Facts

In 2001, defendants Chang Lim and his wife, Lucy Lim, formed a corporation called SLKE Entertainment Inc. ("SLKE) to operate their restaurants. In May 2003, the Lims, on behalf of SLKE, entered into a franchise agreement with Boston Pizza Restaurants, L.P.

The Lims intended to build and operate a new Boston's The Gourmet Pizza restaurant in Rancho Cucamonga. Plaintiffs, at various times, agreed to and invested over $1 million in the venture.

The Rancho Cucamonga restaurant was an immediate success, generating more revenue per month than any Boston Pizza restaurant in the country. Plaintiffs contended, however, that they did not receive any return on their investment.

Subsequently, plaintiffs caused GLP to terminate Chang Lim from his position as manager of the restaurant. As a result, Chang Lim contacted the police and had the new manager removed.

Plaintiffs filed suit against the Lims and SLKE.

PLAINTIFF'S CONTENTIONS:
Plaintiffs contended that it was the intention of everyone involved that eventually plaintiffs' corporation, known as GLP, which would be partly owned by plaintiffs and defendants, would own and operate the franchise. The parties intended to purchase other Boston Pizza restaurants.

Although a GLP Board of Directors resolution, which said that the shares of SLKE would be transferred to GLP, was approved by plaintiffs and Chang Lim, the shares were never actually transferred.

Plaintiffs contended that, after having the new manager removed by the police, Chang Lim took GLP funds in the amount of $113,794. Plaintiffs contended that, from then until time of trial, Chang Lim operated the restaurant as if it were solely his, refused to recognize plaintiffs' alleged ownership interest in the restaurant, and refused to give any of their money back.

Plaintiffs contended that the Lims "hijacked" the restaurant. They contended that the restaurant was run for over two years as if it were owned by GLP, not SLKE. Chang Lim participated in Board of Directors meetings of GLP where the business of the restaurant was discussed and important decisions were made.

Plaintiffs also contended that either their money constituted an equity investment or it was a loan. In either event, they were entitled to something for their investment, but they got nothing.

DEFENDANT'S CONTENTIONS:
Defendants contended that the money that plaintiffs invested was actually for restaurants other than the Rancho Cucamonga location. Those other restaurants never materialized. At trial, Chang Lim acknowledged that some of the money invested was for the Rancho Cucamonga location, but said that he was unsure whether the money was a loan or an equity investment.

Settlement Discussions

Prior to trial, plaintiffs indicated a willingness to take over the restaurant, (with Chang Lim retaining his ownership interest as well) and defendants suggested that they would be willing to agree to that. The settlement broke down over information concerning the debts of the restaurant.

Result

The court entered a judgment against all of defendants, jointly and severally, in the sum of $1,429,447 (which included prejudgment interest). The court also entered judgment against defendant Chang Lim in an additional amount of $200,000 in punitive damages. The punitive damages resulted from the court's finding that Chang Lim converted the GLP funds ($113,794) out of "injured pride and malice" toward plaintiffs.

Other Information

SLKE Entertainment Inc. has filed for relief under Chapter 11 of the Bankruptcy Code. FILING DATE: July 18, 2007.