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North Seattle Health Center Corp. v. Allstate Fire & Casualty Insurance Co.

United States District Court, W.D. Washington, Seattle

May 19, 2017

NORTH SEATTLE HEALTH CENTER CORPORATION, Plaintiff,
v.
ALLSTATE FIRE & CASUALTY INSURANCE COMPANY, Defendant. ALLSTATE INDEMNITY COMPANY, et al., Third-Party Plaintiffs,
v.
DAEHYUN CHOI, et al., Third-Party Defendants.

          ORDER REGARDING MOTION FOR CONTEMPT

          JAMES L. ROBART, United States District Judge

         I. INTRODUCTION

         Before the court is Defendant Allstate Fire and Casualty Insurance Company and Third-Party Plaintiffs Allstate Indemnity Company, Allstate Insurance Company, and Allstate Property and Casualty Insurance Company's (collectively, “Allstate”) motion for contempt against Third-Party Defendants Daehyun Choi and Hyun Joo Kwan (Contempt Mot. (Dkt. # 66)) and the court's order to show cause why the court should not hold Mr. Choi and Ms. Kwan in contempt for failure to appear at their October 3, 2016, depositions (OSC (Dkt. # 72)). Neither Mr. Choi nor Ms. Kwan responded to Allstate's motion or to the court's order to show cause. (See generally Dkt.) The court held a hearing on Allstate's motion and the court's order to show cause on May 18, 2017, at 3:00 p.m. (Min. Entry (Dkt. # 85).) Allstate appeared through counsel. (Id.) Ms. Kwan appeared pro se at the hearing. (Id.) Mr. Choi failed to appear. (See id.) The court has considered Allstate's motion, the relevant portions of the record, and the applicable law. Being fully advised, the court GRANTS in part and DENIES in part Allstate's motion, FINDS Mr. Choi to be in civil contempt of court, ISSUES a bench warrant for Mr. Choi's arrest as described herein, AWARDS Allstate its attorney's fees and costs as described herein, and ORDERS Ms. Kwan to appear for her supplemental proceedings deposition on May 19, 2017, at 10:00 a.m.

         II. BACKGROUND

         On October 4, 2014, Plaintiff North Seattle Health Center Corporation (“Health Center”) filed a complaint in state court against Allstate alleging claims for tortious interference with a contractual and business relationship and tortious interference with a business expectancy. (See Compl. (Dkt. # 1-1) at 1.) On October 31, 2014, Allstate removed the lawsuit from Snohomish County Superior Court to this court. (Not. of Rem. (Dkt. # 1).) Allstate answered the complaint and included counterclaims for violation of Washington's Consumer Protection Act (“CPA”), RCW ch. 19.86, common law civil fraud, violation of Washington's Criminal Profiteering Act, RCW ch. 9A.82, unjust enrichment, and piercing the corporate veil. (Ans. (Dkt. # 3-1) ¶¶ 7.1-10.8.) Allstate also brought third-party claims against Mr. Choi, Ms. Kwan, DRDC Corporation, Inc., Bestway Chiropractic Clinic Corporation (“Bestway”), and Good Care Spine Clinic Corporation (“Good Care”) (collectively, “Third-Party Defendants”) for violation of the corporate practice of medicine doctrine, violation of the Professional Services Corporation Act, RCW ch. 18.100, violation of Washington's Anti-Rebate Statute, RCW ch. 19.68, violation of the CPA, common law civil fraud, violation of Washington's Criminal Profiteering Act, unjust enrichment, and piercing the corporate veil.[1] (Id. ¶¶ 11.1-22.8.)

         On August 25 and 27, 2015, Allstate moved for the entry of default against the Health Clinic and Third-Party Defendants as a sanction for discovery violations and failure to abide by the court's prior orders. (See Mot. for Default (Dkt. # 34); Supp. Mot. for Default (Dkt. # 36).) On September 17, 2015, the court held a hearing on Allstate's motions for sanctions and the entry of default, which was based on the Health Clinic's and Third-Party Defendants' failure to obtain counsel as the court ordered and to respond to Allstate's discovery requests. (See 9/17/15 Min. Entry (Dkt. # 38).) Neither the Health Clinic nor Third-Party Defendants responded to Allstate's motions or appeared at the September 17, 2015, hearing. (See id.; see generally Dkt.) At the hearing, the court granted Allstate's motions, dismissed the Health Clinic's claims, and found Plaintiff and Third-Party Defendants in default. (9/17/15 Min. Entry.)

         On December 2, 2015, Allstate filed a motion for default judgment. (Mot. for DJ (Dkt # 41).) The court denied Allstate's motion on January 27, 2016, without prejudice to re-filing an amended motion. (1/27/16 Order (Dkt. # 46).) Allstate filed an amended motion for default judgment on February 16, 2016 (Am. Mot. for DJ (Dkt. # 49)), and the court granted Allstate's amended motion on April 26, 2016 (DJ Order (Dkt. # 64)). The court formally entered judgment the next day dismissing the Health Clinic's claims with prejudice and granting default judgment to Allstate in the amount of $374, 147.96. (Judg. (Dkt. # 65).)

