OAKLAND RAIDERS, Plаintiff and Appellant, v. OAKLAND-ALAMEDA COUNTY COLISEUM, INC., Defendant and Appellant.
No. C045792
Third Dist.
Nov. 17, 2006.
144 Cal. App. 4th 1175
BUTZ, J.; Raye, J., concurred; DAVIS, Acting P. J., Dissenting.
[CERTIFIED FOR PARTIAL PUBLICATION*]
Howard Rice Nemerovski Canady Falk & Rabkin, Jerome B. Falk, Jr., Kenneth G. Hausman, Douglas A. Winthrop, Jonathan W. Hughes; Dreyer, Babich, Buccola & Callaham, Roger A. Dreyer; and Jeffrey E. Birren for Plaintiff and Appellant.
OPINION
BUTZ, J.—A jury awarded plaintiff Oakland Raiders, a California limited partnership (the Raiders) $34.2 million in damages against defendant Oakland-Alameda County Coliseum, Inc., a California nonprofit corporation (OACC) on the Raiders’ claim for negligent misrepresentation regarding the status of season ticket sales, representations that were allegedly made to induce the team to leave Los Angeles and sign a long-term contract to play at their former home in Oakland. The size of the jury award was only a fraction of the amount of compensatory damages the Raiders had sought. The jury also found that OACC had breached its implied covenant of good faith and fair dealing in negotiating its long-term contrаct with the Raiders, but that the Raiders had suffered no damage as a result. The trial court denied the Raiders’ posttrial motion for attorney fees. Both sides appeal from the ensuing judgment and the Raiders appeal from the order denying them attorney fees.
For the reasons that follow, we shall conclude that OACC‘s motion for judgment notwithstanding the verdict (JNOV) on the fraud count was meritorious and should have been granted.
In an unpublished portion of this opinion, we also find without merit the Raiders’ assignments of evidentiary and instructional error on cross-appeal. We shall reverse with directions, while dismissing as moot the Raiders’ appeal from the order denying attorney fees.
FACTUAL BACKGROUND
OACC is a nonprofit public benefit corporation that was formed in 1961 for the purpose of helping to finance and construct a multipurpose public recreation coliseum and stadium (Coliseum) in the City of Oakland. The Raiders are a professional football team which, in 1960, began its existence in Oakland as a member of the American Football League (AFL). When the
Until 1980, the Raiders played at the Coliseum under a series of five-year leases. In 1982, the team relocated to Los Angeles. However, as the expiration of their stadium lease in Los Angeles drew near, the Raiders entered into negotiations with the City of Oakland (City), County of Alameda (County) and OACC to bring the team back to Oakland.
These negotiations culminated in two letter agreements, both dated June 23, 1995. The first agreement set forth material terms for completion of documents to implement a long-term contract that would commit the Raiders to play in the Coliseum for 1995 and for 15 subsequent football seasons. A confidential side agreement described the first agreement as a “letter of intent,” described the parties’ rights and obligations for the upcoming 1995 season, and set forth certain contingencies that would allow the Raiders to terminate the contemplated transaction.1
OACC then launched a marketing campаign to sell personal seat licenses (PSL‘s) as well as club and luxury suites to the fans. By purchasing a PSL, a fan acquired the right (and assumed the obligation) to buy season tickets in designated seats for the Raiders’ games for the 1995 season and for the next 10 seasons. Because of strong demand, the accounting firm of Arthur Andersen LLP was retained to conduct a lottery for PSL seating assignments. To be included in the lottery, a fan had to submit a PSL application and a 25 percent deposit by July 17, 1995. To complete the purchase, if accepted, the applicant had to put down an additional 25 percent within 15 days of the invoice date, and pay the remaining 50 percent by March 15, 1996.
On July 20, 1995, OACC issued a press release, forwarded to the Raiders, entitled “1995 Games Sell Out in First Phase of [the] Raider[s‘] Ticket Drive.” The release declared that PSL‘s were “grabbed off rapidly” in the first round of marketing which closed on July 17, and that 46,980 seats were sold, including 44,700 PSL‘s and 2,280 seats to suite holders. It continued: “Along
There was evidence that OACC repeated the substance of these representations to the Raiders between July 20 and August 7, 1995.
In fact, while some 45,000 PSL applications had been received, Arthur Andersen LLP excluded about 10 percent of them from the lottery due to credit card problems. Additional applicants were disqualified after the lottery due to bounced checks and other reasons, such that 37,000 PSL seats finally ended up being assigned.
On August 7, 1995, the Raiders executed a binding contract with OACC, the City, County and other entities (collectively the East Bay Entities), committing the Raiders to play in Oakland for 16 consecutive football seasons. The contract consisted of a “Master Agreement” and a series of incorporated collateral agreements (collectively the August 7 agreements), governing such matters as stadium operation, loans for improvements, marketing and revenue sharing.
