Mighty Enterprises, Inc. v. She Hong Industrial Co. Ltd.
2:14-cv-06516
C.D. Cal.Mar 7, 2017Background
- Plaintiff (exclusive U.S. distributor) sued Defendant (manufacturer) for breach of an oral/exclusive distributorship, breach of implied contract, tortious interference with business relations, and fraud; jury found for Plaintiff on all claims, awarded $6,203,000 compensatory damages and $6,000,000 punitive damages, and found malice/oppression/fraud by clear and convincing evidence.
- Evidence supporting exclusivity: decades‑long relationship, testimony from Plaintiff’s CEO that parties agreed exclusivity beginning in 1987, and emails from Defendant staff referring to Plaintiff as the exclusive U.S. dealer.
- Evidence of termination/breach: Defendant imposed restrictive conditions in 2014 (limiting territory, banning sale of other Taiwan‑assembled machines), solicited Plaintiff’s dealers and prospective U.S. distributors in 2013–2014, and did not buy back inventory as Plaintiff claimed was required on termination.
- Fraud theory: Defendant allegedly concealed its solicitation of alternative U.S. distributors; Plaintiff testified it did not learn of solicitation until trade ads in 2014 and would not have placed a large September 2013 equipment order if it had known.
- Damages evidence: non‑expert testimony and expert report (Jason Engel) quantified lost profits, repair/repurchase costs, and diminished inventory value; Defendant challenged expert admissibility and the magnitude/foreseeability of damages.
- Procedural posture: Defendant moved for renewed judgment as a matter of law (Rule 50(b)) and for a new trial or remittitur (Rule 59); the magistrate judge denied both motions after briefing and a hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for breach of contract | Evidence of an exclusive distributorship, termination terms (buy‑back), and Defendant’s solicitations/breach | No meeting of minds, no adequate consideration, no proof of termination or breach | Substantial evidence supported breach; JMOL/new trial denied |
| Sufficiency of evidence for fraud (concealment) | Defendant knew of and concealed solicitation of other distributors; Plaintiff relied on nondisclosure and suffered loss | No duty to disclose, Plaintiff knew of intent or could discover it, no fiduciary relationship | Jury verdict on fraud supported by substantial evidence; JMOL/new trial denied |
| Admissibility and weight of damages expert (Engel) | Expert reliably used plaintiff‑provided financial data, which were admitted and corroborated by live testimony | Engel failed to independently verify data; testimony unreliable/prejudicial | Admission was within trial court discretion; challenges went to weight, not admissibility; no prejudice shown |
| Omission of Cal. Com. Code § 2309 instruction and excessiveness of damages | Damages reflect benefit‑of‑the‑bargain and foreseeable harm; instructions already guided jury on notice/reasonable period | §2309 requires terminable‑at‑will notice limitation; omission led to excessive, speculative damages | No instructional error or prejudice; damages (compensatory and punitive) not grossly excessive; remittitur/new trial denied |
Key Cases Cited
- Wong Kwai Sing v. Dulles, 265 F.2d 131 (9th Cir. 1959) (civil burden is preponderance of the evidence)
- Kern v. Levolor Lorentzen, Inc., 899 F.2d 772 (9th Cir. 1990) (standard for judgment as a matter of law)
- Air‑Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176 (9th Cir. 1989) (JMOL inappropriate where reasonable minds could differ)
- Janes v. Wal‑Mart Stores, Inc., 279 F.3d 883 (9th Cir. 2002) (substantial evidence standard on sufficiency review)
- Zhang v. Am. Gem. Seafoods, Inc., 339 F.3d 1020 (9th Cir. 2003) (standards for new trial under Rule 59)
- Passantino v. Johnson & Johnson Consumer Prods., 212 F.3d 493 (9th Cir. 2000) (new trial only if verdict contrary to clear weight of evidence)
- Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814 (9th Cir. 2001) (district court may not grant new trial merely because it would have reached different verdict)
- Milhouse v. Travelers Commercial Ins. Co., 982 F. Supp. 2d 1088 (C.D. Cal. 2013) (remittitur and new trial standards)
- Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422 (9th Cir. 1996) (jury damage awards receive substantial deference)