Exteres Corp. v. The Connections Group CA4/2 (2023) · DecisionDepot
Exteres Corp. v. The Connections Group CA4/2
California Court of Appeal Apr 20, 2023 No. E078245Unpublished
Filed 4/20/23 Exteres Corp. v. The Connections Group CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO
EXTERES CORPORATION et al.,
Plaintiffs and Respondents. E078245
v. (Super.Ct.No. RIC1818410)
THE CONNECTIONS GROUP, INC., et OPINION al.,
Defendants and Appellants,
APPEAL from the Superior Court of Riverside County. Chad W. Firetag, Judge.
Affirmed.
Reid & Hellyer, Michael G. Kerbs, Jenna L. Acuff, and Douglas A. Plazak for
Defendants and Appellants.
Wolff Mascaro and Joshua M. Wolff, for Plaintiffs and Respondents.
A business relationship, founded on verbal agreements, collapsed. The parties to
the agreements, who had intended to generate revenue from the sale of a now-patented
invention that helps businesses communicate with their customers, disagree whether they
ever had a final and binding written contract.
1
Following a lawsuit, a jury found for the plaintiffs, a company and its principal, on
several claims against the defendants, who include the inventors of the technology. After
adjustments by the trial court, the amended judgment awarded plaintiffs $839,002 in
compensatory damages and $1,430,000 in punitive damages. Defendants contend that
the trial court erred in various ways during trial and in ruling on the posttrial motions.
They request that we reverse the judgment against them and order a new trial or order
judgment to be entered in their favor. We affirm the judgment.
I. FACTS
Defendant and appellant The Connections Group, Inc. (TCGI) provides
technology that facilitates communication between businesses and their customers via
text messages. TCGI’s principals and sole shareholders are defendants and appellants 1 Jay Conrad, Anthony Link, and Mark Sangree. Link and Conrad are the technology’s
inventors, and they now hold a patent on it; their patent application was still pending
during the events here, but it was approved in March 2021. TCGI had an oral, non-
exclusive license from Link and Conrad to use the now-patented technology.
Plaintiff and respondent eXteres Corporation (eXteres) provides “reputation
management services” for businesses, particularly automotive dealerships. Plaintiff and
respondent Richard Winch is the principal of eXteres.
1 Conrad, Link, and Sangree were also the principals of Geo Moment, a predecessor company to TCGI in the same business, using the same technology; Geo Moment was created in January 2016, while TCGI was created in September 2017. Except where specified, we use “TCGI” to refer to both companies.
2
In mid-2016, the parties began discussing doing business together. By December
2016, eXteres was marketing and reselling TCGI’s technology to customers pursuant to
an oral license for the technology and an oral revenue sharing agreement. Winch also
understood that, in exchange for his “sweat equity,” he had been granted the position of
Chief Operating Officer (COO) of TCGI and eXteres would receive stock in TCGI.
While they proceeded with business based on their oral agreements, the parties
engaged in protracted negotiations for a written agreement. Through 2017 and into 2018,
they exchanged multiple drafts of a “Memorandum of Understanding” (MOU).
Link sent a revised version of the MOU to Winch by email on May 24, 2018.
Link had signed the document in his capacity as Chief Executive Officer of TCGI. The
document had a provision stating that “the MOU has been approved by the TCGI Board
of Directors with the approval attached.” The attached TCGI “Board Resolution,”
however, recited that the MOU was adopted at a meeting of the TCGI Board on May 25,
2018—the day after it was sent to Winch—and the attachment was signed only by Link,
not by its other two members, Conrad and Sangree. The MOU, like its attachment, was
dated May 25, 2018. Link’s accompanying email stated that the MOU “is set to be dated
tomorrow so we can get this executed for both sides.” The email noted that Sangree
“wants to have a final read-through later tonight to make sure there are not any wording
changes,” explaining that “‘track changes’” had been unintentionally disabled while the
latest revisions were being made. Link also wrote that “[a]ny final wording changes will
be known by tomorrow so we can get this executed.”
3
Among other things, the May 24, 2018 version of the MOU stated that it is to be
considered effective January 1, 2017, regardless of when final signatures are affixed. It
granted eXteres a 10 percent ownership interest in TCGI as of May 25, 2018. It gave
Winch a seat on TCGI’s Board of Directors, effective May 26, 2018, and the position of
COO on TCGI’s “executive/corporate management team . . . effective January 2017.” It
provided that TCGI grants eXteres “effective January 1, 2017, a General License . . . to
sell [the technology] to the open business market”, as well as “effective January 1, 2017,
an Exclusive License” in the automotive industry in the United States and Canada. It
added that Conrad and Link agree in their capacity as inventors that, once the patent on
the technology issues, they will license to TCGI “the exclusive perpetual use of the
Patent wherein TCGI will be the majority beneficial owner of the rights to the Patent.” It
also included revenue sharing provisions applicable to eXteres’s use of both the exclusive
and the general license for the technology in agreements with third parties.
The parties disagree about what happened after Link’s May 24, 2018 email to
Winch. According to Winch, he waited for any more wording changes, while “pursuing
opportunities and continuing to execute” on the parties’ oral agreements. Hearing
nothing, on July 11, 2018, he signed the MOU and emailed it back to Link, believing that
they had completed a final written agreement. The document Winch sent back to Link
included the MOU with his signature added, but not the Board Resolution.
According to Link, on May 25, 2018, Winch called him and expressed that he
disagreed with some changes in the latest draft MOU. Link told Winch that Conrad and
4
Sangree would not agree to the MOU without those changes, and indeed they had
requested additional changes before final approval. The conversation was contentious
and did not result in a meeting of the minds; Link testified that Winch “was yelling and
screaming and cussing at me, and then he, basically, hung up.” In an email sent on May
26, 2018, Link acknowledged Winch’s “desire to remove” a particular provision of the
May 24th, 2018 draft of the MOU. Nevertheless, Link wrote, “this clause has to be part
of the MOU for [Sangree] and [Conrad] to sign the Board minute[s],” and “[Sangree] is
still reviewing the MOU and will probably have additional changes.” At trial, Link
testified that he was “completely shocked” to receive Winch’s July 11, 2018 email,
returning the MOU signed and without any changes, given their previous conversation
and having heard nothing more in the interim. He was also “taken aback” that Winch
was “trying to remove the [Board Resolution] page and pass this off as a valid contract.”
On July 16, 2018, the TCGI board of directors (that is, Link, Conrad, and Sangree)
met and voted not to approve the MOU. On July 19, 2018, TCGI’s counsel sent Winch
and eXteres a letter notifying them “that a majority of the Board of Directors voted
against approval of the MOU and its contemplated future agreements.” The letter
requested that Winch “cease and desist from identifying [himself] as either an officer,
shareholder, or board member” of TCGI. It also requested that he “refrain from any
further contact with entities engaged in existing business relationships with TCGI.”
