South Korea’s Supreme Court has determined that Samsung C&T Corporation holds no liability to repay deposits or compensate wholesalers impacted by the closure of its direct fabric sales operations. The ruling emphasizes legitimate business decisions as grounds for exemption from such claims.
Court Proceedings
The Supreme Court’s First Division, led by Justice No Tae-ak, overturned a lower court decision on January 8 requiring compensation. It remanded the case to the Seoul Central District Court, aligning with the original trial’s assessment. A wholesaler, referred to as Company A, had sought damages from Samsung C&T after the business unit’s shutdown.
The first-instance court panel stated, “It is difficult to deem Samsung C&T’s management judgment and closure decision as a violation, making it reasonable to deny any compensation obligation.”
In contrast, the appellate court ordered Samsung C&T to pay 50 million won ($36,000), citing a business agreement signed three months prior to the announcement in June 2022. The panel viewed the deposit during that period as qualifying for repayment.
Business Agreement and Closure Details
Company A entered a one-year business agreement with Samsung C&T on November 28, 2011, which renewed annually. Samsung C&T supplied substantial fabric volumes, managing excess inventory through the partnership.
On March 10, 2022, Samsung C&T notified partners that it would liquidate only remaining direct-sales inventory, with other stocks handled via disposal. Despite this, Company A continued operations until the mandatory term end on October 31, 2022. The wholesaler claimed 120 million won in losses, including unsold inventory valued at 120 million won and foregone sales of 299.8 million won from March to October.
Historical Context
Samsung C&T traces its origins to 1956 under the Jeil Textile banner. The entity merged with Samsung Textile’s fabric division in September 2015. The direct fabric sales unit operated until the 2022 closure decision, reflecting strategic shifts amid market changes.
Industry observers note that overall contract terms lacked provisions mandating compensation for business discontinuations, reinforcing the Supreme Court’s view that no repayment obligation exists.
