Tsang v. Tsang

Opinion

-_ -11 ;='52zlj;LJ

S=LlF*E§l¢§»3R CCJIJ€?5" KJ =J.

LIa 1=iilAM

ZLEZ5 DEC -@ PH (Q: TO

CEQERH G?COURT CLER!{ Of CUURT

BV# BY~-

IN THE SUPERIOR COURT OF GUAM

PING CHUNG TSANG CIVIL CIVILCASE

CASENO.

NO.CV0897-15

CV0897-15

Plaintiff,

vs.

WING ON WING ON TSANG, KAMKAM WING WING TAM,

TAM,

WING CHI WING CHI TSANG, TSANG, TSANG

BROTHERS CORPORATION, CORPORATION,

HARMON TRUCKING HARMON TRUCKING & & SCRAP METAL, METAL, INC., and EVERGREEN and EVERGREEN LLC,

INVESTMENT, LLC, DECISION DECISION AND ORDER

Defendants. Defendants. RE MOTIONS MOTIONS TO DISMISS

wlnG ON WING ON TSANG, KAM KAM VENG TA M

(a/k/a KAM WING TAM), and WING WING CHI

TSANG,

Counterclaimants, ounte c

vs.

PING PING CHUNG CHUNG TSANG

TSANG and

and CHRISTINA

L.H. AU (a/k/a AULAI (a/k/a AU LAIHING),

HING),

CCounterclaim

ounte DDefendants.

e fe nda nts .

This matter came before This before the the Honorable

Honorable Dana

DanaA.

A. Gutierrez

Gutierrez on

onfour

fourMotions

Motions to

to Dismiss

Dismiss filed

tiled

by Defendants Tsang Brothers Defendants Tsang BrothersCorporation Corporation("TBC"),

("TBC"), Harmon Trucldng & Harmon Trucking & Scrap

Scrap Metal,

Metal, Inc.

("HTSM"), ("HTSM"),Evergreen EvergreenInvestment

InvestmentLLC

LLC("Evergreen"), and

("Evergreen"), andCounterclaim CounterclaimDefendant

DefendantChristina

Christina Au.

I

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-l 5, Tsang Tsang v.

v. Tsang,

Tsang, el

et aL

al.

Court held a motion hearing on these motions The Court motions on on June

June 17,

17, 2025.

2025. Present

Present at the hearing were

behalf of

Attorney Geri Diaz for Defendants TBC and HTSM, Attorney Georgette Concepcion on behalf

Defendant Evergreen, Evergreen, Attorney

Attorney Ignacio Counterclaimants Wing Ignacio Aguigui for Counterclaixnants Wing On Tsang, Wing Wing

Veng Tam, and Vang and Wing Wing Chi

Chi Tsang,

Tsang, and

and Attorney

Attorney William

William Gavras

Gavras for

for Counterclaim

Counterclaim Defendant

Defendant

Au.I1 Upon review of

Christina Au. of the moving documents, documents, arguments,

arguments, and

and applicable

applicable law, the Court

issues its issues its ruling ruling as

as set

setforth

forthbelow.

below.

BACKGROUND

Plaintiff Ping

Ping Chung

Chung "Larry" Tsang ("Larry")

("Larry") tiled

filed his Verified

Verified Complaint on September

15, 15, 2015.

2015. The Complaint alleges that Larry,2 Larry,2 aa Guam

Guam resident and minority shareholder, brings

suit against against his his brothers

brothers Wing

Wing On

On "Norman" Tsang ("Norman") and and Wing

Wing Chi

Chi Tsang

Tsang ("Wing

("Wing

Chi"), his brother-in-law Kam Wing "Kevin" Tam Tam ("Kevin"),3

("Kevin"),3 and related family-owned family-owned business

entities-TBC,HTSM, entities-TBC, HTSM, and and Evergreen-arising

Evergreen-arisingfrom

froma along-running

long-runningdispute

disputeover

overthe

the operation

operation

and control of ofthese

these shared family

family businesses in Guam.

businesses in Guam. See Comal.,r,r SeeComp!. W1-2.4,

1-2.4,2.5-2.8.

2.5-2.8. Larry

Larry alleges

that he holds holds a20%

20% interest

interest in TBC, while Norman and Kevin Norman and Kevin each

each hold

hold 20%, and Wing Chi holds

35%, with business operations commingled commingled across entities entities and conducted under common control.

,r,r 5,5, 11.

See id. W I I. He He also

also alleges

alleges a 47.5% ownership interest in in HTSM,

HTSM, equal

equal to

to Norman's

Norman's share,

and a 25% interest in Evergreen, Evergreen, where

wherehe

hewas

wasdesignated

designatedGeneral

GeneralManager.

Manager.See

Seeidid. ,r,r 15. The

111112,

Complaint alleges that corporate formalities Complaint formalities were were disregarded,

disregarded, assets

assets and

and books

books were

were commingled,

commingled,

meetings were improperly noticed or not held, held, and he

he was

was ultimately

ultimately removed

removed from

from management

without process. See without lawful process. See id. ,r,r 9,9, 11, id. 'W 11, 14,

14, 16-18.

16-18. Larry

Land further alleges that, after terminating his

|1 Attorney Attorney Curtis Curtis Van

Van dh

de Veld, counsel

counsel for Plaintiff

PlaintiffPing

PingChung

Chung"Larry"

"Lany"Tsang,

Tsang,was

wasnot

notpresent

present at

at the hearing.

hearing.

z Because 2 Becausethis thiscase

caseinvolves

involves parties

parties that

that are

are related, the Court addresses related, the theparties addresses the partieson

onaafirst-name

first-name basis

basisto

to avoid

confusion. confusion. 3 3 Kam Wing Tam Kam Wing Tam is also known as Kam Veng VangTam.

Tam.

3

i l

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsang, et al.

Tsang v. Tsang,

salary salary and excluding excluding him from

from decision-making,

decision-making, the

the individual

individual defendants

defendants continued

continued drawing

compensation while while freezing

freezing him

him out

outas

asaashareholder,

shareholder,director,

director, officer,

officer, and

andmanager.

manager.See ,i,i

See idid.111

18-21, 23-26.

Lan'y asserts Larry asserts four

four causes

causes of

faction

actionarising

arisingfrom

fromwhat

whathe

hecharacterizes

characterizes as

as aa wrongful

wrongful fieezefreeze

-

out by his brothers and brother-in-law from TBC, TBC, HTSM,

HTSM, and

and Evergreen.

Evergreen. First, he brings a claim

for breach of of fiduciary

fiduciary duty, alleging that Norman, Kevin, Wing Wing Chi,

Chi, and

and the

the corporate

corporate entities

entities

deprived him of of aa corporate

corporate office,

office, salary, voting rights, salary, voting rights, and his pro-rata share of income and

Compo. ,i,i

control. See Comp!. W22-28.

22-28. Second,

Second, he asserts a shareholder shareholder derivative claim seeking to separate

commingled assets, assets, restore

restore proper governance, governance, and enforce

enforce compliance

compliance with the companies'

companies'

founding documents.

documents.See

See id. ,i,i 29-31. Third, id. 111129-31. Third,heheseeks seeksan

anaccounting,

accounting, partition,

partition, and

and dissolution

dissolution of

TBC, HTSM, and and Evergreen,

Evergreen, alleging

alleging that their continued operation is untenable under current

conditions. See id. conditions. See id W,i,i 32-35.

32-35. Fourth,

Fourth, he

he seeks

seeks preliminary

preliminary and

and permanent

permanent injunctive

injunctive relief

relief to

prevent other shareholders from holding corporate or limited liability liability company

company ("LLC")

("LLC") meetings

in his absence, absence, asserting

asserting that

that such

suchactions

actionswould

wouldcause

causeirreparable

irreparableharm.

harm.See

SeeCompo. ,i,i 36-40.

Comp!.111]36-40.

On December

December 9, 2015, TBC, HTSM, HTSM, and

and Evergreen

Evergreen each moved

moved to

to dismiss the Complaint.

See Mot. to Dismiss Con pl. Against Comp!. Against Dens. Tsang Bros. Corp. & Harmon Trucking & Scrap Metal, Defs. Tsang

Inc. at 1 ("TBC's ("TBc's Mot."),

Mot."); Evergreen

Evergreen Inv. LLC's

LLC's Mot.

Mot. to

to Dismiss

Dismiss at

at 1 ("Evergreen's

("Evergreen's Mot."). Before

responding to responding to these Motions to Dismiss, Larry filed an Ex Parte Parte Application

Application for Issuance of a

Temporary Temporary Restraining RestrainingOrder

Orderand

and Order

Orderfor

for Preliminary

PreliminaryHearing

Hearingon

onDecember

December21

21, 2015. Presiding

Judge Lamorena denied both both Larry's

Larry's request for a temporary restraining restraining order

order and

and aa pendente

pendent lite

lite

injunction to to stop

stop shareholders' meetings at TBC and HTSM in in a Decision and Order issued on

4

I

'

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS Tsangv. Tsang,

CV0897-15, Tsang Tsang, eta/.

al.

December 4 Decision and Order on PL's Ex Parte Appl. December 282 2015.4 28, 2015. Decision and Order on Pl.'s Ex Parte Appl. for Issuance of a TRO and Order

for Prelim.

Prelim. Hr'g at

at 55 (Dec.

(Dec. 28,

28, 2015)

2015) ("P.J.

("P.J. Lamorena's

Lamorena's Decision").

Decision"). Thereafter,

Thereafter, Larry

Larry filed

filed an

omnibus opposition omnibus opposition on on January 7, 2016,

January 7, 2016, contesting contesting all

all three motions and

and seeking leave to amend.

Opp'n Opp'nto to Mots.

Mots. to Dismiss by TBC and HTSM and and Mot.

Mot. to

to Dismiss

Dismiss by

by Evergreen

Evergreen("PL

("PL's Opp'n").

's Opp'n").

On January 20, 2015, TBC and HTSM HTSM filed

filed their reply. On

On January 21,

21, 2015,

2015, Evergreen

Evergreen filed

filed its

reply.

On December

December 9,

9, 2015,

2015, Defendants Norman and Kevin Defendants Norman Kevin also also filed

filed their

their Answer and

and

Counterclaims, and Defendant Counterclaims, and Defendant Wing Wing Chi

Chi filed

filed his

his on January

January 11,

11, 2016.

2016. The Answer

Answer and

and

Counterclaixns of Norman/Kevin Counterclaims of Norman/Kevin and Wing Chi Chi are identical

identical in stating their seven counterclaims,

which c h ccan

a n be

be summa l ows 5 5 Norma ri z e d a sasfolfollows

summarized n, Ke Norman, vi n, a and

Kevin, nd WWing

i ng C hi

Chi(c ol l e c t i ve l y, (collectively,

"Counterclaimants") allege breach of of fiduciary duty

duty by

by Larry

Larryas

asaashareholder

shareholder and

and manager

manager in a

closely held corporation and as as a member

member of Evergreen (First and Third Claims), see see Answer and

C ount e rc l a i msby Counterclaims by Norman Norma n and

a nd Kevin

Ke vi n ("C ount e r's. ") W ("Countercls.") 11 443-52, 3~ 662-70;

2 -7 , CChristina

hri na Au's

Au's

("Christina")66 participation participation in

in and

and aiding

aiding and

and abetting

abetting Larry's

Larry's breaches of

of fiduciary duty (Second

and Fourth Fourth Claims),

Claims), see

seeid. 11 53-61, 71-79,

id W 71-79; fraud fraud and

and fraudulent

fraudulent nondisclosure by Larry nondisclosure by Lan'y in

concealing his his self-dealing

self-dealing and

and diversion

diversionofoffunds

funds(Fifth

(Fifthand

andSixth

SixthClaims),

Claims),see

seeid.id.111] 80-88, 89-

1180-88, 89-

96, 96; and conspiracy by both Larry and Christina to defraud the counterclaimants and other owners

of TBC and ofTBC and Evergreen Evergreen (Seventh Claim), see id. 1197-102.

see id. W 97-102.

4 This 4 This matter was initially matter was assigned to initially assigned to Presiding Presiding Judge

Judge Alberto

AlbertoC,C.Lamorena

LamorenaIII, III,who

whohandled

handledthe

the proceedings

proceedings through

the stay stay period.

period. Presiding

Presiding Judge Lamorena entered enteredhis

his disqualification

disqualification ininthis thismatter

matteron

onMarch

March26,26,2021,

2021, and

and the

the case

was reassigned to to this this Court on March 30, 2021.

2021. See

SeeNotice

Notice of Judge Assignment Assignment (March

(March 30, 2021). l).

5 Because the Counterclaims are identical, the Court will cite only to 5 Because the Counterclaims are identical, the Court will cite only to Wing Chi's Chi's Answer Answerand and Counterclaims, Counterclaims,

Christina's Christina's Motion Motionto to Dismiss

DismissWing

WingChi's

Chi'sCounterclaims,

Counterclaims,and andWing WingChi's

Chi'sOpposition

Oppositiontotothat

that Motion,

Motion,unless

unless otherwise

specified. 6 Christina 6 Christina Au Au isis Larry's

Larry's wife.

5

T

I I

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-15, Tsang

Tsangv. Tsang,

Tsang, eta/.

al.

Christina moved to dismiss the the Norman/Kevin

Norman/Kevin counterclaims counterclaims on

on January

January 19,

19, 2016,

2016, and

dismiss the

moved to dismiss the Wing Wing Chi

Chi counterclaims

counterclaims on

on April

April 26,

26, 2016.

2016. Counterclaimants Norman and

Kevin filed their Opposition Opposition to Christina's Christina's Motion

Motion to

to Dismiss

Dismisson

onMay

May16,

16, 2016

2016 and

and Wing Chi filed

his on May 24, 2016. Christina did not reply.

reply.

The matter was

was effec

effectively ssuspended

pended for

for sseveral

eral years

ears due

due to

to a sstay

tay first entered

entered on

February February 25,

25, 2016,

2016, when

whenthe

the parties

parties stipulated

stipulated to

to pause

pause proceedings

proceedings to pursue settlement, and then

reimposed reimposed on

on June

June 20,

20, 2016, pending resolution of ofa Motion to Enforce Settlement Settlement and a Motion

to Strike Appearance and Dismiss Dismiss that

that Lan'y

Larry and

and Christina

Christina filed

filed on

on May

May 23,

23, 2016.

2016. See Decision

and Order Granting Mot. to Set Aside Entry of of Default at 2-3 (Sept.

(Sept. 9,

9, 2024).

2024). During this time,

the action was stayed except for limited discovery on the issues raised in the Motion to Enforce

Settlement. See Order Clarifying Stay (Mar. 30,2017).

2017). The

The stay

stay was

was not lifted until

until November

November 19,

19,

2021, 2021, when the parties

parties stipulated to Larry and Christina stipulated to Christina withdrawing their Motion to Enforce Enforce

Settlement, resolving

resolving "all

"allissues

issues causing the matter to be stayed."

stayed." See

SeeDecision

Decision and

and Order

Order Granting

Granting

Mot. to Set Aside Entry of Mot. of Default at 3. No substantive substantive filings

filings followed the withdrawal of of the

Motion to Enforce Settlement until TBC and HTSM filed an Application for Entry of of Default on

November November 6,

6, 2023,

2023, which

which resulted

resulted in

in the

the Clerk

Clerk entering

entering default

default against

against Lan'y

Larry and

and Christina.

Christina. See

id. at

at 3.

3. The

The Court

Court set

set aside

aside the default on September 9, 2024. See See id.

id On

On December

December 23,

23, 2024,

2024, the

Court granted the parties' proposed Order Order re

re Pending

Pending Motions,

Motions, which

which notes

notes that

that "a

"a significant

significant

amount amount of

of time ha[d] passed since the initial initial briefing

briefing in

in connection

connection with

with [the

[the Motions

Motions to

to Dismiss]."

Dismiss].77

In light of

of this, the Court permitted the die parties

parties to

to file

file supplemental

supplemental briefs, if any, any, addressing "any

new legal

legal audiority" arising after authority" arising after the the Motions

Motions to

to Dismiss were

were filed

filed and

and that

that supported

supported the

the

positions positions taken

taken in those

those Motions.

Motions. Order

Order re

re Pending

Pending Motions

Motions at

at 2 (Dec. 23, 2024).

2024). No

No supplemental

supplemental

briefing was filed.

filed.

6

s

i 'r DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-l Tsang v. Tsang,

Tsang, et aL

al.

On June 17, 2025, the

the Court held

hel a motion

moti hearing on the pending pendi Motions

ons to Di smi ss.