Nevertheless, the letter expressed that TCGI was “open to discussions in regard to
engaging [eXteres] through a reseller arrangement,” particularly as to one specific
5
company, with which eXteres had a longstanding business relationship. The letter also
stated “[a]ny existing revenue sharing contracts” between eXteres and TCGI “would be
honored by TCGI.”
Winch and eXteres filed their complaint in this lawsuit in September 2018. The
operative first amended complaint asserted seven causes of action: (1) declaratory relief;
(2) breach of contract; (3) breach of fiduciary duty; (4) tortious interference with
contract; (5) intentional interference with prospective economic relations; (6) intentional
misrepresentation; and (7) negligent misrepresentation.
The jury’s findings on the contract and tort causes of action, expressed on a
detailed special verdict form, largely favored plaintiffs. The jury found the defendants
liable on each cause of action except intentional interference with prospective economic
relations. The jury was instructed to determine damages for each cause of action
separately, without considering whether they were duplicative. Thus, the jury awarded
these compensatory damages: (1) for breach of contract, $678,049; (2) for breach of
fiduciary duty, $839,002; (3) for tortious interference with contract, $745,875; (4) for
intentional misrepresentation, $148,371; and (5) for negligent misrepresentation,
$148,371. In the judgment, to “avoid duplicative damages,” the trial court limited the
plaintiffs’ “compensatory recovery . . . to $839,002, jointly and severally, against (a)
[TCGI, Link, Sangree, and Conrad] for $745,875 and (b) [Link, Sangree, and Conrad ] for
$93,127.” The amount of $839,002 is, to the dollar, the amount plaintiffs’ expert Eric
6
Lane calculated to be the value of a 10 percent interest in TCGI, based on the value of
forecasted royalties from Link and Conrad’s patent, adjusted to present value.
Along with compensatory damages, the jury also decided punitive damages were
appropriate: (1) against TCGI, $22,301,617; (2) against Link, $38,734,388; (3) against
Sangree, $17,606,540; and (4) against Conrad, $38,734,388. This punitive damages
award totaled $117,376,933, which, to the dollar, is the amount Lane described as the
patent’s “Forecasted Royalty Collections over 15 years.” In testimony, Lane explained
that this amount represents the “sum of the [projected] royalty collections” from Link and
Conrad’s patent without any “discount” for risk or adjustment to present value, as
forecasted by another expert for plaintiffs, Don Feuer. In the initial judgment, however,
the trial court “[b]y stipulation of Plaintiffs and order of the Court” awarded reduced
punitive damages as follows: (1) against TCGI, $400,000; (2) against Link, $1,500,000;
(3) against Sangree, $325,000; and (4) against Conrad, $1,500,000.
Defendants brought posttrial motions for new trial and judgment notwithstanding
the verdict. The trial court granted in part and denied in part the motions. It found
insufficient evidence that Conrad or Sangree had made any misrepresentations to Winch
or eXteres, and therefore granted judgment notwithstanding the verdict in their favor as to
those causes of action and struck the corresponding damages awards. Based on evidence
of the individual defendants’ net worth, and with the consent of plaintiffs, the trial court
ordered their punitive damages further reduced, to $450,000 each for Link and Conrad
7
and $130,000 for Sangree. The trial court denied the motions in all other respects. An
amended judgment was entered accordingly.
II. DISCUSSION
A. Excessive damages
Defendants contend that rather than reduce the jury’s excessive award of damages,
the trial court should have instead ordered a new trial. In their view, the damages award
was so excessive it must have been the product of passion or prejudice that infected not 2 only the jury’s decisions about that award, but also liability. We are not persuaded.
Generally, rulings on new trial motions are reviewed for abuse of discretion.
determination underlying any order is scrutinized under the test appropriate to such
determination.” (Ibid.) Here, the trial court denied defendants’ motion for new trial, but
only after reducing the punitive damages award with plaintiffs’ consent. That reduction
was an exercise of the court’s discretion under Code of Civil Procedure section 662.5,
which provides that a court that would otherwise grant a new trial due to excessive
damages may instead “make its order subject to the condition that the motion is denied if
2 On the other hand, we find unpersuasive plaintiffs’ contention that defendants forfeited the argument that the damage award was excessive by failing to raise it in the trial court. In requesting a new trial, defendants argued that “the jury’s verdict with respect to all of Plaintiffs’ claims was tainted by passion and prejudice . . . .” The trial court denied defendants a new trial on that basis (or any other), and instead reduced the jury’s damages award. It is appropriate for defendants to now argue that decision was in error. Certainly, defendants’ arguments on appeal are framed somewhat differently than their trial court arguments. But that is not enough for us to refuse to consider their arguments on the merits, whether as a matter of law or in our discretion.
8
the plaintiff consents to a reduction of the award to an amount that the court
independently determines to be fair and reasonable.” (Bullock v. Philip Morris USA, Inc.
the Sabella dissent for the proposition that “[w]hen appeals to passion and prejudice may
have influenced a verdict, they may have influenced it on the issue of liability as well as
on the issue of damages.” (Id. at p. 326.) In Sabella, however, the plaintiff’s counsel had
employed several blatantly improper arguments to appeal to passion and prejudice. (Id.
at p. 325.) Defendants have not argued that plaintiffs’ counsel here engaged in any
similar misconduct that might have deprived defendants of “the right to an impartial trier
of fact and the correlative right to a trial free of appeals to passion and prejudice.” (Id. at
p. 326.) The quoted language, even if a correct statement of the law where applicable,
does not help defendants here.
We conclude that defendants have not shown that the trial court abused its
discretion under Code of Civil Procedure section 662.5, subdivision (a)(2), to reduce the
jury’s excessive award of damages rather than order a new trial.
B. Admission of Expert Testimony
Defendants contend that the trial court erred by admitting “unreasoned, unreliable,
and speculative expert testimony” by plaintiffs’ experts Don Feuer and Eric Lane
regarding several categories of damages. (Bolding and capitalization omitted.) We find
11
no abuse of discretion in the trial court’s decision to admit the testimony and allow the
jury to decide what weight the testimony deserved.
1. Additional background
At trial, the defense presented no expert testimony about the value of Link and
Conrad’s patent. In contrast, Feuer testified as an expert for plaintiffs “to evaluate the
technology in question and to place a value” on it. He described his background in the
telecommunications industry, which included experience as an inventor and “build[ing]
technology companies.” He had experience in bringing new technologies to market. He
had previously run “an SMS texting company.” He was CEO of a “patent-holding
company,” to which he had assigned his own patents, and which “is involved in litigating
against other telecommunications companies.”
Feuer stated that he is “not a professional patent evaluator,” but that he is “an
expert in terms of what patents are viable and which are not.” Feuer viewed Link and
Conrad’s patent as a “valuable thing” and a “big deal.” Based on his research, he
believed that their then-pending patent application had priority over potential
competitors. As to value, Feuer described the considerations he believed a non-practicing
entity would use in deciding on a purchase price for the patent, if it were to be sold. He 3 estimated a 15-year commercial lifespan for the technology. He testified as to the size of
the mobile advertising market, in which the technology would be used, as well as
3 Feuer opined that, although a patent like Link and Conrad’s protects their invention for 20 years, it does not make sense to project profits that far into the future, because “[y]ou don’t know if there will be some disruptive technology that comes out.”
