63 Cal.App.5th 793
Cal. Ct. App.2021Background
- NMAC (a floorplan lender) financed Kahn/Superior auto dealerships; during the 2008 recession NMAC representatives (notably Steve Lambert) made oral assurances to Kahn about continued financing through 2009. Kahn sold a dealership and provided personal guarantees relying on those assurances.
- Despite oral assurances, NMAC cut off floorplan lending and foreclosed on February 11, 2009. Superior cross-claimed promissory fraud theories (negligent misrepresentation; fraudulent concealment) against NMAC.
- First trial: trial court granted nonsuit on Superior’s promissory-fraud claims under the old Pendergrass rule; on appeal Riverisland overruled Pendergrass and Superior’s fraud claims were revived, prompting a retrial limited to those fraud claims.
- Retrial: jury found for Superior on negligent misrepresentation and fraudulent concealment and awarded $256.45 million (compensatory + punitive). NMAC moved for a new trial based on juror misconduct (Juror Woodside) and also moved for JNOV; trial court granted new trial for juror misconduct but denied JNOV.
- Appeals: Superior appealed the new-trial order; NMAC cross-appealed the denial of JNOV. The Court of Appeal affirmed both the new-trial order (finding no forfeiture and sufficient evidence of juror misconduct/prejudice) and the denial of JNOV (finding sufficient evidence for negligent misrepresentation and fraudulent concealment).
Issues
| Issue | Plaintiff's Argument (Superior) | Defendant's Argument (NMAC) | Held |
|---|---|---|---|
| Did NMAC forfeit right to seek new trial based on juror Woodside's alleged misconduct? | NMAC knew or should have known of Woodside's partial disclosures and questions during trial and therefore forfeited raising misconduct after verdict. | NMAC had no knowledge that Woodside's questionnaire answers were false or that she had conducted outside research until postverdict investigation. | The court held NMAC did not forfeit; declarations and record supported trial court’s credibility finding that NMAC lacked knowledge pre-verdict. |
| Did the trial court abuse its discretion in granting a new trial for juror misconduct (nondisclosure and outside research)? | Woodside’s omissions were innocent or trivial; no substantial evidence of outside research or bias; misconduct was not prejudicial. | Woodside gave patently false/misleading questionnaire answers and posed a timing-belt question based on outside information; her conduct likely biased deliberations and was prejudicial (9–3 verdict). | The court found substantial evidence supported the trial court’s factual findings of nondisclosure and outside-source information, and that the misconduct was prejudicial; no abuse of discretion. |
| Was JNOV required on the negligent misrepresentation claim because statements were mere promises of future action, not statements of past/existing fact? | Lambert’s assurances were promises about future conduct and thus cannot support negligent misrepresentation; written agreements contradicted reliance. | Lambert’s November 3 assurance ("nobody is shutting you down") related to contemporaneous deliberations at NMAC and could be a factual misrepresentation without reasonable basis, supporting negligent misrepresentation; reliance established. | The court held substantial evidence supported negligent misrepresentation (Lambert’s November 3 statement could be treated as a misrepresentation of present fact), so denial of JNOV was affirmed. |
| Was JNOV required on fraudulent concealment (duty to disclose, reliance, punitive damages)? | No duty to disclose internal deliberations or intention not to perform; any nondisclosure was immaterial; punitive award excessive or based on expanded theory. | A disclosure duty arose from the parties’ contractual/transactional relationship; NMAC concealed material internal decisions (e.g., decision to "pull the plug") while reassuring Kahn, and Superior detrimentally relied. | The court held substantial evidence supported the jury’s findings on duty, intentional concealment, and detrimental reliance; fraudulent concealment and punitive damages stand for remand consideration. |
Key Cases Cited
- Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., 55 Cal.4th 1169 (Cal. 2013) (overruled Pendergrass; permits parol evidence to prove promissory fraud in certain circumstances)
- Weathers v. Kaiser Foundation Hospitals, 5 Cal.3d 98 (Cal. 1971) (no-knowledge requirement and forfeiture rule for juror-misconduct new-trial motions)
- Pendergrass (Bank of America etc. Assn. v. Pendergrass), 4 Cal.2d 258 (Cal. 1935) (earlier rule limiting parol evidence; later abrogated by Riverisland)
- Warner Constr. Corp. v. City of Los Angeles, 2 Cal.3d 285 (Cal. 1970) (circumstances giving rise to duty to disclose in nondisclosure/fraud claims)
- LiMandri v. Judkins, 52 Cal.App.4th 326 (Cal. Ct. App. 1997) (duty to disclose arises from fiduciary/confidential or transactional relationships)
- In re Manriquez, 5 Cal.5th 785 (Cal. 2018) (unintentional juror nondisclosure and standard for prejudice/presumption)
- Marketing West, Inc. v. Sanyo Fisher (USA) Corp., 6 Cal.App.4th 603 (Cal. Ct. App. 1992) (concealment of corporate decisions while making reassuring representations can support fraudulent concealment)
- Stockton Mortgage, Inc. v. Tope, 233 Cal.App.4th 437 (Cal. Ct. App. 2014) (future promises generally cannot support negligent misrepresentation)
- Tindell v. Murphy, 22 Cal.App.5th 1239 (Cal. Ct. App. 2018) (elements of negligent misrepresentation)
- Ovando v. County of Los Angeles, 159 Cal.App.4th 42 (Cal. Ct. App. 2008) (standards for reviewing new-trial orders and juror-misconduct prejudice)