Lead Opinion
Opinion
A jury аwarded plaintiff Oakland Raiders, a California limited partnership (the Raiders) $34.2 million in damages against
For the reasons that follow, we shall conclude that OACC’s motion for judgment notwithstanding the verdict (JNOV) on the frаud 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In an unpublished portion of this opinion, we also find without merit the Raiders’ assignments of evidentiary and instructional error on cross-appeal.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
Coliseum was built, the Raiders moved in as its first tenant. In 1970, the Raiders joined the National Football League (NFL) when the AFL merged with the NFL. The Raiders won Super Bowls following the 1976 and 1980 seasons, and enjoyed fine attendance during that period.
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 expiratiоn 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.
OACC then launched a marketing campaign 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)
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 with seats already committed to the NFL and the Raiders, this represents a sellout for 1995 and 80% of the seats for an expanded Stadium in 1996.” The press release quoted marketing director Ted Ganis as saying luxury boxes were completely sold out for 1995 and applicants were being asked to share boxes for that season. Said Ganis: “The response is so strong and the enthusiasm so real that, not only did we sеll out for 1995, we expect to be fully sold out for the 1996 season by Thanksgiving.”
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, A1 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 (June 1996 Supplement or Supplement). The Supplement reaffirmed and clarified certain provisions of the August 7 agreements; it also modified these agreements with respect to disposition of deposits on suite licenses, timetable for construction of additional suites, selection and use of loan proceeds for an alternate training facility, sharing of advertising
The Supplement concluded that “[e]xcept as otherwise specifically supplemented, interpreted or modified by this Supplement, all terms and provisions of the [August 7] [agreements 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 Entities brought an action against the Raiders seeking, inter alia, a declaratory judgment that the team had no right to rescind the August 7 agreements and Supplement or movе the team from Oakland. In June 1998, after OACC was brought in as a party plaintiff, the complaint was amended to allege that the Raiders’ management was claiming the team had the right to terminate or rescind the August 7 agreements and Supplement on grounds of fraudulent inducement, but that the claim was “completely untrue,” and in any event was barred by the doctrines of waiver, estoppel, laches, release and unclean hands.
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 amend their cross-complaint to state a cause of action for breach of the implied covenant of good faith аnd 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
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.
The case submitted to the jury was pared down to the Raiders’ claims for intentional misrepresentation, negligent misrepresentation and breach of the implied covenant of gоod faith and fair dealing.
By special verdict the jury found (1) that OACC had not committed the tort of intentional misrepresentation; (2) that OACC was liable to the Raiders for negligent misrepresentation in the sum of $34,203,135;
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 (Civ. Code, § 1709), negligent misrepresentation encompasses “[t]he assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true” (Civ. Code, § 1710, subd. 2), or “[t]he positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true” (Civ. Code, § 1572, subd. 2).
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)
II. The Implied Waiver Rule
California law has, for more than a century, recognized that a plaintiff claiming to
Schmidt is the seminal California Supreme Court case on the subject and bears substantial similarity in fact pattern to ours. In Schmidt, the defendant lеased 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,
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,
Fifty years later, the state’s high court modified the rule articulated in Schmidt, but only slightly. In Bagdasarian v. Gragnon (1948)
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
The rule is universally recognized and is illustrated in cases from numerous other jurisdictions. (See Glenn Dick Equipment Co. v. Galey Construction, Inc. (1975)
The trial court determined that the implied waiver issue was a question of fact for the jury. The court also accepted the Raiders’ argumеnt 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 into 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.
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,
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 рlaintiff’s case. (Bagdasarian, supra,
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.)
As the italicized language indicates, the implied waiver consequence recognized in Schmidt and Bagdasarian 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.
“The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the еxistence of a state of facts if he 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)
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 оf fraud secret for years has a great advantage in preparing for 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,
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,
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)
III. OACC May Raise the Estoppel Defense
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.
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)
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)
Lawson v. Town & Country Shops, Inc. (1958)
The Raiders’ conduct in obtaining additional benefits and ratifying the earlier contract sets this case apart from аll those relied on by the trial court 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, declines to repudiate a transaction known to him to be fraudulent, and fully and expressly ratifies it, he can neither rescind nor maintain an action for damages.’ ” (Schmidt, supra, 116 Cal. at pp. 271-272, quoting St. John v. Hendrickson (1882)
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.
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 sоrt of conduct that is condemned as impermissible by Schmidt and the numerous authorities from around the nation that we have cited. Thus, it is the dissent, not our decision, which advocates for a significant change in the law.
We also disagree with the dissent’s assertion that we have “substituí [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)
We conclude that the Raiders’ conduct was “ 1 “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,
VI. Cross-appeal
DISPOSITION
Thе order denying OACC’s motion for JNOV on the fraud cause of action is reversed with directions to grant the motion. The trial 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 (Cal. Rules of Court, rule 27(a).)
Raye, J., concurred.
Notes
In summary judgment proceedings, OACC argued that the two June 23, 1995 letters constituted a binding contract obligating the Raiders to play in the Coliseum for 16 football seasons. However, the law and motion judge ruled that the letters only bound the Raiders to play the 1995 season in Oakland, while committing both parties to negotiate in good faith a long-term contract for future years. The trial judge considered himself bound by that ruling and instructed the jury accordingly.
