A SAMPLING OF VICTORIES BY MORRIS & STONE
Hopefully it goes without saying that no firm can guarantee the results of a trial. Even a great attorney can run afoul of a bad judge, a capricious jury, or a client who withholds essential facts. Similarly, while we identify some of the firms we have "defeated", that is in no way an indication that the opposing firm did anything but an excellent job. Morris & Stone enjoys a very successful track record. However, nothing contained on this page should be taken as a representation that your matter will achieve the same success. Every case has its own unique facts, and different facts yield different results.
These summaries are entirely accurate, but the background information has been altered where necessary to protect the confidentiality of our clients. We apologize for this long page, but we've had a number of
Morris & Stone
Victorious on Petition for Reconsideration
Although the dollar amount involved is not huge, we report this victory because of the interesting way it was handled by the Court of Appeal.
Our (future) clients were sued under a breach of contract theory, and were hit with a judgment for about half a million dollars. We were brought in to review the matter, and after a thorough review of the trial transcript, determined that there was inadequate evidence to support the judgment, so we agreed to handle the appeal.
Much to the delight of our clients, we persuaded the Court of Appeal to throw out the damage award and remand the matter back to the trial court for a new trial. But our victory wasn’t complete.
We disposed of the $500,000 judgment, but there had also been an award of $40,000 in attorney fees by the court. Finding that the plaintiffs had prevailed in the breach of contract action, the trial court had granted the plaintiffs' motion for attorney fees. Inexplicably, the Court of Appeal threw out the damages, but specifically denied our appeal as to the attorney fees.
How does that make sense? Since we convinced the Court of Appeal that there was insufficient evidence to support the $500,000 in damages, how could plaintiffs still be deemed the prevailing party such to entitle them to attorney fees?
We responded to the opinion from the Court of Appeal with a Petition for Rehearing, challenging the opinion as to the attorney fees, arguing that there was no support for the award of $40,000 in fees.
Technically, the Court "denied" our Petition for Reconsideration, but it was a distinction without a difference. Without even affording the plaintiffs an opportunity to respond, the Court of Appeal acknowledged the error, and "amended" its opinion to reverse the award of attorney fees.
-- Aaron Morris
Fish in a Barrel -- Morris & Stone Defeats Real Estate Non-Disclosure Claim [April 7, 2015 -- Orange County Superior Court]
The facts of this case began 29 years ago. In 1986, our clients (let’s call them "Sellers") purchased a home on the beach in Southern California ("the Residence"). At that time, the Residence had a bulkhead (also called a seawall) that was little more than a wood fence, that was not up to the task of keeping the ocean at bay. The basement of the Residence was often flooded.
In 1987, the Sellers hired a contractor to build a new bulkhead. Enter the evil Coastal Commission. The Coastal Commission does good things, and strives to keep the beaches accessible to those of us who don’t own beach houses. The problem is that the Coastal Commission sometimes gets overzealous, as was the case here.
The Sellers got tired of pumping the water out of their basement, and asked the Coastal Commission if they could build a new seawall. The Coastal Commission basically said, "Sure, you can build a new seawall, so long as you build it 20 feet further from the ocean in order to create more beach area for the public." The Sellers agreed, and a beautiful (and expensive) bulkhead was constructed, and signed off on by the City. The Coastal Commission has no sign-off process, and relies instead on the local agencies to inspect projects they have approved. There was never a time that either the City or the Coastal Commission expressed any concerns with the new bulkhead constructed by the Sellers’ contractor. For the next 25 years, all was good.
That takes us to 2012. In July of that year, Plaintiffs (we’ll call them the "Buyers") – who both already owned homes in the area and were very familiar with the Coastal Commission – made an offer to purchase the Residence. Sellers’ property was very desirable because it was a double lot with a single home. Buyers planned to buy the Residence, tear it down, and replace it with two homes. They paid $4.9 million cash for the Residence, and testified that they expected to sell the two new houses for more than $5 million each; effectively doubling their money. Not a bad day’s work.
The Buyers submitted their plan to build two homes to the Coastal Commission, and got the answer you would expect. "Sure, you can build your two homes, so long as you move that bulkhead 20 feet further from the ocean in order to create more beach area for the public."
