Filed 7/23/26 Team Makena v. Lasso CA4/3
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
TEAM MAKENA, LLC et al.,
Plaintiffs, Cross-Defendants, and G062790, G064025
Respondents,
(Super. Ct. No. 30-2016-
v. 00884951)
JOHN LASSO, ORDER MODIFYING
OPINION AND DENYING
Defendant, Cross- PETITIONS FOR
Complainant, and Appellant, REHEARING; NO CHANGE
IN JUDGMENT
SPARTAMED, LLC,
Defendant and Appellant, and
JNL CONSULTING SERVICES,
INC.,
Cross-Complainant and
Appellant.
It is ordered that the opinion filed herein on June 29, 2026, be
modified as follows:
On page 14, the first sentence in footnote 11 shall be deleted and
replaced with the following: “Lasso’s, JNL’s, and SpartaMed’s appeal—and
their petitions for rehearing—seem to be largely premised on their
assumption that sanctions are only appropriate if a party ‘actually destroyed’
evidence.”
On pages 16 to 17, the following two sentences shall be deleted:
“We recognize that Lasso and SpartaMed dispute various elements of Garlie’s
lengthy report and assert that certain deleted files were preserved in recycle
bins. But we have reviewed the record and do not see evidence (aside from
conclusory statements in Pixley’s declaration) to support that assertion.”
Those two sentences shall be replaced with the following: “Lasso
and SpartaMed insist that certain deleted files were preserved in recycle bins
or produced by other parties during discovery. But even assuming Lasso and
SpartaMed are correct in this regard, they have not shown that all
suppressed files were preserved and produced, much less that they were
produced by Lasso and SpartaMed.”
Footnote 13 on page 17 (which reads, “For example, the record
citations on page 40 of the opening brief do not appear to support defendants’
preservation argument.”) shall be deleted. All subsequent footnotes shall be
renumbered accordingly.
On page 17, in the paragraph beginning with the words “More
fundamentally,” the first sentence shall be deleted and replaced with the
following: “More fundamentally, discovery requires actively disclosing
information; spoliation is not limited to irreversibly destroying evidence so
that it is lost forever.” Additionally, the following sentence shall be added to
the end of that paragraph: “Suppression alone can warrant sanctions, even
terminating sanctions.”
2
Finally, on page 18, after the sentence that reads, “And since
JNL is Lasso’s wholly owned company and was added by Lasso at the
eleventh hour solely to ensure his cross-complaint did not fail for lack of
standing, we discern no error in extending sanctions for Lasso’s discovery
abuses to JNL.,” the following citation shall be added: “(See R.S. Creative,
supra, 75 Cal.App.4th at p. 496 [affirming terminating sanctions against
corporation for conduct of its sole principal where ‘evidence indicates’ she and
her company ‘were one and the same’].)”
These modifications do not effect a change in judgment.
The petitions for rehearing are DENIED.
SCOTT, J.
WE CONCUR:
GOODING, ACTING P. J.
SCHWARM, J.*
*Judge of the Orange County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
3
Filed 6/29/26 Team Makena v. Lasso CA4/3
NOT TO BE PUBLISHED IN 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
FOURTH APPELLATE DISTRICT
DIVISION THREE
TEAM MAKENA, LLC et al.,
Plaintiffs, Cross-Defendants, and G062790, G064025
Respondents,
(Super. Ct. No. 30-2016-
v. 00884951)
JOHN LASSO, OPINION
Defendant, Cross-
Complainant, and Appellant,
SPARTAMED, LLC,
Defendant and Appellant, and
JNL CONSULTING SERVICES,
INC.,
Cross-Complainant and
Appellant.
Appeal from a judgment and orders of the Superior Court of
Orange County, Randall J. Sherman, Judge. Affirmed in part, reversed in
part, and remanded with directions.
Kowal Law Group and Timothy M. Kowal; Brownstone Law
Group and Thomas A. Moore for Defendant, Cross-Complainant and
Appellant John Lasso, Defendant and Appellant SpartaMed, LLC, and Cross-
Complainant and Appellant JNL Consulting Services, Inc.
Call & Jensen, Scott R. Hatch and Joshua G. Simon for Plaintiff,
Cross-Defendant, and Respondent Össur Americas, Inc. and Cross-
Defendants and Respondents Otto Fernandez, Mark Tymchenko, Olafur
Gylfason, Christian Robinson, and Jon Sigurdsson.
Shields Law Offices, Jeffrey W. Shields and Rick A. Varner for
Plaintiff, Cross-Defendant, and Respondent Team Makena, LLC.
* * *
These consolidated appeals raise four issues, one concerning
liability and three concerning damages.
First, defendant and cross-complainant John Lasso, defendant
SpartaMed, LLC, and cross-complainant JNL Consulting Services, Inc.
appeal from a discovery sanctions order deeming defendants Lasso and
SpartaMed liable on the complaint and striking Lasso’s and JNL’s cross-
complaint. They contend insufficient evidence showed they engaged in
discovery abuse.
