[00:00:00] Speaker 04:
Excuse me.

[00:00:01] Speaker 04:
Good morning, Your Honors.

[00:00:02] Speaker 04:
May it please the court.

[00:00:04] Speaker 04:
My name is Stephen Solovey on behalf of the defendants and appellants, Dong Chen and Jing Lei.

[00:00:10] Speaker 04:
I'd like to reserve two minutes, if I may, for rebuttal.

[00:00:14] Speaker 04:
A new trial isn't necessary in this case for two reasons.

[00:00:17] Speaker 04:
First, the district court improperly excluded the internal agreement, thereby preventing defendants from presenting their defense based upon the- Can you tell me where the E.R.

[00:00:26] Speaker 00:
and the internal agreement?

[00:00:27] Speaker 04:
I'm sorry?

[00:00:28] Speaker 00:
Where in the ER is the internal agreement?

[00:00:32] Speaker 04:
I have to check.

[00:00:33] Speaker 04:
I don't have it in front of me.

[00:00:39] Speaker 04:
But I do know that it's there.

[00:00:43] Speaker 04:
Should I look for it now or can I do it?

[00:00:45] Speaker 04:
I think it's at ER 221.

[00:00:47] Speaker 01:
Pardon me?

[00:00:47] Speaker 01:
ER 221.

[00:00:48] Speaker 04:
Thank you very much.

[00:00:50] Speaker 04:
So the exclusion of that internal agreement as well as the other evidence of the nominal membership structure of T-TEX precluded the defendants from presenting their defense.

[00:01:04] Speaker 04:
Second, aggregating the special verdicts awarding vastly different damages for the same harm.

[00:01:12] Speaker 04:
constituted an impermissible double recovery and a miscarriage of justice.

[00:01:16] Speaker 02:
OK, so on that second point, I've got a question.

[00:01:18] Speaker 02:
So it's pretty common in trials for there to be multiple claims with overlapping but not identical damages.

[00:01:26] Speaker 02:
I have it happen about twice a year, OK?

[00:01:29] Speaker 02:
And it's something that's easily dealt with if people think about it in advance.

[00:01:36] Speaker 02:
There's actually a California pattern jury instruction that covers it.

[00:01:41] Speaker 02:
OK.

[00:01:42] Speaker 02:
So why isn't this invited error on your part for not proposing some way to deal with this in advance for this completely predictable problem?

[00:01:51] Speaker 04:
Thank you.

[00:01:53] Speaker 04:
I agree that both sides should have submitted that jury.

[00:01:56] Speaker 02:
It should be appellant, so.

[00:01:57] Speaker 04:
Appellant as well should have submitted that jury instruction.

[00:02:00] Speaker 04:
But the failure to do so is not fatal.

[00:02:04] Speaker 04:
I think it's the Federal Rules of Civil Procedure Section

[00:02:11] Speaker 04:
Bear with me one second, I apologize.

[00:02:14] Speaker 04:
It's 51D2.

[00:02:16] Speaker 02:
You're going to cite the plain error rule.

[00:02:19] Speaker 04:
Yes.

[00:02:20] Speaker 02:
But this is invited.

[00:02:21] Speaker 02:
I mean, it's not that just somebody botched the jury instructions, that you failed the tender one.

[00:02:28] Speaker 04:
True.

[00:02:30] Speaker 04:
Although perhaps not binding, in Shotsky, distributors versus Kelly, that's 643FSUP57, Northern District, California, 1986.

[00:02:42] Speaker 04:
The court held, in this case, both sides neglected to make a timely demand for the submission of the aggregation issue to the jury.

[00:02:49] Speaker 04:
The district court, under the authority of Guidry, has the power to resolve that issue on its own.

[00:02:56] Speaker 04:
Unfortunately, the district court could not resolve that problem in this case.

[00:03:00] Speaker 02:
You're blaming the district judge for not giving an instruction that you guys didn't tend to.

[00:03:04] Speaker 04:
That's basically what you're saying.

[00:03:05] Speaker 04:
I take blame for not giving that instruction.

[00:03:11] Speaker 04:
that my colleague should have given that instruction.

