An early investor in L&P Cosmetic, the operator of mask pack brand Medi-Heal, has lost an appeal in a 6.4 billion won contractual payment lawsuit based on a written pledge to "pay 0.3% of revenue."
According to legal sources Friday, the Seoul High Court's Civil Division 1-3 (presiding judge Choi Seong-bo) on Nov. 13 dismissed the plaintiff's appeal in the contractual payment claim filed by A against L&P Cosmetic, upholding the lower court's ruling against the plaintiff.
A invested 400 million won in L&P Cosmetic around June 2012, when the company was facing financial difficulties. In the process, A acquired stakes in the company and its affiliates and received a first written pledge stating that "0.3% of the combined revenue of the three companies will be paid as salary."
The dispute arose as the company's revenue surged. L&P Cosmetic's revenue grew from 7.5 billion won in 2012 to 57.6 billion won in 2014. The two sides then signed a second pledge in January 2015 stating that "in exchange for receiving a fixed amount, the recipient will not receive 0.3% of revenue." The company paid A approximately 63.45 million won by December that year under the categories of business income and vehicle support.
However, A filed the lawsuit in 2023, claiming that despite the company's growth, the "fixed amount" stipulated in the second pledge had not been properly paid. A argued that since the second pledge had lost its effect due to non-fulfillment of conditions, the company should pay approximately 6.4 billion won, equivalent to 0.3% of revenue from 2012 to 2023, under the first pledge. The company countered that it had already fulfilled its contractual obligations and that A had also earned approximately 11.6 billion won in capital gains since the investment.
The court sided with the company. The bench interpreted the "fixed amount" in the second pledge as a reasonable sum to be paid by the CEO in accordance with the principle of good faith. It also found that paying 0.3% of revenue indefinitely could result in guaranteeing excessive returns to a specific investor. The fact that A had raised no particular objection for about eight years also served as grounds for the ruling.
"The 63.45 million won A received amounts to roughly three times the approximately 22.63 million won that would correspond to 0.3% of 2012 revenue," the bench ruled. "A also earned approximately 11.6 billion won in capital gains by trading unlisted shares with the company's cooperation."