Second, both defendants appeal from the ensuing judgment for
plaintiffs Team Makena, LLC and Össur Americas, Inc., contending the trial
court wrongly excluded their “mitigation” evidence from the damages phase.
Third, Lasso appeals from the $10 million punitive damages
award. He asserts insufficient evidence showed his financial condition, and in
1
any event, the award was too high a percentage of his net worth as a matter
of law.
Fourth, defendants maintain the court wrongly denied their
postverdict request for an offset based on plaintiffs’ pretrial settlement with
another party.
On the first three issues, we affirm the trial court. Ample
evidence showed defendants repeatedly deleted, destroyed, and suppressed
critical evidence during discovery. The “mitigation” evidence supported
defendants’ unviable contention that corporate officers are free to compete
with their own companies if they simply say they will, and thus was correctly
excluded. And the punitive damages award was sufficiently supported and
not excessive.
On the fourth issue, we reverse and remand only to allow the
trial court to expressly consider defendants’ offset request.
FACTS1
I.
THE PARTIES AND THEIR DISPUTE
1 The record in this case is over 27,000 pages long, yet appellants
repeatedly cite to themselves (their trial brief, their opening statement) and
not to evidence. This is improper and exceedingly unhelpful. (See Cal. Rules
of Court, rule 8.204(a)(1)(C) & (a)(2)(C) [record references required]; Alki
Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574, 590 (Alki)
[“Citing points and authorities filed in the trial court is not appropriate
support for factual assertions in a brief”]; Cardenas v. Los Angeles Unified
School District (2026) 120 Cal.App.5th 554, 556 [pages cited from trial brief
“are just three pages of something [appellant’s] lawyer wrote in the past”].)
We decline to consider appellants’ unsupported factual assertions. (See Alki,
at p. 590, fn. 8.)
2
Lasso and others formed Team Makena in 2007. The company
fills orthotic and prosthetic prescriptions for durable medical equipment
(DME), such as braces and deep vein thrombosis devices, and handles the
billing for those products. Lasso served as Team Makena’s president.
Össur, which manufactures DME, acquired a majority interest in
Team Makena in 2009. Following the Össur acquisition, Team Makena
became the exclusive distributor and biller of certain Össur products in
California and neighboring states, and it agreed to use its best efforts to
promote Össur products.
Lasso continued on as president of Team Makena and
maintained a minority interest in it through his wholly owned company, JNL.
As president, Lasso owed fiduciary duties to Team Makena and was
prohibited from working for its competitors or engaging in work that created
a conflict of interest. According to Össur and Team Makena, however, Lasso
breached those obligations in multiple ways.
First, Lasso incurred large personal expenses at Team Makena’s
expense, engaged in self-dealing by redirecting Team Makena commissions to
himself, and exaggerated Team Makena’s profits so he could collect
distribution payments.
Second, in 2015, Lasso and Team Makena sales representative
Trevor Theriot formed their own DME company, ManaMed, Inc. They used it
to develop a deep vein thrombosis device that Lasso created. Although Lasso
at one point asked Össur if it would be interested in developing the device,
Össur passed, and Lasso transferred ownership first to another company he
created—TryABrace—and then to ManaMed. The device, known as
PlasmaFlow, later became ManaMed’s bestselling product.
3
Third, in 2016, Lasso and Theriot began meeting with Breg, Inc.,
another DME manufacturer and biller, about serving as an independent sales
representative for Breg products. As a DME manufacturer, Breg competed
with Össur, and as a DME biller, Breg competed with Team Makena.
II.
LITIGATION ENSUES;
LASSO IS TERMINATED AND CREATES SPARTAMED
In May 2016, counsel for Össur and Team Makena sent a letter to
Lasso advising him of their potential claims against him and reminding him
of his duty to preserve evidence, including electronic records.
In November 2016, Össur and Team Makena filed a complaint
against Lasso, ManaMed, and another person, asserting claims including
breach of fiduciary duty. Team Makena also filed a separate complaint
against Lasso and ManaMed.
A week later, Team Makena terminated Lasso for his alleged
disloyalty. Össur then exercised its right under the Team Makena operating
agreement to purchase JNL’s interest in the company, triggering a non-
competition clause.
Meanwhile, Lasso and Theriot’s efforts to represent Breg’s
products culminated in their formation of SpartaMed. SpartaMed entered
into an Independent Sales Representative (ISR) Agreement with Breg
effective January 1, 2017, and in the weeks that followed, SpartaMed took
customers and recruited personnel from Team Makena.
Later that month, Team Makena and Össur obtained a
temporary restraining order against Lasso and ManaMed, preventing them
from soliciting Team Makena sales representatives and customers and from
using its confidential business information.
4
Meanwhile, Lasso filed a cross-complaint against Össur, Team
Makena, and others. He accused Össur of “cannibalizing” Team Makena (as
he puts it in his appellate brief) and wrongfully ousting him, alleging causes
of action including breach of contract and derivative claims purportedly on
behalf of Team Makena.
