Kim v. CIMG Inc.

Background

Sooncha Kim alleged that he agreed to invest in CIMG Inc. and transferred $320,000 to CIMG without a written agreement. The parties later signed a Convertible Note and Warrant Purchase Agreement. CIMG delivered a $320,000 convertible promissory note, which could be converted into CIMG stock at a specified price.

According to the opinion, the note and agreement gave Kim rights to convert the unpaid principal into common stock, appoint a director to CIMG’s board, and participate in later financings. Kim also alleged that CIMG agreed not to issue common stock without his written consent, enter into or announce certain agreements or transactions without his consent, or issue stock that could adjust the note’s conversion price.

Kim sued CIMG on October 3, 2024, alleging breach of contract and violations of federal securities law. He alleged, among other things, that CIMG failed to honor his requests to convert the note, issued common stock without his consent in a way that affected the conversion price, failed to notify him of later financing opportunities, and omitted him from registration statements and a share purchase agreement. CIMG denied the allegations and asserted that its former chief executive officer, Masateru Higashida, lacked actual authority to sign the note and agreement because the documents did not receive board approval.

Motion and Legal Standard

Kim moved for a preliminary injunction, which is a temporary court order intended to prevent harm before the case is resolved. He sought orders restricting CIMG’s agreements, stock issuances, possible dilution of its common-stock value, and transfers or dispositions of assets that might be used to satisfy a judgment. He also sought orders directing VStock Transfer LLC to refrain from further issuing CIMG shares and to freeze CIMG’s corporate register.

The court stated that a party seeking a preliminary injunction must show a likelihood of success on the merits, likely irreparable harm without the order, that the balance of the equities favors the order, and that the order would serve the public interest. Irreparable harm means an actual and imminent injury that cannot be adequately remedied after trial, including through money damages.

Court’s Analysis

The court denied the motion because Kim did not show likely irreparable harm. It held that damages from an alleged breach of a convertible-note agreement could be calculated to a definite amount as of a definite date. The court also noted that CIMG is publicly traded and concluded that damages from the alleged breach were ascertainable.

The court further considered Kim’s delay. Kim filed the lawsuit on October 3, 2024, but did not move for a preliminary injunction until January 8, 2025, more than three months later and after settlement discussions had failed. The court stated that delay in seeking emergency relief can indicate a reduced need for that relief.

The agreement stated that a breach by CIMG would cause irreparable harm and that legal remedies might be inadequate. The court considered that provision but held that it was not dispositive and did not, by itself, satisfy Kim’s burden. Because Kim failed to establish irreparable harm, the court said it did not need to address the motion’s other requirements or arguments.

Disposition

The court denied Kim’s motion for a preliminary injunction. It also denied Kim’s request for attorney’s fees for preparing a reply brief, noting that the New York regulation cited for that request did not govern practice in federal court and that the request was baseless. The parties were scheduled to appear for a status conference on February 28, 2025, and the clerk was directed to terminate the pending motion at docket entry 26.