OACC argues on this appeal that the trial court erred in refusing to summarily adjudicate its status as a public entity prior to imposing the discovery sanction. Our disposition dispenses with the need to reach the merits of this claim.
Two OACC codefendants, Edwin O. DeSilva (its director) and Arthur Andersen LLP (its accountаnt), stood trial along with OACC on the misrepresentation claims. Both were exonerated by the jury’s verdict in August 2003 and the Raiders abandoned their claims against DeSilva and Arthur Andersen LLP in this appeal in March 2004.
In Smith, supra,
Alhino v. Starr (1980)
In special verdict No. 5, the jury answered “No” to the following question: “Have the Defendants proved by clear and convincing evidence that the Raiders intended to and did waive their fraud claim . . . when the Raiders entered into the June 1, 1996 Supplement?”
The June 1996 Supplement reсites: “Except as otherwise specifically supplemented, interpreted or modified by this Supplement, all terms and provisions of the [August 7] [agreements shall remain unmodified and in full force and effect.” (Italics added.)
See footnote, ante, page 1175.
The jury was instructed: “It has been determined from the pleadings in this case that, as a matter of law, the [Raiders] were aware of the alleged fraud during the 1995 football season. Therefore, for purposes of your deliberations, it is conclusively established that the [Raiders] became aware during the 1995 football season of the alleged misrepresentations upon which they based their claims of fraud.”
The June 1996 Supplement, whose recited purpose was to “clarify and implement certain provisions of and confirm certain further decisions and elections pursuant to that certain Master Agreement.. . executed on August 7,1995,” modified the August 7 agreements in a number of significant respects. Among other things, the Supplement benefited the Raiders in that it: (1) entitled them to all deposits paid on long-term suite licenses after two seasons; (2) allowed them to use a $10 million loan to acquire property for and construct an alternate training site of their own choosing, in lieu of the training site on publicly owned land, as designated in the August 7 agreements; (3) gave them an increased share of nonclub advertising revenues; and (4) substantially reduced their interest rate on $53.9 million worth of long-term loans.
Schied v. Bodinson Mfg. Co. (1947)
Although the Schied court could have stopped there, the opinion then meanders into case law indicating that waiver presents a question of fact. (Schied, supra, 79 Cal.App.2d at pp. 143-144.) While Schied concludes that “[w]e may not hold, as a matter of law . . . , that the appellant did not intend to waive the fraud” (id. at p. 144, italics added), we submit the court could, with better clarity, have said that the facts found by the trial court established implied waiver as a matter of law.
See footnote, ante, page 1175.
Dissenting Opinion
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 been 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. “ ‘ “[Wjaiver is the intentional relinquishment of a known right after knowledge of the facts.” ’ ” (Waller v. Truck Ins. Exchange, Inc. (1995)
These waiver rules, beginning with Schmidt v. Mesmer (1897)
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’ refers to an intentional relinquishment of a known right. You are instructed that a party to a 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 benefits not required by [the] original contract, thereby waives his right to damages on account of the fraud. It is for you, the jury, to determine from all the facts and circumstances shown in the evidence whethеr [the Raiders] intended to waive its right to recover [fraud] damages from [OACC] by entering into the June 1, 1996[,] agreement [i.e., the June 1996 Supplement]. In order for there to have been such a waiver, it must be established that there was a material change in the agreement to the substantial benefit of the [Raiders], and that the [Raiders] at the time of such change had full knowledge of the facts constituting the fraud.”
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
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,
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 Raidеrs’ interest rate on two long-term loans by itself saved the team $109 million in interest payments.” (Maj. opn., ante, at p. 1193, original italics.) I disagree for three reasons.
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 “[ojverall, 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 claim 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.
And third, it bears repeating that we review here the denial of a motion for JNOV. The majority concludes that the motion should have been granted. As the majority opinion recognizes, a JNOV may be granted only if, “viеwing 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 court’s denial of OACC’s motion for JNOV and consider the remaining pertinent issues in this appeal.
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,
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, “[wjhile the question of waiver ordinarily turns on the intent of the party against whom it is asserted, estoрpel 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,
With its traditional focus on intentional relinquishment, thе issue of whether a party has waived its right to sue for fraud has generally been considered a question for the fact finder, and with good reason. Determining whether a party has waived a fraud claim is a question a jury is particularly well suited to decide, after evaluating the evidence of the parties’ relationship. But the majority’s estoppel-based sole focus on the allegedly defrauded party’s conduct and whether that conduct may be deemed a waiver of the right to sue for fraud, pushes this issue toward the question of law side of the ledger, as the present case well illustrates. Furthermore, because waiving a legal right is serious business, the burden is on the party claiming such a waiver to prove it by the enhanced-proof standard of clear and convincing evidence so as not to leave the matter to speculation; doubtful cases are to be decided against waiver. (Waller, supra,
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 aspects 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,
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,
The majority’s estoppel-based approach to implied waiver muddles the law in this area. That muddle will now make it easier to find that a party has waived a fraud