In February 2017, the trial court issued a preliminary injunction
against Lasso and ManaMed prohibiting their solicitation of Team Makena
sales representatives and customers. Because of the preliminary injunction,
Lasso disassociated from SpartaMed shortly thereafter. Össur and Team
Makena would later amend their complaints to add SpartaMed as a
defendant.
III.
DISCOVERY ABUSES
The trial court entered a stipulated order concerning discovery
and the production of electronically stored information in 2018; this court-
ordered ESI protocol governed the manner in which ESI was to be produced.
The court also eventually appointed a discovery referee.
Discovery went far from smoothly, however. Extensive motion
practice and court orders were required to secure adequate discovery
responses from defendants. For example, the trial court granted Össur’s
motion to compel Lasso’s deposition. It also granted Össur’s numerous
motions to compel SpartaMed to provide discovery responses and produce
responsive documents, collectively imposing over $13,000 in sanctions
against SpartaMed and its counsel.2
2 The trial court also granted two motions by Össur to compel
discovery responses from ManaMed, collectively imposing over $10,000 in
sanctions against ManaMed and its counsel; and it imposed $4,180 in
5
During the course of discovery, plaintiffs’ counsel also uncovered
a series of misrepresentations and omissions in Lasso’s and SpartaMed’s
discovery responses and document productions. For example, SpartaMed was
not entirely accurate when it responded that all communications and
documents relating to contracts with Breg were no longer in its possession,
custody, or control because they had been returned to Breg in January 2020
as required by contract. It was true that the ISR Agreement between Breg
and SpartaMed required SpartaMed to return all confidential information to
Breg upon the agreement’s termination and to not keep any copies. It was
also true that SpartaMed had returned about 60,000 documents to Breg in
early 2020 at Breg’s request. What SpartaMed failed to disclose at the time,
however, was that its counsel and its forensics provider had retained copies of
the documents given to Breg—meaning SpartaMed did have responsive
documents in its control yet did not produce them.
The next discovery controversy began in 2021 when plaintiffs
noticed that Lasso, ManaMed, and SpartaMed had failed to produce key e-
mails that undeniably existed and should have been in their possession. Breg
had previously produced e-mails exchanged between Breg personnel, Lasso,
and Theriot in 2016 and early 2017 when Lasso and Theriot were developing
SpartaMed. Of particular importance were 34 e-mails concerning Lasso’s and
Theriot’s meetings with Breg and their plans to bring over a book of business
and become Breg’s Orange County distributor. According to Össur’s counsel,
these 34 e-mails were “crucial” to plaintiffs’ claims, and they served as key
exhibits at Lasso’s deposition.
sanctions against ManaMed for bringing an unjustified motion to compel
against Össur.
6
After the deposition, Össur’s counsel noticed that Lasso,
ManaMed, and SpartaMed had failed to produce those same 34 e-mails. This
was surprising because Össur’s document requests to them encompassed
those communications.
When the missing e-mails triggered concerns, Össur’s counsel
reviewed documents produced by another third party, Whitney Reynolds—a
former Team Makena sales representative who left with Lasso for a similar
role at SpartaMed. Reynolds had produced 12 e-mails, 11 of which should
have been included in defendants’ document production, and six of which
included Lasso personally. Defendants had not produced a single one of those
11 e-mails.
Össur served discovery on Lasso, ManaMed, and SpartaMed,
asking them to admit they had not produced the 34 Breg e-mails and to
explain why not. In response, they confirmed in February 2022 that they had
never produced the e-mails and asserted they had returned all potentially
confidential documents to Breg in late 2019 or early 2020 pursuant to the ISR
Agreement between Breg and SpartaMed.
SpartaMed then disclosed that the forensic company which had
gathered its records for Breg in 2020 had retained a copy of those documents
on a thumb drive. Additional meet and confer efforts with plaintiffs ensued,
as well as discussions with the discovery referee. SpartaMed ultimately
agreed to produce the 60,000 or so documents it had given to Breg in early
2020.
After those documents were uploaded into their document
management system in June 2022, plaintiffs’ counsel discovered a number of
unexpected things. First, most of the 60,000 documents that SpartaMed had
transferred to Breg had nothing to do with Breg. According to plaintiffs, this
7
suggested that SpartaMed had intentionally transferred those documents to
Breg to avoid producing them in discovery.
Second, to plaintiffs’ surprise, the documents contained none of
the 34 Breg e-mails, and only one of the 11 Reynolds e-mails. From this,
plaintiffs drew two conclusions: (1) defendants had falsely claimed in their
discovery responses that the reason they had not produced the 34 Breg e-
mails was because they had been returned to Breg, when in fact they had not,
and (2) defendants’ failure to produce those e-mails (which were clearly sent,
as confirmed by Breg’s and Reynolds’ productions) meant defendants had
either destroyed their records of those crucial documents or wrongfully
withheld them.
Finally, the 60,000 or so documents did not contain any e-mails
from before May 2017, and thus were missing e-mails from the key period of
2016 to early 2017 when Lasso and Theriot were setting up SpartaMed.
According to plaintiffs, this further suggested that defendants had either
deleted those e-mails or otherwise suppressed them.
IV.