The Raiders presented testimony to the effect that they were not informed of the true state of PSL and luxury seat sales prior to executing the August 7 agreements. The Raiders’ team is controlled by its general partner, A. D. Football, Inc., a California corporation, and its president, Al Davis, who signed all of the agreements on behalf of the Raiders. Davis testified that he relied on the “sellout” representations in entering into the August 7 agreements and that, had he known the representations were false, he would have pursued overtures from representatives of the City of Baltimore, who were trying to persuade the team to move there.
The Raiders learned the true facts concerning the status of ticket sales during the 1995 football season.
On June 1, 1996, the Raiders executed a new agreement with the East Bay Entities, which incorporated and supplemented the August 7 agreements
The Supplement concluded that “[e]xcept as otherwise specifically supplemented, interpreted or modified by this Supplement, all terms and provisions of the [August 7] [a]greements shall remain unmodified and in full force and effect. This Supplement and the other agreements and schedules referred to herein, shall constitute the entire agreement among the parties relating to the subject matter hereof and . . . shall supersede any negotiations, understandings, or agreements, written or oral relating to the subject matter hereof and thereof, and shall not be changed or terminated orally.” (Italics added.)
Although all PSL and luxury suites had not been sold at the time the August 7 agreements were executed, the Raiders ultimately sold out the Coliseum in the 1995 football season, and they made no claim of financial loss for that year. However, the Raiders’ performance faltered at the end of 1995 and they fell below .500 in winning percentage in 1996. While gross ticket sales in 1996 remained about the same as the previous year, the Raiders did not sell out, due to expansion of the stadium. Attendance slipped further in 1997, when the Raiders won four and lost 12 games. Thus, the Raiders failed to sell out in either 1996 or 1997.
The Raiders’ theory of damages was that a sellout of PSL‘s and luxury suites in 1995 would have created an “excess demand” for tickets that would have resulted in season sellouts for the next 15 years. The Raiders’ witnesses also testified that by contracting with OACC the team lost the opportunity to move to Baltimore, where the team would have realized greater profits and enhanced franchise value.
PROCEDURAL HISTORY
This litigation commenced in September 1997, when the East Bay Entitiеs brought an action against the Raiders seeking, inter alia, a declaratory
The Raiders countered with a cross-complaint setting forth causes of action for rescission, breach of contract, declaratory relief, and intentional and negligent misrepresentation.
In pretrial proceedings, the law and motion judge ruled that the Raiders could not rescind the August 7 agreements and Supplement, thereby granting the East Bay Entities’ motion for summary judgment on the declaratory relief cause of action. In the same order, the judge granted the Raiders leave to amеnd their cross-complaint to state a cause of action for breach of the implied covenant of good faith and fair dealing with respect to the June 23 letter agreements, based upon misrepresentations of material fact as to the status of ticket sales. The Raiders amended their cross-complaint accordingly.
The court subsequently dismissed the Raiders’ tort claims (including misrepresentation) against all of the East Bay Entities except OACC for failure to comply with the claims presentation requirements of the California Tort Claims Act (
Eventually OACC was judicially deemed to be a private entity for purposes of this lawsuit as a discovery sanction for willful failure to comply with orders to produce documents and for evasive and incomplete answers to interrogatories pertaining to OACC‘s status as a public or private entity.2
The case submitted to the jury was pared down to the Raiders’ claims for intentiоnal misrepresentation, negligent misrepresentation and breach of the implied covenant of good faith and fair dealing.
DISCUSSION
OACC contends that the evidence established conclusively that the Raiders had waived their claim of fraudulent inducement with respect to the August 7 agreements by entering into the June 1996 Supplement. OACC made the same argument to the trial court before the case went to the jury and by way of motion for JNOV. Each time, the court rejected OACC‘s position. We conclude that JNOV was compelled under the facts of this case.
I. Negligent Misrepresentation—a Type of Deceit
The jury, by its verdict, found that the Raiders were induced by OACC‘s negligent misrepresentations to enter into the August 7 agreements, which bound them to play in Oakland for 15 subsequent football seasons.
While intentional fraud requires the intent to deceive (
Hence, “the term ‘fraud’ may be used to describe not just an intentional misrepresentation but as well certain misrepresentations that are merely negligent, as the separate and distinct tort of negligent misrepresentation is ‘a species of the tort of deceit.‘” (Kolodge v. Boyd (2001) 88 Cal.App.4th 349, 371–372 [105 Cal.Rptr.2d 749], quoting Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407 [11 Cal.Rptr.2d 51, 834 P.2d 745].)
California law has, for more than a century, recognized that a plaintiff claiming to have been induced into signing a contract by fraud or deceit is deemed to have waived a claim of damages arising therefrom if, after discovery of the alleged fraud, he enters into a new contract with the defendant regarding the same subject matter that supersedes the former agreement and confers upon him significant benefits. (Burne v. Lee (1909) 156 Cal. 221, 226 [104 P. 438] (Burne); Schmidt v. Mesmer (1897) 116 Cal. 267, 270–272 [48 P. 54] (Schmidt); Smith v. Roach (1975) 53 Cal.App.3d 893, 898 [126 Cal.Rptr. 29] (Smith); Ball v. Warner (1926) 80 Cal.App. 427, 431 [251 P. 929].)