[00:03:14] Speaker 04:
We both didn't.

[00:03:15] Speaker 04:
And just like in Schatzky, the district court should have, but didn't.

[00:03:20] Speaker 04:
I'm not putting all the blame on the district court, but that instruction wasn't given.

[00:03:24] Speaker 01:
I don't understand why we should think it's duplicative anyway, though, because it seems like the evidence suggested there could have been essentially 1.6 million, and the jury gave 1.3 million total.

[00:03:37] Speaker 01:
It seems like they gave less than was asked for, and they just allocated it somehow.

[00:03:41] Speaker 01:
And why should we think that it's duplicative?

[00:03:43] Speaker 04:
Because as the district court held, there was no evidence of any damages from any other breach of fiduciary duty.

[00:03:51] Speaker 01:
But it seems like they figured out a total amount, and they put some of it in one claim and some of it in the other.

[00:03:55] Speaker 01:
And what's wrong with that?

[00:03:56] Speaker 04:
Well, there's no support for them to do that, especially since the word fiduciary- Weren't there different time periods?

[00:04:02] Speaker 04:
I'm sorry?

[00:04:03] Speaker 00:
weren't there different time periods?

[00:04:07] Speaker 00:
One of them in the interoperatories was specifically with regard to 2015.

[00:04:13] Speaker 00:
There was also alleged misrepresentation of impact in 2014 and part of 2016, right?

[00:04:22] Speaker 00:
Correct.

[00:04:23] Speaker 00:
Why couldn't they just be dividing it by year?

[00:04:26] Speaker 04:
Well, because the district court held

[00:04:29] Speaker 04:
that here the record shows that the claims for intentional misrepresentation and breach of fiduciary duty were intended to compensate for the same economic harm, the damage caused by defendants' misrepresentation of the profits of T-TEX.

[00:04:42] Speaker 04:
Although plaintiff argues... That's the harm, but it's different time periods.

[00:04:46] Speaker 04:
If I may, quote the district court's last sentence of that, where he said, although the plaintiff argues that there were multiple breaches of fiduciary duty,

[00:04:57] Speaker 04:
he has not shown what separate economic harm those breaches caused.

[00:05:01] Speaker 04:
So although they alleged other breaches of fiduciary duty, they didn't put on any evidence or demonstrate in any way that any damages were sustained by any other breach of fiduciary duty.

[00:05:12] Speaker 04:
The only damage sustained under both legal theories was the sale of the interest in T-tex for less than it was worth.

[00:05:21] Speaker 04:
There's no basis to

[00:05:23] Speaker 04:
speculate upon how the jury could have apportioned those damages, especially since there was no mention of fiduciary duty, no mention of fiduciary period at trial at all, and the jury wasn't instructed on breach of fiduciary duty.

[00:05:37] Speaker 00:
I have a question about that.

[00:05:39] Speaker 00:
In one of the briefs, there's a reference to what's called, I think, a preliminary instruction, which was about fiduciary duty.

[00:05:47] Speaker 00:
Does that mean that it was an instruction that was given at the outset of the trial?

[00:05:52] Speaker 00:
Or was it an instruction that was proposed but not given?

[00:05:55] Speaker 00:
I couldn't figure that out.

[00:05:58] Speaker 04:
There was one preliminary jury instruction that mentioned breach of fiduciary duty in connection with what the plaintiff's claims were.

[00:06:09] Speaker 00:
At the outset of the trial.

[00:06:12] Speaker 00:
So it was mentioned.

[00:06:13] Speaker 00:
So it's not true that it wasn't mentioned.

[00:06:16] Speaker 04:
Maybe I wasn't clear.

[00:06:17] Speaker 04:
Fiduciary was not uttered by a single witness at the trial.

[00:06:21] Speaker 02:
That's the legal conclusion.

[00:06:24] Speaker 02:
You wouldn't have witnesses testifying about that.

[00:06:26] Speaker 02:
That's a label that gets attached to the relationship, whether it's an agency relationship or a corporate officer or whatever.

[00:06:32] Speaker 02:
The fact that a witness didn't say fiduciary doesn't mean anything.

