Pandya v. Gillette
Filed 8/21/12 Pandya v. Gillette CA6
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opinion has not been certified for publication or ordered published for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
SIXTH
APPELLATE DISTRICT
AMIT PANDYA,
Plaintiff and
Respondent,
v.
WARD GILLETTE,
Defendant and
Appellant.
H036332
(Monterey
County
Super. Ct.
No. M89952)
Appellant
Ward Gillette challenges a judgment entered in favor of plaintiff Amit Pandya,
in an action for fraud against Gillette, Albert Braun, and their company, Five
Star Technologies, Inc. (Five Star).
Gillette contends that there is insufficient evidence to support the
trial court's findings that (1) plaintiff justifiably relied on the defendants'
misrepresentation and (2) their misrepresentation caused the harm plaintiff
suffered. Gillette further challenges
the amount of compensatory and punitive
damages awarded to plaintiff. We
agree with his last point regarding punitive damages and will accordingly
modify the judgment.
Background
title="">[1]
Plaintiff
first heard about Five Star through a business contact, who told him that the
company principals were "looking for somebody to help them turn the
company around." Plaintiff met with
Gillette in July or August of 2005 and discussed Gillette's business plan for
Five Star. He learned that Five Star was
built on a concept that involved mixing garbage materials together to make
railroad ties. The company was looking
for a president and chief executive officer (CEO), "somebody to lead the
company to the next level."
Plaintiff understood that the product had not yet been tested, and that
the company was "dead financially" because it generated no revenue
and had a "huge burn rate" of about $20,000 a month. Nevertheless, he believed that the product
had "huge potential."
During a
tour of the plant and subsequent meetings with Gillette and Braun, plaintiff
learned that Five Star had three shareholders: Gillette, Braun, and a company
called Una World. He also discovered
that there were no revenue statements, contracts, lists of assets, or
profit-and-loss statements. In a meeting
on August 10, 2005, he
sketched out a plan to attract investors.
Plaintiff knew that the company could not pay him; instead, he proposed
that he have "effective control to set the direction for the company"
by holding a majority of the shares in the company. Plaintiff "essentially wagered"
that if he had control over the direction of the company, he would be able to
turn it around, and his shares would then be worth money. With his confidence in the product, he was
"willing to put in all [his] time, and effort, and energy to turn around
for free on a bet that [the] company would work and move forward."
Gillette
suggested alternatives of between 20 percent and 40 percent ownership. Plaintiff was "firm" in insisting
on a majority share, but he added that his ownership would be limited to five
years; after that, a public offering would reduce his share to two to four percent. At the end of that meeting, Braun shook
plaintiff's hand, smiled, and said, "Welcome on board, Mr.
President." He then took plaintiff
to the bank to put plaintiff's name on the account. Braun told the bank officer that plaintiff
was the new president. In Braun's
presence, plaintiff signed forms as president and applied for a line of credit
indicating that he was majority shareholder.
that his proposal had been accepted.
Braun, however, believed that the parties were still negotiating the
terms of plaintiff's involvement in the company.
Over the
next 15 days following the August 10, 2005 meeting, plaintiff contacted
railroad companies, sought grants, and solicited testing. He also composed minutes of meetings that had
taken place prior to his involvement, and he memorialized the agreement the
parties had reached on August 10, with the title "Appendix A."
and Gillette on August 23, expecting a correction if they perceived any
inaccuracies. Braun and Gillette did
make corrections to the meeting notices and minutes, but they did not reject
plaintiff's representation of the terms of their agreement, and nothing in
their responses indicated to plaintiff that there was any
misunderstanding. On August 11, 2005,
however, only a day after the meeting and trip to the bank, Braun sent e-mail
to Gillette discussing other arrangements they could negotiate with plaintiff
that would not involve his having a majority of the shares. Defendants corresponded with plaintiff while
redacting private comments they exchanged with each other.
As late as
March 16, 2006, defendants still had not executed the documents that reflected
plaintiff's majority share of the company.
On the contrary, in an e-mail to Braun that day, Gillette expressed the
conviction that "we should hold on to our original verbal [
that we are ALL (the 3 of us) equal partners and abandon Amit's request to be granted
one more share than the cumulative sum of all outstanding shares giving him
complete control of this company."
