CRAIG MISSAKIAN v. AMUSEMENT INDUSTRY, INC., et al.
B296749
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE
Filed 9/29/21
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. BC616089)
APPEAL from a judgment of the Superior Court of Los Angeles County, Rafael A. Ongkeko, Judge. Reversed and remanded with directions.
Salisian Lee and Richard H. Lee; Law Offices of Craig Missakian and Craig H. Missakian; Greines, Martin, Stein & Richland and Timothy T. Coates for Plaintiff and Appellant.
Bashir E. Eustache for Defendant and Appellant Amusement Industry, Inc.
Tucker Ellis, Marc R. Greenberg for Defendant and Appellant Allen Alevy.
Professor Laurie Levenson as Amicus Curiae on behalf of Defendant and
Former in-house counsel Craig Missakian (Missakian) filed suit against his former employer Amusement Industry, Inc. (Amusement) and its
Amusement appeals from the portion of the judgment awarding damages for breach of oral contract. Amusement contends the contract in question is void under
Missakian appeals from the order granting JNOV on the promissory fraud claim. We find the jury‘s special verdict to be inconsistent because it found Alevy did not make a false promise, but that Amusement (acting only through Alevy) did. Because the court cannot choose between the jury‘s inconsistent responses, the court should have ordered a new trial as to all parties rather than JNOV.
Alevy appeals from a postjudgment order denying his motion for attorney fees. In light of our reversal of the judgment and remand for a new trial, Alevy‘s contentions are moot.
The judgment is reversed, and the case is remanded for a new trial as to all parties.
FACTUAL BACKGROUND
During the time frame relevant to this case, Alevy was an owner, officer, and board member of Amusement, with authority to enter into contracts on behalf of Amusement. Amusement was a real estate company, and the company was engaged in ongoing litigation (the Stern Litigation) in New York, stemming from a real estate deal in which Amusement lost $13 million to an alleged fraudster. Sometime in the summer of 2010, Alevy contacted
Alevy offered and Missakian accepted the terms of his employment at Amusement (the Oral Contract). As general counsel,3 Missakian would receive a salary of $325,000. Once the Stern Litigation resolved, Missakian would receive a bonus of $6,250 for each month he had worked on that litigation (Monthly Bonus), and an additional bonus of ten percent of the recovery in the Stern Litigation, excluding ordinary litigation costs (Stern Litigation Bonus). The parties exchanged multiple written drafts negotiating various details of the Oral Contract, but they never signed a written contract. Missakian started working as an employee at Amusement on December 10, 2010, spending most of his time on the Stern Litigation, but doing some other work as well.
In March 2011, Missakian learned of the existence of a draft agreement that significantly altered the terms of the Oral Contract, specifying that the Stern Litigation Bonus would be based not on all amounts recovered, but on the balance after Amusement‘s initial $13 million loss and other litigation expenses (such as in-house and outside attorney fees) had been deducted. Missakian “blew up” upon discovering this new draft, but Alevy reassured him that the language was a mistake. Missakian continued working, periodically inquiring about a revised agreement. Alevy usually deflected his inquiries.
As the Stern Litigation moved closer to settlement, Missakian renewed his efforts to reduce the Oral Contract to writing. He sent a new draft agreement to Alevy on April 7, 2014. Alevy told Missakian he already had a signed agreement in his personnel file. Upon obtaining the copy (which was dated December 10, 2010 and was signed by Alevy) from his personnel file, Missakian believed Alevy and Amusement were trying to change the Oral Contract, because the version from the file again contained language that Missakian had disputed in March 2011. Later the same day, Missakian sent an e-mail to Alevy and Yanki Greenspan, president of Amusement, that included the following: “When I first saw this agreement I was furious and almost quit on the spot. I was told that it was a mistake. Now I see that I was lied to and that it was not a mistake but an attempt to paper the file without my knowledge. I simply cannot believe that this was done or that anyone could believe it would hold up in court. Please understand that if we cannot resolve the matter this week, I will be submitting my resignation based on the company‘s tortious denial of and anticipatory breach of our oral agreement
The Stern Litigation settled in February 2015, with Amusement receiving a settlement of $26 million. Missakian never received the Monthly Bonus or the Stern Litigation Bonus.