Schmidt is the seminal California Supreme Court case on the subject and bears substantial similarity in fact pattern to ours. In Schmidt, the defendant leаsed a hotel to the plaintiffs for a three-year term. The plaintiffs alleged that the defendant fraudulently misrepresented the amount of monthly income the hotel had generated. There was a conflict in the evidence as to whether the defendant made the misrepresentation and whether, prior to signing the contract, the plaintiffs were given access to records that accurately reflected the income of the hotel. (Schmidt, supra, 116 Cal. at p. 268.)
The plaintiffs discovered the true facts almost immediately after taking possession of the hotel. Several months later, they fell behind on the rent. Without mentioning the fraud, they proceeded to negotiate an agreement with the defendant permitting them to execute a promissory note in lieu of rental payments, due in six months. (Schmidt, supra, 116 Cal. at pp. 269–270.)
The California Supreme Court found it unnecessary to reach any of the claims of evidentiary and instructional error, because the evidence showed conclusively that the plaintiffs, by their conduct, had waived their claim of fraudulent inducement. (Schmidt, supra, 116 Cal. at p. 270.) Declared the court: “It is no doubt the law, that while where а party seeks to rescind a contract into which he was induced to go by the fraudulent representations of another party, he must rescind at once upon the discovery of the fraud, and restore the other party, as near as may be, to his former condition, yet he may elect to go on with the contract, and sue to recover damages for the deceit, without giving any warning to the other party that he intends at some future time to charge him with fraud. . . . But this rule, which relieves a party when he chooses to sue for damages from many of the acts required of him when he elects to rescind, is subject to some just limitations. If, after his knowledge of what he claims to have been the fraud, he elects not to rescind, but to adopt the contract and sue for damages, he must stand toward the other party at arm‘s length; he must on his part comply with the terms of the contract; he
Fifty years later, the state‘s high court modified the rule articulated in Schmidt, but only slightly. In Bagdasarian v. Gragnon (1948) 31 Cal.2d 744 [192 P.2d 935] (Bagdasarian), the buyers had purchased a farm from the seller. In response to a foreclosure suit, the buyers filed a cross-complaint alleging they had been induced to purchase the farm through fraud, a claim that prevailed at trial. (Id. at p. 747.) On appeal, the seller argued that the buyers’ mere request for an extension of time to make payments on their note constituted an estoppel or waiver of their fraud claim. The court disagreed stating, “There appears to be no decision in California or elsewhere which squarely holds on its facts that the mere making of an unfulfilled request alone constitutes a waiver as a matter of law. . . . [¶] We think it unjust and unreasonable to hold as a matter of law that the mere asking of a favor should deprive an innocent person of rights arising from an unquestionably fraudulent act, and we thеrefore disapprove of the language in Schmidt . . . to the extent that it indicates that the making of a request that is not complied with in itself constitutes a waiver without regard to the circumstances under which it is made.” (Id. at p. 751, citation omitted.)
The core holding of Schmidt/Bagdasarian is that one who, after discovery of an alleged fraud, ratifies the original contract by entering into a new agreement granting him substantial benefits with respect to the same subject matter, is deemed to have waived his right to claim damages for fraudulent inducement. While it has not recently been the central focus of judicial scrutiny in this state, the rule still stands as binding precedent.4
The rule is universally recognized and is illustrated in cases from numerous other jurisdictions. (See Glenn Dick Equipment Co. v. Galey Construction, Inc. (1975) 97 Idaho 216, 224 [541 P.2d 1184, 1192], quoting 37 Am.Jur.2d
The trial court determined that the implied waiver issue was a question of fact for the jury. The court also accepted the Raiders’ argument that OACC had to prove by “clear and convincing evidence” that the Raiders intended to waive their right to sue for fraud when they entered intо the June 1996 Supplement, and instructed the jury accordingly. Emphasizing OACC‘s lofty burden and citing the Raiders’ witnesses’ denials that they “intended” to waive their fraud claim, counsel for the Raiders urged the jurors to reject the waiver defense. Not surprisingly, they did.5
At the outset, we note that the trial court‘s decision to submit the implied waiver question to the jury was influenced by, if not based on, a serious misreading of Schmidt, supra, 116 Cal. 267. In its written ruling, the court asserted that in Schmidt, “the jury had found that the plaintiffs waived any fraud in the inducement . . . by requesting a reduction in rent . . . and by requesting and obtaining an extension of time to pay the rent, all without any reference to the alleged fraud.” (Italics added.) The court went on to state that “the plaintiffs’ intent to waive was not deemed as a matter of law, but was
In Schmidt, the plaintiffs sued for fraud in the inducement. The evidence was in conflict as to whether the plaintiffs were defrauded and the jury returned a verdict for the defendants. (Schmidt, supra, 116 Cal. at pp. 267–269.) The plaintiffs appealed, alleging errors in the jury instructions and in certain evidentiary rulings made by the trial court. Our Supreme Court swept all of these arguments aside, however, on the ground that “the acts of the [plaintiffs], as hereinafter stated, constituted a waiver of the alleged fraud, and prevent [them] from recovering in this action, without regard to said alleged errors.” (Id. at p. 269, italics added.)
