Custodial Third Party

The preponderance of the evidence established that during the two-year period prior to the TLC Petition Date, TLC did transfer inventory assets to LKimmy, and that LKimmy had possession, custody, and control over those assets.¹³²⁶ The preponderance of the evidence likewise established that on November 10, 2019,¹³²⁷ Eachpole executed the Eachpole License, authorizing LKimmy to use two of Eachpole's existing trademarks ¹³²⁸ and three of its existing internet Market IDs ¹³²⁹ for a 5-year period in exchange for a payment of $70,542.00.¹³³⁰ Those assets were transferred to LKimmy, and were therefore in the possession, custody, or control of LKimmy when the TLC Petition and the Eachpole Petition were filed. The first element of the claim for turnover under Section 542 alleged in the Twenty-Third Claim for Relief was established by a preponderance of the evidence.

b. Whether the Property at Issue Constitutes Bankruptcy Estate Property

The question of whether property transferred away by a debtor prior to bankruptcy is estate property, and thus subject to turnover under Section 542, turns on whether the relevant transfer has been avoided. That is so because the turnover provisions of Section 542 generally cannot be used “to recover a fraudulent transfer because the fraudulently transferred property does not become property of the bankruptcy estate until the transfer is avoided and recovered.”¹³³¹ Courts have observed that ¹³³² :

Recovery under 11 U.S.C. § 542 is limited to assets that are undisputedly property of the estate. Stanziale v. Pepper Hamilton LLP (In re Student Finance Corp.), 335 B.R. 539, 554 (D. Del. 2005). Thus, a § 542 action may be used to compel turnover of estate property whose transfer from the estate has been avoided and ownership is no longer in dispute. Id. However, a turnover action cannot be used to demand the return of assets subject to a title dispute or an unavoided transfer. Id. See also In re Saunders, 101 B.R. 303, 305 (Bankr. N.D. Fla. 1989) (holding that until a judicial determination has been made that property was, in fact, fraudulently transferred, it is not property of the estate subject to a turnover action; otherwise, a § 542 turnover action could be used to avoid the statute of limitations on a fraudulent conveyance claim).

The inventory transfers from TLC to LKimmy have been avoided by the Court as constructively fraudulent conveyances under Section 548(a)(1)(B)(ii)(I) and (II). As such, the inventory transferred by TLC to LKimmy is property of the TLC bankruptcy estate. The second element of the claim for turnover under Section 542 alleged in the Twenty-Third Claim for Relief was established by a preponderance of the evidence as to the inventory TLC transferred to LKimmy.

The Court did not, however, avoid the transfer of any of TLC's equipment or accounts receivable to LKimmy or any other party. The Court did not avoid the transfer of any of Eachpole's inventory, equipment or accounts receivable to LKimmy or any other party. Nor did the Court avoid TLC's transfer of authority to use its existing trademarks and Market IDs to LKimmy under the Eachpole License. The preponderance of the evidence did not establish that any of those assets are property of either the TLC bankruptcy estate or the Eachpole bankruptcy estate. Resultantly, the second element of the turnover claim alleged in the Twenty-Third Claim for Relief was not satisfied as to those assets.

c. The Property Subject to the Turnover Motion is Property of the Type That Could Be Used, Sold, or Leased, Under Section 363

Since TLC and Eachpole are entities, they are not individual debtors entitled to claim exemptions under Section 522 as a matter of law.¹³³³ The preponderance of the evidence established incontestably that the inventory TLC transferred to LKimmy is property of the type that could be used, sold, or leased under Section 363. The third element of the claim for turnover under Section 542 alleged in the Twenty-Third Claim for Relief was established by a preponderance of the evidence.

d. The Remaining Property Subject to the Turnover Motion is of Inconsequential Value or Benefit to the Estate.

At trial, Linco's representative, Ms. Chen, was specifically asked about the value of the remaining inventory TLC transferred to LKimmy and held by LKimmy at the time of trial. Ms. Chen testified credibly that while the TLC inventory transferred to and currently held by LKimmy is saleable, it is of such low quality that even Linco does not want it.¹³³⁴ Moreover, whatever value the TLC inventory transferred to and held by LKimmy has, that inventory value is also subject to a lien to secure repayment of the BofA Loan to TLC, which is the subject of a secured proof of claim filed in the TLC Bankruptcy in the amount of $2,149,396.45.¹³³⁵

The preponderance of the evidence established that the remaining inventory TLC transferred to LKimmy and currently held by LKimmy is of inconsequential value or benefit to the TLC bankruptcy estate. The fourth and final element of the claim for turnover under Section 542 alleged in the Twenty-Third Claim for Relief was not established by a preponderance of the evidence.

e. Summary

The preponderance of the evidence failed to establish each of the elements essential to the claim for turnover under Section 542 alleged in the Twenty-Third Claim for Relief. That turnover claim therefore fails as a matter of law. Judgment dismissing the Twenty-Third Claim for Relief will enter accordingly.

G. Twenty-Fourth Claim for Relief: Substantive Consolidation 1336

The Court granted partial summary judgment and denied Linco's substantive consolidation claim prior to trial by order dated August 9, 2022.¹³³⁷ No further analysis is required.

H. Twenty-Fifth Claim for Relief: Permanent Injunctive Relief

The Twenty-Fifth Claim for Relief pled in the SAC generally seeks injunctive relief precluding the transfer or concealment of any interest in the assets and financial accounts of TLC and Eachpole, the transfer, destruction, or concealment of related books and records, and for an accounting.¹³³⁸ A request for injunctive relief is not an action created or controlled by the Bankruptcy Code.

Injunctive relief is a remedy, not a substantive claim. When separately pled, a claim or cause of action for injunctive relief is inappropriate and is subject to dismissal. As explained by the United States District Court for the District of Nevada ¹³³⁹ :

Injunctive relief is a remedy, not an underlying substantive claim. Tyler v. Am. Home Mortgage, No. 3:10–cv–00042, 2011 WL 5025234 at *6 (D. Nev. Oct. 21, 2011) (Reed, J.) (citing In re Wal–Mart Wage & Hour Emp't Practices Litig., 490 F. Supp. 2d 1091, 1130 (D. Nev. 2007)); see also Jensen v. Quality Loan Service Corp., 702 F. Supp. 2d 1183, 1201 (E.D. Cal. 2010) (“An injunction is a remedy, not a separate claim or cause of action. A pleading can ․ request injunctive relief in connection with a substantive claim, but a separately pled claim or cause of action for injunctive relief is inappropriate.”). Therefore, the purported cause of action for injunctive relief is dismissed with prejudice.

Since injunctive relief is not an independent substantive claim, dismissal of the Twenty-Fifth Claim for Relief may be warranted on that basis alone. To ensure that the Court has given full and fair consideration to all issues pled in the SAC, though, the Court will continue its analysis.

1. Essential Elements of a Claim for Injunctive Relief

Injunctive relief may be entered where the plaintiff shows: ‘(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of the hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.’ ”¹³⁴⁰

2. Analysis of the Injunctive Relief Claim

The preponderance of the evidence did establish that the TLC bankruptcy estate suffered injury resulting from the transfers of money from TLC's corporate bank accounts to the Taxing Authorities,¹³⁴¹ and from the transfer of TLC's inventory assets to LKimmy.¹³⁴² But the preponderance of the evidence did not establish that those injuries, nor any injuries claimed to have been suffered by the Eachpole bankruptcy estate, are irreparable. The preponderance of the evidence further demonstrated that an adequate remedy at law exists, in the form of monetary damages, to compensate the TLC bankruptcy estate for the losses it suffered due to those transfers. The same is true with respect to any damages the Eachpole bankruptcy estate claims to have suffered. In fact, the SAC specifically seeks compensatory and punitive monetary damages, pre- and post-judgment interest, attorneys fees and costs.¹³⁴³ Linco has already obtained many volumes of books and records related to the business operations of TLC and Eachpole through the discovery process in this adversary proceeding. TLC and Eachpole are debtors involved in Chapter 7 liquidation proceedings with no assets or income from operations. Kim and Misook are also joint debtors in their own individual Chapter 7 case. The balance of hardships regarding the injunctive relief requested in the Twenty-Fifth Claim for Relief tips in favor of the defendants. The public interest would neither be advanced nor disserved through injunctive relief.

Having considered the entire record, the Court concludes that the preponderance of the evidence failed to establish each of the elements that are the predicate to the issuance of injunctive relief as requested in the Twenty-Fifth Claim for Relief. Judgment dismissing the Twenty-Fifth Claim for relief will be entered accordingly.

I. Twenty-Sixth Claim for Relief: Avoidance and Recovery of an Actual Intent Fraudulent Transfer Under Sections 548(a)(1)(A) and 550 – All Defendants

The Twenty-Sixth Claim for Relief pled in the SAC seeks to avoid and recover the various pre-petition asset transfers made by TLC and Eachpole as having been made with actual intent to hinder, delay, or defraud creditor(s) that TLC and Eachpole became indebted to on or after the dates when the transfers occurred. Section 548(a)(1)(A) of the Bankruptcy Code provides a mechanism for avoiding prebankruptcy transfers made with actual fraudulent intent. The text of that Code section provides the analytical starting point.¹³⁴⁴

1. Statutory Text

Section 548(a)(1)(A), pled by Linco in support of the twenty-sixth claim for relief in the SAC,¹³⁴⁵ reads:

§ 548. Fraudulent transfers and obligations

(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily--

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted[.]

Section 550, quoted above, also provides the mechanism for recovery of a transfer avoided as having been made with actual fraudulent under Section 548(a)(1)(A).

2. Essential Elements and Burden of Proof

A transfer is avoidable under Section 548(a)(1)(A) when (1) the transfer involved property of the debtor; (2) the transfer was made within [two years] of the bankruptcy filing; and (3) the transfer was made with actual intent to hinder, delay, or defraud a present or future creditor.¹³⁴⁶ A party seeking to avoid transfers as having been made with actual fraudulent intent bears the burden of proving all the statutory elements by clear and convincing evidence.¹³⁴⁷ If the party seeking to avoid transfers as having been made with actual fraudulent intent carries that initial burden, the burden shifts to the transferee to prove some “legitimate supervening purpose” for the transfer at issue.¹³⁴⁸

3. Analysis of the SAC's Twenty-Sixth Claim for Relief: Avoidance and Recovery of Actual Intent Fraudulent Transfers – All Defendants

a. The Transfers at Issue Were Transfers of TLC's or Eachpole's Property

The Twenty-Sixth Claim for Relief seeks to avoid seven different asset transfers as having been made with actual intent to hinder, delay, or defraud present or future creditors ¹³⁴⁹ :

• Transfers of money from TLC's corporate bank accounts to the Taxing Authorities;

• Three different sets of transfers of money from TLC's corporate bank accounts to pay balances due on Kim's personal credit cards;

• 68 wire transfers from TLC's corporate bank accounts to entities in China;

• Transfers of TLC's inventory assets to LKimmy; and

• Transfer of authority to use Eachpole's trademarks and internet Market IDs to LKimmy under the Eachpole License.

Clear and convincing evidence established that all of those transactions involved TLC's or Eachpole's Property. The first element of the avoidance claim under Section 548(a)(1)(A) alleged in the Twenty-Sixth Claim for Relief was satisfied.

b. All of the Transfers Referenced in the Twenty-Sixth Claim for Relief Were Made Within Two Years of the Filing of the TLC Petition and the Eachpole Petition

From a timing perspective, clear and convincing evidence proved that all of the transactions referenced in the Twenty-Sixth Claim for Relief occurred within the two-year period prior to the TLC Petition Date ¹³⁵⁰ and the Eachpole Petition Date.¹³⁵¹ More particularly:

• The transfers of money from TLC's corporate bank accounts to the Taxing Authorities were made between October 16, 2017 and December 30, 2018;1352

• The various transfers of money from TLC's corporate bank accounts to pay balances due on Kim's personal credit cards were made between January 3, 2018 and July 26, 2019;

• The 68 wire transfers from TLC's corporate bank accounts to entities in China were made between November 20, 2018, and June 24, 2019;1353

• The transfers of TLC's inventory assets to LKimmy occurred after LKimmy was created on October 19, 2018,1354 so all of the inventory transfers from TLC to LKimmy necessarily occurred within two years prior to the October 8, 2019 TLC Petition Date; and

• Eachpole's transfer of authority to use its trademarks and internet Market IDs to LKimmy occurred when the Eachpole License was executed on November 10, 2019.1355

The second element of the avoidance claim under Section 548(a)(1)(A) alleged in the Twenty-Sixth Claim for Relief was established by clear and convincing evidence.

c. Some But Not All of the Transfers Referenced in the Twenty-Sixth Claim for Relief Were Made With Actual Intent to Hinder, Delay or Defraud a Present or Future Creditor of TLC or Eachpole

Many courts, including the Ninth Circuit Court of Appeals, have examined the question of what evidence is sufficient to establish actual intent in the context of an avoidance action under Section 548(a)(1)(A). As the Ninth Circuit recently explained ¹³⁵⁶ :

“It is often impracticable, on direct evidence, to demonstrate an actual intent to hinder, delay or defraud creditors.” In re Acequia, Inc., 34 F.3d 800, 805 (9th Cir. 1994) (citation omitted). “Therefore, as is the case under the common law of fraudulent conveyance, courts applying Bankruptcy Code § 548(a)(1) frequently infer fraudulent intent from the circumstances surrounding the transfer, taking particular note of certain recognized indicia or badges of fraud.” Id. at 805–06 (citation omitted); see also 5 Richard Levin & Henry J. Sommer, COLLIER ON BANKRUPTCY ¶ 548.04 (16th ed. 2024) (“[I]f the debtor arranges and consummates a transaction that depletes assets available to creditors ․ with little or no corresponding benefit to the debtor's estate, then the requirements for actual intent can be met.”).

No deposition testimony, nor any trial testimony, was adduced from Kim. The preponderance of the evidence established that Kim was a 100% shareholder whose control over the business operations of TLC and Eachpole was not the subject of serious dispute. The trial record was simply bereft of any direct evidence establishing actual fraudulent intent on the part of TLC or Eachpole in making the transfers referenced in the Twenty-Sixth Claim for Relief. The Court's analytical focus necessarily turns to the “well-recognized indicia or badges of fraud” referenced in the O'Gorman decision.

Determining whether actual fraudulent intent has been established in the Section 548(a)(1)(A) context is a matter of federal law.¹³⁵⁷ The Ninth Circuit Court of Appeals has observed ¹³⁵⁸ :

Among the more common circumstantial indicia of fraudulent intent at the time of the transfer are: (1) actual or threatened litigation against the debtor; (2) a purported transfer of all or substantially all of the debtor's property; (3) insolvency or other unmanageable indebtedness on the part of the debtor; (4) a special relationship between the debtor and the transferee; and, after the transfer, (5) retention by the debtor of the property involved in the putative transfer.

Bankruptcy courts have identified traditional badges of fraud in a slightly broader fashion,¹³⁵⁹ to include situations where:

• The transfer was to an insider;

• The debtor retained possession or control of the property after the transfer was made;

• The transfer or obligation was not disclosed or was concealed;

• Before the transfer was made, the debtor had been sued or threatened with suit;

• The transfer was of substantially all of the debtor's assets;

• The debtor absconded;

• The debtor removed or concealed assets;

• The value of the consideration received by the debtor was not reasonably equivalent to the value of the assets transferred;

• The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

• The transfer occurred shortly before or shortly after a substantial debt was incurred; and

• The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

As noted by the Ninth Circuit in O'Gorman, “[t]he presence of a single badge of fraud may spur mere suspicion; the confluence of several can constitute conclusive evidence of actual intent to defraud, absent ‘significantly clear’ evidence of a legitimate supervening purpose.”¹³⁶⁰

i. The Transfers of Money from TLC's Corporate Bank Accounts to the Taxing Authorities Were Made With Actual Fraudulent Intent Under Section 548(a)(1)(A).

Litigation in the form of the Patent Lawsuit against TLC had been pending for years when the payments to the Taxing Authorities were made.¹³⁶¹ Because TLC is a Subchapter S corporation, the transfers to the Taxing Authorities were of no value at all to TLC. They were made exclusively for the benefit of Kim, an insider of TLC.¹³⁶² The transfers to the Taxing Authorities were made while TLC was insolvent, and left TLC without the ability to service its debt, including without limitation the $3 million BofA Loan. No evidence of a “legitimate supervening purpose” for the transfers to the Taxing Authorities is apparent from the record.¹³⁶³

The Court concludes that clear and convincing evidence established the confluence of several badges of fraud, confirming that that the transfers of money from TLC's corporate bank accounts to the Taxing Authorities were made with actual fraudulent intent. The Court concludes that the transfers of money from TLC's corporate bank accounts to the Taxing Authorities were transfers made with actual intent to hinder, delay, or defraud TLC's present or future creditors under Section 548(a)(1)(A). With respect to TLC's payments to the Taxing Authorities as referenced in the Twenty-Sixth Claim for Relief, the third and final element of the avoidance claim under Section 548(a)(1)(A) was established by clear and convincing evidence.

ii. The Transfers of Money from TLC's Corporate Bank Accounts to Pay Balances Due on Kim's Personal Credit Cards Were Not Made With Actual Fraudulent Intent Under Section 548(a)(1)(A).

Litigation in the form of the Patent Lawsuit against TLC had been pending for years when the payments from TLC's bank accounts toward balances due on Kim's personal credit cards were made.¹³⁶⁴ The payments made by TLC were applied toward credit card balances owed by Kim, an insider of TLC. But the Court has previously determined that the preponderance of the evidence established that TLC's payments on Kim's credit cards were primarily to reimburse Kim for business-related items he had purchased for TLC's benefit.¹³⁶⁵ Reimbursement of Kim for business-related items he had purchased for TLC's benefit using his own personal credit cards is a “legitimate supervening purpose” for the transfers at issue.¹³⁶⁶ To the extent that Kim made personal charges using those credit cards, the charges were properly accounted for by TLC personnel as distributions by TLC to Kim. The credit card payments were made while TLC was insolvent and suffered from inadequate capital. But Mr. Bertsch, Linco's proffered expert witness, conceded that it was no longer his opinion that the credit card payments constituted fraudulent conveyances.¹³⁶⁷

This is a close call. The Court has carefully reviewed the entire trial record regarding TLC's payments toward the balances due on Kim's personal credit cards during the two years prior to the TLC Petition Date through the lens afforded by the traditional badges of fraud. Having done so, the Court concludes that clear and convincing evidence did not establish that the payments from TLC's bank accounts toward balances due on Kim's personal credit cards were made with fraudulent intent in the context of Section 548(a)(1)(A). With respect to TLC's payments toward the balances due on Kim's personal credit cards during the two years prior to the TLC Petition Date as referenced in the Twenty-Sixth Claim for Relief, the third and final element of the avoidance claim under Section 548(a)(1)(A) was not established by clear and convincing evidence.

iii. The Claim that the 68 Wire Transfers from TLC's Corporate Bank Accounts to Entities in China Were Made With Actual Fraudulent Intent Under Section 548(a)(1)(A) Fails for Lack of Due Process

Litigation in the form of the Patent Lawsuit against TLC had been pending for years when 68 outgoing international wire transfers totaling $3,656,152.03 were made from TLC's corporate bank accounts to recipients in China.  ¹³⁶⁸ The record developed by the parties who participated in the trial does plainly identify the Chinese entities who received the proceeds from those wire transfers.¹³⁶⁹ But there is a paucity of evidence as to why those wire transfers were made, or what (if anything) TLC received in exchange. The wire transfers to the recipients in China were made while TLC was insolvent and suffering from inadequate capital. No evidence of a “legitimate supervening purpose” for the wire transfers to the recipients in China is apparent from the record.¹³⁷⁰ There is a confluence of several badges of fraud, suggesting that that the wire transfers from TLC's corporate bank accounts to recipients in China were made with actual fraudulent intent.

But paragraph 33 of the SAC ¹³⁷¹ reads:

33. The true names and capacities of ROE CORPORATIONS XI through XX, inclusive, are unknown to Plaintiff, who therefore sue such Defendants by these fictitious names. Plaintiff is informed and believes that each of these Defendants are responsible in some manner for the events and happenings referred to, and damages caused thereby to Plaintiff as alleged herein. Plaintiff will seek leave of this Court to amend its Complaint to insert true names and capacities when such Defendants have been ascertained to join such Defendants in this action.

This adversary commenced on October 8, 2020.¹³⁷² Linco filed a discovery plan with the Court on April 2, 2021, setting the close of discovery for September 10, 2021.¹³⁷³ Subsequently, the Court entered an Order Regarding Pretrial and Trial Matters, extending the close of discovery to November 24, 2021.¹³⁷⁴ On November 5, 2021, Linco filed a motion to further extend the discovery cutoff,¹³⁷⁵ which was granted by the Court by order dated December 3, 2021.¹³⁷⁶ The discovery deadline was extended through April 1, 2022, with the Court's admonition that “[t]here will be no more extensions of the discovery periods in this proceeding absent exigent circumstances satisfactory to the Court.”¹³⁷⁷ The SAC was filed on March 1, 2022, when only 30 days remained before the discovery deadline.¹³⁷⁸

At some point during the discovery process, Linco obtained records relating to TLC's BofA corporate bank accounts ending in 8850 and 5743 from which the wire transfers to Chinese recipients were made.¹³⁷⁹ Those bank records contained summaries of all 68 of the wire transfers referenced in the Twenty-Sixth Claim for Relief, including the name of the Chinese entity that received each wire transfer.¹³⁸⁰ Despite the representations made in paragraph 33 of the SAC, Linco never sought leave of the Court to further amend the SAC to insert true names and capacities of the Chinese entities who received the wire transfers as initial transferees. At no time prior to trial did Linco serve any of the Chinese entities who received the wire transfers as initial transferees with a copy of a summons and the SAC, alerting them to the fraudulent transfer claims advanced against them by Linco.¹³⁸¹ The trial in this adversary proceeding was conducted without naming as parties the Chinese entities who received the wire transfers as initial transferees, without serving them with a summons and copy of the SAC, and without affording them any opportunity to appear and defend their interests by offering evidence of what value (if any) they provided to TLC in exchange for the wire transfer proceeds.

Viewed in a vacuum, this monumental trial record might eke out a prima facie case for avoidance of the 68 wire transfers as actual intent fraudulent transfers under Section 548(a)(1)(A), and also for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1). But it is irrefutable that none of those Chinese entities were ever actually named as defendants in this adversary proceeding, served with notice, or otherwise afforded an opportunity to respond to the claims Linco lodged against them in the SAC. The United States Supreme Court has stated that it is “[b]eyond doubt [that] a prospective party cannot fairly be required to answer an amended pleading not yet permitted, framed, and served.”¹³⁸² The Court is mindful that the liability of immediate transferees of fraudulent conveyances avoided under Section 548(a)(1)(A) is “absolute” under Section 550(a)(1).¹³⁸³ But liability cannot be imposed upon the Chinese entities who received the wire transfers as initial transferees through the simple expedient of entering judgment avoiding and recovering the value of the wire transfers as constructively fraudulent conveyances now, and then amending the SAC to add the Chinese entities as parties to this adversary proceeding. The Supreme Court has plainly stated that when a defendant is not afforded a proper opportunity to respond to litigation claims, judgment against the defendant cannot be entered properly “the very first moment [their] personal liability was legally at issue. Procedure of this style has been questioned even in systems, real and imaginary, less concerned than ours with the right to due process.”¹³⁸⁴

As to the Twenty-Sixth Claim for Relief, this Court concludes that entry of judgment avoiding the 68 wire transfers as actual intent fraudulent transfers under Section 548(a)(1)(a), and/or entry of judgment for recovery of the proceeds from the Chinese entities who received them as initial transferees under Section 550(a)(1), would violate the most fundamental tenet of due process of law: notice and the opportunity to be heard.¹³⁸⁵ This Court will not be party to such a due process violation. Accordingly, judgment will enter dismissing the Twenty-Sixth Claim for Relief as it relates to the wire transfers.

iv. The Transfers of TLC's Inventory Assets to LKimmy Were Made With Actual Fraudulent Intent Under Section 548(a)(1)(A).

Litigation in the form of the Patent Lawsuit against TLC had been pending for years when TLC transferred substantially all of its inventory assets to LKimmy.  ¹³⁸⁶ Hyunjune's credible testimony established that LKimmy did not pay anything at all in exchange for the inventory transferred to it by TLC until well after the inventory was sold.¹³⁸⁷ A special relationship between TLC and LKimmy is further evident from inventory price reductions of 10% for rent and storage, 10% for defective inventory, and for a 13% service charge for a total reduction of 33.33% without a commercially reasonable basis for any of those discounts.¹³⁸⁸ The inventory transfers from TLC to LKimmy were made while TLC was insolvent and suffering from inadequate capital. Without any remaining inventory to generate income from sales, TLC was left without the ability to service its debt, including without limitation the $3 million BofA Loan. No evidence of a “legitimate supervening purpose” for TLC's bulk transfer of its inventory assets to LKimmy is apparent from the record.¹³⁸⁹ The confluence of several badges of fraud, confirming that that the inventory transfers from TLC to LKimmy were made with actual fraudulent intent, was borne out by clear and convincing evidence.

The Court concludes that clear and convincing evidence established that TLC's inventory transfers to LKimmy as referenced in the Twenty-Sixth Claim for Relief were made with actual intent to hinder, delay, or defraud TLC's present or future creditors in the context of Section 548(a)(1)(A). With respect to those inventory transfers, the third and final element of the avoidance claim under Section 548(a)(1)(A) was established by clear and convincing evidence.

v. The Transfer of Authority to Use Eachpole's Trademarks and Internet Market IDs to LKimmy Under the Eachpole License Was Not Made With Actual Fraudulent Intent Under Section 548(a)(1)(A).