Dismiss.

Following this hearing, the Court issued an Order Order for

for Further

Further Briefing

Briefing regarding

regarding what

what effect,

effect, if

any, TBC and HTSM's

HTSM's opting

opting into

into the Guam

Guam Business

Business Corporation

Corporation Act has on the motions to

dismiss. dismiss. Order

Order for

for FLu'ther Briefing at

Further Briefing at 11 (Jun.

(Jun. 25,

25, 2025).

2025).TBC

TBC and

and HTSM

HTSM submitted

submitted supplemental

briefing on July 25, 2025;

2025, Larry filed

filed supplemental

supplemental opposition on August August 18,

18, 2025,

2025; and TBC and

HTSM replied on September September 2, 2025. On September September 9,

9, 2025, the Court took under advisement advisement the

following motions: (1) the December 9, 2015 2015 Motion to

to Dismiss filed by TBC and HTSM; (2)

(2)

Evergreen's December 9,

9, 2015 Motion to Dismiss, Dismiss; (3)

(3) Christina's

Christina's January

January 19,

19, 2016

2016 Motion to

Dismiss counterclaims asserted by counterclaims asserted by Norman Norman and Kevin; and (4)

(4) her

her April

April 26,

26, 2016

2016 Motion

Motion to

Dismiss Dismiss counterclaims

counterclaims asserted by Wing asserted by Wing Chi. See Under Under Advisement

Advisement Notice

Notice at

at 22 (Sept.

(Sept. 9, 2025).

DISCUSSION

Given the extensive briefing submitted, submitted, for clarity's sake, the Court proceeds as follows.

First,t , the Court ssets forth tthe llegal e sstandard

d a rd governing

o v e rn i n g motionss too dismiss.s . Thee Court tthen

addresses, in tum:

tum: (1)

(1) TBC's

TBC's and HTSM's

HTSM's Motion to Dismiss;

Dismiss, (2) Evergreen's

Evergreen's Motion to Dismiss;

Dismiss,

and (3) Christina's two Motions to Dismiss. Christina's Christina's motions

motions are

are considered

considered together

together because,

as noted above, the counterclaims filed by Norman Norman and

and Kevin

Kevin are

are identical

identical to those filed by Wing

Chi, and Christina's

Christina's challenges

challenges to those

those counterclaims

counterclaims are

are likewise

likewise identical.

identical.

I. 1. Legal

Legal Standard

Standard in

in Deciding

Deciding a Motion

Motion to

to Dismiss

Dismiss

"In "In ruling

ruling on

on aa motion

motion to

to dismiss

dismiss under

under Rule

Rule I2(b)(6),

12(b)(6), aa court

court must

must accept

accept all

all the

the well-

pleaded facts as

as true,

true, 'construe

'constablethe

thepleading

pleadingininthe

thelight

lightmost

mostfavorable

favorable toto the

thenon-moving

non-moving party,

and resolve

resolve all

all doubts

doubts inin the

thenon-moving

non-moving party's

party's favor."'

favor."' Guam Police

Police Dap

Dep't v. Guam Civ. Serv.

Comm 'n (Charfauros), ~ 88 (quoting (Cnarfauros), 2020 Guam 12 1] (quoting FFirst i rs t Hawaiian

an Bank

ank v.

v. Manley, 2007

2007 Guam

2 119). "Dismissal for

~ 9). "Dismissal for failure failure to

to state

state aa claim

claim isis appropriate

appropriate only

only 'if it appears beyond doubt doubt drat

that

7

\

DECISION DECISION AND AND ORDER

ORDER RE MOTIONS

MOTIONS TO DISMISS

CV0897-15, Tsang Tsang v. Tsang, et al.

Tsang, et al.

the [non-moving party] can prove no set set of

of facts in support

support of

of his claim

claim which would

would entitle

entitle him

to relief."'

relief." Cruz v. ,r 1010((citingTailano v. Cruz,2023 Guam 20 1] citing Taitano v.

v. Calvo

Calvo Fin.

Fin. Corp.,

Corp.,2009 Guam 9 ,r

2009 Guam

in original)

6) (alteration in original).

II. II. Motion to Dismiss by TBC and HTSM

TBC and TBC and HTSM

HTSMmoved

movedto

todismiss

dismissLarry's

Larry'sclaims

claimson

onseveral

severalgrounds.

grounds. First,

First,they

they argue

argue the

Complaint fails fails to

to state

state aa claim

claim for

for breach

breach of

offiduciary

fiduciaryduty

dutybecause

because aa corporation

corporation does

does not owe

fiduciary duties fiduciary duties to to its

its shareholders.

shareholders. TBC's

TBC's Mot. at 3-4.

3-4. Second,

Second, they

they contend

contend that

that the

the derivative

derivative

must be

claim must dismissed because be dismissed becauseLarry Lan'ydid

did not

not comply

comply with

with Guam

Guam Rules

Rules of Civil Procedure

of Civil Procedure

("GRCP") Rule ("GRCP") 23.. l's Rule 23 1 'sdemand

demandrequirement,

requirement,which

which requires

requires aa shareholder

shareholder to

to first

first request

request corporate

action before filing suit.

suit. id.

Id at

at 4-5.

4--5. Third,

Third, they

they seek

seek dismissal

dismissal of

ofthe

the dissolution,

dissolution, accounting,

accounting, and

partition claims: (1) because not all all necessary

necessary parties were joined, including minority shareholder

7

Richard Laid, Richard ; (2) because an accounting accounting claim belongs to to the

the corporation,

corporation, not

not an

an individual

individual

shareholder; (3) because Larry shareholder, lacks standing to partition corporate assets he does not personally Land lacks

own, own; and and (4)

(4) because involuntary dissolution is an extreme remedy unsupported by allegations allegations of

of

insolvency or failure 6-10. Finally, failure of purpose. See id. atat 6-10. Finally, they they argue

argue the

the injunctive

injunctive relief

relief claim

because the

fails because harm has the alleged harm has passed passed and corporate meetings and corporate meetings need need not

not be to

be delayed to

accommodate a shareholder's travel schedule.

schedule. See

See id. at 10.

id at 10.

A. Lark

LarryFailed

FailedtotoState

StateaaClaim

Claimfor

forBreach

BreachofofFiduciarv

FiduciaryDutv

DutyBecause

Because

TBC TBC and

and HTSM

HTSM Do Do Not

Not OweHim

HimaaFiduciary

Fiducial Dutv

Duty

"It "Itis

is only

onlylogical

logicalthat

thatininorder

orderfor

forthere

theretotobe

beaabreach

breach of

of fiduciary

fiduciary duty,

duty, there

there must

must first be

a definite fiduciary duty duty in

in existence."

existence." Lucan

Lujan v. JETH

JL.H Tr., 2016 Guam 24 ii,r 20.

Tr., 2016 20. Generally, Generally, a

77 At At the motion hearing on June 17, 2025, 2025, Defendants

DefendantsTBCTBC and

and HTSM

HTSM withdrew the argument on failure to join argument on join an indispensable party because indispensable party RichardLai because Richard Lai transferred transferred his

his shares

sharesback

backtoto TBC

TBC and

and Evergreen

Evergreen and

and resigned

resigned from

from both

companies companies inin 2016.

2016. Min.

Min. Entry at

at 10:29:25-10:30:15 (Jun. 17, 10:29:25-10:30:15 (Jun. 2025). The Court 17, 2025). Court therefore therefore will

will not

not address

address this

this

argument in this Decision and and Order.

Order.

8

i

. 1 a

DECISION ANDANDORDER

ORDERRE REMOTIONS

MOTIONSTO

TODISMISS

mslvnss

CV0897-15, Tsang v. Tsang, CV0897-15, Tsang, et al.

fiduciary duty

duty exists

exists between

between directors

directors and

and shareholders,

shareholders, see Yokeno

Yoke rov.v. Lai, I& 112 Guam 18

Lai, 2014 Guam ii 12

(noting that "[one's] (noting that legal duties "[one's] legal officer and as officer

duties as and director director are

are owed

owed to

to the

the shareholders

shareholders of

of the

the

corporation"), or between directors and corporation"), or and corporations, corporations, see

e D ai I

Dai-/chi Hotel Overseas

as D

Dev. CCo. vv.

No. &0-0203A,

Price, Civ. No. 1982 WL 33171, at *7 (D.

80-0203A, 1982 (D. Guam Guam App. Div. Nov.

Nov. 15,

15, 1982)

1982) ("As a

general rule, directors of a corporation general corporation have a duty duty to act in good faith and unselfishly toward the

corporation."). In corporation."). general, such In general, such fiduciary duty does not exist fiduciary duty exist between between a corporation

corporation and its

its

shareholders. See e.g. , Pea eock v. Herald Square Peacock S quare Loft Corp., , 889 889NN.Y.S.2d 22, 23

.Y.S.2d 22, 23 (N.Y.

(N.Y. App. Div.

("[D]efendants correctly point out that 'a 2009) ("[D]efendants 'a corporation corporation does

does not owe fiduciary duties to its

members or members or shareholders."');

shareholders.'"), In

In re

re Stillwater Cap. Inc. Litig., Cap. Partners Inc. 2d 556, 573 Litig., 851 F. Supp. ad 573

(S.D.N.Y. 2012) (S.D.N.Y. 2012) ("A

("Acorporation

corporation does

does not

not owe a fiduciary duty

duty to

to its shareholders,

shareholders; for this reason,

plaintiffs' plaintiffs' breach

breach of fiduciary

fiduciary duty against Gerova duty claims against Gerova are dismissed for failure failure to state a

claim."), claim."); Friedli

Friedliv.v. Silver

Silver Star

Star Props. REIT,Inc.,

Inc., 2024

2024 WL 1406329,

1406329, at *3 (D. Md.

Md. Feb.

Feb. 15,

15, 2024)

("[A] ("[A] corporation

corporation does

does not

not owe fiduciary duties

duties to

to its shareholders."). 8 If Larry fails to its shareholders.").8 to prove the

existence of a fiduciary duty that TBC or HTSM owe him, his claim claim of

of breach of fiduciary duty

must be dismissed as to these Defendants. See In re See In re Stillwater

Stillwater Cap.

Cap. Partners Inc.

Inc. Litig., 851

851 F.

F.

Supp. ad at Supp. 2d at 573;

573; Friedli

Friedliv.v. Silver

Silver Star

Star Props. REIT, Inc.,

Inc., 2024 WL 1406329 at *3.

1406329 at *3.

Here, Here, Larry

Larry claims

claims damages under 20

damages under 20 GCA

GCA §§ 2120

2120 for

for the

the alleged

alleged breach

breachof

of fiduciary

fiduciary duty

duty

by TBC by TBC and

and HTSM.

HTSM. See

See Comal.

Comp!. 1]

127. Because §§ 2120

27. Because 2120 awards awards damages

damages only

only for

for breaches

breaches "not

"not

arising from

from contract," the

the breach

breach of

of fiduciary

fiduciary duty

duty Larry alleges

alleges must

must arise

arise either

either from

from statute

statute or

from from case law. Nonetheless, the sole Nonetheless, the sole case case law that Larry

Lady points

points to in the Complaint is Southern

s8 Neither this Court, nor Plaintiff, Plaintiff,can canpoint

pointtotoaaGuam

Guamcase

case or

orstatute holds a corporation statute that holds corporation owes owes aa fiduciary

fiduciary duty

duty

its shareholders.

to its "Since no shareholders. "Since no statute statute addresses thematter addresses the Guam,this onGuam,

matteron this[C]ourt [C]ourtmust

mustrely

relyon

onother

otherjurisdictions

jurisdictions for

guidance."See guidance." SeeGov't

Gov'tofGuam

of v.v. FHP,

FHP, Inc.,

Inc., Civ.

Civ.No.

No.90-00014A,

90-00014A, 1991

1991 WL

WL275584,

275584, atat *6

*6 (D.

(D. Guam App. Div. July

10, 10, 1991).

1991).

9

'I .

*

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsangv. Tsang, ef

v. Tsang, eta/.

al.

Pacu'ic Bogert which purportedly Pacific Company v. Bogart purportedly supports supports the

the proposition

proposition that the

the "majority

shareholders owe owe a fiduciary duty to

fiduciary duty to minority minorityshareholders

shareholdersto

toprotect

protectthe

thecorporate

corporateassets

assets and to

pro-rata equally with

share pro-rata with the the minority."

minority." See Comp!. 1]23 See Compo. 123 (citing Southern Pacy'ic Pacific Company v.

v.

Bogert, Bogert,250 U.S. 483,492 483, 492 (1919)). Larry's reliance on thiscase (19I9)). Lanky's case is misplaced misplaced as

as the issue is whether

whether

HTSM owe

TBC and HTSM owe Larry Larry aafiduciary

fiduciary duty,

duty, not

not whether

whether the

the rnaiority

majority shareholders

shareholders of

of those

corporations do.

do.

Larry'sOpposition Land's Oppositiontotothe

theMotion

Motionto

to Dismiss

Dismissby

byTBC

TBC and

and HTSM

HTSM cites

cites a greater number of of

cases butfares cases but faresno nobetter.

better.Most

Mostnotably,

notably, Larry

Larry devoteshalf

halfaa page to quotingThompson Thompson v.

v. Central

Ohio Cellular, "It is Cellular, beginning with "It is axiomatic axiomatic that

that corporations

corporations and

and their

their officers and

and directors

directors

occupy a fiduciary relationship with corporate fiduciary relationship corporate shareholders."

shareholders." Pl.'s

PL's Opp'n

Opp'n at

at 2 (citing Thompson v.

Cent. Ohio Cellular, Cent. Ohio Cellular, Inc., Inc., 93 Ohio App.

App. ad

3d 530,

530, 540,

540, 639

639 N.E.2d 462, 468 (1994)). This single 462,468

sentence forms the entire basis of Larry's contention contention that TBC and HTSM owed him him aa fiduciary

fiduciary

duty. This This sentence falls short of sentence falls of establishing a fiduciary fiduciary duty on

on the part of

of these corporations.

A look

look at

at more

more recent interpretations of of Ohio law clarifies

clarifies that

that "[c]orporati0ns

"[ c]orporations as

as entities

do not owe fiduciary duties duties to their shareholders employees."See shareholders or employees." Foreman v.

See Forsman v. Silverstein, Silverstein, 2025

WL 240920, at *12 n.2 n.2 (S.D. Ohio Jan.

Jan. 17, 2025)

2025) (citation omitted);

omitted), Steele

Steele v.v. Mara El'lfs., Ents., Inc.,

2009-Ohio-5716, 1122 2009-0hio-5716, 22 ("The ("The majority

majority shareholder,

shareholder, not

not the

the corporation,

corporation, bears the

the fiduciary

fiduciary

obligations."), obligations."); Maas v.

v..ITS

JTMProvisions

Provisions Co., Inc.,

Inc., 2025 WL 823671, at *15 823671, at *l5 (S.D.

(S.D. Ohio Mar. 13,

13,

2025) ("Joe's claim 2025) ("Joe's claim against JTM is not against JIM not cognizable cognizable because '[t]here is because '[t]here is not,

not, and

and could

could not

not

conceptually be any conceptually be any authority authority that

that aa corporation

corporationasas an

an entity

entity has

has aa fiduciary

fiduciary duty

duty to its

its

shareholders."'). shareholders. ' ") .

Larry Larry also cites to O'Reilly 'Reilly v. Transworld

TransworldHealthcare,

Healthcare, Inc.

Inc.,, aa case from

from Delaware, to argue

that "[a] that "[a] corporation corporation may owe aa fiduciary duty duty to

to others."

others." Pl.'s

Pl.'s Opp'n

Opp'natat2.2. Lan'y

Larrymisconstrues

misconstrues

10

a'

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang v. Tsang, Tsangv. et al

Tsang, eta!.

0 'Reilly. The Delaware Court of O'Reilly. of Chancery in O'Reilly itself owes O'Reilly did not hold that a corporation itself owes

fiduciary fiduciary duties duties to

to shareholders or third parties. Rather, the court merely found that that the plaintiff

plaintiff

had adequately alleged that a corporation called Transworld, Transworld, as

as a controlling

controlling stockholder, owed

e

ary duties to the minority fiduciary minority shareholders shareholders of

of another

another corporation. See O'Reilly v.