Thus, contrary to the trial court‘s belief, the Schmidt jury made no factual finding of waiver—the Supreme Court found waiver as a matter of law from the plaintiffs’ conduct. The court makes this abundantly clear in the concluding sentence of the opinion: “This conduct of the [plaintiffs] clearly brings them within the principle declared in the authorities above cited, and, this being so, the alleged errors of the court, with respect to other matters, become immaterial. Under no view of the case could a verdict in favor of plaintiffs be maintained.” (Schmidt, supra, 116 Cal. at pp. 272–273, italics added.)
In Bagdasarian, the Supreme Court did not overrule Schmidt, but merely disapproved of dicta indicating that an ungranted request for a favor automatically brings down the curtain on the plaintiff‘s case. (Bagdasarian, supra, 31 Cal.2d at p. 751.) Here, we have much more than an ungranted request. We have a new agreement negotiated аnd signed by the parties, which not only bestows substantial benefits on plaintiff (the Raiders), but also reaffirms the former agreement that plaintiff (the Raiders), after receiving such benefits, now claims was procured by fraud.6
The Bagdasarian court strongly indicated that the Schmidt rule still applies under such circumstances: “There is serious doubt whether even a granted request of a favor, such as an extension of time, should be held to constitute a waiver in the absence of estoppel or the making of a new agreement supported by consideration, but we need not determine that question here because the facts established by the record are not as claimed by appellant.” (Bagdasarian, supra, 31 Cal.2d at pp. 751–752, italics added.)
“The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if hе intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment.” (Strong v. County of Santa Cruz (1975) 15 Cal.3d 720, 725 [125 Cal.Rptr. 896, 543 P.2d 264], citing City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 488–489 [91 Cal.Rptr. 23, 476 P.2d 423] (Mansell).) The traditional elements of estoppel are: ” ‘(1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.’ ” (Mansell, supra, 3 Cal.3d at p. 489.)
The estoppel underpinnings of the implied waiver rule may be traced back to Schmidt itself, where our Supreme Court observed: “It is true that one actually guilty of fraud is not entitled to much consideration; but the real difficulty usually is to determine whether or not the alleged fraud actually existed, and the issue has generally to be determined upon conflicting testimony, and in accordance with the preponderance of evidence. In such a case it is evident that the party who keeps his intended charge of fraud secret for years has a great advantage in preparing fоr a future intended action, which he alone anticipates, over his adversary, who has had no intimation of such action or such charge of fraud, and has had no reason to preserve or discover evidence concerning it.” (Schmidt, supra, 116 Cal. at p. 270, italics added.) Noting the injustice of permitting a party to gain new benefits “without giving any warning to the other party that he intends at some future time to charge him with fraud,” the court fashioned the rule that a party aware of the alleged fraud must stand at arm‘s length from his adversary and not enter into a new agreement extracting concessions, lest he be deemed to have waived his claim of fraud. (Ibid.)
While the question of waiver ordinarily turns on the intent of the party against whom it is asserted, estoppel focuses solely on the party‘s conduct: “The term ‘waiver’ is sometimes used indiscriminately to refer to the doctrine of waiver, and the distinct but similar doctrine of estoppel. [Citation.] ‘Waiver refers to the act, or the consequences of the act, of one side. Waiver is the intentional relinquishment of a known right after full knowledge of the facts and depеnds upon the intention of one party only. Waiver does not require any act or conduct by the other party.’ [Citation.]
This form of estoppel is, for practical purposes, indistinguishable from the doctrine of implied waiver through conduct. (See Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31 [44 Cal.Rptr.2d 370, 900 P.2d 619]; id., at pp. 33–34 [” ‘California courts will find waiver when a party intentionally relinquishes a right or when that party‘s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished,’ ” italics added].) As one national treatise states, “a person defrauded in a transaction may, by conduct inconsistent with an intention to sue for damages for the fraud, waive the right to sue. Waiver in this sense may mean not only a consensual waiver, but a relinquishment of rights and powers akin to estoppel.” (37 Am.Jur.2d (2001) Fraud and Deceit, § 321, p. 332.)
III. OACC May Raise the Estoppel Defense*
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IV. Application of the Schmidt/Bagdasarian Rule
In this case, the Raiders admittedly discovered the falsity of the OACC‘s “sellout” representations regarding PSL and other ticket sales not later than the end of the 1995 football season.7 In 1996, without any mention of fraud, they negotiated and executed a new agreement concerning the same subject matter, which modified the rights of the parties, granted the Raiders significant benefits,8 and otherwise reaffirmed the validity and enforceability
We acknowledge the existence of cases that stand for the truism that the existence of waiver is ordinarily a question of fact. (E.g., French v. Freeman (1923) 191 Cal. 579, 590 [217 P. 515]; Craig v. White (1921) 187 Cal. 489, 498 [202 P. 648]; Wilder v. Beede (1898) 119 Cal. 646, 650–651 [51 P. 1083]; California Southern Hotel Co. v. Callender (1892) 94 Cal. 120, 126 [29 P. 859]; Russel v. Amador (1853) 3 Cal. 400, 402–403.) But this does not mean it can never be a question of law, as Schmidt itself plainly demonstrates. Implied waiver, especially where it is based on conduct manifestly inconsistent with the intention to enforce a known right, may be determined as a matter of law where the underlying facts are undisputed (Old Republic Ins., supra, 80 Cal.App.4th at p. 679), or the evidence is susceptible of only one reasonable conclusion (see, e.g., Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557–559 [94 Cal.Rptr.2d 201] [implied waiver of right to compel arbitration]; Pine v. Tiedt (1965) 232 Cal.App.2d 733, 737–738 [43 Cаl.Rptr. 184] [implied waiver of right to partition land]).