The Eachpole License was executed on November 10, 2019.¹³⁹⁰ No evidence was presented at trial establishing the existence of any pending litigation against Eachpole on that date. The preponderance of the evidence at trial established that LKimmy paid $70,542.00 to Eachpole in exchange for the use of Eachpole's existing trademarks and Market IDs under the Eachpole License, equating to $1,165.70 per month during the term of the Eachpole License.¹³⁹¹ No competent evidence was presented at trial as to the value of the Eachpole License, or whether the money LKimmy paid to Eachpole was a reasonable equivalent of that value. The transfer to LKimmy of the authority to use Eachpole's existing trademarks and Market IDs under the Eachpole License occurred while Eachpole was insolvent and suffering from inadequate capital.¹³⁹² But the Eachpole License was for an initial term of five years, not an absolute transfer of Eachpole's existing trademarks and Market IDs to LKimmy.¹³⁹³

This is also a close call. The Court has carefully reviewed the trial record regarding the transfer occasioned by the Eachpole License through the lens of the traditional badges of fraud. Having done so, the Court concludes that clear and convincing evidence did not establish that the transfer to LKimmy of the authority to use Eachpole's existing trademarks and Market IDs under the Eachpole License was made with actual fraudulent intent in the context of Section 548(a)(1)(A). With respect to the transfer to LKimmy of the authority to use Eachpole's existing trademarks and Market IDs under the Eachpole License as referenced in the Twenty-Sixth Claim for Relief, the third and final element of the avoidance claim under Section 548(a)(1)(A) was not established by a preponderance of the evidence.

d. Summary

Each of the elements necessary to establish the existence of an actual intent fraudulent transfer avoidable under Section 548(a)(1)(A) was proven by clear and convincing evidence as to the following transfers referenced in the Twenty-Sixth Claim for Relief:

• The transfers of money from TLC's corporate bank accounts to the Taxing Authorities during the two years before the TLC Petition Date;1394 and

• The transfers of TLC's inventory assets to LKimmy made during the two years before the TLC Petition Date.1395

As a result, those transfers will be, and are hereby, avoided under Section 548(a)(1)(A) as actual intent fraudulent transfers. Judgment will enter accordingly.

All of the elements necessary to establish the existence of an actual intent fraudulent transfer avoidable under Section 548(a)(1)(A) were not proven by clear and convincing evidence with respect to the following transfers referenced in the Twenty-Sixth Claim for Relief:

• The transfers of money from TLC's corporate bank accounts to pay balances due on Kim's personal credit cards;1396

• The 68 wire transfers from TLC's corporate bank accounts to entities in China were made between November 20, 2018, and June 24, 2019;1397 and

• The transfer of authority to use Eachpole's trademarks and internet market IDs to LKimmy under the Eachpole License.1398

Specifically, the preponderance of the evidence failed to establish that those transfers were made with actual intent to hinder, delay or defraud existing or future creditors of TLC or Eachpole. As a result, those transfers are not avoided under Section 548(a)(1)(A). Accordingly, judgment will enter dismissing the Twenty-Sixth Claim for Relief as to those transfers.

e. Recovery Under Section 550(a) of the Avoided Actual Intent Fraudulent Transfers Referenced in the Twenty-Sixth Claim for Relief

i. The Avoided Transfers from TLC to the Taxing Authorities Totaling $1,158,581.96 are Recoverable from Kim Under Section 550(a)(1).

As the Ninth Circuit Court of Appeals has observed, when a corporate principal [Kim] misdirects company funds [$1,158,581.96 in tax overpayments while TLC was insolvent] directly to a third party [the Taxing Authorities] for personal gain [generating large future tax refunds as the sole shareholder of TLC, a Subchapter S corporation], “the principal is not a transferee at all but, rather, is the party for whose benefit the transfer was made” in the context of Section 550(a)(1).¹³⁹⁹ The Court therefore concludes that under Section 550(a)(1), Kim was and is the entity for whose benefit transfers were made while TLC was insolvent in the form of overpayments to the Taxing Authorities totaling $1,158,581.96. Kim's liability for the full $1,158,581.96 value of those transfers is therefore absolute under Section 550(a)(1).¹⁴⁰⁰ Judgment will enter against Kim accordingly.¹⁴⁰¹

ii. The $3,523,950.75 Value of the Avoided Transfers of TLC's Inventory Assets to LKimmy is Absolutely Recoverable from LKimmy as the Initial Transferee Under Section 550(a)(1).

Under Section 550(a)(1), the right to recover an avoided transfer from the initial transferee of the debtor, or from the entity for whose benefit the initial transfer was made, is absolute.¹⁴⁰² The Court therefore concludes that under Section 550(a)(1), LKimmy is absolutely liable for the full $3,523,950.75 value of the inventory transfers it received from TLC as referenced in the Twenty-Sixth Claim for Relief that are avoided herein as actual intent fraudulent transfers under Section 548(a)(1)(A). Judgment will enter against LKimmy accordingly.¹⁴⁰³

iii. Liability of the Other Defendants Under an Actual Intent Fraudulent Conveyance Theory Was Not Established by Clear and Convincing Evidence

The Twenty-Sixth Claim for Relief was asserted against “All Defendants.” The liability of defendants Beauty, Synguru Corp., Chris, Misook, and/or Panchal under an actual intent fraudulent conveyance theory under Section 548(a)(1)(A) was not established by clear and convincing evidence at trial. Judgment dismissing the Twenty-Sixth Claim for Relief as to those defendants will enter accordingly.

J. Twenty-Seventh Claim for Relief: Successor Liability - LKimmy

The twenty-seventh and final claim for relief pled in the SAC is one to impose successor liability upon LKimmy as the purchaser of assets from TLC and Eachpole.¹⁴⁰⁴ A claim for relief under a successor liability theory is not created or controlled by the Bankruptcy Code. But the imposition of successor liability is, in some circumstances, a cognizable legal theory for recovery under Nevada state law.

1. Choice of Law Regarding Successor Liability Claims

Nevada follows the Second Restatement regarding choice of law in tort and contract cases.¹⁴⁰⁵ The Second Restatement states that the rights and liabilities of the parties “are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties.”¹⁴⁰⁶

Here, the Twenty-Seventh Claim for Relief advanced by Linco seeks to impose successor liability upon LKimmy. LKimmy is a Nevada corporation.¹⁴⁰⁷ The inventory transferred by TLC to LKimmy was delivered to, and warehoused in, the State of Nevada. Linco does not dispute that Nevada law applies, and in fact cites Nevada law in its post-trial brief on the issue of successor liability. The Court concludes that Nevada has the most significant relationship to the transfer of TLC's inventory to LKimmy. Nevada law therefore applies in resolving the successor liability claims asserted in the Twenty-Seventh Claim for Relief.

2. Essential Elements of a Successor Liability Claim Under Nevada Law

Nevada law provides that “[u]nder traditional rules of successor liability, asset purchasers are not liable as successors unless one of the following four exceptions applies: (1) The purchasing corporation expressly or impliedly agrees to assume the liability; (2) The transaction amounts to a ‘de-facto’ consolidation or merger; (3) The purchasing corporation is merely a continuation of the selling corporation; or (4) The transaction was fraudulently entered into in order to escape liability.”¹⁴⁰⁸ Since the default rule under Nevada law is that acquirors of assets have no successor liability,¹⁴⁰⁹ the crux of the issue is whether any of the exceptions to the default rule were proven by a preponderance of the evidence.

2. The Preponderance of the Evidence Failed to Establish an Express or Implied Assumption of TLC's Liabilities by LKimmy

The record is devoid of proof that a formal asset purchase agreement conveying all of TLC's assets to LKimmy was ever executed by TLC on the one hand, and LKimmy on the other. The preponderance of the evidence showed transfer of TLC's inventory assets to LKimmy was accomplished through a series of sales transactions.¹⁴¹⁰ Through those sale transactions TLC transferred its inventory assets to LKimmy in exchange for no consideration at the time of the transfers,¹⁴¹¹ TLC later invoiced LKimmy for the inventory transferred,¹⁴¹² and TLC subsequently received payments from LKimmy for 54.47% of the value of the inventory transferred.¹⁴¹³ None of the invoices TLC issued in connection with the inventory transfers to LKimmy state that LKimmy was assuming any of TLC's existing liabilities.

In transactions separate from the inventory transfers, TLC and Eachpole conveyed the right to use their existing trademarks and Market IDs to LKimmy under the License Agreements.¹⁴¹⁴ The License Agreements do not state or otherwise suggest that LKimmy was assuming any of TLC's existing liabilities. Further, the written License Agreements contain integration clauses providing that the License Agreements constituted the “entire Agreement between the parties relating to this subject matter and supersedes and cancels any and all prior agreements or understandings, written or oral, between them relating to the subject matter hereof. The Agreement may not be amended except in writing signed by both parties.”¹⁴¹⁵

The Court concludes that no express or implied assumption of TLC's liabilities by LKimmy was proven by a preponderance of the evidence. Resultantly, the first exception to the general rule that asset purchasers are not liable as successors under Nevada law does not apply.

3. The Preponderance of the Record Evidence Did Not Establish a De Facto Merger of TLC or Eachpole With LKimmy

The de facto merger exception to the successor liability rule applies when the successor corporation has essentially merged with the seller corporation, even though there was no actual merger.¹⁴¹⁶ In Nevada, “[t]o determine whether there has been a de facto merger, courts apply a four-factor test and consider: (1) whether there is a continuation of the enterprise, (2) whether there is a continuity of shareholders, (3) whether the seller corporation ceased its ordinary business operations, and (4) whether the purchasing corporation assumed the seller's obligations.”¹⁴¹⁷ Under Nevada law, “the factors should be weighed equally, and therefore no single factor is ‘either necessary or sufficient to establish a de facto merger.’ ”¹⁴¹⁸ Ultimately, “at least three of the four factors must be met for a plaintiff to demonstrate a prima facie case of de facto merger.”¹⁴¹⁹

a. Continuation of the Enterprise

“To determine whether there is a continuation of the enterprise, courts generally look to whether there is a ‘continuity of management, personnel, physical location, assets and general business operations' between the purchaser and the seller.”¹⁴²⁰

i. Management of TLC and LKimmy

The preponderance of the evidence showed that Kim controlled the management of TLC's business operations when it transferred its inventory and authority to use its existing trademarks and Market IDs to LKimmy. The preponderance of the evidence also showed that when LKimmy was created on October 19, 2018, the LKimmy List identified Hyunjune as LKimmy's President, Secretary, Treasurer, and sole director.¹⁴²¹ The Court concludes that continuity of management as between TLC and LKimmy was not established by a preponderance of the evidence.

ii. Personnel of TLC and LKimmy

With respect to personnel Hyunjune testified credibly that Kim's executive assistant at TLC, TLC's human resources manager, TLC's warehouse manager, two TLC shipping clerks, and three Eachpole service representatives, all eventually became LKimmy employees.¹⁴²² LKimmy also shared computers with TLC and Eachpole.¹⁴²³ When sending out emails, LKimmy employees decided which of two email addresses to use, one attributable to TLC or Eachpole, or the other attributable to LKimmy.¹⁴²⁴ The Court concludes that continuity of personnel as between TLC and LKimmy was established by a preponderance of the evidence.

iii. Physical Location, Warehousing of Assets, and General Business Operations of TLC and LKimmy

As to warehouse storage for the inventory LKimmy acquired from TLC, the preponderance of the evidence showed that the inventory was initially stored in a warehouse located on the North Lamb Property leased by TLC. Subsequently, on December 6, 2018, LKimmy and Eachpole entered into a written Standard Commercial Sublease for the Donovan Way Property.¹⁴²⁵ The Donovan Way Sublease provided for a commencement date of April 1, 2019, and a seven-year term ending on March 31, 2026.¹⁴²⁶ The Donovan Way Sublease was signed by Kim in his capacity as Eachpole's President, and by Hyunjune in his capacity as LKimmy's President.¹⁴²⁷

As to the initial location of LKimmy's business office, Hyunjune testified that prior to the filing of the LKimmy Articles on October 19, 2018,¹⁴²⁸ his work related to LKimmy's creation and organization was carried out at TLC's offices in Rancho Cucamonga, California.¹⁴²⁹ Even after the LKimmy Articles were filed with the Nevada Secretary of State on October 19, 2018,¹⁴³⁰ the Donovan Way Sublease was executed by LKimmy in December 2018,¹⁴³¹ and Hyunjune had moved to Kim's Vigilante Court Property in Las Vegas, LKimmy was still in need of an office location in Nevada. That was true because the warehouse at the Donovan Way Property did not have an office.¹⁴³² Hyunjune testified that from January through the end of August or early September 2019, the office where he conducted LKimmy's business operations was located in the North Lamb Property leased by TLC.¹⁴³³ The Court concludes that continuity of physical location and general business operations as between TLC and LKimmy was established by a preponderance of the evidence.

iv. Summary

The preponderance of the evidence did not establish continuity of management as between TLC and LKimmy. But it did establish continuity of personnel, physical location, warehousing of assets, and general business operations of TLC and LKimmy. The Court concludes that continuity of the enterprise as between TLC and LKimmy was proven by a preponderance of the evidence.¹⁴³⁴

b. Continuity of Shareholders as Between TLC and LKimmy

The preponderance of the evidence showed that Kim was the 100% shareholder of TLC at the end of calendar years 2017 ¹⁴³⁵ and 2018.¹⁴³⁶ The preponderance of the evidence established that when LKimmy was created on October 19, 2018, Hyunjune contributed $1,000.00 of his own money and $9,450.00 borrowed from Kim in exchange for LKimmy's common stock.¹⁴³⁷ He also stated that no one else provided any initial capital related to the organization of LKimmy.¹⁴³⁸ There is no evidence to suggest that the consideration for the transfer to LKimmy of TLC's inventory, and/or the authority to use its existing trademarks and Market IDs under the TLC License, was stock in LKimmy. “[C]ourts generally will not find a de facto merger unless the consideration for the assets is the stock of the transferee, which is not the case here.”¹⁴³⁹ The Court concludes that continuity of shareholders as between TLC and LKimmy was not proven by a preponderance of the evidence.

c. Cessation of Ordinary Business Operations at TLC

When evaluating whether the cessation-of-ordinary-business-operations factor has been met in the de facto merger calculus under Nevada law, courts look to whether the business that sold its assets continued to exist after the asset purchase took place.¹⁴⁴⁰ In this context, and under Nevada law, a business continues to exist when it is maintained as a corporate entity and is amenable to suit.¹⁴⁴¹ Under Nevada law, “[e]ven when a business's existence is transcendental and the business does not engage in any business operations, it still exists for the purposes of meeting this factor.”¹⁴⁴²

It is undisputed on the record before the Court that shortly after TLC transferred its inventory assets to LKimmy ¹⁴⁴³ and TLC and Eachpole transferred authority to use their existing trademarks and Market IDs to LKimmy under the License Agreements,¹⁴⁴⁴ TLC and Eachpole both filed bankruptcy petitions to liquidate their remaining assets under Chapter 7 of the Code. The fact that TLC and Eachpole remained amenable to suit after the asset transfers to LKimmy is amply demonstrated by their status as defendants in this adversary proceeding.¹⁴⁴⁵ The Court concludes that the cessation of TLC's ordinary business operations was not proven by a preponderance of the evidence.

d. LKimmy Did Not Expressly or Impliedly Assume TLC's Obligations

The Court has previously determined, and reiterates here, that the preponderance of the evidence failed to establish an express or implied assumption of TLC's liabilities by LKimmy.

e. Summary

The four elements examined to determine whether a de facto merger has occurred are to be afforded equal weight in the analytical calculus, with no single factor being “either necessary or sufficient to establish a de facto merger” under Nevada law.¹⁴⁴⁶ “[A]t least three of the four factors must be met for a plaintiff to demonstrate a prima facie case of de facto merger.”¹⁴⁴⁷

Only one of the four elements in the de facto merger calculus was established by the preponderance of the evidence in the trial of this adversary proceeding. Specifically, the continuation of the enterprise after TLC transferred its inventory assets to LKimmy ¹⁴⁴⁸ and TLC and Eachpole transferred authority to use their existing trademarks and Market IDs to LKimmy under the License Agreements ¹⁴⁴⁹ was proven by a preponderance of the evidence.

The other three elements in the de facto merger calculus were not established by a preponderance of the evidence. More particularly, neither continuity of shareholders as between TLC and LKimmy, the cessation of TLC's business operations, nor the existence of an express or implied assumption of TLC's liabilities by LKimmy, was proven by a preponderance of the evidence. Resultantly, the Court concludes that the existence of a de facto merger was not proven by a preponderance of the evidence.

4. The Preponderance of the Evidence Failed to Establish That LKimmy is Merely a Continuation of TLC and Eachpole

As the Nevada Supreme Court explained in Village Builders ¹⁴⁵⁰ :

One federal district court has opined that “[t]he gravamen of the ‘mere continuation’ exception is the continuation of corporate control and ownership, rather than continuation of business operations.” Many courts have likewise concluded that the key inquiry in resolving this issue is whether there exists a continuation of the corporate entity. We agree.

Under Nevada law, two essential elements must be established by a preponderance of the evidence to justify bringing a sale of assets within the purview of the mere continuation exception: (1) only one corporation remains after the transfer of assets; and (2) there is an identity of stock, stockholders, and directors between the two corporations.¹⁴⁵¹

As to the first element, it is undisputed on the record before the Court that shortly after TLC transferred its inventory assets to LKimmy ¹⁴⁵² and TLC and Eachpole transferred authority to use their existing trademarks and Market IDs to LKimmy under the License Agreements,¹⁴⁵³ TLC and Eachpole both filed bankruptcy petitions to liquidate their remaining assets under Chapter 7 of the Code. The Court has previously determined, and reiterates here, that TLC and Eachpole remained amenable to suit after the asset transfers to LKimmy as amply demonstrated by their status as defendants in this adversary proceeding.¹⁴⁵⁴ The bankruptcy filings by TLC and Eachpole gave rise to the bankruptcy estates and related claims Linco purchased in order to prosecute this adversary proceeding. The preponderance of the evidence established that more than one corporation remained after TLC transferred its inventory assets to LKimmy and TLC and Eachpole transferred authority to use their existing trademarks and Market IDs to LKimmy under the License Agreements. The Court therefore concludes that the preponderance of the evidence did not establish the first element required to establish the mere continuation exception.

As to the second element, the preponderance of the evidence failed to establish an identity of stock, stockholders, and directors between TLC and/or Eachpole on the one hand, and LKimmy on the other. Kim owned 100% of TLC's shares at the end of calendar years 2017 and 2018. See Ex. 11, Bates Nos. JWK000079; Ex. 102, Bates No. L046877. The Julius Information Statement identified Kim as Eachpole's sole director.  ¹⁴⁵⁵ Eachpole's 2017 federal tax return identifies Kim as the holder of 100% of Eachpole's stock.¹⁴⁵⁶ The Statement of Financial Affairs filed in support of the Eachpole Petition identifies Kim as the holder of 100% of Eachpole's stock.¹⁴⁵⁷ The preponderance of the evidence showed that when LKimmy was created on October 19, 2018, Hyunjune contributed $1,000.00 of his own money and $9,450.00 borrowed from Kim in exchange for LKimmy's common stock.¹⁴⁵⁸ He also stated that no one else provided any initial capital related to the organization of LKimmy.¹⁴⁵⁹ There is no evidence to suggest that any of LKimmy's stock served as consideration for the transfer to LKimmy of TLC's inventory, and/or the authority to use its existing trademarks and Market IDs under the TLC License. Resultantly, the Court concludes that the preponderance of the evidence did not establish the second element required to establish the mere continuation exception.

In summary, the Court concludes that neither of the two essential elements required to establish the existence of the mere continuation exception were proven by a preponderance of the evidence. The Court thus concludes that the mere continuation exception is inapplicable under the facts presented at trial in this adversary proceeding.

5. The Preponderance of the Record Evidence Established That the Transfers of the Assets of TLC and Eachpole to LKimmy Were Fraudulently Entered Into in Order to Escape Liability for the Judgment Entered in the Patent Lawsuit

The fourth and final exception to the general rule under Nevada law that an asset purchaser is not liable as a successor to the asset seller is established where “[t]he transaction was fraudulently entered into in order to escape liability.”  ¹⁴⁶⁰ The analytical calculus is focused on the motive of the asset seller in making the transfers at issue. Where the preponderance of the evidence establishes that the asset seller fraudulently entered into the sale transaction(s) at issue “in order to escape liability,” the asset purchaser may be deemed a successor to the asset seller.¹⁴⁶¹ Traditional badges of fraud inform the analysis.¹⁴⁶²

The Patent Lawsuit was filed on August 8, 2015.¹⁴⁶³ While the Patent Lawsuit was pending, Kim caused TLC and Eachpole to spend approximately $4,000,000 on sale materials, professionals, lawyers, investment bankers, and merger and acquisition consultants, culminating in the unsuccessful August 2, 2018, Management Presentation meeting with Vitec.¹⁴⁶⁴ With the Patent Lawsuit still pending, attempts to sell eTop Lighting Corporation (formerly TLC) and Eachpole (formerly Julius) were abandoned.

While the Patent Lawsuit was pending, on October 19, 2018, Articles of Incorporation forming LKimmy were filed with the Nevada Secretary of State.¹⁴⁶⁵ Hyunjune, who was previously employed by TLC while Kim was TLC's director and controlling shareholder, and who had participated in the August 2, 2018 Management Presentation to Vitec as “VP of Sales (Head of Amazon Sales Team)” for eTop Lighting Corporation (formerly TLC),¹⁴⁶⁶ was identified as LKimmy's President, Secretary, Treasurer, and sole director.¹⁴⁶⁷ Hyunjune acknowledged that he had very limited financial resources available to capitalize LKimmy, contributing just $1,000.00 of his own money and $9,450.00 borrowed from Kim as the initial capital for LKimmy's common stock.¹⁴⁶⁸

On November 10, 2018 - - only 22 days after LKimmy was incorporated in Nevada - - LKimmy entered into the License Agreements with TLC ¹⁴⁶⁹ and Eachpole.¹⁴⁷⁰ Clear and convincing evidence showed that while the Patent Lawsuit was pending, TLC conveyed its existing trademarks and internet Market IDs, inventory, warehouse facilities, business office, personnel, and operating loans, to LKimmy.

Clear and convincing evidence showed that when LKimmy was created, and while the Patent Lawsuit was pending, LKimmy did not pay for the inventory provided by TLC and Eachpole upon receipt.¹⁴⁷¹ LKimmy instead paid TLC for the inventory only after the inventory was sold.¹⁴⁷² When LKimmy subsequently received invoices for its inventory from TLC and Eachpole, LKimmy was afforded substantial discounts, including reductions of 10% for rent and storage, 10% for defective inventory, and for a 13% service charge for a total reduction of 33.33%.¹⁴⁷³

Additionally, clear and convincing evidence showed that while the Patent Lawsuit was pending, LKimmy initially stored inventory in a warehouse located on the North Lamb Property leased by TLC. Meanwhile, on November 12, 2018 - - just 24 days after LKimmy was incorporated and only two days after LKimmy entered into the License Agreements with TLC ¹⁴⁷⁴ and Eachpole ¹⁴⁷⁵ - - Eachpole entered into the Donovan Way Lease,¹⁴⁷⁶ with Kim signing as Eachpole's President.¹⁴⁷⁷ Less than a month later, on December 6, 2018, the Donovan Way Sublease was signed by Kim in his capacity as Eachpole's President, and by Hyunjune in his capacity as LKimmy's President.¹⁴⁷⁸

Moreover, clear and convincing evidence showed that while the Patent Lawsuit was pending, but prior to LKimmy's incorporation, Hyunjune's work related to the creation and organization of LKimmy was carried out at TLC's offices in Rancho Cucamonga, California.¹⁴⁷⁹ Hyunjune testified that from January 2019, through the end of August or early September 2019, the office where he conducted LKimmy's business operations was located in the North Lamb Property leased by TLC.¹⁴⁸⁰

As to LKimmy's employees, Hyunjune testified credibly that while the Patent Lawsuit was pending, Kim's executive assistant at TLC, TLC's human resources manager, TLC's warehouse manager, two TLC shipping clerks, and three Eachpole service representatives, all became LKimmy employees.¹⁴⁸¹ LKimmy also shared computers with TLC and Eachpole.¹⁴⁸² When sending out emails, LKimmy employees decided which of two email addresses to use, one attributable to TLC or Eachpole, or the other attributable to LKimmy.¹⁴⁸³

To finance its early business operations, and while the Patent Lawsuit was still pending, clear and convincing evidence proved that between April 4 and September 23, 2019, LKimmy entered into a series of five unsecured loan transactions with Kim and Misook totaling $703,000.00.¹⁴⁸⁴ None of the promissory notes required installment payments prior to maturity.¹⁴⁸⁵

There is no evidence to show that TLC ever disclosed any of the foregoing events, transactions, or transfers involving the assets of TLC summarized above during the 4-year pendency of the Patent Lawsuit. It is undisputed that following the jury trial in the Patent Lawsuit, on August 26, 2019, judgment was entered in favor of Linco against TLC in the principal sum of $991,028.79.¹⁴⁸⁶

With respect to the transfers of substantially all of TLC's business assets to LKimmy,¹⁴⁸⁷ the following badges of fraud were borne out by clear and convincing evidence:

• Before the transfers were made, TLC had filed the Patent Lawsuit. After Linco filed its counterclaim, Kim and TLC were well aware that the Patent Lawsuit was pending.

• LKimmy was initially created during the latter stages of the Patent Lawsuit, approximately one year before the entry of judgement against TLC.

• While the Patent Lawsuit was pending, TLC failed to disclose, and thus concealed from Linco and the Court in the Patent Lawsuit the various events, transactions, and transfers involving the assets of TLC discussed above, as well as a series of corporate name changes by TLC.

• The transfer of TLC's inventory assets to LKimmy,1488 and the transfer of authority to use TLC's existing trademarks and Market IDs to LKimmy under the License Agreements,1489 occurred while the Patent Lawsuit was pending, and within approximately one year after the $3 million BofA Loan was taken out by TLC on September 20, 2018,1490 which had rendered TLC insolvent.

• The transfer of TLC's inventory assets to LKimmy,1491 and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements,1492 occurred less than a year prior to entry of judgment in the Patent Lawsuit.

