Kuist v. Hodge

Filed 2/27/08 Kuist v. Hodge CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

APPEALS from a judgment and orders of the Los Angeles Superior Court, Michael L. Stern, Judge. (Case No. B193863, affirmed; Case No. B195663, reversed.)

Quinn Emanuel Urquhart Oliver & Hedges, Steven G. Madison and Michael T. Lifrak for Defendants and Appellants Richard E. Hodge, Richard E. Hodge, Inc., and Richard E. Hodge LLP.

Hillel Chodos and Jonathan P. Chodos for Plaintiff and Respondent and Appellant Gary G. Kuist.

Burbidge & Mitchell and Richard D. Burbidge; Weston, Benshoof, Rochefort, Rubalcava & MacCuish, and Andrew M. Gilford for Plaintiff and Respondent Jefferson W. Gross.

Hahn & Hahn, Don Mike Anthony and Todd R. Moore for Defendant and Respondent John C. Bedrosian.

SUMMARY

This matter involves two consolidated appeals in an action involving a dispute between three former partners of a law firm over the distribution of a $41 million contingency fee received by the firm several years after two attorneys left the firm.

In the first appeal (case no. B193863), a partner, respondent Jefferson Gross, was awarded just over $4 million in compensatory damages after a jury concluded appellants breached an implied oral agreement to pay Gross 10 percent of the contingency fee. Another partner, respondent Gary Kuist, was awarded 11 percent of the contingency fee, or about $4.5 million. Gross and Kuist also received punitive damage awards of approximately $646,000 and $1.3 million, respectively. Appellants - Grosss and Kuists former law partner, Richard E. Hodge; their former partnership, Richard E. Hodge, LLP; and the corporation formed after the partnership was dissolved, Richard E. Hodge, Inc., - assert numerous bases for reversal. They argue reversal is mandated because:

(1) Gross cannot recover under an implied agreement that contradicts the parties written partnership agreement;

(2) Kuists claims are barred by the terms of the partnership agreement;

(3) The jury made the factually inconsistent findings that the partnership agreement was abandoned as to Gross and later breached as to Kuist;

(4) The trial court made numerous errors regarding California partnership law, including: instructing the jury regarding common law principles abrogated by the Revised Uniform Partnership Act of 1994 (RUPA) (Corp. Code 16100-16962) for partnerships that do not dissolve upon a partners dissociation; ruling Grosss claims were not time-barred; and refusing to permit testimony regarding the value of the contingency fee case at the time Gross left the partnership;

(5) The jury improperly awarded punitive damages because: the record does not support an award for punitive damages; punitive damages were improperly awarded against one defendant who was not sued by Gross and owed no fiduciary duty to Kuist; and the jury rendered an unlawful quotient verdict;

(6) The compensatory damage awards were excessive;

(7) The trial court improperly awarded prejudgment interest;

(8) The trial court erred by permitting the introduction of improper and prejudicial evidence of other legal actions against one defendant, and deprived appellants of a full complement of peremptory challenges.

As to the first appeal, we find no error and affirm.

In the second appeal (case no. B195663), Kuist asserts the trial court erred in awarding costs to a former client, who was dismissed as a defendant early in the litigation after his demurrer to Kuists complaint was sustained without leave to amend. Kuist had filed a motion to tax costs, asserting the costs for which the client sought recovery were unwarranted and had not been paid or incurred by him. In accordance with an earlier decision in this action, we conclude reversal of the order awarding costs is required. Kuist must be permitted to depose the client, after which the trial court may reconsider the merits of the motion to tax.

FACTUAL AND PROCEDURAL BACKGROUND OF EACH APPEAL

I. The appeal in the action by Kuist and Gross against the Hodge defendants.

Respondents Gary Kuist and Jefferson Gross filed independent actions against their former law partner, appellant Richard E. Hodge (Hodge), their former law partnership, appellant Richard E. Hodge, LLP (partnership), a corporation controlled by Hodge, appellant Richard E. Hodge, Inc. (collectively, appellants), and John Bedrosian, a former client for whom Hodge obtained a huge settlement several years after Kuist and Gross left the partnership. Kuist and Gross claimed they were owed 11 and 10 percent, respectively, of a contingent fee of approximately $41 million Hodge obtained as a result of the Bedrosian settlement. Kuist sued appellants for breach of a written partnership agreement. He also sued appellants and Bedrosian for breach of fiduciary duty, but the claim against Bedrosian was dismissed.[1] In his action, Gross claimed Hodge had abandoned the written partnership agreement and operated under and breached an implied oral agreement. Gross also sued Hodge for breach of fiduciary duty. Appellants denied Kuist and Gross were entitled to any portion of the Bedrosian contingency fee. They also asserted, as an affirmative defense, an offset for monies Kuist and Gross allegedly owed the partnership.

Our factual recitation is taken from an independent review of the record and the evidence presented at trial viewed most favorably to the successful plaintiffs. (Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th 635, 642, fn. 3.) Because this is an appeal from a judgment following a trial by jury, we recite facts that support the judgment (Schwartzman v. Wilshinsky (1996) 50 Cal.App.4th 619, 626), which tend to be Grosss and Kuists recitation of their discussions, agreements and experiences with appellants. These are the facts recited in the Factual and Procedural Background part of this opinion. When a particular issue requires a consideration of all relevant evidence presented, we recite the facts in the discussion part related to that issue.