See O'Reilly v. Transworld

Healthcare, Inc., 745 A.2d 902, 912-13 (Del. Ch. 1999). Healthcare, Inc., 1999). The The opinion is therefore consistent with

the principle under Delaware law that fiduciary fiduciary duty

duty runs

runs from

from those who control the corporation,

not from from the the corporation

corporation itself. See, e.g., Buttonwood See, e.g., Buttonwood Tree Value Partners, L.P. v. R.L Polk Polk & Co.

Co.,

No. CIV.A. 9250-VCG, 9250-VCG, 2014

2014 WL

WL 3954987,

3954987, at

at *4 (Del. Ch. Aug. 7, 2014)

2014) ("[A]

("[A] corporation does

not not owe owe fiduciary fiduciary duties

duties to its stockholders.");

stockholders."), Aug. v. Glade Prop. Owners Ass 'n, Inc., Ass 'n, Inc., No.

No. 2020-

0834-BWD, 0834-BWD,2023 2023 WL

WL3359466,

3359466,atat*4

*4(Del.

(Del.Ch.

Ch.May

May11,

11,2023)

2023)("Fiduciary

("Fiduciaryduties

dutiesare

are owed

owed to, not

by, the corporation.").

orporati on."). Therefore, T herefore, because

bec aus eTBC

T BCand

andHTSM

HT SM do

do not owe Larry aa fifiduciary duc duty

duty,

Larry's Larry's claim claim of

ofbreach

breach of

offiduciary

fiduciary duty

duty is insufficiently pled.

In the alternative,

alterative, Lan'y

Larry has

has also

also "move[d]

"move[d] for

for leave

leave to amend." Pl.'s Opp'n Opp'n at

at 4. "[E]ven

where where amendment amendment is

is not

not a matter of

of right,

right, the

the court

court should

should grant leave to amend 'when 'when justice

justice so

so

requires."' Cruz v. Cruz, Cruz v. Cruz, 2023 Guam 20 20 1] 17(citing

'I[ 17 (citing Guam

Guam R.

R. Civ.

Civ. P.

P. 15(a)).

l5(a)). On a motion

motion for leave

leave

to amend, a court consider factors such as "undue "undue delay,

delay, bad

bad faith or dilatory motive on the part

of of the movant, movant, repeated

repeated failure to cure deficiencies deficiencies by amendments previously allowed, undue

prejudice to prejudice to the the opposing

opposing party

party by virtue

virtue of

of allowance

allowance of

of the

the amendment,

amendment, [and]

[and] iiitility

futility of

of

amendment." amendment." See Arashi & Co.

See Arashi Co. v.

v. Nakashima

Nakashima Enters., ,r 16 2005 Guam 21 1]

Enters., Inc., 2005 16 (citing (citing Foman

Foman v.

v.

Da v i s , 371 U.S. 178, 182 (1962)).

Here, Here, amendment would be futile futile because even if Larry were permitted permitted to amend the

Complaint Complaint to to add

add further

further factual

factual allegations,

allegations, such allegations could could not

not overcome

overcome the fundamental

fundamental

legal barrier that legal barrier that fiduciary fiduciary duties

dutiesrun

run from

from directors,

directors, officers,

officers,or

or controlling

controllingshareholders-not shareholders-not

11

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsang v.

v. Tsang, et al.

from the corporate entities themselves. Accordingly, amendment would would be

be futile.

futile. Thus,

Thus, Lanky's

Larry's

Motion to to Amend is DENIED and Larry's claim claim of

of breach

breach of

offiduciary

fiduciary duty against TBC and

HTSM is DISMISSED.

B. Larry

LarryFailed

Failedto

to State

State aa Derivative

Derivative Claim

Claimto to Separate

Separate thethe Assets of of TBC

TBC

andd HHTSM

T S M B Because

e c a u s e HHe

e FFailed

ail tto

o CComply

o m p l v wwith

i t t the

h e DDemand

emand

Req u em en of GRCP Requirement G RCP Ru le 23.1 Rule

Larry's derivative

The threshold issue in Larry's derivative action action to separate the assets assets of TBC and HTSM

Larry's Complaint

is whether Larry's Complaintsatisfies satisfies the

the demand

demand requirement

requirement of

ofRule

Rule 23.1,

23.1, which

which states

states that

that in

a derivative action,

The complaint

complaint shall

shall also

also allege

allege with particularity the efforts, if any, made by the made the plaintiff

plaintiff to

to obtain

obtain the action

action he desires

desires from

from thethe

directors or directors comparable authority, or comparable and, if necessary, authority, and, necessary, from from thethe

shareholders or members, and the reasons shareholders reasons for the the plaintiffs

plaintiffs failure

to obtain the action

action or

or for

for not

not making

making the

the effort.

effort

"The derivative "The derivative demand requirement requirement is

is a mandatory precondition precondition to

to bringing

bringing aa derivative

derivative

action." ti on." See Friesen v.v.Hawley See Miesen Hawley Troxell Ennis && HHawley a w l e LLP, 2022

2022 WL

WL 1422942,

1422942, at

at *25 (D. Idaho

2022); In re Cray Inc., May 5, 2022), 431 F. Supp. 2d Inc., 431 2d 1114, 1114, 1119

1119 (W.D. Wash. 2006) ("Rule 23.1 23.1 is

related related to to the the substantive

substantive requirement

requirement that

that plaintiffs

plaintiffs in

in shareholder

shareholder derivative

derivativesuits

suitsmust

must first

list

corporation take

demand that the corporation take the action that the plaintiffs seek to enforce through through the suit."). 9

the suit.").9

For corporations For corporat i ons like l i k e TBC HTSM, whi TB C and HTSM which were i ncorporat ch were incorporated

ed under Guam's General

er Guam's General

Corporation Corporation Law Lawas

as opposed

opposed to the more recent Guam Business recent Guam Business Corporation Corporation Act,

Act, only Rule 23.1

.I

requirement. See

governs the demand requirement. See Young v. Nguyen, Young v. Super. Ct.

Nguyen, Super. Ct. Guam

Guam CV0901-15 (Dec.

(Dec. &

Order at 10, Nov. 1, 10, Nov. I, 2016).

2016).

99 "(B]ecause "[B]ecause the the Guam

Guam Rules

Rules ofof Civil

Civil Procedure

Procedure are generally derived from, although not identical are generally identical to, to, the

the Federal

Federal

Rules of Civil CivilProcedure

Procedure ...,

...federal

, federaldecisions

decisionsthat

thatconstrue

construethe

thefederal

federalcounterparts

counterparts to

to the

the [GRCP]

[GRCP] are

are persuasive

persuasive

authority." Portie authority." Portis Int'L Int'/, LLC

LLCv.v. Marquardt,

Marquardt,20 l8 Guam

2018 Guam22 n.l(citing 22 n,l (citingGov 'r of Gov't ofGuam

Guam v.

v. O'Keefe, 2018 lb Guam 4119).

~

12

I I

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsangv. Tsang,

Tsang, eta!.

al

23.1, if a plaintiff

Under Rule 23.1, plaintiff in a derivative derivative action

action does

does not allege

allege that

that he has made

demand on the corporation, he must allege why making such such demand

demand would

would be

be futile,

futile; otherwise,

the derivative derivative action must

must be dismissed. See

See id. ("The Court

id ("The Court finds

finds itit would

would be

be futile

futile for

for Plaintiff

Plaintiff to

have to request action be taken by the director ... Accordingly, the Court will not dismiss the , . Accordingly,

complaint complaint on this ground.");

ground."), see.also

also Vanderbilt

Vanderbilt v.

v. Geo-Energy

Geo-Energy Ltd.,

Ltd 590 F. Supp. 999, 1001 1001 (E.D.

(E.D.

Pa. 1984) ("While failure failure to

to comply 23.1 is comply with Rule 23.1 is grounds for dismissal of of the complaint, the

demand requirement itself may may be

be excused

excused where

where plaintiff's complaint alleges plaintiffs complaint alleges some facts which

show that that a demand

demand would

would be

be futile.")

futile.") (citation

(citation omitted). Whether plaintiff has met the demand

requirement is judged on the face of the complaint.

complaint. See Brooks v.v. Land See Brooks Land Drilling Drilling Co., 564 F. Supp.

1518, 1522 (D. Colo.

1522 (D. Colo. 1983)

1983) ("Where

("Where it is

is obvious

obvious from the face of

of the complaint

complaint that the requisite

demand upon shareholders shareholders was

was not

not made

made and

and no

no explanation

explanationfor

for the

the lack

lack of

of demand

demand is

is offered, an

action by the shareholder shareholder will

will not lie.").

Here, the Complaint neither alleges any effort to make a demand on either TBC or HTSM

nor states why making making such

such aa demand

demand would

would be

be futile.

futile. Instead, the Complaint merely alleges what

wants. See

Larry wants. Comal. ,r,r See Comp!. W 30-31

30-31 ("Plaintiff

("Plaintiff...

... seeks

seeks to

to have

have the

the court

court declare

declarewhich

whichassets

assets...

...

belong to each respective legal entity and the relationship between such entities entities as it determines

legally and to legally exist and to conform to the mandates mandates of the Articles

Articles of Incorporation and Bylaws of of the

respective corporate respective corporateDefendant[s]

Defendant[s]....

....").

"). Since

SinceLarry

Larryneither

neither shows

shows he

he has

has made

made aa demand

demand nor

the futility futility of

of doing

doing so,

so, Larry

Land has not met the demand requirement requirement under

under Rule 23.1.

Larry also moves, in the alterative, alternative, for

for leave

leave to

to amend

amend the

the Complaint

Complaint ifif the

the Court

Court finds

that his derivative action action is

is not sufficiently

sufficiently pied.

pled. Because

Because an

an amendment

amendment to

to the Complaint might

show compliance compliance with

with Rule

Rule 23.1,

23.1, the Court GRANTS Larry's Larry's Motion

Motion for

for Leave

Leave to Amend

Amend in the

alternative and DENIES the dismissal as to this claim. See King v. Terwilliger, 2013 WL 708495,

13

i

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsangv. Tsang,

Tsang, eta!.

al.

(S.D. Tex. Feb. 26, 2013)

at *7 (S.D. 2013) ("[T]he ("[T]he plaintiff

plaintiff is

is given

given LEAVE

LEAVE TO AMEND his

his complaint

complaint

within within 30 days date of days of the date of this order to comply comply with

with Rule

Rule 23,l(b)'s

23.l(b)'s pleading

pleading standards

standards to

demonstrate tratedemand

demandfutility

futi l i ty....

....").

cC. Larry

arrv FFailed

ailed toto State

State aaClaim

Claimfofor Accounting

r Acco Because u n tin g Becau Accounting of se Acco

Corporate Assets Corporate Assets Is

Is aa Derivative

Derivative Action

Action that Requires Compliance Compliance with

with

GRCP R C P RRule

u l e 23.11

$35

"A "Aderi v ati v e ac

derivative ti on iis action s brought

brought by

by aa sshareholder

harehol to 'enforce a right of of aa ccorporation."'

orporati on.

Dumaliang Silan, 2000 Guam 24 'I[1]7 (citing Guam R. Civ. P. Dumaliangv. Sivan, P. 23.1). Without aa derivative action, 23.l). Without

a sharehol der "do[es]

shareholder "do[es] not have standi ng to pursue personal standing cl ai ms for injuries the corporation personal claims

suffered." suffered." Arnold rn o l d v. Melwani,, 20133 WL 2205430, 0 at *20 (D. GGuam

u Jan.

Jan. 9, 2013). The question

before the Court then is whether accounting accounting is a derivative action such that Larry Lan'y must comply

with the demand demand requirement

requirement under

underRule 23 .1.

Rule 23.1

"It has been "It been held

held that [a claim for an accounting] may be pursued pursued as [a]

[a] derivative action[],

not as [a]

[a] direct action[]." See direct action[]." See 19

19 Am. Jur. a2d Corporati Am. Jut. ons §§ 1946, Corporations 1946, Westlaw (database database updated

Nov. Nov. 2025).

2025). Since

Since aa derivative

derivative action

action "enforce[s] aa right right of

ofaa corporation,"

corporation," see

see Dumaliang,

um 2000

Guam 24 'li 'I[ 7,7, accounting

accounting isisaaderivative derivativeaction

action"when

"when brought

brought in

in connection

connection with

with a corporation

corporation's

right right to recover corporate funds."

funds." See Oliver &

See Oliver & Co. v. Zamber, 2025 WL 1580288, v. Zamber, 1580288, at *8 *8 (E.D.

(E.D. Mo.

Mo.

June 4, 2025) June 4, 2025) (citing Daws on v . Daws on, 645 S.W.2d 120, Dawson 120, 126 (Mo.

(Mo. Ct.

Ct. App.

App. 1982))

1982)) (emphasi

(emphasiss

in original). Generally, aa shareholder original). Generally, shareholder does does not have an interest in his or her contributions to the

capital of the corporation. See Matter 0f See Matter of Guardianshq1 Guardianship z2fMoylan,

ofMoylan, 2017 Guam 28 1]6 '1[ (contrasting

shareholder's loan, shareholder's which is loan, which an asset

is an asset ofofthe

theshareholder,

shareholder, with

with a ashareholder's

shareholder's "additional "additional

contributions contributions to capital," which whichare

are not).

not). Therefore,

Therefore, aa shareholder shareholder seeking accounting of corporate

assets alone must assets alone must bring bring aa derivative

derivative action. See Dooley v.

See Dooley v. O'Brien,

'Brien, 226 Ariz.

Ariz. 149, 155,

149,155,244 P.3d

586, 592 (Ct. App. 2010) 586,592 2010) ("Generally, ("Generally,shareholders

shareholders have

have no

no right,

right, title

title or

or interest

interest in

in the corporate

14

I

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-I 5, Tsang Tsang v.

v. Tsang, al,

Tsang, et al.

property and may not property not maintain maintain aa direct

direct action

action for

for an

an accounting?)

accounting.") (citations

(citations and

and quotations

quotations

omitted); see also omitted), also Fisher Fisher v.v. Big

Big Squeeze

Squeeze(N.Y), 2d 483, (NY), Inc., 349 F. Supp. ad 483,488 (E.D.N.Y.

(E.D.N.Y. 2004)

2004)

action for a corporate ("An action corporate accounting brought by by aa shareholder

shareholder in

in the

the shareholder's

shareholder's individual

individual

capacity fails fails to

to state

state aa claim

claim under

under New

New York

York law.");

law."), Neese v. Richer, 428 N.E.2d 36, 37 (Ind. Ct.

1981) ("[The App. 1981) ("[The plaintiff]

plaintiff] brought a shareholder shareholder derivative

derivative action

action for accounting and for an accounting

damages?) damages.") (emphasis (emphasis added),

added); Sinibaldi v. Sinibaldi ex rel. Get Get Strong,

Strong, Inc.,

Inc., 100

100 So. ad

3d 72,

72, 73

73

(Fla. Dist. Ct.

Ct. App.

App. 2011)

2011) (Under

(Under Florida

Florida law,

law, an

an accounting

accounting action

action "could

"could only

only be

be brought

brought by a

shareholder on shareholder on behalf corporation."). Accounting behalf of a corporation."). Accounting of of corporate

corporate assets

assets makes

makes sense

sense as

as a

where the assets belong

derivative action also because where belong to to the corporation, the right to recover such

assets or seek assets seek transparency transparency over them

them should

should also

also belong

belong to

to the

the corporation.

corporation. See 18 C.J.S.

See 18 C.J.S.

Corporati ons §§ 477 Corporations 477 ("[Deri v ati e ac ("[Derivative action] is a claim that that a corporation could bring because the

corporation's corporation's assets are affected."), assets are affected."), Westlaw Westlaw (database

(database updated

updated May

May 2025).

Here, Larry is seeking an accounting of corporate assets. Specifically, Larry is requesting

that TBC and HTSM account to him "for all activities of of said entities

.. and ... andfor forthe

thepresent

presentassets

assetsofofthe

thecorporate

corporateDefendants

DefendantsTBC

TBCand

andHTSM." Comp!.1]133;

HTSM."Comal. 33; see

see

Oppo. at at 77 ("seek

("seek to

to separate

separate assets

assets of

ofthe

the business

business entities").

entities"). Therefore,

Therefore, the Court

Court finds

finds that

that

Larry's Larry's accounting accounting claim

claim is

is aa derivative

derivative action such that Plaintiff must must comply with the demand

requirement of requirement .I before bringing the action.

of Rule 23.1

Similar to

to Larry's

Larry's derivative

derivative action

action to

to separate the assets

separate the assetsofofTBC T BC and

and HTSM,

HT SM, the Court

GRANTS his Motion for Leave to Amend the the accounting

accounting claim because an amendment might

show compliance compliance with Rule 23.1 23.1 and DENIES TBC and HTSM's HTSM's Motion

Motion to

to Dismiss

Dismiss as

as to

to the

the

accounting claim.