• The transfer of TLC's inventory assets to LKimmy,1493 and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, were transfers to LKimmy of

substantially all of the operating assets of TLC and Eachpole while the Patent Lawsuit was pending.

• While the Patent Lawsuit was pending, TLC received less than reasonably equivalent value in exchange for the transfer of TLC's inventory assets to LKimmy.1494

• The existence of a legitimate supervening purpose for the transfer of TLC's inventory assets to LKimmy, and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, was not borne out by a preponderance of the evidence at trial.

The Court concludes that multiple badges of fraud regarding the transfer of substantially all of TLC's assets to LKimmy, and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, were proven by clear and convincing evidence at trial. As noted by the Ninth Circuit in O'Gorman, “[t]he presence of a single badge of fraud may spur mere suspicion; the confluence of several can constitute conclusive evidence of actual intent to defraud, absent ‘significantly clear’ evidence of a legitimate supervening purpose.”¹⁴⁹⁵ The Court also concludes that no legitimate supervening purpose for transferring substantially all of TLC's business assets to LKimmy, or the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, was proven at trial. Put simply, clear and convincing evidence presented at trial established that the transfer of substantially all of TLC's business assets to LKimmy, and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, were transactions that were entered into fraudulently in order to escape liability for the claims made by Linco against TLC in the Patent Lawsuit, and the judgment ultimately entered against TLC therein.

In summary, the general rule under Nevada law is that an asset purchaser is not liable as a successor to the asset seller. But the fourth and final exception to that general rule is established where “[t]he transaction was fraudulently entered into in order to escape liability.”  ¹⁴⁹⁶ Multiple badges of fraud attended the transfer of substantially all of TLC's business assets to LKimmy, and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements while the Patent Lawsuit was pending. Those badges of fraud were proven by clear and convincing evidence at trial. The confluence of those badges of fraud is conclusive evidence of TLC's actual intent to defraud its creditors generally, and Linco in particular, through the transfer of substantially all of TLC's business assets to LKimmy,¹⁴⁹⁷ and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, while the Patent Lawsuit was pending.¹⁴⁹⁸ No legitimate supervening purpose for those transfers was proven at trial.¹⁴⁹⁹

Resultantly, the Court concludes that while the general rule under Nevada law is that an asset purchaser is not liable as a successor to an asset seller, the fourth and final exception to that general rule applies under the specific facts of this case. The transfer of substantially all of TLC's business assets to LKimmy, and the transfer of authority to use TLC's and Eachpole's existing trademarks and Market IDs to LKimmy under the License Agreements, were transactions entered into fraudulently in order to escape liability for the claims made by Linco against TLC in the Patent Lawsuit, and the judgment ultimately entered against TLC therein. The Court therefore concludes that LKimmy is liable as a successor to TLC for the judgment entered in favor of Linco against TLC in the Patent Lawsuit. Judgment against LKimmy will enter accordingly.

K. Linco's Amended Motion for Declaration of Contempt and to Enforce Temporary Restraining Order is Denied

The Court has considered Linco's Contempt Motion ¹⁵⁰⁰ filed one month prior to the commencement of trial, as well as the papers LKimmy filed in opposition to it.¹⁵⁰¹

As amended, the Contempt Motion asserts that LKimmy should be held accountable in contempt for violating this Court's TRO ¹⁵⁰² as later modified by stipulation between Linco and LKimmy.¹⁵⁰³ In particular, the Contempt Motion asserts that LKimmy violated those orders by selling inventory acquired from TLC and Eachpole and removing four containers housing that inventory. LKimmy's Opposition contends that it did not violate this Court's prior orders, was not selling stored inventory received from TLC (which Ms. Chen testified Linco does not want in any event ¹⁵⁰⁴ ), and to the extent that containers with the stored inventory were moved, they were moved in response to security concerns and break-ins at the Ontario warehouse. This dispute was not the subject of significant argument at trial.

The Ninth Circuit Court of Appeals has plainly established the evidentiary standard to be applied by bankruptcy courts when resolving contempt motions like this one ¹⁵⁰⁵ :

The standard for finding a party in civil contempt is well settled: The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite order of the court. The burden then shifts to the contemnors to demonstrate why they were unable to comply.

The clear and convincing evidence standard requires the moving party, in this case Linco, to “place in the ultimate factfinder an abiding conviction that the truth of its factual contentions are ‘highly probable.’ ”¹⁵⁰⁶ Factual contentions are highly probable if the evidence offered in support of them “instantly tilt[s] the evidentiary scales in the affirmative when weighed against the evidence [the non-moving party] offered in opposition.”¹⁵⁰⁷

In Taggart, the United States Supreme Court established the appropriate legal standard to be applied by the bankruptcy courts when resolving a contempt motion. Addressing the legal standard in the context of an alleged violation of the discharge injunction under Section 524(a) of the Code, the Taggart Court stated ¹⁵⁰⁸ :

We conclude that the Court of Appeals erred in applying a subjective standard for civil contempt. Based on the traditional principles that govern civil contempt, the proper standard is an objective one. A court may hold a creditor in civil contempt for violating a [court] order where there is not a “fair ground of doubt” as to whether the creditor's conduct might be lawful under the discharge order. In our view, that standard strikes the “careful balance between the interests of creditors and debtors that the Bankruptcy Code often seeks to achieve.”

Having carefully considered the record, the Court denies this contested Contempt Motion for three different reasons. First, while there is no dispute that the Court has previously entered the TRO and subsequent stipulation modifying it, the evidence proffered by Linco does not satisfy the applicable clear and convincing standard. The declarations in support of the Contempt Motion, even after the conclusion of an eight day trial, do not place in this Court as a factfinder “an abiding conviction that the truth of its factual contentions are ‘highly probable.’ ”¹⁵⁰⁹

Second, even if Linco's proffered evidence did rise to the level of clear and convincing evidence, which in this Court's view it does not, the Court concludes that the declaration proffered by Hyunjune in opposition demonstrates satisfactorily to the Court why LKimmy took the action it did: to keep the inventory held in the containers at issue secure for Linco's benefit, despite the fact that Linco's witness, Ms. Chen, expressly disclaimed any interest in taking possession of it.

Third, there is a “fair ground of doubt” as to whether LKimmy's conduct might be lawful under the TRO and subsequent stipulation modifying it. In particular, there is “fair ground of doubt” as to whether LKimmy's efforts to properly secure the four containers at issue for the benefit of Linco is consistent with, as opposed to running afoul of, the intended purpose of the TRO and the subsequent stipulation modifying it.

Civil contempt is a severe remedy not to be imposed lightly. For the reasons and under the authorities stated above, the Court denies Linco's Contempt Motion. For clarity and avoidance of doubt, denial of the Contempt Motion is without prejudice to a pending motion filed by Linco on December 16, 2024 ¹⁵¹⁰ which seeks a similar remedy, was opposed by LKimmy on January 7, 2025,¹⁵¹¹ is the subject of Linco's reply filed January 13, 2025 ¹⁵¹² was heard by the Court on January 15, 2025, and is scheduled for oral ruling on February 6, 2025.¹⁵¹³

III. CONCLUSION

This Memorandum of Decision constitutes the Court's findings of fact and conclusions of law required under Fed. R. Civ. P. 52(a)(1) as applicable in this adversary proceeding under Fed. R. Bankr. P. 7052. Judgment consistent with this Memorandum of Decision will be entered separately in accordance with Fed. R. Civ. P. 58 as applicable in this adversary proceeding under Fed. R. Bankr. P. 7058 and 5003(a).

FOOTNOTES

1.   The trial dates were August 1, 2, 4, 5, 25, 26, 29, and 30, 2022.

2.   The Court previously granted summary judgment in favor of all Defendants as to Plaintiff's Twenty-Fourth Claim for Relief, which sought substantive consolidation of two bankruptcy estates, discussed in more detail below). ECF No. 297. In this Memorandum, all references to “ECF No.” are to the numbers assigned to the documents filed in the above-captioned adversary proceeding as they appear on the docket maintained by the Clerk of the Court. Additionally, “Code” refers to the United States Bankruptcy Code, 11 U.S.C. §§ 101 – 1532. “Section” refers to corresponding section of the Code. “Rule” refers to the corresponding Federal Rules of Bankruptcy Procedure. “LR” refers to the corresponding Local Rules of Bankruptcy Practice of the United State Bankruptcy Court for the District of Nevada. “NRS” refers to the Nevada Revised Statutes.

3.   Linco's Second Amended Complaint is on the docket at ECF No. 199 and is referred to hereafter as the “SAC.”

4.   The transcripts were docketed on September 19, 2022. See ECF Nos. 314 – 321, inclusive.

5.   See ECF No. 347 (Il Kim); ECF No. 346 (Misook Kim), ECF No. 345 (Beauty Memory and Synguru Corporation); ECF No. 344 (Chris Kim); ECF No. 343 (Linco, Inc.); ECF No. 342 (Bhasker Panchal); and ECF No. 341 (Hyunjune Kim and LKimmy, Inc.).

6.   The Court acknowledges that it has taken some time to fully consider the trial transcripts, deposition transcripts, and 20 binders of exhibits containing thousands of pages of material that comprise the evidentiary record in this case.

9.   Ex. 43.0002, para. 26. In this Memorandum, all references to “Ex. ___” are to the numbers or letters of the corresponding exhibits offered and admitted into evidence at trial.

11.   Ex. 43.0003, para. 26.

14.   Ex. 131.

15.   Ex. 8, Bates No. KROLL_eTop_002951.

16.   Ex. 131.

17.   Ex. 28, Bates No. L050442; hereafter the “TLC Information Statement.”

18.   Ex. 28, Bates No. L050442.

19.   Ex. 28, p. Bates No. L050442.

20.   Ex. 184; hereafter the “BofA Loan.”

21.   Ex. 184.

22.   Ex. 31, hereafter the “TLC/eTop Name Change.”

23.   Ex. 31.

24.   Ex. 2, Bates No. L044566; hereafter the “eTop Articles.”

25.   Ex. 2, Bates No. L044566.

26.   Ex. 2, Bates No. L044565; hereafter the “eTop/TLC List.”

27.   Ex. 2, p. Bates No. L044565.

28.   Ex. 2, p. Bates No. L044565.

29.   Ex. 250.

30.   Ex. 184, Bates No. 184.0009.

31.   Ex. 184, Bates No. 184.0058; hereafter the “eTop/TLC Name Change.”

32.   Hereafter the “TLC Petition.” The TLC Petition commenced the bankruptcy case styled In re Top Lighting Corporation dba ETop Lighting Corporation, Debtor, Ch. 7 No. 19-16516, hereafter the “TLC Bankruptcy.” The TLC Petition, together with supporting schedules and statements, is located at ECF No. 1 on the docket in the TLC Bankruptcy. The Court takes judicial notice of the pleadings and papers comprising the official court docket in the TLC Bankruptcy pursuant to, and to the extent permitted by, Fed. R. Evid. 201(b) and (c)(1).

33.   Hereafter the “TLC Petition Date.”

34.   TLC Petition, p. 1.

35.   TLC Petition, p. 1.

36.   TLC Petition, p. 1.

37.   TLC Petition, p. 7.

38.   TLC Petition, p. 37. More particularly, Statement of Financial Affairs Part 13, Question 28 reads: “List the debtor's officers, directors, managing members, general partners, members in control, controlling shareholders, or other people in control of the debtor at the time of the filing of this case.” Kim is the only person identified in response to that question.

39.   TLC Petition, p. 4.

40.   TLC Petition, p, 40.

41.   Hereafter the “BofA Proof of Claim;” Ex. 184.

42.   Ex. 184, pp. 184.005 – 184.007. The BofA Proof of Claim also details the amount of work Bank of America had taken to ensure that its security interest in TLC's assets remained perfected despite TLC's various name changes during the two-year term of the BofA Loan. See Ex. 184, pp. 184.008 – 184.009.

43.   Hereafter “Julius.”

44.   Ex. 35, Bates No. KROLL_eTop_003028.

45.   Ex. 35, Bates No. KROLL_eTop_003028.

46.   Ex. 28, Bates No. L050443; hereafter the “Julius Information Statement.”

47.   Ex. 28, Bates No. L050443. It is noteworthy that the address information shown on the Julius Information Statement is the same as the address information shown on the TLC Information Statement. Compare Ex. 28, Bates No. L050443 with Ex. 28, Bates No. L050442.

48.   Ex. 28, Bates No. L050443.

49.   Ex. 28, Bates No. L050443.

50.   Ex. 28, Bates No. L050443.

51.   Ex. 32, hereafter the “Julius/Eachpole Name Change.” It is noteworthy that the TLC/eTop Name Change and the Julius/Eachpole Name Change were filed on the same date.

52.   Ex. 32.

53.   Ex. 90, hereafter the “Donovan Way Lease,” and the leased premises the “Donovan Way Property.”

54.   Ex. 90, Bates No. 90.0020.

55.   Ex. 90, p. Bates No. 90.0001.

56.   Hereafter the “Eachpole Petition.” The Eachpole Petition commenced the bankruptcy case styled In re Eachpole, Inc., Debtor, Ch. 7 No. 20-10956, hereafter the “Eachpole Bankruptcy.”

57.   Hereafter the “Eachpole Petition Date;” Eachpole Petition, p. 1.

58.   Eachpole Petition, p. 1.

59.   Eachpole Petition, p. 1.

60.   Eachpole Petition, p. 2.

61.   Eachpole Petition, p. 8. Specifically, Schedule A/B: Assets – Real and Personal Property Part 5, Question 18 reads: “Does the debtor own any inventory (excluding agricultural assets)?” The checkbox response “No” is marked.

62.   Eachpole Petition, p. 34. More particularly, Statement of Financial Affairs Part 13, Question 28 reads: “List the debtor's officers, directors, managing members, general partners, members in control, controlling shareholders, or other people in control of the debtor at the time of the filing of this case.” Kim is the only person identified in response to that question.

63.   Hereafter “Synguru Inc.”; see Ex. 24; ECF No. 345, p. 3.

64.   Ex. 24, hereafter the “Synguru Inc. Information Statement.”

65.   Ex. 24.

66.   Hereafter “Synguru Corp.” The Court takes judicial notice of the online records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

67.   ECF No. 199, p. 1.

68.   The Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

69.   The Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

70.   T.1, p. 110; T.3, p. 22-23, T.6, p. 30; Ex. 115, Bates No. L017510. References to “T._” are to the trial transcript and chronological day of trial. All transcripts are available on the official court docket at ECF Nos. 314 [T.1], 315 [T.2], 316 [T.3], 317 [T.4], 318 [T.5]; 319 [T.6], 320 [T.7], and 321 [T.8]. The Court also takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c) in support of this finding.

72.   The Court takes judicial notice of the online records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

73.   Ex. 23; hereafter the “Beauty List.”

74.   Ex. 23.

75.   Ex. 23; hereafter the “North Lamb Property.”

76.   T.1, p. 95; T.2, p 114; ECF No. 345, p. 3.

77.   T.4, p. 51.

78.   Ex. 131.

79.   Ex. 35, Bates No. KROLL_eTop_003028.

80.   Top Lighting Corporation v. Linco, Inc., Case No. 5:15-cv-01589-JVS-KK (C.D. Cal.), hereafter the “Patent Lawsuit.” See Ex. 182.

81.   Ex. 24; ECF No. 345, p. 3.

82.   The Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), and finds that articles of incorporation establishing named defendant Synguru Corp. as a Nevada corporation were filed with that office on September 8, 2017.

83.   The Court takes judicial notice of the online records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

84.   Ex. 31.

85.   Ex. 32.

86.   Ex. 2, Bates No. L044566.

87.   T.1, p. 110; T.3, p. 22-23, T.6, p. 30; Ex. 115, Bates No. L017510. The Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c) and finds that the paperwork dissolving Synguru Corp. as a Nevada corporation was filed with that office on July 17, 2019.

88.   Ex. 184, Bates No. 184.0058

89.   Ex. 129.

90.   See note 32, supra.

91.   See note 56, supra.

93.   T.2, p. 154.

94.   T.1, p. 105.

95.   T.2, pp. 53 – 54;

96.   Ex. 24.

97.   Ex. 28, Bates No. L050442.

98.   Ex. 28, Bates No. L050443.

99.   Ex. 2, Bates No. L044566.

100.   Ex. 2, Bates No. L044565.

101.   See ECF No. 314, pp. 104 – 208; ECF No. 315, pp. 4 – 131.

102.   T.1, p. 112; T.2, pp. 8, 60, 115.

103.   T.2, p. 116.

104.   T.2, p. 123.

105.   T.1, p. 112.

106.   T.1, p. 112; T.2, pp. 8 - 9.

107.   T.1, p. 109, lines 1 – 21.

108.   See note 80, supra.

109.   T.2, pp. 8 - 9

110.   T.2, p. 9

111.   T.1, p. 112 line 21 – p. 113 line 22.

112.   T.2, p.149; Ex. 48. The organizational chart was prepared by TLC employee Andrew Kwon, whose involvement in the Kim Family Companies is discussed in more detail below.

113.   Compare Ex. 48 with Ex. 28, Bates No. L050442.

114.   Hereafter “Duff & Phelps.”

115.   Ex. 259, Bates No. KROLL_eTop_016168.

116.   Hereafter “Hilco.”

117.   Ex. 260.

118.   Ex. 260, Bates No. 260.0015.

119.   Hereafter “Deloitte.”

120.   Ex. 262, Bates No. 262.0013.

121.   Ex. 250.

122.   See Ex. 19 and Ex. 256. The Vitec Group, plc, and The Vitec Group US Holdings, Inc., are referred to collectively heareafter as “Vitec.”

123.   Ex. 256, Bates No. KROLL_eTop_011787.

124.   T.2, p. 90; T.5, p. 129.

125.   T.2, p. 90.

126.   T.1, p. 160; T.5, pp.127-128.

127.   T.2, pp. 68, 89-90, 95.

128.   T.2, p. 123.

129.   T.5, p. 128.

131.   ECF No. 199, p. 5, para. 28; ECF No. 200, p. 5, para. 28.

132.   T.4, p. 124; T.5, pp. 100, 102.

133.   T.4, p. 124 line 2 – p. 126 line 23; Ex. 48.

135.   Panchal testified that he learned that the sale effort fell through “[p]robably a week or two later” after an August 2, 2018, Management Presentation was made to a potential buyer. T.1, p. 198 l. 6 – p. 199 line 7. Hyunjune testified that to the best of his recollection, the sale effort fell through “around September or October of 2018.” T.4, p. 133 line 7 – p. 134 line 24.

136.   More particularly, Hyunjune testified that Kim instructed TLC employee Hyukjoon “Andrew” Kwon (hereafter “Andrew”) to find an accountant to form the new company, and that Andrew arranged for James Yu, CPA, to prepare the documents that formed LKimmy. T.2, p. 141 line 13 – p. 143 line 21; T.5, p. 107 line 20 – p. 108 line 14; Ex. 115, p. L017519-21, L021915-16.

137.   Ex. 115, p. L017520; hereafter “LKimmy Articles.”

138.   See Ex. 86, p. 86.0005; Ex. 87, p. 87.0005.

139.   Ex. 115, p. L017520.

140.   Ex. 115, p. L017520; hereafter the “Vigilante Court Property.” With respect to Hyunjune's service as registered agent, the LKimmy Articles provided a mailing address of 2560 Montessouri Street, Suite 208, Las Vegas, Nevada 89117.

141.   Ex. 116, p. L026678; hereafter the “LKimmy List.”

142.   Ex. 116, p. L026678.

143.   T.4, p. 154 line 9 – p. 163 line 7.

144.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

145.   T.4, p. 158 line 9 – p. 159 line 4.

146.   T.4, p. 130 line 9 – p. 131 line 21; see also Ex. 48.

147.   T.4, p. 130 line 9 – p. 131 line 21; see also Ex. 48.

148.   T.2, p. 152-54, 156, 160.

149.   T.4, p. 184

150.   T.4, p. 144 line 14 – p. 145 line 8.

151.   T.4, p. 159 line 19 – p. 160 line 18.

152.   T.4, p. 159 line 19 – p. 160 line 18.

153.   T.4, p. 189; Ex. 99 p. L013520; Ex. 100, p. L018024-25, L013520

154.   Ex. 100, p. L018025.

155.   Ex. 99, p. L050800; Ex. 100 p. L050800.

156.   Ex. 99, p. L013526; Ex. 100 p. L013526.

157.   Ex. 62, 1/7/2019, Invoice #D9618, $840,177.95, p. L019298; 1/17/2019, Invoice #D9619, $1,844,623.54, p. L018883; 5/30/2019, Invoice #D9620, $23,002.25, p. LKimmy000091; 2/4/2019, Invoice #E0122, p. LKimmy001641, $18,247.92; 3/25/2019, Invoice #E0124, $9,981.86, p. LKimmy00162; 4/15/2019, Invoice #E0125, $11,550.64, p. LKimmy001643; 5/13/2019, Invoice #E0126, $8,951.44, p. LKimmy001644; 5/27/2019, Invoice #E0127, $2,705.77, p. LKimmy001645; 1/21/2019, Invoice #F0915, $138,307.64, p. LKimmy001646; 1/22/2019, Invoice F0917, $18,533.12, p. LKimmy001649; 1/7/2019, Invoice #F0916, $50,513.72, p. (NO BATES NUMBER); 12/14/2018, Invoice #D9614, $45,594.41, p. LKimmy000001; 12/11/2018, Invoice #D9613, $68,537.63, p. LKimmy000006; 12/3/2018, Invoice #D9612, $295,679.13, p. LKimmy000026 ; 12/20/2018, Invoice #D9616, $49,441.96, p. LKimmy000049; 12/19/2018, Invoice #D9615, $264,212.21, p. LKimmy000058; 11/20/2018, Invoice #D9611, $363,780.54, p. LKimmy000075; 12/20/2018, Invoice #D9617, $151,109.76, p. LKimmy000111; 1/7/2019, Invoice #D9618, $840,177.95, p. LKimmy000123.

158.   T5, p. 37-39.

159.   See Ex. F.

160.   See Ex. F.

161.   Ex. 89, hereafter the “Donovan Way Sublease.”

162.   Ex. 89, p. 89.0001.

163.   Ex. 89, p. 89.0004.

164.   Compare Ex. 89, p. 89.0001 with Ex. 90, p. 90.0002. The monthly base rent Eachpole was required to pay under the Donovan Way Lease began at $42,980.85 per month in 2019 - 2020, and increased over time to $49,844.61 in 2025 – 2026.

165.   Ex. 90, p. 90.0002.

166.   T.4, p. 148 line 24 – p. 152 line 9.

167.   Ex. 179, pp. L044416 – L044421, hereafter the “Eachpole License.”

168.   Ex. 179, pp. L044401 – L044406, hereafter the “TLC License” and collectively with the Eachpole License, the “License Agreements.”

169.   Ex. 179, p. L044421.

170.   Ex. 179, p. L044406.

171.   Ex. 179, pp. L044421 and L044406.

172.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing trademarks “LimoStudio” and “Julius Studio.” See Ex. 179, p. L044416.

173.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing internet Market IDs “KimOutlet,” “Eachpole,” and “Hoully.” See Ex. 179, p. L044416.

174.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing trademarks “Loadstone Studio,” “LS Photography,” “eTopLighting,” “Lusana Studio,” “LS Photo Studio,” and “TP Party Saving.” See Ex. 179, p. L044401.

175.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

176.   See Eachpole License, Ex. 179, p. L044416, Section II.1.a.

177.   See TLC License, Ex. 179, p. L044402, Section II.1.a.

178.   T.4, p. 148 line 24 – p. 152 line 9.

179.   See Note 137, supra.

180.   T.4, p. 143 line 22 – p. 144 line 13.

181.   See note 137, supra.

182.   See note 161, supra.

183.   T.4, pp. 163 lines 8 – p. 165 line 18.

184.   T.4, pp. 163 lines 8 – p. 165 line 18.

185.   See Ex. 93.

187.   T.7, p. 7 lines 2 – line 13; p. 11 lines 7 – line 15; p. 48 lines 16 – p. 49 line 9.

188.   T.7, p. 6 line 23 – p. 10, line 4; T.7, p. 71 line 3 – p. 72 line 12; T.7, p. 76 line 9 – p. 77 line 3; ECF No. 343, p. 10.