Kuist and Hodge began practicing law together in 1986. Gross joined the firm, then known as Richard E. Hodge, Inc., as an associate in 1993, the year when Bedrosian v. Tenet Healthcare Corp. (Oct. 28, 2003, B166742) [nonpub. opn.] (Bedrosian action) was filed. The firm was retained to represent Bedrosian in that action on a 25 percent contingency fee basis, after he paid $250,000 in hourly fees. The Bedrosian action was litigated through numerous trial and appellate proceedings over the course of the next 10 years.

On June 30, 1997, Richard E. Hodge, LLP was formed according to a written partnership agreement allocating profits and losses among Hodge (79 percent), Kuist (11 percent) and Gross (10 percent). Hodge controlled the partnership just as he had its predecessor corporation. He took the position he had the authority to fire Kuist or Gross as employees or partners at any time if he felt they werent performing adequately as partners, or as employees . . . . The assets including the Bedrosian contingency fee agreement of Richard E. Hodge, Inc., were transferred to the new partnership. Unbeknownst to Kuist and Gross, Hodge also secretly transferred to the partnership undocumented liabilities that exceeded its assets by at least $1.4 million. Those liabilities related to debts to corporations wholly owned by Hodge. Although Hodge frequently told Gross and Kuist the partnership was losing money, he never disclosed the total amount of liabilities transferred to the partnership, or permitted Gross or Kuist access to the partnerships financial records.

In violation of the partnership agreement, Hodge failed to discharge personal debts of at least $14 million, and allowed judgments to be entered against him for several million dollars. Hodge caused the partnership to guarantee at least one of those debts, for approximately $634,000, which the creditor attempted to enforce against the partnership. To evade their creditors, Hodge and his wife used partnership accounts to conduct personal business, including paying their mortgage and pet food bills. In addition, Hodge directed Gross and Kuist to devote over $2 million of attorney time representing Hodge, his wife and their personal business entities in actions brought by their creditors. The partnership was never reimbursed for those legal services. Without discussing the matter with his partners, Hodge also caused the partnership to pay his nonattorney wife an annual salary of $150,000, twice the combined annual salaries of Gross and Kuist.

In June 1998, Gross completed and filed an opening brief in the first appeal in the Bedrosian action.[2] Shortly thereafter, Gross left the partnership, moved to Utah, and began working for a Utah law firm where he eventually became a partner. After leaving the partnership, Gross received a final distribution from the partnerships profit sharing/retirement plan. However, no formal withdrawal documents were prepared by Gross or the partnership, as required by the partnership agreement, the partnership agreement was not amended to indicate Gross had withdrawn, no formal accounting was performed following Grosss departure, and no discussions took place between Kuist and Hodge regarding the impact of Grosss departure on the firm.

After Gross left the partnership, Kuist assumed the laboring oar on the Bedrosian action during the next two years. On June 1, 2000, after he completed and filed two reply briefs on motions requesting attorney fees of approximately $3 million after Bedrosian had prevailed in a second trial, Kuist was summarily fired by Hodge. Hodge called Kuist into his office, informed him he could no longer afford to pay his salary, and terminated him effective immediately. A day or two later, Kuist proposed to Hodge that he continue to work on Hodges cases as an independent contractor or in other capacity and in the same office space. Hodge, however, rejected the proposal and told Kuist to leave the office by the end of the day. Kuist collected unemployment benefits for a time, withdrew his participation in the partnerships profit-sharing plan, and began work as a sole practitioner.[3] Kuist and Hodge never discussed dissolution, winding up, or Kuists withdrawal from or the financial condition of the partnership, and no formal written notice of withdrawal was prepared, as required by the partnership agreement. They also did not discuss the relinquishment of Kuists interest in the partnership. Although Kuist was provided K-1 statements for tax purposes, he did not receive a partnership accounting or documentation related to winding up the partnerships affairs.

By the time Kuist was terminated, the firm had devoted about 5,500 hours of work to the Bedrosian action, approximately half of which were performed by Gross. Hodge had repeatedly told Kuist and Gross that the three of them would all become rich when the Bedrosian contingency fee was received.

In July 2000, without providing notice or an accounting to Kuist or Gross, Hodge transferred all the partnerships assets to a newly formed corporation with the same name as his former law firm, Richard E. Hodge, Inc. (Hodge, Inc.). Hodge was the sole shareholder of the new corporation.

In 2003, this court issued an opinion modifying and affirming a trial court judgment in favor of Bedrosian for approximately $163 million. The modified judgment ultimately resulted in a settlement and a contingent fee of $40,817,499.54, which Hodge paid to Hodge, Inc., in March 2004. Kuist and Gross each demanded his share of the contingency fee. Appellants denied Kuist and Gross were entitled to any portion of the contingency fee, and refused both demands. This litigation ensued.

A bifurcated jury trial was conducted in July 2006. By special verdict, the jury found Kuist never withdrew from the partnership or waived his right to share in the Bedrosian contingency fee. It further found appellants breached a fiduciary duty to Kuist, and Kuist was entitled to 11 percent of the Bedrosian fee, or $4,489,924.95. The jury also found Gross was entitled to 10 percent of the Bedrosian contingency fee ($4,081,749.95), by virtue of Hodges breach of an implied agreement formed after the partnership agreement was abandoned. The jury found appellants failed to prove an offset as to either plaintiff, and clear and convincing evidence demonstrated appellants had engaged in intentional conduct with malice, oppression or fraud. The second phase of the trial proceeded and the jury by special verdict, awarded Kuist and Gross $1,291,517 and $645,833, respectively, in punitive damages against Hodge and Hodge, Inc.