12
projections for that industry’s growth. He forecasted the “utilization rate” that he
expected for the patent over time, representing the patented technology’s penetration into
the mobile advertising market as the “minor fraction” of the total mobile advertising
market that would be dedicated to royalties for using the patented technology. His
forecast of the royalty potential of the patent separated out expected royalties from
licensing and litigation settlements from royalties recovered through judgments after trial,
to account for the extra expense of litigation.
During Feuer’s testimony, on cross examination, he estimated that if Link and
Conrad were to sell their patent, “it would probably sell for 5, $10 million today.” Feuer,
however, provided his “data” to Lane, a certified public accountant and business
appraiser who also testified as an expert witness for plaintiffs. Lane used the numbers
Feuer provided to calculate a more precise value than Feuer’s view of the sale price.
Lane took the total potential royalties forecasted by Feuer and discounted them to present
value using a “reasonable discount rate that a private investor would expect investing in
some kind of new technology.” Lane determined the “Present Value Discounted Royalty
Collections” of the patent to be $8,390,017, an amount he described as the “forecasted
revenue stream” for the patent, discounted to present value. From that, he calculated a 10
percent interest to be $839,002, which is the amount the jury awarded to plaintiffs on the
breach of fiduciary duty claim.
Lane’s opinions also included a “forecast” of the profits that eXteres would have
received from certain contracts with third parties if defendants had not tortiously
13
interfered. Lane calculated projected revenue and expenses for six years, from July 2018
through June 2024. He testified that he chose that length of time based on discussions
with Winch: “We didn’t want to reach too far out in the future, but six years is a decent
mid-term event where [Winch] felt he could reasonably forecast the minimum revenue
that he could have achieved.” Lane’s opinions about the likely growth rate of revenue
from the contracts, as well as eXteres’s expenses, were also calculated from information
he received from Winch. Lane concluded that eXteres’s lost profits over the six-year
period, with future profits adjusted to present value, amounted to $3,231,238. The jury
awarded plaintiffs a lesser amount on the tortious interference claim, allocating $740,875
to one contract and $5,000 to another (roughly a quarter of the amounts suggested by
Lane’s calculations), and finding no liability or damages for two other contracts.
Lane also calculated the value of plaintiffs’ time and money spent during
eXteres’s relationship with TCGI during the period from June 2016 through July 2018,
which they sought as pre-contract damages on their breach of contract claim. Again, his
calculations started from information provided by Winch. Winch reviewed his records to
create a “chronological time line” of meetings, travel, and other activities he personally
engaged in as part of the “TCGI project,” and had his office “match up” those activities
with receipts for expenses associated with those activities. Winch also estimated the
percentage of time that he and various eXteres employees spent each month on the
project. From Winch’s itemized chronology, Lane calculated the total time that either
Winch or other eXteres staff spent, using task-specific “assumptions” based on his
14
“business experience” of how much time should be allocated to, for example, a text, or an
email, or a business meeting. To that total amount of time, he applied a “blended” hourly
rate derived from an industry survey, and he added travel expenses to determine a “Total
Reimbursement” figure. For comparison, Lane also made calculations starting from
Winch’s estimates of percentages of time he and eXteres staff had spent monthly,
resulting in an alternative amount. The jury apparently adopted the calculations starting
from Winch’s itemized chronology as the basis for its award of damages for breach of 4 contract.
2. Applicable Law
The trial court has a “substantial ‘gatekeeping’ responsibility” to ensure that an
expert’s opinion is based on both reliable material and sound reasoning. (Sargon
Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 769
(Sargon).) The court “may inquire into, not only the type of material on which an expert
relies, but also whether that material actually supports the expert’s reasoning.” (Id. at p.
771; Evid. Code, §§ 801 [governing judicial review of the subject of expert testimony and
type of matter the expert relied on in “forming an opinion”], 802 [governing judicial
review of the “reasons” for expert’s opinion].) “The court must not weigh an opinion’s
4 As noted, the jury awarded plaintiffs $678,049 on the breach of contract claim. To the dollar, that is the amount Lane calculated starting from Winch’s itemized chronology to be the appropriate “Total Reimbursement” amount ($491,621) plus pre- trial interest. The analogous amount that Lane calculated for comparison, based on Winch’s estimates of percentages of time spent, was $593,484 ($437,716 plus interest). Winch’s own, lay opinion was that the appropriate “aggregate number” was “$700,000 to $800,000.”
15
probative value or substitute its own opinion for the expert opinion. Rather, the court
must simply determine whether the matter relied on can provide a reasonable basis for the
opinion or whether that opinion is based on a leap of logic or conjecture.” (Sargon,
supra, at p. 772.)
“‘The trial court must exclude expert opinion testimony ‘that is (1) based on
matter of a type on which an expert may not reasonably rely, (2) based on reasons
unsupported by the material on which the expert relies, or (3) speculative.’” (Hewlett-
Cal.4th at pp. 771-772.) Nevertheless, some areas that are properly the subject of expert
opinion, such as lost profits, are “always speculative to some degree.” (Sargon, at p.
775.) “Courts must not be too quick to exclude expert evidence as speculative [. . . .] A
reasonable certainty only is required, not absolute certainty.” (Ibid.)
The trial court’s discretion to exclude or admit expert testimony under Evidence
Code sections 801 and 802 is broad. We may overturn the court’s decision only if we
conclude it was arbitrary or irrational. (Sargon, supra, 55 Cal.4th at p. 773.)
3. Analysis
a. Patent valuation
We do not find the trial court’s decision to admit Feuer’s testimony about the
value of Link and Conrad’s patent arbitrary or irrational. Feuer’s experience in the
industry, both as an inventor of patents and an entrepreneur running businesses built
around patented technology, and including both practicing and non-practicing entities, is
16
substantial. He testified that the factors he considered in making his forecasts about
future royalties were those a potential purchaser of the patent would consider in
determining a reasonable purchase price if the patent were to come up for sale. On its
face, there is nothing unreasonable about valuing a patent (and by extension a business
built around that patent) by such a measure.
Defendants criticize some of the numbers that Feuer used as speculative or without
foundation. While this criticism certainly supports a basis for vigorous cross-
examination of Feuer as to how much leeway his numbers permit, we do not find Feuer’s 5 testimony so speculative as to have compelled the trial court to exclude it. The patent
had some value, and Feuer provided reasoning with an adequate foundation to establish
with a reasonable degree of certainty what that value is. For example, Feuer’s projections
about the growth of the mobile advertising market were based on “analyst reports,” one
of which he identified by author. That is the sort of published information experts
routinely rely on in developing their opinions. (See Maatuk v. Guttman (2009) 173
Cal.App.4th 1191, 1198 (Maatuk) [“an expert may rely on any information of the type
reasonably relied on by an expert, even if it is hearsay, and from a nonexpert”]; Evid.
