Rhee v. Sante Ventures

Background

Youngjoo Rhee was formerly employed by SHVMS, LLC, doing business as Santé Ventures, as its Director of Marketing and Investor Relations. Her 2010 offer letter promised incentive compensation, including a cash bonus equal to 1% of capital she was directly involved in sourcing, qualifying, and helping close. The letter stated that the bonus would be paid in equal quarterly installments over three years and would be 100% vested when each limited partner closed its investment.

Rhee helped Santé Ventures secure a $75 million investment from the Pennsylvania Public School Employees’ Retirement System in Fund III. After that investment formally closed in April 2019, Santé Ventures paid Rhee $300,000. Her employment ended in July 2020. PSERS later invested another $75 million in Fund IV in April or May 2021.

At trial, the jury found that Santé Ventures breached the offer letter by failing to pay Rhee the cash bonus and rejected the company’s contract-modification defense. It awarded Rhee $1.5 million in compensatory damages. The jury found for Santé Ventures on Rhee’s claim that the company breached the offer letter by failing to award carried interest in Funds III and IV. The Court entered judgment for $1.5 million.

Defendant’s Motion for a New Trial or Remittitur

Santé Ventures argued that the $1.5 million damages award was excessive. It contended that the $300,000 payment fully compensated Rhee for the Fund III bonus installments that had become due during her employment and that Rhee was not entitled to later installments. It also argued that Rhee was not entitled to a Fund IV bonus because that bonus vested after her employment ended.

The Court held that the offer letter was unambiguous. Rhee earned the Fund III bonus when PSERS formally invested $75 million, making the total bonus $750,000, payable in quarterly installments of $62,500 over three years. Because the bonus became fully vested at the time of the investment, Rhee’s later termination did not eliminate her right to the unpaid installments.

The Court found, however, that the $300,000 payment was intended to compensate Rhee for her work securing PSERS’s Fund III investment. It therefore deducted that payment from the $750,000 Fund III bonus, leaving $450,000 unpaid.

The Court also held that Rhee did not earn a Fund IV bonus. When her employment ended, PSERS was not yet legally obligated to invest in Fund IV. Because the Fund IV investment occurred after her termination, the bonus had not vested while Rhee was employed.

The Court concluded that the jury had made two quantifiable errors: it failed to deduct the $300,000 payment from the Fund III bonus and awarded $750,000 for the unvested Fund IV bonus. The Court therefore remitted, meaning reduced, the damages award to $450,000. Rhee may reject the reduced award and receive a new trial on damages instead.

Plaintiff’s Motion for Prejudgment Interest

Rhee moved to add prejudgment interest. The Court declined to deny the motion based on technical failures to follow a local motion rule because her filings adequately explained the legal basis, requested relief, and supporting authorities.

Under New York law, prejudgment interest is available for damages awarded for breach of contract. The Court held that Rhee was entitled to interest, but rejected her proposed starting date because the December 2018 investment memorandum was only a recommendation and did not legally bind PSERS to invest.

The Court determined that the first Fund III installment became due in July 2019. Because Rhee’s damages accrued at different times, interest was to run separately from the due dates of the unpaid installments. The calculation also had to account for the $300,000 payment: $250,000 covered the first four $62,500 installments, and the remaining $50,000 partially covered the next installment. Thus, interest was available on the unpaid $12,500 portion of the April 2020 installment and on later unpaid installments from their respective due dates.

Disposition

The Court granted in part Rhee’s motion for prejudgment interest and granted in part Santé Ventures’ motion for a new trial or remittitur. Rhee was required to notify the Court within 21 days whether she accepted the reduced $450,000 verdict or chose a new trial on damages. If she accepted the reduced verdict, she was required to submit a proposed judgment reflecting the reduced damages and prejudgment interest calculated under the Court’s instructions.