Hodge and Hodge, Inc., challenged the punitive damages award, alleging the jury had rendered an unlawful quotient verdict. Juror declarations were submitted. The trial court concluded the verdict was not improper, and judgment was entered. Appellants moved for judgment notwithstanding the verdict and for a new trial. This appeal followed denial of those motions.

II. The appeal in the action by Kuist against Bedrosian.

Bedrosians demurrer to Kuists complaint was sustained without leave to amend, and Bedrosian was dismissed from the underlying litigation. Following his dismissal, Bedrosian filed a memorandum to recover approximately $22,000 in costs. The costs included $18,780 representing one-third the cost of a court-ordered accounting and $2,829.77 for one-third the cost of depositions taken. Kuist moved to tax costs. He claimed it was unreasonable for Bedrosian to seek costs because his interests were not implicated in the accounting, and it was Hodge who actually incurred or paid many, if not all, of the costs Bedrosian sought to recover. Kuist also noticed Bedrosians deposition in an effort to elicit testimony and other evidence related to items listed in the cost memorandum. Bedrosian moved to quash the deposition notice and sought sanctions in the form of attorney fees expended in bringing the motion to quash. The trial court granted the motion to quash and awarded sanctions. The motion to tax costs was held in abeyance until the case was concluded as to all defendants.

Kuist filed an interim appeal from the order imposing sanctions against him. We found the trial court erred in granting the motion to quash and in imposing sanctions, and reversed the order. (Kuist v. Bedrosian (June 27, 2006,B190718) [nonpub. opn.].) We determined Kuist was entitled to conduct Bedrosians deposition to ascertain the truth of Bedrosians assertions as to the motion to tax, namely, the disputed question of who incurred or paid the claimed expenses: by objecting to the memorandum of costs and specifically taking issue with Bedrosians factual assertions, [Kuist] placed the items at issue and Bedrosian must show he actually incurred or expended the amounts sought. [Citation.] In that circumstance, limited case law finds it improper for a judge to deny a specific discovery request as a matter of law when the law actually allows such discovery. (Id. at p. 7, citing Oak Grove School Dist. v. City Title Ins. Co. (1963) 217 Cal.App.2d 678, 710.)

Meanwhile, the trial was completed and judgment in favor of Kuist and Gross against the remaining defendants was entered in July 2006. The Hodge defendants post trial motions were denied in mid-September 2006, and their notice of appeal filed on September 18, 2006. On October 13, 2006, Bedrosian renewed his cost memorandum by filing a motion to finalize costs award. It is from the grant of that motion that Kuist appeals.

DISCUSSION

I. The appeal in the action by Kuist and Gross against the Hodge defendants.

A. The partnership agreement.

Appellants insist the judgment must be reversed and judgment entered in their favor because neither of Hodges former partners is entitled to any portion of the Bedrosian contingency fee received years after their departure from the firm. They claim the ironclad partnership agreement precludes a partner who leaves the firm from sharing in its future profits.

The pertinent terms of the June 1997 partnership agreement are:

Term of Partnership

1.04. The Partnership commences on June 30, 1997 and continues until dissolved by mutual agreement of the parties or terminated as provided in this Agreement. The Partnership does not automatically dissolve if or when the Partnership changes its status from a limited liability partnership to a general partnership or a professional corporation.

[] . . . []

Partners

2.01. A Partner is a party to this agreement who has not been separated from the Partnership by death, retirement, withdrawal, a determination of incapacity or disability, and has not been terminated or expelled.

[] . . . []

Profits and Losses

3.04. Profits of the Partnership shall be net of payments made to the Partners or for the benefit of the Partners on account of salaries, bonuses, and other employee benefits. Such salaries, bonuses, and other employee benefits shall be determined in the sole discretion of the Managing Partner. For the calendar years 1997 through 2002 and thereafter, the net Partnership profits will be divided and the net Partnership losses will be borne by the Partners in the following proportions:

Name of Partner Richard E. Hodge

Share of Profits and Losses 79%

Name of Partner Gary G. Kuist

Share of Profits and Losses 11%

Name of Partner Jefferson W. Gross

Share of Profits and Losses 10%

Profits of Deceased or Terminated Partner

3.05. On the . . . withdrawal . . . of a Partner as provided in this Agreement, that Partners distributive share of the future Partnership profits and losses will be divided among the remaining Partners in accordance with their percentage interests as specified in Paragraph 3.0[4][4]of this Agreement.

[] . . . []

Books

3.10. Complete and accurate accounts of all Partnership transactions will be kept in proper books and each Partner must enter in those books a full and accurate account of all transactions conducted by that Partner on behalf of the Partnership. The books of account and other Partnership records must, at all times, be kept in the Partnership place of business and each Partner, at all times, has access to, and may inspect and copy, any of them.

[] . . . []

Accountings

3.12. As soon after December 31 in each year as is reasonably practicable, a complete and accurate accounting will be made of all Partnership receipts and disbursements during the preceding calendar year. The net Partnership profits or losses during that year will be ascertained and credited or debited, as the case may be, on the Partnership books, to the respective Partners in the proportions specified in this Agreement.

Capital Accounts

3.13. An individual capital account will be maintained for each Partner. . . .  

Income Accounts

3.14. An individual income account will be maintained for each Partner. . . .  

[] . . . []

Personal Debts

4.06. Each Partner must pay and discharge his or her own separate obligations as they become due and will protect the other Partners and the Partnership from all costs, claims, and demands relating to his or her personal obligations.