The facts surrounding the execution of the June 1996 Supplement satisfied all the elements of implied waiver, while the only evidence to the contrary—the Raiders’ undisclosed subjective intent to preserve their fraud claim—was entitled to no weight whatsoever.
Cases cited by the Raiders to support their claim that the implied waiver issue was a factual one are clearly distinguishable. For example, in Clark Equipment Co. v. Wheat (1979) 92 Cal.App.3d 503 [154 Cal.Rptr. 874], the defendant compounded the original fraud by making a second misrepresentation. There, the seller, Clark Equipment, sold the plaintiff Wheat a “reconditioned” forklift called the York TM 70, which proved defective. When Wheat complained that the TM 70 did not perform as promised, Clark Equipment induced Wheat to buy a more expensive forklift, the CHY 140, promising Wheat that such a purchase would relieve Wheat of its obligation to make further payments on the TM 70. (Id. at pp. 512–514, 519.) Subsequently, Clark Equipment filed a lawsuit against Wheat for default in payments on the TM 70 and Wheat cross-complained for fraud, breach of warranty and breach of contract. In upholding a jury verdict in favor of Wheat, the court found
Lawson v. Town & Country Shops, Inc. (1958) 159 Cal.App.2d 196, 201 [323 P.2d 843], Friedberg v. Weissbuch (1955) 135 Cal.App.2d 750, 756 [287 P.2d 785], and Lobdell v. Miller (1952) 114 Cal.App.2d 328, 338 [250 P.2d 357], all apply the Bagdasarian dictum that the mere granting of a favor will not constitute waiver as a matter of law, but in none of the cases did the plaintiff enter into a new contract with the defendant that not only conferred new benefits on the plaintiff but ratified the very agreement purportedly induced by fraud. As the court in Smith stated, a plaintiff claiming fraud in the inducement is deemed to have waived his claim of damages “if, after he discovers the fraud, he makes a ‘new agreement or engagement’ with the other party to the original contract (the contract allegedly procured by the fraud of that party), and such new agreement or engagement results in a compromise and adjustment of the plaintiff‘s rights under the original contract, thereby superseding that contract.” (Smith, supra, 53 Cal.App.3d at pp. 898–899, quoting Burne, supra, 156 Cal. at p. 226, italics modified from original; see also Burne, at pp. 226–228.)9
The Raiders’ conduct in obtaining additional benefits and ratifying the earlier contract sets this case apart from all those relied on by the trial cоurt and the Raiders. In the words of Schmidt: ” ‘We fully recognize and approve the rule that a party may retain what he receives, stand to his bargain, and recover for the loss caused him by the fraud. [But] where a party, with full knowledge of all the material facts, does an act which indicates his intention to stand to the contract, and waive all right of action for fraud, he cannot maintain an action for the original wrong practiced upon him. Where the affirmance of the contract is equivalent to a ratification, all right of action is gone. . . . [Thus] where a party, with full knowledge,
The Raiders try to avoid these consequences by citing evidence that both parties benefited by the June 1996 Supplement, even suggesting that OACC may have benefited more. However, the rule contains no requirement that the party against whom it applies receive greater consideration than his adversary, or that the fact finder weigh and compare the benefits received by each party. The undisputed evidence that the Raiders obtained significant monetary and nonmonetary concessions by virtue of the new contract (see fn. 8, ante) is sufficient. In this case, the Supplement‘s reduction of the Raiders’ interest rate on two long-term loans by itself saved the team $109 million in interest payments, or more than three times the amount of the compensatory damages the jury awarded in this case.
Finally, application of the Schmidt/Bagdasarian rule to the facts of this case vindicates the estoppel principlеs upon which it rests: By signing the June 1996 Supplement, the Raiders reaffirmed the validity of the original contract and induced OACC to change its position, to OACC‘s detriment. ” ’ “The vital principle is that he who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden. It involves fraud and falsehood, and the law abhors both.” ’ ” (Mansell, supra, 3 Cal.3d at p. 488, quoting Seymour v. Oelrichs (1909) 156 Cal. 782, 795 [106 P. 88].) OACC should not have to defend itself against a multimillion dollar fraud claim of which the Raiders were aware but concealed at the time they entered into a new agreement granting the Raiders significant concessions.