PROCEDURAL HISTORY
A. Complaint, demurrer, and writ
In April 2016, Missakian filed suit against Alevy and Amusement, alleging five causes of action: breach of contract, fraudulent inducement, failure to pay wages (
Alevy and Amusement filed a demurrer to the complaint and moved to strike from the complaint all references to the Stern Litigation Bonus. Both defendants argued that Missakian was barred from enforcing the Oral Contract, because a contingency fee agreement is voidable unless in writing, signed by both parties. The trial court overruled the demurrer, but granted the motion to strike, reasoning that
Missakian filed a petition for writ of mandate, seeking relief from this court. Missakian argued the trial court made two errors when it granted the motion to strike. First, the court erroneously construed
Ruling on Missakian‘s petition, this court offered the following tentative conclusion: “In reviewing an order sustaining a demurrer, we take the allegations of the complaint as true. (Dale v. City of Mountain View (1976) 55 Cal.App.3d 101, 105.) Plaintiff‘s complaint alleges that
B. Pretrial motions
Before trial, the parties filed several motions in limine raising the issue of the Oral Contract‘s enforceability under
C. Special verdicts after trial
The parties went to jury trial on two causes of action: breach of oral contract and promissory fraud. The jury found that Amusement had breached the Oral Contract. For Amusement‘s failure to pay the Stern Litigation Bonus, the jury awarded Missakian $2.25 million, and for the failure to pay the Monthly Bonus, the jury awarded $275,000.
On the promissory fraud claim, the jury ultimately entered a special verdict in favor of Alevy, but against Amusement.5 It made special verdict findings that while Alevy made a promise to Missakian, he intended to keep the promise when made. However, the jury found against Amusement on the promissory fraud claim, finding it made a false promise, and awarded Missakian $750,000 in compensatory damages. The jury further found that Amusement acted with malice, oppression, and/or fraud, and awarded $1,750,000 in punitive damages against Amusement.
After the jury returned its verdict, Amusement filed motions for new trial and JNOV. The trial court denied Amusement‘s new trial motion, as well as the portion of the JNOV motion relating to Missakian‘s breach of contract claim. The court granted Amusement‘s JNOV motion as to the promissory fraud claim, explaining “that because Defendant Alevy was found not liable for fraud, neither should defendant Amusement have been found liable for fraud. The court agrees with Amusement that Plaintiff‘s sole theory of promissory fraud began and ended with his dealings with Defendant Alevy. . . . If Alevy did not make a false promise, as the jury found, whatever reliance Plaintiff had was not based on anything false.” Rejecting Missakian‘s argument that there was evidence of arguably fraudulent acts or statements by other individuals acting on behalf of Amusement, the court explained that the jury was not instructed on that “different (and unpled) fraud theory.” Finding that there was no substantial evidence to support Amusement‘s liability for promissory fraud, the court granted JNOV in part, as to the promissory fraud and punitive damage judgment against Amusement.
E. Alevy‘s motion for attorney fees
Alevy filed a motion to recover his attorney fees based on the Oral Contract‘s fee provision. The trial court denied Alevy‘s motion, explaining that because Missakian‘s sole claim against Alevy—fraudulent inducement—is a tort claim, not a contract claim, attorney fees were not available under
DISCUSSION
A. Breach of oral contract
Amusement appeals from the judgment, arguing that Missakian cannot prevail on his breach of contract claim because the Oral Contract between Missakian and Amusement is voidable under
1. Standard of review
The interpretation of a statute is a question of law that we review de novo. (Smith v. LoanMe, Inc. (2021) 11 Cal.5th 183, 190.) “Our fundamental task in interpreting a statute is to determine the Legislature‘s intent so as to effectuate the law‘s purpose. We first examine the statutory language, giving it a plain and commonsense meaning. We do not examine that language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment. If the language is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend. If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute‘s purpose, legislative history, and public policy.” (Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.)
2. The statutory scheme
[Citations.]