[] . . . []

ARTICLE 5. TERMINATION OF PARTNERSHIP

Withdrawal of Partner

5.01. Any Partner may withdraw from the Partnership at the end of any calendar year by giving one month [sic] written notice to the other Partners. On service of this notice:

(1) The withdrawal automatically becomes effective at the end of the calendar year in which given, unless fifteen days (15) after receiving notice the remaining Partners, by written agreement signed by all of them, elect to dissolve the Partnership and serve written notice of their election on the withdrawing Partner . . . .  

(2) If the remaining Partners do not elect to dissolve the Partnership, the Partnership books will be closed at the end of the calendar year in the usual manner. The withdrawing Partner must then be paid the balance shown in his or her capital and income accounts . . .  The net amount payable to the withdrawing Partner will not include any share in uncollected charges received by the Partnership after the effective date of withdrawal . . . .  

Expulsion of a Partner

5.02. Any Partner may be expelled from the Partnership.

(1) Expulsion becomes effective on the adoption by the majority vote of the remaining Partners, at a meeting held after five (5) days written notice has been given to the expelled Partner, of a written resolution finding that the Partner has:

(a) Engaged in personal misconduct or a willful breach of this Agreement of such a serious nature as to render the Partners continued presence in the Partnership personally or professionally obnoxious or detrimental to the other Partners or the partnership;

(b) Been expelled, suspended, or otherwise disciplined by . . . the California State Bar . . . .;

(c) Affected adversely other Partners or the Partnership in a manner . . . which will continue to adversely affect the other partners and/or the Partnerships business and professional interests;

(d) Resigned from any professional organization under threat of disciplinary action;

(e) Been convicted . . . of any offense punishable as a felony or involving moral turpitude.   

[] . . . []

Continuation of Partnership

5.05. The withdrawal . . . of any Partner does not dissolve the Partnership business, except as expressly provided in this Agreement. [A] withdrawing . . . Partner . . . has [no] claim against the Partnership or the remaining Partners except for payments expressly provided in this Agreement to be paid to them. . . .  

Dissolution

5.06. On dissolution of the Partnership other than by reason of the withdrawal . . . of a Partner, all Partnership assets . . . will be liquidated and the proceeds distributed in the manner specified in [former] Corporations Code section 15040(b).

[] . . . []

Notices

6.02. Any notices permitted or required by law or by this Agreement must be in writing and will be deemed duly given when personally delivered to the Partner to whom they are addressed or, in lieu of personal delivery, when deposited in the United States mail, first-class postage prepaid, certified, addressed to the Partner at the office of the Partnership.

Amendments

6.03. No amendment to this Agreement is valid unless made in writing and signed by all of the Partners.

B. The written agreement between Gross and Hodge was

abandoned and replaced by an implied partnership agreement

that appellants breached.

Appellants contend the judgment in Grosss favor must be reversed because it is based on an implied oral agreement that improperly modifies the written partnership agreement. The inaccurate predicate underlying appellants argument rests on the unexamined and unsubstantiated premise that the verdict in favor of Gross was grounded in an improperly amended partnership agreement. It was not. By special verdict, the jury found Gross prove[d] by a preponderance of the evidence that the written Partnership Agreement was abandoned [and]that Hodge breached an implied agreement to pay Gross ten percent (10%) of the Bedrosian contingent fee. The record supports that conclusion.

The record does not reflect the partnership agreement was merely modified. Rather, the jury found a novation. A [n]ovation is the substitution of a new obligation for an existing one. (Civ. Code, 1530.) The substitution of a new obligation is by agreement and is done with the intent to extinguish the parties old obligation. (Civ. Code, 1530, 1531; Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 431 (Wells Fargo).) When a novation occurs, the old agreement is entirely abrogated or extinguished, and the rights and duties of the parties must be governed by the new agreement alone. (Alexander v. Angel (1951) 37 Cal.2d 856, 862 (Alexander); Wells Fargo, supra, 32 Cal.App.4th at p. 431.)

A novation is governed by the general rules of contract formation. (Civ. Code,  1532.) To satisfy the intent requirement, the parties must intend to extinguish, rather than merely modify, the original agreement. (Alexander, supra, 37 Cal.2d at p. 860; Wells Fargo, supra, 32 Cal.App.4th at p. 432 [assignment of lease constituted novation because original lease provided lessee would be  relieved of all liability accruing under this lease from and after the date of any assignment ].) Consideration is usually required. (Wells Fargo, supra, 32 Cal.App.4th at p. 432; Manfre v. Sharp (1930) 210 C. 479, 481.) But no particular form of agreement is necessary. A novation may be written, oral or implied from conduct, even where the original contract was in writing. (Producers Fruit Co. v. Goddard (1925) 75 Cal.App. 737, 755; Tucker v. Schumacher (1949) 90 Cal.App.2d 71, 74; Porter Pin Co. v. Sakin (1952) 112 Cal.App.2d 760, 762 [conduct may form basis of novation without an express agreement].) Whether the necessary elements are present is a factual determination, reviewed for substantial evidence. (Wade v. Diamond A Cattle Co. (1975) 44 Cal. App.3d 453, 457; Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1658.)

Appellants argue that no evidence supports a finding the parties intended a novation. While evidence supporting novation is not overwhelming, it need not be. Sufficient evidence would permit the jury to reasonably infer an intention to substitute a new obligation for an existing one. The partnership agreement obligated Hodge, as managing partner, to discharge and oversee the partnerships general management and administrative responsibilities. Evidence offered at trial showed that, from the moment the partnership agreement was executed, Hodge essentially ignored those obligations. As Gross describes it, Hodge treated the partnership as his personal fiefdom without regard to the written agreement.