[00:06:36] Speaker 04:
Okay, that's not the only point.

[00:06:38] Speaker 04:
The jury wasn't even instructed on breach of fiduciary duty.

[00:06:42] Speaker 00:
But it was, in fact, at the outset of the trial.

[00:06:44] Speaker 04:
No, I respectfully disagree.

[00:06:47] Speaker 04:
The fact that breach of fiduciary duty was mentioned in a preliminary jury instruction referring to what the claims were being made has nothing to do with a final jury instruction instructing the jury on what a breach of fiduciary duty claim is.

[00:07:09] Speaker 04:
I'm going to jump back to the internal agreement, if I may.

[00:07:14] Speaker 02:
Actually, one more thing on this fiduciary duty thing.

[00:07:17] Speaker 02:
Give me just one second here.

[00:07:19] Speaker 02:
So this verdict form, which is the longest verdict form I've ever seen in my life, 15 pages, 14 pages.

[00:07:27] Speaker 02:
Page seven is entitled Breach of Fiduciary Duty.

[00:07:30] Speaker 02:
And it's a special verdict form because it walks through a list of questions.

[00:07:34] Speaker 02:
And those questions basically track on the elements of fiduciary duty.

[00:07:38] Speaker 02:
So if the jury finds yes on all the right questions on that, which they did, then they've found all the elements of a fiduciary duty claim.

[00:07:45] Speaker 02:
So why is it necessary that they get a separate instruction that has that title?

[00:07:50] Speaker 04:
I think that if you're going to seek damages for a claim for breach of fiduciary duty, there should be a jury instruction.

[00:07:57] Speaker 02:
OK.

[00:07:57] Speaker 02:
And I don't know if you were the trial lawyer, but did somebody on behalf of the defendant say, hey, wait a second, Judge.

[00:08:01] Speaker 02:
You're giving this jury a verdict form that says breach of fiduciary duty.

[00:08:05] Speaker 02:
And there isn't a Geistar instruction about that in the whole set of instructions.

[00:08:09] Speaker 04:
I was the trial attorney.

[00:08:12] Speaker 04:
And that was another error of mine, that I should have requested a breach of fiduciary duty claim instruction.

[00:08:22] Speaker 02:
I mean, it just strikes me, though, that let's just put aside not submitting the instruction.

[00:08:29] Speaker 02:
It just strikes me that it's harmless, because the questions 21 through 24 of the verdict form

[00:08:37] Speaker 02:
basically the elements of a fiduciary duty claim.

[00:08:39] Speaker 02:
The first three are the elements of the merits, and then 23 is a causation, and 24 is another causation question.

[00:08:48] Speaker 02:
It seems like it's harmless.

[00:08:51] Speaker 04:
I respectfully disagree, and I would submit that under all of the circumstances of this case where they weren't instructed on the breach of fiduciary duty claim,

[00:09:01] Speaker 04:
where they weren't instructed on the prohibition against double recovery for the same harm, that together that resulted in a miscarriage of justice.

[00:09:11] Speaker 04:
And there's no basis upon which the court could, or which the jury could have apportioned those damages.

[00:09:17] Speaker 04:
There's certainly no basis to apportion three times, almost three times more in damages for breach of a duty claim than for the same harm than under the

[00:09:27] Speaker 04:
fraud claim, especially since the court found that there was no evidence of any separate damages from any breach of fiduciary duty, from any other breach of fiduciary duty.

[00:09:43] Speaker 04:
If there are no questions, I'd like to keep going on the internal agreement unless you have further questions.

[00:09:52] Speaker 04:
Had the jury heard that Alvin Lee, who was plaintiff's Mr. Zuh's father-in-law,

[00:09:58] Speaker 04:
was actually the true owner of the majority interest in T-TEX, then they couldn't have found that the defendants defrauded Mr. Zhu into selling his interest for less than it was worth because it wasn't his interest.

[00:10:13] Speaker 04:
And they couldn't have breached any fiduciary duty to Mr. Zhu.

[00:10:15] Speaker 01:
But why wasn't it bound by a stop-all-by contract?

[00:10:19] Speaker 04:
Well, there's two points to that.

