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`Laurence M. Rosen, Esq. (SBN 219683)
`THE ROSEN LAW FIRM, P.A.
`355 South Grand Avenue, Suite 2450
`Los Angeles, CA 90071
`Telephone: (213) 785-2610
`Facsimile: (213) 226-4684
`Email: lrosen@rosenlegal.com
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`Counsel for Plaintiff
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`IN THE UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
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`Case No.:
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`DEMAND FOR JURY TRIAL
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`JESUS MENDOZA, derivatively on
`behalf of HF FOODS GROUP INC.,
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`Plaintiff,
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`v.
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`ZHOU MIN NI, XIAO MOU ZHANG,
`CAIXUAN XU, JIAN MING NI,
`ZHEHUI NI, HONG WANG, CHAN
`SIN WONG, and REN HUA ZHENG,
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`HF FOODS GROUP INC.,
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`Defendants,
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`and
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`Nominal Defendant.
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`VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT
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`Verified Shareholder Derivative Complaint
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`INTRODUCTION
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`Plaintiff Jesus Mendoza (“Plaintiff”), by Plaintiff’s undersigned attorneys,
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`derivatively and on behalf of Nominal Defendant HF Foods Group Inc. (“HF Foods” or
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`the “Company”), files this Verified Shareholder Derivative Complaint against Individual
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`Defendants Zhou Min Ni, Xiao Mou Zhang, Caixuan Xu, Jian Ming Ni, Zhehui Ni, Hong
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`Wang, Chan Sin Wong, and Ren Hua Zheng (collectively, the “Individual Defendants,”
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`and together with HF Foods, the “Defendants”) for breaches of their fiduciary duties as
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`controlling shareholder, directors and/or officers of HF Foods, unjust enrichment, abuse
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`of control, gross mismanagement, waste of corporate assets and violations of Sections
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`14(a), 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). As
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`for Plaintiff’s complaint against the Individual Defendants, Plaintiff alleges the following
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`based upon personal knowledge as to Plaintiff and Plaintiff’s own acts, and information
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`and belief as to all other matters, based upon, inter alia, the investigation conducted by
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`and through Plaintiff’s attorneys, which included, among other things, a review of the
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`Defendants’ public documents and announcements made by Defendants, United States
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`Securities and Exchange Commission (“SEC”) filings, wire and press releases published
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`by and regarding HF Foods, legal filings, news reports, securities analysts’ reports and
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`advisories about the Company, and information readily obtainable on the Internet.
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`Plaintiff believes that substantial evidentiary support will exist for the allegations set
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`forth herein after a reasonable opportunity for discovery.
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`NATURE OF THE ACTION
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`1.
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`This is a shareholder derivative action that seeks to remedy wrongdoing
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`committed by HF Foods’ directors, officers, and controlling shareholder from August 23,
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`2018 through the present (the “Relevant Period”).
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`2.
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`HF Foods, formerly known as Atlantic Acquisition Corp. (“Atlantic”),
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`through its subsidiaries, is a leading food service distributor to Asian restaurants,
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`particularly Chinese restaurants, and other food service customers across the United
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`States. The Company boasts 14 distribution centers, a fleet of over 340 refrigerated
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`vehicles, and over 10,000 Asian restaurant customers in 21 states.
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`3.
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`In March 2018, Atlantic entered into a merger agreement with a privately
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`held North Carolina corporation, “HF Group Holding Corporation” (“HF Group”).
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`Pursuant to the agreement, HF Group merged with a subsidiary formed by Atlantic and
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`became the surviving entity and wholly owned subsidiary of Atlantic.
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`4.
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`In November 2019, HF Foods completed another business combination, this
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`time, with another leading Asian restaurant distributor and wholesale supplier, B&R
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`Global Holdings Inc. (“B&R Global”) based in California, for approximately 30.7 million
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`shares of HF Foods common stock.
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`5.
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`HF Foods conducts a significant amount of business with related parties
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`through regular sales and purchases made during the normal course of business.
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`6.
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`Throughout the Relevant Period, the Individual Defendants caused the
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`Company to consistently make statements in the Company’s SEC filings and press
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`releases that misrepresented the Company’s business operations, prospects, and
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`compliance, particularly with respect to the related party transactions HF Foods was
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`engaged in. While the Company’s SEC filings purported to accurately disclose, among
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`other things, all related party transactions, the Company was actually engaging in
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`numerous undisclosed related party activity, in addition to dubious disclosed activities,
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`that enabled insiders to unjustly enrich themselves to the detriment of the Company and
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`its shareholders.