Specifically, evidence indicated that, in violation of sections 3.10 through 3.14 of the partnership agreement, Hodge neglected to maintain accurate partnership books and records, failed to maintain income and capital accounts for his partners, and refused Gross access to partnership records, even after he requested it. Hodge also failed to discharge his personal debts, as required by section 4.06 of the partnership agreement, and allowed judgments totaling several million dollars to be entered against him. Bank of America attempted to enforce a judgment for $634,000 against the partnership which had guaranteed Hodges personal debts without his partners knowledge and in violation of the partnership agreement. Evidence also indicates Hodge and his wife regularly used the firms business accounts for personal matters. Gross testified that no partner meetings were ever conducted to discuss the partnerships financial condition, he was specifically denied access to partnership records, and he never received or reviewed any books of account.

In addition, Hodge, who assigned all the work at the firm, directed Gross and Kuist to devote over $2 million worth of attorney time representing Hodge, his wife and their business entities against claims asserted by their creditors. The partnership was not reimbursed for those services. Hodge, again without informing his partners, also arranged for the partnership pay his wife, a nonlawyer receiving a social security disability income, an annual salary of $150,000, which exceeded the combined salaries of Kuist and Gross. Hodge also caused the partnership to enter into a sublease and pay $30,000 per month for offices housing three attorneys. However, liability for the primary lease, which belonged to an entity owned and controlled by Hodge and which he had personally guaranteed, was specifically excluded from liabilities the partnership agreed to assume. Moreover, when Gross left for Utah, Hodge unilaterally appropriated Grosss 10 percent partnership interest for himself. This occurred, even though, if Gross had actually withdrawn from the partnership as Hodge claimed, section 3.05 of the partnership agreement required that Grosss partnership interest be divided pro rata among the two remaining partners.

Evidence also supports Grosss intention to abandon the partnership agreement. Although Gross testified he received a little more information after becoming a partner than he had as an associate, his relationship with the firm remained largely unchanged. Before and after the partnership agreement was executed, Gross conducted himself as and was always treated by Hodge as an employee, not as a co-equal partner. [W]here the subsequent conduct of parties is inconsistent with and clearly contrary to provisions of the written agreement, the parties modification setting aside the written provisions will be implied. (Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1038 (Diamond Woodworks), disapproved on other grounds by Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182-1183.) Sufficient evidence permitted the jury to find Gross and Hodge did not conduct themselves as copartners, and Hodge never intended to be bound by the terms of the written partnership agreement.

Substantial evidence also supports the finding that a new implied partnership agreement existed. The contingency fee agreement in the Bedrosian case was viewed by all concerned as the partnerships most significant asset. Hodge repeatedly assured Gross and Kuist that the Bedrosian case represented a tremendous opportunity for the three of them, and said they would be rich if the case hit the jackpot. Over the course of 11 years, the partnership invested thousands of hours of attorney time and overhead in the case, and the matter eventually paid off handsomely. Between 1993 and 1998, Gross devoted approximately 2,500 hours to the Bedrosian case, which represented about 36 percent of the total firm time spent on the matter. Even after moving to Utah, Gross continued to assist Kuist and consult on matters related to Bedrosian. Gross claimed Hodge held out the Bedrosian contingency fee as a carrot to motivate Gross and Kuist to continue defending his personal collection actions. Gross testified he devoted a substantial portion of his billable time for which the partnership was never paid to Hodges personal litigation matters in reliance on Hodges repeated assurances that he would receive 10 percent of any contingency fee eventually realized in the Bedrosian case. This is sufficient consideration for Hodges promise to pay. [5]

The evidence supports the jurys findings that Gross proved the written partnership agreement was abandoned and was replaced by an oral implied partnership agreement by which Hodge agreed but then refused to pay Gross 10 percent of the Bedrosian contingent fee.

C. Kuists claims.

By a preponderance of evidence, the jury found that (1) appellants failed to prove Kuist withdrew from his partnership interest in Richard E. Hodge, LLP at any time before the Bedrosian contingent fee was received; (2) Kuist is entitled to share in the Bedrosian contingent fee; and (3) [appellants] breached a fiduciary duty to Kuist by not paying him a share of the Bedrosian contingent fee. By clear and convincing evidence, the jury also found appellants failed to prove Kuist waived any right to share in the Bedrosian contingent fee. Appellants insist the verdict in favor of Kuist cannot stand because undisputed evidence shows Kuist withdrew from the partnership. Even if Kuist was terminated or expelled, appellants maintain that any recovery is barred by the terms of the partnership agreement. Moreover, appellants assert their claim of breach is inconsistent with the jurys finding that the partnership agreement was abandoned.

1. Kuist did not withdraw and was not expelled from

the partnership.

The partnership agreement permits a partner to withdraw at the end of any calendar year by providing notice to the other partners. (Partnership Agreement, 5.01.) Withdrawal is a voluntary act. A partner may also be involuntarily expelled for cause if a majority of the partners meet certain procedural requirements and adopt a resolution finding the partner engaged in specified misconduct. (Partnership Agreement,  5.02(1)(a)-(e).) The circumstances surrounding Kuists departure from the firm demonstrate he was neither an expelled nor a withdrawing partner.