By way of background, the Coastal Commission will always try a land grab when presented with a construction request. But in the past, when dealing with seawalls, the Coastal Commission would require only that any new seawalls line up with what they refer to as the "predominant line". In other words, they look at the other seawalls in the area, and so long as your proposed seawall does not extend beyond those, you’re golden. (Although they will sometimes fight you if they deem that you don’t really need a seawall.)
But the Coastal Commission was in a bad mood. The bulkhead that Sellers had built 25 years earlier absolutely lined up with all the others in the area, but as it happened the houses on either side did not have seawalls. The Coastal Commission looked at a Google map, and decided that the seawall should line up with the neighbors who had no seawalls. In other words, the Coastal Commission staff was asking Buyers to move their bulkhead back to the edge of the planned houses.
At first, the Coastal Commission based its land grab entirely on this "predominant line" claim. But during the application process, the Coastal Commission decided (based on Buyers’ own survey) that back in 1987 the seawall had been moved only 14 feet inland instead of the requested 20 feet. Because the seawall was about six feet too close to the ocean, the Coastal Commission deemed it to be "unpermitted" since the location did not match the plans, and used that as ammunition against the Buyers.
The Buyers fought the recommendation by the Coastal Commission staff, and when the Buyers’ plan came up for a public hearing, the Commissioners voted unanimously to reject the staff recommendation and to approve the Buyers’ development plan. Oh happy days.
But the Buyers did not go quietly into the night to count their profits. They were upset that they had spent so much time and money fighting with the Coastal Commission, and blamed the Sellers. Buyers sued the Sellers, claiming they should be responsible for all the expenses incurred in fighting the Coastal Commission, since they had failed to disclose that the seawall was not built in the right place. All told, the Sellers were seeking about $2.5 million in damages, which included "not less than $1 million in punitive damages."
You see, at the time of the sale, the Sellers had signed a disclosure form stating that they were not AWARE of any problems with permits on any new construction. The Buyers sued them for fraud and negligent misrepresentation, claiming that the Sellers knew or should have know the seawall was built in the wrong location. Never mind that the Buyers signed not one, not two, but three forms stating that they were in charge of determining if there were any permit problems.
Upon receiving our trial brief, Buyers immediately dismissed the two fraud causes of action. So much for the "not less than $1 million in punitive damages." Then they decided they did not want a jury to decide the case, even though they had posted jury fees. Having seen the trial brief, they knew the fraud claims would not play well to a jury.
The bench trial took just three days, and the judge issued his ruling immediately following the trial. Counsel for Buyers had argued that whether or not the Sellers knew the seawall was built in the wrong place, they assumed the duty to investigate whether there were any problems with the permits when they indicated in the disclosure statement that they were not aware of any permit issues.
"Balderdash!", I said. (I was a little more articulate than that.) "Aware" means having knowledge or perception of a situation or fact. Being "aware" is a state of mind. If you ask me, "are you aware of whether it is raining?", I need only look inside my head to determine if I have any such awareness. I don’t need to go to the window to look outside, since the question is only whether I am aware. It is very different than asking, "Is it raining?" To answer that question, I need to know whether it is raining.
The judge agreed with my analysis, and entered judgment in favor of the Sellers. He found that the Sellers had been completely truthful when they stated they were unaware of any permit problems and, in any event, the Buyers had been free to investigate that issue prior to the purchase.
A complete victory for our clients.
-- Aaron Morris
Appeal Victory -- Morris & Stone Defeats Judgment Against Homeowners [March 2, 2015 -- Fourth Appellate District]
We are pleased to announce that we were able to reverse a terrible judgment obtained by an HOA against its members. The odds were really against us on this one, but we were able to snatch victory from the jaws of defeat.
We had no involvement with the trial. Our (future) clients (the "Homeowners") were fighting with their HOA about some improvements they had made to their property. The HOA claimed the improvements were improper, and wanted certain changes made. The parties could never agree on what changes needed to be made, and how to go about making them. The total cost of the repairs was not significant, but the Homeowners were standing on principle.
After many months of litigation, on the eve of trial, the parties entered into a settlement agreement, whereby the Homeowners would submit repair plans and estimates. Under the agreement, the HOA could accept or reject the Homeowners' remediation plans, and if it rejected them, the parties would return to court to make a determination how the repairs should be undertaken.