An oral contingency fee agreement cannot be enforced by an attorney. Under
The plain language of
Dictionaries and treatises further support our understanding that the term “contingency fee” generally refers to compensation tied to the client‘s success. Black‘s Law Dictionary defines “contingent fee” or “contingency fee” as “[a] fee charged for a lawyer‘s services only if the lawsuit is successful or is favorably settled out of court. Contingent fees are us[ually] calculated as a percentage of the client‘s net recovery (such as 25% of the recovery if the case is settled, and 33% if the case is won at trial).” (Black‘s Law Dict. (11th ed. 2019).) According to the Restatement Third of the Law Governing Lawyers, a contingency fee contract “is one providing for a fee the size or payment of which is conditioned on some measure of the client‘s success. Examples include a contract that a lawyer will receive one-third of a client‘s recovery and a contract that the lawyer will be paid by the hour but receive a bonus should a stated favorable result occur.” (Rest.3d Law Governing Lawyers, § 35, com. a, p. 257; see also 1 Witkin, Cal. Proc. (5th ed. 2008, Attorneys, § 176, p. 245.) The Merriam-Webster Unabridged Dictionary defines “contingency fee” as “a fee for services (as of
4. The role of in-house counsel
Next, we turn to the initial portion of
In PLCM, a legal malpractice insurance company prevailed in a lawsuit brought by the insurance company against its insured (an attorney) for a deductible payment. The insured cross-complained, asserting bad faith and related claims. The insurance company was represented in the litigation by its parent company‘s in-house attorneys. After the insurance company prevailed, it sought an award of attorney fees under
The PLCM court concluded that the cost of representation by in-house attorneys fell within the scope of attorney fees available under
In Gutierrez v. G & M Oil Co., Inc. (2010) 184 Cal.App.4th 551 (Gutierrez), the defendant company sought mandatory relief from a default judgment entered against it, citing the attorney fault provision in
The appellate court declined to read into
5. Analysis
Given the terms of the Oral Contract at issue in this case, most significantly the Stern Litigation Bonus, and cognizant of Missakian‘s principal role as an attorney representing Amusement in the Stern Litigation, we readily conclude that he acted as “[a]n attorney who contract[ed] to represent a client on a contingency fee basis.” (
Despite the foregoing, Missakian argues for a wholesale exemption for in-house attorneys from the requirements of
because in-house attorneys are paid “wages,” not “fees,” and the use of the word “fees” reflects the Legislature‘s intent to exempt in-house attorneys. In support of this argument, he cites to
Missakian attempts to bolster his argument for a narrow reading of the term “fee” by pointing to two cases—General Dynamics, supra, 7 Cal.4th 1164, and Chyten v. Lawrence & Howell Investments (1993) 23 Cal.App.4th 607 (Chyten)—that he claims demonstrate the Legislature‘s awareness of case law drawing a sharp distinction between the contractual rights of in-house attorneys and privately retained attorneys. While both cases draw a distinction between in-house and privately retained attorneys in situations where the client ends the attorney-client relationship, we find nothing in the reasoning of either case to support reading
Both Chyten and General Dynamics were decided against the backdrop of the holding in Fracasse v. Brent (1972) 6 Cal.3d 784 (Fracasse), that when a client discharges an attorney, the attorney cannot sue for breach of contract, but rather is limited to a quantum meruit recovery. “In doing so, we preserve the client‘s right to discharge his attorney without undue restriction, and yet acknowledge the attorney‘s right to fair compensation for work performed.” (Id. at p. 791.) Fracasse involved a traditional contingency fee agreement between a personal injury attorney and an individual client. (Id. at p. 786.)
In General Dynamics, the California Supreme Court upheld an in-house attorney‘s right to bring tort and contract claims for wrongful discharge against an employer in certain circumstances. (General Dynamics, supra, 7 Cal.4th at p. 1169.) Like Chyten, General Dynamics involved an attorney who claimed he had been wrongfully terminated. (Id. at p. 1171.) The opinion includes “an extended and nuanced disquisition of the role of in-house attorneys.” (Gutierrez, supra, 184 Cal.App.4th at p. 559.) The General Dynamics court discussed the increasing numbers of in-house attorneys and the unique confluence and potential conflicts inherent in that role, particularly with respect to an attorney‘s professional and ethical duties. (General Dynamics, supra, 7 Cal.4th at pp. 1171-1173.) The court‘s decision was heavily qualified to emphasize that the holding was based on facts that were unlikely to have an adverse impact on the central values of the attorney-client relationship. The opinion explains: “because so-called ‘just
Missakian contends that finding
The dual status of in-house counsel—acting as both employee and attorney—and the dual status of the company—acting as both employer and client—can pose some challenging questions about when one role takes precedence over another. However, in the context of interpreting and applying
The very existence of
B. Promissory fraud
Missakian‘s appeal seeks to reverse the court‘s JNOV order and reinstate judgment in his favor on his promissory fraud claim against Amusement. Alternatively, he contends the verdict is inconsistent and a new trial is necessary against both Amusement and Alevy. Amusement contends that JNOV was correctly granted, and that there is no inconsistency in the jury‘s special verdict because there was no substantial evidence to support a finding of promissory fraud. Alevy contends that no new trial is warranted based on inconsistent verdicts, but in any event, Missakian‘s request for a new trial is untimely and waived as to Alevy based on Missakian‘s failure to move for a new trial against Alevy in the trial court.