189.   T.7, pp. 8-10; ECF No. 343, p. 10.

190.   Hereafter, “Ms. Chen;” T.7, pp. 6 – 77.

191.   T.7, p. 10 lines 5 – 23.

192.   T.7, p. 10 line 24 – p. 11 line 6.

193.   See note 80, supra.

194.   T.7, p. 11 line 7 – p. 12, line 13.

195.   T.7, p. 70 lines 12 – 19.

196.   T.7, p. 12 line 14 – p. 14, line 4; T.7, p. 49 line 10 – p. 51 line 15.

197.   T.7, p. 49 line 10 – p. 50 line 12; Ex. 183.

198.   T.7, p. 50 lines 13 – 17; Ex. 183.

199.   T.7, p. 50 lines 18 – 20; Ex. 183.

200.   T.7, p. 50 line 21 – p. 51 line 4.

201.   T.7, p. 14, line 5 – p. 15 line 14.

202.   T.7, p. 19 line 13 – p. 21 line 15.

203.   T.7, p. 19 line 13 – p. 20 line 3.

204.   T.7, p. 20 line 23 – p. 21 line 15.

205.   T.7, p. 21 lines 9 – 15.

206.   T.7, p. 72 lines 14 – 22.

207.   T.7, p. 21 line 16 – p. 23 line 10; Ex. 78.

208.   T.7, p. 23 lines 2 – 10; Ex. 78.

209.   T.7, p. 23 lines 11 – 17.

210.   T.7, p. 23 lines 11 – 22.

211.   T.7, p. 23 line 23 – p. 27 line 12.

212.   T.7, p. 23 line 23 – p. 24 line 6.

213.   T.7, p. 23 line 23 – p. 24 line 6; T.7, p. 68 lines 13 – 24.

214.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

215.   T.7, p. 25 line 15 – p. 26 line 12; T.7, p. 74 line 1 – p. 75 line 7.

216.   T.7, p. 25 line 15 – p. 27 line 12.

217.   T.7, p. 27 line 13 – p. 29 line 10; Ex. 80.

218.   T.7, p. 29 lines 12 – 24.

219.   T.7, p. 29 lines 12 – 24.

220.   T.7, p. 29 line 12 – p. 30 line 1.

221.   T.7, p. 30 line 2 – p. 31 line 9.

222.   T.7, p. 31 line 17 – p. 32 line 4; see Ex. 179, p. L044416.

223.   T.7, p. 32 lines 5 – 18.

224.   T.7, p. 32, lines 5 – 13; see Ex. 179, p. L044402.

225.   T.7, p. 32, lines 8 – 18.

226.   T.7, p. 32 line 19 – p. 33 line 22.

227.   T.7, p. 32 lines 19 – 24.

228.   T.7, p. 32 line 25 – p. 33 line 2.

229.   T.7, p. 33 lines 3 – 22; see also Ex. 89.

230.   T.7, p. 33 line 23 – p. 34 line 8.

231.   T.7, p. 33 line 23 – p. 34 line 8.

232.   See notes 167 and 168, supra.

233.   T.7, p. 34 line 9 – p. 35 line 16.

234.   T.7, p. 34 line 9 – p. 35 line10.

235.   T.7, p. 34 line 9 – p. 35 line 19.

236.   T.7, p. 35 lines 11 – 16.

237.   T.7, p. 66 lines 13 – 20; see note 80, supra.

238.   T.7, p. 36 line 5 – p. 43 line 16.

239.   T.7, p. 43 lines 3 – 16.

240.   T.7, p. 43 line 17 – p. 44 line 9.

241.   T.7, p. 43 line 17 – p. 44 line 9.

242.   Ex. 62.

243.   T.7, p. 46 line 9 – p. 47 line 24.

244.   T.7, p. 46 line 9 – p. 47 line 24.

245.   T.7, p. 46 line 9 – p. 47 line 7.

246.   T.7, p. 47 lines 8 – 15.

247.   T.7, p. 47 lines 16 – 24.

248.   T.7, p. 52 lines 10 – 20.

249.   T.7, p. 52 line 21 – p. 55 line 13.

250.   T.7, p. 55 line 14 – p. 56 line 14.

251.   T.7, p. 56 line 15 – p. 57 line 1.

252.   T.7, p. 56 line 15 – p. 57 line 13.

253.   T.7, p. 57 line 2 – p. 59 line 4; T.7, p. 64 lines 12 – 18; T.7, p. 75 line 21 – p. 76 line 8.

254.   T.7, p. 59 line 5 – p. 60 line 14.

255.   T.7, p. 60, lines 15 – 18.

256.   T.7, p. 60, line 19 – p. 62 line 10.

257.   T.7, p. 62, lines 17 – 19; Ex. F.

258.   T.7, p. 62 line 20 – p. 63, line 15. Pursuant to Fed. R. Evid. 201, the Court takes judicial notice of the fact that 33% of $4,536,387.52 is $1,512,129.17.

259.   Compare T.7, p. 59 line 5 – p. 60 line 14 with p. 63 line 18 – p. 64 line 2; see also T.7 p. 75 line 21 – p. 76 line 8.

260.   T.7, p. 64 lines 3 – 16.

261.   See notes 167 – 168, supra.

262.   T.7, p. 63 lines 5 – 17.

263.   Ex. A.

264.   T.7, p. 64 line 19 – p. 65 line 10; see also T.7, p. 65 line 11 – p. 66 line 12.

265.   T.7, p. 66 line 21 – p. 68 line 2.

266.   T.7, p. 68 lines 3 – 7.

267.   T.7, p. 68 line 25 – p. 69 line 10.

268.   T.7, p. 69 lines 11 – 19; T.7, p. 75 lines 8 – 20.

269.   T.7, p. 69 lines 11 – 19.

271.   T.3, p. 42.

272.   T.3. pp. 45-46. Mr. Bertsch acknowledged that he is not a Certified Fraud Examiner. T.3, pp. 137-38.

273.   T.3, pp. 129-30.

274.   T.3, p. 129-31. For example, during the week immediately before the trial, Mr. Bertsch changed his report regarding damages attributable to Fraudulent Transfer #7 referenced in the SAC. More particularly, Mr. Bertsch increased his damage calculations related to Fraudulent Transfer #7 from $11 million to $20 million, by dropping in their entirety and taking out Fraudulent Transfers #3 and #4 as identified in the SAC, and then adding in a damage claim calculation predicated on royalty payments in the context of Fraudulent Transfer #7. T.3, pp. 130-31; T.3, p. 119.

275.   T.3, pp.130-31.

276.   T.4, pp. 107-08.

278.   T.6, p. 22 line 23 – p. 23 line 18.

279.   T.6, p. 23 line 19 – p. 27 line 12.

280.   T.6, p. 26 lines 12 – 17; T.6, p. 33 line 1 – p. 34 line 21.

281.   T.6, p. 26 line 18 – p. 27 line 12.

282.   T.6, p. 27, lines 3 – 9; T.6, p. 37 line 10 – p. 38 line 14.

283.   See notes 137 and 141, supra.

284.   T.6, p. 38 line 15 – p. 40 line 4; T.6, p. 47 line 9 – p. 48 line 11; Ex. 116.

285.   T.6, p. 41 line 15 – p. 45 line 1; see also Ex. 115, Bates No. L026683.

286.   T.6, p. 45 line 2 – p. 47 line 8; see also Ex. 115, Bates No. L026684.

287.   T.6, p. 28 line 13 – p. 30 line 1.

288.   T.6, p. 30 line 2 – p. 31 line 15.

289.   T.6, p. 30 line 2 – p. 31 line 11; see note 87, supra.

290.   T.6, p. 34 line 22 – p. 36 line 5.

291.   T.6, p. 34 line 22 – p. 36 line 5.

292.   T.6, p. 34 line 22 – p. 35 line 21.

293.   T.6, p. 34 line 22 – p. 35 line 21; T.6, p. 40 line 5 – p. 41 line 10; T.6, p. 48 line 19 – p. 50, line 23; see also Ex. 86.

294.   T.6, p. 35 line 22 – p. 36 line 5.

296.   ECF 1, p. 1.

297.   ECF 143, p. 3, lines 12 – 14.

298.   Resultantly, the Court is unable to evaluate his credibility.

299.   T.2, pp. 136 – 227; T.3, pp. 5 – 40.

300.   T.2, p. 137.

301.   T.2, p.146; T.5, p. 108.

302.   T.2, p. 146.

303.   T.5, pp. 118-19.

304.   T.5, pp. 119-20.

305.   T.5, p. 116.

306.   T.1, p. 160; T.5, p.127-128.

307.   See note 136, supra.

308.   T.5, p. 65-66, 75.

309.   T.2, p.144-45.

310.   T.4, p. 167-68.

311.   T.2, p. 142, 226.

312.   T.2, p. 139-40

313.   T.2, p. 214-15.

314.   T.2, p. 214-15.

315.   T.2, p. 171, 215.

316.   T.2, p. 140-41.

317.   T.2, p. 141.

318.   T.2, pp. 147, 180-82; T.4, p. 168.

319.   T.2, p. 181

320.   T.4, p. 167-68.

321.   T.2, pp. 156-57, 185.

322.   T.4, p. 168.

323.   T.4, p. 168.

324.   T.4, p. 168.

325.   T.2, pp. 144-47; T.4, pp. 167-68.

326.   T.5, p. 128.

327.   T.5, p. 128.

328.   T.2, pp. 164-66. Kwon Depo, Ex. 2.

329.   T.2., p. 184.

330.   T.2, p. 173; T.3, pp. 11-12.

332.   Joo Dep., p. 1. References to “Joo Dep.” are to Mr. Joo's deposition transcript.

333.   Joo Dep., p. 13 lines 5 – 6.

334.   Joo Dep., p.13 lines 14 – 24.

335.   Joo Dep., p. 14, lines 6 – 8.

336.   Joo Dep., p. 14, line 9 – p. 15, line 12.

337.   Joo Dep., p. 14 line 9 – p. 15 line12.

338.   Hereafter “Yoona.”

339.   Joo Dep., p. 14 line 9 – p. 15 line 20.

340.   Joo Dep., p. 15 line 21 – p. 16 line 17; p. 20 lines 21 – 24.

341.   Joo Dep., p. 16 lines 13 – 22.

342.   Joo Dep., p.16 lines 23 – 24.

343.   Joo Dep., p. 16 line 25 – p. 19 line 23.

344.   Joo Dep., p. 19 line 24 – p. 20 line 1.

345.   Joo Dep., p. 20 lines 2 – 20; p. 20 line 25 – p. 21 line1.

346.   Joo Dep., p. 21 line 12 – p. 23 line 16.

347.   Joo Dep., p. 22 lines 8 – 13.

348.   Joo Dep., p. 23 line 11 – p. 41 line 12.

349.   Joo Dep., p. 23 line 11 – p. 41 line 12.

350.   Joo Dep., p. 41 lines 13 – 18.

351.   Joo Dep., p. 41 lines 19 – 22.

352.   Joo Dep., p. 41 line 23 – p. 42 line 3.

353.   Joo Dep., p. 42 lines 4 – 7.

354.   Joo Dep., p. 42 line 8 – p. 43 line 18.

355.   Joo Dep., p. 42 line 8 – p. 43 line 18.

356.   Joo Dep., p. 43 line 19 – p. 48 line 4.

357.   Joo Dep., p. 48 line 14 – p. 50 line 3.

358.   Joo Dep., p. 50 line 4 – p. 52 line 11; p. 52 line 20 – p. 53 line 2.

359.   Joo Dep., p. 52 lines 12 – 23.

360.   Joo Dep., p. 52 lines 12 – 23. Mr. Joo did not testify as to whether audits were conducted to confirm that the paychecks issued by LKimmy actually matched the paycheck stubs prepared by Mr. Joo's firm.

361.   Joo Dep., p. 52 line 24 – p. 53 line 8.

362.   Joo Dep., p. 54 lines 3 – 19.

363.   Joo Dep., p. 54 lines 3 – 19.

364.   Joo Dep., p. 54 line 23 – p. 55 line 1.

365.   Joo Dep., p. 55 line 2 – p. 63 line 3.

366.   See note 169, supra.

367.   Joo Dep., p. 55 line 2 – p. 63 line 3.

368.   Joo Dep., p. 55 line 2 – p. 61 line 3.

369.   Joo Dep., p. 63 lines 4 – 10.

370.   Joo Dep., p. 63 line 4 – p. 64 line 7.

371.   Joo Dep., p. 64 line 16 – p. 66 line 16.

372.   Joo Dep., p. 66 line 17 – p. 67 line 2.

373.   Joo Dep., p. 67 lines 3 - 15.

374.   Joo Dep., p. 67 line 24 – p. 69 line 12.

375.   Joo Dep., p. 69 lines 13 – 25.

376.   Joo Dep., p. 70 line 1 – p. 73 line 4; p. 75 line 22 – p. 76 line 23.

377.   Joo Dep., p. 73, line 8 – p. 74 line 8.

378.   Joo Dep., p. 74 line 15 – p. 75 line 5.

379.   Joo Dep., p. 75 lines 7 – 11; p. 76 lines 23 – 25.

380.   Joo Dep., p. 75 line 18 – p. 77 line 22; see also notes 185 – 189 and accompanying text.

381.   Joo Dep., p. 77 line 23 – p. 79 line 1.

382.   Joo Dep., p. 79 lines 4 – 25.

383.   Joo Dep., p. 80 line 1 – p. 84 line 19.

384.   Joo Dep., p. 80 line 1 – p. 82 line 1.

385.   Joo Dep., p. 83 line 9 – p. 84 line 19.

386.   Joo Dep., p. 83 line 9 – p. 84 line 19.

387.   Joo Dep., p. 84 line 20 – p. 85 line 20.

388.   Joo Dep., p. 86 line 14 – p. 87 line 1.

389.   Joo Dep., p. 87 lines 2 – 8.

390.   Joo Dep., p. 87 line 9 - p. 88 line 25.

391.   Joo Dep., p. 89 line 1 – p. 90 line 3.

392.   Joo Dep., p. 90 line 15 – p. 91 line 4.

393.   Joo Dep., p. 91 line 5 – p. 92 line 3.

394.   Joo Dep., p. 92 line 4 – p. 93 line 7.

395.   Joo Dep., p. 93 line 22 – p. 94 line 7.

396.   Joo Dep., p. 94 line 8 – p. 95 line 8; p. 97 line 14 – p. 98 line 23.

397.   Joo Dep., p. 97 line 14 – p. 98 line 23.

398.   Joo Dep., p. 100 line 16 – p. 101 line 12.

399.   Ex. 29, p. 29.0002.

400.   Joo Dep., p. 101 lines 13 – 20.

402.   Sun Ha Dep., p. 1. References to “Sun Ha Dep.” are to Sun Ha's deposition transcript.

403.   Sun Ha Dep., p. 5 line 8 – p. 15 line 20.

404.   Sun Ha Dep., p. 15 line 21 – p. 16 line 6.

405.   Sun Ha Dep., p. 18 lines 1 – 8.

406.   Sun Ha Dep., p. 18 line 9 – p. 19 line 1.

407.   Sun Ha Dep., p. 19 line 3 – p. 20 line 10.

408.   Sun Ha Dep., p. 20 line 11 – p. 21 line 5.

409.   Sun Ha Dep., p. 21 lines 6 – 15.

410.   Sun Ha Dep., p. 21 line 19 – p. 22 line 1.

411.   Sun Ha Dep., p. 22 line 2 – p. 24 line 4.

412.   Sun Ha Dep., p. 24 lines 5 – 25.

413.   Sun Ha Dep., p. 25 line 2 – p. 26 line 8.

414.   Sun Ha Dep., p. 26 lines 9 – 25.

415.   Sun Ha Dep., p. 27 lines 1 – 4.

416.   Sun Ha Dep., p. 27 lines 5 – 20.

417.   Sun Ha Dep., p. 27 lines 21 – 24.

418.   Sun Ha Dep., p. 27 line 25 – p. 28 line 14.

419.   Sun Ha Dep., p. 28 lines 8 – 12.

420.   Sun Ha Dep., p. 29 line 1 – p. 30 line 15.

421.   Sun Ha Dep., p. 29 line 1 – p. 30 line 12.

422.   Sun Ha Dep., p. 30 line 16 – p. 32 line 12.

423.   Sun Ha Dep., p. 31 line 2 – p. 32 line 9.

424.   Sun Ha Dep., p. 32 line 13 – p. 33 line 12.

425.   Sun Ha Dep., p. 33 line 18 – p. 34 line 6.

426.   Sun Ha Dep., p. 34 lines 3 – 15.

427.   Sun Ha Dep., p. 34 line 17 – p. 36 line 3.

428.   Sun Ha Dep., p. 35 line 25 – p. 36 line 3.

429.   Sun Ha Dep., p. 36 lines 4 – 8.

430.   Sun Ha Dep., p. 36 line 9 – p. 37 line 5.

431.   Sun Ha Dep., p. 37 line 6 – p. 38 line 11.

432.   Sun Ha Dep., p. 38 lines 12 – 17.

433.   Sun Ha Dep., p. 38 line 12 – p. 40 line 3.

434.   Sun Ha Dep., p. 40 lines 8 – 25.

435.   Sun Ha Dep., p. 41 lines 2 – 4.

436.   Sun Ha Dep., p. 41 lines 5 – 14.

437.   Sun Ha Dep., p. 41 lines 15 – 23.

438.   See Ex. 29.

439.   Sun Ha Dep., p. 41 line 24 – p. 42 line 17; Ex. 29.

440.   Sun Ha Dep., p. 42 lines 18 – 23.

441.   Sun Ha Dep., p. 42 line 24 – p. 43 line 9.

442.   Sun Ha Dep., p. 43 line 10 – p. 45 line 19. She testified that the precise amount of the refund generated by the 2017 IRS Form 1045 would have been $638,966 for the 2015 tax year, and $725,978 for the 2016 tax year, totaling $1,364,944. Sun Ha Dep., p. 44 line 15 – p. 45 line 19; see also Ex. 29.

443.   Sun Ha Dep., p. 45 lines 2 – 19.

444.   Sun Ha Dep., p. 45 line 10 – p. 47 line 7.

445.   Under Fed. R. Evid. 201, the Court takes judicial notice that the difference between the Deloitte inventory total ($8,581,288) and the 2017 income tax return inventory totals for TLC and Eachpole ($5,048,368) is $3,532,920.

446.   Sun Ha Dep., p. 50 line 5 – p. 52 line 16.

447.   Sun Ha Dep., p. 52 line 17 – p. 53 line 3.

448.   Sun Ha Dep., p. 53 lines 4 – 8.

449.   Sun Ha Dep., p. 53 line 14 – p. 54 line 15.

450.   Sun Ha Dep., p. 54 line 16 – p. 56 line 3.

451.   Sun Ha Dep., p. 56 line 12 – p. 60 line 1.

452.   Sun Ha Dep., p. 60 lines 2 – 10.

453.   Sun Ha Dep., p. 60 lines 2 – 10.

454.   Sun Ha Dep., p. 60 lines 11 – 22.

455.   Sun Ha Dep., p. 61 lines 1 – 13.

456.   Sun Ha Dep., p. 61 line 13 – p. 70 line 25.

457.   Sun Ha Dep., p. 71 lines 1 – 4.

459.   Ms. Moon Dep., p. 1. References to “Ms. Moon Dep.” are to Ms. Moon’s deposition transcript.

460.   Ms. Moon Dep., p. 8 lines 2 – 7.

461.   Ms. Moon Dep., p. 9 lines 8 – 20.

462.   Ms. Moon Dep., p. 9 line 22 – p. 10 line 5.

463.   Ms. Moon Dep., p. 10 lines 5 – 19.

464.   The subpoena indicates that her testimony was taken pursuant to FED. R. BANKR. P. 2004.

465.   Ms. Moon Dep., p. 11 line 2 – p. 12 line 23.

466.   Ms. Moon Dep., p. 14 lines 6 – 24.

467.   Ms. Moon Dep., p. 14 line 25 – p. 15 line 6.

468.   Ms. Moon Dep., p. 15 lines 9 – 12.

469.   Ms. Moon Dep., p. 15 line 13 – p. 16 line 2.

470.   Ms. Moon Dep., p. 15 lines 18 – 21.

471.   Ms. Moon Dep., p. 15 line 22 – p. 16 line 7.

472.   Ms. Moon Dep., p. 15 line 22 – p. 16 line 15.

473.   Ms. Moon Dep., p. 17 lines 2 – 18.

474.   Ms. Moon Dep., p. 17 lines 19 – 22.

475.   Ms. Moon Dep., p. 17 lines 23 – 25.

476.   Ms. Moon Dep., p. 18 lines 10 – 14.

477.   Ms. Moon Dep., p. 18 lines 15 – 21.

478.   Ms. Moon Dep., p. 18 line 22 – p. 20 line 2.

479.   Ms. Moon Dep., p. 20 lines 3 – 12.

480.   Ms. Moon Dep., p. 20 line 20 – p. 21 line 18.

481.   Ms. Moon Dep., p. 21 line 19 – p. 22 line 1.

482.   Ms. Moon Dep., p. 22 lines 2 – 3.

483.   Ms. Moon Dep., p. 22 lines 4 – 6.

484.   Ms. Moon Dep., p. 22 lines 7 – 20.

485.   Ms. Moon Dep., p. 22 lines 7 – 23.

486.   Ms. Moon Dep., p. 22 line 24 – p. 23 line 25.

487.   Ms. Moon Dep., p. 25 line 21 – p. 26 line 3.

488.   Hereafter “Ms. Jun.” Ms. Moon Dep., p. 25 line 21 – p. 27 line 16.

489.   Ms. Moon Dep., p. 25 line 21 – p. 27 line 16.

490.   Ms. Moon Dep., p. 27 lines 17 – 24.

491.   Ms. Moon Dep., p. 29 lines 3 – 6.

492.   Ms. Moon Dep., p. 29 line 7 – p. 30 line 22.

493.   Ms. Moon Dep., p. 30 lines 3 – 22.

494.   Ms. Moon Dep., p. 30 lines 23 – 25.

495.   Ms. Moon Dep., p. 31 lines 1 – 9.

496.   Ms. Moon Dep., p. 31 line 10 – p. 32 line 4.

497.   Ms. Moon Dep., p. 31 line 10 – p. 32 line 9.

498.   Ms. Moon Dep., p. 32 line 5 – p. 33 line 14.

499.   Ms. Moon Dep., p. 33 lines 15 – 23.

500.   Ms. Moon Dep., p. 33 line 15 – p. 34 line 13.

501.   Ms. Moon Dep., p. 33 line 15 – p. 34 line 16.

502.   Ms. Moon Dep., p. 34 line 24 – p. 35 line 15.

503.   Ms. Moon Dep., p. 35, line 16 – p. 36 line 1.

504.   Ms. Moon Dep., p. 36 lines 2 – 4.

505.   Ms. Moon Dep., p. 36 lines 5 – 22.

506.   Ms. Moon Dep., p. 37 line 1 – p. 38 line 6.

507.   Ms. Moon Dep., p. 38 line 13 – p. 39 line 17.

508.   Ms. Moon Dep., p. 41 lines 1 – 12.

509.   Ms. Moon Dep., p. 39 line 18 – p. 40 line 12.

510.   Ms. Moon Dep., p. 36 lines 23 – 25.

511.   Ms. Moon Dep., p. 40 lines 13 – 19.

512.   Ms. Moon Dep., p. 40 lines 20 – 25.

513.   Ms. Moon Dep., p. 41 lines 14 – 17.

514.   Ms. Moon Dep., p. 41 lines 18 – 21.

515.   Ms. Moon Dep., p. 41 lines 22 – 24.

516.   Ms. Moon Dep., p. 41 line 25 – p. 42 line 24.

517.   Ms. Moon Dep., p. 42 line 1 – p. 44 line 1.

518.   Ms. Moon Dep., p. 42 line 25 – p. 43 line 6.

519.   Ms. Moon Dep., p. 62 lines 2 – 7.

520.   Ms. Moon Dep., p. 44 lines 2 – 7.

521.   Ms. Moon Dep., p. 44 line 12 – p. 45 line 10.

522.   Ms. Moon Dep., p. 45 lines 12 – 24.

523.   Ms. Moon Dep., p. 45 line 25 – p. 46 line 8.

524.   Ms. Moon Dep., p. 46, lines 9 – 17.

525.   Ms. Moon Dep., p. 46, line 18 – p. 47 line 6.

526.   Ms. Moon Dep., p. 47 lines 7 – 12.

527.   Ms. Moon Dep., p. 47 line 13 – p. 48 line 14.

528.   Ms. Moon Dep., p. 48 lines 15 – 17.

529.   Ms. Moon Dep., p. 48 line 18 – p. 49 line 8.

530.   Ms. Moon Dep., p. 49 lines 9 – 11.

531.   Ms. Moon Dep., p. 49 line 12 – p. 50 line 8.

532.   Ms. Moon Dep., p. 50 lines 9 – 20.

533.   Ms. Moon Dep., p. 50 lines 21 – 25.

534.   Ms. Moon Dep., p. 51 lines 1 – 13.

535.   Ms. Moon Dep., p. 52 lines 9 – 11.

536.   Ms. Moon Dep., p. 52 lines 9 – 17.

537.   Ms. Moon Dep., p. 52 line 9 – p. 53 line 3.

538.   Ms. Moon Dep., p. 53 lines 4 – 13.

539.   Ms. Moon Dep., p. 54 lines 1 – 19; see Ex. 29.

540.   Ms. Moon Dep., p. 54 lines 1 – 19.

541.   Ms. Moon Dep., p. 54 line 1 – p. 55 line 2; see Ex. 29, Bates No. 29.0002.

542.   Ms. Moon Dep., p. 55 lines 3 – 13.

543.   Ms. Moon Dep., p. 56 lines 15 – 20.

544.   Ms. Moon Dep., p. 53 lines 20 – 22.

545.   Ms. Moon Dep., p. 53 lines 23 – 25.

546.   Ms. Moon Dep., p. 56 line 21 – p. 59 line 4.

547.   Ms. Moon Dep., p. 57 line 6 – p. 58 line 10.

548.   Ms. Moon Dep., p. 58 line 12 – p. 59 line 4.

549.   Ms. Moon Dep., p. 59 lines 6 – 17.

550.   Ms. Moon Dep., p. 59 line 18 – p. 60 Line 18.

551.   Ms. Moon Dep., p. 59 line 6 – p. 61 line 12.

552.   Ms. Moon Dep., p. 61 line 13 – 62 line 1.

553.   Ms. Moon Dep., p. 62 lines 8 – 11.

554.   Ms. Moon Dep., p. 62 line 16 – p. 63 line 8.

555.   Ms. Moon Dep., p. 63 line 9 – p. 64 line 10.

556.   Ms. Moon Dep., p. 63 line 9 – p. 64 line 10.

557.   Ms. Moon Dep., p. 64 line 11 – p. 65 line 12.

558.   Ms. Moon Dep., p. 65 lines 13 – 18.

559.   Ms. Moon Dep., p. 65 line 24 – p. 67 line 12.

560.   Ms. Moon Dep., p. 66 line 21 – p. 67 line 12

561.   Ms. Moon Dep., p. 67 line 17 – p. 70 line 18.

562.   Ms. Moon Dep., p. 70 line 24 – p. 71 line 4.

563.   Ex. 131.

564.   Ex. 8, Bates No. KROLL_eTop_002951.

565.   Ex. 131.

566.   Julius would later change its name to Eachpole.

567.   Ex. 35, Bates No. KROLL_eTop_003028.

568.   Ex. 35, Bates No. KROLL_eTop_003028.

569.   T.2, p. 143.

570.   The 2015 tax return shows an ordinary profit of $38,694.00 for Julius (Ex. 35, Bates No. KROLL_etop 003028) and $1,706,160.0 for TLC (Ex. 35, Bates No. KROLL_etop 003031). The profits were offset by the sizable losses in 2017 and 2018 to generate a sizable refund for the Kims in 2019.