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`7.
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`The truth was revealed to the public on March 23, 2020, when Hidenburg
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`Research published a report disclosing (i) alarming similarities between HF Foods and
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`two prior mergers orchestrated by Atlantic that ended in poor states; (ii) undisclosed links
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`between B&R Global and the Company, suggesting that the massive merger between the
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`companies was actually an undisclosed related party transaction, rather than one at
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`“arm’s-length”; (iii) numerous red flags with HF Foods’ related parties and purported use
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`of shareholder cash, including the inexplicable purchase of exotic supercars for
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`businesses affiliated with HF Foods; (iv) concerning issues with HF Foods’ auditor; and
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`(v) allegations of foul play with the amount of HF Foods’ free floating shares for the
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`FTSE/Russell indices (the “Hidenburg Report”).
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`8.
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`On this news, the price of the Company’s stock dropped from $12.32 per
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`share at the close of the previous trading day on March 20, 2020, to $9.80 at the close of
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`trading on March 23, 2020, a drop of over 20%.
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`9.
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`During the Relevant Period, the Individual Defendants breached their
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`fiduciary duties by engaging in and or causing the Company to engage in numerous
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`related party transactions (both disclosed and undisclosed) that resulted in the concealed
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`enrichment of Company insiders and affiliates, including: (1) loaning or otherwise
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`utilizing Company money for improper purchases and advances to the Chief Executive
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`Officer’s (“CEO”) son’s purported businesses and another Company subsidiary,
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`including to purchase a fleet of exotic luxury supercars, such as Ferraris and others with
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`vanity plates; (2) using HF Foods to shuffle cash through disclosed sales and purchases to
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`dubious affiliates of the Company’s CEO and other insiders; and (3) allowing related
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`parties to effectively “loot” the Company with wholesale purchases, causing a collapse in
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`the Company’s wholesale margins (collectively, the “Related Party Misconduct”).
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`10.
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`In further breach of their fiduciary duties during the Relevant Period, the
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`Individual Defendants personally made and/or caused the Company to make to the
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`investing public a series of materially false and misleading statements about HF Foods’
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`business, operations, and compliance. Specifically, the Individual Defendants willfully or
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`recklessly made and/or caused the Company to make false and misleading statements to
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`the investing public that failed to disclose, inter alia, that: (1) HF Foods engaged in the
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`Related Party Misconduct; and (2) the Company was “gaming” FTSE/Russell indices by
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`concealing the actual number of free floating shares. As a result of the foregoing, HF
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`Foods’ public statements were materially false and misleading at all relevant times.
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`11. The Individual Defendants also breached their fiduciary duties by failing to
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`correct and/or causing the Company to fail to correct these false and misleading
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`statements and omissions of material fact to the investing public.
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`12. Additionally, in breach of their fiduciary duties, the Individual Defendants
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`caused the Company to continuously fail to maintain adequate internal controls
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`throughout the duration of the Relevant Period, including by utilizing an independent
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`auditor with questionable standing.
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`13. Furthermore, the Individual Defendants breached their fiduciary duties by
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`causing the Company to repurchase its own stock at prices that were artificially inflated
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`due to the foregoing misrepresentations, while at least one of the Individual Defendants
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`breached their fiduciary duties by engaging in improper insider sales, obtaining proceeds
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`of over $67,894.
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`14. According to the Company’s quarterly report filed with the SEC on a Form
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`10-Q on November 14, 2019, approximately 905,115 shares of the Company’s stock
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`were repurchased at inflated prices between September 1, 2019 and September 30, 2019
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`for approximately $12,038,029, the aggregate balance of principal and accrued interest on
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`four unsecured loans. As the Company’s stock was actually only worth $9.80 per share,
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`the price at which it was trading on March 23, 2020, the Company overpaid
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`approximately $3.16 million in total.
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`15.
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`Foods, its Co-CEOs, its Chief Financial Officer (“CFO”), and its former CFO to being
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`In light of the Individual Defendants’ misconduct, which has subjected HF
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`named as defendants in two federal securities fraud class action lawsuits pending in the
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`United States District Court for the Central District of California (the “Securities Class
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`Actions”), the need to undertake internal investigations, the need to implement adequate
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`internal controls over its financial reporting, the losses from the waste of corporate assets,
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`the losses due to the unjust enrichment of the Individual Defendants who were
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`improperly over-compensated by the Company and/or who benefitted from the
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`wrongdoing alleged herein, the Company will have to expend many millions of dollars.