[00:10:21] Speaker 04:
One is the internal agreement does not contradict

[00:10:26] Speaker 04:
any of the actual terms of the purchase and sale agreement.

[00:10:30] Speaker 04:
It merely explains the transaction and states who the real parties in interest were.

[00:10:36] Speaker 04:
The United States Supreme Court has held that evidence concerning who the true parties are is admissible.

[00:10:44] Speaker 04:
And the court characterized it as an explanation of the transaction, not a contradiction of the agreement.

[00:10:51] Speaker 04:
It usually arises in principle and agent theories, but it's usually brought by the other side.

[00:11:00] Speaker 04:
In this case, Mr. Zhu hid behind the parole evidence roll, using it as a shield to prevent defendants from showing the true facts, which were that Mr. Zhu, who was fully aware of T-Tex's actual profits, was the true owner and the

[00:11:19] Speaker 04:
The purchase and sale agreement was only in the names of the nominal shareholders, because that's how it was held, and that's how it was set up in the internal agreement from the beginning, before T-TEX was even formed.

[00:11:34] Speaker 04:
Even if the parole evidence rule applied, which we submit it does not, because it only shows who the true parties were,

[00:11:44] Speaker 04:
the internal agreement, which should have been admissible under the fraud exception to the parole evidence rule.

[00:11:51] Speaker 04:
The courts have held that parole evidence should not be a shield to prevent the proof of fraud, and that it should be admitted to show that.

[00:12:01] Speaker 04:
And in this case, again, it would have shown that defendants could not have breached any fiduciary duty or defrauded Mr. Zhu in connection with the sale of the state tax interest.

[00:12:15] Speaker 01:
I think you wanted to reserve your time.

[00:12:17] Speaker 04:
Thank you.

[00:12:34] Speaker 03:
Thank you, Your Honors.

[00:12:35] Speaker 03:
May it please the Court?

[00:12:37] Speaker 03:
I'm Brian Erion and I represent Martin Zoo, formerly Jiajie Zoo, the plaintiff and the appellee.

[00:12:45] Speaker 03:
The appellant's assigned two errors to the court.

[00:12:51] Speaker 03:
And with all due respect, Judge Kennelly, I don't think you're just a justice court judge.

[00:12:55] Speaker 03:
It makes you irrelevant.

[00:12:56] Speaker 03:
You're in the trench, as was Judge White.

[00:13:00] Speaker 03:
With respect to the motion and limiting to exclude the secret illegal contract, it was not error for the court to exclude that.

[00:13:12] Speaker 03:
First, there is a provision in the purchase and sale agreement that says it is an exclusive and full understanding.

[00:13:19] Speaker 03:
There's an integration clause.

[00:13:20] Speaker 03:
Secondly, the recitals do say who is the record and beneficial owner, and that is Martin Zhu.

[00:13:26] Speaker 03:
He was the seller.

[00:13:27] Speaker 03:
He was a member under the operating agreement, also an integrated agreement.

[00:13:33] Speaker 03:
the person who negotiated for the sale of his interest upon graduating from business school.

[00:13:39] Speaker 03:
He was the person who was getting paid.

[00:13:41] Speaker 03:
He was the person who, in the tax returns, was getting taxed and was listed as a member.

[00:13:47] Speaker 03:
There's just no way in the world that the defendants now can say, oh, he wasn't really a member.

[00:13:54] Speaker 03:
They negotiated with him.

[00:13:56] Speaker 03:
He was on the Perch PSA.

[00:13:57] Speaker 03:
He was the one who was getting paid.

[00:13:59] Speaker 03:
And to come back now and say that an agreement signed by other people in another place that he never saw somehow makes him a non-member defies logic, would confuse the jury, and violates the statute of frauds, the parole evidence rule, estoppel by contract, and in fact is an illegal contract.

[00:14:21] Speaker 03:
As a matter of fact, defendants prior counsel, Mr. Soloway's predecessor, even said in open court that the practice is illegal in the United States.

[00:14:29] Speaker 00:
So is there a document somewhere that the internal agreement itself doesn't specifically say it says these three people are setting up this company, but it doesn't talk about the nominal owners, right?