Gillette also told Braun that he was "unsure at this time as to
whether or not we should draft or otherwise formalize any company documents
authorizing Amit's takeover as CEO, including meeting minutes."
Meanwhile,
between late August of 2005 and mid-March of 2006 Braun repeatedly asked
plaintiff to procure funds for the company.
Altogether plaintiff contributed $44,000 to enable Five Star to pay
outstanding bills. While accepting the
cash infusion, defendants did not transfer the majority shares to
plaintiff. They also resisted informing
the company lawyer about the contract with plaintiff, because they believed
that the lawyer would reject the deal and "scare Pandya off." Plaintiff continued trying to get signed
minutes from defendants, but the parties could not agree on the content and
related issues.
On March
20, 2006, Braun wrote to Gillette, asking whether Gillette could contribute
some funds to keep the company going until the next utility bill came due. He added, "Here's hoping everything
works out and Will joins us. . . ." Later that day Gillette informed plaintiff
that he and Braun had located a possible investor, Will Low.
On March
29, 2006, the parties met over the issues facing the company. During the meeting, to plaintiff's expressed
surprise, Gillette and Braun would not
acknowledge the existence of an agreement giving him majority shares; in
Gillette's view, he and plaintiff "never had an
agreement . . . on anything other than my offer that it be
equal." The recording of the
meeting was transcribed and played for the court at trial. The transcript, which the court admitted into
evidence, discloses extensive arguing, during which Gillette told plaintiff
that the only arrangement defendants had ever agreed to was plaintiff's
position as equal partner, each owning 16.5 million shares. If plaintiff wanted to continue his involvement
in the company, he would have to accept that condition, serving as an equal
partner, "at the leisure of the board." Otherwise, he would be "cut
loose." At one point Gillette
informed plaintiff that the assets of Five Star would be moved to a holding
company owned by Braun so "they're protected. So that, that matter is done. Now.
If you want to come after us and sue us, do whatever you want, but 5
Star is nothing. It's a shell
company. There's no assets, there's
nothing."
The next
day plaintiff expressed his understanding of the conclusions reached at the
meeting—notably, defendants' proposal to grant equal shares to Braun, Gillette,
Low, Braun's son, and plaintiff, thereby "cutting" plaintiff's
majority share to 20 percent. In addition,
as plaintiff related it, his personal no-interest loan would be recharacterized
as a contribution toward the purchase of his shares. If he did not accept this new arrangement, he
noted, he would be terminated as president and CEO and removed from the board,
he would lose all his stock, and defendants would "consider" giving
him a promissory note for the money he loaned the company. Finally, in the event that plaintiff sought
compensation for the time and money he had put into Five Star, the assets of
the company were to be placed in a holding company to keep it out of reach of
the courts.
Plaintiff
did not accept this "ultimatum," and he was terminated on March 30,
2006. On March 21, 2008, he filed this
action against Gillette, Braun, and Five Star, asserting fraud, violation of
Corporations Code section 25401, conversion, and breach of oral
contract. Plaintiff requested $44,000
for "rescission and restitution of the consideration paid," along
with general and punitive damages. Ward
and Gillette separately answered the complaint and, together with Five Star,
filed a cross-complaint against plaintiff for fraud, breach of oral contract,
breach of fiduciary duty, and promise made without intention to perform. In August 2008 a default judgment was entered
against Five Star, and the remaining parties (including Five Star as
cross-complainant) appeared for a court trial on April 27, 2010.
At trial
Gillette and Ward maintained that there was no contract between the parties,
and that even if a contract existed, (a) there was no fraud and (b) they could not
be personally liable for any wrongdoing.
The court found, however, that the parties had reached a contract, that
they had deceived plaintiff into believing his demand for majority control had
been met, and that they were liable as alter-egos of Five Star. The court awarded plaintiff $94,000,
consisting of reimbursement of the $44,000 loan and $50,000 for plaintiff's
lost time, plus interest. The court also
granted plaintiff $94,000 as punitive damages.
Defendants were to take nothing on their cross-complaint. After denial
of Gillette and Braun's motion for a new trial, Gillette alone brought this
appeal.