Our dissenting colleague declines to accept the rule we apply on the view that a fraud plaintiff should be able to negotiate an agreement for “half a loaf” while keeping the fraud charge a secret, and then be able to sue for the entire “loaf” in a subsequent lawsuit. (Dis. opn., post, at pp. 1199–1200.) But it is precisely this sort of conduct that is condemned as impermissible by
We also disagree with the dissent‘s assertion that we have “substitut[ed]” estoppel for implied waiver, thereby “denigrat[ing]” the importance of intent. (Dis. opn., post, at p. 1199.) Whether denominated “estoppel” or “implied waiver as a matter of law,” the operative principle is exactly the same—where a party‘s conduct is so inconsistent with the intent to enforce a legal right, the intention to give up that right will be presumed, notwithstanding evidence that the party did not subjectively “intend” to relinquish it. (Dis. opn., post, at p. 1199.)
V. Denial of JNOV Was Error
An appellate court reviews the grant or denial of a motion for JNOV de novo using the same standard as the trial court. (Mason v. Lake Dolores Group (2004) 117 Cal.App.4th 822, 829–830 [11 Cal.Rptr.3d 914].) A JNOV must be granted where, viewing the evidence in the light most favorable to the party securing the verdict, the evidence compels a verdict for the moving party as a matter of law. (Paykar Construction, Inc. v. Spilat Construction Corp. (2001) 92 Cal.App.4th 488, 493–494 [111 Cal.Rptr.2d 863]; see, e.g., Sukoff v. Lemkin (1988) 202 Cal.App.3d 740, 743 [249 Cal.Rptr. 42]; DeVault v. Logan (1963) 223 Cal.App.2d 802, 810 [36 Cal.Rptr. 145].) In general, ” ‘[t]he purpose of a motion for judgment notwithstanding the verdict is not to afford a review of the jury‘s deliberation but to prevent a miscarriage of justice in those cases where the verdict rendered is without foundation.’ ” (Sukoff v. Lemkin, supra, 202 Cal.App.3d at p. 743.)
We conclude that the Raiders’ conduct was ” ’ “so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished” ’ ” (Old Republic Ins., supra, 80 Cal.App.4th at p. 678), and there was no substantial competent evidence to support a contrary conclusion. Since implied waiver of the fraud claim was established as a matter of law, the trial court erred in denying OACC‘s motion for JNOV.
Our conclusion renders it unnecessary for us to reach any of the other assignments of error raised by OACC. It also moots the Raiders’ claim on cross-appeal that the trial court erroneously refused to award them attorney fees as the prevailing party. Our remaining task is to address the Raiders’ contentions that the trial court committed evidentiary and instructional errors, such that they are entitled to a new trial on damages for breach of the implied covenant of good faith and fair dealing.
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DISPOSITION
The order denying OACC‘s motion for JNOV on the fraud cause of action is reversed with directions to grant the motion. The triаl court is directed to vacate the judgment and prepare a new judgment consistent with this disposition. The Raiders’ appeal from the order denying attorney fees is dismissed as moot. OACC shall recover its costs on appeal (
Raye, J., concurred.
DAVIS, Acting P. J., Dissenting.—I respectfully dissent. Unlike the majority, I believe the trial court properly denied the motions of the Oakland-Alameda County Coliseum (OACC) for judgment notwithstanding the verdict (JNOV) on the negligent misrepresentation (fraud) count. The trial court properly submitted to the jury, as a question of fact, the issue of whether the Oakland Raiders (Raiders) had waived its claim of fraud, and correctly instructed on this issue as one of intentional relinquishment. And there is substantial evidence to support the jury‘s finding that the Raiders did not waive this claim.
More generally, I believe that the majority‘s approach to the doctrine of implied waiver—by basing that doctrine on estoppel while downplaying intent—is misguided. That approach muddles the law in this area. And that muddle will now make it easier to find that a party has waived a fraud claim as a matter of law, thereby harming many who may actually have bеen defrauded. The majority concludes that the doctrine of implied waiver as to a fraud claim is “better understood as an application of the doctrine of equitable estoppel than ‘waiver’ in the traditional sense, which generally rests on a party‘s intent.” (Maj. opn., ante, at p. 1189, italics added.) On the contrary, the doctrine of implied waiver as to a fraud claim is best understood as an application of the doctrine of implied waiver, which focuses on intent.
