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Yu v. Premiere Power LLC

United States District Court, S.D. New York

January 17, 2018

MOON JOO YU and HEE RAK KIM, Plaintiffs,


          KATHERINE POLK FAILLA United States District Judge

         Plaintiffs Moon Joo Yu and Hee Rak Kim brought this action in September 2014 alleging that Premiere Power LLC and several of its directors and officers, including Defendants Sandra Dyche (“Dyche”) and John Jankovic (“Jankovic”) (collectively, “Defendants”), had defrauded them out of $1.65 million. Defendants have filed two substantially identical motions seeking summary judgment on the bases that (i) Plaintiffs' securities fraud claims were not filed within the two-year limitations period and (ii) Plaintiffs have failed to demonstrate that they relied on Defendants' statements when they decided to invest in Premiere.

         Plaintiff Yu argues that she was only on notice of the fraudulent scheme in late 2012 and that her claims, which she filed on September 18, 2014, are not time-barred. She further claims that, at a minimum, there is a genuine dispute of material fact as to whether she relied on Defendants' statements. The Court agrees, and denies Defendants' motions for summary judgment as to Plaintiff Yu.

         Plaintiff Hee Rak Kim does not oppose Defendants' motions for summary judgment, choosing instead to withdraw his Securities Act Section 10(b) and Rule 10b-5 claims. Accordingly, the Court does not address further his federal claims. However, the Court will retain pendent jurisdiction over Plaintiff Kim's state-law claims, as those claims arise under the same operative facts as other federal claims in this case.


          A. Factual Background

         The Court discusses the underlying facts in this case only to the extent necessary to resolve the instant motion, as the Court previously engaged in more exhaustive factual recitations, both in this case and in a related case. See SEC v. Jankovic, No. 15 Civ. 1248 (KPF), 2017 WL 1067788, at *2-6 (S.D.N.Y. Mar. 21, 2017); Yu v. Premiere Power LLC, No. 14 Civ. 7588 (KPF), 2015 WL 4629495, at *1-4 (S.D.N.Y. Aug. 4, 2015).

         1. Jankovic's Role at Premiere

         John Jankovic founded Premiere Power LLC (“Premiere”) in 2009 with his father, Jerry Jankovic, and Thomas Gudgel (“Gudgel”). (Pl. 56.1 ¶ 1). Between July and December 2009, Jankovic worked as a consultant for Premiere. Jankovic, 2017 WL 1067788, at *3. In December 2009, Jankovic became Premiere's Chief Executive Officer (“CEO”), a position he held until late 2011. (Pl. 56.1 ¶ 115).

         Premiere's stated mission was to develop and operate power plants and on-site hydroponic tomato hot-houses on Native American land. (Pl. 56.1 ¶ 2). But Premiere also had another mission, one that it failed to disclose to investors: to raise money to cover expenses arising from a 2006 lawsuit against Jerry Jankovic, Sandra Dyche, and a company they had formed in 2001, 21st Century Morongo Energy, LLC (“Morongo”). (Id.). The Morongo litigation involved claims against, inter alia, Jerry Jankovic and Dyche for fraud, negligent misrepresentation, and conversion. Jankovic, 2017 WL 1067788, at *2.

         On December 22, 2009, Jankovic, Dyche, and others at Premiere hosted a meeting for existing and prospective investors (the “Investors Meeting”), during which Jankovic distributed copies of a Preliminary Information Memorandum (the “PIM”). Jankovic, 2017 WL 1067788, at *2. The PIM was intended “to provide preliminary information in order to assist the recipient in deciding whether it wants to [invest].” (Dkt. #86-1). Its cover page listed Jankovic as one of its two authors (id.); indeed, according to Dyche, Jankovic was the lead author (Pl. 56.1 ¶ 119). At the Investors Meeting, Jankovic spent at least one hour addressing those in attendance, with Dyche translating into Korean. Jankovic, 2017 WL 1067788, at *2.

