## Facts

- Yuk Fung Ma agreed with Gee Wai (“Alex”) Chan and Gee On (“Adam”) Chan to open and operate a restaurant.
- The three formed J.C. Sake Inc. to run the restaurant.
- Ma contributed $46,414.50 to the venture and worked as the restaurant’s chef and manager.
- After the restaurant began operating, Alex became dissatisfied with Ma’s management and threatened to “kick [him] out” unless Ma sold his shares.
- Ma said he would sell only for the fair value of his interest.
- Alex and Adam offered Ma $47,000 for his shares; Ma rejected the offer as too low.
- The next day, Ma arrived to find the restaurant’s locks had been changed and he could not enter to open or operate the business.
- Adam told Ma the offer was now $35,000 and stated that if Ma did not accept, Alex and Adam would keep the restaurant closed and Ma would “receive nothing.”
- Ma ultimately accepted $38,000 for his shares, believing he had no practical choice given the lockout and threats.
- Ma sued J.C. Sake Inc. and the other shareholders, alleging the share sale was induced by economic duress and seeking to void the transaction.

## Issues

1. Whether Ma’s sale of his shares was voidable for economic duress because defendants used wrongful threats and pressure that left him no reasonable alternative but to accept a reduced buyout.
2. Whether Ma’s conduct after the sale barred relief (including whether he affirmed the transaction rather than promptly challenging it).

## Decision

- After a framed-issue bench trial, the court found that Ma proved economic duress.
- The court determined that defendants’ conduct—changing the locks to exclude Ma and threatening to keep the restaurant closed so Ma would get nothing unless he sold at a reduced price—was wrongful and coercive.
- The court concluded that, under the circumstances, Ma lacked a reasonable and timely alternative and his assent to the $38,000 sale was not the product of free choice.
- The court granted Ma relief consistent with treating the stock transfer as voidable based on economic duress and set aside the coerced share sale.

## Legal Principles

- Economic duress is shown when a party’s assent is induced by an improper or wrongful threat that leaves the victim with no reasonable alternative.
- Pressure that includes exclusion from a business and threats to destroy the value of an owner’s investment may qualify as wrongful conduct, not merely hard bargaining.
- The “reasonable alternative” inquiry is practical: the existence of a theoretical legal remedy does not defeat duress if the remedy is not realistically available in time to prevent the threatened harm.
- A contract or transfer procured by economic duress is voidable at the election of the victim, who must disaffirm within a reasonable time and seek appropriate equitable relief.

## Conclusion

In Yuk Fung Ma v. J.C. Sake Inc., the court held that Ma’s co-owners procured his agreement to sell his shares through economic duress by locking him out of the restaurant and threatening to keep the business closed so he would receive nothing unless he accepted a reduced buyout; because Ma lacked a reasonable, timely alternative and his assent was coerced, the court treated the share sale as voidable and set it aside.


Yuk Fung Ma v. J.C. Sake Inc., 2011 WL 2175913 (2011)