This parties agreed that the settlement agreement would be enforceable under Code of Civil Procedure § 664.6. At one time, when parties entered into a settlement agreement and dismissed the case, if either party failed to perform the terms of the settlement agreement, the other party would have to file a new action for breach of the agreement, and go through litigation all over again. Section 664.6 allows the court to retain jurisdiction, and if a party breaches the settlement agreement, the other party can bring a simple motion to compel performance.
In our case, before the Homeowners could even perform, the HOA ran to court and brought a motion to enforce the settlement agreement. Unfortunately, the Homeowners were representing themselves, and the technicalities of the process ran them over. To "enforce" the settlement, the court entered a judgment exceeding $600,000, based an unopposed estimate of what the repairs would cost! Making matters worse, the judge ordered that the damages were immediately enforceable, whether or not the HOA ever elected to make the repairs.
The Homeowners continued to represent themselves on appeal, but after they had filed the opening brief, they retained Morris & Stone to respond to the HOA’s brief, and to file an opening brief in a related appeal (there were two appeals filed from the judgment).
Working with an appeal that already had an opening brief was a new experience. The brief did not contain the arguments we wanted to make, creating the issue of whether they could be raised for the first time in the reply brief. Much of the court documentation we wanted to cite in the reply brief had not been designated.
We found creative ways around the briefing issue, and argued that the trial court had exceeded its authority under section 664.6, because that judgment rewrote the terms of the settlement agreement. The parties had never contemplated a process whereby the HOA could obtain a judgment without first making the repairs. The Justices unanimously agreed with our argument and remanded with instructions to strike the damage award.
The $600,000 judgment that was hanging over our clients heads is now gone. We returned the Homeowners to that point in time at which they agreed to make the repairs. The repairs can now be made at 1/30th of the amount awarded by the court.
-- Aaron Morris
Summary Judgment Victory -- Morris & Stone Helps Save Client from Million Dollar Verdict [November 30, 2014 -- Los Angeles County Superior Court]
We reported way back in September of 2011 (sad that the law moves so slowly) that our appeal client -- we called it ACME -- suffered a crushing defeat when the plaintiff company in a lawsuit convinced a jury that ACME had caused nearly a million dollars in damages when it allegedly breached a contract between the two businesses. ACME and its trial counsel consulted with our firm to see if anything could be done on appeal.
We argued on appeal that no evidence was submitted that would support one million dollars in damages. This is not an easy argument to win on appeal, because damage awards are controlled by the "substantial evidence rule", which provides that a damage award will not be disturbed on appeal so long as there is any evidence to support it. The Court of Appeal cannot weigh the evidence and cannot alter any amount awarded, even if it concludes that it would have reached a different result.
Nonetheless, we successfully persuaded the Court of Appeal that there was no evidence to support the damage award, and the Court ordered a new trial. The client later told us that the company refers to the day the ruling came out as "Morris & Stone Day" -- the day the company found out it could continue to exist due to our success with the appeal.
The only thing we did not like about the opinion from the Court of Appeal was that it was a remand for new trial, instead of an outright reversal. We felt and argued that the plaintiff had already had its chance to show damages, and had failed to do so. However, the Court of Appeal apparently did not want to entirely disregard the finding of the jury. It had found a breach of the agreement, and although we persuaded the Court that the damages the jury awarded were not supported by the evidence, the Court of Appeal apparently wanted to give plaintiff another chance to present sufficient evidence to support a damage award.
The client used the same trial counsel for the new trial, but this time, buoyed by the holding following our appeal, trial counsel brought a motion for summary judgment, pointing out that all the "damages" plaintiff had presented in the prior trial were determined to be unsupported by the evidence. Since the plaintiff could not support the prior damages or find any new damages, the trial court granted the motion for summary judgment. Although the opinion of the Court of Appeal had wiped out the judgment, it appeared to doom our client to the time and expense of another trial. But trial counsel brilliantly extracted our client from that fate using a motion for summary judgment, bolstered by the result of the appeal.