Discussion
1. Appealability
Gillette
first filed his notice of appeal from the August 11, 2010 judgment on November
18, 2010, just short of 30 days after the court denied the motion for a new
trial. (Cal. Rules of Court,
rule 8.108(b)(1)(A)). On November
22, 2010, he filed an amended notice, this time purporting to appeal from the
October 20 order denying the motion.
Plaintiff now urges us to dismiss the appeal, pointing out that an order
denying a motion for a new trial is not an appealable order. He concedes that Gillette's opening brief
"demonstrates that he intends to appeal the trial court's judgment;"
but he then obliquely retracts that concession by arguing that the amended
notice "indicates a conscious, specific intent not to appeal the underlying judgment. It would be contrary to logic and precedent
for this appellate court to impute an intent inconsistent with these
actions."
Plaintiff
acknowledges the guidance supplied by Walker
v. Los Angeles County Metropolitan Transportation Authority (2005) 35
Cal.4th 15, 20, where the Supreme Court reaffirmed the appellate practice of
considering a notice of appeal from an underlying judgment when a party has
appealed from both the judgment and
the order denying that party's motion for a new trial. Here, however, plaintiff insists that we
should ignore the first notice and acknowledge only the second notice, and thus
refuse to consider the merits of the appeal.
Gillette
responds that the "clear import of the amended notice of appeal was to
inform this court that the notice of appeal was timely filed under
rule 8.108(b)(1)." Although
there is no clear evidentiary basis for inferring such intent, we agree with
Gillette's additional point, that no conceivable prejudice can accrue to
plaintiff by considering the appeal on the merits. We will therefore dismiss the appeal from the
nonappealable order and proceed to review the matter as an appeal from the
original judgment.
2. Sufficiency of the Evidence:
Justifiable Reliance and Causation
In his
complaint plaintiff alleged several false statements of fact and a promise that
if plaintiff accepted the position of president and CEO of Five Star, he would
have control of the company and be given 51 percent of the outstanding
shares. The trial court determined that
defendants had engaged in fraud by deceiving plaintiff, within the meaning of
Civil Code sections 1709 and 1710.
they had accepted his proposal to "work for free for five years" on
condition that he have majority control of the company. Yet, the court found, defendants "did
not intend to fulfill the agreement. On
August 11, 2005, one day after the agreement to hire Pandya, the Defendants
plotted how to maintain their majority control of the
corporation. . . . They hid their ideas from Pandya, sending him
sanitized versions of their emails and delaying the execution of necessary
documents including minutes."
On appeal,
Gillette does not dispute these facts; thus, he implicitly concedes that
misrepresentation occurred. Instead,
Gillette contends only that plaintiff did not justifiably rely on defendants' misrepresentations and that the
misrepresentations did not cause the harm he suffered.
Section
1709 provides a remedy in damages for one who is deceived by another "with
intent to induce him to alter his position to his injury or risk." Section 1710 more specifically defines
"deceit" as "1. The suggestion, as a fact, of that which is
not true, by one who does not believe it to be true; [¶] 2. The assertion, as a fact, of that which is
not true, by one who has no reasonable ground for believing it to be true; [¶]
3. The suppression of a fact, by one who
is bound to disclose it, or who gives information of other facts which are
likely to mislead for want of communication of that fact; or, [¶] 4. A promise, made without any intention of
performing it."
Our Supreme
Court has refined this definition by adopting pertinent sections of the Second
Restatement of Torts—namely, sections 525, 531, and 551. "Section 525 of the Restatement Second
of Torts states: 'One who fraudulently
makes a misrepresentation of fact, opinion, intention or law for the purpose of
inducing another to act or to refrain
from action in reliance upon it, is subject to liability to the other in
deceit for pecuniary loss caused to him by his justifiable reliance upon the
misrepresentation.' . . . Section 531 states the 'general rule'
that '[o]ne who makes a fraudulent misrepresentation is subject to liability to
the persons or class of persons whom he intends or has reason to expect to act
upon the misrepresentation, for pecuniary loss suffered by them through their
justifiable reliance in the type of transaction in which he intends or has
reason to expect their conduct to be influenced'. . . And section
551, subdivision (1) states: 'One who
fails to disclose to another a fact that he knows may justifiably induce the
other to act or refrain from acting
in a business transaction is subject to the same liability to the other as
though he had represented the nonexistence of the matter that he has failed to
disclose . . . .' " (
Cal.4th 167, 174.)