15

l

DECISION AND ORDER RE MOTIONS TO DISMISS Tsangv. Tsang,

CV0897-15, Tsang Tsang, eta/.

al.

D. D. Larrv

LarryFailed

Failedto

to State

State aa Claim

Claim for

forPartition

PartitionBecause

Because He

He Failed

Failed to

to Plead

What Pronertv

Property HeHe Seeks

Seeks to Partition

Partition and

and Whether

Whether HeHe Owns

Owns Such

Such

Property Propertv

that a party seeking partition identify both the property to be partitioned Guam law requires that

ownership interests

and the ovmership interests of of all

all parties claiming an interest interest in that property. In particular, "the

summons summons must must contain

contain aa description

description of

of the

the property

property sought

sought to

to be

be partitioned."

partitioned." 77 GCA

GCA §§ 24406.

24406.

complaint must The complaint also set forth "the interests of all must also all persons persons in the

the property,

property, whether

whether such

such persons

persons

are known or are known or unknown."

unknown." 77 GCA

GCA §§ 24403.

24403. And

And critically,

critically,one

one cannot

cannot partition

partition what

what one

one does

does not

not

own: own: only only "co-owners "co-owners of

of [a]

[a] personal

personal property"

property" may

may seek

seek partition

partition under

under 77 GCA

GCA §§ 24402,

24402, and

and

only only aa co-tenant co-tenant or

or life

life tenant

tenant may

may seek

seek partition

partition of

ofreal

real property

property under

under77GCA

GCA§§24401.10

24401. 10

Here, Lan'y

Larry has not

not stated a viable partition claim because he neither identifies the specific

property he seeks to partition nor alleges alleges that

that he

he personally

personally holds

holds a co-ownership interest in such

property. The property. contain no description The summonses contain description of any real real or

or personal

personal property

property subject

subject to

partition, and while the the Complaint

Complaint alleges

alleges Larry's ownership of Larry's ownership ofshares shares in

in TBC and

and HTSM, it does

not identify identify "the "the interests

interestsof all persons"

fall persons" in

in any

any specific asset

asset allegedly subject to division. Instead,

the Complaint the vaguely refers Complaint vaguely refers to to "the personal

personal and

and real

real property

property assets

assets of

of the

the Plaintiff

Plaintiff and

and

describing what those

Defendants" without describing those assets assets are.

are. See Comp!. qt,i 33. That is insufficient See Comal. insufficient to

support a partition partition action under Guam law.

law.

Moreover, Moreover, as

as TBC

TBC and

and HTSM

HTSM correctly

correctlynote,

note, Larry

Larryseeks

seeks to

to partition

partitioncorporate

corporateassets

assets that

the corporations-not

are owned by the corporations-notbybythe theshareholders

shareholdersindividually.

individually. TBC's

TBC's Mot.

Mot. at

at 8.

8. Larry

Larry

himself himself clarifies that his partition action action is

is "based

"based on the inventory and real real property

property assets of

of each

corporation." Opp'n Opp'n at

at 66 (emphasis added).Because "[a]n (emphasis added). "[a]n individual individualshareholder,

shareholder, by virtue ofhis

10 The Court notes that while Land seeks "the 10The Court notes that while Larry seeks "the partition of of the

the personal

personal and real property and real property assets assetsof

ofthe

thePlaintiff

Plaintiff and

and

Defendants," Larry only Defendants," Larry only invokes invokes 7 GCA §24402,

7 GCA § 24402, which

whichapplies

appliessolely

solelytotothe

the partition

partitionof

ofpersonal

personal property.

property.

16

I' i E

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-I 5, Tsang Tsang v. Tsang, et al.

Tsang, et al.

of shares,

ownership of shares, does does not

not own the

the corporation's assets,"

assets," Dole

Dole Food Co. v.

v. Pafrickson, 538

Patrickson, 538

U.S. 468, 475 475 (2003),

(2003), no

no amendment

amendment could

could transform

transform the

the corporate

corporate assets

assets into

into Larry's

Larry's assets for

the purposes of of this

this partition

partition action.

action. For

For that

that reason,

reason, Larry's

Larry's Motion for Leave to Amend the the

partition claim is DENIED and the partition claim is DISMISSED.

E

E. Larrv's

Larry's Argument

Argument Regarding

Regarding the Veil-Piercing Doctrine Is Is Irrelevant

Irrelevant

as to the Court's

Court's Analvsis Accounting Claim Analysis of the Accounting Claim and the Partition Partition

Claim

also considered

The Court has also considered Lanky's Larry's argument regarding the veil-piercing doctrine and

finds this argument irrelevant finds irrelevant to to the Court's analysis

analysis of

of the

the accounting

accounting claim

claim and

and the

the partition

partition

claim. Specifically, claim. Specifically, Larry Land argues

argues that

that "[w]hen

"[w]hen other

other shareholders

shareholders combine

combine for

for the

the purpose of

of

exploiting the assets of of the various

various entities

entities without

without regard

regard for

for their

their separate

separate existence,

existence, remedy

lie in

must lie in the the form

form ofofaccounting

accounting and

andpartitioning

partitioning those

those assets

assets toto establish

establish their

their separate

separate

existence." P1.'s Pl.'s Opp'n at 7. He

He then

then devotes half

half a page

page to

to reciting

reciting factors

factors courts

courts consider when

determining whether to pierce the corporate veil.

It It is

is unclear

unclear how

how the

the veil-piercing

veil-piercing doctrine

doctrine advances

advances Larry's claims

claims for accounting

accounting or

partition. partition. Veil piercing isis an Veil piercing an equitable equitable remedy

remedy that allows courts, in narrow circumstances, allows courts, circumstances, to

disregard the disregard corporate form and the corporate and hold hold shareholders

shareholders personally

personally liable

liable for

for corporate

corporate debts.

debts. See

See

Associated Ins.

Ins. Underwriters,

Underwriters, Inc.

Inc. v.

v. Guam Int'!

]nt'l Insurers,

Insurers, Inc., Civ. No.

No. 90-00059A,

90-00059A, 1991

1991 WL

336911, at *5 336911, at *5 (D.

(D, Guam App. Div. June

June 18, 1991)

1991) ("The purpose of the doctrine is not to protect

creditor, but

every unsatisfied creditor, but rather rather to

to afford

afford him

him protection

protection where

where some conduct amounting to

bad faith makes it inequitable for for the

the owner

owner of a corporation to hide behind its corporate veil.").

Larry isis not

However, Land not attempting attempting to

to impose

impose personal

personal liability

liability on the shareholders of of TBC

HTSM, HTSM, or orEvergreen.

Evergreen. Instead,

Instead, he seeks an accounting and a partition partition of

ofthe

the companies'

companies' assets

assets as

as

a shareholder and member of of the

the corporate entities. It is therefore unclear to corporate entities. to the the Court how veil

17

• u

DECISION AND DECISION AND ORDER ORDERRE

REMOTIONS

MOTIONSTO

TODISIVHSS

DISMISS

CV0897-15,Tsang CV0897-15, Tsangv.v. Tsang, Tsang eta!.

al.

piercing, which applies to achieve equitable outcome for a creditor of of a corporation under limited

circumstances, hasany circumstances, has anyapplication applicationto

to Larry's

Lam"y'sclaims.

claims.For

Forthat

thatreason,

reason,the

theCourt

Courtfinds

finds Larry's

Larry's

argument argument with respect respect to

to piercing the corporate veil inapposite to his claims.

F. Larrv

Larry Failed

Failed to

to State

State aaClaim

Claimfor

forDissolution

Dissolution Because

Because He

He Does

Does Not

Have Have aa Legal Basis for

for His

His Action

11. The

The Guam Business Corporation Act Business Corporation Act Does DoesNot

NotApply

Applvto

toLarry's

Larrv's

Claim Claim for

for Dissolution

Dissolution

A threshold issue in

in analyzing whether

whether the Court

Court should

should dismiss

dismiss Lanky's

Larry's dissolution claim

is whether the General Corporation Corporation Law or its

its successor the Guam Business Business Corporation

Corporation Act

Act

("GBCA") ("GBCA") should should govern

govern Larry's

Larry's dissolution

dissolution claim.

claim. Both TBC and HTSM

HTSM were incorporated in

Guam before the GBCA was was passed.

passed. At

At the

the onset

onset of

ofthis

this lawsuit

lawsuit in

in 2015,

2015, both

both entities

entities had not

adopted the GBCA. See See TBC's Mot. at 9.

First, the GBCA does not apply to "a corporation organized under the General Corporation

Law of Law of Guam Guam prior

prior to

to the

the effective

effective date

date of

of [the] Act." 18

[the] Act." 18 GCA

GCA §§ 281703. But the

281703. But the Act

Act applies

applies "if

"if

[such corporation's] articles articles of

of incorporation are amended, in accordance accordance with the

the provisions of

of

its articles articles of

of incorporation,

incorporation, bylaws, and law applicable to to such corporation, without regard to this

Act, to provide Act, to provide that that this Act shall

this Act shall apply

apply to

to such corporation." 18

such corporation." GCA §28 18 GCA issue here The issue

l702(b). The

§ 281702(b). here

is: Once a corporation adopts the Act, does does the Act apply retroactively to govern retroactively to govern the the Plaintiffs

Plaintiffs

claim of of dissolution, which was filed before the adoption?

The The Guam Supreme

Supreme Court

Court has

has held

held that

that "there

"there isis aa'presumption 'presumptionagainst

against retroactive

retroactive

application application of ofnew laws

laws to pendingcases." Jenkinsv.v.Montallana, cases." Jenkins ~ 13 Montallana,2007 Guam 121] 13(citing (citing Bank

Bank

of ofGuam Guam v.v. Ready,

Reidy, 2001I Guam

Guam 14 ~ 16

14 11 16n.n.2).

2). "As

"As a rule, aa statute

statute is

is presumed to have only

presumed to

prospective effect unless prospective effect unless itit is made made expressly

expressly retroactive

retroactive or is

is retroactive

retroactive by 'necessary 'necessary

implication." implication."' In re re Request of Twenty-Fourth Request of Twenly-Fourth Guam Legislature Legislature of Declaratory Declaratory Judgment,

Judgment, 1997

18

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang v. CV0897-15, v. Tsang, Tsang,Hz*al.

et

15 ,r Guam 15 11515 (citing (citing Nelson v. Ada, 878 F.2d 277, 277, 280

280 (9th

(9th Cir.1989)).

Cir.1989)).lf"the

If"the purpose of

of statute

is abundantly clear" that it is intended to apply retroactively, the Court Id ,r 20.

Court will so apply it. Id.

The GBCA

GBCA is

is clearly

clearly not

not made

made expressly

expressly retroactive-in

retroactive-in fact,

fact, itit isis made

made expressly

expressly

prospective. See 18 18 GCA

GCA §§ 1101.1

1101.1 ("A

("A corporation

corporation organized

organized in

in Guam

Guam prior

prior to

to the

the effective

effective date

date

of of the the Guam Guam Business Business Corporation Act shall shall not

not be

be subject

subject to

to the

the Guam

Guam Business Corporation

Act."). Therefore, Therefore, the the GBCA

GBCA does not

not govern

govern Larry's

Larry's claim

claim of

of dissolution.

With the GBCA inapplicable here, the Court Court further

further finds

finds that

that the

the Guam

Guam Corporation

Corporation Law

is silent on involuntary dissolution. Therefore, this Court looks to the common law in considering

Larry has whether Larry has stated aa claim claim for

for dissolution

dissolution of TBC and

ofTBC and HTSM.

HTSM.See

See In re

re People, 2024 Guam

17 1]22 17,r ("[W]here the 22 ("[W]here the code code is

is silent,

silent, the

the common

common law govems.").

0ovems.")..11

2. Larrv

LarryFailed

Failed to

to State

State aa Claim

Claim for

forDissolution

Dissolution Under

Under Common

Common

Law Law

"As "As aa general general rule,

rule, aa minority

minority stockholder

stockholderor

orgroup

groupofofstocldmolders of a going stockholders of going and solvent

corporation corporation cannot cannot maintain

maintain aa suit

suit to have

have itit dissolved

dissolved or

orto

tohave

haveits

itsassets

assets distributed."

distributed." 19

19 Arm,

Am.

Jar. ad Corporations Jur. 2d Corporations §§ 2350.

2350. At

At common

common law,

law, aa court

court lacks

lacks "the

"the ability

ability to

to grant

grant petitions for

petitions for

involuntary involuntary dissolution dissolution of

ofaa corporation

corporation without

without express

express authorization by statute."

statute." See

See Renbaum

v. v. Custom Holding Inc., 871 Custom Holding, 871 A.2d 554, 565 565 (Md. 2005),

2005); see also Peck

see also Peck v.

v. Jonathan

Jonathan Michael

Builders, Inc., 2006 WL 3059981, Builders, Inc., 3059981, at *5 *5 (R.I.

(R.1. Super.

Super. Oct.

Oct. 27,

27, 2006), aff'd, 940

940 A.2d 640

640 (R.I.

(RI.

2008) ("[E]quity ("[EJquity courts courts lack

lack inherent

inherent power to dissolve a corporation.");

corporation."), In re

re Mai.

Mut. Bldg. & Inv.

Bldg. &

Co., 15 Ohio Law Abs. 218, 218, 219-20

219-20 (Ohio

(Ohio Ct.

Ct. App.

App. 1933)

1933) ("It

("It is

is aa well-settled

well-settled rule

rule that, in the

absence absence of of statutory statutory authorization,

authorization, aa court

court of

of equity,

equity, in the exercise of of its general jurisdiction, has

11 The Court 11 The Court notes notes that

that no

no party,

party, including

including TBC and l-ITSM, TBC and HTSM,disputes

disputesthat

thatthe

the standards

standards governing

governing involuntary

involuntary

dissolution dissolution must must be drawn from the common common law. Defendants diernselvesconcede Defendants themselves concedeas asmuch.

much.See SeeTBC's

TBC's Mot.

Mot. at

at 9

9

("Chapter ("Chapter 55 discusses discusses voluntary dissolution, dissolution, but not involuntary dissolution, meaning that the court must resort to but not involuntary dissolution, meaning that the court must resort common law to to determine standardsupon determine the standards uponwhich whichto

toundertake

undertakeananinvoluntary

involuntarydissolution

dissolutionof

of aacorporation.").

corporation.").

19

T 1

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-15,Tsang v. Tsang, CV0897-15, Tsangv. Tsang, et al.

power to no power to dissolve dissolve or wind up the

wind up the affairs of a corporation.");

corporation."), Cardoz

Cardozao v.. Millington, 297 P.2d Ml i ngt on, 297 P .2d

778, 783 (Cal.

(Cad. Dist.

Dist. Ct.

Ct. App.

App. 1956)

1956) (noting

(noting that

that Section

Section 404

404 of the California Civil Code, Code, which

provided for provided involuntary dissolution for involuntary dissolutionof of aa corporation

corporation by

by a shareholder's

shareholder's lawsuit,

lawsuit, "was in

"was in

of the common

derogation of common law")

law").

Under n d tthe ccommon

o m m o n l alaw,

w , t hthis

i s CCourt

o u rt l alacks

c k s i ninherent

h e re n aauthority

ut tto oorder

rd e r tthe

h e i involuntary

nvolunt

of a solvent, operating corporation dissolution of corporation absent absent explicit

explicit statutory

statutory authorization.

authorization. Because

Because the

Corporation Law

General Corporation Law contains contains no

no provision

provision authorizing

authorizing judicial

judicial dissolution at the request of of a

minority minority shareholder, shareholder, this Court's Court's equitable

equitable Powers

powers cannot

cannot supply

supply what

what the

the statute

statute omits.

omits. See

See

Renbaum, Md. at Renbaum, 386 Md. at 47 47 (holding

(holding that

that courts

courts cannot order "dissolution of a corporation corporation without

without

express authorization express authorization by by statute").

statute"). Larry

Larry cites

cites no

no common law

law doctrine

doctrine that

that would

would permit

permit

dissolution notwithstanding the absence of statutory absence of statutory authorization.

authorization. Accordingly, Accordingly, even

even assuming

all of his factual factual allegations are

are true,

true, he

he has

has not stated a legally cognizable claim for involuntary

dissolution under common common law.

law. And

And because

because no

no amendment

amendment could

could remedy

remedy the

the fundamental

fundamental lack

lack

of legal authority for the relief sought, of sought, Plaintiff Plaintiff Larry's

Larry's Motion for Leave to Amend Amend is DENIED,

and his claim for dissolution ofTBC and HTSM is DISMISSED.