-- Aaron Morris
Appeal Victory -- Court of Appeal Upholds $1.5 Million Judgment for Internet Defamation Victims [January 2, 2014 -- Fourth Appellate District]
In May 2012 we obtained a $1.5 million judgment against defendant Pankaj Karan for a defamatory email he sent. Defendant fought the judgment with a Motion for New Trial and Motion Notwithstanding the Verdict, claiming we had not presented sufficient evidence to support that level of damages. Damages are always challenging in a defamation action, because the reality is that customers just don't notify the business that they are going elsewhere because of the defamation. In this case, we showed the value of the projects that were in the pipeline, and provided experts to testify to the value of the business that was lost as a result of the defamation.
The trial court denied the motions and defendant appealed, making the same claim that there was insufficient evidence. I was a bit disappointed by the lack of commentary by the justices at the oral argument, because counsel for defendant had completely misstated the record on appeal. Unlike typical law and motion matters, where you can state the evidence in the best possible light for your motion, on appeal, where you are claiming there was insufficient evidence to support the judgment, you are required to set forth all the evidence that supports that judgment. Here, defense counsel had cited to only the testimony of his own client, and ignored all the favorable evidence we had introduced. I had taken him to task in my appeal brief, and expected the Justices to do the same. When they failed to do so, I suspected they might be saving their vitriol for the written opinion.
I was right. The court agreed that the evidence we presented was more than sufficient to support the verdict. In the first sentence of the opinion, the court said: "All things considered, appellant Dr. Pankaj Karan got off cheaply in the trial court." The court chastised defense counsel for failing to properly set forth the evidence in the appeal brief, and in our favorite language from the opinion, stated: "Karan has misstated the record in numerous particulars, as shown in a respondent's brief so devastating it has left Karan, like Job, with no reply but silence and a hand over his mouth."
-- Aaron Morris
Trial Victory --
Morris & Stone Wins Internet Defamation Action
It is crucial to move quickly on an internet defamation case, because the websites and Internet Service Providers keep the information that will identify the person who posted the comments for only a short time. Here, the defamer had published false information about our clients on a dozen websites, but by the time the clients retained us, it was already too late to subpoena the information from some of those sites. Thankfully, we were able to pull out a victory despite these obstacles.
We were able to get identifying information on one site, and we persuaded the trial court that given the nature and timing of the postings, all the postings had been posted by the same person. The trial court found all the comments posted on all the websites to be defamatory, and entered judgment in our clients' favor.
-- Aaron Morris
Appeal Victory --
Morris & Stone Blazes New Interpretation of
Law, Allowing Recovery of Triple Damages against
Failing to Repay Loan
[January 18, 2013 -- Fourth Appellate District]
The case involved a loan made by our client to the defendant. Defendant and his entities failed to repay the loan, and we were retained by the plaintiff to sue. I am always bothered by cases where the worst that can happen to the defendant is that he is required to do what he was supposed to do in the first place. The loan agreement did not provide for attorney fees, so other than the defendant's own attorney fees, he was not facing any downside in fighting such an action. Any other attorney would have pursued this as a garden variety breach of contract case, and since so many attorneys are loathe to go to trial, at the end of the day such attorneys would have settled the case for less than what was owed, or gone to trial and received a judgment for the loan amount. The plaintiff is left far from whole.
We figured out a better way. There is a criminal code section that makes it illegal to receive stolen property, and provides for a civil action to recovery any losses. We argued that Defendant had used a false pretense to obtain the money from our client. Basically, he told her he had a certain valuable trademark, and that the money from the licensing of that trademark would be used to repay the loan. It turned out he did not own that trademark, and he made no money from its licensing.
A quick aside for an important concept. Picture that an aluminum salesman comes to your door and sells you aluminum siding for your house for $12,000. He presents you with and you sign an agreement for the installation of the aluminum siding, pay the $12,000, and then he never installs it. You sue for breach of contract, but during discovery you find out that he is not even a licensed contractor and has no access to aluminum siding. You can add a claim for fraud, and that gives you a shot at punitive damages, but basically your damages are the same under both the breach of contract and fraud actions -- the $12,000 you paid for the aluminum siding that was never installed.