I must begin at the beginning. ” ’ “[W]aiver is the intentional relinquishment of a known right after knowledge of the facts.” ’ ” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31 [44 Cal.Rptr.2d 370, 900 P.2d 619] (Waller).) ” ’ “Waiver always rests upon intent.” ’ ” (Ibid.) “[A] waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.” (Ibid., italics
These waiver rules, beginning with Schmidt v. Mesmer (1897) 116 Cal. 267 [48 P. 54] (Schmidt), have been applied in the context of a contractual party who may have been fraudulently induced to enter into a contract but who, through subsequent expression or conduct, has been found to have waived any claim of fraud through intentional relinquishment. Citing Schmidt, as well as the other venerable decisions cited in the majority opinion—Burne v. Lee (1909) 156 Cal. 221 [104 P. 438] and Ball v. Warner (1926) 80 Cal.App. 427 [251 P. 929]—this court, nearly 60 years ago, in Schied v. Bodinson Mfg. Co. (1947) 79 Cal.App.2d 134 [179 P.2d 380] (Schied), accurately encapsulated the Schmidt waiver principle as follows: “The authorities are uniform in holding that a party to an executory contract, who, with full knowledge of the facts constituting the fraud complained of, subsequently, with intention to do so, affirms the contract and recognizes it as valid, either by his written agreement or by acts and conduct, and accepts substantial payments, property or the performance of work or labor not required by the original contract, thereby waives his right to damages on account of the fraud.” (Schied, supra, at p. 142, italics added; accord, Storage Services v. Oosterbaan (1989) 214 Cal.App.3d 498, 512–513 [262 Cal.Rptr. 689]; see also Clark Equipment Co. v. Wheat (1979) 92 Cal.App.3d 503, 530 [154 Cal.Rptr. 874] [” ‘A careful review of some of the more recent cases’ “—quoting from a 1958 decision—indicates there can be no waiver of a right to sue for fraud in the absence of an intentional relinquishment of a known right, and a request for modification of contractual provisions and even the acceptance thereof are simply factors to consider in determining whether the requisite intent of a contractual party to waive a fraud claim was express, or whether it can be implied or inferred from the surrounding circumstances].) (See maj. opn., ante, at p. 1184.)
Schied also noted, correctly, that determining the issue of fraud waiver ordinarily presents a question of fact, a point the majority acknowledges as a “truism.” (Schied, supra, 79 Cal.App.2d at pp. 143–144; see maj. opn., ante, at p. 1191.)
In line with Schied and the waiver rules of intentional relinquishment quoted above, the trial court here properly instructed the jury on the issue of whether the Raiders had intentionally waived its claim for fraud—by expression or by conduct—by instructing as follows: “The term ‘waiver’
Thus, the trial court correctly instructed the jury on express waiver (based on words) and implied waiver (based on conduct), recognizing that both types of waiver encompass intentional relinquishment. The trial court did not provide what would have been an improper instruction in light of the implied waiver rule: that no waiver could be found unless the Raiders subjectively intended to waive its right to sue for fraud; conduct would not suffice. (See Rubin v. Los Angeles Fed. Sav. & Loan Assn. (1984) 159 Cal.App.3d 292, 298 [205 Cal.Rptr. 455].)
As I shall explain, I also think the trial court properly submitted the waiver issue to the jury as a question of fact, and that substantial evidence supports the jury‘s finding of no waiver. In special verdict No. 5, the jury answered “No” to the following question: “H[as] the Defendants [OACC] proved by clear and convincing evidence that the Raiders intended to and did waive [its] fraud claim . . . when the Raiders entered into the June 1, 1996[,] Supplement?” (See Waller, supra, 11 Cal.4th at p. 31 [the party claiming a waiver of a right has the burden of proving the waiver by clear and convincing evidence that does not leave the matter to speculation, and doubtful cases will be decided against waiver].) (See maj. opn., ante, at p. 1187, fn. 5.)
Acknowledging several decisions, the majority opinion correctly notes “the truism that the existence of waiver is ordinarily a question of fact.” (Maj. opn., ante, at p. 1191.) But the majority says the issue of waiver here may be determined as a matter of law because the undisputed facts lead to only one reasonable conclusion: “The facts surrounding the execution of the June 1996 Supplement satisfied all the elements of implied waiver, while the only evidence to the contrary—the Raiders’ undisclosed subjective intent to preserve [its] fraud claim—was entitled to no weight whatsoever” (maj. opn., ante, at p. 1191, italics omitted); “the Supplement‘s reduction of the Raiders’
First, there was evidence that the person who drafted the June 1996 Supplement on behalf of East Bay Entities (i.e., OACC and others) surveyed her effort and concluded that “[o]verall, I believe the Supplement is economically favorable to the East Bay Entities . . . .” The majority correctly notes that the implied waiver rule‘s application does not turn on some sort of comparative benefit analysis between the Raiders and OACC. (Maj. opn., ante, at p. 1193.) Nevertheless, a juror may have gleaned from this evidence that the June 1996 Supplement was simply an agreement sought by both OACC and the Raiders for their mutual benefit, rather than an agreement through which the Raiders, knowing of the fraud, affirmed the validity of the original contract and accepted substantial benefits not found therein, thereby demonstrating an intent to waive any fraud сlaim regarding the original contract.
Second, one of the Raiders’ theories of damages was that by contracting with OACC—pursuant to OACC‘s fraudulent inducements of “sellouts“—the team lost approximately $544 million in past and future profits and $289 million in franchise value. (See BAJI No. 12.57 [“benefit of the bargain” measure of damages].) The $109 million the Raiders saved in long-term interest payments—via the June 1996 Supplement—pales in comparison to these sums. If a juror accepted this evidence, he or she may have concluded that the June 1996 Supplement was merely a way for the Raiders to cut its fraud losses rather than an agreement through which the Raiders, knowing of the fraud, affirmed the validity of the original contract and obtained substantial benefits not found therein, demonstrating an intent to waive any fraud claim as to the original contract. (See Smith v. Roach (1975) 53 Cal.App.3d 893 [126 Cal.Rptr. 29], as characterized in Storage Services v. Oosterbaan, supra, 214 Cal.App.3d at p. 512, fn. 7 [“The [contractually] defrauded plaintiffs in Smith v. Roach . . . were held not to have waived the defendants’ fraud just because they had attempted to mitigate their losses through a ‘new agreement’ with a third party“].)