[00:14:46] Speaker 03:
This is the internal agreement.

[00:14:48] Speaker 03:
I believe that's correct, your honor.

[00:14:51] Speaker 00:
So is there a document that I thought I'd seen one, but I don't see it now that

[00:14:57] Speaker 00:
lists out who are the owners and who are the nominal owners?

[00:15:01] Speaker 03:
There is no document that lists who are the real owners and who are the nominal owners as far as I know, because as far as Mr. Zuh knew, he was an owner.

[00:15:10] Speaker 03:
He had never seen that document until the motion to dismiss that was brought before Judge White.

[00:15:18] Speaker 03:
So you've got me as well, Your Honor.

[00:15:22] Speaker 02:
OK, go ahead.

[00:15:23] Speaker 03:
The second alleged error is that somehow the jury impermissibly gave a double recovery.

[00:15:32] Speaker 03:
And again, I don't think that the trial court erred.

[00:15:36] Speaker 03:
And I'm going to go back to both the Zang and the, I think it's Gallic versus B&O Railroad, that a jury's verdict is not to be disturbed unless it is the result of passion and prejudice, internalist consistency, or there is no evidence.

[00:15:54] Speaker 03:
In other words, it's one thing if the jury comes back and says there was no duty, there was no breach, there was no proximate cause, but plaintiff gets a million dollars.

[00:16:03] Speaker 03:
That's not what happened here.

[00:16:04] Speaker 03:
And as Judge Kennelly pointed out, the elements of breach of fiduciary duty are all laid out in the special verdict form.

[00:16:11] Speaker 03:
And I would also respectfully disagree with Mr. Soloway with respect to the issue of whether there was a final jury verdict instruction.

[00:16:20] Speaker 03:
It was.

[00:16:21] Speaker 03:
It wasn't called fiduciary duty, but it was the duties of the manager of an LLC.

[00:16:26] Speaker 02:
And that's where the fiduciary duty comes from in this case, right?

[00:16:29] Speaker 03:
Exactly, Your Honor.

[00:16:31] Speaker 03:
And that, if I can, is at, I believe it's 2ER124.

[00:16:36] Speaker 03:
And it lays out by the California Corporations Code what the duties of the manager of an LLC are.

[00:16:44] Speaker 03:
And they are to account to the LLC for all profits and losses, essentially to do all the things that a fiduciary

[00:16:50] Speaker 03:
in a corporation or an LLC would do.

[00:16:53] Speaker 03:
There is no fiduciary form in Casey.

[00:16:58] Speaker 03:
So we use the California Corporations Code statute, which lays out the fiduciary duties of a manager.

[00:17:07] Speaker 03:
So there is an instruction.

[00:17:08] Speaker 01:
It seems like the jury awarded about $358,000 less than it could have from the difference in value.

[00:17:15] Speaker 01:
Do you have any idea why?

[00:17:17] Speaker 03:
I wish I had been able to look inside the jury room, Your Honor.

[00:17:20] Speaker 03:
I was actually hoping for something closer to $2.5 million.

[00:17:24] Speaker 01:
Was there expert testimony or any testimony that had the number that the jury came up with, or just somehow came up with a smaller number?

[00:17:32] Speaker 03:
No, Your Honor.

[00:17:33] Speaker 03:
With respect to the fraud in the sale of shares, which were based on the 2015 US tax return, which said that profits were $204,000, when in reality profits were $750,000,

[00:17:47] Speaker 03:
only testimony as to the value of the company came from plaintiff's expert Carl Saba with Hemingmores, who went and did all of his expert things that economists do, and said that with profits truly being about three times what they should have been, the sale price should have been three times what it should have been, and that also is consistent with companies in these industries of textile

[00:18:11] Speaker 03:
And so as a result, the value of his interest was about $2,440,000.

[00:18:14] Speaker 03:
He got $752,000.

[00:18:18] Speaker 03:
The damages were $1,680,000.

[00:18:21] Speaker 03:
That was the only testimony.

[00:18:25] Speaker 00:
But the jury obviously was confused about something, because it gave this very large breach of contract award, which had no basis.