571.   See Ex. 182.

572.   See Ex. 182.

573.   See Ex. 183.

574.   T.2, pp. 68, 86-87.

575.   T.2, p. 71.

576.   T.2, p. 71.

577.   T.1, p. 112 line 21 – p. 113 line 22.

578.   See generally Ex. 8, Bates No. KROLL_eTop_002946.

579.   Ex. 246, p. 5. TLC would later change its name to eTop Lighting Corporation on November 1, 2017 (Ex. 184, Bates No. 184.0058), and a Nevada corporation bearing the name eTop Lighting Corporation would be created on January 5, 2018 (Ex. 2, Bates No. L044566).

580.   Ex. 24; ECF No. 345, p. 3.

581.   Ex. 24.

582.   Ex. 24.

583.   Hereafter “IRS.”

584.   Hereafter “CFTB,” and collectively with the IRS, the “Taxing Authorities.”

585.   Ex. 264.

586.   Id.

587.   The Court takes judicial notice of the online records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

588.   ECF No. 199, p. 1.

589.   The Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding. Synguru Corp. was designed to emulate the functionality of Amazon's software. It proved to be largely unsuccessful. Synguru Corp. was eventually dissolved in June 2019. T.1, p. 110; T.3, p. 22-23, T.6, p. 30; Ex. 115, Bates No. L017510.

590.   See generally, Ex. 8, Bates Nos. KROLL_eTop_002950 – 003018 (TLC); Bates Nos. KROLL_eTop_003019 – 003027 (Julius).

591.   The Court takes judicial notice of the online records maintained by the Nevada Secretary of State pursuant to Fed. R. Evid. 201(b) and (c), in support of this finding.

592.   Ex. 23.

593.   ECF No. 345, p. 3; T.2, pp. 113-14.

594.   See Ex. 184, pp. 184.011 – 184.048.

595.   See Ex. 184, pp. 184.011 – 184.048.

596.   Ex. 184, p. 184.0047.

597.   Ex. 31.

598.   Ex. 31.

599.   Ex. 32.

600.   Ex. 32.

601.   Ex. 182.

602.   Ex. 264.

603.   Ex. 184.

604.   Ex. 31.

605.   Ex. 32.

606.   Ex. 182.

607.   Ex. 182.

608.   Ex. 31.

609.   Ex. 260, Bates Nos. 260.006 – 260.013.

610.   Ex. 260, Bates Nos. 260.006 and 260.010. It is noteworthy that Mr. Barrigan's email address in Ms. Wu's December 5, 2017, memorandum was “nicholas@etoplighting.com”. Ex. No. 260, Bates No. 260.006.

611.   Ex. 260, Bates No. 260.0006.

612.   Ex. 260, Bates No. 260.0011.

613.   Ex. 31.

614.   Ex. 2, Bates No. L044566.

615.   Ex. 2, Bates No. L044566.

616.   Ex. 2, Bates No. L044566.

617.   Ex. 259.

618.   Ex. 259, Bates No. KROLL_eTop_016168.

619.   Ex. 260, Bates Nos. 260.0014 – 260.0060.

620.   Ex. 260, Bates No. 260.0015, the “Hilco Inventory Report.”

621.   Ex. 260, Bates No. 260.0015.

622.   Ex. 260, Bates No. 260.0015.

623.   Ex. 260, Bates No. 260.0033.

624.   Ex. 260, Bates No. 260.0020.

625.   Ex. 260, Bates No. 260.0022.

626.   Ex. 260, Bates No. 260.0022.

627.   Ex. 260, Bates No. 260.0022.

628.   Ex. 9, hereafter the “Deloitte Audited Financials.”

629.   Ex. 9, Bates Nos. KROLL_eTop_001223 – 001224.

630.   Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226.

631.   Ex. 9, Bates No. KROLL_eTop_001229.

632.   Ex. 9, Bates No. KROLL_eTop_001230.

633.   Ex. 9, Bates Nos. KROLL_eTop_001230.

634.   Ex. 9, Bates Nos. KROLL_eTop_001235.

635.   Ex. 9, Bates Nos. KROLL_eTop_001235.

636.   Ex. 9, Bates Nos. KROLL_eTop_001235.

637.   Ex. 250.

638.   Ex. 250.

639.   Ex. 31.

640.   Ex. 2, Bates No. L044566.

641.   Ex. 250.

642.   Ex. 250.

643.   Ex. 250.

644.   Ex. 250.

645.   Ex. 19; hereafter the “Vitec Letter.”

646.   Ex. 19, Bates No. KROLL_eTop_011783.

647.   Ex. 256.

648.   Ex. 256, Bates No. KROLL_eTop_011783.

649.   For avoidance of any doubt, this is a reference to defendant Hyunjune.

650.   T.2, p. 90; T.5, p. 129.

651.   Sun Ha Dep., p. 20 line 11 – p. 21 line 5.

652.   Ex. 11. The return was prepared for signature by Misook as President of eTop Lighting Corporation. Ex. 11, Bates No. JWK000073.

653.   Ex. 10. The return was prepared for signature by Kim as President of Eachpole. Ex. 10, Bates No. JWK000004.

654.   Sun Ha Dep., p. 22 line 2 – p. 24 line 4.

655.   Ex. 115, p. L017520.

656.   Ex. 115, p. L017520.

657.   Ex. 115, p. L017520.

658.   Ex. 116, p. L026678.

659.   Ex. 116, p. L026678.

660.   Ex. 256, Bates No. KROLL_eTop_011787.

661.   T.4, p. 154 line 9 – p. 163 line 7.

662.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

663.   T.4, p. 158 line 9 – p. 159 line 4.

664.   Ex. 179, pp. L044401 – L044406.

665.   Ex. 179, pp. L044416 – L044421.

666.   Ex. 179, p. L044421.

667.   Ex. 179, p. L044406.

668.   Ex. 179, pp. L044421 and L044406.

669.   T.4, p. 148 line 24 – p. 152 line 9.

670.   T.5, p. 96.

671.   Ex. 179, pp. L044401 – L044406.

672.   Ex. 179, pp. L044416 – L044421.

673.   T.4, p. 144 line 14 – p. 145 line 8.

674.   T.4, p. 159 line 19 – p. 160 line 18.

675.   T.4, p. 159 line 19 – p. 160 line 18.

676.   Ex. 260, Bates Nos. 260.0014 – 260.0060.

677.   Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226.

678.   Ex. 250.

679.   T.5, pp. 25-26, 133-34, 158.

680.   T.7, p. 62, lines 17 – 19; Ex. F.

681.   Ex. 179, pp. L044401 – L044406.

682.   Ex. 179, pp. L044416 – L044421.

683.   Ex. 179, pp. L044401 – L044406.

684.   Ex. 179, pp. L044416 – L044421.

685.   Ex. 90.

686.   Ex. 90.

687.   Ex. 89, p. 89.0004.

688.   Ex. 179, pp. L044401 – L044406.

689.   Ex. 179, pp. L044416 – L044421.

690.   Ex. 89.

691.   T.4, p. 143 line 22 – p. 144 line 13.

692.   Ex. 115, p. L017520

693.   Ex. 90.

694.   See note 162, supra.

695.   T.4, p. 163 line 8 – p. 165 line 18.

696.   T.4, p. 163 line 8 – p. 165 line 18.

697.   Ex. 179, pp. L044401 – L044406.

698.   Ex. 179, pp. L044416 – L044421.

699.   T.4, p. 130 line 9 – p. 131 line 21; see also Ex. 48.

700.   T.2, pp. 152-54, 156, 160.

701.   T.4, p. 184.

702.   Ex. 179, pp. L044401 – L044406.

703.   Ex. 179, pp. L044416 – L044421.

704.   T.5, p. 77.

705.   T.5, p. 77.

706.   Ex. 29, Bates No. 29.0002; Sun Ha Dep., p. 41 line 24 – p. 45 line 19.

707.   See generally Ex. 93.

708.   Ex. 93.

709.   See generally Ex. 93.

710.   T.5, p. 97-98.

711.   Ex. 67 at pp. L045056-57, L040562-63, L046399; Ex. 70 at L046447-48, L046451-52.

712.   Ex. 68 at p. L046627.

713.   T.4, pp. 177-78.

714.   Ex. 115, Bates No. 017510.

715.   T.3, pp. 22-23; T6, p. 30; Ex. 115, Bates No. 017510. Pursuant to Fed. R. Evid. 201(b) and (c), the Court takes judicial notice of the online corporate records maintained by the Nevada Secretary of State and finds that the paperwork dissolving named defendant Synguru Corporation was filed with that office on July 17, 2019.

716.   Ex. 184, Bates No. 184.0058.

717.   Ex. 129.

718.   Ex. 179, pp. L044401 – L044406.

719.   Ex. 179, pp. L044416 – L044421.

720.   TLC Bankruptcy ECF No. 1, p. 1 of 52, Item 2.

721.   TLC Bankruptcy ECF No. 1, pp. 3 – 4 of 52, Items 13 – 16.

722.   TLC Bankruptcy ECF No. 1, p. 24 of 52.

723.   The page of Schedule A/B: Assets – Real and Personal Property containing this total is missing. See TLC Bankruptcy ECF No. 1, pp. 11 and 12 of 52. This $15,000.00 figure is reflected on the summary of assets. See TLC Bankruptcy ECF No. 1, p. 12 of 52, Part 12, Item 87.

724.   TLC Bankruptcy ECF No. 1, pp. 13 – 20 of 52.

725.   TLC Bankruptcy ECF No. 1, p. 22 of 52.

726.   TLC Bankruptcy ECF No. 1, p. 22 of 52.

727.   Ex. 179, pp. L044401 – L044406.

728.   TLC Bankruptcy ECF No. 1, p. 23 of 52.

729.   TLC Bankruptcy ECF No. 1, p. 25 of 52, Part 1, Item 1.

730.   TLC Bankruptcy ECF No. 1, p. 26 of 62, Part 2, Item 4.

731.   TLC Bankruptcy ECF No. 1, p. 27 of 52, Part 3, Item 7.1.

732.   TLC Bankruptcy ECF No. 1, p. 30 of 52, Part 6, Item 13.

733.   TLC Bankruptcy ECF No. 1, p. 30 of 52, Part 7, Item 14.

734.   TLC Bankruptcy ECF No. 1, p. 32 of 52, Part 10, Item 20.

735.   TLC Bankruptcy ECF No. 1, p. 36 of 52, Part 13, Item 27.

736.   TLC Bankruptcy ECF No. 1, p. 37 of 52, Part 13, Item 28.

737.   TLC Bankruptcy ECF No. 1, pp. 4, 38, 40, 44.

738.   TLC Bankruptcy ECF No. 33.

739.   See TLC Bankruptcy ECF No. 33, p. 8 of 40, Item 55.1 and ECF No. 33, p. 11 of 40.

740.   See TLC Bankruptcy ECF No. 33, p. 8 of 40, Item 55.1 and ECF No. 33, p. 11 of 40.

741.   See TLC Bankruptcy ECF No. 33, p. 8 of 40, Item 55.1 and ECF No. 33, p. 11 of 40.

742.   Compare TLC Bankruptcy ECF No. 33, pp. 12 – 15 of 40 with TLC Bankruptcy ECF No. 1, pp. 13 – 14 of 52.

743.   Compare TLC Bankruptcy ECF No. 33, pp. 12 – 15 of 40 with TLC Bankruptcy ECF No. 1, pp. 13 – 14 of 52.

744.   Compare TLC Bankruptcy ECF No. 1, pp. 15 – 20 of 52 with TLC Bankruptcy ECF No. 33, pp. 16 – 23 of 40.

745.   Compare TLC Bankruptcy ECF No. 1, p. 20 of 52 with TLC Bankruptcy ECF No. 33, p. 23 of 40.

746.   Compare TLC Bankruptcy ECF No. 1, p. 23 of 52 with TLC Bankruptcy ECF No. 33, p. 25 of 40.

747.   TLC Bankruptcy ECF No. 1, p. 30 of 52, Part 6, Item 13.

748.   Compare TLC Bankruptcy ECF No. 1, p. 30 of 52, Part 6 Item 13 with TLC Bankruptcy ECF No. 33, p. 31 of 40, Part 6, Item 13.1.

749.   TLC Bankruptcy ECF No. 33, p. 31 of 40, Part 6, Item 13.1.

750.   TLC Bankruptcy ECF No. 33, pp. 2 and 39 of 40.

751.   Eachpole Bankruptcy ECF No. 1, pp. 3 – 4 of 40, Items 13 – 16.

752.   Eachpole Bankruptcy ECF No. 1, p. 5 of 40.

753.   Eachpole Bankruptcy, pp. 6 – 13 of 40.

754.   See Eachpole Bankruptcy ECF No. 1, p. 11of 40, Item 55.1.

755.   Eachpole Bankruptcy ECF No. 1, pp. 14 – 19 of 40.

756.   Eachpole Bankruptcy ECF No. 1, p. 20 of 40.

757.   Ex. 179, pp. L044416 – L044421.

758.   Ex. 90.

759.   Ex. 89.

760.   See Eachpole Bankruptcy ECF No. 1, p. 20 of 40.

761.   Eachpole Bankruptcy ECF No. 1, p. 21 of 40.

762.   TLC Bankruptcy ECF No. 1, p. 22 of 52, Part 1, Item 1.

763.   Eachpole Bankruptcy ECF No. 1, p. 23 of 40, Part 2, Item 4.

764.   Eachpole Bankruptcy ECF No. 1, p. 242 of 40, Part 3, Item 7.1.

765.   Eachpole Bankruptcy ECF No. 1, p. 27 of 40, Part 7, Item 14.

766.   Eachpole Bankruptcy ECF No. 1, p. 30 of 40, Part 11, Item 21.

767.   Eachpole Bankruptcy ECF No. 1, p. 34 of 40, Part 13, Item 28.

768.   Eachpole Bankruptcy ECF No. 1, pp. 4, 35, and 36 of 40.

769.   TLC Bankruptcy Claims Register, Claim No. 7-1.

770.   Eachpole Bankruptcy Claims Register, Claim No. 3-1.

771.   TLC Bankruptcy ECF No. 129, the “TLC Sale Motion.”

772.   TLC Bankruptcy ECF No. 129.

773.   See TLC Bankruptcy ECF Nos. 129 – 140.

774.   TLC Bankruptcy ECF No. 140; the “TLC Sale Order.”

775.   Eachpole Bankruptcy ECF No. 41, the “Eachpole Sale Motion.”

776.   Eachpole Bankruptcy ECF No. 41.

777.   See Eachpole Bankruptcy ECF Nos. 41 – 47.

778.   Eachpole Bankruptcy ECF No. 47; the “Eachpole Sale Order.”

779.   ECF No. 1.

780.   ECF No. 4, the “TRO Motion”

781.   ECF No 4.

782.   ECF No. 8, the “TRO.”

783.   ECF Nos. 27 (as to LKimmy), 32 (as to Beauty, Synguru Corp., Kim, Misook, and Chris) and 36 (as to Andrew and Panchal).

784.   ECF No. 88, the “Contempt Motion.”

785.   ECF No. 88, 104, 107, and 122.

786.   ECF No. 101, 102, 103, 123, and 124.

787.   ECF No. 135.

788.   In re Il Kim and Misook Kim, Debtors, Ch. 7 No. 21-13245; the “Kim Bankruptcy.”

789.   Kim Bankruptcy ECF No. 1, p. 6 of 47, Part 6, Items 16 – 20.

790.   Kim Bankruptcy ECF No. 1, pp. 12 - 13 of 47.

791.   Kim Bankruptcy ECF No. 1, pp. 12 - 13 of 47.

792.   Kim Bankruptcy ECF No. 1, pp. 14 – 21 of 47.

793.   Kim Bankruptcy ECF No. 1, pp. 22 – 23 of 47.

794.   Kim Bankruptcy ECF No. 1, pp. 23 – 26 of 47.

795.   Kim Bankruptcy ECF No. 1, pp. 27 – 28 of 47.

796.   Kim Bankruptcy ECF No. 1, pp. 29 – 30 of 47.

797.   Kim Bankruptcy ECF No. 1, pp. 31 – 32 of 47.

798.   Kim Bankruptcy ECF No. 1, p. 35 of 47, Part 2, Item 4.

799.   Kim Bankruptcy ECF No. 1, p. 35 of 47, Part 2, Item 4.

800.   Kim Bankruptcy ECF No. 1, p. 35 of 47, Part 2, Item 4.

801.   Kim Bankruptcy ECF No. 1, p. 35 of 47, Part 2, Item 5.

802.   Kim Bankruptcy ECF No. 1, pp. 36 – 37 of 47, Part 4, Item 9.

803.   Kim Bankruptcy ECF No. 1, p. 36 of 47, Part 4, Item 9.

804.   Kim Bankruptcy ECF No. 1, p. 36 of 47, Part 4, Item 9. The Court takes judicial notice of the docket maintained by the United States District Court for the District of Nevada in Civil Case No. 2-20-cv-02184 under Fed. R. Bankr. P. 201(b) and (c), and notes that the case was later remanded to state court by order dated March 16, 2022; see ECF No. 61 in that case.

805.   Kim Bankruptcy ECF No. 1, p. 37 of 47, Part 4, Item 9.

806.   Kim Bankruptcy ECF No. 1, p. 39 of 47, Part 7, Item 18.

807.   Kim Bankruptcy ECF No. 1, p. 39 of 47, Part 7, Item 18.

808.   Kim Bankruptcy ECF No. 1, pp. 40 – 41 of 47, Part 11, Item 27.

809.   Kim Bankruptcy ECF No. 1, pp. 6, 33, and 41 of 47.

810.   That adversary proceeding is styled Linco, Inc., a California corporation, Plaintiff, v. Il Kim and Misook Kim; DOES I through X, inclusive; and ROE Entities XI through XX, inclusive, Defendants, Adv. No. 21-01219-nmc, hereafter the “Kim Discharge Adversary.”

811.   See Kim Discharge Adversary ECF No. 1. The Kim Discharge Adversary is still pending.

812.   Kim Bankruptcy ECF No. 113.

813.   Kim Bankruptcy ECF No. 122.

814.   Kim Bankruptcy ECF No. 124.

815.   Kim Bankruptcy ECF Nos. 125 and 126.

816.   Kim Bankruptcy ECF Nos. 142, Hon. Natalie M. Cox, presiding.

817.   Kim Bankruptcy ECF No. 142. The order did not grant relief from the automatic stay as to Count 23 (turnover) or Count 25 (injunction) as it related to Kim and Misook. It lifted the automatic stay to a limited extent to allow Linco to obtain “an adjudication in the Adversary Case as to whether the Kims are personally liable for the [sic] Linco's $1,042,648,84 judgment against [TLC]” but not “to permit substantive consolidation of the Kim Bankruptcy estate, or its assets, with any other entity, estate, company, or person.” Id. Subsequently, on August 9, 2022, this Court granted summary judgment denying Linco's substantive consolidation claim in this adversary proceeding. ECF No. 297.

818.   ECF No. 199.

819.   ECF Nos. 212 and 216.

820.   ECF No. 232 and 252.

821.   ECF No. 255.

822.   ECF No. 297.

823.   ECF No. 297.

824.   ECF Nos. 260 and 279.

825.   ECF No. 290.

826.   ECF No. 301 and 302; the “Kim Motion to Compel.”

827.   T.7, p. 78 line 6 – p. 89 line 8; T.8, p. 4 line 2 – p. 7 line 22.

828.   ECF No. 313.

829.   T.8, p. 4 line 2 – p. 7 line 22.

830.   T.8, p. 4 line 20 – p. 36 line 20.

831.   ECF Nos. 314 – 321.

832.   ECF Nos. 341 – 347.

833.   Exec. Benefits Ins. Agency v. Arkison, 573 U.S. 25, 33 (2014) (emphasis added).

834.   See Marshall v. Stern (In re Marshall), 600 F.3d 1037, 1055-56 (9th Cir. 2010) (“We agree with Pierce Marshall that our case law presents a two-step approach. A bankruptcy judge may only determine a claim that meets Congress’ definition of a core proceeding and arises under or arises in title 11.”) (citation omitted), aff'd sub. nom. Stern v. Marshall, 564 U.S. 462 (2011); see also 28 U.S.C. §§ 157(b)(1), (b)(2), and (c)(1).

835.   Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124, 1131 (9th Cir. 2010); see also Piombo Corp. v. Castlerock Props. (In re Castlerock Props.), 781 F.2d 159, 161 (9th Cir. 1986) (“28 U.S.C. § 157(b)(2), which enumerates the proceedings designated as “core,” consists of two ‘catch-all’ provisions, § 157(b)(2)(A) and (O), and a list of more specific provisions, § 157(b)(2)(B)-(N).”) (internal citation omitted).

836.   See Table 1, Claim Category 8.

837.   See Table 1, Claim Categories 1, 2, 5, 6, and 11.

838.   Breach of fiduciary duty, conversion, conspiracy of conversion, substantive consolidation, injunctive relief, and successor liability; see Table 1, Claim Categories 3, 4, 7, 9, 10, and 12.

839.   See In re Top Lighting Corporation, Ch. 7 Case No. 20-01130, at ECF No. 140; In re Eachpole, Inc., Ch. 7 Case no. 20-10956, at ECF No. 47.

840.   Certain Underwriters at Lloyds v. GACN, Inc. (In re GACN, Inc.), 555 B.R. 684, 692–93 (9th Cir. BAP 2016), appeal dismissed, 2017 WL 4513499 (9th Cir. May 10, 2017), citing Wilshire Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire Courtyard),729 F.3d 1279, 1285 (9th Cir. 2013).

841.   Wilshire Courtyard,729 F.3d at 1285, quoting Sasson v. Sokoloff (In re Sasson), 424 F.3d 864, 868 (9th Cir. 2005), cert. denied, 547 U.S. 1206 (2006); GACN, Inc., 555 B.R. at 692–93 (citing Wilshire Courtyard).

842.   Wilshire Courtyard, 729 F.3d at 1285; Sasson, 424 F.3d at 868; GACN, Inc., 555 B.R. 692-93.

843.   Exec. Benefits, 573 U.S. at 34.

844.   SAC, ECF No. 199, pp. 11 – 18 of 39, para. 73 – 142.

845.   Dale v. Maney (In re Dale), 505 B.R. 8, 11 (9th Cir. BAP 2014), citing Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004).

846.   Rainsdon v. Garcia (In re Garcia), 465 B.R. 181, 190–91 (Bankr. D. Idaho 2011), citing Jordan v. Kroneberger (In re Jordan), 392 B.R. 428, 440, 447 (Bankr. D. Idaho 2008) (other internal citations omitted); Hasse v. Rainsdon (In re Pringle), 495 B.R. 447, 462 – 463 (9th Cir. BAP 2013).

847.   Section 101(54)(D); see also Jordan, 392 B.R. at 440, citing BFP v. Resol. Tr. Corp., 511 U.S. 531, 535 (1994) (noting that the Supreme Court decision in BFP “recognizes the applicability of § 101(54) to constructively fraudulent transfer assertions under § 548.”).

848.   Samson v. W. Cap. Partners, LLC (In re Blixseth), 514 B.R. 871, 881 (D. Mont. 2014), rev'd on other grounds, 679 Fed. App'x 611 (9th Cir.), cert. denied, 583 U.S. 916 (2017), citing Butner v. United States, 440 U.S. 48, 54–55 (1979).

849.   See, e.g., Krommenhoek v. Nat. Res. Recovery, Inc. (In re Treasure Valley Opportunities, Inc.), 166 B.R. 701, 704 (Bankr. D. Idaho 1994).

850.   Jordan, 392 B.R. at 440, quoting 11 U.S.C. § 548(d)(1).

851.   11 U.S.C. § 548(d)(2)(A); Jordan, 392 B.R. at 441, citing Wyle v. C.H. Rider & Fam. (In re United Energy Corp.), 944 F.2d 589, 595 (9th Cir. 1991).

852.   Jordan, 392 B.R. at 441, citing Pummill v. Greensfelder, Hemker & Gale (In re Richards & Conover Steel Co.), 267 B.R. 602, 612 (8th Cir. BAP 2001) (other internal citations omitted).

853.   Jordan, 392 B.R. at 442.

854.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC v. Campbell Soup Co., 482 F.3d 624, 631 (3d Cir. 2007), and Lindquist v. JNG Corp. (In re Lindell), 334 B.R. 249, 255-56 (Bankr. D. Minn. 2005) (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

855.   Jordan, 392 B.R. at 442, citing Kendall v. Carbaat (In re Carbaat), 357 B.R. 553, 560 (Bankr. N.D. Cal. 2006), and BFP, 511 U.S. at 540 n. 4 (the Supreme Court noting that “[o]ur discussion assumes that the phrase ‘reasonably equivalent’ means ‘approximately equivalent’ or ‘roughly equivalent.’ ”).

856.   Jordan, 392 B.R. at 441, citing Hopkins v. D.L. Evans Bank (In re Fox Bean Co.), 287 B.R. 270, 281 (Bankr. D. Idaho 2002) and Frontier Bank v. Brown (In re N. Merch., Inc.), 371 F.3d 1056, 1059 (9th Cir. 2004) (noting that the “primary focus ․ is on the net effect of the transaction on the debtor's estate and the funds available to the unsecured creditors.”) (other citations omitted).

857.   Jordan, 392 B.R. at 441, citing BFP, 511 U.S. at 546, and Treasure Valley, 166 B.R. at 704 (other citations omitted).

858.   11 U.S.C. § 101(32)(A).