And third, it bears repeating that we review here the denial of a motion for JNOV. The majority concludes that the mоtion should have been granted. As the majority opinion recognizes, a JNOV may be granted only if, ”viewing the evidence in the light most favorable to the party securing the verdict [the Raiders], the evidence compels a verdict for the moving party [OACC] as a matter of law.” (Maj. opn., ante, at p. 1194, italics added.) Viewing the evidence above in the light most favorable to the Raiders, the evidence does not compel a verdict for OACC as a matter of law. I would uphold the trial
That brings me to my general concerns about the majority‘s view of the implied waiver doctrine as applied to waiving a fraud claim.
Prior to the majority‘s opinion, the Schmidt principle governing the waiver of a right to sue for fraud had been interpreted as requiring the intentional relinquishment of that right, a known right. This intentional relinquishment could be conveyed through words (express waiver) or through conduct (implied waiver), or both. (See, e.g., Schied, supra, 79 Cal.App.2d at p. 142; Clark Equipment Co. v. Wheat, supra, 92 Cal.App.3d at p. 530.) But intentional it had to be.
The majority‘s new interpretation of the Schmidt waiver principle essentially substitutes estoppel for implied waiver, thereby downplaying intent by focusing solely on conduct. As the majority opinion notes, “[w]hile the question of waiver ordinarily turns on the intent of the party against whom it is asserted, estoppel focuses solely on the party‘s conduct.” (Maj. opn., ante, at p. 1189, original italics.) This denigrates the pivotal criterion of intentional relinquishment of the right to sue for fraud.
Under the traditional view of the Schmidt waiver principle, the conduct that will constitute implied waiver of the right to sue for fraud must be so definitive that it is the functional equivalent of express waiver—i.e., a party‘s conduct must indicate “an intent to relinquish the right” (Waller, supra, 11 Cal.4th at p. 31, italics added); the conduct must be ” ‘so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.’ ” (Id. at pp. 33–34, italics added.) With its focus on intentional relinquishment, this traditional view of waiver ensures that implied-waiver conduct meets these exacting standards. The same cannot be said for the concept of estoppel, which focuses solely on conduct absent this critical backdrop of intent. Consequently, the majority has muddled the law by substituting estoppel for implied waiver. And to think the majority started all this mischief simply because of an offhand comment in Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 751 [192 P.2d 935], that ” ‘[t]here is serious doubt whether even a granted request of a [subsequent] favоr [between contracting parties], such as an extension of time, should be held to constitute a waiver [of the right to sue for fraud] in the absence of estoppel or the making of a new agreement supported by consideration . . . .’ ” (Maj. opn., ante, at p. 1188, italics added in maj. opn.)
With its traditional focus on intentional relinquishment, the issue of whether a party has waived its right to sue for fraud has generally been
There may be all sorts of reasons why a defrauded party would try to cut its losses and seek at least half a loaf through a subsequent agreement, without giving up its right to be fully compensated for the fraud arising from the original agreement. But the majority‘s view of implied waiver—with its estoppel focus on conduct rather than intent—may deem this conduct a waiver as a matter of law because the defrauded party has obtained a significant benefit. Using the majority‘s approach, a wily defrauder could offer some significant benefit to the defrauded party in the hopes of destroying any chance the defrauded party may have of suing for fraud. True, the majority has emphasized, in its calculus, the allegedly defrauded party‘s affirmation of the original agreement when making the subsequent agreement. But such affirmation would commonly occur where, as here, a subsequent supplemental agreement resolves some issues but not all. In that situation, the original agreement is still needed to govern the contractual аspects not governed by the half-a-loaf supplemental agreement. As this court noted in Schied, to intentionally relinquish a right to sue for fraud, the allegedly defrauded party, knowing of the fraud, must intend to affirm the original contract and recognize it as valid, and must obtain significant benefits outside the original agreement. (Schied, supra, 79 Cal.App.2d at p. 142deems it knows best as a matter of law before trial.
We must keep in mind that the issue here is the waiver of a right to sue for fraud. As the Schmidt court noted, “one actually guilty of fraud is not entitled to much consideration; but the real difficulty usually is to determine whether or not the alleged fraud actually existed, and the issue has generally to be determined upon conflicting testimony . . . .” (Schmidt, supra, 116 Cal. at p. 270.) I am perplexed as to why the majority feels the need to craft a waiver rule that benefits the alleged defrauder at the expense of the defrauded, and that tends to take the issue of whether a party has waived its right to sue for fraud from the forum best suited to determining that issue: the jurors who hear all the evidence, employing their life experiences and common sense.