G. Mo tio n to

Motion to Dismiss

iss by b y TBC

T BC and

an d HTSM

HT Is

Is Mo

Moot o t as L arrv's Claim for as to Larry's

Pendenten te Lite IInjunction n j u n c ti Be c

Because e Presiding

i d i n g Judge

J u d g e Lamorena

L r n a Ha

Hass

Alread v Den Already Denied ied th e In ju n ctio n

Previously, Presiding Judge Previously, Presiding Judge Lamorena Lamorena "denie[d]

"denie[d] [Plaintiff's]

[Plaintiffs] request for aa preliminary preliminary

because Plaintiff

injunction" because Plaintiff"will not suffer irreparable injury,"

injury," which

which Presiding Judge

Judge Lamorena

Lamorena

stressed was the "sine "sine qua

qua non

non of

ofinjunctive

injunctive relief." See

See P.J.

P.J. Lamorena's

Lamorena's Decision at 4-5 (citing (citing

Siegel LePore, 234 Siegel v. LePore, 1163, 1175-77 234 F.3d 1163, 1175-77 (11th Cir. 2000)).

(nth Cir. 2000)). InInparticular, particular, Presiding

Presiding Judge

Judge

found Plaintiff's

Lamorena found Plaintiffs assertion assertion of

of harm

harm was

was "too

"too speculative

speculative for

for aa temporary

temporary restraining

restraining

order or preliminary preliminary injunction

injunctiontotoissue."

issue." Id

Idatat5.5.Because

Because Presiding

Presiding Judge

Judge Lamorena

Lamorena has

has already

20

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang v. CV0897-15, v. Tsang, Tsang, et al.

al.

denied Plaintiffs request request for

for preliminary

preliminary injunction,

injunction, the Court finds finds Defendants'

Defendants' Motion MOOT

as to this request.

request.

H. Prior Denial The Prior Denial of

ofTemporary

TemporaryRelief

ReliefDoes

Does Not

Not Preclude

Preclude Permanent

Permanent

Injunctive Injunctive Relief

Presiding Judge Lamorena denied After Presiding denied Larry's request request for

for temporary

temporary restraining

restraining order

order

and preliminary injunction, see P.J.

P.J. Lamorena's Decision at Lamorena's Decision at 5, 5, TBC and HTSM

HTSM asserted that "the

rejected Plaintiffs

Court rejected PlaintifFs assertions assertions that

that he suffer irreparable he would suffer irreparable injury injury if the

the meetings

meetings

proceeded." Reply Reply at

at 7-8.

'7-8. Because

Becausethe

theCourt

Court"has

"has...

... substantively addressed [Larry's] concerns

regarding the regarding the holding shareholder and director holding of shareholder director meetings,"

meetings," Larry's request request for

for permanent

permanent

injunction is injunction is moot. Id. atat 8.8. Lan'y Larry countered

countered that

that "[w]hile

"[w]hile the

the [C]ourt

[C]ourt ruled

ruled that

that injunction

injunction by

Temporary Restraining Temporary Restraining Order Order would

would not

not be

be allowed,

allowed, such

such does

does not

not prevent on the full presentation prevent on

of the evidence at trial the [C]ourt from imposing future future relief

relief against continuing freeze-out of of

Plaintiff." Opp'n Plaintiff." Opp'n at 10.

the argument.

Larry has the better of the argument. The standard for a preliminary preliminary injunction differs from

the standard for a permanent permanent injunction, even even though

though "both require a showing of of irreparable harm

which cannot be remedied through monetary monetary compensation."

compensation." See

See Gov

Gov?'t of

of Guam v.

v. Gutierrez,

Gutierrez,

2015 ,r 35 2015 Guam 8 ii 35 n.8.

n.8. To obtain a preliminary injunction, injunction, "[a]

"[a] plaintiff must

must show that he will

suffer irreparable injury and that he otherwise lacks an adequate remedy at law." Mack v. Davis,

13 ,r (citingMarangiv.

2013 Guam 131112 v. Gov'to/Guam, 319 F.Supp.2d ofGuam, 319 F.Supp.2d 1179, 1179, 1186 (D. Guam2004))

2004))

added). By contrast, a permanent injunction requires a showing that "[the plaintiff] has (emphasis added).

suffered an an irreparable

irreparable injury."

injury." See

See Valencia v.

v. Sap la, Super.

Sapla, Ct. Guam

Super. Ct. Guam CV0085-l

CV0085-16 (Findings of

6 (Findings of

Fact and Conclusions of Law Law at

at 9,

9, Jun. 2, 2017)

Jun. 2, 2017) (citing

(citing eBay Ire. v.

eBay Inc. v. MercExchange, MercExchange, L.L.C.,

L.L.C., 547

547

U.S. 388,391 391 (2006));

(2006)), Farmerlv

Farmer's Coop.

Coop. Ass'n

Ass'n of Guam v.

a/Guam v. McDonald,

McDonald, Super.

Super. Ct.

Ct. Guam

Guam CV1125-

21

l

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang v. Tsang, Tsangv. el al

Tsang, eta!.

14 (Dec. & Order Order atat 16,

16, Feb. 6, 2015) (same).

(same). In

In other

other words,

words, the

the preliminary-iajunction preliminary-injunction inquiry

focuses on whether whether the

the plaintiff

plaintiff faces

faces imminent harm before before the

the case can be fully heard, whereas

injunction is evaluated only after the Court has considered a permanent injunction considered the full full presentation of

of

evidence and determined whether the plaintiff has in fact suffered an injury warranting this relief.

This distinction

distinctionundermines

underminesTBC

TBCand

andHTSM's

HTSM'sreliance

relianceononPresiding

PresidingJudge Lamorena's Judge Latrena's

of preliminary relief reflects Decision and Order. The denial of reflects only that Lan'y Larry did not satisfy the

requirements for requirements temporary injunction for a temporary injunction or preliminary preliminary injunction

injunction at

at that

that early

early stage

stage of the

the

litigation; it does litigation, does not not constitute

constitute aa determination determination that

dirt he cannot establish irreparable harm on a full

evidentiary record.

record. Therefore,

Therefore, Presiding

Presiding Judge

Judge Lamorena's Decision and Order does not foreclose Lamorena's Decision

the Court from granting granting permanent

permanent injunctive

injunctive relief

relief should

should the Court, after holding a full hearing

on the merits, determine that such relief is appropriate.

Accordingly, TBC and HTSM's HTSM's reliance

reliance on

on the

the prior

prior denial

denial of

of the

the preliminary injunction

is misplaced, and the Court DENIES the Motion to Dismiss of of TBC

TBC and

and HTSM

HTSM as

as to

to Lanky's

Larry's

request for permanent permanent ire unction.

injunction.

III. 111. Motion

Motion to

to Dismiss

Dismiss by Evergreen

Evergreen moves to

to dismiss

dismiss all

all claims asserted against against it on the grounds that Larry Land fails to

state any cognizable state any cognizable claim.

claim. Evergreen's

Evergreen's Mot.

Mot. at

at 1-2. Evergreen argues that that itit owed

owed no

no fiduciary

duty to Larry Lan'y as a matter

matter oflaw,

of law, and

and that

that Larry

Larry alleges

allegesonly

only conclusory

conclusory assertions

assertions of fraud without

identifying any misrepresentation, identifying any misrepresentation, intent, intent, reliance,

reliance,ororresulting

resultingdamages.

damages.Id.

Id at 3-5. Evergreen

Evergreen

further contends that Larry's Larry's second

second and third causes

causes of action are derivative in nature and must

be dismissed because Larry Larry did

did not

notmake

makeaapre-suit

pre-suitdemand

demand ororplead

pleadparticularized

particularized reasons

reasons for

failing to failing to do do so, as

as required by

by Rule 23.1.

23.1. /d.

Id at

at 5-6.

5-6. Finally,

Finally, Evergreen

Evergreen argues

argues that

that Plaintiff

Plaintiff has

any facts

not alleged any facts triggering triggering dissolution

dissolution under the

the Operating

Operating Agreement

Agreement or Guam law, and that

22

l' G

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang CV0897-15, Tsang v.

v. Tsang,

Tsang, et

et al.

al

his request to enjoin other members from conducting business business violates

violates the Agreement and GRCP

Rule 65. Id. Rule 65. Id at 6-7.

A. Larrv

Larry Failed

Failed to

to State

State aa Claim

Claim for

for Breach

Breach of

of Fiduciarv

Fiduciary Dutv

Duty as

as to

to

Evergreen Because EvergreenDoes Because Evergreen DoesNotNotOwe OweLarry

Larrv aa Fiduciary

Fiduciarv Duty

Dutv

Generally, an LLC does not owe owe aa fiduciary

fiduciary duty

duty to

to its

its members.

members. See,

See, e.g., Cosmo

Cosma v.

v. Fir

Fit

Kitchen, LLC, Kitchen, 7915, 2022 LLC, No. 22 CVS 7915, 2022 WL WL 2815117,

2815117, at

at *2

*2 (N.C.

(N.C. Super.

Super. July

July 18,

18, 2022)

2022) ("[A]H

("[A]n

LLC LLC does does not owe a fiduciary

fiduciary duty to its

its members."),

members."); Yonkov

Yonkov v. Holding Gap.

v. Maximus Holding Grp. LLC, 2024

WL 2300967, at *4 (N.D. Ohio May 21, 2024) ("As an an LLC

LLC is

is an

an entity,

entity, like

like a corporation, that

can only act through its agents or managers, it makes sense that the entity entity alone

alone does

does not owe a

duty to its members. Rather the fiduciary fiduciary duty

duty rests

rests on the member or manager manager that acts for the

LLC."), LLC."); see alsoHarris see also Harris v. TLSA/Igmt.

TLS Mgmt. && Mktg.

Mklg. Serve., LLC,2019 WL 7763990 at *4 (D.P.R. Mar.

Servs., LLC, Mar.

18, 2019) ("It is settled law in many jurisdictions that a corporate entity does not have a fiduciary 18,

duty toward its members or or stockholders,

stockholders; rather, that duty is held held by

by the

the corporation's

corporation's officers and

directors.") directors.")..

Here, Evergreen, as an LLC, does not owe Larry, as a member, a fiduciary duty. Larry has

not identified any legal authority authority to

to the contrary.

contrary. Because a fiduciary fiduciary duty is a necessary element

of of a breach of of fiduciary

fiduciary duty claim, Larry has not not sufficiently

sufficiently pled

pied this claim against Evergreen.

The Court Court also finds that since no amendment amendment of

of the Complaint

Complaint could

could devise a duty that Evergreen

owes Lan'y, Larry, his Motion for Leave to Amend as to to this

this claim

claim is also DENIED. Accordingly, the

claim of of breach of

of fiduciary is DISMISSED as to Evergreen.

23

I

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-15, Tsang v. Tsang, Tsangv. et al

Tsang, eta!.

B. Larrv

LarryFailed

Failedtoto State

State aa Claim

ClaimtotoSeparate

Separatethe

theAssets

Assets of Evergreen and

for an Acco Becau se He Accounting Because He Has Has Not Sh

Shown Co p lian

Compliance with the

Demand

an Requirement Under GRCP RCP Ru le 23.1 Rule

A member

member ofofan

ao LLC,

LLC,just

justlike

likea ashareholder

shareholderofofaacorporation, corporation, may

maysue

sue derivatively.

derivatively. See

See

Bischojfv. Bischoffv. Boar Boar's Head Provisions

Provisions Co.,, 436 F. Supp.

Supp. 2d

2d 626,

626,631-32

631-32 (S.D.N.Y.

(S.D.N.Y. 2006) ("[B]ecause

an ao LLC is is aa hybrid of

of the corporate and

aod limited partnership

partnership forms,

forms, its

its members should have the

same rights as corporate shareholders and limited partners, including the right, right, under

under common

common law,

to bring bring derivative derivative claims."),

claims."); Rose

Rose Goodyear Props.,., LLC LLC vv. NEA

NBA Enters

Enters.. Ltd. Ps hz 235 Ariz.

Pship,

344, 332P.3d 339,344,332 P.3d86, 91(Ct.

86, 91 (Ct.App.

App.2014)

2014)(noting

(notingthat

that"a"amember

memberofan

an LLC

LLC may

may bring

bring a derivative

action"); Condon v. action"), v. Kadakia, Kadakia,661 S.W.3d443,

443,453 (Tex. App. 2023)

2023) ("Under

("Under Delaware law, when when

ao injury

a claimant seeks recovery for an injury to to aa limited

limited liability

liability company, that claim belongs to the

company and and can brought by a member cao be brought member only as a derivative derivative claim.").

claim.").

In bringing

bringing a derivative lawsuit, ao derivative lawsuit, an LLC LLC member

member must also comply with with the

the demand

demand

requirement under Rule 23.1. See Wood v.

v. Baum, 953 A.2d 136,

136, 140 (Del. 2008)

2008) (noting that a

derivative r i v a t i v e lawsuit l a w s u i t against

a g a i n s tdirectors

d i r e c t o r sofo fa a Delaware D e l a w a r eLLC

L L C must

s t comply

m p l y with

i t t the

h e ddemand

ema

requirement), Barone requirement); Barons v. Sowers, Sowers, 128 A.DJd

A.D.3d 484, 484, 10 N.Y.S.3d N.Y.S.3d 22,

22, 23

23 (2015)

(2015) ("The

("The demand

requirement requirement of of Business

Business Corporation

Corporation Law

Law§ 626(c) also applies

626(c) also applies to

to members

members of

of New

New York

York limited

limited

liability liability companies."), companies."); Star v.

v. TI Oldfield Dev., LLC, 962 F.3d 117, 128 (4th Cir.

Cir. 2020)

2020) ("And

("And as

as

to [the p1aintiff']s plaintiff]s eighth through seventeenth causes of ofaction,

action, the

the Special

Special Master concluded that

although they although they were were not

notduplicative

duplicative of

ofthe [LLC]Boards'

the [LLC] Boards'claims,

claims,they

theyfailed

failedtotomeet

meetRule

Rule2323.. 1I (b

(b)'s

)'

demand requirement because [the [ plaintiff] failed to plaintiff] failed to 'state with particularity'

particularity' that he had made a

pre-suit demand of of the Boards.").

Because the Court has determined that Larry Lan'y has not adequately pied pled compliaoce

compliance with the

demand requirement for the claim to separate assets and aod for the claim of

of accounting against TBC

24

r

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang Tsangv. Tsang, eta/.

al.

Court likewise

and HTSM, the Court likewise finds Larry has has failed

failed to

to sufficiently

sufficiently plead compliance with the

demand requirement for the corresponding claims claims against Evergreen. However, However, since amendment

cure these may cure these deficiencies, deficiencies, the Court DENIES Evergreen's Motion Motion to Dismiss and GRANTS

Larry'sMotion Larry's Motionfor forLeave

LeavetotoAmend

Amendthese

theseclaims

claimsagainst

against Evergreen.

cC. LarryFailed

Lark FailedtotoState

StateaaClaim

Claimfor

forPartition

PartitionBecause

Because Plaintiff

Plaintiff Has Not

Shown that He Owns the Shown that the Property Propertv He

He Seeks toPartition.

Seeks to Partition.

Guam law on partition does ou partition does not distinguish distinguish between

between the assets of an

assets of an LLC

LLC and those

those of

of a

corporation, and corporation, and the the Court's

Court's analysis

analysis of

of Larry's claims regarding Lam/'s claims regarding TBC and and HTSM

HTSM applies

applies with

equal force here. The Court notes that as with a shareholder and his or her corporation, a member

of an LLC does does not own the LLC's property, both under Evergreen's Evergreen's Operating

Operating Agreement and

applicable case law. Article 5.8 5.8 of

of the

the Evergreen

Evergreen Operating

Operating Agreement

Agreement provides that "the Manager

shall cause all all assets,

assets,whether

whetherreal

realor

orpersonal,

personal, ...

... be

be held

held in

in the

the name of the Company." See Deal.

See Deel.

of Camacho, of Camacho, Ex. at 14 14 (Dec. 9, 2015)

2015) ("Deel.

("Deal. of

of Camacho").

Camacho"). This provision is consistent with the

principle that

well-established principle that LLC LLC members

members have no ownership interest interest in company assets.

assets. See

See

In re Brattain, 435 B.R.

Brittain, 435 B.R. 318,

318, 322

322 (Bankr.