But here's the thing. If he had come to your door, put a gun in your face and stolen the $12,000, everyone would understand that was a theft. The fact that he used a bogus contract instead of a gun to steal the money from you does not make it any less of a theft. That reality is so self-evident, but it escapes many judges. Kudos to Judge James Di Cesare who understood that a theft is a theft, whether by way of burglary, robbery or bogus contract.
And now back to our story. The Judge agreed that this was more than a simple breach of contract, and amounted to receipt of stolen property (the money). Although he expressed that he didn't like it because attorneys could start alleging breach of contract actions as thefts, he agreed that the criminal statute applied, and awarded close to $700,000 against Defendant, and all of our attorney fees.
Defendant appealed that aspect of the judgment, claiming that the criminal code did not apply because he had to first be criminally convicted, and that as the party that allegedly stole the money, he could not be convicted for receiving it.
The Court of Appeal rejected his arguments, and affirmed the judgment. The Court found that the criminal statute means exactly what it says. It agreed with us that theft by false pretense (the bogus contract) is still a theft, and that even the person who steals the money is still liable for receiving it. As icing on the cake, the Court of Appeal decided that our application of the statute, and the fact that the statute has generated no appellate decisions, made the opinion worthy of publication. In the future, when we advance this theory and encounter a judge who just can't wrap his or her mind around the concept, we can cite to our own case as authority.
Here is the
Trial Victory --
Morris & Stone Wins $1.5 Million for Internet
In this case, we represented a business and the individual who owns that business. The defendant, a medical doctor named Pankaj Karan, was starting his own business, MDTelexchange, and traveled to an overseas company also owned by our client (we’ll call that the "foreign company") and entered into a contract for the creation of some custom call center software.
And that is where the divergence in the two versions of the story begins. Our clients asserted (and proved at trial) that the working software was delivered on time by the foreign company. The defendant, Dr. Karan, claimed otherwise, and blamed the failure of his start-up company on the software.
Dr. Karan’s claims never made sense, because while the software would have been useful in his business, it was in no way essential. Blaming the software for the failure of the business was akin to saying a business failed due to a lack of business cards. But for whatever reason, Dr. Karan chose to blame our clients, and in an email announced that he was going to "work night and day to inflict the maximum amount of financial pain that is allowed under the law." To that end, he ignored the fact that his contract was with the foreign company, and instead attacked our client personally, along with his other company, taking to the Internet to publish negative information about them.
This is a scenario that I see over and over in Internet defamation cases. Someone becomes unhappy with a business or individual, and decides to criticize them on-line. It might even begin with a laudable motive – just putting out the word to the public to avoid a business that did not satisfy the critic. I would defend to the death the right of anyone to go on line and publish a legitimate criticism of a business.
But something happens that takes the person beyond a legitimate review. As the person types the words, he or she decides it’s just not stinging enough and won’t cause enough harm. In this case, Dr. Karan must have felt that a legitimate review of the foreign company, stating that in his opinion the software did not work as promised or was not delivered on time, just wasn’t hurtful enough. He posted two articles on his own blog, and sent an email to our clients’ customers. In the email and postings, Dr. Karan’s comments had almost nothing to do with the alleged problems with the software. Indeed, he abandoned his claim that the software was late, and instead claimed that it had never been delivered at all. He added that our client had cheated an employer ten years earlier, and that his company had failed to pay vendors hundreds of thousands of dollars. Although our clients had never received a single complaint from a customer, Dr. Karan claimed that "they are swindlers of the highest kind and have milked many of their clients of money and time."
At trial, Dr. Karan could not identify a single customer that our clients had "swindled", he could not identify a single vendor they had failed to pay, could not specify how he had cheated his former employer, and acknowledged that the software was in fact delivered. Today, an Orange County jury, known for being very conservative with damage awards, awarded $1.5 million jointly and individually to both of our clients for the damage to their reputations and business, caused by Dr. Karan.
In a standard civil
action, the plaintiff has the burden to prove the
case. This is true in a defamation action as well,
but since truth is a defense to defamation, the
burden of proving a statement is true falls on the
defendant. I can’t fathom how defendant thought he
would get away with what he published in this email
and on his blog, but I think he may have thought he
would be safe because we could not prove a
negative. In other words, how do you show that you
have never defrauded any of your customers? Bring
in every customer you have ever worked with to
testify that you did not defraud them? That would
be impossible, and that is why the law puts the
burden on defendant to prove the TRUTH of the
statements. Dr. Karan could not prove his
statements were true.