THE SANCTIONS MOTION AND THE FORENSIC EXAMINATION
Össur and Team Makena filed a motion for terminating, issue,
and evidentiary sanctions. They cited defendants’ spoliation of the 34 Breg e-
mails and the 11 Reynolds e-mails and their destruction or intentional
withholding of SpartaMed’s communications from before May 2017. As they
put it in their motion, “Accidents happen in document productions, but 0-for-
34 and 0-for-11 is not an accident.” Lasso and SpartaMed filed a cursory
opposition, offering no explanation for why the 34 e-mails were produced by
Breg but not Lasso—they responded, “Who knows why”—and insisting that
8
“no spoliation has occurred” because plaintiffs were able to obtain the
documents from Breg.
The trial court assigned the motion to the discovery referee, who
recommended monetary sanctions based on SpartaMed’s repeated discovery
violations. She noted SpartaMed had provided “misleading” verified discovery
responses and failed to produce responsive documents in its possession.
However, she declined to recommend terminating sanctions, as she was not
yet “persuaded” that SpartaMed and Lasso “spoliated evidence.”3 Citing the
imminent trial date, which was less than a week away, the referee noted she
was hesitant to recommend an independent forensic examination to
determine if SpartaMed or Lasso had deleted or double-deleted4 documents
from their devices, but added that the court had discretion to order such an
examination.
Days later, plaintiffs settled with ManaMed. The trial court then
continued trial given the ongoing discovery disputes and ordered the parties
to meet and confer about a forensic examination. Meanwhile, Lasso amended
his cross-complaint to add his wholly owned company, JNL, as a cross-
complainant, after concerns arose about whether he lacked standing to
pursue certain claims. In doing so, Lasso assured the court that he “and JNL
3 We do not read the discovery referee’s report as affirmatively
finding that no evidence had been destroyed or suppressed, as Lasso, JNL,
and SpartaMed assert. She instead appears to have believed that spoliation
remained an open question, with only “an inadequate basis in the record . . .
for issuing terminating sanctions at this time.”
4 Double deletion is when a file is deleted in a manner that makes
forensic recovery more difficult or impossible, such as by first sending the file
to the recycle bin (single deletion) and then emptying the recycle bin (double
deletion).
9
are pursuing the same damages for the same acts of Cross-Defendants on the
same legal basis.”
With the discovery referee’s assistance, the parties eventually
stipulated to a forensic protocol order. Michael Garlie was appointed to
conduct a forensic examination of Lasso’s and SpartaMed’s e-mail accounts,
computers, phones, and other electronic devices. In particular, he was tasked
with determining (1) if any documents were “deleted or otherwise destroyed,”
and (2) if the 34 Breg e-mails and 11 Reynolds e-mails were still located on
any devices or in any e-mail accounts.
Garlie conducted a forensic examination of five Apple iPhones,
four Apple computers, a Dell desktop, a Surface Pro laptop with a Samsung
solid state drive, three e-mail accounts, and two flash drives. He then issued
a lengthy report in January 2023, with individual reports on each device and
e-mail account.
Garlie began by noting that recovering deleted data from Apple
mobile devices was “not expected” because of “Apple’s privacy and security
posture” and that “data deleted from devices using solid state drives (‘SSD’) is
unlikely to be identified or recovered” because it is “quickly zero’d out by an
automated process.” But despite those limitations, which impacted a majority
of the inspected devices, Garlie nevertheless found evidence that Lasso had
deleted files and e-mails.
Since Garlie’s report is over 11,000 pages long, we offer an
example. Garlie’s review of Lasso’s desktop computer revealed that in April
2017—a few months after litigation began and long after plaintiffs asked him
to preserve evidence—Lasso had deleted an entire folder entitled
“ManaMed,” which contained hundreds of documents and included subfolders
on topics like “Distributor Contracts,” “DVT Pitch Folder,” “ManaMed
10
Invoices,” and “PlasmaFlow.”5 That same month, Lasso had deleted another
folder entitled “tryabrace_files,” which contained dozens of documents
presumably related to his development of PlasmaFlow.6 And in November
2019—while discovery was well underway—Lasso had deleted his Outlook e-
mail folder entitled “ManaMed Mail.”7
As for the 45 unproduced e-mails (the 34 Breg e-mails and 11
Reynolds e-mails), Garlie located multiple copies of 36 of those e-mails in the
devices he inspected—not in deleted folders or recycle bins, but in accessible
locations. Additionally, he found three of the unproduced e-mails in other e-
mail threads. He was unable to find the remaining six e-mails in any form.
Based on this, plaintiffs concluded that defendants had (1) failed to produce
dozens of responsive documents in their possession, custody, and control, and
(2) deleted several responsive e-mails in a way that could not be tracked.
The trial court accepted supplemental briefing from the parties.
Lasso’s forensic examiner, Bruce Pixley, declared that “the majority of the
data” described in Garlie’s report was not in fact fully deleted but rather
remained in accessible locations like recycle bins. Plaintiffs objected to
Pixley’s declaration on the grounds that he was never disclosed or designated
5 According to Össur’s counsel, defendants produced very few of
the deleted ManaMed documents.
