Jau-Fei Chen v. Stewart

2004 UT 82, 100 P.3d 1177, 510 Utah Adv. Rep. 9, 2004 Utah LEXIS 186, 2004 WL 2258190
CourtUtah Supreme Court
DecidedOctober 8, 2004
Docket20020927
StatusPublished
Cited by185 cases

This text of 2004 UT 82 (Jau-Fei Chen v. Stewart) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jau-Fei Chen v. Stewart, 2004 UT 82, 100 P.3d 1177, 510 Utah Adv. Rep. 9, 2004 Utah LEXIS 186, 2004 WL 2258190 (Utah 2004).

Opinion

*1181 DURHAM, Chief Justice:

INTRODUCTION

¶ 1 On January 10, 2001, plaintiff Jau-Fei Chen brought suit against her sister, defendant Jau-Hwa Stewart, and the family corporation, E. Excel, of which Jau-Hwa was president at that time. In the suit Jau-Fei claimed corporate waste, breach of fiduciary duty, and improper removal of a director. On March 13, 2001, the parties stipulated to the removal of Jau-Hwa Stewart from her position as president of E. Excel and agreed to the appointment of an interim CEO, Larry Holman, to run the company during the pen-dency of the lawsuit. On October 29, 2001, the interim CEO filed a cross-claim against Jau-Hwa Stewart and third-party defendants Hwan Lan Chen (Jau-Hwa and Jau-Fei’s mother) and Taig Stewart, (Jau-Hwa Stewart’s husband) as well as other individuals the court later found to have been working in concert with Hwan Lan Chen and Jau-Hwa Stewart. On October 16, 2002, the trial court entered a preliminary injunction barring all defendants from worldwide competition with E. Excel. Within ten days, Hwan Lan Chen filed a motion, in which Jau-Hwa and Taig Stewart joined, to vacate the trial court’s orders relating to Mr. Holman’s appointment as interim CEO. The trial court denied Hwan Lan Chen’s motion to vacate. This court granted defendants’ petition for an interlocutory appeal from the trial court’s decision. We affirm.

BACKGROUND

¶ 2 The respective parties tell two different stories about the events that gave rise to this lawsuit; the facts, however, tell only one. Over 200 pages of findings of fact and conclusions of law entered by the trial court narrate a tale of intrigue, deceit, and family strife of surprising proportions.

¶ 3 The trial court’s findings directly contradict defendants’ characterization of the underlying dispute. Because defendants have failed to properly marshal the evidence in support of the trial court’s findings of fact, we do not consider those findings properly challenged and, therefore, assume the evidence supports them. Utah Med. Prods., Inc. v. Searcy, 958 P.2d 228, 233 (Utah 1998). As a result, we rely on those findings in reciting the facts here.

¶ 4 E. Excel International, Inc. (E. Excel) is a manufacturer of nutritional supplements and skin care products sold both nationally and internationally. In the United States and Canada, the products are sold directly through multilevel marketers. In Asia, the products are sold to a single territorial owner in each of the major markets, who in turn sells the products through a multilevel marketing network. Members of the Chen family control the corporation and have served in various roles as directors, officers, or employees of E. Excel. Prior to the events that form the basis of the present litigation, E. Excel was run by Jau-Fei Chen (Dr. Chen) as president and her sister Jau-Hwa Stewart (Ms. Stewart) as vice president.

¶ 5 Although this is not the Chen family’s first serious internal feud, 1 in 2000 a particularly vicious dispute arose. In the early part of that year, Ms. Stewart and her mother, Hwan Lan Chen (Madame Chen), came to believe that Dr. Chen’s husband, Rui-Kang Zhang, had been using company funds to support a mistress in California. They insisted that Dr. Chen immediately divorce her husband and give up custody of her children. When Dr. Chen refused, Ms. Stewart and Madame Chen demanded that both Dr. Chen and her husband end their affiliation with E. Excel. Dr. Chen again refused. Unable to convince Dr. Chen to remove herself voluntarily, Ms. Stewart and Madame Chen turned to more aggressive measures.

¶ 6 At the time the present dispute arose, the ownership of the company rested with Ms. Stewart, who possessed a 25% minority share in the company, and the three minor children of Dr. Chen, who possessed a combined 75% share. In September 2001, pur *1182 porting to act as trustee for Dr. Chen’s children, Ms. Stewart claimed control of 100% of the outstanding shares and removed Dr. Chen from the board of directors. She then installed her husband, Taig Stewart, and Madame Chen as new directors. 2 The new board voted to remove Dr. Chen as president of E. Excel, appointing Ms. Stewart in her place. Acting as president of E. Excel, without authorization from the board or any justifiable business reason, Ms. Stewart transferred nearly $2 million from E. Excel to her personal account. Ms. Stewart and Madame Chen then proceeded to attack the long-term distributors still loyal to Dr. Chen by stopping the shipment of supplies and transferring millions of dollars to Asian markets to establish new distribution networks.