title="">[6]
In order to
establish tort liability for deceit, a plaintiff must show "(1)
misrepresentation (false representation, concealment, or nondisclosure); (2)
knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce
reliance); (4) justifiable reliance; and (5) resulting damage." (Molko
v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1108; Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) " 'Promissory fraud' " is
a subspecies of the action for fraud and deceit. A promise to do something
necessarily implies the intention to perform; hence, where a promise is made
without such intention, there is an implied misrepresentation of fact that may
be actionable fraud." (
638.) "Thus, in a promissory fraud
action, to sufficiently allege [that] defendant made a misrepresentation, the
complaint must allege (1) the defendant made a representation of intent to
perform some future action, i.e., the defendant made a promise, and (2) the
defendant did not really have that intent at the time that the promise was
made, i.e., the promise was false."
(Beckwith v. Dahl (2012) 205
Cal.App.4th 1039, 1060.)
In
addressing the first element at issue, justifiable reliance, Gillette asserts that
significant facts known to plaintiff made his reliance unreasonable. Specifically, Gillette argues, plaintiff knew
(1) that the company was in financial trouble, which would prevent him from
getting paid; (2) that the product was untested; (3) that the company had no
profit and loss statement, list of assets and their values, or formal minutes
of past meetings; and (4) that the assets of Una World had been purchased in
return for 7 million shares, but that defendants were not going to issue those
shares to Una World because they did not like its president.
of the company's financial troubles" when, immediately after agreeing to
work for Five Star, plaintiff was told that the company was running out of
cash. Finally, Gillette points out that
there was no formal written agreement between the parties; plaintiff had
prepared a document memorializing the terms, "but neither Gillette nor
Braun ever signed it." In short,
Gillette argues, "[n]o reasonable person would have given so much time and
money to Five Star under these circumstances."
"Reliance
exists when the misrepresentation or nondisclosure was an immediate cause of
the plaintiff's conduct which altered his or her legal relations, and when
without such misrepresentation or nondisclosure he or she would not, in all
reasonable probability, have entered into the contract or other
transaction. . . . 'Except in the rare case where the undisputed
facts leave no room for a reasonable difference of opinion, the question of
whether a plaintiff's reliance is reasonable is a question of
fact.' " (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239; cf.
Edmunds v. Valley Circle Estates
(1993) 16 Cal.App.4th 1290, 1300 [reliance on statement of intent not justified
if plaintiff knows promisor will be unable to carry out his intention], quoting
Rest.2d Contracts, § 171, com. a, p. 466.)
Gillette
acknowledges the burden he faces on appeal.
" 'Defendant correctly states that fraud must be proved by clear
and convincing evidence.
[Citations.] But it is the
function of the trial court, not the reviewing court, to determine whether that
standard has been met, and the trial court's determination of the issue is
conclusive where, as here, it is supported by substantial
evidence. . . . [I]t was
the exclusive province of the trial court to determine which of two or more
reasonable inferences should be drawn; and its findings, based on the
inferences drawn, cannot be disturbed on
appeal. . . .' " (Edmunds
v. Valley Circle Estates, supra, 16 Cal.App.4th at p. 1297.)
plaintiff suggests; instead, " 'all of the evidence must be examined,
but it is not weighed. All of the
evidence most favorable to the respondent must be accepted as true, and that
unfavorable discarded as not having sufficient verity[ ] to be accepted by the
trier of fact. If the evidence so viewed is sufficient as a matter of law, the
judgment must be affirmed.' "
(OCM Principal Opportunities Fund
v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 866 (
insufficient evidence merely because the witnesses offered conflicting testimony,
" ' "for it is the exclusive province of the trial judge or
jury to determine the credibility of a witness and the truth or falsity of the
facts upon which a determination depends." ' [Citations.]" (OCM, supra, 157 Cal.App.4th at p.
867.)
We agree with
Gillette that plaintiff was " 'aware of the risks' of investing his
time and money into Five Star, a struggling company that had yet to produce a
product." But that fact does not
relate to the gravamen of plaintiff's fraud claim. Plaintiff's awareness of the company's shaky
financial condition, and, arguably, of its inadequate record-keeping, would be
relevant if, for example, he had alleged misrepresentation of the current or
expected profitability of the product. (See, e.g., Atari Corp. v. Ernst & Whinney (9th Cir. 1992) 981 F.2d 1025,
1029 [reliance unjustified where plaintiff purchased company despite belief
that company's assets were overvalued].)