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`16.
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`In light of the breaches of fiduciary duty engaged in by the Individual
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`Defendants, most of whom are the Company’s current directors, their collective
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`engagement in fraud, the substantial likelihood of the directors’ liability in this derivative
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`action and the Co-CEOs’ liability in the Securities Class Actions, their being beholden to
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`each other, their longstanding business and personal relationships with each other, and
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`their not being disinterested and/or independent directors, a majority of HF Foods’ Board
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`of Directors (the “Board”) cannot consider a demand to commence litigation against
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`themselves on behalf of the Company with the requisite level of disinterestedness and
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`independence.
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`JURISDICTION AND VENUE
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`17. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331
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`because Plaintiff’s claims raise a federal question under Section 14(a) of the Exchange
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`Act, 15 U.S.C. § 78n, Rule 14a-9 of the Exchange Act, 17 C.F.R. § 240.14a-9, Sections
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`10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j, 78t), and SEC Rule 10b-5 (17
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`C.F.R. § 240.10b-5) promulgated thereunder.
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`18. Plaintiff’s claims also raise a federal question pertaining to the claims made
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`in the Securities Class Action based on violations of the Exchange Act.
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`19. This Court has supplemental jurisdiction over Plaintiff’s state law claims
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`pursuant to 28 U.S.C. § 1367(a).
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`20. This derivative action is not a collusive action to confer jurisdiction on a
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`court of the United States that it would not otherwise have.
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`21. The Court has personal jurisdiction over each of the Defendants because
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`each Defendant is either a corporation incorporated in this District, or he or she is an
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`individual who has minimum contacts with this District to justify the exercise of
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`jurisdiction over them.
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`22. Venue is proper in this District pursuant to 28 U.S.C. §§ 1391 and 1401
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`because a substantial portion of the transactions and wrongs complained of herein
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`occurred in this District, and the Defendants have received substantial compensation in
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`this District by engaging in numerous activities that had an effect in this District.
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`23. Venue is proper in this District because HF Foods and the Individual
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`Defendants have conducted business in this District, and Defendants’ actions have had an
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`effect in this District.
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`Plaintiff
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`PARTIES
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`24. Plaintiff is a current shareholder of HF Foods common stock. Plaintiff has
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`continuously held HF Foods common stock at all relevant times.
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`Nominal Defendant HF Foods
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`25. HF Foods is a Delaware corporation with its principal executive offices
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`located at 19319 Arenth Avenue, City of Industry, California 91748, as of May 4, 2020.
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`Prior to May 4, 2020, the Company’s principal executive offices were located at 6001 W.
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`Market Street, Greensboro, North Carolina 27409. HF Foods’ shares trade on the Nasdaq
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`Global Select Market (“NASDAQ”) under the ticker symbol “HFFG.”
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`Defendant Min Ni
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`26. Defendant Zhou Min Ni (“Min Ni”) is the co-founder of HF Group, and has
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`served as the Company’s Chairman since 2018, and as the Company’s Co-CEO since
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`November 2019. Previously, Min Ni served as the Company’s sole CEO from August
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`2018 until November 2019, and as HF Group’s CEO and Chairman since its founding in
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`1997. According to the Company’s Schedule 14A filed with the SEC on April 29, 2020
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`(the “2020 Proxy Statement”), as of April 20, 2020, Defendant Min Ni beneficially
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`owned 13,772,713 shares of the Company’s common stock, which represented 26.4% of
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`the Company’s outstanding shares of common stock on that date. Given that the price per
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`share of the Company’s common stock at the close of trading on April 20, 2020 was
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`$6.31, Defendant Min Ni owned approximately $86.9 million worth of HF Foods stock.
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`27. For the fiscal year ended December 31, 2019, Defendant Min Ni purportedly
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`received $400,000 in compensation from the Company.
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`28. The Company’s 2020 Proxy Statement stated the following about Defendant
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`Min Ni:
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`Zhou Min Ni, together with his wife, Chan Sin Wong, founded HF Group.
`Mr. Ni has served as Chairman and Chief Executive Officer of HF Group for
`over 20 years since he founded the business in 1997. From 1997 to the
`present, Mr. Ni has been responsible for the supervision of the Company’s
`strategy development, financing, acquisition, business expansion, inventory
`procurement and vendor management. Under his leadership, the Company
`developed into a well-recognized foodservice distributor operating three
`distribution centers serving over 3,200 Chinese/Asian restaurants in ten
`states in Southeastern America. We believe Mr. Zhou Min Ni’s qualification
`to sit on our board of directors includes his extensive knowledge of the
`Company and the foodservice distribution industry serving Chinese/Asian
`restaurants, his 20 years of management and leadership experience in the
`Company, and his connections in Chinese/Asian American business society.