6 Lasso transferred ownership of PlasmaFlow to TryABrace
(another company he created) before transferring the rights to ManaMed.
7 Garlie later submitted a declaration clarifying that although his
report concerned deleted data, he did not determine “if the reported deleted
files exist elsewhere, nor if deleted files were previously produced.” He
cautioned that “documents deleted from the devices may exist elsewhere.”
11
yet was providing expert opinion on topics that the neutral examiner (Garlie)
was appointed to cover.
After extensive oral argument, the trial court granted plaintiffs’
sanctions motion. It found plaintiffs had “established a vast wholesale of
destruction and deletion of evidence on a widespread scale and that it goes to
the heart of plaintiffs’ case,” and it was therefore “appropriate to issue a
sanction.” The court then ordered that liability is “deemed established” on
plaintiffs’ complaints against Lasso and SpartaMed, and it struck Lasso’s and
JNL’s cross-complaint. It further ordered that plaintiffs’ damages would be
decided by a jury.
V.
TRIAL ON DAMAGES AND POSTTRIAL MOTIONS
Trial on plaintiffs’ damages went forward in December 2023.
During those proceedings, the trial court did not let Lasso or SpartaMed
introduce evidence that Lasso told Össur he was developing PlasmaFlow or
that Össur passed on the opportunity to manufacture the device; according to
the court, “that is not a legitimate mitigation-of-damages argument.” The
court also issued a four-page special jury instruction detailing the bases for
defendants’ liability.
After a multi-week trial, the jury returned a verdict for plaintiffs
in excess of $40 million, which included $10 million in punitive damages
against Lasso.8 The trial court entered judgment on the verdict.
8 The jury awarded Team Makena $26,382,000 in damages
against Lasso (of which $1,802,000 was against SpartaMed as well), plus
$8,000,000 in punitive damages against Lasso. It awarded Össur $3,763,195
against Lasso (of which $877,195 was against SpartaMed as well), plus
$2,000,000 in punitive damages against Lasso.
12
Lasso and SpartaMed filed motions for new trial (Code Civ.
Proc.,9 §§ 657, 659) and for judgment notwithstanding the verdict (JNOV) (§
629). The trial court denied both motions.10
DISCUSSION
I.
THE SANCTIONS ORDER WAS NOT AN ABUSE OF DISCRETION
Lasso, JNL, and SpartaMed maintain there is no evidence of
“‘vast’” or “‘widespread’” destruction of documents so as to warrant sanctions.
We cannot agree.
California law authorizes “a broad range of sanctions” against a
party who fails to respond to discovery, provides evasive responses, destroys
evidence in anticipation of discovery, or engages in any other conduct
amounting to “‘misuse of the discovery process.’” (Cedars-Sinai Medical
Center v. Superior Court (1998) 18 Cal.4th 1, 12 (Cedars-Sinai); see §§
2023.030 [authorizing sanctions], 2023.010 [defining discovery misuse].)11
A most egregious form of discovery abuse is spoliation, which is
“the intentional destruction or suppression of evidence.” (R.S. Creative, Inc. v.
Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 497 (R.S. Creative).)
9 All further statutory references are to this code.
10 We consolidated JNL’s appeal from the sanctions order (No.
G062790) with Lasso, JNL, and SpartaMed’s appeal from the judgment and
postjudgment order (No. G064025).
11 Lasso’s, JNL’s, and SpartaMed’s appeal seems to be largely
premised on their assumption that sanctions are only appropriate if a party
“actually destroyed” evidence. That is not what the Civil Discovery Act says.
As discussed below, the failure to produce responsive documents, even if
those documents were not actually destroyed, can warrant terminating
sanctions if the suppression was sufficiently egregious.
13
Permissible sanctions for discovery misuse include “issue
sanctions ordering that designated facts be taken as established or
precluding the offending party from supporting or opposing designated claims
or defenses, evidence sanctions prohibiting the offending party from
introducing designated matters into evidence, and terminating sanctions that
include striking part or all of the pleadings [or] dismissing part or all of the
action . . . .” (Cedars-Sinai, supra, 18 Cal.4th at p. 12.)
We review a discovery sanctions order for abuse of discretion,
looking to “whether the trial court’s decision exceeded the bounds of reason.”
(Cornerstone Realty Advisors, LLC v. Summit Healthcare REIT, Inc. (2020)
56 Cal.App.5th 771, 789 (Cornerstone).) We review the court’s factual findings
for substantial evidence. (Ibid.)
Importantly, we must resolve any evidentiary conflicts most
favorably to the trial court’s ruling. If more than one reasonable inference can
be deduced from the facts, we must accept the inference supporting the
court’s decision. (Cornerstone, supra, 56 Cal.App.5th at p. 789; see Reedy v.
Bussell (2007) 148 Cal.App.4th 1272, 1292 (Reedy) [we infer all necessary
findings to support sanctions order if supported by substantial evidence].)