We conclude the trial court erred by crediting one of two inconsistent special verdict responses, and a new trial on Missakian‘s promissory fraud claim is necessary.
1. Legal framework and standard of review
The elements of fraud are misrepresentation, knowledge of falsity, intent to induce reliance on the misrepresentation, justifiable reliance on the misrepresentation, and resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).) Promissory fraud is a subspecies of fraud, and an action may lie where a defendant fraudulently induces the plaintiff to enter into a contract, by making promises he does not intend to keep. (Ibid.) “[T]he intent element of promissory fraud entails more than proof of an unkept promise or mere failure of performance.” ( Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1183 (Riverisland); Lazar, supra, 12 Cal.4th at p. 638 [a promissory fraud claim “does not depend upon whether the defendant‘s promise is ultimately enforceable as a contract“].) “[P]romissory fraud requires proof of ‘(1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise[e].’ [Citation.]” (Gruber v. Gruber (2020) 48 Cal.App.5th 529, 540.)
A trial court may grant the defendant a JNOV only if no substantial evidence supports a verdict in the plaintiff‘s favor. (Webb v. Special Electric Co., Inc. (2016) 63 Cal.4th 167, 192.) In passing upon the propriety of a JNOV order, appellate courts view the evidence in the light most favorable to the party who obtained the verdict and against the party to whom JNOV was awarded. (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 546 (Hasson), overruled on other grounds by Soule v. General Motors Corp. (1994) 8 Cal.4th 548.)
An order granting JNOV “cannot be dependent on another of the jury‘s verdicts in the case.” (Stillwell v. The Salvation Army (2008) 167 Cal.App.4th 360, 375 (Stillwell); see also Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344 (Shaw). The law contemplates the entry of a judgment that is in accord with the special verdict. (
2. Summary of trial, jury instructions, and jury deliberations
a. Trial
In Missakian‘s opening statement, his attorney told the jury that Missakian would testify he would not have started at Amusement unless he had a concrete deal on the terms of his employment, including the Stern Litigation Bonus and the Monthly Bonus. Explaining Missakian‘s theory of promissory fraud, Missakian‘s counsel stated “the idea is that the defendant, or defendants here, would be Mr. Alevy would have made a promise or representation that not only did he not keep, but that there was an immediate repudiation of that promise. [¶] In other words, he did something behind plaintiff‘s back, or that would be our contention, that was completely contrary to the promise that was just made.” Missakian‘s counsel further explained that Missakian would testify that he met with Alevy, Alevy made him the offer, including the terms of the salary and the bonuses, and that Missakian and Alevy shook hands on the deal. Thereafter, the evidence would show an exchange of e-mails with different versions of a written agreement, fine-tuning certain terms. Counsel outlined that the evidence would show later incidents gave Missakian pause. In March 2011, he discovered a different version of his draft agreement with changes so egregious he would not have accepted employment on the terms outlined. Alevy assured Missakian that the version he had just seen was a mistake. Later, Missakian wanted to make sure “Alevy is going to follow through on his word and honor the parties’ agreement about the compensation,” but it became clear to Missakian that Alevy and Amusement were not going to pay the Stern Litigation Bonus, and he eventually left Amusement and accepted different employment, with a drop in pay.
Amusement‘s opening statement focused on the theory that there was never a meeting of the minds on the terms of an agreement, and the parties’ inability to agree on the terms of a written agreement demonstrated that there was never an oral agreement, particularly with respect to the details of the Stern Litigation Bonus.
After the close of Missakian‘s case-in-chief, Alevy‘s attorney moved for non-suit, arguing that there was no evidence Alevy had any intent to defraud Missakian when he made the offer of employment. The court denied the motion, noting that “plaintiff‘s theory is he was offered certain terms and he took the job based on the terms offered.”