         Allstate sent subpoenas to Mr. Choi and Ms. Kwan for supplemental proceeding depositions, which Allstate noted for October 3, 2016. (Goltermann Decl. (Dkt. # 67) ¶¶ 3-4, Exs. B, C; see also Leid Decl. (Dkt. # 83) ¶¶ 3-6, Exs. A-D.) Allstate hoped to obtain information from Mr. Choi and Ms. Kwan that would enable Allstate to collection upon and satisfy the default judgment it had obtained. (Contempt Mot. at 6.) Both Mr. Choi and Ms. Kwan failed to appear at their October 3, 2016, depositions and gave no explanation for their absence. (See Golterman Decl. ¶¶ 5-6, Exs. D, E; Leid Decl. ¶¶ 7-8, Exs. E, F; see also PI Mot. (Dkt. # 69) at 3-4 (“To date [March 6, 2017], Allstate has received no communications from either Daehyun Choi or Hyun Joo Kwan regarding their missed debtor depositions or attempting to reschedule for a later date.”).)

         Allstate asserts that after instituting claims against the Health Center and Third-Party Defendants, Mr. Choi and Ms. Kwan opened two new clinics-Appletree Acupuncture Clinic (“Appletree”) and Green Day Clinic (“Green Day”)-“under the overarching umbrella” of the Health Center. (PI Mot. at 4.) Allstate argues that Mr. Choi and Ms. Kwan opened the new clinics to “shield assets from any judgments that might stem from Allstate's suit.” (Id.)

         In support of this assertion, Allstate submits copies of the articles of incorporation for both Appletree and Green Day. (2d Goltermann Decl. (Dkt. # 70) ¶¶ 7-8, Exs. F, G.) Appletree's articles of incorporation indicate that Appletree was incorporated by “Dae Hyun Choi, ” who is also serving as Appletree's registered agent at 4629 168th SW C4, Lynnwood, Washington. (Id. ¶ 8, Ex. G at 3.) The name “Dae Hyun Choi” is remarkably similar to Third-Party Defendant Daehyun Choi. Further, Mr. Choi's address on the court docket is listed as 4629 168th St. SW, STE B, Lynnwood, Washington. (See Dkt.) Although the suite numbers are distinct, the remainder of the address for Mr. Choi, as Appletree's registered agent, corresponds to the address for Mr. Choi on the court's docket. (Compare 2d Goltermann Decl. Ex. G, with Dkt.)

         The articles of incorporation for Green Day indicate that Green Day was incorporated by “Sung Jun Jung.” (2d Goltermann Decl. ¶ 7, Ex. F at 3.) Allstate provides no explanation or evidence concerning the relationship, if any, between Sung Jun Jung and the Health Clinic or Third-Party Defendants. However, the address listed for Sung Jun Jung on Green Day's articles of incorporation is nearly identical to the address provided for the Health Center and Third-Party Defendants on the court's docket.[2] (Compare id., with Dkt.)

         Finally, Allstate asserts that it “recently received information suggesting that [M]r. Choi and [Ms.] Kwan are in the process of selling their businesses and moving back to South Korea, likely to escape the payment of the Court ordered judgment to Allstate.” (PI Mot. at 4.) Allstate, however, submits no evidence to support this assertion.[3] (See generally Dkt.)

         On December 28, 2016, Allstate filed a motion for contempt against Mr. Choi and Ms. Kwan for their failure to appear at their debtors' depositions. (See Contempt Mot.) Allstate asked the court to award its reasonable attorneys' fees and costs in bringing the motion for contempt and the court reporter fees for the depositions at which Mr. Choi and Ms. Kwan failed to appear. (Id. at 6.) Allstate also asks the court to issue bench warrants for both Mr. Choi and Ms. Kwan. (Id.) Allstate personally served this motion on Mr. Choi and Ms. Kwan at the address for their clinic, which is the only address that they have provided to the court. (See Supp. Mem. (Dkt. # 82) at 3; Leid Decl. ¶¶ 9-10, Exs. G, H.) On March 6, 2017, Allstate filed a motion for a preliminary injunction seeking an order from the court prohibiting Mr. Choi and Ms. Kwan, in either their personal capacities or in their capacities as owners of Third-Party Defendants, from selling any real property, personal property, or businesses. (See PI Mot.) Allstate also personally served this motion on Mr. Choi, who accepted personal service for both himself and his wife, Ms. Kwan. (Supp. Mem. at 3; Leid Decl. ¶ 11, Ex. I.)

         On April 11, 2017, the court denied Allstate's motion for a preliminary injunction[4]and reserved ruling on Allstate's motion for contempt pending a hearing on the contempt motion and an opportunity for Mr. Choi and Ms. Kwan to be heard on the propriety of a finding of civil contempt. (OSC (Dkt. # 72) at 7-11.) In the same ruling, the court issued an order to show cause to Mr. Choi and Ms. Kwan, directing them to appear at a hearing on May 1, 2017, at 3:00 p.m. to explain to the court why they did not comply with the subpoenas that Allstate served upon them and did not attend their depositions. (Id. at ...


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