Here, substantial evidence supports the trial court’s finding that
Lasso and SpartaMed engaged in a “wholesale” “destruction and deletion of
evidence on a widespread scale.” For example, the court-ordered forensic
examination revealed that in April 2017, Lasso deleted hundreds of
documents related to ManaMed and TryABrace from his laptop, and in
November 2019, he deleted his Outlook e-mail folder on ManaMed. Also, we
infer SpartaMed deleted all its e-mails with Breg from the key period of 2016
and early 2017, considering that SpartaMed’s document production contained
virtually no e-mails from that window, but Breg’s document production
14
contained dozens. And we infer Lasso and SpartaMed destroyed their records
of at least six of the 45 missing Breg/Reynolds e-mails—e-mails which we
know were sent based on the Breg/Reynolds productions, but which Lasso
and SpartaMed inexplicably failed to produce in their own productions—in a
way that could not be tracked.
That destruction of evidence is compounded by Lasso’s and
SpartaMed’s repeated discovery abuses. For example, when asked for its
communications with Breg, SpartaMed falsely said it had no responsive
documents in its possession, custody, and control because it had given them
to Breg, when in fact its counsel and forensic provider had retained a copy.
Then, when asked why it had not produced the 34 key Breg e-mails in
particular, SpartaMed falsely claimed it had returned those documents to
Breg in 2020, when in fact those e-mails were not part of any data transfer to
Breg.12
In addition, the forensic examiner’s search for the 45 unproduced
Breg/Reynolds e-mails revealed that Lasso’s and SpartaMed’s devices
contained multiple copies of over 30 of those e-mails—not in deleted folders or
recycle bins, but in accessible locations. This means Lasso and SpartaMed
failed to produce dozens of responsive documents in their possession, custody,
and control, despite extensive meet and confer efforts about those very e-
mails.
We recognize that Lasso and SpartaMed dispute various
elements of Garlie’s lengthy report and assert that certain deleted files were
preserved in recycle bins. But we have reviewed the record and do not see
12 The trial court sanctioned SpartaMed over $13,000 for its
discovery abuses.
15
evidence (aside from conclusory statements in Pixley’s declaration) to support
that assertion.13 And in any event, we must resolve any evidentiary conflicts
and draw all inferences in favor of the trial court’s ruling. We thus find
substantial evidence that Lasso and SpartaMed engaged in pervasive
discovery abuses and repeatedly destroyed or otherwise suppressed evidence
that should have been produced in discovery. The court permissibly imposed
serious sanctions for such serious dereliction of discovery duties.
More fundamentally, spoliation is not limited to irreversibly
destroying evidence so that it is lost forever. Spoliation includes “the
intentional destruction or suppression of evidence.” (R.S. Creative, supra, 75
Cal.App.4th at p. 497, emphasis added.) Although sending electronic
information to the recycle bin may not necessarily result in the information’s
destruction, it certainly suppresses that information.
Lasso, JNL, and SpartaMed assert the sanctions order was
punitive and put plaintiffs in a better position than they otherwise would
have been in. They are correct that a discovery sanction “‘should not provide
a windfall to the other party’” or put them “‘in a better position than if [they]
had obtained the discovery sought and it had been favorable.’” (Kwan
Software Engineering, Inc. v. Hennings (2020) 58 Cal.App.5th 57, 75.) The
sanctions order put plaintiffs in exactly the position they would be if the
missing documents “had been favorable” to them and established Lasso’s and
SpartaMed’s liability.
Lasso and SpartaMed contend plaintiffs failed to show the
deletions caused any prejudice. This is an unfair argument considering
13 For example, the record citations on page 40 of the opening
brief do not appear to support defendants’ preservation argument.
16
defendants’ “own actions make that showing difficult, if not impossible.” (See
Electronic Funds Solutions, LLC v. Murphy (2005) 134 Cal.App.4th 1161,
1184 (Murphy).) Once plaintiffs made a prima facie showing that Lasso and
SpartaMed destroyed or concealed relevant evidence, the burden shifted to
Lasso and SpartaMed to show a lack of prejudice. (See Williams v. Russ
(2008) 167 Cal.App.4th 1215, 1227 [burden shifting]; see also id. at p. 1224
[document destruction “raise[d] an inference” that party had “cherry-pick[ed]”
favorable documents and destroyed “unfavorable” ones].) “When a party does
not produce ordered documents, the court is entitled to infer the documents
would contain evidence damaging to that party’s case and instruct the jury
accordingly.” (Lopez v. Watchtower Bible & Tract Society of New York, Inc.
(2016) 246 Cal.App.4th 566, 605; see also Murphy, at p. 1184 [“The mere fact
plaintiffs’ forensic consultant recovered some of the data does not mean none
was lost”].)
Lasso, JNL, and SpartaMed assert the sanctions order
improperly “lumped” them together even though there was no showing of who
deleted what. But, as noted above, the record includes sanctionable conduct
by both Lasso and SpartaMed. And since JNL is Lasso’s wholly owned
company and was added by Lasso at the eleventh hour solely to ensure his
cross-complaint did not fail for lack of standing, we discern no error in
extending sanctions for Lasso’s discovery abuses to JNL.