         The PIM contained numerous misstatements, including the following:

i) The PIM listed a former Oklahoma Congressman as a member of Premiere's Board of Directors and claimed that this Congressman held a 1% equity interest in Premiere. That Congressman never agreed to serve on Premiere's Board.
ii) The PIM identified the Managing Executive Director of an energy company as a member of Premiere's Board of Directors. Like the Congressman, the Managing Director was purported to hold a 1% stake in Premiere. Though the Managing Director had discussed the possibility of joining Premiere, he never committed to serving as a member of Premiere's Board.
iii) The PIM stated that an Oklahoma accounting firm would handle Premiere's outsourced accounting and bookkeeping. That firm, however, never agreed to work with Premiere.
iv) Finally, the PIM identified a nationally known accounting firm as an “Affiliate” of Premiere's “Corporate Holdings” division. But the National Accounting Firm never had a relationship of any sort with Premiere.

Jankovic, 2017 WL 1067788, at *5. At the Investors Meeting, Jankovic delivered a PowerPoint presentation that mirrored the PIM's content, repeating many, if not all, of its misstatements. Id. Jankovic did not mention the Morongo litigation, nor any intention to use investor funds to cover legal fees arising from that litigation. Id. at *4.

         As Premiere's CEO, Jankovic was aware that Dyche, Annie Kim (“Kim”), and Anna Lee (“Lee”) were working to find investors for Premiere. Jankovic also knew that Dyche, Kim, and Lee would receive brokers' fees for the sale of Premiere membership units to investors, including Plaintiff Yu. (Pl. 56.1 ¶ 121).

         2. Dyche's Role at Premiere

         Dyche, a native Korean speaker, was a member of the Board of Directors of Premiere. (Pl. 56.1 ¶ 5). When she joined the Board of Directors, she received a percentage ownership of Premiere. (Dyche Dep. 112:2-6). Dyche actively solicited funds on Premiere's behalf and, according to Jankovic, worked as a “broker” for Premiere. (Jankovic Dep. 46:9-13). Dyche helped solicit Yu's $1.5 million investment. Jankovic, 2017 WL 1067788, at *3.

         In exchange for obtaining investors, Dyche received membership interests in Premiere. (Dyche Dep. 203:13-204:9). According to Jankovic, Dyche hired Lee and Kim to work as brokers “on behalf of Premiere.” (Jankovic Dep. 272:17-273:11). Jankovic's understanding was that Lee and Kim, who first introduced Yu to Premiere, “were working for Sandra [Dyche]” (id. at 272:24-25), and their primary role was to “introduc[e] [investors] to Sandra” (id. at 100:8-17). In exchange, they received ownership interest in Premiere. (Id. at 226:4-7). Dyche, Lee, and Kim all attended the Investors Meeting on December 22, 2009. (Id. at 128:14-129:23). Dyche spoke to investors in Korean before, during, and after the meeting. (Pl. 56.1 ¶ 38).

         3. Yu's Decision to Invest in Premiere

          a. Dyche, Lee, and Kim Introduce Yu to Premiere

         Yu first learned about Premiere in the fall of 2009 from Lee and Kim. (Dyche 56.1 ¶ 10). Lee “explained [to Yu] about this investment repeatedly, ” “told [Yu] a lot about this investment, ” and told Yu that “[Lee and Kim] invested in that business too.” (Yu Dep. 22:23-23:2, 24:15-21). Lee highlighted Dyche's involvement to encourage Yu to invest; she also told Yu that if Yu invested $1.5 million, Yu would enjoy strong returns on her investment. (Id. at 24:15-21; 44:2-8, 13-15). Based on Lee's initial descriptions, Yu thought that she would ultimately decide to invest in the company. (Id. at 23:18-21, 29:3-15, 28:3-7, 44:25-46:13).

         Yu met with Dyche, Lee, and Kim in early December 2009 at a Seoul coffee shop. At that point, Yu had not finalized her decision to invest in Premiere. (Yu Dep. 22:15-22). Dyche, Lee, and Kim promised Yu that if she invested in Premiere, she would receive $300, 000 in profit in addition to her initial investment of $1.5 million “within two to three years after [her initial] investment, ” as well as an annual dividend of more than $300, 000 for the next thirty years. (Id. at 14:12-17, 15:9-11, 15:25-16:19, 80:8-11, 131:22-133:25). At the meeting, Dyche also provided Yu with an English version of the PIM. (Id. at 18:14-20). Though Yu could not read English, she noticed a chart in the PIM that displayed potential returns over 30 years. (Id. at ...

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