(Bankr. D.S.C.

D.S.C. 2010)

2010)("The

("The members

members of

of an

an LLC

LLC 'have no

property interest in property owned by [the LLC]."');

LLC]."'), Ecce

Ecco Plains,

Plains, LLC v. United States, States, 728 F.3d

1190, 1197 n.10 n.10 (10th

(10th Cir.

Cir. 2013)

2013) ("[LLCs]

("[LLCs] generally

generally operate

operate under an entity

entity theory of property

this theory, a member

rights. Under this member has no interest in the property owned by the LLC.").

The Court further

further observes that its consideration consideration of the Operating Operating Agreement does not

convert Evergreen's Motion Motion to 12 On a Rule 12(b)(6)

to Dismiss

Dismiss into a motion for summary judgment."

summary judgment. On )(6)

motion, a court may consider "written instruments attached attached to the complaint as exhibits" as well

12 The re The Court further notes that that neither

neitherLarry

Larrynot Evergreen

Evergreen has

has arguedthat conversion isrequired.

required.

25

i

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang v. Tsang, CV0897-15, Tsang, et al.

as "statements or documents incorporated incorporated in the complaint by reference." Core Techlnt'l Int'! Corp.

Corp. v.

Hamil Eng'g & Constr. Hanil Eng IO Guam 13 ,r1]29.

Co., 2010

Constr. Co., 29.

Here, the Complaint expressly refers refers twice

twice to

to aa "management

"managementagreement."

agreement."See

SeeComal. ,r

Comp!.11

15 (alleging that "control (alleging that "control of Defendant Evergreen has been removed from Plaintiff Plaintiff without any

amendment of of the

the Articles

Articles or

or management

management agreement"), ,r 30 agreement"); 11 30 (referring to "the Articles (referring to Articles and

Management Agreement of of Defendant Limited Liability Liability Company Evergreen"). The Court finds

that this this "management agreement" is the same document as Evergreen's agreement" is Evergreen's Operating Operating Agreement

because Article Article 1.1

1.1 of

ofEvergreen'

Evergreen's Articles of

s Articles ofOrganization-attached Organization-attached to

to the

the Complaint

Complaint as Exhibit

5-states states that that any

any reference

reference to

to an

an "Agreement"

"Agreement" means "the

"the Operating

Operating Agreement of

of Evergreen

Investments LLC, Investments LLC, as as originally

originally executed

executed and

and as amended

amended from

from time

time to

to time."

time." See

See Con pl., Ex. 5 at

Comp!.,

1. I. Thus, because the Complaint incorporates the Operating Agreement Agreement by reference, the Court may

properly properly consider in resolving consider it in resolving Evergreen's Evergreen's Motion to Dismiss without without converting

converting the motion

into one for for summary

summary judgment.

no amendment can

Because no can transform transform property

property held

held in

in Evergreen'

Evergreen'ss name into

into Plaintiffs

Plaintiffs

personal property, amendment would would be futile. The Court therefore DENIES the Motion for Leave

to Amend and GRANTS Evergreen's Evergreen's Motion

Motion to

to Dismiss

Dismiss as

as to

to the

the partition

partition claim.

D. Larrv

LarryFailed

FailedtotoState

Stateaa Claim

Claimfor

forDissolution

Dissolutionof

ofEvergreen

EvergreenBecause

Because He

Failed Failed to

to Allege that Trigger Dissolution under Allege Facts that under Either Either Guam Law

or the Operating

Operating Agreement of of Evergreen

A limited liability company may be involuntarily dissolved by court liability company court decree decree in an action

action

brought by the Attorney General when it is established brought established that the the company

company was

was formed through Haud,

fraud,

acted ultra vires, virus, violated the law in aa manner manner resulting

resulting in forfeiture

forfeiture of

ofits

its charter,

charter, engaged

engaged in

persistently fraudulent or illegal conduct, or otherwise otherwise abused its powers Powers contrary to public policy.

18 GCA §§ 15127(a). 18 GCA In addition, 15127(a). In addition, the the Guam

Guam Department

Department of

of Revenue

Revenue and

and Taxation

Taxation may

may dissolve

dissolve an

an

26

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-l 5, Tsang Tsang v.

v. Tsang,

Tsang, et al.

LLC for failing to file annual reports or pay required required fees,

fees, failing

failing to maintain aa registered registered agent,

or failing to or failing to update registered agent update registered agentor oroffice

officeinformation.

information. 18

18 GCA

GCA §§ 15127(b).

15l27(b). The

The statute further

statute further

preserves the right to to seek annulment or dissolution on any other grounds provided under Guam

llaw. 18 GCA §§ 15127(e).

18 GCA 15127(e).

Evergreen's Operating Agreement Agreement also

also specifies

specifies certain

certain events

events that trigger dissolution.

dissolution.

Evergreen "shall be dissolved" upon upon the death, incapacity, bankruptcy, withdrawal, or dissolution

of member, the expiration ofEvergreen's of a member; of Evergreen's term of of existence,

existence; unanimous

unanimous written

written agreement

agreement of

of the

members to to dissolve, dissolve; the sale or other disposition of substantially all all of

of Evergreen'

Evergreen's assets,

assets; or the

entry of aa decree entry of decree of ofjudicial dissolution under 18 dissolution under 18 GCA

GCA §§ 15127. Decl. of

15127. Deel. of Camacho, Ex. at Camacho, Ex. at 22-23.

22-23.

Here, Here, the the Court is presented with neither presented with neither an action action by the

the Attorney

Attorney General

General nor an

an

administrative dissolution by administrative dissolution by the Department of of Revenue

Revenue and

and Taxation.

Taxation. Accordingly,

Accordingly, Plaintiff

Plaintiff

cannot rely cannot rely on on§ 15127 to dissolve

15127 to Evergreen. Furthermore, dissolve Evergreen. Furthermore, Larry has also Larry has not pled

also not pied any

any facts

facts to

to

trigger trigger dissolution under the dissolution under the Operating Agreement. For that reason, Operating Agreement. reason, Larry's dissolution dissolution claim

claim

against Evergreen is insufficiently pied.

pled.

Taken all the facts facts alleged

alleged as

as true,

true, the

the Court finds

finds that none of

of the provisions triggering triggering

dissolution applies here. dissolution applies here. However, However, because

because an amendment

amendment might

might allege

allege facts

facts that

that trigger

trigger

dissolution dissolution under under either

either §§ 15127 or the

15127 or the Operating

Operating Agreement,

Agreement, the

the Court

Court DENIES Evergreen's

Motion to Dismiss and GRANTS Larry's Larry's Motion

Motion for

for Leave

Leave to

to Amend

Amend as

as to

to this claim.

E. The

h CCourt

o u r t DDismisses

i s m i s e s Larry's

L a r v Claim fo

for PPreliminary

r e l i m i n v IInjunction n j u n c ti fo

for

Lack a c k oflrreparable

I r r e p a r a b l e Harm Ha r

Larry Larry requests requests preliminary injunction against preliminary injunction against Evergreen Evergreenon

on the

the same

same ground

ground that he

requested preliminary preliminary injunction

injunction against

against TBC and HTSM.

HTSM.See

See Comal.

Comp!. at

at 12-13.

12-13. Because

Because Presiding

Judge Lamorena has already Land's request already found Larry's request for for preliminary

preliminary injunction

injunction against

against TBC and

27

• 4

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-15, Tsangv. CV0897-15, Tsang, et al.

v. Tsang,

HTSM as lacking irreparable harm, P.J. Lamorena's Decision P.J. Lamorena's Decision at at 5,

5, the

the Court

Court likewise

likewise finds that

that

Lanky's claim of Larry's claim of preliminary injunction deficient preliminary injunction deficientinin its its showing

showing of irreparable harm and irreparable harm and

DISMISSES Larry's Larry's request

request for

for preliminary injunction.

F. Evergreen's Operating Agreement Evergreen's Operating DoesNot Agreement Does NotCategorically CategoricallvBar

BarLarry's

Larrv's

Request for Permanent Request for Permanent Injunction Injunction

As the Court touched on previously, to obtain obtain a permanent

permanent injunction,

injunction, the plaintiff "must

establish: (1)

(!) that it has suffered an irreparable injury;

injury, (2) that remedies available at law, law, such as

monetary damages, are inadequate to compensate for that injury, injury; (3) that, considering the balance

of hardships between of between the the plaintiff

plaintiffand

and defendant,

defendant, a remedy in

in equity is

is warranted,

warranted; and

and (4) that the

public interest interest would not

not be

be disserved

disserved by aa permanent injunction." Valencia, permanent injunction." Valencia, Super.

Super. Ct. Guam

Guam

CV0085-I6 CV0085-16 (Findings (Findings of

of Fact

Fact and

and Conclusions

Conclusions of

of Law

Law at 9, Jun.

at 9, Jun. 2,

2, 2017).

2017). Evergreen does not not

contend that Larry has failed failed to plead any of

of these

these elements,

elements; instead,

instead, Evergreen argues that that the

permanent injunction injunction that

that Larry seeks would

Lam seeks would violate violate Evergreen's

Evergreen's Operating

Operating Agreement,

Agreement, which

"provides for for procedures

procedures for

for conducting

conducting meetings,

meetings, and in

in most

most cases, actions only

cases, actions only require a

majority of the members to approve an action." See Evergreen's Mot.

Mot. at 7.

The Court

Court does

does not

not find

findEvergreen's

Evergreen'sargument

argument persuasive.

persuasive. The

The Operating

Operating Agreement

Agreement

governs the internal procedures of Evergreen, but it does not insulate Evergreen's members from members from

judicial oversight judicial oversight when, when, as

as here,

here, such members allegedly allegedly exercise their powers Powers in a manner that

causes irreparable harm to another member. Moreover, irreparable harm Moreover, the Court's analysis analysis above

above--see supra

Section II.H-applies II.H-applies ininthis

thiscontext:

context:although

althoughthe

theCourt

Courtdeclined

declined to

to find

find irreparable

irreparable harm at

at the

preliminary-injunction stage, preliminary-injunction stage, Larry Larry may

may still

still be

be able

able to

to establish

establish the

the elements

elements necessary

necessary for a

permanent injunction after permanent injunction after aa full full hearing

hearing on

on the merits.

merits. For that reason,

reason, the Court

Court DENIES

Evergreen'ss Motion Motion to

to Dismiss

Dismissas

asto

to Lanky's

Larry's claim for a permanent injunction.

28

. ¢` r

DECISION AND ORDER ORDER RE RE MOTIONS

MOTIONS TO

TO DISNIISS

DISMISS

CV0897-15, Tsangv. CV0897-15, v. Tsang, Tsang, et al.

IV. v Motions to

Motions to Dismiss

Dismiss by Christina

Christina moves Christina moves to dismiss all seven counterclaims to dismiss counterclaims under under Rule 2(b)(!) and l2(b)(6), Rule l2(b)(1) l 2(b)( 6),

arguing they are derivative derivative corporate claims that Wing Chi, Chi, as

as an

an individual

individual shareholder,

shareholder, lacks

lacks

standing to assert because the alleged standing alleged harms are injuries injuries to the corporation, corporation, with any personal personal

incidental. Christina's

damages merely incidental. Christina's Mot.

Mot. at 2-3. She further seeks dismissal of of the Seventh

Seventh

Claim ("Conspiracy ("Conspiracy to

to Defraud")

Defraud")because

because conspiracy

conspiracy is

is not

not an

an independent

independent tort, she

she owed no

fiduciary duty, duty, and the

the claim

claim fails

fails Rule 9(b)'s

9(b)'s particularity requirement. Id at 3-5.

requirement. Id. 3-5. Christina Christina also

argues the Second Claim ("Aiding and Abetting Breach of Fiduciary Fiduciary Duty") sounds in fraud and

must must meet meet Rule

Rule 9(b),

), but

but the

the allegations-such

allegations-such as

as concealment

concealment of records

records and

and wrongful

wrongful

payments-areconclusory payments-are conclusoryand andlack

lackthe

therequired

required specificity.

specificity. See id at 5-6.

See id.

A. The

The Stipulation

Stipulation and

and Order

OrderStaving

Staying Action

Action Issued

Issued on February

Februarv 25.

25, 2016

Did Did Not

Not Strip

Strip Christina

Christina of

ofHer

HerRight

Rightto

to File

File aa Motion

Motionto

to Dismiss

Dismiss

merits of Christina's Motions to Dismiss, Before considering the merits Dismiss, the Court first addresses

Wing Chi's Chi's attack

attack on the procedural propriety propriety ofChirstina's

of Chirstina's Motion to Dismiss his counterclaims

before the Court. Wing Chi argues that her Motion was improperly filed filed because "the Stipulation

and and Order Order of February 22, 2016 February 22, 2016 only

only permitted [Christina]Au permitted [Christina] Au toto file file an 'answer'

'answer' to the

the

Counterclaims of Counterclaims ofWing Wing Chi

Chi Tsang

Tsangwithin

withinaadefinitive

definitive time

time period,

period, i.e.,

i.e., 20 days after the expiration

stay." Wing

of the stay." Wing Chi's Opp'n Opp'n atat 2.2. The

The Court

Court disagrees

disagrees with

with Wing

Wing Chi's

Chi's reading

reading of

of the

the

Stipulation and Order.

The Stipulation

Stipulation and Order

Order states that

that "[t]he

"[t]he parties

parties stipulate

stipulate to

to stay this action in its entirety,

including all deadlines, motions, motions, and hearings in this action, until April 25, 25, 2016."

2016." Stip.

Stir. and Order

at 2 (Feb. 25, 2016). ItIt goes 25, 2016). goes on

on to

to provide:

provide: "Counsel

"Counsel for Christina L.H.

L.H. Au

Au and Counsel for Wing

On Tsang, Kam Wing Wing Tam,

Tam, and

and Wing

Wing Chi

Chi Tsang

Tsang stipulate

stipulate that

that the

the deadlines

deadlines for (i) Christina L.H.

29

a* 1

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang v. Tsang, CV0897-15, Tsang, et al.

Au's Au's answer answer to

to the

the Counterclaims

Counterclaims of

of Wing

Wing Chi

Chi Tsang, and (ii)

(ii) Wing

Wing On

On Tsang's

Tsang's and Kam Wing

Tam's Tam's Opposition Opposition to

to Christina

Christina Au's

Au'sMotion

MotiontotoDismiss

Dismiss(filed

(filedJanuary

January 19,

19, 2016),

2016), shall

shall be held in

abeyance during the abeyance during the stay, stay, and

and that

that the

the answer

answerand

andopposition

opposition shall

shall not

not be

be due

due until

until twenty (20)

days after the expiration of the stay (including any extensions thereto), or twenty (20) days after

the date of the the Court's

Court's written order lifting the stay, whichever comes first."

as

The Stipulation and Order does not prohibit Christina from filing filing a motion

motion to

to dismiss, nor

does it contain language restricting her to to an answer

answer alone.

alone. ItIt merely

merely deferred the deadline deadline for

for an

answer, answer; itit did not extinguish her rights under GRCP Rule 12(b)

12(b) to file a responsive motion in in lieu

lieu

of an answer. Nothing Nothing in

in the Stipulation or the Court's Court's Order

Order states

states that

that a Rule 12 motion is barred,

waived, or subject waived, to prior court subject to court approval.

approval. Accordingly, under under the language

language of the Stipulation

itself, Christina's motion motion remains properly before the Court.

B. Christina Onlv

Only Has

Has Standing

Standing to

to Move

Move totoDismiss

Dismiss Claims

Claims Asserted

Asserted

Against Her Against Her

At the June 17, 2025

2025 motion

motion hearing,

hearing, Christina's

Christina's counsel, Attorney Gavras, conceded conceded that

Christina lacks standing Christina lacks standing to to seek dismissal of

of the

the First,

First, Third,

Third, Fifth,

Fifth, and

and Sixth

Sixth Counterclaims

Counterclaims

because those claims are are asserted

asserted only

only against

against Lan"y, her. Min.

Larry, not against her. Min. Entry at 11:05:10-

11:05:10-

11:05:16 A.M. (Jun. 11 :05: 16 A.M. (Jun. 17, 17, 2025).

2025). The

The Court

Court agrees.

agrees. A

A defendant

defendant has

has no

no standing

standing to

to move for

dismissal of of claims asserted

asserted solely

solely against

against a different

different party. See Trzpharma, Tripharma, LLC v.

v. First Fruits

Bus. Ministry LLC, Bus. Ministry LLC, 2023 WL 2695476, at at *6

*6 (C.D. Cal. Feb.