Lasso and SpartaMed further contend there was no evidence they
willfully destroyed or suppressed evidence with a culpable state of mind.
However, “willfulness is no longer a requirement for the imposition of
discovery sanctions.” (Reedy, supra, 148 Cal.App.4th at p. 1291; see Shiheiber
v. JPMorgan Chase Bank, N.A. (2022) 81 Cal.App.5th 688, 703 [discovery
sanctions statutes “do not require a showing of willfulness, much less bad
17
faith”].) In any event, there is ample evidence here of intentional conduct,
including repeated discovery abuses over a considerable time period despite
ongoing meet and confer efforts.
Finally, Lasso and JNL assert the terminating sanction striking
their cross-complaint was an abuse of discretion because the trial court did
not consider a lesser sanction. They are correct that severe sanctions are
disfavored if lesser sanctions are available. (City of Los Angeles v.
PricewaterhouseCoopers, LLP (2024) 17 Cal.5th 46, 63.) But the court here
had repeatedly entered discovery orders against SpartaMed and Lasso and
had repeatedly imposed monetary sanctions against SpartaMed and its
counsel—all to little effect. True, the monetary sanctions were largely issued
against SpartaMed, not Lasso and JNL, but Lasso and JNL were equal
participants in this multi-year discovery dispute. Indeed, they were
represented by the same counsel as SpartaMed, and Lasso repeatedly took
the same apathetic attitude as SpartaMed toward the holes and
inconsistencies in defendants’ production. Further, the record confirms Lasso
and JNL had ample warning that the trial court intended to enforce the
parties’ compliance with their discovery obligations.
Where “[t]he record demonstrates [a] defendant engaged in
repeated and egregious violations of the discovery laws that not only
impaired plaintiff’s rights, but threatened the integrity of the judicial
process,” it can be an error not to impose terminating sanctions. (Doppes v.
Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 971; see Reedy, supra, 148
Cal.App.4th at pp. 1274, 1293 [affirming terminating sanctions where the
sanctioned parties’ “obduracy was plenary” and their “entire course of
conduct in this case [could] be fairly summed up in two words: ‘Make me.’”].)
Such was the case here. After years of discovery disputes arising from Lasso’s
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and SpartaMed’s misleading responses, their continued suppression of
responsive documents, and their destruction of electronic records, the trial
court did not abuse its discretion in imposing issue and terminating
sanctions.
II.
THE TRIAL COURT PROPERLY EXCLUDED LASSO’S “MITIGATION EVIDENCE”
Lasso and SpartaMed next assert the trial court erred when it
prevented them from introducing certain “mitigation” evidence at trial. They
sought to present evidence that Lasso told Össur he was developing
PlasmaFlow, but Össur passed on the opportunity to manufacture the device
and did not tell Lasso to stop. According to defense counsel, this evidence was
relevant to show Össur could have prevented Lasso from developing
PlasmaFlow and therefore failed to mitigate its losses. The court did not
allow it, noting “that is not a legitimate mitigation-of-damages argument.”
We agree with the trial court. A plaintiff of course has a duty to
mitigate damages. (Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559,
1568.) But we are aware of no authority that a company must explicitly tell
its fiduciary not to develop a competing product, at risk of limiting its
damages. A contrary rule would enable a rogue employee to reduce damages
by living out the “The Scorpion and the Frog” fable and simply asserting,
“Well, you knew I couldn’t be trusted.”14
14 The opening brief includes cursory references to the fact that
the trial court also precluded Lasso and SpartaMed from raising a statute of
limitations defense regarding their development of PlasmaFlow. However,
because they do not develop that argument, we do not consider it further.
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III.
THE PUNITIVE DAMAGES AWARD IS NOT PRESUMPTIVELY EXCESSIVE
Lasso next contends the $10 million punitive damages award is
presumptively excessive because it exceeds 10 percent of his alleged net
worth and because the evidence on his financial condition was faulty. We
disagree.
When reviewing a punitive damages award for excessiveness, one
of the main factors we consider is the defendant’s financial position.15 (Adams
v. Murakami (1991) 54 Cal.3d 105, 110.) This factor is relevant because the
purpose of punitive damages “is to deter, not to destroy.” (Id. at p. 112.) For
us to affirm a punitive damages award, the record must contain “meaningful
evidence of the defendant’s financial condition.” (Id. at p. 109; see Doe v. Lee
(2022) 79 Cal.App.5th 612, 618 [substantial evidence review].)
The record here contains substantial (albeit imperfect) evidence
concerning Lasso’s considerable financial position: a 2022 personal financial
statement listing his net worth as over $18.6 million; his ownership interests
in real estate in California, Hawaii, Montana, Nevada, and Texas; his 40
percent interest in ManaMed, which he declined to value at trial but which
was listed for sale in 2020 for $100 million; and his ownership interests in at
least five other businesses. During closing arguments, plaintiffs’ counsel
emphasized that Lasso had repeatedly dodged questions about his financial
condition. It appears his evasiveness may have contributed to the sizable
15 The other two relevant factors are “the particular nature of the
defendant’s acts” and “the amount of compensatory damages awarded.” (Neal
v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928.) Lasso does not
challenge the punitive damages award based on either of those factors.
