Facts

Plaintiffs were minority shareholders in One Easy Loan Inc., a start-up student loan consolidation corporation whose stock was privately held. In 2005, One Easy Loan had its first year of profit, and an anticipated change in a federal regulation governing debtors' ability to consolidate multiple loans with one lender promised large profits in 2006. Majority shareholders, Marcus Lee and David Wei sought to buy out the minority shareholders, but could not reach an accord.

A shareholder derivative suit was later filed claiming Lee and Wei looted One Easy Loan, and used its assets, resources, and employees to open a new, competing student loan consolidation business, Priority Student Loans. The suit also alleged that Lee and Wei fired One Easy Loan's founder and president, James Dodds and left One Easy Loan an empty shell.

A jury trial in 2010 resulted in verdicts holding Lee, Wei, and Priority Student Loans liable for conversion and breach of fiduciary duty. However, plaintiffs appealed the jury and trial court's calculation of the damages.

The Court of Appeal reversed the damages portion of the 2010 judgment, while letting stand the liability findings, and remanded for a limited retrial on damages.

PLAINTIFF'S CONTENTIONS:
Plaintiffs contended that defendants looted and destroyed One Easy Loan in order to start their own competing company thus violating their fiduciary duties as majority shareholders of One Easy Loan.

DEFENDANT'S CONTENTIONS:
Defendants denied any wrongdoing. Defendants contended that Dodds had mismanaged One Easy Loan. Defendants also contended that One Easy Loan lacked any value in March 2006, and thus that there were no damages.

Settlement Discussions

Plaintiffs demanded $1 million. Before trial, defendant Wei offered to pay $200,000 in order to settle the case.

Result

Statement of decision awarding plaintiffs $2,452,647, plus prejudgment interest at 10 percent from November 2006 (an additional $1,660,987), for a total of $4,113,634. The court ruled all proceeds of judgment would be placed in a constructive trust for the benefit of the minority shareholder-plaintiffs, and disallowed any recovery to the majority shareholder-defendants Lee and Wei, as a result of their tortious conduct. Damages were measured according to CACI 2102, as the destroyed value of One Easy Loan, measured by its fair market value as of March 2006.

Other Information

Defendants Marcus Lee and Priority Student Loans Inc. are currently unrepresented and in default. FILING DATE: March 13, 2009.