Facts

On Dec. 15, 2006, KPL Scaffold Inc. (KPL) was incorporated by defendant Tianrong Situ (Situ). Situ was the sole shareholder and president. In March 2007, plaintiff Roy Hu and Situ entered negotiations for Hu to become a shareholder. Situ drafted a proposed "Share Transfer Agreement," which stated that KPL had possessed capital of $2 million, $600,000 of which would be transferred by Hu. In return, Hu would receive a 30 percent interest in KPL. As represented by Situ, another $600,000 was to be transferred by Hong Kong Huilong Holdings Co. Ltd. (Huilong), who would also receive a 30 percent interest in KPL. Situ would retain the remaining 40 percent interest.

In fact, at the time the agreement was drafted and presented to Hu, KPL had no capital invested in it at all, according to plaintiff's counsel.

The parties did not sign the agreement because there were some minor revisions that needed to be made. In the meantime, starting from March 2007 through May 2007, Hu made wire transfers from his own company and himself to KPL totaling $350,000. Huilong, however, was never involved in the deal as Situ had represented and wanted Hu to believe, according to plaintiff's counsel.

In August 2007, Situ gave Hu a letter of confirmation of Hu's contribution of $350,000. However, in information statements filed with the Secretary of State in March and December 2007, Situ remained listed as the sole director and president. When Hu asked for the money back, Situ refused. Hu sued for fraud, breach of contract and rescission. Situ counter-sued Hu for breach of contract and failure to repay a loan.

PLAINTIFF'S CONTENTIONS:
Hu claimed that Situ fraudulently represented that he had invested $2 million in KPL, and that Huilong would invest in KPL, in an effort to induce Hu into investing in KPL. Hu also claimed that Situ breached the contract by failing to secure the investment of Huilong, repeatedly failing to explain or clarify the situation, failing to respond to requests for information, failing to produce an agreement to sign, failing to issue stock certificates, and failing to produce even a receipt for the funds Hu contributed.

DEFENDANT'S CONTENTIONS:
Situ claimed that Hu breached the agreement when he ceased performing and requested rescission. Situ further claimed that Hu failed to purchase KPL stock as agreed and failed to repay a loan made by Situ.

Settlement Discussions

According to plaintiff's counsel: At trial, plaintiff demanded $350,000, which was countered by the defense's offer of $300,000 in stock certificate. Defendant never offered $420,000, which plaintiff would have accepted. According to defense counsel: At trial, plaintiff demanded $570,000. Defendant offered $420,000, but this was rejected by plaintiff.

Damages

Hu sought compensatory damages, interest, and punitive damages.

Result

The jury found in favor of plaintiff Hu and awarded him $370,000, plus interest. The jury rejected plaintiff's punitive damages claim.

Other Information

FILING DATE: May 6, 2008.