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Korean American Association of Greater New York, Inc. v. Min

United States District Court, S.D. New York

January 3, 2020

Korean American Association of Greater New York, Inc., Plaintiff,
v.
Sung Ki Min, Defendant.

          Plaintiff Korean American Association of Greater New York, Inc. is represented by Charles M. Yoon of Yoon LLP, Steven Yudin of the Law Offices of Bernard D'Orazio & Associates, P.C., and Bernard D'Orazio of the Law Offices of Bernard D'Orazio & Associates, P.C.

          Defendant Sung Ki Min is represented by Nolan Klein and Hector Ramirez of the Law Offices of Nolan Klein

          OPINION AND ORDER

          RICHARD J. SULLIVAN UNITED STATES CIRCUIT JUDGE.

         Plaintiff Korean American Association of Greater New York, Inc. ("KAAGNY" or "the Association") brings this action for breach of contract, breach of fiduciary duty, and conversion against its former president, Sung Ki Min ("Min"), alleging that Min mismanaged KAAGNY's assets during his time as president and in the year following his impeachment in March 2015 when he continued to hold himself out as president, before his successor, Minsun Kim ("Kim"), assumed office. Having presided over a bench trial in this case, the Court now issues the following findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52(a). For the reasons set forth below, the Court concludes that KAAGNY has satisfied its burden on each of its claims and is entitled to damages in the amount of $369, 095.56.

         I. Procedural History

         KAAGNY filed its Complaint on September 7, 2017, asserting three claims under New York state law: breach of contract, breach of fiduciary duty, and conversion. (Doc. No. 1 ("Compl.").) KAAGNY alleged that (1) Min breached his contractual obligation to satisfy KAAGNY's outstanding debt of approximately $300, 000, using his personal finances if necessary, before leaving office; (2) Min breached his fiduciary obligations as KAAGNY president and de facto president by mismanaging KAAGNY's finances; and (3) Min unlawfully converted $191, 172 in funds that KAAGNY maintained in two Chase Bank accounts to pay for personal expenses and to fight his impeachment from office. (Id. at 5-8.) Min filed his Answer on November 22, 2017. (Doc. No. 22.)

         On June 4, 2018, the case proceeded to a two-day bench trial, which was conducted in accordance with the Court's Individual Rules for non-jury proceedings. Specifically, the parties submitted affidavits containing the direct testimony of their respective witnesses, as well as copies of all exhibits they intended to offer as evidence. The parties were then invited to call those witnesses whom they wished to cross-examine at trial. In all, three witnesses -Kim, Min, and KAAGNY Director and Vice President Sarah Kim-Beague ("Kim-Beague") - submitted affidavits and testified before the Court. The parties submitted written summations on June 19, 2018. (Doc. Nos. 61, 62.) KAAGNY responded to Min's summation on June 25, 2018 (Doc, No. 63), and Min responded to KAAGNY's summation on June 26, 2018 (Doc. No. 64).[1]

         II. Legal Standard

         To prevail on its claims, KAAGNY was required to present evidence in support of the allegations set forth in its Complaint (as narrowed or focused in summation), and to prove those allegations by a preponderance of the evidence. See Diesel Props S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011). "The burden of showing something by a preponderance of the evidence . . . simply requires the trier of fact to believe that the existence of a fact is more probable than its nonexistence . . . ." Metro. Stevedore Co. v. Rambo, 521 U.S. 121, 137 n.9 (1997) (internal quotation marks omitted). As the finder of fact, the Court is entitled to make credibility findings as to the witnesses and their testimony. See Krist v. Kolombos Rest. Inc., 688 F.3d 89, 95 (2d Cir. 2012).

         III. Findings of Fact[2]

         A. Background and KAAGNY Bank Accounts

         KAAGNY is a New York-based nonprofit organization that "represents the interests of Korean-American immigrants, helps them assimilate and integrate into the United States, and provides a common network for the Korean-American community throughout the tri-state area." (Stip. Facts ¶1; see Affidavit of Minsun Kim ("Kim Aff") ¶ 3.) KAAGNY represents more than 500, 000 Korean-American residents and 200, 000 professional, religious, educational, and trade organizations throughout the region, and is the most prominent Korean-American non-profit recognized by the President of the Republic of Korea. (Kim Aff. ¶ 3.)

         KAAGNY's principal asset is its building at 149 West 24th Street in Manhattan (the "KAAGNY building"). (Id. ¶ 16.) Building-related expenses such as property taxes are paid out of a bank account that KAAGNY maintains at Chase Bank (account number xxxx0206) (the "building account"); in addition, KAAGNY maintains a separate Chase account for operating expenses (account number xxxx5517) (the "operating account"). (Id. ¶ 17; PX7.)

         KAAGNY's lease of the building generates approximately $40, 000 in rent each month, which goes directly into the building account to cover building-related expenses. (Tr. 165:7-13.) By contrast, funds in the operating account are generated from non-building-related sources such as "membership fee[s], Board of Director fee[s], . . . advertisements, . . . government[] support, and business income" (PX1 at 31), as well as community fundraising or, in certain circumstances, the KAAGNY president's personal funds (Tr. 48:1-3, 77:17-78:2). In the event that rental income in the building account is insufficient to pay KAAGNY's building-related expenses, the KAAGNY president may also use community fundraising or personal funds to cover such expenses. (Tr. 48:5-11.)