[00:18:35] Speaker 00:
So could that account for the extra money that you didn't end up getting?

[00:18:41] Speaker 03:
Your Honor, I think I understand what the trial court did, and I'm speculating, but here's where I think it came in.

[00:18:50] Speaker 03:
The only evidence with respect to the breach of fiduciary duty, aside from the fraud and the sale, comes at 3SER 416 to 427, where... Sorry, I think the answer just has to be no.

[00:19:06] Speaker 01:
I think Judge Berzon is asking, maybe I'm not understanding her question, but I thought her question was,

[00:19:10] Speaker 01:
Does the amount of contract damages make up this 350 missing amount?

[00:19:14] Speaker 01:
And I think the answer is no, because that wasn't the amount of the contract damages.

[00:19:18] Speaker 03:
No, Your Honor.

[00:19:19] Speaker 03:
You're right.

[00:19:20] Speaker 03:
The contract damages that were awarded by the jury of, I think, $881,000, if you total the breach of contract with the breach of fiduciary duty, with the misrepresentation, and then you subtract a small amount for failure to mitigate, it comes about to $2.2 million, which is still less than plaintiffs' expert testified.

[00:19:40] Speaker 03:
There's one additional element in the breach of contract claim, and that is a failure to pay accumulated but undistributed profits.

[00:19:50] Speaker 03:
So all three of these claims are interdependent, even though they're distinct.

[00:19:54] Speaker 03:
The 2015 fraud is for the misrepresentation regarding the profits for 2015.

[00:19:59] Speaker 03:
The breach of fiduciary duty also includes, as referenced in that section of the supplemental record I just said,

[00:20:08] Speaker 03:
essentially siphoning off profits for years before and after.

[00:20:11] Speaker 03:
Well, if you've been siphoning off profits for years, then the undistributed accumulated profits would also be higher, which means the breach of contract damages are also going to be larger.

[00:20:23] Speaker 03:
So the three claims are interdependent, but the total amount awarded by the jury is still less than what was proven and what the evidence provided for.

[00:20:34] Speaker 03:
And so this is not a case where a jury gave

[00:20:37] Speaker 03:
internally inconsistent rulings, awarded an amount out of passion or prejudice, or.

[00:20:43] Speaker 00:
So are your explanations, leaving the contract damages out of this, your explanations or the explanations are one of two.

[00:20:52] Speaker 00:
One is they just arbitrarily chose some numbers dividing up the overlapping damages and didn't come out to more than

[00:21:05] Speaker 00:
the actual damages that was shown, so it's okay.

[00:21:09] Speaker 00:
That's one version.

[00:21:10] Speaker 00:
The other is that it has to do with this time period, as I was saying before, that they somehow tried to divide it up by time period.

[00:21:18] Speaker 03:
Yes, Your Honor, and I think they probably took it upon themselves to believe most, but perhaps not everything that was said in the expert reports.

[00:21:26] Speaker 03:
It's a guess.

[00:21:27] Speaker 03:
I can't look into what the jury was doing any more than anybody in this courtroom can.

[00:21:31] Speaker 03:
That's the purpose of federal evidence.

[00:21:33] Speaker 02:
We're not talking about liquidated amounts here necessarily.

[00:21:35] Speaker 02:
We're talking about something that you had to depend on expert testimony for.

[00:21:38] Speaker 02:
So they could have bought 80% of the expert testimony, but not the other 20, right?

[00:21:42] Speaker 03:
That's about it, Your Honor.

[00:21:43] Speaker 03:
That's the same situation that was in the Cardinal versus Lupo case.

[00:21:48] Speaker 03:
That said, I don't think the court erred.

[00:21:49] Speaker 03:
I mean, the fact of the matter is the jury, in its special verdict form, came back unequivocally.

[00:21:55] Speaker 03:
The defendants lied, they cheated, and they stole.

[00:21:58] Speaker 03:
And they found it sufficiently convincingly that they awarded punitive damages.

[00:22:03] Speaker 03:
So this is not a situation where a jury came back and said, well, maybe there was no duty, but we really feel bad for the plaintiffs, so we're going to give award.