But that is not the essence of defendants' tortious conduct. Defendants led plaintiff to believe that they
had accepted his express, "firm" condition of joining the company as
president and CEO with no salary: that
he have functional control of the company and 51 percent of the outstanding
shares.
The only
fact Gillette cites that even remotely bears upon defendants' false promise is
plaintiff's awareness that Five Star had not issued the shares to which Una
World was entitled. That fact was
plainly insufficient to convince the trial court that plaintiff's reliance on
defendants' misrepresentations was unreasonable. It was for the trial court, as finder of
fact, to determine the significance of defendants' refusal to issue one company
its shares. The court could have found that plaintiff reasonably believed defendants
when they told him that the reason they were not giving Una World those shares
was that its president was "a really, really bad guy." We will not second-guess the lower court in
making this factual determination.
Without evidence that plaintiff should have known that defendants would not
keep their promise to make him majority shareholder, the court properly determined that
plaintiff's reliance on the misrepresentation was justified.
A similar
conclusion must attend Gillette's contention that there was insufficient
evidence of causation. He is correct
that even where reliance has occurred, "no liability attaches if the
damages sustained were otherwise inevitable or due to unrelated
causes." (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 60; see also
872 [proximate causation shown between misrepresented financial condition of
company and damages to purchasers of notes], citing Rest.2d Torts § 548A,
com. b, p. 107) [entitlement to damages requires causal link between losses and
facts misrepresented].) "[T]here
are two causation elements in a fraud cause of action. First, the plaintiff's
actual and justifiable reliance on the defendant's misrepresentation must have
caused him to take a detrimental course of action. Second, the detrimental action taken by the
plaintiff must have caused his damage."
(Beckwith v. Dahl, supra,
205 Cal.App.4th at p. 1062.)
Plaintiff's
challenge is again predicated on the assumption that plaintiff claims a lost
investment: "Pandya gave the
$44,000 and his time to Five Star because he expected a profitable return on
those investment[s] when and if the
product became successful. Nothing in
the record indicates that Pandya would not have gotten his $44,000 back, with a
profit, if the product had been successful enough to produce profits for the
company. However, since Five Star was
never able to produce a successful product, all investments—by the defendants as well as by
Pandya—were lost." This is not the
factual basis of defendants' liability.
Although plaintiff did allege a misrepresentation of the company's value
in his complaint, the allegation the court found meritorious was that plaintiff
was assured that he would be given 51 percent of the shares and functional
control of the company in exchange for his service as president and CEO. Thus, this case does not resemble those in
which a plaintiff invested in a product or security by relying on a false
assurance of its worth. (See, e.g.,
202 Cal.App.3d at p. 63 [loss following stock transfer caused not by asserted
misrepresentations by bank, but by bank's refusal to extend long-term loan to
business]; Piscitelli v. Friedenberg
(2001) 87 Cal.App.4th 953, 990 [lost commissions speculative to the extent
based on assumed growth of account]; compare OCM, supra, 157 Cal.App.4th at pp. 873-875 [causal link
shown between misrepresentation and loss of investment]; cf.
(1996) 44 Cal.App.4th 1807, [no cause of action for deceit where expenses
incurred in entering and performing contract caused by defendant's
nonperformance and termination of contract, not its alleged fraudulent promise
to ensure continued performance of plaintiff's nonunion personnel.)
Causation
was adequately proved here. Plaintiff
testified that in reliance on defendants' acceptance of his condition, he took
the job, extended a loan to the company, and worked without compensation for
close to eight months. He thus proved
not only that he relied on defendants' misrepresentation, but that that
reliance caused the detriment of lost time and money. The court did not err in finding this element
to have been proved by clear and convincing evidence.
3. Damages
Gillette
next contests the award of compensatory and punitive damages. He contends that $50,000 should be struck
from the judgment because plaintiff failed to prove the value of his lost
time. He further contends that punitive
damages should not have been awarded because there was no "meaningful
evidence" of his financial condition.