Code, § 801, subd. (b).) Any lack of specificity regarding Feuer’s sources “simply
affected the testimony’s weight and could have been probed in cross-examination at
trial.” (People ex rel. Dept. of Transp. v. Clauser/Wells Partnership (2002) 95
5 We are not addressing here whether the trial court could have exercised its discretion to exclude Feuer’s testimony as too speculative or lacking in foundation.
17
Cal.App.4th 1066, 1086.) Similarly, Feuer’s forecast of the fraction of that market that
Link and Conrad’s patented technology would capture as royalties was based on his
“experience” in the relevant market. (Cf. Maatuk, supra, 173 Cal.App.4th at p. 1198
[excluding expert’s assumptions about market penetration in part because she “did not
testify to any expertise on the market”].) Defendants criticize Feuer for ignoring
available “historical data” of “actual revenues” showing royalties the patent had
generated to date, and a lack of other specific sources. Feuer’s experience, however,
included close attention to how patents he viewed as analogous have tended to perform
over time, informing how he expected Link and Conrad’s patent would do. Comparison
with arguably analogous patents is different from pure speculation. Feuer’s expressed
reasoning for how profitable he expected patent enforcement efforts would have been is
hardly unassailable. Nevertheless, he runs a patent holding company, which generates
revenue from such efforts, so the issue is squarely within his area of expertise.
Defendants were, of course, free to present evidence showing Feuer’s reasoning to
be wrong and to point out to the jury any arguable holes in his reasoning through cross-
examination and argument. That Feuer’s testimony might be susceptible, at least in some
respects, to such challenges does not demonstrate that the trial court was compelled to
exclude the testimony altogether. (See Ventura County Flood Control Dist. v. Security
First Nat. Bank (1971) 15 Cal.App.3d 996, 1004 [“Where it appears that the opinion of a
valuation witness is based upon considerations which are proper as well as those which
are not, the testimony may be admitted and the trier of fact shall determine its weight and
18
credibility”].) Defendants could argue to the jury, for example, that Feuer’s testimony
could reliably establish only a lesser amount of damages than what he asserted , or even
that the jury should give the testimony no weight at all.
Defendants criticize Feuer’s method of valuing the patent on the ground that he
did not apply the so-called “Georgia-Pacific factors,” which are often used in federal
courts to determine statutory damages for patent infringement. (See Uniloc USA Inc. v.
Microsoft Corp (Fed. Cir. 2011) 632 F.3d 1292, 1317-1318 (Uniloc) [Federal Circuit has
“sanctioned the use of the Georgia-Pacific factors” in determining statutory patent
infringement damages]; Georgia-Pacific Corp. v. U.S. Plywood Corp. (S.D.N.Y. 1970)
318 F.Supp. 1116, 1120 (Georgia-Pacific).) This case, however, is not governed by
federal law about statutory damages for patent infringement. Defendants cite no
California authority requiring an expert to use the Georgia-Pacific factors in
circumstances like this case, and we are aware of none. And for good reason; the
Georgia-Pacific factors are evidentiary facts relevant to determining how a hypothetical
negotiation of a “reasonable royalty” would have turned out, had the parties engaged in
such a negotiation. (35 U.S.C. § 284; Uniloc, supra, 632 F.3d at p. 1317; Georgia-
Pacific, supra, 318 F.Supp. at p. 1120.) It is not at all apparent that a patent must be
valued only by that measure in contexts other than determining statutory damages for
patent infringement under federal law. Indeed, even in the context of a federal patent
infringement matter, “there are ways of determining a reasonable royalty other than
through the Georgia-Pacific factors.” (Exmark Manufacturing Co. Inc. v. Briggs &
Certainly, defendants could have presented expert testimony of their own, contesting
Feuer’s methodology. Such evidence, however, would have raised only a factual 6 question for the jury regarding what methodology was more appropriate. (See People ex
rel. Dept. of Transp. v. Clauser/Wells Partnership, supra, 95 Cal.App.4th at p. 1083 [in
eminent domain action, “whether the specific circumstances of [defendants’] business
warranted application of [expert appraiser’s] methodology [for valuing the business] was
a factual question for the jury. However, although any ‘just and equitable’ method could
be proper, the jury would remain ‘free to accept or reject’ [the expert’s] valuation”].)
The Federal Circuit’s reasoning in Exmark, supra, 879 F.3d 1332, emphasized by
defendants, does not persuade us that the trial court was compelled to exclude Feuer’s
testimony. In Exmark, a federal patent infringement matter, the plaintiff’s expert opined
that the appropriate hypothetical royalty rate to use in calculating damages was 5 percent.
(Id. at p. 1349.) The expert recited the Georgia-Pacific factors and discussed them in a
superficial manner. (Exmark, at pp. 1350-1351.) The expert’s opinion was, however,
“devoid of any analysis tying either the evidence or the specific Georgia-Pacific factors
to the proposed 5 percent royalty rate.” (Id. at p. 1351.) Among other things, the
6 We note also that Feuer’s testimony just is the opinion testimony of a qualified expert, which is one of the 15 Georgia-Pacific factors. (Georgia-Pacific, supra, 318 F.Supp. at p. 1120.) We infer that the Georgia-Pacific factors are useful for evaluating a party’s evidence of damages for patent infringement as a whole, but they do not necessarily speak to the admissibility of any particular expert’s opinion, particularly outside the context of a patent infringement action.
20
evidence that the expert failed to analyze included a comparable, but non-hypothetical,
settlement agreement, the parties to which had agreed to a royalty rate of 3.64 percent.
(Id. at p. 1349) The Federal Circuit concluded that the expert’s opinion, based on a 5
percent royalty rate “plucked . . . out of nowhere,” should have been excluded from
evidence because it “lacked sufficient ties to the facts of the case.” (Id. at p. 1351.) In
contrast, as discussed, Feuer’s opinions, while debatable, were not plucked from
nowhere, but derived from his experience with other patents he viewed as comparable.
There were ample grounds for defendants to dispute the strength of that foundation
supporting Feuer’s conclusions. But we do not find it irrational or arbitrary for the trial
court to have allowed the jury to make the determination of how much weight Feuer’s
testimony deserved in determining the value of the patent.
Defendants further contend that Lane’s testimony about the patent’s value should
have been excluded “for the same reasons [Feuer’s] testimony should have been
excluded.” Because we are not persuaded by defendants’ arguments as to Feuer, we
reach the same conclusion as to Lane. Defendants have not demonstrated that the trial
court abused its discretion by admitting the testimony of either Feuer or Lane as to the
valuation of Link and Conrad’s patent.
b. Lost profits
Defendants contend that Lane’s forecast of eXteres’s lost profits resulting from
defendants’ tortious interference with contract should have been excluded from evidence
21
as speculative and “unhelpful to the jury.” We find no abuse of discretion in the trial
court’s decision to allow the jury to decide what weight to give the testimony.