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`Defendant Zhang
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`29. Defendant Xiao Mou (aka Peter) Zhang (“Zhang”) has served as HF Foods’
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`Co-CEO and as a Company director since November 2019. He also served as the
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`Company’s CFO from November 2019 until he resigned from that position on May 1,
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`2020. Previously, he served as Chairman of the Board of B&R Global, which he founded
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`in 2014. According to the 2020 Proxy Statement, as of April 20, 2020, Defendant Zhang
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`beneficially owned 3,089,354 shares of the Company’s common stock, which represented
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`5.9% of the Company’s outstanding shares of common stock on that date. Given that the
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`price per share of the Company’s common stock at the close of trading on April 20, 2020
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`was $6.31, Defendant Zhang owned approximately $19.4 million worth of HF Foods
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`stock.
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`30. For the fiscal year ended December 31, 2019, Defendant Zhang received
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`$93,494 in compensation from the Company. This included $85,000 in salary, and $8,494
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`in other compensation related to the personal use of an automobile provided by the
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`Company.
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`31. The Company’s 2020 Proxy Statement stated the following about Defendant
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`Zhang:
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`Xiao Mou Zhang (aka Peter Zhang), has served as Co- Chief Executive
`Officer and Chief Financial Officer and a director since November 4, 2019.
`He served as Chairman of the Board, and as a Director of B&R Global from
`2014 when he founded B&R Global with his partners, who are all originally
`from China. Mr. Zhang has over 20 years of experience in the food
`distribution
`industry with extensive experience
`in sales, marketing,
`financing, acquisitions, inventory, logistics and distribution. Under Mr.
`Zhang’s leadership, B&R Global has established a large supplier network
`and maintains long-term relationships with many major suppliers stemming
`from business relationships that have been built up over the years. A large
`purchase volume and a centralized procurement process has also allowed
`B&R Global favorable negotiating power with vendors that source high
`quality products at lower prices than many competitors. By also establishing
`a call center in China, B&R Global has been able to grow its customer base
`and, at the same time, keep its operating costs low. We believe Mr. Zhang’s
`qualification to sit on our board of directors includes his extensive
`knowledge of
`the
`food distribution
`industry, particularly serving
`Chinese/Asian restaurants, and his 20 years of management and leadership
`experience at B&R Global.
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`Defendant Xu
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`32. Defendant Caixuan Xu (“Xu”) has served as the Company’s Vice President,
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`Chief Accounting and Financial Reporting Officer since February 2019. She also served
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`as the Company’s CFO from April 2019 to November 2019.
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`33. For the fiscal year ended December 31, 2019, Defendant Xu received
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`$229,167 in compensation from the Company. This included $201,667 in salary, and
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`$27,500 in bonus.
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`34. The Company’s 2020 Proxy Statement stated the following about Defendant
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`Xu:
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`Caixuan Xu has served as the Vice President, Chief Internal Control and
`Financial Planning Officer since November 4, 2019 and served as the Chief
`Financial Officer of HF Group from April 1, 2019 to November 4, 2019. Ms.
`Xu was hired by HF Foods on February 1, 2019. Ms. Xu has nearly 20 years
`of accounting and financial management experience. Prior to joining the
`Company, Ms. Xu served as the Vice President of Finance of Ninestar
`(Lexmark) since June 2018. Ms. Xu served as the Finance Director (Greater
`China CFO) for Red Hat from June 2017 until June 2018, and as the Chief
`Financial Officer of Shouqi Car Rental in Beijing, China from December
`2016 through June 2017. Prior to that, she spent five years in finance
`positions with Lenovo in Morrisville, NC and Beijing, China, most recently
`as Senior Finance Manager and Controller. Before joining Lenovo, Ms. Xu
`held finance and auditor positions with Credit Suisse and PwC in Durham
`and Raleigh, NC, which followed her earlier career in public accounting
`firms (PwC and Tin Wha CPAs) in Beijing, China. Ms. Xu earned a BS in
`Accounting from The Central University of Finance and Economics in
`Beijing, China, and a Master’s Degree in Business Administration from the
`Freeman School of Business in New Orleans, LA. She is a CPA, certified in
`both North Carolina and Beijing, China (inactive), and has passed all three
`levels of the Chartered Financial Analyst (CFA) exams.
