Beginning in 1996, Donna Yoon operated an export business in California, doing business as ANA. Between 1996 and 2001, ANA had a business relationship with the government of Jeju, South Korea, importing and exporting oranges.
Jeju is an autonomous island province that is known for its phalaenopsis orchids, also called “moth” orchids. In 2003, the Jeju government sought to develop United States markets for its orchids. Jeju purchased a nursery in Somis, California in order to export JeJu’s orchid seedlings for cultivation in Somis followed by sale throughout the United States. The Jeju government formed a new entity, American Cheju Trading Co. (ACTC), to manage the Somis nursery. ACTC is the predecessor of appellant JPDC.
In 2003, Jeju invited ANA to act as ACTC’s exclusive U.S. orchid distributor. Yoon accepted on behalf of ANA. ANA and ACTC had been doing business under this agreement for about six months when the Jeju government decided to replace ACTC with a new manager, JPDC.
In January 2004, JPDC succeeded ACTC as manager of the Somis nursery. In the months before the transition, ANA, JPDC and ACTC representatives met several times. According to ANA, they orally agreed that ANA would continue to be the exclusive U.S. distributor for the Somis nursery under JPDC management. According to JPDC, it did not agree to an exclusive relationship and proposed that it would be allowed to sell to new customers. In March 2004, JPDC sent a letter to Yoon proposing an open marketing relationship. Yoon did not sign the open marketing proposal and she testified that she did not agree to it. Several witnesses testified on ANA’s behalf that JPDC’s president and ACTC’s branch manager each told Yoon that the exclusive sales relationship would continue.
From January 2004 until August of 2005, ANA purchased orchids from JPDC. Yoon testified that she also shared ANA’s proprietary customer information with JPDC and invested in improving the nursery, things she would not have done if the agreement had not been exclusive.
Disputes arose between ANA and JPDC concerning quality, price and credits for returns. According to ANA, JPDC failed to fill some orders and filled other orders with un-saleable orchids, which ANA returned but for which she did not receive credits. According to JPDC, ANA unilaterally modified invoices by reducing the orchid grade (and price) and by designating some orchids as free samples or as no-charge returns. By August of 2005, JPDC was demanding $66,453.50 for unpaid July and August, 2005 invoices while ANA was claiming $33,562 in credits for unfilled orders and un-saleable orchids for the period from January 2004 to March 2005.
On September 1, 2005, Yoon and her daughter met at the nursery with JPDC’s new branch manager, Soo Nam Koh, and JPDC’s bookkeeper to try to resolve their dispute. After the parties reviewed the invoices together, Yoon presented a check to JPDC for $28,198 with a notation in the memo: “zero balance as of 8-31-05.” She and her daughter testified that Yoon explained that this check was offered to settle all accounts between them and that this would be the end of their business relationship. According to JPDC’s manager and bookeeper, it was only partial satisfaction of the July and August invoices and did not constitute a full and final settlement of JPDC’s claims. At trial, JPDC claimed $120,000 in unpaid invoices. JPDC’s Branch Manager testified that he did not understand English well, did not notice the “zero balance” notation, and Yoon’s Korean was difficult to understand. He and the bookkeeper testified that Yoon did not explain the consequences of depositing the check.
Meanwhile, JPDC began selling orchids to other United States distributors without ANA’s consent. Yoon testified that she was aware JPDC was developing a customer in Canada, but did not know about the United States sales. ANA presented expert testimony and invoices demonstrating lost profits for unfilled orders and lost profits resulting from sales to third parties during the contract term.
After a 21-day bench trial, the trial court entered a verdict against JPDC on its complaint, finding that the “zero balance” check was an accord and satisfaction of all JPDC’s claims on the orchid invoices. It also awarded ANA $394,023 on the cross-complaint, finding that JPDC breached an exclusive distribution contract with ANA and that ANA suffered $199,146 in losses resulting from unfilled orders and $167,277 in lost profits resulting from JPDC’s sales to third parties.
Upon request of the parties, the court issued a tentative statement of decision, heard arguments on written objections, and entered a statement of decision. The court made specific findings on the ultimate factual issues and found that “the testimony of Donna Yoon, Carol Yoon, Scott Hyun, Seong Kim and John Parks is more credible and more worthy of belief than the testimony of witnesses such as Bang Eun Kim and SN Ko.” The court wrote that this was a case, “where there is a series of significant controversies in which one side’s witnesses and evidence represents the essential truth of what occurred and the other side is distorting the truth by lies and deception.”