As defendants emphasize, Lane’s forecast of lost profits does not rest on available
data regarding actual revenues from the contracts at issue, either during the period from
2016 to 2018 when eXteres acted as a middleman between TCGI and customers, or the
period from 2019 to 2021 when TCGI was dealing with the customers directly. It is not
apparent, however, why actual revenues are the only reasonable basis for determining
what would have happened in a hypothetical situation, that is, what the revenue would
have been absent TCGI’s tortious interference. The point of the business relationship
between TCGI and eXteres was to try to achieve greater profits than TCGI would be able
manage on its own by leveraging eXteres’s experience and expertise, including its 7 preexisting client relationships. Arguably, the difference between actual and
hypothetical revenues is not a sign of any flaw in Lane’s forecasts, but a measure of the
value of eXteres’s efforts to market the technology.
Similarly, defendants emphasize that Lane’s lost profits forecasts derived from
information he received from Winch, rather than independently gathered or verified data.
It is not apparent, however, why that alone might render Lane’s calculations so unreliable
as to be “entirely speculative,” as defendants propose. Winch had personal knowledge of
the contracts and client relationships at issue, and thus some foundation to describe them
7 For example, the bulk of damages awarded for tortious interference related to a contract with a company that already had a decade-long business relationship with eXteres before signing on to use TCGI’s technology.
22
with reliability to Lane including, at least arguably, projections of how things would
likely have developed without defendants’ interference. Certainly, Winch’s information
was subject to challenge, for example, as biased or excessively optimistic. But Winch
was available for cross-examination on these or other purported defects, and the
reasonableness of Winch’s information, on which Lane relied, is a question of fact. (See,
e.g., Sargon, supra, 55 Cal.4th at p. 774 [“‘[A]lthough generally objectionable for the
reason that their estimation is conjectural and speculative, anticipated profits dependent
upon future events are allowed where their nature and occurrence can be shown by
evidence of reasonable reliability’”].) It was within the bounds of the trial court’s
discretion to leave it to the jury to decide how much weight Lane’s opinions should be
given based on any deficiencies in the information underlying them.
Defendants’ arguments in favor of a different conclusion based on Sargon, supra,
55 Cal.4th 747, are not persuasive. In Sargon, our Supreme Court upheld a trial court’s
exercise of discretion in its role as “gatekeeper” to “exclude speculative expert
testimony.” (Id. at p. 781.) We face a different question, whether the expert’s opinions
were so unreasonable that the trial court was required to exclude them. Thus, deference
to the trial court’s discretion requires we view Lane’s testimony generously, whereas
Sargon’s circumstances required the opposite perspective.
Furthermore, the expert testimony excluded in Sargon differed from Lane’s
testimony in that it was unreliable and poorly reasoned. In Sargon, the expert purported
to compute lost profits via a market share approach, comparing the plaintiff company to
23
six large, multinational companies that were the dominant market leaders in the relevant
industry for dental implants. (Sargon, supra, 55 Cal.4th at p. 756.) The expert, who was
a certified public accountant and attorney, testified that if there had been no breach of
contract by the defendant, the plaintiff would have grown from a three-person operation
with no market share to one of the industry leaders, in part by investing in research and
development on new products not yet invented. (Id. at pp. 755, 765-766.) This testimony
was grounded solely in the expert’s “belief,” unsupported by evidentiary facts or relevant
expertise, that the plaintiff was “innovative, and that innovation was the prime market
driver.” (Id. at p. 777.) The expert offered no rational basis to conclude that the plaintiff
would become a market leader, let alone any rational basis for the jury to decide whether
that would mean, say, a 4 percent share or a 20 percent share of the market. (Id. at pp.
777-778.) The Supreme Court agreed with the trial court’s decision to exclude such
“‘faith-based’” predictions. (Id. at pp. 766 [quote], 781.) Winch’s predictions about lost
profits, in contrast, were founded on more measured reasoning, based not only in
knowledge of the technology and the industry, but the specific contracts and client
relationships that defendants were alleged to have disrupted. While his predictions about
what would have happened without the interference are not unassailable, they are not
nearly so speculative as that of the expert in Sargon.
Defendants have demonstrated no abuse of discretion in the trial court’s decision
to admit Lane’s testimony about lost profits.
24
c. Pre-contract damages
Defendants contend that Lane’s calculations relating to eXteres’s pre-contract
damages arising from time and money spent in the period from June 2016 through July
2018, before the MOU, should have been excluded because the testimony “added nothing
but improper unfounded emphasis to Winch’s testimony.” This argument does not merit
extended discussion. It is implausible, to say the least, that ordinary jurors are as capable
as a certified public accountant to take raw data of itemized receipts and time records and
calculate an appropriate dollar amount to represent total expenses. (Cf. Summers v. A. L.
Gilbert Co. (1999) 69 Cal.App.4th 1155, 1169 [proper to exclude expert testimony when
“‘“‘the subject of inquiry is one of such common knowledge that men of ordinary
education could reach a conclusion as intelligently as the witness’”’”].) Moreover, even
if some jurors might be able to manage the task, it is reasonable to conclude that it would
still be helpful to have an expert perform the calculations. (See ibid. [“‘“expert opinion
may be admitted whenever it would ‘assist’ the jury”’”].)
Similarly, defendants are correct that “the proper role of expert testimony is to
help the jury understand the significance of case-specific facts proven by competent
evidence, not to place before the jury otherwise unsubstantiated assertions of fact.”
(People v. Valencia (2021) 11 Cal.5th 818, 837.) It is not apparent, however, why this
principle should bar Lane’s testimony. Lane did not serve as a proxy to smuggle in
evidence of case-specific facts from an absent witness. (Cf. id. at p. 839-840 [gang
expert’s recitation of facts of predicate offenses of which he had no personal
25
knowledge].) He did not rely on the opinion of another, absent expert in an
“uninformed” manner and in the absence of any basis in the record that would justify
such reliance. (Cf. San Francisco Print Media Co. v. The Hearst Corp. (2020) 44
Cal.App.5th 952, 963.) Rather, he took raw data showing hours spent and expenses
incurred and performed his own analysis, relying on his own expertise, to produce a
dollar amount representing the total cost of the activities. Defendants have not shown
that Lane’s testimony fell outside the proper role of expert testimony.
C. Time and cost damages
The only damage award that plaintiffs sought on their contract claim was recovery
for their pre-contract expenses; Lane presented the jury with two alternative calculations
of such expenses, and the jury chose one of them as the amount of the contract damages.