Appellants do not claim Kuist was involuntarily expelled from the partnership for cause. Rather, Hodge testified he told Kuist only that the monetary pressures had grown so great on the firm that [he] just simply could not longer afford to pay his salary and [he] was going to have to change [their] relationship and terminate [Kuists] employment.

Evidence that Kuist voluntarily withdrew from the partnership is equally weak. He testified he never intended to or took action to indicate his intent to relinquish his partnership interest, and never wrote anything akin to a notice of withdrawal. No year-end accounting was provided to Kuist after his alleged withdrawal in 2000, as required by the partnership agreement, nor did Hodge ever offer to buy out Kuists partnership interest. Rather, Hodge summarily fired Kuist in June 2000. As managing partner, Hodge was authorized to unilaterally terminate employees. However, Kuists sudden deprivation of his regular salary, by no choice or misdeed of his own, did not affect his right to a share of partnership property to which he was entitled as a partner whose partnership interest had not terminated. Nothing in the partnership agreement vests a partner with the right or ability to terminate another partners interests under the agreement at will, viz., without cause or notice and without compensation for his share of the business property or income. Thus, the determinative issue is whether Kuist, terminated by Hodge and thereby effectively prevented from performing further services on behalf of the partnership, retained a financial interest in partnership assets. We conclude he did.

2. The partnership dissolved but did not terminate on

Kuists departure.

Once Kuist departed, the partnership was effectively dissolved because only Hodge remained. One cannot partner with oneself. (Corp. Code, 16101, subd. (9) [ Partnership means an association of two or more persons to carry on as coowners a business for profit . . . .].) However, a dissolved partnership is not necessarily a terminated partnership. Dissolution operates prospectively with respect to future transactions. As to past or unfinished business, the partnership continues until all pre-existing business is completed or wound up. (Corp. Code, 16802, subd. (a), 16803, subd. (c); Cotten v. Perishable Air Conditioners (1941) 18 Cal.2d 575, 577; Jewel v. Boxer (1984) 156 Cal.App.3d 171, 176 (Jewel).) Once the firms unfinished business is completed, the dissolved partnership terminates. (Corp. Code, 16802, subd. (a).)

To determine the partnership business that remains unfinished, we must look to circumstances at the time of dissolution. (Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 217-218 (Rosenfeld, Meyer), disapproved on other grounds, Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521, fn. 10.) Under Rosenfeld, Meyer, the unfinished business of a law partnership is any business covered by retainer agreements between the firm and its clients for the performance of partnership services that existed at the time of dissolution. (Rosenfeld, Meyer, supra, 146 Cal.App.3d at p. 217.) Unfinished business includes matters in progress but not completed when the firm is dissolved, regardless of whether the firm was retained to handle the matters on an hourly or a contingency fee basis. (Rothman v. Dolin (1993) 20 Cal.App.4th 755, 759.) Following dissolution, a partner may take new business for himself, even if the business comes from a client of the dissolved partnership. However, the partner cannot take for himself business in existence during the term of partnership. (Rosenfeld, Meyer, supra, 146 Cal.App.3d at p. 220.) Nor may a partner dissolve a partnership in order to benefit himself without fully compensating his copartners for their share of a prospective business opportunity. In short, a business opportunity may not be appropriated by one partner to the detriment of another. (Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 425, rev. denied.)

Partners liquidating of the affairs of the partnership retain a duty of care and remain fiduciaries of their former partners until the winding up is complete. The duties are outlined in Corporations Code section 16404, subdivisions (b) and (c). They include the ability and obligation to maintain the partnership business as a going concern for a reasonable time in order to prosecute or defend matters, settle or close partnership business, account to the partnership for property and benefits derived in the wind up, and distribute partnership assets. (Corp. Code, 16404, subds. (b)(1) & (2), 16803, subd. (c).) Absent an agreement to the contrary, partnership assets include attorney fees received by the partnership for cases in progress at dissolution. The fees must be shared among all partners in accordance with the ownership interest of each, regardless of which partner performs the services for winding up purposes. (Jewel, supra, 156 Cal.App.3d at p. 176.)

The pending Bedrosian action was unfinished business of the partnership that dissolved when Hodge ousted Kuist in 2000. (See Corp. Code, 16801, subd. (1) [partnership is dissolved by express will to dissolve and wind up of at least half the number of partners].) The fact that the Bedrosian litigation would continue through the trial and appellate courts for several additional years before it resolved could not have been foreseen any more clearly than the circuitous route traveled during the cases first seven years. Thus, absent a provision to the contrary in the partnership agreement, Kuist was entitled to a proportionate share of the Bedrosian contingency fee, once realized. (See Corp. Code, 16103, subd. (a) [with limited exceptions, statutory rules govern where partnership agreement does not provide otherwise].)

3. The partnership agreement does not bar Kuists recovery.

We conclude that Kuists expectation that he would share in any fee from the Bedrosian action that would eventually materialize was not barred by the partnership agreement for two reasons. First, Kuist neither withdrew nor was expelled from the partnership. Accordingly, the provisions of the partnership agreement on which Hodge relies - the sums due and financial rights of a withdrawing or expelled partner after he leaves - do not apply. (See Partnership Agreement, 5.01(2), 3.05 & 5.05.) Second, even if Kuist did withdraw, he would not be barred from recovering his share of the Bedrosian fee because the partnership agreement does not expressly refer to contingency fee cases or unfinished business. As Hodge admitted at trial, unearned contingency fees are not uncollected charges, as the term is employed in section 5.01(2) of the partnership agreement, i.e., sums charged or already billed to a client, but not yet collected by the partnership. A contingency fee is not a future profit as that term is used in the partnership agreement. Rather, it is a security interest in the eventual proceeds of an unfinished litigation matter pending at the time of a partners departure. (Isrin v. Superior Court (1965) 63 Cal.2d 153, 158.) If the parties intended to deny a withdrawing partner the right to share in pending contingency fee cases, it was necessary to precisely state that intent. Contractual waivers between fiduciaries must be clear. (Cf. Vai v. Bank of America (1961) 56 Cal.2d 329, 349, 351.) By clear and convincing evidence, the jury found Hodge failed to prove Kuist waived any right to share in the Bedrosian contingent fee. That conclusion finds ample support in the record.