At the start of defendants’ case, Alevy‘s attorney made an opening statement emphasizing that the case was very simple; it concerned a lawyer who did not get an agreement in writing so it would be clearly understood by both sides. Instead, there was a misunderstanding. Missakian blew up and decided to leave, but the decision to leave was his own. The defendants presented testimony from three Amusement employees, as well as video testimony from Missakian‘s deposition. Missakian offered brief rebuttal testimony from himself and a former Amusement attorney.
In closing argument, Missakian‘s attorney reminded the jurors of the questions posed at the outset of the case, including whether “Mr. Allen Alevy on behalf of himself and also for Amusement, did they make promises to Mr. Missakian that the defendants did not intend to keep?” Alevy‘s closing argument focused on the fact that Missakian claimed to have entered into a handshake deal with Alevy on October 27, 2010, but then the parties continued to negotiate afterwards. On the fraud claim, Missakian learned in March 2011 that there was a materially different draft agreement, but he continued working until August 2014 and did not sue until April 2016. Despite his training and education, Missakian did not clarify the details of the parties’ agreement in writing, but Alevy‘s proposed edits showed he consistently considered the Stern Litigation Bonus to be based on the net recovery, meaning it would be calculated after expenses were deducted. The negotiations demonstrated that Alevy never thought that he would defraud Missakian, but that he only expected to pay the Stern Litigation Bonus net of the $13 million Amusement had lost. Amusement‘s closing argument followed similar themes, emphasizing that there had been no meeting of the minds on the terms of an agreement, and that Alevy had insisted on the term “net” from the first written draft.
Missakian gave his own rebuttal closing argument, painting himself as a talented, hardworking litigator who successfully turned the Stern Litigation
b. Jury instructions
Most of the jury instructions were taken from the Judicial Council of California Civil Jury Instructions (CACI). The court gave CACI No. 1902 (false promise), referring to the defendants collectively in the introduction and as to each element. The introduction started: “Mr. Missakian claims he was harmed because defendants Amusement and Mr. Alevy (“Defendants“) made a false promise.” Then each element also referred to “Defendants” collectively.
For CACI No. 3948 (Punitive damages – individual and corporate defendants [corporate liability based on acts of named individual] – bifurcated trial [first phase]), the instruction addressed Alevy‘s individual liability and then Amusement‘s corporate liability. The first paragraph stated, “If you decide that Mr. Alevy‘s conduct caused Mr. Missakian‘s harm, you must decide whether that conduct justifies an award of punitive damages against Mr. Alevy and, if so, against Amusement.” For Alevy, the court instructed, “You may award punitive damages against Mr. Alevy only if Mr. Missakian proves by clear and convincing evidence that Mr. Alevy engaged in that conduct with malice, oppression, or fraud.” After defining those terms, the instruction continued,: “You may also award punitive damages against Amusement based on Mr. Alevy‘s conduct if Mr. Missakian proves one of the following by clear and convincing evidence. . . .” The instruction went on to describe different scenarios where Alevy‘s conduct resulted in harm to Missakian.
c. Initial special verdict
The jury‘s special verdict responses on the contract claim found that Amusement had breached the Oral Contract and failed to pay the Stern Litigation Bonus and the Monthly Bonus.15 The jury awarded Missakian combined breach of contract damages of $2,525,000.
On Missakian‘s promissory fraud claim, the jury‘s responses on the initial special verdict form were ambiguous. The jury found defendants Alevy and
d. Revised special verdict
At a conference outside the presence of the jury, Missakian asked the court to use a revised special verdict form in light of the instructional error and the inconsistency between the jury‘s responses on promissory fraud and punitive damages. The attorneys for Amusement and Alevy objected, arguing that a revised form was unnecessary because the jury‘s responses made it clear that they found no promissory fraud. The attorneys further argued that the availability of punitive damages was a legal question that made the jury‘s response on malice, oppression, and fraud irrelevant. Alevy‘s attorney also argued that the jury‘s responses had exonerated Alevy entirely.
The court decided to have the jury complete a revised form. As the jury was returning to the courtroom, and while changes were being made to the special verdict form, Alevy‘s attorney pointed out that the special verdict form did not separate the two defendants on the promissory fraud claim, Amusement and Alevy. Missakian agreed to separate revised verdict forms for each defendant. The court denied Alevy‘s oral motion for a mistrial, but acknowledged that the court and the parties together bore responsibility for providing proper special verdict forms and the court should have scrutinized the initial form more closely. Over objections by Amusement and Alevy, the court instructed the jury to complete the revised special verdict forms for promissory fraud and punitive damages only.