859.   Akers v. Koubourlis (In re Koubourlis), 869 F.2d 1319, 1321 (9th Cir. 1989).

860.   Gugino v. Kerstein (In re Miller), 536 B.R. 863, 869 (Bankr. D. Idaho 2015) (citations omitted).

861.   Blixseth, 514 B.R. at 881 (citations omitted).

862.   Blixseth, 514 B.R. at 881.

863.   SAC, p. 7 of 39, para. 42.

864.   SAC, pp. 11 – 12 of 39, para. 73 – 82.

865.   Ex. 264; Ex. 111, Bates No. JWK000052-53; Ex. 3.

866.   Ex. 264.

867.   A significant benefit derived from making a Subchapter S election is to allow the relevant corporation and its shareholders to avoid double taxation on corporate income. See, e.g., Pahl v. Commissioner, 150 F.3d 1124, 1125 (9th Cir. 1998) (noting that a law firm “had been organized two years earlier as a Subchapter S corporation, which has the feature of paying no taxes and instead passing through profits and losses pro rata to its shareholders.”); Kelley v. Commissioner, 877 F.2d 756, 758 (9th Cir. 1989) (observing that “with certain exceptions an S corporation does not pay taxes. Instead, it files an informational return, and its shareholders pay taxes on its income.”) see generally https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations

868.   Ex. 8, Bates No. KROLL_eTop_002951.

869.   Ex. 11, Bates No. JWK000073.

870.   Ex. 102, Bates No. L046871.

871.   As Ms. Moon explained in her deposition testimony, when a company (TLC) pays the personal tax liabilities of a shareholder (Kim), the result is income to the shareholder, both at the federal level and in California. Ms. Moon Dep., p. 59 line 18 – p. 60 Line 18.

872.   Ex. 8, Bates Nos. KROLL_eTop_2976 – 2976

873.   Ex. 8, Bates Nos. KROLL_eTop_2976 – 2976.

874.   Ex. 11, Bates Nos. JWK000079.

875.   Ex. 29; see also Sun Ha Dep., p. 43 line 10 – p. 45 line 19. Sun Ha testified that the precise amount of the refund generated by the 2017 IRS Form 1045 would have been $638,966 for the 2015 tax year, and $725,978 for the 2016 tax year, totaling $1,364,944. Sun Ha Dep., p. 44 line 15 – p. 45 line 19. It should be noted that questions asked of Sun Ha incorrectly suggested that the refund sought by Kim and Misook for the 2016 tax year was “$725,978” while the 2017 IRS Form 1045 itself shows that the refund requested for the 2016 tax year was “$725,798.” Compare Ex. 29, Bates No. 29.0002, line 32 with Sun Ha Dep., p. 44 line 23 and p. 45 line 17. The correct amount of the refund generated by the 2017 IRS Form 1045 is $638,966 for the 2015 tax year, and $725, 798 for the 2016 tax year, totaling $1,364,764.

876.   Ex. 102, Bates No. L046877.

877.   Ex. 102, Bates Nos. L046871 and L046877.

878.   See Valentino v. Franchise Tax Bd., 105 Cal. Rptr. 2d 304, 306 - 307, 87 Cal. App. 4th 1284, 1288 - 1289 (Cal. Ct. App. 2001) (providing a historical overview of the treatment of Subchapter S corporations under federal and California tax laws, and observing that “[o]ne notable difference between federal and California law regarding the treatment of S corporations is that under the former, with certain exceptions not relevant here, S corporations do not pay federal income tax (26 U.S.C. § 1363(a); 26 C.F.R. § 1.1363–1 (1993)), while under California law a state tax is imposed upon the net income of the reporting S corporation (§ 23802, subds.(a), (b)(1)). (Heller v. Franchise Tax Bd., supra, 21 Cal. App. 4th at p. 1734, 27 Cal. Rptr. 2d 88.).”).

879.   Id.; see also https://www.ftb.ca.gov/file/business/types/corporations/s-corporations.html.

880.   Ex. 8, Bates Nos. KROLL_eTop_002981 – 003017; hereafter the “2016 California Return.”

881.   Ex. 8, Bates No. KROLL_eTop_003010.

882.   Ex. 8, Bates No. KROLL_eTop_003006.

883.   Ex. 8, Bates Nos. KROLL_eTop_002982 and 003014 – 003017.

884.   Ex. 22, Bates Nos. JWK000088 – JWK000120; hereafter the “2017 California Return.”

885.   Ex. 22, Bates No. JWK000096.

886.   Ex. 22, Bates No. JWK000090.

887.   Ex. 102, Bates No. L046905 – L046933; hereafter the “2018 California Return.”

888.   Ex. 102, Bates No. L046916.

889.   Ex. 102, Bates No. L046906.

890.   Ex. 22, Bates No. JWK000090.

891.   Ex. 102, Bates No. L046906.

892.   Ex. 8, Bates No. KROLL_eTop_002956.

893.   Ex. 11, Bates No. JWK000076.

894.   Ex. 102, Bates No. L046874.

895.   Ex. 184.

896.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction increased TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

897.   Ex. 264.

898.   Id. The Court notes that the $1,015,000.00 total TLC paid to the taxing authorities during 2018 equates to 35.17% of the $2,886,053.00 amount by which TLC was insolvent under the balance sheet test at the end of 2018.

899.   Ex. 264.

900.   Abele v. Mod. Fin. Plans Servs., Inc. (In re Cohen), 300 F.3d 1097, 1101 - 1102 (9th Cir. 2002) (citing 11 U.S.C. §§ 550(a)(1) and (2)); Danning v. Miller (In re Bullion Rsrv. of N. Am.) 922 F.2d 544 (noting that “Section 550(a)(1) authorizes the trustee to recover from the ‘initial transferee’ or ‘the entity for whose benefit such transfer was made.’ ”).

901.   Bullion Rsrv., 922 F.2d at 548.

902.   Bullion Rsrv., 922 F.2d at 547, quoting Merill v. Dietz (In re Universal Clearing House Co.), 62 B.R. 118, 128 n. 12 (D. Utah 1986).

903.   Bullion Rsrv., 922 F.2d at 547.

904.   Cohen, 300 F. 3d at 1102, citing Schafer v. Las Vegas Hilton Corp. (In re Video Depot), 127 F.3d 1195, 1197–98 (9th Cir.1997) and 11 U.S.C. § 550(b).

905.   Ex. 264.

906.   As noted previously, a Subchapter S corporation generally does not pay taxes. It instead files informational returns “and its shareholders pay taxes on its income.” Kelley v. Commissioner, 877 F.2d at 758.

907.   Off. Comm. of Unsecured Creditors v. Nilson (In re Woodside Grp., LLC), 427 B.R. 817, 827 - 829 (Bankr. C.D. Cal. 2010) (noting that “[a]s a qualified subchapter S corporation, Woodside Group was a ‘pass through’ entity for income tax purposes; i.e., the income and losses of the corporation were attributed directly to its shareholders” such that a $500 million loss generated by a restructuring transaction in 2008 permitted “shareholders to secure the write-down, apply their portions of the write-down to taxable income recognized in 2006 and 2007, and to receive state and federal tax refunds collectively exceeding $110 million.”). The tax scenario in Woodside Group is analogous to the tax scenario present in this case.

908.   Ex. 22, Bates No. JWK000096.

909.   Ex. 102, Bates No. L046877.

910.   As Panchal credibly testified, Kim “was the lead person. You - - you could not move a chair without [Kim's] approval. [Kim] ran the show, and he employed capable - - what he thought were capable people in different places.” T.1, p. 109, lines 1 – 21.

911.   See Ex. 11, Bates Nos. JWK000079 (showing an ordinary business loss from TLC's 2017 operations passed through to Kim in the amount of <-$3,403,861.00>) and Ex. 102, Bates Nos. L046871 and L046877 (showing an ordinary business loss from TLC's 2018 operations that passed through to Kim in the amount of <-$2,398,222.00>).

912.   Ex. 264.

913.   Ex. 29. The correct amount of the refund generated by the 2017 IRS Form 1045 is $638,966 for the 2015 tax year, and $725, 798 for the 2016 tax year, totaling $1,364,764.

914.   Ms. Moon Dep., p. 52 lines 9 – 17.

915.   Henry v. Off. Comm. of Unsecured Creditors (In re Walldesign, Inc.), 872 F.3d 954, 964 (9th Cir. 2017), cert. denied sub. nom. Henry v. Weiss, 584 U.S. 1001 (2018), citing Sklar v. Susquehanna Bank (In re Glob. Prot. USA, Inc.), 546 B.R. 586, 624 (Bankr. D.N.J. 2016).

916.   Bullion Rsrv., 922 F.2d at 547.

917.   See Ex. 22, Bates No. JWK000096 and Ex. 102, Bates No. L046877 (reflecting that Kim owned 100% of TLC's stock in 2017 and 2018).

918.   SAC, ECF No. 199, p. 8 of 39, para. 43.

919.   SAC, ECF No. 199, p. 13 of 39, para. 87.

920.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1; T.3, p. 117 line 25 – p. 119 line 11; T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

921.   SAC, ECF No. 199, p. 8 of 39, para. 43; p. 20 of 39, para. 157.

922.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1. T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 84 line 2.

923.   T.4, p. 53 lines 2 – 15; T.4, p. 54 line 20 – p. 59 line 24; T.4, p. 82 line 12 – p. 84 line 2.

924.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631, and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

925.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

926.   SAC, ECF No. 199, p. 13 of 39, para. 87.

927.   T.4, p. 58 line 10 – p. 59 line 21.

928.   T.4, p. 58 line 10 – p. 59 line 21.

929.   SAC, ECF No. 199, p. 8 of 39, para. 44. Exhibit 6 contains the statements showing the relevant payments from TLC's corporate account at Chase Bank ending in 1610.

930.   SAC, ECF No. 199, p. 14 of 39, para. 100.

931.   See Ex. 6; T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1; T.3, p. 117 line 25 – p. 119 line 11; T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

932.   See Ex. 6; SAC, ECF No. 199, p. 8 of 39, para. 44.

933.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1.

934.   T.4, p. 53 line 2 – p. 56 line 24; T.4, p. 82 line 12 – p. 84 line 2.

935.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

936.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

937.   See Ex. 6; SAC, ECF No. 199, p. 8 of 39, para. 44; p. 14 of 39, para. 97.

938.   See Ex. 6.

939.   The SAC alleged that the credit card payments referenced in the Third Claim for Relief amounted to “some portion of $629,292.83.” SAC, ECF 199, p. 8 of 39, para. 44. The expert report prepared by Mr. Bertsch, Linco's expert witness, as support for the Third Claim for Relief was not admitted into evidence at trial.

940.   SAC, ECF No. 199, p. 8 of 39, para. 45.

941.   SAC, ECF No. 199, p. 115 of 39, para. 110.

942.   See Ex. 7; T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1; T.3, p. 117 line 25 – p. 119 line 11; T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

943.   See Ex. 7; SAC, ECF No. 199, p. 8 of 39, para. 45.

944.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1. T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

945.   T.4, p. 53 line 2 – p. 56 line 24; T.4, p. 82 line 12 – p. 84 line 2.

946.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

947.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

948.   See Ex. 7; SAC, ECF No. 199, p. 8 of 39, para. 45.

949.   See Ex. 7.

950.   The SAC alleged that the credit card payments referenced in the Fourth Claim for Relief amounted to “some portion of $117,034.44.” SAC, ECF 199, p. 8 of 39, para. 45. The expert report prepared by Mr. Bertsch, Linco's expert witness, as support for the Fourth Claim for Relief was not admitted into evidence at trial.

951.   The outbound international wire transfers to China referenced in the Fifth Claim for Relief pled in the SAC were alleged to have been made from two separate corporate accounts maintained by TLC at BofA. Linco alleged in the Fifth Claim for Relief that between December 11, 2018, and June 24, 2019, TLC made outbound wire transfers from its BofA corporate account ending in 8850 to China totaling $3,069,606.40. Linco further alleged that between November 26, 2018 and May 20, 2019, TLC made outbound wire transfers from its BofA corporate account ending in 5743 to China totaling another $424,741.64. In summary, in the Fifth Claim for Relief, Linco alleged that between November 26, 2018 and June 24, 2019, TLC made outbound wires from its BofA corporate accounts ending in 8850 and 5743 totaling $3,494,348.04 “without receiving anything of value in exchange.” See SAC, ECF 199, p. 8 of 39, para. 46 – 48 and pp. 15 – 16 of 39, para. 115 – 121; see also Ex. 128, Bates No. 128.0017.

952.   Ex. 188. The preponderance of the evidence showed that between November 20, 2018, and May 20, 2019, TLC made 18 outbound international wire transfers to China from TLC's corporate account at BofA ending in 5743 totaling $586,545.63. See Ex. 188, Bates Nos. L001979 – L001980, L001396 – L001397, and L001411. The preponderance of the evidence further revealed that between December 11, 2018, and June 24, 2019, TLC made 50 outbound international wire transfers to China from TLC's corporate account at BofA ending in 8850 totaling $3,069,606.40. See Ex. 188, Bates Nos. L049338, L001533 – L001536, L001843 – L001844, L002063 – L002064, L001542 – L001543, L001851 – L001852, L002071 – L002072, and L001856 – L001857. In summary, the 68 outbound international wire transfers to China from TLC's corporate BofA accounts ending in 5743 and 8850 made between November 20, 2018, and June 24, 2019, totaled $3,656,152.03. See Ex. 188.

953.   SLC, ECF No. 199, p. 8 of 39, para. 46.

954.   ECF No. 343, pp. 99 – 100 of 150; see generally Ex. 188.

955.   See generally ECF No. 188.

956.   Ex. 188.

957.   T2, p. 117 line 12 – p. 118 line 5; p. 125 line 1 – p. 126 l. 6.

958.   T2, p. 125 line 1 – p. 126 l. 6.

959.   T7, p. 23 line 23 – p. 24 line 4; p. 68 lines 8 – 24.

960.   T7p. 68 lines 8 – 19.

961.   T7, p. 68 line 25 – p. 69 line 10.

962.   Ex. 188.

963.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

964.   Ex. 188.

965.   Ex. 188.

966.   Ex. 188.

967.   Ex. 188.

968.   Cohen, 300 F.3d at 1101 - 02 (citing 11 U.S.C. §§ 550(a)(1) and (2)); Bullion Rsrv., 922 F.2d at 547 (noting that “Section 550(a)(1) authorizes the trustee to recover from the ‘initial transferee’ or ‘the entity for whose benefit such transfer was made.’ ”).

969.   Bullion Rsrv., 922 F.2d at 547.

970.   Ex. 188.

971.   See generally, In re Zetta Jet USA, Inc., 2024 WL 3198826 (C.D. Cal. March 26, 2024).

972.   Zetta Jet, 2024 WL 3198826 at *25, quoting RJR Nabisco, Inc. v. Eur. Cmty., 579 U.S. 325, 335 (2016) (quoting Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 454 (2007)).

973.   Zetta Jet, 2024 WL 3198826 at *25, quoting RJR Nabisco, 579 U.S. at 335 (citing Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 255 (2010)).

974.   Zetta Jet, 2024 WL 3198826 at *25, quoting RJR Nabisco, 579 U.S. at 335 (citing Morrison, 561 U.S. at 261).

975.   Zetta Jet, 2024 WL 3198826 at *25, quoting RJR Nabisco, 579 U.S. at 335 (citing Morrison, 561 U.S. at 255).

976.   Zetta Jet, 2024 WL 3198826 at *25, citing RJR Nabisco, 579 U.S. at 340.

977.   Zetta Jet, 2024 WL 3198826 at *25.

978.   Zetta Jet, 2024 WL 3198826 at *26 – 33.

979.   Zetta Jet, 2024 WL 3198826 at *28.

980.   Zetta Jet, 2024 WL 3198826 at *28.

981.   Zetta Jet, 2024 WL 3198826 at *28 – 31.

982.   The complete citation to the Picard case is In re Picard, 917 F.3d 85 (2d Cir. 2019), cert. denied, ___ U.S. ___, 140 S. Ct. 2824 (2020).

983.   Zetta Jet, 2024 WL 3198826 at *28, citing Off. Comm. of Unsecured Creditors v. Bahrain Islamic Bank (In re Arcapita Bank B.S.C.(C)), 575 B.R. 229, 244 (Bankr. S.D.N.Y. 2017), aff'd sub nom. Bahrain Islamic Bank v. Arcapita Bank B.S.C.(C) (In re Arcapita Bank B.S.C.(C)), 640 B.R. 604 (S.D.N.Y. 2022).

984.   Zetta Jet, 2024 WL 3198826 at *29, citing Picard, 917 F.3d at 100.

985.   Zetta Jet, 2024 WL 3198826 at *29, citing Picard, 917 F.3d at 100.

986.   Zetta Jet, 2024 WL 3198826 at *29, citing Picard, 917 F.3d at 99 n. 9.

987.   SAC, ECF No. 199, p. 6 of 39.

988.   ECF No. 1.

989.   ECF No. 96, p. 1 of 4.

990.   ECF No. 126.

991.   ECF No. 150.

992.   ECF No. 170.

993.   ECF No. 170.

994.   SAC, ECF No. 199.

995.   Ex. 188.

996.   Ex. 188.

997.   ECF Nos. 1 – 296. The Court notes that Chinese entities can be served through the Hague Convention.

998.   Nelson v. Adams USA, Inc., 529 U.S. 460, 467 (2000).

999.   Bullion Rsrv., 922 F.2d at 547.

1000.   Nelson, 529 U.S. at 468.

1001.   Nelson, 529 U.S. at 466, citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (“ ‘The fundamental requisite of due process of law is the opportunity to be heard.’ ”), quoting Grannis v. Ordean, 234 U.S. 385, 394 (1914).

1002.   Ex. 115, p. L017520.

1003.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

1004.   T.4, p. 144 line 14 – p. 145 line 8; T.4, p. 159 line 19 – p. 160 line 18.

1005.   Ex. 115, p. L017520.

1006.   T.4, p. 159 line 19 – p. 160 line 18.

1007.   T.4, p. 159 line 19 – p. 160 line 18.

1008.   Ex. 62, Invoice Nos. D9611 (Bates Nos. LKimmy 000075 – 000090); D9612 (Bates Nos. LKimmy 000026 – 000048); D9613 (Bates Nos. LKimmy 000006 – 000025); D9614 (Bates Nos. LKimmy 000001 – 000005); D9615 (Bates Nos. LKimmy 000058 – 000074); D9616 (Bates Nos. LKimmy 000049 – 000057); D9617 (Bates Nos. LKimmy 000111 – 000122); D9618 (Bates Nos. LKimmy 000123 – 146); D9619 (Bates Nos. LKimmy 000093 – 000110); and D9620 (Bates Nos. LKimmy 000091 – 000092). The Court notes that Invoice No. D9620 wasn't issued to LKimmy until May 30, 2019.

1009.   Ex. 62, Bates Nos. L019299, ; see alsoT.5, pp. 25-26, 133-34, 158.

1010.   T.5, p. 25 line 15 – p. 26 line 6; T.7, p. 46 line 22 – p. 47 line 5.

1011.   Ex. 86, Bates No. 86.0005 at Line 1b; Ex. 87, Bates No. 87.0005 at Line 1b.

1012.   Ex. 87, Bates No. 87.0041 at Statement 3.

1013.   Ex. 87, Bates No. 87.0029, Schedule R-1, Line 1.

1014.   Per the Hilco Inventory Report ($8,100,000.00; Ex. 260, Bates Nos. 260.0014 – 260.0060), the Deloitte Audited Financials ($8,581,288.00; Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226), and the BofA Borrowing Base Certificate ($8,277,849.00; Ex. 250).

1015.   TLC Bankruptcy ECF No. 33.

1016.   Exhibit F.

1017.   Ex. F.

1018.   Ex. F; T.7, p. 62, lines 17 – 19.

1019.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

1020.   Ex. 115, p. L017520.

1021.   Ex. 115, p. L017520.

1022.   Per the Hilco Inventory Report ($8,100,000.00; Ex. 260, Bates Nos. 260.0014 – 260.0060), the Deloitte Audited Financials ($8,581,288.00; Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226), and the BofA Borrowing Base Certificate ($8,277,849.00; Ex. 250).

1023.   TLC Bankruptcy ECF No. 33.

1024.   Ex. F.

1025.   Bullion Rsrv., 922 F.2d at 547.

1026.   Ex. 179, pp. L044416 – L044421.

1027.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing trademarks “LimoStudio” and “Julius Studio.” See Ex. 179, p. L044416.

1028.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing internet Market IDs “KimOutlet,” “Eachpole,” and “Hoully.” See Ex. 179, p. L044416.

1029.   See Eachpole License, Ex. 179, p. L044416, Section II.1.a.

1030.   Notably, the Seventh Claim for Relief pled in the SAC seeks only to avoid and recover the value of the transfer under the Eachpole License as constructively fraudulent under Sections 548 and 550. It does not state a claim to avoid and recover the value of the transfer under the separate TLC License as constructively fraudulent under Sections 548 and 550. See SAC, ECF 199, p. 10 of 39, para. 63 – 66 and p. 17 of 39, para. 133 – 142.

1031.   Ex. 179, p. L044421.

1032.   Ex. 179, p. L044421.

1033.   Ex. 179, pp. L044416 – L044421.

1034.   Ex. 115, p. L017520.

1035.   Ex. 179, pp. L044416 – L044421.

1036.   T.5, p. 152 line 23 – p. 153 line 3; T.5, p. 165 line 23 – p. 166 line 2; T.7, p. 31 line 10 – p. 32 line 4. The Court is mindful that LKimmy's $70,542.00 payment to Eachpole is exactly equal to the amount due from LKimmy to Eachpole under the Eachpole License. Compare Ex. 179, Bates No. L044416, para. 1(a) with Ex. B.2, Bates No. LKimmy001651. The Court also notes that LKimmy's payment to Eachpole was made on December 6, 2018, the same day that the Donovan Way Sublease was executed by Eachpole and LKimmy. The Donovan Way Sublease does contain a “building installing and remodeling in-house office space” charge payable by LKimmy to Eachpole of $70,542.00 - - the exact same amount due from LKimmy to Eachpole under the Eachpole License. Compare Ex. 89, Bates No. 89.0001, para. 1.5. But the Donovan Way Sublease did not specify that the build out amount was due on signing, and Hyunjune testified credibly that the contemplated buildout at the Donovan Way Property never actually happened. T.5, p. 150 lines 8 – 25. The Court concludes that the preponderance of the evidence established that the $70,542.00 payment made by LKimmy to Eachpole on December 6, 2018, was in satisfaction of the amount due under the Eachpole License, as the use of Eachpole's existing trademarks and Market IDs was essential to LKimmy's business operations.

1037.   T.3, p. 96 line 6 – p. 101 line 3.

1038.   Rule 702 was amended after trial, effective December 1, 2023, in two respects: (1) to clarify that expert testimony may not be admitted unless the proponent demonstrates to the court that it is more likely than not that the proffered testimony satisfies the requirements of the rule; and (2) to emphasize that each expert opinion must stay within the bounds of what can be concluded from a reliable application of the expert's basis and methodology. See Fed. R. Evid. 702 advisory committee note to 2023 amendments.

1039.   T.3, p. 45, line 18 – p. 46 line 2.

1040.   In re Smitty Inv. Grp., LLC, 2008 WL 3095523 *8 (Bankr. D. Idaho May 16, 2008), citing Kumho Tire Co. v. Carmichael, 526 U.S. 137, 148 (1999) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592 (1993)).

1041.   T.3, p. 96 line 6 – p. 98 line 17.

1042.   T.3, p. 96 line 6 – p. 101 line 3.

1043.   T.4, p. 31 line 16 – p. 39 line 12.

1044.   See T.4, p. 38 line 9 – p. 39 line 12.

1045.   Fed. R. Evid. 1011(a) and (b).

1046.   Smitty, 2008 WL 2095523 at *8, citing Daubert, 509 U.S. at 580, and Kumho Tire, 526 U.S. at 141 – 42.

1047.   Smitty, 2008 WL 2095523 at *9 (citing cases).

1048.   Smitty, 2008 WL 2095523 at *9.

1049.   Smitty, 2008 WL 2095523 at *10 (quoting Fed. R. Evid. 702 advisory committee note to 2000 amendments).

1050.   Smitty, 2008 WL 2095523 at *10.

1051.   T.3, p. 45, line 18 – p. 46 line 2.

1052.   T.4, p. 31 line 16 – p. 39 line 12.

1053.   Smitty, 2008 WL 2095523 at *11, quoting Lippe, 288 B.R. at 686.

1054.   Smitty, 2008 WL 2095523 at *10, citing Lippe v. Bairnco Corp., 288 B.R. 678, 686 (S.D.N.Y. 2003), aff'd, 99 Fed App'x 274 (2d Cir. 2004) (quoting Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)). The Smitty court added that “Ipse dixit literally translated is ‘he himself spoke’ or, more figuratively phrased, ‘because I said so.’ It connotes an assertion made but not proven. As the Advisory Committee Notes to the 2000 amendments to Federal Rule of Evidence 702 state: ‘The trial court's gatekeeping function requires more than simply ‘taking the expert's word for it.’ See Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1319 (9th Cir.1995) (‘We've been presented with only the experts' qualifications, their conclusions, and their assurances of reliability. Under Daubert, that's not enough.’).” Smitty, 2008 WL 2095523 at *10 n. 25.

1055.   The Court notes that there was no objection to Mr. Bertsch's opinion testimony at trial. But as the Smitty court explained, “lack of objection does not preclude the Court from considering the adequacy of the testimony under Federal Rule of Evidence 702 and, acting as gatekeeper, excluding such testimony.” Smitty, 2008 WL 2095523 at *11, citing In re Salem, 465 F.3d 767, 777 (7th Cir. 2006) (noting the differences in approach to the gatekeeper function in bench trials, and concluding that, if the court is the fact-finder, it does not err by admitting the evidence subject to the ability to later exclude it or disregard it if it turns out not to meet the standard of reliability established by Federal Rule of Evidence 702).