Feb. 15,

15, 2023)

2023) ("[A]

("[A] party

party does

does not have

standing standing to dismiss counterclaims counterclaims asserted against against [anodier

[another defendant]."),

defendant]."); seee also

l s o Chabad

Chadd

Lubavitch of of Litchfield

Litchjield City.,

Cnty., Inc.

Inc. v.

v. Borough of

ofLitchj'ield,

Litchfield, 2010 WL 1882308, at *3 1882308, at *3 (D. Conn.

May 10, 10, 2010) (institutional defendants lacked (institutional defendants lacked standing standing to

to dismiss

dismiss claims

claims asserted only against

30

re 'i 1

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15,

7-15, Tsang

Tsang v. Tsang,

Tsang, et al.

al

individual defendants). lacks standing to challenge these four counterclaims, defendants). Because Christina lacks counterclaims,

the Court

Court does not reach the merits of her motion as to to the

the First,

First, Third,

Third, Fifth,

Fifth, and

and Sixth

Sigh Claims.

c. C. Counterclaimants o r l a i m a n t s Have H a v e Stated

S t a t e d aa Claim

C a i m forr Aiding

id aand AAbetting

be a

Breach Breach of Fiduciary

ciarv Duty tv

11. Co

Counterclaimants HaveHave Stated Stated En o

Enough Facts to Support

rt Each

Elemen Elementt ooff a Claim for Aid in g and Abetting Aiding

Under Under Guam

Guam case

case law,

law, "the

"the elements

elements of

of the

the common

common law

lawtort

tort of

ofaiding

aiding and abetting breach

of of fiduciary

fiduciary duty are: primary tortfeasor breaches are: (1) the primacy breaches a fiduciary fiduciary duty

duty which

which he owes to the

victim-plaintifi (2) the aider-abettor victim-plaintiff; defendant has aider-abettor defendant has actual knowledge of the actual knowledge the breach, breach, i.e.,

i.e., the

the

specific primary wrong,

wrong; (3)

(3) the

the aider-abettor

aider-abettor defendant

defendant lends the primary primacy tortfeasor

tortfeasor substantial

substantial

assistance assistance or

or encouragement

encouragement in

in committing

committing the

the breach,

breach; and

and (4) the victim-plaintiff victim-plaintiff suffers

suffers damages

proximately proximately caused

caused by Me

the breach." Lucan

Lujan vv. Girardi/Keese,

rardi /Kees 2009 WL

L 2567302,

2567302, at * (D.

at *6 (D, G

Guam

Aug. 18, report and 18, 2009), report and recommendation recommendation adopted

adopted sub nom. Lujan

Lucan v.v. Girardi/Keese, Girardi/Keese, 22009 WL

W

5216906 (D. Guam

Guam Dec. 29, 2009).

Counterclaimants Counterclaimants allege

allege that: (1)

1) as a shareholder in a closely held held corporation,

corporation, Larry

Lan'y owed

fiduciary

ry dutiess of lloyalty,

o d u e ccare,

a re , c andor,

n d o r, and

a n d utmost

t m o s t good

o o d f a i thh d i re ctly t l y to

t o tthem

h e m aass ccoo

-

shareholders in TBC,

TBC; (2) Larry breached those duties by diverting corporate funds diverting corporate funds for his and and

Christina's personal benefit, Christina's personal benefit, secretly secretly causing

causing corporate

corporate payments

payments toto be

be made to

to Christina

Christina

(including purported "bonuses" (including purported "bonuses" and life-insurance life..,insurance premium payments), and by establishing establishing and

and

operating operating a competing

competing construction-materials construction-materials business business to

to the

the detriment

detriment ofT BC, (3) Christina knew ofTBC; knew

of Larry of ' s breac

Larry's hes and "was breaches "was aware

aware of,

of, rati fi ed, and/or

ratified, ooperated with"

and/or ccooperated wi them, and them, and "ac

"actively

participated in designing, participated in designing, implementing, implementing, directing,

directing,approving,

approving,and/or

ardor otherwise furthering" his his

wrongful wrongful conduct,

conduct, including

including by concealing

concealing and

and altering

altering corporate

corporate records,

records, accepting

accepting and

and

benefiting from diverted corporate monies, and actively managing and assisting in the competing competing

31

L

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang CV0897-15, Tsang v.

v. Tsang,

Tsang, el

et al.

business; and business, and (4) as a result, Counterclaimants suffered damages, including the loss of economic

benefits and distributions associated associated with

with their

their ownership

ownership interests

interests ininTBC. See Countercl.

TBC. See ,i,i 13, Countercl. 'W 13,

20-28, 34, 52-60, 70-78. 20-28, 70-78. Taken Taken as true,

true, these

theseallegations

allegationssatisfy

satisfyeach

eachelement ofof

element a claim

claim for

for aiding

and abetting at the pleading stage.

contends that because

Christina contends because Counterclaimants Counterclaimants are

are merely

merely TBC shareholders,

shareholders, "they

have no standing." Christina's Mot.

Mot. to Dismiss

Dismiss at 2. However, this at 2. this is

is not

not true in the context of of a

close corporation, corporation, aa shareholder could could have standing to sue sueother

other shareholders.

shareholders. A

A close

closecorporation

corporation

is characterized characterized by by "(1)

"(l) aa small

small number

number of

ofshareholders,

shareholders; (2)

(2) no ready

ready market

market for corporate stock, stock;

and (3) active and (3) active shareholder shareholder participation participation in

inthe

thebusiness."

business." IA

IA Fletcher

Fletcher Cyc.

Cyc. Corp.

Corp. §§70.10, Westlaw

Westlaw

(database updated updated Sep.

Sep. 2025).

2025). TBC

TBC fits

fits this definition: itit was this definition: was founded founded and closely

closely held by the

brothers. ItIt isis well-settled Tsang brothers. well-settled that that shareholders

shareholders in

in aa close

close corporation

corporation owe

oweFiduciary

fiduciary duties to

one another. See, See, e.g., Barth v. Barth, 659 N.E.2d 559,561 561 (Ind. 1995)

1995) ("[S]hareholders in a close

corporation stand in a fiduciary relationship to each other.");

other."), Bodio

Bodiedv.v. Ellis,

Ellis, 401

401 Mass. 1,

1, 9, 513

513

N.E.2d 684, 688-89 (1987) ("The shareholders in a close corporation owe owe to each other duties of of

utmost loyalty, the utmost loyalty, trust, and and confidence.");

confidence."), Kortum

Kortum v.

v. Johnson,

Johnson, 2008 ND

ND 154, ,i 28,

154,'U 28, 755

755 N.W.2d

432, 443 443 ("The fiduciary fiduciaryduty

dutyowed

owedby

by close

close corporation

corporationshareholders

shareholders to

to one

one another

another also includes

loyalty."), see also 3 Fletcher a duty ofloyalty."); Cyc. Corp.

Fletcher Cyc. Corp. §§ 844.20 844.20 ("Close

("Close corporation

corporation shareholders, shareholders, as

as

such, stand in such, stand in fiduciary relationship relationship to

to each

eachother."),

other."),WWestlaw

estlaw (database

(database updated

updated Sep.

Sep. 2025).

2025).

Because close corporation Because TBC is a close corporation and Counterclaimants Counterclaimants have

have alleged

alleged personal

personal harm

harm arising

arising from

from

breaches of these duties, they have adequately stated breaches claim for aiding stated a claim aiding and abetting abetting breach of

of

duty.

fiduciary duty.

32

i 1

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-l 5, Tsang CV0897-15, Tsang v.

v. Tsang,

Tsang, et al.

2. Counterclaimants' Claim of Counterclaimants' Claim of Aiding and and Abetting

Abetting Breach

Breach of

Fiducial Duty Does Not Sound Fiduciary Duty Does Not Sound in Fraud

Christina further argues Christina further argues that that the

the claim

claim against

against her for aiding

aiding and

and abetting

abetting breach of

of

fiduciary duty duty "sounds

"sounds 'm

in fraud" and

and therefore

therefore isis subject

subject to

to the

the heightened

heightened pleading requirement

under GRCP Rule 9(b). The Court Court disagrees.

disagrees.

"Rule "Rule 9(b)

9(b) applies

applies when

when (1)

(I) aa complaint

complaint specifically

specifically alleges

alleges fraud as an

an essential element

of of aa claim, claim, (2)

(2) when

when the

the claim

claim 'sounds

'sounds inin fraud'

fraud' bybyalleging

alleging that

that the

the defendant

defendant engaged

engaged in

in

liaudulent fraudulent conduct ... and conduct ... and(3)

(3)totoany

anyallegations

allegationsofofraudulent

fraudulentconduct,

conduct, even

even when

when none of the

the

claims in the complaint 'sound 'sound in fraud."'

fraud." Arnold v. Melwani, Melwani, 2011 WL 1317066

1317066 at *3 (D.

(D. Guam

Mar. Mar. 31, 2011) (citing 31, 2011) (citingDavis

Davis v. ChaseBank

v. Chase BankUS.A.,

USA.,NA.,

NA., 650 F.Supp.2d

F.Supp.2d 1073,

1073, 1089-90

1089-90 (C.D. Cal.

2009)). A claim sounds in fraud when the plaintiff"allege[s]

plaintiff"al1ege[s] a unified course of fraudulent conduct

and rely entirely on that course of conduct as the basis of of that claim." Kearns v. Ford Motor Co.,

567 F.3d 1120, 1125 1125 (9th

(9th Cir.

Cir. 2009). 13 "In other cases, however, [the] plaintiff may choose not to 2009).13 "In other cases, however, [the] plaintiff may

allege allege a unified course of fraudulent unified course fraudulent conduct conduct in

in support of a claim,

claim, but rather to allege some

llaudulent and some non-fraudulent fraudulent and conduct. In non-fraudulent conduct. In such cases, cases, only the

the allegations

allegations of fraud

fraud are

are

subject subject to Rule 9(b)'s 9(b)'s heightened

heightened pleading

pleading requirements."

requirements." Vest

Vess v.

v. Ciba-Geigy Corp.

Corp. USA,

USA, 317

317

F.3d 1097, 1097, 1104

1104(9111 Cir. 2003).

(9th Cir. 2003).

Counterclaimants' Second Claim Counterclaimants' Second Claim alleges alleges "some fraudulent

fraudulent and

and some

some non-fraudulent

non-fraudulent

conduct." See Vass Vess 317 F.3d at

at 1104.

1104. Specifically, the Second Specifically, the Second Claim Claim isis pied

pled as

as a claim

claim for

participation in and/or aiding and abetting abetting breach of fiduciary fiduciary duty against Christina, which does

not require fraud fraud as

as an

an essential

essential element.

element. See

See Counterclaim 111]53-60.

Counterclaim,, The gravamen 53-60. The gravamen of the cause

13 Because Rule 9(b) is "mirrors its Federal counterpart, Ninth 13 Because Rule 9(b) is "mirrors Federal counterpart, Ninth Circuit authority authority construing the federal construing the federal rule rule is

persuasive wheninterpreting interpreting the Guam statutory rule." Kerrigan v.

statutory rule." v. Gill, Gill, Civ.

Civ. No.

No.95-00072A,

95-00072A, 1996

1996 WL

WL 104517,

I 04517, at

*3 (D. Guam App. Div.

Div. Mar.

Mar. 6,

6, 1996) persuasiveNinth 1996) (found persuasive Ninth Circuit Circuit case law on Rule 60(a) of of the

the Federal

FederalRules

Rules of

of

Civil CivilProcedure).

Procedure). 1

33

r Sr

DECISION AND ORDER ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang CV0897-15, Tsang v.v. Tsang, Tsang et al.

al.

ofaction of action is is that Christina

Christina (1) knew that Larry owed fiduciary fiduciary duties

duties to

to Counterclaimants,

Counterclaimants, (2) knew

that he was breaching those duties, duties, and

and (3) "was aware o12 ratified, and/or of, ratified, and/or cooperated cooperated with"

with" and

and

"actively participated "actively participated in designing, implementing, in designing, implementing, directing, directing, approving,

approving, and/or

and/or otherwise

otherwise

furthering" his fUrtlwring" his wrongful wrongful conduct, including including "the

"the wrongful of tens of thousands of wrongful payment of of dollars

to her personal benefit" and accepting placement as beneficiary on life-insurance policies policies funded

girded

1157-58.

with corporate monies. Id. W 57-58.Those Thoseallegations

allegations ofofparticipation participation in

in aa fiduciary

fiduciary breach are

are

not necessarily necessarily fraudulent and and thus are not

not governed

governed by

by Rule 9(b).

At the same time, the Second Claim also incorporates some some allegations

allegations that are expressly

"fraudulent" in "fraudulent" in character, character, such

such as the

the assertion

assertion that

thatLarry

Lan'y "fraudulently

"fraudulently represented" the the purpose

and beneficiaries of life-insurance policies, and that Christina participated in or benefitted from of the life-insurance

that misrepresentation and from "concealment "concealment and

and alteration

alteration of See id.

of corporate records." See 1 58;

id 1] 58,

see also id. see also id W1124-25.

24-25.Under

UnderVass,

Vess, only

onlythose

those discrete

discrete allegations of fraudulent allegations of fraudulent conduct-the conduct-the

misrepresentation misrepresentation and and concealment

concealmentcomponents-must satisfy Rule components-must satisfy Rule 9(b)'s 9(b)' sheightened

heightened standard,

standard,

while the remainder of the remainder of the aiding-and-abetting aiding-and-abetting theory proceeds under the more liberal noticetheory proceeds

standard. See

pleading standard. See Vass, 317 F.3d Vess, 317 F.3d at

at 1104.

1104. The

The Court

Court therefore

therefore examines

examines whether

whether the

the

Counterclaim satisfies satisfies Rule

Rule 9(b) as

as to those allegations.

"Rule "Rule 9(b)

9(b) does plaintiff to does not require a plaintiff to prove prove aa claim

claim of

offraud

fraud at

at the pleading stage."

stage." Ukase

Ukau

v. Wang, v. 1 47 Wang, 2016 Guam 26 1] 47 (citation (citationomitted).

omitted). "Rather,

"Rather, what

what is

is required is that a plaintiff plaintiff set

sufficient detail to provide notice to forth his claim with sufficient to defendants as to to what

what particular fraudulent

action is being alleged."

alleged." Taitano

Taitano v.

v. Calve

Calvo Fin.

Fin. Corp., 2008 Guam

Guam 12 1] 16, aff'd

12116, aff'd on red 'g, 2009 reh'g,

Guam 1 16. Guam 99 1] 16. "This "This standard

standard has

has been

been described

describedasas aa 'who,

'who, what,

what, when,

when, where, and how'

where, and

requirement." requirement." Ukase Ukau v.v. Wang,

Wang, 2016 Guam 26 1]47.

26147.

34

a* P v

DECISION AND ORDER

ORDER RE MOTIONS TO DISMISS CV0897-15, Tsang

Tsang v. Tsang, el al.

Tsang, et

Counterclaim specifies

The Counterclaim specifies who (Larry and Christina), who (Lan'y Christina), what (wrongful "bonus" and what (wrongful and

personal payments totaling totaling tens

tens of thousands of

of dollars, life-insurance life-insurance premiums

premiums in the tens of

of

thousands of dollars with thousands of with Christina Christina as beneficiary, and diversion of corporate funds from identified

entities), when (during the period of entities), of Lanky's Larry's management up to and including his termination in

February 2014, and continuing thereafter), thereafter), from where

where (TBC

(TBCand

and Evergreen

Evergreen bank

bank accounts),

accounts), and

for whose

whose benefit

benefit (Larry and Christina personally, including real-estate and and business

business acquisitions).

See, ,r,r 24-25, See, e.g., W 24-25, 57-59.

57-59. These

These allegations

allegations provide the

the "who,

"who, what, when, where, and and how" of

how" of

the alleged misconducts, see Ukase, Ukau, 2016 GGuam 26 1],r 47, uam 26 47, and

and are

are therefore

therefore sufficient

ent to gi

give

Christina notice of Christina of the nature of of the claim and to

to satisfy

satisfy Rule

Rule 9(b)

9(b) as

as to

to any

any fraud-based

fraud-based allegations.

sum, Counterclaimants' In sum, Counterclaimants' aiding~and~abetting aiding-and-abetting claim claim contains

contains both

both fraud

fraud and non-fraud

elements. The non-fraud allegations allegations are properly pled pied under Rule 8(a),

8(a), and the fraud allegations

are pied

pled with sufficient particularity under Rule 9(b). Accordingly, the Court DENIES Christina's

Motion Motiontoto Dismiss

Dismiss as

as to

to the claim for aiding and abetting breach breach of

of fiduciary

fiduciary duty.