Under the judgment proposed by plaintiffs and adopted by the trial court, as well as the
later amended judgment, this amount was awarded only in the alternative to other forms
of damages arising from other causes of action, such as the lost profits sought for
interference with contract. Defendants argue that these “time and costs damages” for
breach of the MOU were “unrecoverable” because those expenses would have been
incurred under the parties’ oral agreements. Plaintiffs contend this argument was
forfeited by failing to raise it in the trial court, and that it is in any case without merit. 8 We do not find the argument forfeited. We do find it unpersuasive.
8 In defendants’ new trial motion, they argued that the time and cost expenses did not amount to an “actual loss” caused by breach of contract, but rather were “in service of” contracts with clients obtained under the parties’ oral agreements or in “an attempt to [footnote continued on next page]
26
“One proper ‘measure of damages for breach of contract is the amount expended
[by the nonbreaching party] on the faith of the contract.’” (Agam v. Gavra (2015) 236
Cal.App.4th 91, 105 (Agam); see also 1 Witkin, Summary of Cal. Law (10th ed. 2005)
Contracts, § 883, p. 970 [one measure of contract damages “is the amount of the
plaintiff’s expenditures, together with the reasonable value of his or her own services, in
preparation and performance in reliance on the contract”].) Initially, “the burden is on
the plaintiff to establish ‘the amount which he has been induced to expend.’” (Agam,
supra, 236 Cal.App.4th at p. 106.) “The burden then shifts to the defendant to show the
nonbreaching party’s expenses were unnecessary, such that his or her recovery of
reliance damages should be reduced.” (Ibid.) The recovery may also be reduced if the
defendant can show plaintiffs “would have suffered a loss even if the defendant had fully
performed.” (Ibid.) There is a “rebuttable presumption,” however, “‘that complete
performance of the agreement would . . . have resulted in at least reimbursing the injured
party for his outlay fairly made in performance of it.’” (Id. at p. 107)
Defendants have not attempted to show that plaintiffs’ expenditures of time and
money were unnecessary. In other contexts, as discussed, defendants have disputed
plaintiffs’ projections of how much revenue would have been generated if the parties’
business relationship had continued. Defendants have not, however, specifically argued
that revenues would have been inadequate even to reimburse plaintiffs for their claimed
expenditures.
obtain” such contracts, “of which Plaintiffs received 50 percent of the net proceeds.” This is fundamentally the same argument as the one defendants have raised on appeal.
27
Instead, defendants argue that plaintiffs’ expenditures should not be viewed as
initial outlays relying on the expected MOU, but rather as being in service of entirely
separate contracts—the parties’ oral agreements. Defendants have not articulated,
however, why the jury (and, on the new trial motion, the trial court) might have been
required to accept that framing of the issue. There is evidence supporting the different
conclusion that the parties’ oral agreements—though also valid and enforceable as
contracts in their own right—were precursors, organizing the parties’ initial dealings
during a preparatory phase, but not independent of the MOU. Among other things,
Winch’s testimony supports that view of what occurred. He stated that “ultimately we
intended for there to be a final agreement at some point in the future that would
memorialize the entire span of time that our oral agreement and these drafts were taking
place . . . We just didn’t know at that moment in time when that would take place.” The
terms of the MOU itself—including its backdated effective date of January 1, 2017, and
incorporation of many terms from the parties’ oral agreements that were effective during
the same period—support the same conclusion.
Defendants emphasize that the jury was instructed using CACI No. 1923 that
plaintiffs may recover amounts “spent in reliance on Appellants’ misrepresentations”
only “‘if those amounts would not otherwise have been spent.’” This argument, however,
muddles together two different types of reliance damages. CACI No. 1923 relates to
damages arising from reliance on tortious misrepresentations. The pre-contract expenses
here flow not from any misrepresentations, but from the defendants’ breach of a contract
28
(the MOU), representing plaintiffs’ expenditures in preparation for that contract. The
jury was properly instructed on the law relating to that sort of reliance damages using
CACI No. 361. The question in the contract context is not whether the “amounts would
not otherwise have been spent” (CACI No. 1923), but whether eXteres “would have
suffered a loss” even if TCGI had “fully performed its obligations under the contract”
(CACI No. 361). Those different questions lead to different answers, as reflected here in
the jury’s awards of compensatory damages for breach of contract ($678,049) and
tortious misrepresentation ($148,371).
We conclude that defendants have not shown any appropriate basis for us to
disturb the jury’s award of contract damages.
D. Inconsistent jury findings
Defendants argue that the jury’s finding of liability on the breach of contract cause
of action contradicts its findings of liability on the intentional and negligent
misrepresentation causes of action. It does not.
In civil cases, “a fact finder may not make inconsistent factual determinations 9 based on the same evidence.” (Oxford v. Foster Wheeler LLC (2009) 177 Cal.App.4th
700, 707].) “On appeal, we review a special verdict de novo to determine whether its
findings are inconsistent.” (Singh v. Southland Stone, U.S.A., Inc. (2010) 186
9 The rule is different in criminal cases, where “[t]he law generally accepts inconsistent verdicts as an occasionally inevitable, if not entirely satisfying, consequence of a criminal justice system that gives defendants the benefit of a reasonable doubt as to guilt and juries the power to acquit whatever the evidence.” (People v. Palmer (2001) 24 Cal.4th 856, 860.)
29
Cal.App.4th 338, 358.) “A special verdict is inconsistent if there is no possibility of
reconciling its findings with each other.” (Id. at p. 357.) “With a special verdict, unlike a
general verdict or a general verdict with special findings, a reviewing court will not infer
findings to support the verdict.” (Id. at p. 358.) We are “‘not permitted to choose
between inconsistent answers.’” (Ibid.) Rather, “the proper remedy for an inconsistent
special verdict is a new trial.” (Ibid.)
The first premise of defendants’ inconsistency argument is that, to find for
plaintiffs on the breach of contract claim, “the jury necessarily had to find that the MOU
had been approved by the [TCGI] Board . . . .” The second premise is that the jury must
also have found that the Board did not approve the MOU, since “the only basis for fraud
was the purported misrepresentation in the MOU that the MOU had been approved by the
TCGI Board.” They conclude on that basis that the jury returned irreconcilable verdicts,
which must be reversed.
The validity of defendants’ syllogism turns on whether the first premise is true. In
our view, it is not. The jury was not asked to make an express finding that the TCGI
Board had approved the MOU. The special verdict only asked the jury to decide: “Did
[TCGI] agree to the terms of the contract?” There is some basis to find that it did: Link 10 signed the MOU in his capacity as Chief Executive Officer of TCGI. “Under statutory
10 We do not know if this is the theory argued to the jury by plaintiffs, as the parties’ opening statements and closing arguments are not part of the trial transcript in our record. The trial court did not have a court reporter available for those portions of the proceedings, and the parties apparently chose not to provide their own.
30
law, an officer can bind the corporation in dealings with third parties in which the officer
has actual or apparent authority.” (GAB Business Services, Inc. v. Lindsey & Newsom
Claim Services, Inc. (2000) 83 Cal.App.4th 409, 421, disapproved on other grounds by
Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1154; Corp. Code, § 208, subd. (b); see also
Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 137
[“Larger corporations often have formal board committees to recommend the approval of
a variety of contracts. But small corporations . . . conduct much of their official business
informally. . . . The practice of allowing officers to approve contracts is so prevalent in
some close corporations, for example, that they bind the entity even though the officer
should have obtained board approval”].)