Gillette
acknowledges that a plaintiff is entitled to recover compensation for
"time and effort expended in reliance on a defendant's
misrepresentation." (
220; Civ. Code, §§ 1709, 3333.) In
this case, however, Gillette insists that "the record does
determination that Pandya's time and effort should be valued at $50,000 for
seven and one-half months' worth of work."
Gillette's argument sidesteps the standard of review. It is not our role to determine whether
plaintiff should have recovered less than $50,000; our only task is to
ascertain whether substantial evidence supports the trial court's finding. We conclude that it does. Plaintiff, who had
previously identified himself as a "business turnaround specialist,"
was the founder and president of a business entity that specialized in selling
businesses and helping others "get right management direction, appropriate
profitability." He had bought and
sold multiple businesses, had "fixed" and advised others, and was
involved in the Monterey County business community. Defendants brought out plaintiff's admission
that he did not have a college degree and that some of his business experience was
in owning gas stations and managing Togo's restaurants and three sporting goods
stores. The court heard all of this
testimony and weighed it in determining an appropriate compensation for his
time and effort. Plaintiff testified
that $75,000 was a fair salary for his seven and one-half months of work; the
trial court gave him significantly less than that, $50,000. Whether we would have awarded less than that
amount is irrelevant; the trial court was the finder of fact, and it properly
exercised its discretion in determining that $50,000 was fair. Because its findings are supported by
substantial evidence, Gillette's request that we strike $50,000 from the
damages award must be rejected.
The
punitive damages award requires a different focus. "In the narrow context of this case,
where neither the reprehensibility of the defendant's conduct nor the magnitude
of harm to the plaintiff is at issue, the question is whether the amount of
damages exceeds the defendant's ability to pay." (Zaxis
Wireless Communications, Inc. v. Motor Sound Corp. (2001) 89 Cal.App.4th 577, 582.) The requirement that there be
"meaningful evidence" of a defendant's financial condition in order
to impose punitive damages is "ancient" and well understood. (Adams
v. Murakami (1991) 54 Cal.3d 105, 109, 113.) The burden of producing such evidence is, of
course, on the plaintiff. (
(1994) 25 Cal.App.4th 1269, 1283 [annual report of parent corporation
insufficient evidence of defendant company's financial condition].) "We
review the trial court's award of punitive damages for substantial
evidence." (Baxter v. Peterson (2007) 150 Cal.App.4th 673, 679.)
Standing
alone, neither net worth, nor assets, nor income is sufficient to support
punitive damages. (See
Sound Corp., supra, 89
Cal.App.4th at p. 582 [net worth too easily manipulated to be the sole standard
for ability to pay]; Lara v. Cadag
(1993) 13 Cal.App.4th 1061, 1065 [evidence of earnings is not by itself
sufficient]; Baxter v. Peterson supra
["evidence of liabilities should accompany evidence of assets, and
evidence of expenses should accompany evidence of income"].)
As in much
of his respondent's brief, plaintiff fails to direct us to the evidence
supporting the trial judge's award. Only
in his statement of facts are there two references to relevant facts with
record citations: "Gillette has
lived in Carmel for the last 25 years"; and "Gillette owns a home in
Shaver Lake." While arguing that
substantial evidence supports the award, he offers nothing in the record to
support such a conclusion beyond a superficial assertion that such evidence
"was acknowledged at trial."
Even viewing the record in the light most favorable to the judgment (
910, 916), we can find no such evidence.
Gillette himself testified that he owned a home at Shaver Lake, but
there was no further evidence on that point, nothing to give the trial court
some idea of the value of the home or any indebtedness attached to it. The bare fact that Gillette had lived in
Carmel for 25 years was even weaker.
(Cf. Kelly v. Haag, supra, 145 Cal.App.4th at p. 917
[even if defendant currently owned
properties, absence of evidence of encumbrances or other liabilities on them
defeats punitive damages award].) Nor
was there any indication of Gillette's income or other assets and liabilities
for which he was responsible.
In an
apparent effort to divert the analysis from his failure to prove Gillette's
financial circumstances, plaintiff argues that the award may nonetheless be
upheld because Five Star's financial condition filled the gap in evidence.