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`
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`Defendant Jonathan Ni
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`35. Defendant Jian Ming Ni (“Jonathan Ni”) served as the Company’s CFO
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`from August 2018 until his resignation in April 2019. Previously, he served as HF
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`Group’s CFO from 2008. According to the 2020 Proxy Statement, as of April 20, 2020,
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`Defendant Jonathan Ni held voting and dispositive power over the shares owned by
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`Irrevocable Trust for Raymond Ni, the CEO’s son, which beneficially owned 5,591,553
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`shares of the Company’s common stock. This represented 10.7% of the Company’s
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`outstanding shares of common stock on that date. Given that the price per share of the
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`Company’s common stock at the close of trading on April 20, 2020 was $6.31, Defendant
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`Jonathan Ni owned approximately $35.2 million worth of HF Foods stock.
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`Defendant Ni
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`36. Defendant Zhehui Ni (“Ni”) has served as a Company director since August
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`2018, and also serves as a member of the Audit Committee and the Compensation
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`Committee.
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`37. For the fiscal year ended December 31, 2019, Defendant Ni received
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`$20,000 in compensation from the Company.
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`38. The Company’s 2020 Proxy Statement stated the following about Defendant
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`Ni:
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`Zhehui Ni has served as a director of HF Group since August 2018. Ms. Ni
`has served as vice president of Shanghai Electric Investment Company since
`2014, charged with strategic and financial investment. She worked as an
`associate at Haixiahuifu Investment Company from 2011 to 2013 and
`worked as a senior consultant in Deloitte Touche Tohmatsu Shanghai Office
`from 2007 to 2011. Ms. Ni is experienced in equity investment, corporate
`finance and investment-related tax structuring. Ms. Ni received a master’s
`degree and bachelor’s degree in international economical law from Shanghai
`Jiaotong University. She is a certified public accountant and certified tax
`accountant, and passed the bar exam in the People’s Republic of China. We
`believe Ms. Ni’s qualification to sit on our board of directors includes her
`knowledge in accounting, financial reporting, equity investment, corporate
`finance, and investment-related tax structuring.
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`Defendant Wang
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`39. Defendant Hong Wang (“Wang”) has served as a Company director since
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`December 2019, and also serves as a member of the Audit Committee and the
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`Compensation Committee. Previously, Defendant Wang served as a Company director
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`from August 2018 until November 2019.
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`40. For the fiscal year ended December 31, 2019, Defendant Wang received
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`$20,000 in compensation from the Company.
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`41. The Company’s 2020 Proxy Statement stated the following about Defendant
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`Wang:
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`Hong Wang has served as a director of HF Group since December 2019.
`Mr. Wang was previously a member of the Board of Directors of the
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`Company from August 22, 2018, through November 1, 2019. Dr. Wang has
`served as a Professor of Management Information Systems at North Carolina
`A&T State University since 2005 and a Visiting Professor at Yunnan
`University of Finance and Economics in China since June, 2012, Dalian
`Maritime University in China since June 2012, and Henan Polytechnic
`University in China since June 2015. Dr. Wang has over 30 years of
`university teaching experience and has taught Management Sciences,
`Operations Research, Optimization, Business Environment, Management
`Concepts, Strategic Management, Engineering Economy, in addition to
`various Information Systems courses at both graduate and undergraduate
`levels. Dr. Wang is active in professional and community services. He has
`served in multiple cities in the US for several terms as president of local
`Chinese Associations, on various boards, as a principal of Chinese schools,
`as session chair of academic conferences, and as a journal referee. He also
`helped several Chinese universities to establish international programs in
`collaboration with US universities. Dr. Wang received his Ph.D. in
`Management Information Systems/Decision Sciences from Ohio State
`University. We believe Dr. Wang’s qualifications to sit on our board of
`directors include his knowledge of management, operations, optimization,
`business environment, and economic engineering, and his prior effective
`service as a member of our board.
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`Defendant Wong
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`42. Defendant Chan Sin Wong (“Wong”) is the wife of Defendant Min Ni and
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`co-founder of HF Group. She served as the Company’s Chief Operating Officer,
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`President, and as a Company director from August 2018 until November 2019.
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`43. For the fiscal year ended December 31, 2019, Defendant Wong received
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`$400,000 in compensation from the Company.