3. Analysis
Missakian and Amusement each contend that the jury‘s special verdict responses mandate that judgment should be entered in their favor and against the opposing party on the promissory fraud claim. Exercising de novo review, we find the special verdict responses to be inconsistent. Because the law does not permit a court to choose between two inconsistent responses, we conclude the trial court erred by granting JNOV in favor of Amusement based on the jury‘s special verdict response as to Alevy. We remand the case for a new trial.
a. The special verdict was inconsistent
The jury‘s responses on the revised special verdict forms—that Amusement made a false promise, but Alevy did not—are contradictory on a material issue. From opening statements, through the presentation of evidence, closing arguments, and jury instructions, Missakian presented, and defendants contested, only a single theory of the case: that Alevy, acting for himself and as Amusement‘s agent, made the promise upon which Missakian relied. (Fuller, supra, 38 Cal.App.5th at p. 1038; Singh, supra, 186 Cal.App.4th at p. 358.) While evidence of what other Amusement employees said and did both before and after Missakian and Amusement reached an oral agreement may have provided some circumstantial evidence of Amusement‘s intent, it does not negate the inconsistency at the heart of the jury‘s special verdict responses. Missakian framed the case solely on Alevy‘s promises, and never argued to the jury that Amusement made any misrepresentations through anyone other than Alevy. The jury made inherently inconsistent factual findings at the core of the promissory fraud case in returning a special verdict that Amusement made a false promise, but that Alevy did not.
Missakian contends the jury‘s two opposing findings should be reconciled. He argues that the words and actions of other Amusement employees supported the jury‘s finding that Amusement did not intend to keep its promise, even though the jury also found that Alevy did intend to
Second, as described above, Missakian‘s argument is at odds with the pleadings and theory of the case reflected in counsels’ arguments and the jury instructions. (Fuller, supra, 38 Cal.App.5th at p. 1038; Singh, supra, 186 Cal.App.4th at p. 358.) The possibility that Amusement‘s promise and intent would be different than Alevy‘s promise and intent was never contemplated by the parties and their attorneys, nor was that possibility mentioned in the pleadings, trial briefs, opening statements, or closing arguments to the jury. In fact, the initial special verdict form referred to defendants collectively, such that it was not contemplated the jury would even have the opportunity to make different findings for Amusement and Alevy. Only in the midst of deliberations, after unrelated problems arose with the special verdict form, did Alevy‘s attorney request that the verdict form be split between the two defendants. This request was made in an apparent attempt to insure Alevy‘s non-liability for punitive damages. This revision to the special verdict form did not transform the case from the sole factual theory on which it had been tried.
Amusement also contends the trial court‘s grant of its JNOV motion should be affirmed because there was no substantial evidence to support a promissory fraud judgment against Amusement. But Amusement‘s framing of its argument in the guise of a substantial evidence claim is disingenuous: to argue no substantial evidence, Amusement necessarily relies on the trial court‘s decision to accept the verdict against Alevy over the verdict against Amusement. Explaining its reasoning for granting Amusement‘s JNOV motion, the trial court credited the jury‘s response that Alevy had not misrepresented his personal intent to carry out the promises made. Accepting this finding, the trial court then reasoned that, since Alevy was the only person alleged to have made the representations on which Missakian had relied, Amusement could not logically be held liable for promissory fraud. The trial court stated: “If Alevy did not make a false promise, as the jury found, whatever reliance [Missakian] had was not based on anything false.” Because
Reviewing the evidence, opening statements, closing arguments, and jury instructions, we conclude there is no way to resolve the inconsistency between the two findings. In light of this material inconsistency, it was an error for the trial court to credit the jury‘s finding as to Alevy and rely on that aspect of the verdict to grant JNOV in favor of Amusement. Amusement was “no more entitled than [Missakian] to have the favorable verdict credited and the unfavorable one disregarded.” (Shaw, supra, 83 Cal.App.4th at p. 1346.)17 Where findings on material issues conflict, a special verdict cannot stand. (D.R. Horton, supra, 126 Cal.App.4th at p. 682.) “An inconsistent verdict may arise from an inconsistency between or among answers within a special verdict [citation] or irreconcilable findings . . . . [Under those circumstances,] all the questions are equally against the law.” (Trejo, supra, 13 Cal.App.5th at p. 124.)
b. Based on the inconsistent special verdict, a new trial is warranted
Alevy contends that by choosing not to seek a new trial under
Because we find the special verdict responses are inconsistent, both special verdict responses—the one against Amusement and the one in favor of Alevy—are invalid, and Missakian‘s claims against both defendants are subject to a new trial.