Assuming, without deciding, that Five Star's financial condition may be imputed
to Gillette as its alter-ego, we are directed to no meaningful evidence
demonstrating Five Star's ability to pay the award either. Plaintiff suggests (again without citation
to the record) that the company's value was "more than $1 million,"
measured by what he assumes was the cost to develop the technology. He also invokes the salvage value of the
equipment, which he represents to be $100,000.
He then admits that "Five Star had certain recurring liabilities
and expenses, for which Pandya loaned the corporation
money. . . . Gillette
transferred the technology out of Five Star, leaving it 'judgment proof' to
avoid debts owed to Pandya."
Plaintiff
claims that this nonspecific "information" allowed the trial judge to
"gauge the approximate financial condition of the corporation." He does not even suggest an amount
representing this "approximate financial condition" or identify the
evidence from which that condition might be inferred. At best we have plaintiff's statement of
facts, which inaccurately refers to the testimony of Braun regarding his
contributions to the company.
name="_ftnref10" title="">[10] In addition, Braun was cross-examined about
an August 2005 e-mail to Gillette, the content of which he did not recall; in
that message he had speculated about the amount they could obtain from selling parts
for "scrap value," which could be "upwards of
[$]100,000." None of this purported
evidence of net worth, notably devoid of liability and expense figures,
approaches anything resembling "meaningful evidence" of Five Star's
financial condition at the time of trial.
We must
conclude, therefore, that plaintiff failed to establish a factual basis for
imposing punitive damages on Gillette.
The absence of meaningful evidence precludes a punitive damages award
because it is impossible to assess its impact on Gillette's financial
resources; consequently, we "can only speculate as to whether the award is
appropriate or excessive." (
p. 112; see also Storage Services v.
Oosterbaan (1989) 214 Cal.App.3d 498, 516 ["There is no basis for
meaningful appellate review of a punitive damage award without evidence of the
defendant's financial condition"].)
The purpose of punitive damages is "to deter, not to destroy." (Adams
v. Murakami, supra, 54 Cal.3d at p. 112.)
"[O]bviously, the function of deterrence . . . will
not be served if the wealth of the defendant allows him to absorb the award
with little or no discomfort. [Citations.] By the same token, of course, the
function of punitive damages is not served by an award which, in light of the
defendant's wealth . . . exceeds the level necessary to properly
punish and deter." (Neal v. Farmers
Ins. Exchange (1978) 21 Cal.3d 910, 928, fn. 13; see also
p. 915.)
Here, as in
Baxter v. Peterson supra
had " 'a full and fair opportunity to present his case for punitive
damages, and he does not contend otherwise.'
(Kelly v. Haag, supra, 145
Cal.App.4th at p. 919.) When a punitive
damage award is reversed based on the insufficiency of the evidence, no retrial
of the issue is required." We will
follow Baxter and remove the punitive
damages from the judgment without ordering retrial.
Disposition
The
judgment against Gillette is modified to strike the award of punitive
damages. As so modified, the judgment is
affirmed. The parties shall bear their
own costs on appeal.
______________________________
ELIA,
J.
WE CONCUR:
______________________________
RUSHING, P. J.
______________________________
PREMO, J.
name="_ftn1" title="">[1]
Plaintiff complains that Gillette's statement of facts is deficient in that it
fails to set forth both sides' evidence.
His Respondent's Brief, however, is no model of accuracy. Many of the points in plaintiff's factual
summary are completely unsupported by his record references, contrary to
California Rules of Court, rule 8.204(a)(1)(C). He also makes factual assertions in his
"Argument" section without any citation of the record whatsoever,
making his points useless for purposes of this court's review. Even if the judgment did not require
modification, plaintiff's failure to adhere to the rules governing appellate
briefs would subject him to payment of his own costs. (Cf. Hearn
v. Howard (2009) 177 Cal.App.4th 1193, 1210 ["In view of the unhelpful
nature of the respondents' brief, the parties are to bear their own costs on
appeal"].)
name="_ftn2" title="">[2]
At trial Braun testified that he was unaware of plaintiff's representation as
being the 51 percent shareholder until the bank asked him for plaintiff's
contact information in preparation for extending a loan to the company. Braun instructed the bank officer to remove
that representation from the paperwork; he did not, however, confront plaintiff
about this matter because he "knew what Amit wanted."