D. Couuterclaimants Have Stated a Claim for Conspiracv Counterclaimants Have Defraud Conspiracy to Defraud

11. Co r l a i m a n ts Have Counterclaimants Ha v e Alleged e d Enough

u g h Facts

ts to

to Support

rt a

Claim Claim fo

for Civil

Civil Co n sn iracv to Defraud Conspiracy Defrau

prima facie "A prima facie showing ofcivil showing of civil conspiracy conspiracy requires

requires the

the plaintiff

plaintiff to

to allege in his complaint

formation and operation

'(1) the formation operation of of the conspiracy,

conspiracy, (2)

(2) the wrongful act or acts acts done pursuant

and (3)

thereto, and (3) the damage damage resulting

resulting from

from such act

act or

or acts."' Moylan

Moylan v.v. Citizens

Citizens Sec.

Sec. Bank, 2015

2015

Guam 36 ii,r 72 (citing Wasco Wasco Products Inc. v.

v. Soufhwall

Southwall Techs., Inc., 435 F.3d 989, 992 (9th Cir.

Techs., Inc.,

2006)).

Counterclaimants Counterclaimants have alleged enough facts to support support the

the Seventh

Seventh Claim.

Claim. Specifically,

Specifically,

they they allege

allege that Counterclaim Defendants Larry Counterclaim Defendants Larry and Christina formed and participated Christina formed in a participated in

35

(` Rx v

DECISION AND ORDER

ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-15, Tsang v. Tsang, el al.

Tsang, et al.

conspiracy to defraud conspiracy to defraud by by agreeing to and

agreeing to acting in concert and acting to wrongfully divert concert to divert and and conceal

conceal

corporate funds belonging belonging to TBC and Evergreen for their own personal benefit, including through through

unauthorized withdrawals, withdrawals, improper

improper"bonus"

"bonus"and

andother

otherpayments

payments to

to Christina,

Christina,and

and the

the use of those

use of

funds funds to

to purchase real property purchase real property and and to

to establish

establish and

and operate

operate aa competing

competing business.

business. Countercl.

Counters. W,i,i

24-25, 24-25, 27-30:

27-30, 58-59,

58-59, 98-101.

98-101. They

They further

further allege

allege multiple

multiple overt

overt wrongful

wrongful acts

acts taken

taken in

furtherance of

ofthat agreement, asthe agreement, such as theconversion conversion of

of over

over $53,000

$53,000 from

from TBC and over $77,000

from Evergreen,

Evergreen, the

the mischaracterization

mischaracterization of approximately approximately $87,000

$87,000 in life-insurance life-insurance premium

payments, the manipulation and concealment concealment of

of corporate

corporate financial

financial records, and the maintenance

of of delinquent

delinquent insider

insider charge

charge accounts.

accounts. Counters.

Countercl. 111] 24(a)-(e), 25(a)-(d), ,i,i 24(a)-(e), 25(a)-(d), 58.

58. Finally,

Finally,

Counterclaimants allege that Counterclaimants allege that as as a direct and proximate result of of these

these concerted

concerted actions,

actions, they

they

suffered damages, including the loss and dissipation of of corporate assets, diminution in the value

of their of ownership interests, their ownership interests, and and lost profits and

lost profits and distributions. Counters. W distributions. Countercl. 60, 78, ,i,i60, 78, 101. Taken as 101. Taken as

true, true, these allegations

allegations satisfy

satisfy all

all three

three elements

elements of a civil conspiracy and are sufficient to state a

prima facie claim at the pleading stage.

2. A Civil

Civil Conspiracv

Conspiracy Claim Does

Does Not Require

Require that

that the

the Co-

Co-

Conspirators Owe

Owe aa Duty

Dutv to

to the

the Injured

Injured Party

Partv

Christina argues that

that Counterclaimants

Counterclaimants have

have not

not stated

stated aaclaim

claim for

for conspiracy

conspiracy to

to defraud

because they failed to allege that Christina owed the corporate entities a fiduciary fiduciary duty.

duty. Christina

cites to Kidron v.

v. Movie

Movie Acquisition Corp.,

Corp., 40 Cal.

Cal. App.

App. 4th

4th 1571,

1571, 1597

1597 (Cal. Ct. App. 1995), 1995),

which states that "Conspiracy states that "Conspiracy is is not

not an

an independent

independent tort;

tort,ititcannot

cannotcreate

createa aduty

duty...

... itit allows

allows

recovery only

only against

against aa party who

who already

already owes

owes a duty." The

The question before

before the Court is whether

owing a fiduciary duty

duty to

to the

the corporation

corporationisis an

an element

element of

ofaa conspiracy to defraud claim.

36

N

T Q -

DECISION AND ORDER RE MOTIONS TO DISMISS Tsangv. Tsang,

CV0897-15, Tsang Tsang, eta!.

al.

When considering a claim of When considering of civil civilconspiracy,

conspiracy, the

the Guam

Guam Supreme

Supreme Court

Court has

has recognized

dirt that "[i]n other jurisdictions, jurisdictions, civil

civilconspiracy

conspiracyisiseither

eitherananindependent

independenttort

tort...

... or a theory of

of

vicarious liability" vicarious liability" and

and that

that "[i]n both circumstances, circumstances, the law

law imposes

imposes liability for damages liability for

stemming stemming from

from the

the actions of

of two or more people working together to to cause harm." See Chung v.

Blair Blair Constr.

Constr. Co.,

Co., 2019

2019 Guam ,r 26

Guam 28 1] 26 (citations omitted), omitted); see also id. 1127 see also ,I 27 ("These ("These facts alone

support support aa potential

potential claim

claim for

for civil

civil conspiracy

conspiracyas

asan

anindependent

independenttox*t."). This Court tort."). This Courl acknowledges

that courts elsewhere are split elsewhere are split on whether whether a co-conspirator must owe an co-conspirator must an independent independent duty,

duty, cf

et

Chance Chance World Trading E.C. v.

v. Heritage

Heritage Bank

Bank of

ofCom.,

Com., 2004 WL 2359857, at *3 2359857, at *3 (N.D. Cal. Oct.

Oct.

15, 2004)

2004) ("Liability

("Liability under

underaacivil

civilconspiracy

conspiracyrequires

requiresthe

theco-conspirator

co-conspiratorhave

havean

an independent

independent duty

to the plaintiff")

plaintiff.") with

with Javitch

Javitch v.v. Capwill,

Capwill, 2011

2011 WL

WL 1002744,

1002744, at *3 (N.D.

(N.D. Ohio

Ohio Mar.

Mar. 15,

15, 2011)

2011)

("Civil conspiracy does ("Civil conspiracy does not not require

require the

the existence

existenceof

of aa duty

duty on

on the part

part of

of the

the alleged

alleged coco

-

conspirator."). However, the conspirator."). However, the Guam Guam Supreme

Supreme Court has neither adopted nor neither adopted nor endorsed such a endorsed such

requirement. requirement. If anything, its its discussion in Chung

Chung suggests that the

suggests that the existence existence of

of a separate duty is

separate duty

not a prerequisite to pleading a civil conspiracy conspiracy claim under Guam law.

law. Accordingly, the Court

finds that Counterclaimants need not allege that Christina owes the finds the corporate corporate entities

entities a fiduciary

duty to plead a claim

claim for conspiracy to defraud.

3. Counterclaimants' Claim for Conspiracv Counterclaimants' Claim to Defraud Conspiracy to Defraud Has Has Met

Met

the Requirements of

of GRCP

GRCP Rule 9(b)

Lastly, Christina Lastly, Christina argues

argues that

that the Seventh Claim is is subject

subject to

to the

the heightened

heightened pleading

pleading

requirement of

of Rule 9(b).

The Court finds that Counterclaimants have satisfied the requirements requirements of Rule 9(b). The

Seventh Claim

Claim expressly

expressly incorporates

incorporatesby

byreference

referenceall

allpreceding

precedingfactual

factualallegations,

allegations,Countercl. ,r Countercl.11

97, 97, which lay out

out in

in detail

detail the

the who,

who, what,

what, when,

when, where, and how of

where, and of the

the alleged

alleged fraud

fraud and

and

37

g u»

DECISION DECISION AND ORDER ORDER RE MOTIONS

MOTIONS TO DISMISS

CV0897-15, CV0897-J Tsang v.

v. Tsang,

Tsang, et

et al.

al.

conspiracy. The "who" conspiracy. The "who" is clearly identified identified as Larry

Land and Cristina,

Christina,who

whoare

arealleged

alleged to

to have

have acted

acted

conceal corporate

together to divert and conceal corporate funds funds toto their

theirpersonal

personalbenefit. Countercl.1]'I[ 99. As to the benefit.Countercl.

when, where,

what, when, where, and and how,

how, the

the Counterclaimants

Counterclaimants rely

rely on their allegations allegations set

set out in

in paragraphs

paragraphs

25 of

24 and 25 ofthe the Counterclaims.

Counterclaims.Min.

Min.Entry

Entryatat10:53:42-10:55:30 10:53 :42-10:55:30A.M.

A.M.(Jun.

(Jun.17, 2025). 14 The

17,2025>.14

consists of

"what" consists of specific specific wrongful

wrongful acts

acts such

such as converting

converting over $53,000

$53,000 from

from TBC and over

$77,000 from Evergreen $77,000 from Evergreen after after Lanky's termination, Countercl.

Larry's termination, Counters. 1] 24(a), (b);

'I[ 24(a), (b), issuing

issuing unauthorized

unauthorized

"bonus" "bonus" payments paymentsofof$45,000

$45,000 and

and other

other personal

personal payments

paymentsofof$80,000

$80,000 to

to Christina,

Christina, Counters.

Countercl.11'I[

24(c); causing approximately 24(c), approximately $87,000 $87,000 to

to be paid to Christina under the guise guise of

of life-insurance

life-insurance

premiums while premiums while making makingChristina

Christinathe

thebeneficiary

beneficiary ofofpolicies

policiesinsuring

insuringLarry, Countercl.1]'If 24(d), Larry,Countercl. d);

allowing Christina Christina to open

open and

and mismanage

mismanage charge accountsand charge accounts andmaintain maintainher

herown

our delinquent

delinquent

balance exceeding $30,000, balance exceeding $30,000, Countercl.

Counters. ii

'If 25(b),

25(b ); and

and using

using those

those diverted funds to

diverted funds to purchase purchase real

real

estate and capitalize a competing competing business. 'I[ 25(a). The Countercl. 1125(a).

business. Countercl. The "when"

"when" is alleged as the period

during which Larry controlled controlled TBC,

TBC, HTSM,

HTSM, and

and Evergreen,

Evergreen, up

up to

to his

his termination

termination in

in February

February

2014 continuing thereafter-"during 1 4 and continuing the time thereafter-"d uring the time period period that

that Lan'y

Larry Tsang

Tsang controlled

controlled the

the

of the businesses and "for management and operations" of "for aa period period of

of time

time afterward,"

afterward," and "after

Counterclaim Defendants were Counterclaim Defendants wereterminated."

terminated."l5

15 Counters. W 24-25. The "where" is identified as Countercl. 'l['I[ 24-25. The "where" is identified as

14 The 14 TheCourt Court notes

notes that

that although these allegations allegations are not expressly pleaded under Count Count Seven, Seven, they

they are

are nonedreless

nonetheless

sufficient sufficient totosustain sustain the

theclaim.

claim.SeeSee Ukase Wang, 2016 Guam 26 ,r,r Ukau v.v. Wang, W 44-48 (holding (holding that allegations describing the "circumstances surrounding "circumstances surrounding the the fraud,"

fraud," incorporated

incorporated intointo a fraudulent fraudulent transfer

transfer count,

count, were

were sufficiently

sufficiently particular to satisfy satisfy Rule 9(b) of the Guam Rules Rules ofof Civil Civil Procedure).

Procedure).

15 The Guam is Guam Supreme Supreme CourtCourt has

has held

held that

that "[i]n

"[i]n cases where the

cases where exact timing the exact timing of specific events isis critical specific events critical for determining fraud, fraud, for

for example statements expressing optimistic statements expressing optimistic corporate corporate performance

performance in in securities securities fraud

fraud cases,

cases, lack

of of precision precision in alieglulg

alleging dates can be fatal to a pleading." Taitano, 2008 Guam 12 ,ri128 pleading." Tailano, 28 (citation omitted). Where Where thethe

"the exact dates "the exact dates are are not

not critical

critical to the claim, their lack ofspecificity lack of specificityweighs weighs against

against aa finding

finding that

that the

the pleadings

pleadings areare

9(b)." Id

sufficient under Rule 9(b)." ld Here, Here, the

the context

context differs

differs from

from the

the securities-fraud

securities-fraud scenario contemplated in scenario contemplated in Taitano, Taitano,

as as the Seventh Count for Conspiracy Seventh Count Conspiracy to Defraud Defraud doesdoes not hinge hinge onon pinpointing

pinpointing thethe exact

exact dates

dates of thethe alleged

alleged

misconduct. instead, what misconduct. Instead, what matters mattersisisthetheallegation allegationthat

thatLarry

LarryandandChristina's

Christina'sactions-such

actions-such as as converting converting corporate

corporate

funds or issuing unwarranted bonuses-occurred issuing unwarranted bonuses-occurred while while Larry Larrycontrolled

controlledand

andmanaged

managed the corporations.

corporations. Thus,

Thus, even

even if

if

the Court finds the "when" inadequately inadequately pled,

pied, that shortcoming merely against, but merely weighs against, but does does not

not defeat,

defeat, Rule

Rule 9(b)

sufficiency, given given that the other aspects aspects ofofthethepleading-"who,"

pleading-"who," "what,"

"what," "where,"

"where," and

and"how"-are

"how"-are well-pled.

well-pied.

38

re s

DECISION AND ORDER RE MOTIONS TO DISMISS CV0897-15, CV0897-15, Tsangv.

v. Tsang,

Tsang, eta!.

aL

the Guam the Guam businesses businesses themselves-TBC, themselves-TBC, HTSM,

HTSM, and

and Evergreen, Counters. W24-25.

Evergreen, Countercl. ,r,r 24--25.Finally, Finally, the

the

"how" "how" isisextensively extensively detailed:

detailed: unauthorized

unauthorized checks

checks and

andwithdrawals,

withdrawals,Countercl. ,r 24(a), Countercl. 11 24(a), (b), (b);

disguised payments booked disguised payments booked as as insurance

insurance premiums,

premiums, Countercl.

Counters. ii,r 24(d),

24(d); improper

improper bonuses

bonuses and

and

personal payments personal payments to to Christina, Counters. W Christina, Countercl. ,r,r24(c), 24(c), 25(a),

25(a); creation

creation and

and use

use of

of delinquent

delinquent charge

charge

accounts, Countercl. ,r1[25(b), concealment and 25(b); concealment and removal removal of corporate books and computer records,

Countercl. ,r'U25( Countercl. 25(0), (d),and c ), (d); and the

the establishment

establishment and

and operation

operation of

of aa competing

competing business using

using

misappropriated misappropriated funds, funds, Counters.

Countercl.1125(a).

,r 25(a). The

The Court

Court finds

findsthat

thatthese

these detailed

detailed factual

factual averments

averments

adequately put Christina on notice of adequately put of the the fraudulent

fraudulent conduct

conduct alleged and therefore satisfy Rule

9(b). 9(b). Accordingly, the Court Accordingly, the Court DENIES Christina's Motions to Christina's Motions to Dismiss Dismiss as

as to the

the claim

claim for

for

conspiracy to defraud.

CONCLUSION

For the reasons set forth herein, the Court GRANTS IN PART and and DENIES IN PART

the Motions to Dismiss by Defendants TBC, HTSM, and and Evergreen, and DENIES Counterclaim

Defendant Christina Christina Au's

Au's Motion

Motion to Dismiss.

Dismiss. Should

Should Plaintiff

Plaintiff Larry Tsang choose to amend his

Complaint, the Court further ORDERS that Plaintiff file file his

his Amended Complaint within thirty

(30) days after the issuance of this Decision and Order.

.- E ;-

th

SO 0 O R D E R E D this 9th day of day of December,

December, 2025. .;~>:- ~_

HO BLE u1»xn GUTS z EZ

Judd; Jud e,Sup§ri<k

Sup rior._

1/<'»_ _. -"{\~'<c··{::C.' .-

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.//`-,

.

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