1056.   Ex. 101, p. L014620, Bates No. L014620, line 15.

1057.   Eachpole Bankruptcy ECF No. 1, p. 5 of 40.

1058.   Ex. 179, pp. L044416 – L044421.

1059.   Ex. 179, p. L044421.

1060.   Ex. 179, p. L044421.

1061.   Ex. 179, pp. L044416 – L044421.

1062.   SAC, ECF No. 199, pp. 18 – 26 of 39, para. 143 – 212.

1063.   Dale, 505 B.R. at 11; Lamie, 540 U.S. at 534.

1064.   Pringle, 495 B.R. at 462 – 463 (citations omitted); see also Pac. Links U.S. Holdings, Inc. v. Tianjin Dinghui Hongjun Equity Inv. P'ship (In re Pac. Links U.S. Holdings, Inc.), 644 B.R. 197, 206–07 (Bankr. D. Haw. 2022), aff'd, 2023 WL 4586476 (9th Cir. BAP July 18, 2023); Off. Comm. of Unsecured Creditors v. Hancock Park Cap. II, L.P. (In re Fitness Holdings Int'l, Inc.), 714 F.3d 1141, 1145 n. 5 (9th Cir. 2013).

1065.   Pac. Links, 644 B.R. at 208.

1066.   Pac. Links, 644 B.R. at 208 n. 6, citing Garcia, 465 B.R. at 191 and Gowan v. The Patriot Group, LLC (In re Dreier LLP), 452 B.R. 391, 436 (Bankr. S.D.N.Y. 2011) (other internal citations omitted).

1067.   Pac. Links, 644 B.R. at 209 (citations omitted).

1068.   Pac. Links, 644 B.R. at 209 n. 13 and 14, citing Moody v. Sec. Pac. Bus. Credit, Inc., 971 F.2d 1056, 1070 & n. 22 (3d Cir. 1992) and Solution Tr. v. 2100 Grand LLC (In re AWTR Liquidation Inc.), 548 B.R. 300, 312-13 (Bankr. C.D. Cal. 2016) (other citations omitted).

1069.   Pac. Links, 644 B.R. at 209, citing Moody, 971 F.2d at 1070 – 72 & n. 24.

1070.   Ex. 264.

1071.   Ex. 184.

1072.   Ex. 264.

1073.   Ex. 11, Bates No. JWK000073, line 21.

1074.   Ex. 102, Bates No. L046871, line 21.

1075.   Ex. 264.

1076.   Ex. 29.

1077.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1078.   See generally Ex. 93.

1079.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1080.   Ex. 62.

1081.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1082.   TLC Bankruptcy ECF 1, p. 13 of 52.

1083.   TLC Bankruptcy ECF 33, p. 23 of 40.

1084.   Ex. 264.

1085.   Pac. Links, 644 B.R. at 209.

1086.   Specifically, the business of transferring substantially all of TLC's operating assets to LKimmy after having failed to sell TLC and Eachpole for a price acceptable to Kim.

1087.   Specifically, transactions resulting in the transfer of $1,160,325.96 to the Taxing Authorities without any substantive benefit to TLC, a Subchapter S corporation.

1088.   Walldesign, 872 F.3d at 964, citing Glob. Prot. USA, Inc., 546 B.R. at 624.

1089.   Bullion Rsrv., 922 F.2d at 547.

1090.   For clarity and avoidance of any doubt, while the overpayments to the taxing authorities are avoided under both Section 548(a)(1)(B)(ii)(I) and Section 548(a)(1)(B)(ii)(II), and the avoided transfers to the Taxing Authorities under both of those sections are recoverable from Kim under Section 550(a)(1), Linco is entitled to only a single satisfaction under Section 550(a)(1). See 11 U.S.C. § 550(d) (“The trustee is entitled to only a single satisfaction under subsection (a) of this section.”).

1091.   See Ex. 22, Bates No. JWK000096 and Ex. 102, Bates No. L046877 (reflecting that Kim owned 100% of TLC's stock in 2017 and 2018).

1092.   SAC, ECF 199, p. 20 of 39, para. 157.

1093.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

1094.   T.4, p. 53 lines 2 – 15; T.4, p. 54 line 20 – p. 59 line 24; T.4, p. 82 line 12 – p. 84 line 2.

1095.   Ex. 184.

1096.   SAC, ECF 199, p. 20 of 39, para. 157.

1097.   Ex. 264.

1098.   Ex. 29.

1099.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1100.   See generally Ex. 93.

1101.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1102.   Ex. 62.

1103.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1104.   TLC Bankruptcy ECF 1, p. 13 of 52.

1105.   TLC Bankruptcy ECF 33, p. 23 of 40.

1106.   Pac. Links, 644 B.R. at 209.

1107.   Ex. 6; SAC, ECF No. 199, p. 21 of 39, para. 166.

1108.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

1109.   T.4, p. 53 line 2 – p. 56 line 24; T.4, p. 82 line 12 – p. 84 line 2.

1110.   Ex. 184.

1111.   Ex. 6; SAC, ECF No. 199, p. 21 of 39, para. 166.

1112.   Ex. 264.

1113.   Ex. 29.

1114.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1115.   See generally Ex. 93.

1116.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1117.   Ex. 62.

1118.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1119.   TLC Bankruptcy ECF 1, p. 13 of 52.

1120.   TLC Bankruptcy ECF 33, p. 23 of 40.

1121.   Pac. Links, 644 B.R. at 209.

1122.   Ex. 7; SAC, ECF 199, p. 22 of 39, para. 177.

1123.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

1124.   T.4, p. 53 line 2 – p. 56 line 24; T.4, p. 82 line 12 – p. 84 line 2.

1125.   Ex. 184.

1126.   Ex. 7; SAC, ECF 199, p. 22 of 39, para. 177.

1127.   Ex. 264.

1128.   Ex. 29.

1129.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1130.   See generally Ex. 93.

1131.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1132.   Ex. 62.

1133.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1134.   TLC Bankruptcy ECF 1, p. 13 of 52.

1135.   TLC Bankruptcy ECF 33, p. 23 of 40.

1136.   Pac. Links, 644 B.R. at 209.

1137.   See generally ECF No. 188.

1138.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

1139.   Ex. 184.

1140.   Ex. 188.

1141.   Ex. 264.

1142.   Ex. 29.

1143.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1144.   See generally Ex. 93.

1145.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1146.   Ex. 62.

1147.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1148.   TLC Bankruptcy ECF 1, p. 13 of 52.

1149.   TLC Bankruptcy ECF 33, p. 23 of 40.

1150.   Pac. Links, 644 B.R. at 209.

1151.   Ex. 188.

1152.   SAC, ECF No. 199, p. 6 of 39.

1153.   ECF No. 1.

1154.   ECF No. 96, p. 1 of 4.

1155.   ECF No. 126.

1156.   ECF No. 150.

1157.   ECF No. 170.

1158.   ECF No. 170.

1159.   SAC, ECF No. 199.

1160.   Ex. 188.

1161.   Ex. 188.

1162.   ECF Nos. 1 – 296. The Court notes that Chinese entities can be served through the Hague Convention.

1163.   Nelson, 529 U.S. at 467 (2000).

1164.   Bullion Rsrv., 922 F.2d at 547.

1165.   Nelson, 529 U.S. at 468.

1166.   Nelson, 529 U.S. at 466, citing Mullane, 339 U.S. at 314 (“ ‘The fundamental requisite of due process of law is the opportunity to be heard.’ ”), quoting Grannis, 234 U.S. at 394.

1167.   Ex. 115, p. L017520.

1168.   Jordan, 392 B.R. at 441 – 442, citing VFB LLC, 482 F.3d at 631 (3d Cir. 2007), and Lindell, 334 B.R. at 255-56 (observing that a “determination of reasonably equivalent value is fundamentally one of common sense, measured against market reality.”).

1169.   Ex. 184.

1170.   T.7, p. 24 line 7 – p. 25 line 14; Ex. 189.

1171.   Ex. 264.

1172.   Ex. 29.

1173.   TLC's 2017 tax return showed year end capital stock valued at $31,323.00 against gross sales of $24,344,295.00. Ex. 11, Bates Nos. JWK000076 lines 22 – 23 and JWK000073 line 1c. TLC's 2018 tax return showed year end capital stock valued at $81,323.00 against gross sales of $19,736,885. Ex.102, Bates Nos. L046874 lines 22 – 23 and L046871 line 1c. The value of TLC's capital stock at year end 2017 totaled .129% of gross sales, and at year end 2018 totaled .412% of gross sales.

1174.   See generally Ex. 93.

1175.   Specifically, under the TLC License, LKimmy was granted the right to use TLC's existing internet Market IDs “Lightingsaving,” “Savingtosaving,” and “Ememexit.” See Ex. 179, p. L044401.

1176.   TLC Bankruptcy ECF 1, p. 13 of 52.

1177.   TLC Bankruptcy ECF 33, p. 23 of 40.

1178.   Pac. Links, 644 B.R. at 209.

1179.   Ex. 62.

1180.   Per the Hilco Inventory Report ($8,100,000.00; Ex. 260, Bates Nos. 260.0022), the Deloitte Audited Financials ($8,581,288.00; Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226), and the BofA Borrowing Base Certificate ($8,277,849.00; Ex. 250).

1181.   TLC Bankruptcy ECF No. 33.

1182.   Ex. F.

1183.   Bullion Rsrv., 922 F.2d at 547.

1184.   For clarity and avoidance of any doubt, while TLC's inventory transfers to LKimmy are avoided under both Section 548(a)(1)(B)(ii)(I) and Section 548(a)(1)(B)(ii)(II), and the avoided transfers under both of those sections are recoverable from LKimmy as the initial transferee under Section 550(a)(1), Linco is entitled to only a single satisfaction under Section 550(a)(1). See 11 U.S.C. § 550(d) (“The trustee is entitled to only a single satisfaction under subsection (a) of this section.”).

1185.   Ex. 179, pp. L044416 – L044421.

1186.   Ex. 115, p. L017520.

1187.   Ex. 179, pp. L044416 – L044421.

1188.   Ex. 101, p. L014620, Bates No. L014620, lines 3, 15 and 18.

1189.   Ex. 101, p. L014620, Bates No. L014620, line 22. During 2018, though, Eachpole reported gross sales of $28,202,210.00. Ex. 101, p. L014620, Bates No. L014617, line 1a.

1190.   Ex. 179, pp. L044416 – L044421.

1191.   Eachpole Bankruptcy ECF No. 1, p. 5 of 40.

1192.   ECF No. 199, pp. 26 – 28, para. 213 – 231.

1193.   ECF No. 199, pp. 28 – 30, para. 232 – 250.

1194.   HP Tuners, LLC v. Cannata, 2019 WL 3848792 at * 3 (D. Nev. Aug. 15, 2019) (citations omitted).

1195.   Ex. 131, 31, 184, Bates No. 184.0058.

1196.   Ex. 35, Bates No. KROLL_eTop_003028; Ex. 32.

1197.   Cousin v. Sharp Healthcare, 681 F. Supp. 3d 1117, 1124 – 25 (S.D. Cal. 2023) (citation omitted)). The elements of a breach of fiduciary duty claim under California law and Nevada law are exactly the same. See Mission Healthcare Servs., LLC v. Battle Born Home Health, LLC, 2023 WL 5507764 *10 (D. Nev. Aug. 25, 2023) (noting that under Nevada law a “claim for breach of fiduciary duty customarily has three elements: (1) existence of a fiduciary duty, (2) breach of the duty, and (3) damages as a result of the breach.”), citing Guzman v. Johnson, 137 Nev. 126, 132, 483 P.3d 521, 538 (2021).

1198.   MH Pillars Ltd. v. Realini, 277 F. Supp. 3d 1077, 1095 (N.D. Cal. 2017), citing Yamauchi v. Cotterman, 84 F. Supp. 3d 993, 1016 (N.D. Cal. 2015); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445, 80 Cal. Rptr. 2d 329 (1998).

1199.   Petro-Diamond, Inc. v. SCB & Assocs., LLC, 122 F. Supp. 3d 949, 958 (C.D. Cal. 2015).

1200.   MH Pillars, 84 F. Supp. 3d at 1095 – 96.

1201.   Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 345, 49 Cal. Rptr. 825, 838 – 39, 411 P.2d 921, 934 - 35 (1966).

1202.   See 1975 Cal. Stat. c. 682, § 6.

1203.   Berg & Berg Enterprises, LLC v. Boyle, 178 Cal. App. 4th 1020, 1037, 100 Cal. Rptr. 3d 875, 890 (2009), citing Cal. Corp. Code § 309(a).

1204.   Pepper v. Litton, 308 U.S. 295, 307 (1939).

1205.   CarrAmerica Realty Corp. v. NVIDIA Corp., 2006 WL 2868979 at *5 (N.D. Cal. 2006), aff'd in part and rev'd in part on other grounds, 302 Fed. App'x 514 (9th Cir. 2008), cert. denied sub. nom. Carlyle Fortran Tr. v. NVIDIA Corp., 558 U.S. 816 (2009).

1206.   Tatung Co. v. Hsu, 2015 WL 11089493 at * 19 (C.D. Cal. Oct. 22, 2015), quoting Scouler & Co. v. Schwartz, 2012 WL 1502762 at *5 (N.D. Cal. April 23, 2012); see also Swimmer v. Moeller (In re Moeller), 466 B.R. 525, 532 (Bankr. S.D. Cal. 2012) (noting the long-standing legal principle that “corporate officers and directors generally occupy a fiduciary relationship only towards their corporation and shareholders, but [․] in the event of insolvency, the fiduciary relationship is modified to expand or shift the duty to include the corporation's creditors[,]” and citing Credit Lyonnais Bank Nederland, N.V. v. Pathe Comms. Corp., 1991 WL 277613 (Del. Ch. Dec. 30, 1991)).

1207.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1208.   CarrAmerica, 2006 WL 2868979 at *6, citing Steinberg v. Kendig (In re Ben Franklin Retail Stores, Inc.), 225 B.R. 646, 655 (Bankr. N.D. Ill. 1998) (quoting Laura Lin, Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of Directors' Duty of Creditors, 46 Vand. L. Rev. 1485, 1512 (1993)); Bank of Am. v. Musselman, 222 F. Supp. 2d 792 (E.D. Va. 2002); and Helm Financial Corp. v. MNVA R.R., 212 F.3d 1076, 1081 (8th Cir. 2000).

1209.   More particularly, Kim owned 100% of TLC's shares at the end of calendar years 2017 and 2018. See Ex. 11, Bates Nos. JWK000079; Ex. 102, Bates No. L046877.

1210.   As Panchal credibly testified, Kim “[W]as the lead person. You - - you could not move a chair without [Kim's] approval. [Kim] ran the show, and he employed capable - - what he thought were capable people in different places.” T.1, p. 109, lines 1 – 21.

1211.   Ex. 2, Bates No. L044565.

1212.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

1213.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1214.   Pepper v. Litton, 308 U.S. at 307.

1215.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1216.   Ex. 2, Bates No. L044566. The document is signed only by Kim.

1217.   T.1, p. 111 line 25 – p. 112 line 16.

1218.   Bancroft-Whitney, 64 Cal. 2d at 345, 49 Cal. Rptr. at 838 – 39, 411 P.2d at 934 - 35.

1219.   Ex. 2, Bates No. L044565. The document is signed only by Kim.

1220.   T.1, p. 111 line 25 – p. 112 line 16.

1221.   Bancroft-Whitney, 64 Cal. 2d at 345, 49 Cal. Rptr. at 838 – 39, 411 P.2d at 934 - 35.

1222.   Ex. 28, Bates No. L050442.

1223.   See note 80, supra.

1224.   T.2, pp. 8 - 9

1225.   T.2, p. 9

1226.   T.2, p.149; Ex. 48. The organizational chart was prepared by Andrew.

1227.   Ex. 259, Bates No. KROLL_eTop_016168.

1228.   Ex. 260.

1229.   Ex. 260, Bates No. 260.0015.

1230.   Ex. 262, Bates No. 262.0013.

1231.   Ex. 250.

1232.   See Ex. 19 and Ex. 256.

1233.   Ex. 256, Bates No. KROLL_eTop_011787.

1234.   T.1, p. 160; T.5, pp.127-128.

1235.   If TLC hadn't taken out the $3 million BofA Loan in late September 2017, TLC would have remained solvent under the balance sheet test. But for the $3 million BofA Loan, TLC's 2017 year-end total liabilities would have been $3,917,898.00, and its 2017 year-end total assets of $6,763,894.00 would have exceeded its liabilities by $2,845,996.00. But the BofA Loan transaction did in fact increase TLC's liabilities by $3 million, rendering TLC insolvent by $154,004.00 as of September 20, 2017.

1236.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1237.   Bancroft-Whitney, 64 Cal. 2d at 345, 49 Cal. Rptr. at 838 – 39, 411 P.2d at 934 - 35.

1238.   Bancroft-Whitney, 64 Cal. 2d at 345, 49 Cal. Rptr. at 838 – 39, 411 P.2d at 934 - 35.

1239.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1240.   CarrAmerica, 2006 WL 2868979 at *6, citing Ben Franklin Retail Stores, 225 B.R. at 655 (quoting Laura Lin, Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of Directors' Duty of Creditors, 46 Vand. L. Rev. 1485, 1512 (1993)); Bank of Am. v. Musselman, 222 F. Supp. 2d 792 (E.D. Va. 2002); and Helm Financial, 212 F.3d at 1081.

1241.   T.2, p. 116.

1242.   T.2, p. 123. There is no evidence to the contrary in the absence of any deposition or trial testimony from Kim.

1243.   T.2, p. 20 line 19 – p. 21 line 1.

1244.   The timing of the invoices indicates that Kim waited until after Panchal's departure to make the transfer of TLC's inventory assets to LKimmy, thereby avoiding any potential for objection by Panchal. See Ex. 62, Invoice Nos. D9611, dated November 20, 2018 (Bates Nos. LKimmy 000075 – 000090); D9612, dated December 3, 2018 (Bates Nos. LKimmy 000026 – 000048); D9613, dated December 11, 2018 (Bates Nos. LKimmy 000006 – 000025); D9614, dated December 14, 2018 (Bates Nos. LKimmy 000001 – 000005); D9615, dated December 19, 2018 (Bates Nos. LKimmy 000058 – 000074); D9616, dated December 20, 2018 (Bates Nos. LKimmy 000049 – 000057); D9617, dated December 20, 2018 (Bates Nos. LKimmy 000111 – 000122); D9618, dated January 7, 2019 (Bates Nos. LKimmy 000123 – 146); D9619, dated January 17, 2019 (Bates Nos. LKimmy 000093 – 000110); and D9620 dated May 30, 2019 (Bates Nos. LKimmy 000091 – 000092).

1245.   Ex. 28, Bates No. L050443.

1246.   Ex. 28, Bates No. L050443.

1247.   Ex. 32.

1248.   Ex. 32.

1249.   Ex. 10, Bates No. JWK000010.

1250.   Eachpole Petition, p. 34. More particularly, Statement of Financial Affairs Part 13, Question 28 reads: “List the debtor's officers, directors, managing members, general partners, members in control, controlling shareholders, or other people in control of the debtor at the time of the filing of this case.” Kim is the only person identified in response to that question.

1251.   Ex. 101, p. L014620, Bates No. L014620, line 15.

1252.   Pepper v. Litton, 308 U.S. at 307.

1253.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1254.   Ex. 28, Bates No. L050443.

1255.   Ex. 32.

1256.   Ex. 10, Bates No. JWK000010.

1257.   Eachpole Petition, p. 34.

1258.   Ex. 28, Bates No. L050443.

1259.   Ex. 28, Bates No. L050443.

1260.   Ex. 10, Bates No. JWK000010.

1261.   Eachpole Petition, p. 34.

1262.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1263.   Bancroft-Whitney, 64 Cal. 2d at 345, 49 Cal. Rptr. at 838 – 39, 411 P.2d at 934 - 35.

1264.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1265.   CarrAmerica, 2006 WL 2868979 at *6, citing Ben Franklin Retail Stores, 225 B.R. at 655 (quoting Laura Lin, Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of Directors' Duty of Creditors, 46 Vand. L. Rev. 1485, 1512 (1993)); Bank of Am. v. Musselman, 222 F. Supp. 2d 792 (E.D. Va. 2002); and Helm Financial, 212 F.3d at 1081.

1266.   This is unsurprising. TLC had historically purchased all inventory from China, then allocated inventory to Eachpole based on the internet sales platform used to sell the inventory.

1267.   CarrAmerica, 2006 WL 2868979 at *5 – 6.

1268.   Petro-Diamond, 122 F Supp. 3d at 958 (noting that the absence of any one element of a breach of fiduciary duty claim “is fatal to a plaintiff's cause of action” under California law).

1269.   Id.

1270.   Id.

1271.   SAC, ECF No. 199, pp. 30 – 31 of 39, para. 251 – 268.

1272.   SAC, ECF No. 199, p. 30 of 39, para. 251 – 256.

1273.   SAC, ECF No. 199, pp. 30 – 31 of 39, para. 257 – 262.

1274.   SAC, ECF No. 199, p. 31 of 39, para. 263 – 268.

1275.   HP Tuners, 2019 WL 3848792 at * 3 (citations omitted).

1276.   HP Tuners, 2019 WL 3848792 at * 3, quoting RESTATEMENT (SECOND) OF CONFLICTS OF LAW § 309.

1277.   Ex. 131.

1278.   Ex. 115, Bates No. L017520.

1279.   Haas v. Travelex Ins. Servs., Inc., 555 F. Supp. 3d 970, 982 (C.D. Cal. 2021). Conversion has a similar definition under Nevada law: “[A] distinct act of dominion wrongfully exerted over another's personal property in denial of, or inconsistent with his title or rights therein or in derogation, exclusion, or defiance of such title or rights.” Watkins v. Rapid Fin. Sols., Inc., 2024 WL 3938537 *11 (D. Nev. Aug. 26, 2024), citing M.C. Multi-Fam. Dev., L.L.C. v. Crestdale Assocs., Ltd., 124 Nev. 901, 193 P.3d 536, 542 (Nev. 2008).

1280.   Nguyen v. Stephens Inst., 529 F. Supp. 3d 1047, 1057 – 58 (N.D. Cal. 2021), quoting Lee v. Hanley, 61 Cal. 4th 1225, 1240, 191 Cal. Rptr. 3d 536, 354 P.3d 334 (2015) (internal quotation marks omitted). The elements a plaintiff must prove to prevail on a conversion claim under Nevada law are similar: “(1) the defendant committed a distinct act of dominion wrongfully exerted over the plaintiff's personal property; (2) the act was in denial of or inconsistent with the plaintiff's title or rights to the property; and (3) the act was in derogation, exclusion, or defiance of the plaintiff's title or rights in the personal property.” Dunham Tr. Co. v. Wells Fargo Bank, N.A., 2019 WL 489095 at *6 (D. Nev. Feb. 7, 2019).

1281.   See Ex. 104, 105, 188, and 264.

1282.   Ex. 11, Bates No. JWK000073; Ex. 102, Bates No. L046871.

1283.   Ex. 22, Bates No. JWK000090; Ex. 102, Bates No. L046906.

1284.   Ex. 264.

1285.   As Panchal credibly testified, Kim “was the lead person. You - - you could not move a chair without [Kim's] approval. [Kim] ran the show, and he employed capable - - what he thought were capable people in different places.” T.1, p. 109, lines 1 – 21.

1286.   See Ex. 11, Bates Nos. JWK000079 (showing an ordinary business loss from TLC's 2017 operations passed through to Kim in the amount of <-$3,403,861.00>) and Ex. 102, Bates Nos. L046871 and L046877 (showing an ordinary business loss from TLC's 2018 operations that passed through to Kim in the amount of <-$2,398,222.00>).

1287.   Ex. 264.

1288.   Ex. 29. The correct amount of the refund generated by the 2017 IRS Form 1045 is $638,966 for the 2015 tax year, and $725, 798 for the 2016 tax year, totaling $1,364,764.

1289.   Ms. Moon Dep., p. 52 lines 9 – 17.

1290.   See Ex. 264. Damages for conversion under California law are not limited to the two year look-back period applicable to actions seeking to avoid and recover fraudulent transfers under Sections 548(a)(1) and 550(a).

1291.   See Ex. 104, 105, 188, and 264.

1292.   Ex. 11, Bates No. JWK000073; Ex. 102, Bates No. L046871.

1293.   Ex. 22, Bates No. JWK000090; Ex. 102, Bates No. L046906.

1294.   See Ex. 22, Bates No. JWK000096 and Ex. 102, Bates No. L046877 (reflecting that Kim owned 100% of TLC's stock in 2017 and 2018).

1295.   See Ex. 104, 105, 188, and 264.

1296.   Ex. 6.

1297.   The Court has previously analyzed these payments in resolving Claims 2 – 4 and 9 – 13, and that analysis is incorporated here by this reference.

1298.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1. T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

1299.   T2, p. 117 line 12 – p. 118 line 5; p. 125 line 1 – p. 126 l. 6.

1300.   T7, p. 23 line 23 – p. 24 line 4; p. 68 lines 8 – 24.

1301.   T7p. 68 lines 8 – 19.

1302.   T7, p. 68 line 25 – p. 69 line 10.

1303.   Ex. 115, p. L017520.

1304.   Per the Hilco Inventory Report ($8,100,000.00; Ex. 260, Bates Nos. 260.0014 – 260.0060), the Deloitte Audited Financials ($8,581,288.00; Ex. 9, Bates Nos. KROLL_eTop_001225 – 001226), and the BofA Borrowing Base Certificate ($8,277,849.00; Ex. 250).

1305.   TLC Bankruptcy ECF No. 33.

1306.   Ex. F.

1307.   SAC, ECF No. 199, pp. 31 – 33 of 39, para. 269 – 280.

1308.   Ajzenman v. Off. of the Comm'r of Baseball, 487 F. Supp. 3d 861, 867 (C.D. Cal. 2020), quoting Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-11, 28 Cal. Rptr. 2d 475, 869 P.2d 454 (1994).

1309.   Ajzenman, 487 F. Supp. 3d at 869, n. 2 (noting in a motion to dismiss context that if the “Plaintiffs choose to amend their complaint, civil conspiracy should not be stated as its own claim for relief[.]”), citing Applied Equip., 7 Cal. 4th at 510-11, 28 Cal. Rptr. 2d at 478, 869 P.2d at 457.