         The parties dispute whether, and in what circumstances, building account funds may be transferred to the operating account or otherwise used to pay operating expenses. KAAGNY's written bylaws ("the Bylaws"), as revised on March 11, 2013 and translated into English, do not expressly speak to this issue, providing obliquely that "[t]he operation of the [KAAGNY] Building must be done on a self-financed basis." (PX1 at 37 (Article 89); see also Id. at 31 (Article 76(2)) ("The finance whose purpose is determined may not be used for other purposes.").) According to Kim, however, a well-recognized custom prohibits KAAGNY presidents from using building account funds to pay for operations. Kim testified that all KAAGNY presidents and the broader KAAGNY community "clearly understand" that "[b]uilding fund[s] cannot be transferred to [the] operati[ng] account and . . . must be used for only building purpose[s]." (Tr. 46:19-23; see also Tr. 92:9-12 (Question: "[A]s far as you know, other than Mr. Min, has any other person in charge of KAAGNY moved building money to the operating account to pay ordinary expenses?" Kim: "No.").)

         When the Court asked Min if, "[a]s the president of the [Association, [he had] an understanding [as] to whether it was permissible to use the building account funds to cover expenses related to something other than the building," Min responded, "[i]t's not that it's permissible, but as a custom, customarily the money was taken from [the building account], it was used and then it was replenished." (Tr. 149:12-18.) Min later clarified, however, that he had "heard" that past presidents had used building account funds for operating expenses only in "emergency situation[s]." (Tr. 152:5-22.) Moreover, when the Court asked Min to state on the record who had told him that it was an acceptable custom to use building account funds to pay for operating expenses, Min was evasive and initially declined to answer the question; in fact, he only responded when faced with contempt sanctions. (Tr. 154:6-19.) In light of the witnesses' testimony and demeanor at trial, the Court credits Kim's statement that a well-recognized custom generally prohibited KAAGNY presidents from using building account funds for operating purposes. Although a limited exception may have existed for emergency situations, even then, past presidents would replenish the building funds after using them. To the extent Min testified that any such exception was commonly invoked, the Court does not credit Min's testimony. Indeed, Min's testimony as to the permissible use of building account funds is belied by his evasive answers when questioned as to his sources of information, suggesting that Min knew the use of building account funds for operating purposes was generally improper.

         B. The KAAGNY Presidency and Election Process

         The KAAGNY president serves a two-year term that begins on May 1st of every odd-numbered year and ends on April 30th of the following odd-numbered year. (Kim Aff. ¶¶ 5, 7.) Although the KAAGNY presidency is a "very honorable and prestigious position" in the Korean-American community (Tr. 60:14-15), it does not come cheap. To run for president, a candidate must pay a $100, 000 election registration fee and promise that, if elected, the candidate will comply with rigorous -and, as this case demonstrates, perhaps risky - financial obligations set forth in the Bylaws. (See Kim Aff. ¶¶ 10-15, 23; PX2, 4; Tr. 26:6-7.)

         Specifically, each candidate in the 2013 KAAGNY presidential election was required to sign a pair of affidavits (the "2013 Affidavits"). (PX2; see Kim Aff. ¶¶ 11, 14, 23.) The first affidavit, titled "Financial Assurance Note," provided that, in the event the candidate was elected president, the candidate and his or her spouse would be responsible for "all expense[s] incurred by KAAGNY during the president's term as determined by the KAAGNY By-Laws," and that "in the event [such] financial responsibilities are not discharged," the candidate and his or her spouse would "remain financially liable even after the end of [the candidate's] term" as president. (PX2 at 2.) The relevant Bylaws referenced in the affidavit include Article 69 (titled "Financial Guarantor"), which provides in relevant part that "[t]he winner of the Presidential Election ... is responsible for all the running expenses that occur during his or her Presidency." (PX1 at 27-28.) Similarly, Article 76 (titled "Finance") provides that "[t]he President of the Association is responsible for all the running expenses that occur during his or her term, and the running expenses during his or her term cannot be transferred to the next fiscal year unpaid." (Id. at 31.) As Kim testified at trial, these financial obligations made an outgoing KAAGNY president and his or her spouse personally responsible for any debt left on KAAGNY's books at the end of the presidency. (Tr. 75:10-78:18; see also PX38 at ¶ 39 (July 17, 2015 Affidavit of Sung Ki Min, No. 15-cv-3370 (PJS)) ("I - as President -remain personally responsible for any deficit in operating funds.").)

         The second affidavit, titled "Assurance Promissory Note for the Financial Liabilities of the Building," set forth similar financial obligations concerning the KAAGNY building. In particular, each candidate pledged:

I . . . confirm and agree that in the event I am elected and I take the office as the 33rd KAAGNY president that all financial liabilities incurred by the KAAGNY [b]uilding during the president's term as determined by the KAAGNY By-Laws shall be the responsibility of myself and assure by notarized signature that I shall be civilly responsible for financial liabilities of the KAAGNY building.

(PX2 at 5.)

         Finally, candidates in the 2015 KAAGNY presidential election were required to sign an additional affidavit ("2015 Affidavit"), which expressly barred the successful candidate from transferring debt to his presidential successor, providing as follows:

I . . . will undertake any and all financial liabilities of KAAGNY office, in the event the Candidate wins and is declared as 34th President of [KAAGNY] and produces any financial liabilities during the presidency according to the By-Laws of KAAGNY Chapter 12 Article 69 in which it is specified that the financial liabilities from the Secretariat of KAAGNY shall not be transferred to the next presidency.

(PX4.) As a candidate in both the 2013 and 2015 presidential elections, Min signed each of the above affidavits (collectively, the "Campaign Affidavits"). (Kim Aff. ¶¶ 23, 27; PX2, 4.)

         C. Min and Kim

         Min first became involved with KAAGNY in 2003. (Affidavit of Sung Ki Min ("Min Aff.") ¶ 5.) Before being elected president in 2013, Min was a General Secretary of the Association and the Vice Chairman of the Board of Directors. (Id. ΒΆ 6.) In March 2013, Min was elected as the 33 rd ...


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