## Facts

- Jinro America, Inc. and its parent, JR International Corp. (collectively, Jinro), advanced roughly $10 million in a transaction documented as an international frozen-chicken trade deal.
- Jinro asserted it financed chicken purchases for resale and was to receive repayment, profit, and Treasury securities as collateral.
- Defendants (including Secure Investments, Inc. and related individuals/entities) contended the written “chicken” agreement was a sham concealing a high-risk “roll program” structured to evade Korean currency regulations.
- No chicken was ever purchased or sold; Jinro demanded repayment and later sued for breach of contract, fraud, and civil RICO.
- The district court bifurcated trial proceedings and tried first whether the written contract reflected a genuine commodities deal or a sham.
- During phase one, the court admitted testimony from a defense witness presented as an expert on Korean culture and business practices.
- The jury found the transaction was a sham; the district court then sua sponte entered summary judgment against Jinro on all claims.

## Issues

1. Whether the district court erred under Federal Rules of Evidence 702 and 403 by admitting purported expert testimony that relied on ethnically based generalizations about Korean businesses and suggested a propensity for fraud or currency-law evasion.
2. Whether any evidentiary error in admitting that testimony was harmless given the contested sham-contract determination that drove the later disposition.
3. Whether parol evidence and foreign-law determinations were properly handled in litigating the sham-contract defense (secondary).

## Decision

- The Ninth Circuit reversed the judgment against Jinro and remanded for a new trial.
- The court held that the challenged “expert” testimony was inadmissible because it lacked reliable expert foundation under Rule 702 and posed a substantial risk of unfair prejudice under Rule 403.
- The court concluded the improper testimony prejudiced the phase-one verdict on the sham-contract question, and the ensuing summary judgment could not stand.

## Legal Principles

- Expert testimony must rest on reliable specialized knowledge and methodology; anecdote-driven cultural generalizations unsupported by expertise fail Rule 702.
- Evidence whose probative value is substantially outweighed by the danger of unfair prejudice must be excluded under Rule 403, including testimony that invites decision on group-based stereotypes rather than party-specific proof.
- Courts should not permit propensity-style inferences in civil cases based on ethnicity or national origin (e.g., that a party is more likely to have acted unlawfully because of group identity).
- Parol evidence may be admissible to show that a written agreement is a sham used to conceal illegality, but it must be presented through admissible, non-prejudicial proof.
- Determination of foreign law is a question of law for the court under Federal Rule of Civil Procedure 44.1.

## Conclusion

The Ninth Circuit ordered a new trial because the district court allowed unreliable and unfairly prejudicial expert testimony that depended on ethnic stereotyping, which likely affected the jury’s sham-contract finding and invalidated the later summary judgment entered against Jinro.


Jinro Am., Inc. v. Secure Invs., Inc., 266 F.3d 993 (9th Cir. 2001)