Thus, as relevant here, the jury found that TCGI—implicitly, Link, on behalf of
TCGI—agreed to the following term: “TCGI represents the MOU has been approved by
the TCGI Board of Directors with the approval attached .” On its face, there is no
irreconcilable conflict between the propositions that (1) TCGI represented that the MOU
had been approved by the TCGI Board and (2) the representation in the MOU that the
TCGI Board had approved the MOU was false. Indeed, that is just plaintiffs’ version of
what happened.
Defendants apparently interpret the MOU’s reference to board approval to mean
that board approval—and specifically approval in the form of a fully executed version of
the attachment to the MOU—was a condition precedent to contract formation: “Board
approval was a necessary term of the MOU . . . . As such, if the MOU had been
31
approved, there could be no misrepresentation as to the Board’s approval of the
MOU . . . .” Such an interpretation, however, is in some tension with the language of the
MOU. There is no reason for TCGI to “represent[]”anything about what its board had
done if the parties’ intent was that a fully executed copy of the board resolution must be
attached to the MOU for a contract to be formed. Instead, something to the effect of “A
copy of the resolution of the TCGI Board approving the MOU is attached here as Exhibit
A,” perhaps also with a proviso that the MOU only takes effect upon attachment of a
copy of a fully executed board resolution, would seem more likely.
When possible, we interpret contracts to give effect to every part and avoid
constructions that render terms surplusage. (See Civ. Code, § 1641 [contracts should be
interpreted “so as to give effect to every part”]; Code Civ. Proc., § 1858 [in construing an
instrument, “where there are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all” (italics added)]; Rice v. Downs (2016)
248 Cal.App.4th 175, 186 [“An interpretation that leaves part of a contract as surplusage
is to be avoided”].) Viewed in that light, a more natural reading of the term at issue is
that TCGI was representing in the MOU that its Board had adopted a resolution in the
form of the attached document. Thus, whether the attachment to the MOU was signed by
all the TCGI board members is not necessarily dispositive of whether the board ever
adopted such a resolution.
We conclude that defendants have not shown the jury’s factual findings to be
inconsistent or irreconcilable.
32
E. Reasonable reliance
Defendants contend that there is no substantial evidence to establish that eXteres
or Winch reasonably relied on the alleged misrepresentation in the MOU that the TCGI
Board had approved the MOU. Plaintiffs contend the argument is waived, and in any
case without merit. We decline to address the parties’ disagreement regarding waiver,
finding it more expedient to decide the issue. We find substantial evidence supports a
finding of reasonable reliance.
“‘“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.”’” (Thrifty Payless, Inc. v. The Americana at Brand,
LLC (2013) 218 Cal.App.4th 1230, 1239.) A trial court sits as the thirteenth juror in
ruling on a motion for new trial (Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d
498, 507), but we do not. “‘“When a finding of fact is attacked on the ground that there
is not any substantial evidence to sustain it, the power of an appellate court begins and
ends with the determination as to whether there is any substantial evidence contradicted
or uncontradicted which will support the finding of fact.”’” (Orozco v. WPV San Jose,
LLC (2019) 36 Cal.App.5th 375, 390 (Orozco).) When two or more inferences can
reasonably be deduced from the evidence, we may not substitute our deductions for those
of the finder of fact. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th
559, 571.)
33
Defendants assert that Winch “knew” that the MOU’s representation that the
TCGI board had approved it was “untrue,” and therefore he and eXteres could not have
reasonably relied on that representation. As discussed above, however, knowing whether
all TCGI board members had signed the attachment to the May 24, 2018 version of the
MOU and knowing whether the TCGI board had approved the MOU are not necessarily
the same thing. Defendants also emphasize that, on cross-examination, Winch admitted
that the absence of Conrad’s and Sangree’s signatures could be seen as “a reason” to
think the Board had not approved the MOU, as was the email accompanying the May 24,
2018 version of the MOU, stating that Sangree wanted to look through the document as
to possible “wording changes.” Winch further testified, however, that “that’s not how
[he] interpreted it.”
Winch explained that he took Link’s signature on the May 24, 2018 version of the
MOU to mean that Link was conveying an offer, not just circulating another draft. He
took Link’s statement that Sangree might have some changes to mean that both Link and
Conrad—a majority of the TCGI board—were “on board” with the current version of the
MOU. Based on the state of their negotiations, Winch understood that any changes
Sangree might propose would be wording details, rather than substantive changes, and
that if Sangree had changes, Link would “recall or rescind the offer.” Winch left an
ample period for any such retraction before he accepted the offer. Furthermore, although
Winch had felt it “prudent” for the TCGI board to approve the MOU, and “[a]t some
point” he would want to have a copy of the board resolution, he did not have any
34
“specific knowledge” that a board resolution was required for the MOU to be effective.
In this context, the jury found it reasonable for Winch to take at face value the
representation in the MOU that it had been approved by the TCGI board , as he testified
he had done. The trial court, too, in ruling on defendants’ new trial motion, implicitly
found Winch’s testimony credible and his reliance reasonable. On this record and under
the applicable, deferential standard of review, we may not disturb those findings.
F. Tortious interference with contract
Defendants argue that the evidence could not support a finding in favor of
plaintiffs on their tortious interference with contract cause of action. In their view,
eXteres’s “own conduct” caused the termination of the relevant contracts between
eXteres and third parties, and it was “failure to mitigate” that caused eXteres’s alleged
damages. We find no lack of substantial evidence to support the verdict. (See Orozco,
supra, 36 Cal.App.5th at p. 390.)
Defendants contend that eXteres “unilaterally” terminated the contracts at issue, so
there is no evidence of causation in support of the tortious interference claim. It has long
been the rule, however, that a plaintiff “need not allege an actual or inevitable breach of
contract in order to state a claim for disruption of contractual relations.” (Pacific Gas &
Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1129.) It is enough that the
defendants’ actions make “plaintiff’s performance . . . more costly or more burdensome.”
(Ibid.) The July 19, 2018 letter from defendants’ attorney, although phrased as a
“request[],” is reasonably interpreted as a threat of litigation if plaintiffs continued to
35
have contact with its clients. Those clients, after all, had “existing,” albeit indirect,
“business relationships with TCGI,” given their use of TCGI technology resold by
eXteres. We see no reason why such a threat may not be considered actionable
interference.
Relatedly, defendants’ theory is that eXteres should have mitigated its damages by
continuing to work with its existing clients for TCGI’s technology. It is not apparent,
however, why a finder of fact might be required to find continuing with those contracts
despite TCGI’s cease-and-desist request/demand to be a reasonable, rather than 11 extraordinary, mitigation effort. (See State Dept. of Health Services v. Superior Court
(2003) 31 Cal.4th 1026, 1044 [“Under the avoidable consequences doctrine as recognized
in California, a person injured by another's wrongful conduct will not be compensated for
damages that the injured person could have avoided by reasonable effort or expenditure.”