¶ 7 On January 10, 2001, Dr. Chen brought derivative claims against Ms. Stewart and E. Excel, alleging corporate waste, breach of fiduciary duty, and improper removal of a director. That same day, the court granted a temporary restraining order prohibiting Ms. Stewart from violating E. Excel’s exclusive contracts with the territorial owners and from acting as president and spokesperson of E. Excel. The order also required Ms. Stewart to fulfill all pending orders from the territorial owners. The court held evidentia-ry hearings from January 19, 2001, to February 21, 2001, in order to determine whether the temporary restraining order should be converted into a preliminary injunction. During that time a series of increasingly bizarre events unfolded, manifesting Ms. Stewart and Madame Chen’s intent to either squeeze Dr. Chen out of the corporation or destroy it entirely. In defiance of the temporary restraining order, Ms. Stewart continued to ship products to the new distributors, using “front” companies rather than shipping directly to them, and omitting the names of recipients from the shipping orders. Orders in transit to the new distributors were not stopped, and the only order shipped to a long-term distributor was rejected by the recipient country’s government as adulterated. As it became increasingly clear that the court would grant a preliminary injunction in Dr. Chen’s favor and remove Ms. Stewart as president of the company, defendants set out to disable E. Excel and set up a competing enterprise, Apogee, in its place. To this end, Ms. Stewart and the third-party defendants who assisted in the scheme disabled the surveillance system that monitored activities at E. Excel’s warehouse and offices. They stole, converted, and destroyed millions of dollars worth of E. Excel’s inventory, equipment, business records, and computer files. In one of the more bizarre episodes of this case, the defendants purchased mice at a pet store and released them into the warehouse, thereafter claiming that it was necessary to remove the product from the warehouse due to a rodent infestation.

¶ 8 Matters came to a head when, on February 13, 2001, a tape of a recorded conversation between Ms. Stewart and two new distributors located in Asia was anonymously delivered to Dr. Chen and her attorneys. During the conversation, Ms. Stewart and the distributors agreed to deny knowledge of certain critical matters during the evidentia-ry hearings and blame Dr. Chen for harmful events caused by Ms. Stewart or others. The trial court entered the tape into evidence and referred the recording and a transcript of testimony before the court to the county attorney.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

State v. Nielsen
2014 UT 10 (Utah Supreme Court, 2014)
Nelson v. City of Orem
2013 UT 53 (Utah Supreme Court, 2013)
Brown v. State
2013 UT 42 (Utah Supreme Court, 2013)
Julie Iacono v. Bret B. Hicken
2011 UT App 377 (Court of Appeals of Utah, 2011)
Columbia HCA v. Labor Commission
2011 UT App 210 (Court of Appeals of Utah, 2011)
Cahoon v. Evans
2011 UT App 148 (Court of Appeals of Utah, 2011)
Bott v. Osburn
2011 UT App 139 (Court of Appeals of Utah, 2011)
Osburn v. Bott
2011 UT App 138 (Court of Appeals of Utah, 2011)
Timpanogos Hospital v. Labor Commission
2011 UT App 106 (Court of Appeals of Utah, 2011)
Jensen Ex Rel. Jensen v. Cunningham
2011 UT 17 (Utah Supreme Court, 2011)
GOLDEN MEADOWS PROPERTIES, LC v. Strand
2011 UT App 76 (Court of Appeals of Utah, 2011)
State v. Millard
2010 UT App 355 (Court of Appeals of Utah, 2010)
Ostermiller v. Ostermiller
2010 UT 43 (Utah Supreme Court, 2010)
State v. Candedo
2010 UT 32 (Utah Supreme Court, 2010)
Johnson v. Johnson
2010 UT 28 (Utah Supreme Court, 2010)
State Ex Rel. Db
2010 UT App 111 (Court of Appeals of Utah, 2010)
Robinson v. Robinson
2010 UT App 96 (Court of Appeals of Utah, 2010)
Friends of Maple Mountain, Inc. v. Mapleton City
2010 UT 11 (Utah Supreme Court, 2010)
Commercial Debenture Corp. v. Amenti, Inc.
2010 UT 10 (Utah Supreme Court, 2010)
Richardson v. Hart
2009 UT App 387 (Court of Appeals of Utah, 2009)

Cite This Page — Counsel Stack

Bluebook (online)
2004 UT 82, 100 P.3d 1177, 510 Utah Adv. Rep. 9, 2004 Utah LEXIS 186, 2004 WL 2258190, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jau-fei-chen-v-stewart-utah-2004.