1310.   Ajzenman, 487 F. Supp. 3d at 867, quoting Kidron v. Movie Acquisition Corp, 40 Cal. App. 4th 1571, 1581, 47 Cal. Rptr. 2d 752, 757-58 (1995). Under Nevada law, a conspiracy is “a combination of two or more persons who, by some concerted action, intend to accomplish an unlawful objective for the purpose of harming another, and damage results from the act or acts.” Motogolf.com, LLC v. Top Shelf Golf, LLC, 528 F. Supp. 3d 1168, 1180 (D. Nev. 2021), citing Sutherland v. Gross, 105 Nev. 192, 196, 772 P.2d 1287, 1290 (1989).

1311.   Ajzenman, 487 F. Supp. 3d at 867, quoting Craigslist Inc. v. 3Taps Inc., 942 F. Supp. 2d 962, 981 (N.D. Cal. 2013) (citing Kidron, 40 Cal. App. 4th at 1583, 47 Cal. Rptr. 2d at 758-59).

1312.   Avoidance due to TLC's insolvency at the time the transfers to the Taxing Authorities occurred.

1313.   Avoidance due to TLC's unreasonably small capital at the time the transfers to the Taxing Authorities occurred.

1314.   Ajzenman, 487 F. Supp. 3d at 867, quoting Kidron, 40 Cal. App. 4th at 1581, 47 Cal. Rptr. 2d at 757-58. Under Nevada law, a conspiracy is “a combination of two or more persons who, by some concerted action, intend to accomplish an unlawful objective for the purpose of harming another, and damage results from the act or acts.” Motogolf.com, 528 F. Supp. 3d at 1180, citing Sutherland, 105 Nev. at 196-97, 772 P.2d at 1290.

1315.   See Ex. 22, Bates No. JWK000096 and Ex. 102, Bates No. L046877 (reflecting that Kim owned 100% of TLC's stock in 2017 and 2018).

1316.   The Court is mindful that Misook subsequently participated in a series of loans made to LKimmy totaling $703,000.00. But the focus of the conspiracy claims in the Twentieth and Twenty-First Claims for Relief is on whether substantial evidence established that Misook first entered into an arrangement with Kim to cause TLC to make the overpayments to the Taxing Authorities while TLC was insolvent and/or had inadequate capital. Substantial evidence in that regard is lacking, particularly in the absence of deposition or trial testimony from Kim or Misook. The fact that loans were later made to LKimmy by Misook does not, in and of itself, establish wrongful conduct by Misook.

1317.   Ajzenman, 487 F. Supp. 3d at 867, quoting Kidron, 40 Cal. App. 4th at 1581, 47 Cal. Rptr. 2d at 757-58.

1318.   See Ex. 22, Bates No. JWK000096 and Ex. 102, Bates No. L046877 (reflecting that Kim owned 100% of TLC's stock in 2017 and 2018).

1319.   The Court is mindful that Misook subsequently participated in a series of loans made to LKimmy totaling $703,000.00. But the focus of the conspiracy claim in the Twenty-Second Claim for Relief is on whether substantial evidence established that Misook first entered into an arrangement with Kim to convert TLC's assets by making the overpayments to the Taxing Authorities. Substantial evidence in that regard is lacking, particularly in the absence of deposition or trial testimony from Kim or Misook. The fact that loans were later made to LKimmy by Misook does not, in and of itself, establish wrongful conduct by Misook.

1320.   SAC, ECF No. 199, pp. 33 of 39, para. 281 – 285.

1321.   Dale, 505 B.R. at 11; Lamie, 540 U.S. at 534.

1322.   Process Am., Inc. v. Cynergy Holdings, LLC (In re Process Am., Inc.), 588 B.R. 82, 98 (Bankr. C.D. Cal. 2018); see also SVB Fin. Grp. v. Fed. Deposit Ins. Corp., 2024 WL 3745009 *10 (N.D. Cal. Aug. 8, 2024), quoting Pereira v. Brown (In re Brown), 2022 WL 4390454 * 20 (Bankr. S.D.N.Y. Sept. 22, 2022) (other internal citation omitted).

1323.   SAC, ECF No. 199, p. 3 of 39, para. 12, note 2; and p. 33 of 39, para. 282 – 285.

1324.   SAC, ECF No. 199, p. 3 of 39, para. 12, note 3; and p. 33 of 39, para. 282 – 285.

1325.   SAC, ECF No. 199, p. 33 of 39, para. 282.

1326.   Ex. 62.

1327.   Ex. 179, pp. L044416 – L044421.

1328.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing trademarks “LimoStudio” and “Julius Studio.” See Ex. 179, p. L044416.

1329.   Specifically, under the Eachpole License, LKimmy was granted the right to use Eachpole's existing internet Market IDs “KimOutlet,” “Eachpole,” and “Hoully.” See Ex. 179, p. L044416.

1330.   See Eachpole License, Ex. 179, p. L044416, Section II.1.a.

1331.   Wagner v. Ultima Homes, Inc. (In re Vaughn Co.), 493 B.R. 597, 603 n. 5 (Bankr. D.N.M. 2013), citing Liquidating Tr. v. Baker (In re Amcast Indus. Corp.), 365 B.R. 91, 122 (Bankr. S.D. Ohio 2007) and Savage & Assoc., P.C., v. BLR Servs., SAS (In re Teligent, Inc.), 307 B.R. 744, 751 (Bankr. S.D.N.Y. 2004)

1332.   Amcast Indus., 365 B.R. at 122.

1333.   See generally 11 U.S.C. § 522(b)(1) (providing in part that “an individual debtor may exempt from property of the estate” certain assets pursuant to applicable federal or state law.

1334.   T.7, p. 59 line 24 – p. 60 line 14.

1335.   Ex. 184.

1337.   ECF No. 297.

1338.   SAC, ECF No. 199, pp. 34-35 of 39, para. 291 – 297. The Court has previously addressed and resolved Linco's claims for a TRO and a preliminary injunction. Linco's claim for permanent injunctive relief has not previously been addressed by the Court.

1339.   Nationstar Mortg., LLC v. Falls at Hidden Canyon Homeowners Ass'n, 2017 WL 2587926 *4 (D. Nev. June 14, 2017); Tualli v. EverBank, 2017 WL 5196701 *3 (D. Nev. Nov. 6, 2017) (same).

1340.   BBK Tobacco & Foods, LLP v. Aims Grp. USA Corp., 723 F. Supp. 3d 973, 989 – 90 (D. Nev. 2024), quoting La Quinta Worldwide LLC v. Q.R.T.M., S.A. de C.V., 762 F.3d 867, 879 (9th Cir. 2014).

1341.   Ex. 264.

1342.   Ex. 62.

1343.   SAC, ECF No. 199, p. 37 of 39.

1344.   Dale, 505 B.R. at 11; Lamie, 540 U.S. at 534.

1345.   SAC, ECF No. 199, pp. 35 – 36 of 39, para. 298 – 311.

1346.   Leonard v. Coolidge (In re Nat'l Audit Defense Network), 367 B.R. 207, 218 – 219 (Bankr. D. Nev. 2007), citing Pioneer Liquidating Corp. v. San Diego Tr. & Sav. Bank (In re Consolidated Pioneer Mortg. Entities), 211 B.R. 704, 709–10 (S.D. Cal. 1997), aff'd in part, rev'd in part, In re Consolidated Pioneer Mortg. Entities, 166 F.3d 342 (9th Cir.1999).

1347.   Pac. Links, 644 B.R. at 208 (“Although intentional fraudulent claims require the proponent to meet the ‘clear and convincing evidence’ standard, the ‘preponderance of the evidence’ standard applies to constructively fraudulent transfers.”), citing Garcia, 465 B.R. at 191 and Dreier LLP, 452 B.R. at 436.

1348.   Hopkins v. Crystal 2G Ranch, Inc. (In re Crystal), 513 B.R. 413, 418 (Bankr. D. Idaho 2014), quoting Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 806 (9th Cir. 1994).

1349.   SAC, ECF No. 199, pp. 7 – 10, para. 42 – 68.

1350.   The TLC Petition Date is October 8, 2019.

1351.   The Eachpole Petition Date is February 20, 2020.

1352.   Ex. 264.

1353.   See generally ECF No. 188.

1354.   Ex. 115, p. L017520.

1355.   Ex. 179, pp. L044416 – L044421.

1356.   Lovering Tubbs Tr. v. Hoffmann (In re O'Gorman), 115 F. 4th 1047, 1058 (9th Cir. 2024).

1357.   O'Gorman, 115 F. 4th at 1058 – 59 n. 5.

1358.   Acequia, 34 F.3d at 806.

1359.   Parkinson Seed Farm, Inc. v. Weeks (In re Parkinson Seed Farm), 640 B.R. 218, 241 – 42 (Bankr. D. Idaho 2022), citing Pringle, 495 B.R. at 465 and Crystal, 513 B.R. at 418 (quoting Acequia, 34 F.3d at 806).

1360.   O'Gorman, 115 F. 4th at 1058, quoting Acequia, 34 F.3d at 806.

1361.   Ex. 182.

1362.   See 11 U.S.C. § 101(31)(B)(iii), defining the term “insider” of a corporate debtor to include a “person in control of the debtor.”

1363.   Crystal, 513 B.R. at 418; Acequia, 34 F. 3d at 806.

1364.   Ex. 182.

1365.   T.2, p. 21 line 11 – p. 44 line 10; T.2, p. 120 line 11 – p. 121 line 1; T.4, p. 53 line 2 – p. 59 line 24.

1366.   Crystal, 513 B.R. at 418; Acequia, 34 F. 3d at 806.

1367.   T.4, p. 53 line 2 – p. 59 line 24; T.4, p. 82 line 12 – p. 83 line 20.

1368.   Ex. 182.

1369.   Ex. 188.

1370.   Crystal, 513 B.R. at 418; Acequia, 34 F. 3d at 806.

1371.   SAC, ECF No. 199, p. 6 of 39.

1372.   ECF No. 1.

1373.   ECF No. 96, p. 1 of 4.

1374.   ECF No. 126.

1375.   ECF No. 150.

1376.   ECF No. 170.

1377.   ECF No. 170.

1378.   SAC, ECF No. 199.

1379.   Ex. 188.

1380.   Ex. 188.

1381.   ECF Nos. 1 – 296. The Court notes that Chinese entities can be served through the Hague Convention.

1382.   Nelson, 529 U.S. at 467.

1383.   Bullion Rsrv., 922 F.2d at 547.

1384.   Nelson, 529 U.S. at 468.

1385.   Nelson, 529 U.S. at 466, citing Mullane, 339 U.S. at 314 (“ ‘The fundamental requisite of due process of law is the opportunity to be heard.’ ”), quoting Grannis, 234 U.S. at 394.

1386.   Ex. 182.

1387.   T.4, p. 159 line 19 – p. 160 line 18.

1388.   Ex. 62, Bates Nos. L019299; see also T.5, pp. 25-26, 133-34, 158.

1389.   Crystal, 513 B.R. at 418; Acequia, 34 F. 3d at 806.

1390.   Ex. 179, pp. L044416 – L044421.

1391.   T.5, p. 152 line 23 – p. 153 line 3; T.5, p. 165 line 23 – p. 166 line 2; T.7, p. 31 line 10 – p. 32 line 4. The Court is mindful that LKimmy's $70,542.00 payment to Eachpole is exactly equal to the amount due from LKimmy to Eachpole under the Eachpole License. Compare Ex. 179, Bates No. L044416, para. 1(a) with Ex. B.2, Bates No. LKimmy001651. The Court also notes that LKimmy's payment to Eachpole was made on December 6, 2018, the same day that the Donovan Way Sublease was executed by Eachpole and LKimmy. The Donovan Way Sublease does contain a “building installing and remodeling in-house office space” charge payable by LKimmy to Eachpole of $70,542.00 - - the exact same amount due from LKimmy to Eachpole under the Eachpole License. Compare Ex. 89, Bates No. 89.0001, para. 1.5. But the Donovan Way Sublease did not specify that the build out amount was due on signing, and Hyunjune testified credibly that the contemplated buildout at the Donovan Way Property never actually happened. T.5, p. 150 lines 8 – 25. The Court concludes that the preponderance of the evidence established that the $70,542.00 payment made by LKimmy to Eachpole on December 6, 2018, was in satisfaction of the amount due under the Eachpole License, as the use of Eachpole's existing trademarks and Market IDs was essential to LKimmy's business operations.

1392.   Ex. 101, p. L014620, Bates No. L014620, line 15.

1393.   It is noteworthy that the Eachpole License was not accepted or rejected by the trustee within 60 days after the Eachpole Bankruptcy was filed. See 11 U.S.C. § 365(d)(1). The initial 5-year term under the Eachpole License is now expired.

1394.   Defined in the SAC as “Transfer 1.” SAC, ECF 199, p. 7 of 39, para. 42.

1395.   Defined in the SAC as “Transfer 6.” SAC, ECF 199, pp. 8 – 10 of 39, para. 49 – 62.

1396.   Defined in the SAC as “Transfers 2 – 4” inclusive. SAC, ECF 199, p. 8 of 39, para. 43 – 45.

1397.   See generally ECF No. 188. As noted, the actual intent fraudulent conveyance claim under Section 548(a)(1)(A) as to these wire transfers also fails for lack of due process.

1398.   Defined in the SAC as “Transfer 7.” SAC, ECF 199, p. 10 of 39, para. 63 – 68.

1399.   Walldesign, 872 F.3d at 964, citing Glob. Prot. USA, Inc., 546 B.R. at 624.

1400.   Bullion Rsrv., 922 F.2d at 547.

1401.   For clarity and avoidance of any doubt, the overpayments to the Taxing Authorities are avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), separately as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II), and now as actual intent fraudulent transfers under Section 548(a)(1)(A). While the avoided transfers to the Taxing Authorities are recoverable from Kim under Section 550(a)(1), Linco is entitled to only a single satisfaction under Section 550(a)(1). See 11 U.S.C. § 550(d) (“The trustee is entitled to only a single satisfaction under subsection (a) of this section.”).

1402.   Bullion Rsrv., 922 F.2d at 547.

1403.   For clarity and avoidance of any doubt, the inventory transfers to LKimmy are avoided as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(I), separately as constructively fraudulent transfers under Section 548(a)(1)(B)(ii)(II), and now as actual intent fraudulent transfers under Section 548(a)(1)(A). While the avoided inventory transfers are recoverable from LKimmy as the initial transferee under Section 550(a)(1), Linco is entitled to only a single satisfaction under Section 550(a)(1). See 11 U.S.C. § 550(d) (“The trustee is entitled to only a single satisfaction under subsection (a) of this section.”).

1404.   SAC, ECF No. 199, pp. 36 – 37 of 39, para. 312 – 325.

1405.   Pac. Cheese Co. v. Advanced Coil Tech., LLC, 2015 WL 7568582 *2 (D. Nev. Nov. 24, 2015) (internal citations omitted), citing Gen. Motors Corp. v. Eighth Jud. Dist. Ct., 122 Nev. 466, 473, 134 P.3d 111, 116 (2006); Progressive Gulf Ins. Co. v. Faehnrich, 130 Nev. 167, 171, 327 P.3d 1061, 1063 (Nev. 2014); S.E.C. v. Inteligentry, Ltd., 2015 WL 1470498 *15 (D. Nev. March 31, 2015) (same).

1406.   Pac. Cheese, 2015 WL 7568582 at *2, citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145 (1971); Inteligentry, 2015 WL 1470498 at *15 (same).

1407.   Ex. 115, p. L017520.

1408.   Pac. Cheese, 2015 WL 7568582 *3 (D. Nev. Nov. 24, 2015) (internal citations omitted); Inteligentry, 2015 WL 1470498 *15 (D. Nev. March 31, 2015) (same); A.B.C. Learning Ctrs., Ltd. v. RCS Cap. Dev., LLC, 2013 WL 3618550 *10 n. 9 (9th Cir. BAP July 16, 2013) (same); Vill. Bldrs. 96, LP v. U.S. Labs., Inc., 121 Nev. 261, 268, 112 P. 3d 1082, 1087 (2005).

1409.   In re Station Casinos, Inc., 2010 WL 11813123 *17 (Bankr. D. Nev. July 15, 2010), citing Vill. Bldrs., 121 Nev. at 268, 112 P. 3d at 1087.

1410.   Ex. 62.

1411.   T.4, p. 159 line 19 – p. 160 line 18.

1412.   Ex. 62.

1413.   T.4, p. 159 line 19 – p. 160 line 18.

1414.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1415.   Ex. 179, p. L044405, Section II.9(a); and Ex. 179, p. L044419 – 20, Section II.9(a).

1416.   MOH Mgt., LLC v. Michelangelo Leasing, Inc., 135 Nev. 689, 437 P.3d 1054 (table), 2019 WL 1437136 *4 (March 29, 2019), citing Vill. Bldrs., 121 Nev. at 268-69, 112 P.3d at 1087.

1417.   Pac. Cheese, 2015 WL 7568582 at *3, citing Vill. Bldrs., 121 Nev. at 269, 112 P. 3d at 1087.

1418.   Vill. Bldrs. 96, 121 Nev. at 269 - 270, 112 P. 3d at 1087 – 88; see also MOH Mgt., 2019 WL 1437136 *4 (same).

1419.   MOH Mgt., 2019 WL 1437136 at *4, citing Vill. Bldrs., 121 Nev. at 273, 112 P. 3d at 1090.

1420.   Vill. Bldrs., 121 Nev. at 270, 112 P. 3d at 1088.

1421.   Ex. 116, p. L026678.

1422.   T.4, p. 130 line 9 – p. 131 line 21; see also Ex. 48.

1423.   T.2, p. 152-54, 156, 160.

1424.   T.4, p. 184

1425.   Ex. 89, hereafter the “Donovan Way Sublease.”

1426.   Ex. 89, p. 89.0001.

1427.   Ex. 89, p. 89.0004.

1428.   See Note 137, supra.

1429.   T.4, p. 143 line 22 – p. 144 line 13.

1430.   See note 137, supra.

1431.   See note 161, supra.

1432.   T.4, pp. 163 lines 8 – p. 165 line 18.

1433.   T.4, pp. 163 lines 8 – p. 165 line 18.

1434.   See Peddie v. Spot Devices, Inc., 134 Nev. 994, 427 P.3d 125 (table); 2018 WL 4781617 at *5 - 6 (Oct. 2, 2018) (citing Vill. Bldrs., 121 Nev. at 270, 112 P.3d at 1088, and concluding in a summary judgment context that plaintiff “has made a prima facie showing on ‘continuity of management, personnel, physical location, assets, and general business operations between the purchaser and the seller.’ ”)

1435.   Ex. 11, Bates Nos. JWK000079.

1436.   Ex. 102, Bates No. L046877.

1437.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

1438.   T.4, p. 158 line 9 – p. 159 line 4.

1439.   Stations Casinos, 2010 WL 11813123 at *18 (citations omitted).

1440.   MOH Mgt., 135 Nev. 689, 437 P.3d 1054 (table), 2019 WL 1437136 *4 (March 29, 2019), citing Vill. Bldrs. 96, 121 Nev. at 272, 112 P. 3d at 1089 – 90.

1441.   MOH Mgt., 2019 WL 1437136 at *4, citing Vill. Bldrs. 96, 121 Nev. at 272, 112 P. 3d at 1090.

1442.   MOH Mgt., 2019 WL 1437136 at *4, citing Vill. Bldrs. 96, 121 Nev. at 272, 112 P. 3d at 1089 - 90. In MOH Mgt., the Nevada Supreme Court was invited to adopt a different standard in determining whether a business has ceased to exist. The invitation was declined. Id. at *4 n. 3.

1443.   Ex. 62.

1444.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1445.   See Peddie, 134 Nev. 994, 427 P.3d 125 (table); 2018 WL 4781617 *4 (1994).

1446.   Vill. Bldrs. 96, 121 Nev. at 269 - 270, 112 P. 3d at 1087 - 88.

1447.   MOH Mgt., 2019 WL 1437136 at *4 (March 29, 2019), citing Vill. Bldrs. 96, 121 Nev. at 273, 112 P. 3d at 1090.

1448.   Ex. 62.

1449.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1450.   Vill. Bldrs., 121 Nev. at 275, 112 P. 3d at 1091 - 92.

1451.   Vill. Bldrs., 121 Nev. at 274, 112 P. 3d at 1090 – 91, citing East Prairie R–2 School Dist. v. U.S. Gypsum Co., 813 F. Supp. 1396, 1400 (E.D. Mo. 1993) (other citations omitted). In Village Builders, the Nevada Supreme Court was invited to adopt a more expansive eight-factor test when examining the mere continuation exception, focusing on (1) retention of the same employees; (2) retention of the same supervisory personnel; (3) retention of the same production facilities in the same location; (4) production of the same product; (5) retention of the same name; (6) continuity of the assets; (7) continuity of general business operations; and (8) whether the successor holds itself out as the continuation of the previous enterprise. The Village Builders court declined the invitation. Id.

1452.   Ex. 62.

1453.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1454.   See Peddie, 134 Nev. 994, 427 P.3d 125 (table); 2018 WL 4781617 at *4.

1455.   Ex. 28, Bates No. L050443.

1456.   Ex. 10, Bates No. JWK000010.

1457.   Eachpole Petition, p. 34.

1458.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

1459.   T.4, p. 158 line 9 – p. 159 line 4.

1460.   Pac. Cheese Co., 2015 WL 7568582 at *3 (internal citations omitted); Inteligentry, 2015 WL 1470498 at *15 (same); RCS Cap., 2013 WL 3618550 at *10 n. 9 (same); Vill. Bldrs., 121 Nev. at 268, 112 P. 3d at 1087.

1461.   Pac. Cheese, 2015 WL 7568582 at *3 (internal citations omitted); Inteligentry, 2015 WL 1470498 at *15 (same); RCS Cap., 2013 WL 3618550 at *10 n. 9 (same); Vill. Bldrs., 121 Nev. at 268, 112 P. 3d at 1087 (2005).

1462.   See, e.g., Nat'l Audit Def. Network, 367 B.R. at 219 – 20, citing NEV. REV. STAT. § 112.180.2(a) – (k) (Nevada's version of the Uniform Fraudulent Transfers Act).

1463.   See Ex. 182.

1464.   T.2, p. 90; T.5, p. 129.

1465.   Ex. 115, p. L017520.

1466.   Ex. 256, Bates No. KROLL_eTop_011783.

1467.   Ex. 116, p. L026678.

1468.   T.4, p. 154 line 9 – p. 163 line 7; Ex. 65, pp. 65.0001 – 65.0002.

1469.   Ex. 179, pp. L044401 – L044406.

1470.   Ex. 179, pp. L044416 – L044421.

1471.   T.4, p. 159 line 19 – p. 160 line 18.

1472.   T.4, p. 159 line 19 – p. 160 line 18.

1473.   T.5, pp. 25-26, 133-34, 158.

1474.   Ex. 179, pp. L044401 – L044406.

1475.   Ex. 179, pp. L044416 – L044421.

1476.   Ex. 90.

1477.   Ex. 90.

1478.   Ex. 89, p. 89.0004.

1479.   T.4, p. 143 line 22 – p. 144 line 13.

1480.   T.4, p. 163 line 8 – p. 165 line 18.

1481.   T.4, p. 130 line 9 – p. 131 line 21; see also Ex. 48.

1482.   T.2, p. 152-54, 156, 160.

1483.   T.4, p. 184.

1484.   See generally Ex. 93.

1485.   See generally Ex. 93.

1486.   Ex. 129.

1487.   Ex. 62.

1488.   Ex. 62.

1489.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1490.   Ex. 184.

1491.   Ex. 62.

1492.   Ex. 179, pp. L044401 – L44406 and L044416 – L044421.

1493.   Ex. 62.

1494.   Ex. 62.

1495.   O'Gorman, 115 F. 4th at 1058, quoting Acequia, 34 F.3d at 806.

1496.   Pac. Cheese, 2015 WL 7568582 at *3 (internal citations omitted); Inteligentry, 2015 WL 1470498 at *15 (same); RCS Capital, 2013 WL 3618550 *10 n. 9 (9th Cir. July 16, 2013) (same); Vill. Bldrs., 121 Nev. at 268, 112 P. 3d at 1087 (2005).

1497.   Ex. 62.

1498.   O'Gorman, 115 F. 4th at 1058, quoting Acequia, 34 F.3d at 806.

1499.   O'Gorman, 115 F. 4th at 1058, quoting Acequia, 34 F.3d at 806.

1500.   ECF Nos. 260 and 279 (Linco's Contempt Motion as originally filed and as amended), and ECF Nos. 261 and 262 (declarations of Linco's General Manager, Bruce Lin, and Wen-Tyng Tsui, Ms. Chen's assistant in support of the Contempt Motion).

1501.   ECF Nos. 290 (LKimmy's opposition to the Contempt Motion) and 291 (Hyunjune's declaration in support, collectively hereafter the “Opposition.”).

1502.   ECF No. 8.

1503.   ECF No. 21.

1504.   Compare T.7, p. 59 line 5 – p. 60 line 14 with p. 63 line 18 – p. 64 line 2; see also T.7 p. 75 line 21 – p. 76 line 8.

1505.   Taggart v. Lorenzen (In re Taggart), 888 F.3d 438, 443 (9th Cir. 2018), vacated in part and remanded on other grounds, 587 U.S. 554 (2019), quoting Renwick v. Bennett (In re Bennett, 298 F.3d 1059, 1069 (9th Cir. 2002) and F.T.C. v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir.1999).

1506.   Colorado v. New Mexico, 467 U.S. 310, 316.

1507.   Colorado v. New Mexico, 467 U.S. at 316; In re Taggart, 548 B.R. at 288 (9th Cir. BAP 2016), aff'd, 888 F.3d 438 (9th Cir. 2018); vacated and remanded on other grounds, 587 U.S. 554 (2019).

1508.   Taggart, 587 U.S. at 565.

1509.   Colorado v. New Mexico, 467 U.S. 310, 316.

1510.   ECF No. 350, as amended at ECF No. 355.

1511.   ECF No. 362.

1512.   ECF No. 365.

1513.   ECF No. 367.

Honorable August B. Landis United States Bankruptcy Judge