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award, as the jury ultimately awarded plaintiffs a total of $10 million in
punitive damages—$2 million more than what they asked for.
Lasso insists the award is presumptively excessive because it is
more than 10 percent of his alleged net worth of $60 million.16 (See Bigler-
Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 308 [punitive damages
“‘generally are not allowed to exceed 10 percent of the net worth of the
defendant’”].) We are not persuaded. Other courts have “reject[ed] the
argument that 10 percent of net worth constitutes a ceiling above which
juries may not go in setting the amount of punitive damages.” (Bankhead v.
ArvinMeritor, Inc. (2012) 205 Cal.App.4th 68, 83 (Bankhead); see Rufo v.
Simpson (2001) 86 Cal.App.4th 573, 624−625 [similar].) It is well recognized
that since net worth is subject to easy manipulation, it “is not the only
measure for determining whether punitive damages are excessive.” (Cameron
v. Las Orchidias Properties, LLC (2022) 82 Cal.App.5th 481, 524 (Cameron).)
In our view, the proper question is not quantitative but
qualitative—does the award properly punish and deter, in light of the
defendant’s wealth and the gravity of his acts? (Cameron, supra, 82
Cal.App.5th at p. 524; Bankhead, supra, 205 Cal.App.4th at p. 83.) On this
record, we cannot say that the jury’s award is disproportionate.
16 The opening brief states that plaintiffs “argued that Lasso’s net
worth was as high as $60,538,089” without any record citation showing that
figure was what plaintiffs had argued. While Lasso takes a paragraph to
critique the evidence of the value of his financial interests, he does not
develop any argument concerning debts or liabilities.
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IV.
THE TRIAL COURT MUST CONSIDER THE OFFSET ISSUE ON REMAND
Finally, Lasso and SpartaMed claim the trial court erred in
denying them an offset for ManaMed’s 2022 settlement with Össur and Team
Makena. “A nonsettling defendant is entitled to a setoff for all preverdict
settlements ‘in the amount stipulated by the [settlement agreements], or in
the amount of the consideration paid for [them], whichever is the greater.’
[Citation.] A plaintiff has ‘the burden . . . to show that [the defendant is] not
entitled to a credit in the full amount of the settlements because some portion
of the recovery should be allocated to other claims.’” (Hellam v. Crane Co.
(2015) 239 Cal.App.4th 851, 860, fn. omitted; see § 877, subd. (a).)
Before trial, when defense counsel raised the issue of defendants’
entitlement to an offset for the ManaMed settlement, the trial court
responded that was “not a jury issue” and told counsel to raise the issue
postverdict. After judgment was entered, Lasso and SpartaMed requested an
offset as part of their JNOV motion and filed the ManaMed settlement
agreement under seal. The court denied the JNOV motion without
addressing the offset request.
The trial court should have addressed the request. “The cases
show that the procedure for applying a section 877 settlement credit varies.”
(Wade v. Schrader (2008) 168 Cal.App.4th 1039, 1047.) When a defendant’s
entitlement to an offset is not considered by the jury, “the nonsettling
defendant may raise the issue after the verdict but before judgment so that
the trial court may calculate the judgment with the settlement credit in
mind. [Citations.] And there are cases in which the trial court has applied a
settlement credit by amending the judgment to reflect the credit.” (Id. at p.
1048; cf. Fortman v. Hemco, Inc. (1989) 211 Cal.App.3d 241, 264 [court had
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discretion to invite postjudgment ex parte application to offset settlement].)
Here, defendants appropriately raised the issue after verdict, in this case by
JNOV, but it does not appear the court considered the request. We cannot do
so in the first instance, as the record is silent as to what portion of the
settlement, if any, ManaMed has paid. (See Garcia v. Duro Dyne Corp. (2007)
156 Cal.App.4th 92, 100 [“a nonsettling defendant is not entitled to an offset
for such a settlement until the settlement monies have been paid”].)
We therefore remand the case with instructions to the trial court
to determine if it should award offset credits to Lasso and SpartaMed17 and,
if any portion of the settlement has been paid, to reserve jurisdiction to
award future credits if appropriate, and to amend the judgment if
appropriate to reflect the correct offset figure for the compensatory damages
award.
17 At oral argument, Team Makena’s counsel argued there was no
showing that Team Makena benefitted from the settlement. We do not reach
that issue. The trial court should consider it in the first instance.
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DISPOSITION
The discovery sanctions order is affirmed; the judgment is
reversed in part and the matter is remanded to the trial court to consider
Lasso and SpartaMed’s offset request. In all other respects, the judgment is
affirmed. In the interests of justice, plaintiffs shall recover their costs on
appeal. (Cal. Rules of Court, rule 8.278, subd. (a)(5).)
SCOTT, J.
WE CONCUR:
GOODING, ACTING P. J.
SCHWARM, J.*
*Judge of the Orange County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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