4. The special verdict is not fatally inconsistent.

Appellants insist the judgment cannot stand because the jurys factual findings that the partnership agreement was abandoned as to Gross and later breached as to Kuist are fundamentally at odds.

Inconsistent verdicts are against the law,  and the proper remedy is a new trial. (Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344; Code Civ. Proc., 657, subd. (6).) A factfinder may not make inconsistent factual determinations based on the same evidence. (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 682.) The standard of review for a special verdict is de novo. (Id. at p. 678.) Moreover, unlike the review of a general verdict, when a special verdict is involved, we do not imply findings in favor of the prevailing party. By its nature, a special verdict has recognized pitfalls because it requires the jury to resolve all controverted issues in a case, unlike a general verdict which implies findings on all issues in a partys favor. Because no presumption favors upholding a special verdict, appellate courts may not attempt to reconcile inconsistent questions and choose between inconsistent answers in a special verdict. (Id. at pp. 679, 682.) On the surface, the jurys findings that the partnership agreement was both abandoned and breached appear at odds with one another. Upon review, however, those conclusions are not fundamentally inconsistent or irreconcilable.

The jury was specifically instructed to decide the case of each [party] as if it were a separate lawsuit, and was advised that Gross and Kuist were each entitled to separate consideration of their own claims. On the one hand, with respect to Grosss claim, the jury necessarily found Hodge and Gross mutually intended to abandon the written partnership agreement and replace it with an implied agreement. On the other hand, with respect to Kuists claim, the jury necessarily did not find, nor was asked to find, that Kuist and Hodge shared a similar mutual intent to abandon the written partnership agreement. Indeed, the jury found the opposite, that is, the agreement was enforceable as between Hodge and Kuist. Although both Gross and Kuist ultimately sought the same recovery the fruits of the partnerships unfinished business and damages for breaches of fiduciary duty they pursued those remedies according to independent, yet consistent, contractual theories. The findings in the special verdict are therefore not inconsistent.[6]

Finally, to the extent the wording of the special verdict may have confused the jury, the doctrine of invited error requires that its findings must stand. Under that doctrine, a party whose conduct induces the commission of error is estopped from asserting it as a ground for reversal. Similarly, an appellant may waive his right to attack the error by expressly or impliedly agreeing at trial to the ruling or procedure with which he takes issue on appeal. (Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1685-1686.) The record indicates appellants did not object or propose any changes to the special verdict form. It is incumbent upon counsel to propose a special verdict that does not mislead a jury into bringing in an improper special verdict. (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960, fn. 8; see also Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 857-858 [where the record is devoid of any showing that appellants objected to the special verdict questions, any inherent error therein is waived].)

D. The trial courts alleged errors regarding California partnership law.

1. RUPAs buyout rule does not apply to the circumstances of Grosss departure.

The unfinished business rule provides that a contingent fee case pending at the time of a law partnerships dissolution constitutes unfinished business of the partnership. If the contingent fee is later realized, the partners of the dissolved partnership have a property interest in the fee equal to their respective interests in the defunct firm. The rule applies even though the work necessary to realize the contingent fee is performed only by one or a few members of the former firm, although counsel is substituted and a new compensation agreement is executed postdissolution, and irrespective of the nature of the compensation agreement with the client. (Rosenfeld, Meyer, supra, 146 Cal.App.3d at pp. 216-220; see also Jewel, supra, 156 Cal.App.3d at pp. 174, 178; Fox v. Abrams (1985) 163 Cal.App.3d 610, 614-617; Rothman v. Dolin, supra, 20 Cal.App.4th at pp. 757-759; Grossman v. Davis (1994) 28 Cal.App.4th 1833, 1835.) Appellants insist that, as to a partnership like this one, that did not dissolve after Grosss dissociation, the rule was impliedly revoked or abrogated by RUPA.

Gross dissociated from the partnership when he moved to Utah. Appellants insist that, under RUPA, a dissociating partner of a firm that does not dissolve upon his departure is entitled only to a buyout of his partnership interest when he leaves, based on the market value of his interest at the time of departure, as though the partnership had dissolved and its business had wound up. (Corp. Code, 16701, subds. (a) & (b), 16807.) Appellants argument is premised on an Official Comment to RUPA, which states: after a partners dissociation, the partners interest in the partnership must be purchased pursuant to the buyout rules . . . unless there is a dissolution and a winding up of the partnership business . . . . Thus, a partners dissociation will always result in either a buyout . . . or a dissolution and winding up of the business. (6 Wests U. Laws Ann., Part 1 (2001), U. Partnership Act (1997) & Commentaries, com. 1 to 603, p. 172, emphasis omitted.) Thus, appellants insist RUPA impliedly abrogated the unfinished business rule in cases where the partnership continues as an ongoing concern, by providing that a dissociating partner has no remedy other than a buyout of his interest when he leaves.