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`44. The Company’s Schedule 14A filed with the SEC on April 30, 2019 (the
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`“2019 Proxy Statement”) stated the following about Defendant Wong:
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`Chan Sin Wong, 53, the wife of Zhou Min Ni, co-founded the Company in
`1997. She has served as Director and President of the Company for over 20
`years since she co-founded HF Group in 1997. From 1997 to the present,
`Ms. Wong has been responsible for the operation and supervision of the
`Company,
`including sales,
`inventory,
`logistics distribution, human
`resources, regulations and legal compliance. She also led the development of
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`the Company’s logistics and distribution network. We believe Ms. Wong’s
`qualification to sit on our board of directors includes her knowledge of the
`Company, her extensive expertise in Company operations, and established
`relationships with service providers.
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`Defendant Zheng
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`45. Defendant Ren Hua Zheng (“Zheng”) served as a Company director from
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`June 2017, prior to the merger with Atlantic, until he resigned in December 2019.
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`Defendant Zheng served as a member of the Audit Committee and the Compensation
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`Committee during the Relevant Period.
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`46. For the fiscal year ended December 31, 2019, Defendant Zheng received
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`$20,000 in compensation from the Company.
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`47. During the period of time when the Company materially misstated
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`information to the investing public to keep the stock price inflated, and before the scheme
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`was exposed, Defendant Zheng made the following sales of Company stock, and made no
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`purchases of Company stock:
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`Date
`9/6/2019
`9/9/2019
`9/10/2019
`9/11/2019
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`Shares
`208
`500
`1,000
`2,000
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`Cost
`$19.13
`$18.61
`$18.35
`$18.13
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`Proceeds
`$3,979
`$9,305
`$18,350
`$36,260
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`Thus, in total, before the fraud was exposed, he sold 3,708 Company shares on inside
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`information, for which he received approximately $67,894. His insider sales made with
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`knowledge of material non-public information before the material misstatements and
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`omissions were exposed demonstrate his motive in facilitating and participating in the
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`scheme.
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`48. The Company’s 2019 Proxy Statement stated the following about Defendant
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`Zheng:
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`Ren Hua Zheng, 48, has served as a director since June 2017. Mr. Zheng
`founded Hope Kitchen Cabinets and Stone Supply LLC, a cabinet decoration
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`company in the United States, and has served as its Manager since January
`2006. Mr. Zheng has served as Property Manager of H&C Brother LLC,
`Orland Property LLC, B&J Investment LLC, and 5904 5th Ave LLC since
`January 1999. We believe Mr. Zheng’s qualification to sit on our board of
`directors includes his business experience in the areas of strategy
`implementation, sales and marketing, staff training, cost analysis, and
`financial budget supervision in enterprise operation.
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`FIDUCIARY DUTIES OF THE INDIVIDUAL DEFENDANTS
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`49. By reason of their positions as controlling shareholder, officers, directors,
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`and/or fiduciaries of HF Foods and because of their ability to control the business and
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`corporate affairs of HF Foods, the Individual Defendants owed HF Foods and its
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`shareholders fiduciary obligations of trust, loyalty, good faith, and due care, and were and
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`are required to use their utmost ability to control and manage HF Foods in a fair, just,
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`honest, and equitable manner. The Individual Defendants were and are required to act in
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`furtherance of the best interests of HF Foods and its shareholders so as to benefit all
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`shareholders equally.
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`50. Each controlling shareholder, director and officer of the Company owes to
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`HF Foods and its shareholders the fiduciary duty to exercise good faith and diligence in
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`the administration of the Company and in the use and preservation of its property and
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`assets and the highest obligations of fair dealing.
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`51. The Individual Defendants, because of their positions of control and
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`authority as controlling shareholder, directors and/or officers of HF Foods, were able to
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`and did, directly and/or indirectly, exercise control over the wrongful acts complained of
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`herein.
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`52. To discharge their duties, the controlling shareholder, officers and directors
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`of HF Foods were required to exercise reasonable and prudent supervision over the
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`management, policies, controls, and operations of the Company.
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`53. Each Individual Defendant, by virtue of his or her position as a controlling
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`shareholder, director and/or officer, owed to the Company and to its shareholders the
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`highest fiduciary duties of loyalty, good faith, and the exercise of due care and diligence
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`in the management and administration of the affairs of the Company, as well as in the use
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`and preservation of its property and assets. The conduct of the Individual Defendants
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`complained of herein involves a knowing and culpable violation of their obligations as
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`directors and officers of HF Foods, the absence of good faith on their part, or a reckless
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`disregard for their duties to the Company and its shareholders that the Individual
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`Defendants were aware or should have been aware posed a risk of serious injury to the
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`Compan