(Italics added.)].)
Moreover, defendant’s arguments about both causation and mitigation rest on the
premise that the July 19, 2018 letter expressed TCGI’s willingness to honor the parties’
earlier oral contracts. It is questionable whether the letter is best read to express such a
sentiment. Arguably, the letter repudiates the parties’ prior agreements, while stating a
11 Additionally, as plaintiffs correctly note, the jury instruction on mitigation that defendants cite in briefing, derived from CACI No. 358, applies on its face only to the breach of contract cause of action, and not the tortious interference claim. Defendants did not request an equivalent jury instruction regarding mitigation of damages from tortious interference with contract. Although we exercise our discretion to decide this issue on the merits, we acknowledge plaintiffs’ argument that this claim of error was in any case forfeited.
36
willingness to negotiate a new, more limited “reseller arrangement”: “Although it is
unfortunate that eXteres and TCGI cannot move forward as originally contemplated by
the parties, TCGI is open to discussions in regard to engaging your company through a
reseller arrangement . . . .” The statement about the parties’ “existing . . . contracts” is
phrased in the subjunctive: “Any existing revenue sharing contracts between the two
companies would be honored by TCGI.” That suggests that TCGI’s willingness to honor
those agreements was conditioned on entering into this new business arrangement.
Particularly in the context of the rest of the letter, such language is hardly an unequivocal
reassurance that TCGI intended to continue honoring the parties’ existing oral
agreements.
Defendants have not shown that the verdict on the tortious interference cause of
action lacks the support of substantial evidence.
G. Statute of frauds
Defendants note that Link signed the May 24, 2018 version of the MOU as well as
the attached board resolution, but Conrad did not. In their view, one provision of the
MOU required Conrad’s individual written consent, and not just the assent of the TCGI
board, that is, the provision contemplating that Link and Conrad would grant TCGI a
“license for the exclusive perpetual use” of their technology once their then-pending
37
patent application was approved. They contend that the lack of Conrad’s signature means 12 13 the entire MOU is invalid under the statute of frauds. Not so.
Under California Civil Code section 1624, subdivision (a)(1), a contract “not to be
performed within a year from the making thereof” is “invalid” unless the contract itself
“or some note or memorandum thereof” is “in writing and subscribed by the party to be
charged or by the party’s agent.” This law, however, has been interpreted literally and
narrowly by California courts. (See Plumlee v. Poag (1984) 150 Cal.App.3d 541, 548.)
“Only those contracts which expressly preclude performance within one year are
unenforceable.” (Ibid.; see White Lighting Co. v. Wolfson (1968) 68 Cal.2d 336, 343
(White Lighting) [statute of frauds “applies only to those contracts which, by their terms,
cannot possibly be performed within one year”].) “‘It has been repeatedly held that, if an
12 The complete text of this provision is as follows: “Jay Conrad and Anthony Link (“Inventors”) has [sic] developed a text messaging software platform (“Connectionstm”) and have also filed a patent application for U.S. Non-Provisional Patent titled System and Method for Generating a Tracked Message with serial number US15/684926 Docket 4705 (“Patent”). The Parties along with the Inventors agree to execute a mutually agreeable license for the exclusive perpetual use of the Patent wherein TCGI will be the majority beneficial owner of the rights to the Patent and associate patents, if any, filed or to be filed associated with the Patent. Such agreement shall be executed upon the issuance of the Patent herein referenced.” 13 Plaintiffs are incorrect that defendants failed to raise their statute of frauds defense in the trial court. The defense was pleaded as an affirmative defense in defendant’s first amended answer, and the issue was raised in defendants’ trial brief. During trial, the statute of frauds was asserted as a basis for nonsuit and for a directed verdict. That preserved the argument for appeal. (Carrier & Braddock, Inc. v. S.W. Straus & Co. (1931) 213 Cal.508, 513 [motion for nonsuit not too late]; Ellis v. Klaff (1950) 96 Cal.App.2d 471, 475, disapproved on other grounds in Sterling v. Taylor (2007) 40 Cal.4th 757, 769 [motion for new trial not too late].)
38
agreement whose performance would otherwise extend beyond a year may be completely
performed within a year on the happening of some contingency, it is not within the statute
of frauds.’” (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 674 (Foley) [quoting
Carnig v. Carr (1897) 167 Mass. 544].)
It does not matter how improbable performance of the contract within a year may
be. (See White Lighting, supra, 68 Cal.2d. at p. 343, fn. 2 [generally there “must not be
the slightest possibility that it can be fully performed within one year”]; e.g., Gaskins v.
Security-First Nat. Bank of Los Angeles (1939) 30 Cal.App.2d 409, 418-419 (Gaskins)
[contract to care for minor children of an incompetent person during their minority
“might be fully performed in one year from the date of its execution, as, for instance,
would be the case should all the minor children have died within the first year”].) The
applicability of the statute of frauds is “analyzed prospectively, based on the intentions of
the parties and the terms of the agreement at the time it is made.” (Foley, supra, 47
Cal.3d at p. 674, fn. 18.) The test is whether there is a “‘possibility of performance,’” not
one of “‘probable expectations.’” (Ibid.)
In July 2018, when Winch returned the signed MOU, there was a possibility that
the license provision at issue could have been performed within a year, even though it
contemplated a “perpetual” license. Under the MOU, such a license was to be executed
only “upon the issuance of the Patent. . . .” But the then-pending patent application could
have been denied at any point, and thus no license for the technology from Link or
Conrad in their capacity as inventors—perpetual or otherwise—would be necessary or
39
required. There remained the possibility, therefore, that within a year neither Link nor
Conrad would have any obligations remaining to perform under the clause at issue. As
such, the statute of frauds does not apply. (See Gaskins, supra, 30 Cal.App.2d at pp.
418-419.)
Defendants do not contend that Conrad’s individual written consent was required
for any other provision of the MOU to be valid. We conclude, therefore, that they have
not demonstrated that the MOU is invalid under the statute of frauds.
III. DISPOSITION
The judgment is affirmed. Winch and eXteres are awarded costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAPHAEL J.
We concur:
SLOUGH Acting P. J.
MENETREZ J.
40
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the trial court's judgment, holding that the trial court did not abuse its discretion in denying a new trial after reducing excessive punitive damages or in admitting expert testimony regarding patent valuation and lost profits.
Issues
Whether the trial court abused its discretion by reducing excessive damages instead of ordering a new trial.
Whether the trial court erred in admitting expert testimony regarding patent valuation and lost profits.
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“We conclude that defendants have not shown that the trial court abused its discretion under Code of Civil Procedure section 662.5, subdivision (a)(2), to reduce the jury’s excessive award of damages rather than order a new trial.”