Appellants focus on rules applicable to partners dissociating from ongoing partnerships is misplaced. Gross could not have dissociated from an ongoing partnership because, once he left, his implied partnership with Hodge, which existed independently of Hodges partnership with Kuist, was effectively dissolved. The RUPA provisions concerning dissociated partners are designed to allow remaining partners to carry on after a partner leaves. However, they apply only when the affected partner leaves behind a viable partnership comprised of at least two co-owners. Gross could not dissociate from a continuing partnership because the implied partnership ceased to exist without him. For good reason, RUPA does not address how one partner can carry on a partnership business. By definition, a partnership cannot exist absent the association of two or more persons to carry on as coowners a business for profit . . . . (Corp. Code,  16101, subd. (9), 16202.) RUPAs buyout rule does not apply.[7] Rather, where a partners dissociation necessarily effectuates a dissolution of the partnership, the partnership is wound up, the unfinished business is completed, and the partners share in the profits after the winding up is complete. (See Corp. Code, 16701.5, subd. (a) [Section 16701 shall not apply to any dissociation that occurs within 90 days prior to a dissolution under Section 16801 (which, in turn, provides that dissolution and wind up is required in a partnership at will if at least half of the partners express a will to dissolve)].) In such a case, as here, the partnership is wound up, the unfinished business is completed and the partners share in the proceeds after the wind up is complete. (Corp. Code,  16807, subd. (a); see also 6 Wests U. Laws Ann., supra, at p. 172 [after a partners dissociation, the partners interest . . . must be purchased pursuant to the buyout rules . . . unless there is a dissolution and a winding up of the partnership business (italics added)].)

2. Grosss claims are not time-barred.

Appellants argument that Grosss action is time-barred is premised on the mistaken assumption that his claims are governed by RUPA, and the statute of limitations began to run when he would have been entitled to a buyout in 1998.

RUPA does not govern the circumstances of Grosss departure. The Bedrosian contingency fee, which was no more than the attorneys security interest in the proceeds of the Bedrosian litigation (Isrin v. Superior Court, supra, 63 Cal.2d at pp. 158-159), was not earned until 2003 or paid until March 2004. This action for breach of an implied agreement to pay Gross 10 percent of that fee was timely filed in late 2003.

3. The jury was properly instructed as to the unfinished

business rule.

According to instruction No. 20, the jury was told:

If a contingent fee is realized after a partner has left the partnership, he may have a financial interest in the contingent fee as the unfinished business of the partnership. Unfinished business is the work in process of the partnership at the time of the partners departure.

The language of the written partnership agreement in this case does not contain express reference to the right of a former partner to unfinished business. The jury must determine whether a former partner retained a financial interest in the partnership after he departed the partnership, and, if so, the percentage of his respective interest in any unfinished business of the partnership or other payment under the agreement.

Appellants insists that giving instruction No. 20 was erroneous because (1) it is inconsistent with pleadings filed by Gross and Kuist stating that neither partner withdrew from the partnership and the partnership was never dissolved; and (2) the written partnership agreement does address unfinished business. Neither assertion has merit.

First, our concern is not with the pleadings but with the facts established at trial. As to the implied partnership agreement between Hodge and Gross, the partnership ceased to exist after Gross left for Utah, and only the winding up of pending business remained. The Bedrosian contingency fee case was unfinished business of the implied partnership. The jury concluded, and we agree, that Kuist never voluntarily withdrew, and no viable partnership remained under the partnership agreement after he was fired and prevented from performing further partnership services. When that event occurred, the partnership dissolved, and Hodge was required to wind up its work.

Second, appellants assert the instruction was erroneous because the partnership agreement addresses unfinished business and provides that a departing partner has no right to future profits. As to Gross, this argument is irrelevant because the written partnership agreement was abandoned. As to Kuist, we do not agree that sections 3.05, 5.01 and 5.05 of the partnership agreement clearly address unfinished business. Moreover, not only do those sections fail to expressly reference a departed partners right to unfinished business, they do not apply because Kuist was not expelled from the partnership and did not die, withdraw, become incapacitated, or retire.[8] For this reason, appellants reliance on Heller v. Pillsbury Madison & Sutro (1996) 50 Cal.App.4th 1367, is misplaced. That case involved an appeal from the dismissal of an expelled partners action for a formal accounting under the Uniform Partnership Act (former Corp. Code,  15022). The law firms partnership agreement did not provide for an accounting. Instead, it detailed an expelled partners compensation rights, stating an  expelled . . . [p]artner shall have no right to any payment of any kind or nature whatsoever,  beyond his agreed capital contribution and 10 percent of the amount distributed to him in the year preceding his expulsion. (Heller v. Pillsbury Madison & Sutro, supra, 50 Cal.App.4th at p. 1391, fn. 13.) The trial court dismissed the accounting action. The appellate court affirmed the dismissal on the ground the parties expressly contracted for terms not set forth in the Uniform Partnership Act. That element is lacking here. The agreement at issue precludes departing partners from recovering future profits in future business opportunities. It does not specifically address the partners rights with respect to pending unfinished business or contingency fees. The court consequently did not err in instructing the jury and permitting the jury to decide whether a departing partner retained a financial interest in pending matters after he left and, if so, the amount of that interest.[9]

E. Punitive damages.

1. The record supports the punitive damages awards.

Appellants insist their conduct did not involve oppression, fraud, or malice, and falls short of meeting the clear and convincing evidentiary standard necessary to sustain an award of punitive damages.[10] According to appellants, Hodge placed the contested portion of th