[00:22:10] Speaker 03:
That's the kind of case where it's got to get returned.

[00:22:14] Speaker 03:
Here, I don't think that's the case.

[00:22:17] Speaker 03:
If there's anything else, Your Honors, I'd be happy to respond.

[00:22:19] Speaker 03:
Other than that.

[00:22:21] Speaker 01:
Thank you.

[00:22:22] Speaker 03:
Thank you.

[00:22:22] Speaker 04:
Thank you, Your Honors.

[00:22:34] Speaker 04:
First of all, even if the internal agreement was illegal, illegal contracts can still be enforced where they would prevent unjust enrichment.

[00:22:46] Speaker 00:
How did the internal agreement establish that the current plaintiff was not an owner at the relevant time?

[00:22:58] Speaker 04:
I thought that there was evidence that Alvin Lee designated his son-in-law, Mr. Chen, that I have to go and look for him.

[00:23:10] Speaker 00:
That's why you're here, is to help us with this.

[00:23:12] Speaker 04:
I apologize.

[00:23:13] Speaker 04:
I should have that at my fingertips, but I don't.

[00:23:16] Speaker 04:
To simplify this case, this whole case turned upon whether Mr. Zhu knew the actual profits of T-TEX.

[00:23:28] Speaker 04:
There's no dispute that his father-in-law, Alvin Lee, knew the actual profits of T-TEX.

[00:23:35] Speaker 04:
That's evidenced by the same emails that Mr. Zhu relied upon in bringing his claims.

[00:23:40] Speaker 04:
So in fact, Mr. Zhu argued that

[00:23:45] Speaker 04:
Although his father-in-law knew he didn't.

[00:23:48] Speaker 04:
But he wasn't involved in T-Tex.

[00:23:52] Speaker 04:
His father-in-law, Alvin Lee, was the quote, boss, end quote.

[00:23:56] Speaker 04:
He put up $500,000 out of the $530,000 used to start up T-Tex.

[00:24:02] Speaker 04:
Mr. Chen ran the day-to-day operations and reported to Mr. Chen.

[00:24:07] Speaker 04:
Mr. Chen, excuse me, Mr. Alvin Lee.

[00:24:10] Speaker 04:
Mr. Alvin Lee made all of the major financial decisions for T-Tex.

[00:24:15] Speaker 04:
So the fact that Mr. Chen did not report to Mr. Zhu is not weird.

[00:24:24] Speaker 04:
He reported to his father-in-law, Alvin Lee, who was the real boss.

[00:24:29] Speaker 04:
Mr. Zhu never even went to T-Tex during this time, if ever.

[00:24:35] Speaker 04:
He wasn't involved in any way.

[00:24:36] Speaker 04:
First he was in China, and then he was in business school in Texas.

[00:24:40] Speaker 04:
Had nothing whatsoever to do with T-Tex.

[00:24:44] Speaker 04:
So had the jury heard that Alvin Lee was the true owner, then they would have seen that he knew the prophets and wasn't defrauded.

[00:24:55] Speaker 04:
And it wasn't even Mr. Zhu's interest.

[00:24:58] Speaker 04:
They certainly didn't breach any fiduciary duties to Alvin Lee, because Mr. Chen reported everything.

[00:25:05] Speaker 04:
And Alvin Lee directed how the prophets were to be reported.

[00:25:10] Speaker 04:
Defendant Jing Li never had any involvement in T-Tex either.

[00:25:15] Speaker 04:
Mr. Chen paid the $30,000 remaining from the $530,000, and he ran the operations of T-TEX.

[00:25:23] Speaker 04:
She was never involved.

[00:25:25] Speaker 04:
None of the nominal members were ever involved.

[00:25:28] Speaker 04:
So that's a critical piece of evidence.

[00:25:31] Speaker 04:
Had the jury heard, it would have changed the entire case.

[00:25:37] Speaker 01:
Thank you.

[00:25:38] Speaker 01:
Thank you both sides for the helpful argument.

[00:25:39] Speaker 01:
This case is submitted, and we're adjourned for the week.

[00:25:42] Speaker 04:
Thank you very much, Your Honor.