C. Alevy‘s motion for attorney fees
Based upon Alevy having prevailed in the trial court on the sole cause of action against him (i.e., promissory fraud), Alevy appealed the trial court‘s denial of his motion for attorney fees under
DISPOSITION
The judgment is reversed, and the case is remanded for a new trial as to all parties. In the interests of justice, each party shall bear their own costs on appeal.
MOOR, J.
I concur:
EGERTON, J.*
* Justice of the Court of Appeal, Second Appellate District, Division Three, assigned by the Chief Justice pursuant to
Missakian v. Amusement Industry, Inc. – B296749
RUBIN, P. J. – Concurring:
I agree with the result the majority opinion reaches. I write separately only to urge that the opinion be read narrowly, confined for the most part to facts similar to the present case. The majority‘s analysis, although undoubtedly correct when applied here, should not be interpreted as a blanket rule that governs all in-house attorney arrangements. There are many corporate counsel relationships that, in my view, are not subject to
It is fairly non-debatable that in-house counsel are on the same footing as their outside retained counterparts, at least for most purposes. For example, the attorney-client privilege itself applies. “The privilege protects communications between legal professionals within the law firm representing the client (Fireman‘s Fund Ins. Co. v. Superior Court (2011) 196 Cal.App.4th 1263, 1273-1274), communications between a business entity and its in-house counsel acting in a legal capacity (Alpha Beta Co. v. Superior Court (1984) 157 Cal.App.3d 818, 825), and communications made during preliminary consultation, regardless whether
I also agree with the majority that in-house counsel are attorneys for purposes of determining an award of statutory or contractual attorney‘s fees. (See PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1093.) And, I agree that in-house counsel should be treated the same as retained outside counsel for the attorney fault provision in
But I see substantial differences in salary/compensation to in-house counsel, on the one hand, and contingency fee compensation based on success or failure in standalone litigation, on the other. The reasons are fairly self-evident. As our Supreme Court has stated plainly: “A private corporation with an office of general counsel and a large corporate legal staff is not in any material sense analogous to the personal injury plaintiff of limited means who seeks representation in a single matter.” (General Dynamics Corp. v. Superior Court, supra, 7 Cal.4th at p. 1178.)
It is precisely that difference that requires a narrow reading of the majority‘s opinion. Its holding should not be treated as an invitation to meld the diverse types of compensation available to in-house counsel with the free-standing contingency agreement often found in personal injury representation. A fair reading of the record here is that Amusement hired Missakian to handle two related pieces of litigation (the Stern litigation) and as part of his compensation Missakian was to receive “a bonus equal to 10% of any and all sums recovered in the [Stern litigation] or related matters less” certain other fees and costs. To be sure, this initial interest developed into an agreement to act as in-house counsel. But from the outset of Missakian‘s employment as Amusement‘s counsel, part of his compensation was contingent, as that term is used in
The contingency fee agreed upon at the incipiency of the attorney-client relationship here is a factor that distinguishes the present case from those involving long standing employment relationships that regularly or periodically include percentage-based compensation, I give as examples: (1) the previously hired in-house counsel without a written employment agreement who one year is promised by the company that, if he or she is successful in reducing the amount of attorney‘s fees charged the company by outside counsel, the company will pay the in-house lawyer a 10 percent bonus based on the reduced amount of fees; and (2) in-house counsel, also without a written agreement, who is directed to represent the company as a plaintiff in litigation and is promised, in addition to regular salary, 10 percent of any recovery.
There are many other compensation structures that experienced in-house counsel could imagine. To insist that those attorneys already hired must ask their employer for a written agreement covering percentage compensation is unrealistic and likely to invite mischief. Nor is it in keeping with the language or the policies of
RUBIN, P.J.
Ultimately, it is the totality of the circumstances of the attorney-client relationship – not just the inclusion of a contingency element – that, in my view, determines whether