Trial Victory --
Morris & Stone Recovers Triple Damages for Client
When is a breach of contract also fraud? When the party never intended to perform.
When do you get triple damages and all of your attorney fees for fraud? When you hire Morris & Stone (although your results could differ).
Breach of contract is easy to spot, but business owners are often confused about what constitutes fraud. Someone fails to pay all the money owed on an invoice, and the client wants us to add a cause of action for fraud. That's probably not fraud.
The elements of fraud are (1) a misrepresentation of a material fact; (2) made with the intention that the party rely on that representation to his detriment; (3) reasonable reliance on the misrepresentation; and (4) damages. As you can see from the above elements, in the case of a contract, for there to be fraud the fraudulent intent must exist at the time of the contract. If a person enters into a contract intending to perform, if he later fails to perform, that breach will not transmute into fraud no matter now egregious and flagrant his breach. To prove fraud, you must show that at the time the defendant entered into the agreement, he had no intention of performing.
So how do you get into the mind of the defendant to determine if he intended to perform when he signed the agreement? Thankfully, California courts have held that the behavior after the contract was signed can be used to show that the defendant never intended to perform. In our case, the defendant borrowed a significant amount of money from our client, and pursuant to the agreement that money was to be invested in a business venture. The money was never repaid, and our client hired us to recovery the money.
We went her one better. We sued for fraud, because we could see no indication that the money ever went into the business venture. We felt that would be sufficient to show that at the time of the contract the defendant did not intend to perform. He was free to argue that he intended to invest the money at the time of the contract and therefore it was not fraud, but how would he explain that the money was never used for the intended purpose? As we suspected, defendant fought us on discovery, and when we compelled him to respond, he could not provide any proof that the money had ever gone to the business.
But here is where we got really creative. There is a criminal code section that makes it illegal to receive stolen property, and allows a victim to bring a civil action against the criminal to recover three times the value of the stolen property. We sued under that section, alleging that the entire loan process had just been a artifice to relief our client of her money. In other words, he stole the money from our client through a bogus business venture, and kept that money for himself. It was no different than if he had stolen the money by hacking into her checking account. The fact that he used loan documents to steal the money did not make it any less of a theft.
A fact pattern that will support this breach of contract/fraud/theft approach does not arise very often, but we have pursued it twice before. The theft cause of action provides a real conceptual hurdle for most judges. Many judges are former District Attorneys or Public Defenders, and their criminal law backgrounds taught them that a criminal cannot be convicted of both stealing property and receiving that property. Yet, here I am arguing to them that I want damages under a statute dealing with receiving stolen goods even though this is the same person that stole the goods (here, the money). In reality, the law says that someone cannot be convicted of both offenses, but can be charged with either. Indeed, the law says that if the statute of limitations has passed for the theft of the goods, the thief can still be charged with receiving the property, because the statute actually states that it is an offense to receive or exercise control over the stolen property. Thus, the same person that steals the property is guilty of exercising control over it if it still has not been returned.
The second conceptual hurdle involves the erroneous concept that the defendant must have been convicted of the offense before the civil suit can take place. After all, the judges reason, the legal standard for the burden of proof on a criminal conviction is beyond a reasonable doubt, whereas in civil court it is just more probable than not. How can a defendant be made to pay under a criminal statute when he has never been convicted of the offense? Complicating the matter, no reported decision has ever discussed the civil remedies under the criminal statute upon which we were relying.
In reality, these concerns are easily disposed of, but the judge must be made to wrap his mind around the concept. In the latter case, no criminal conviction is necessary because it still must be shown in the civil action that the defendant committed the offense. Other cases involving civil enforcement of criminal statutes have made clear that the primary reason the statutes provide for a civil remedy is that law enforcement does not always have the will or resources to go after a criminal. A victim of a crime should not be dependant on the vagaries of the criminal system in order to seek redress. For example, there is a statute that permits cable companies to seek civil damages for the theft of a cable signal. What are the odds that police departments around the state are going to devote resources to going after cable thieves? Therefore, the Court of Appeal held that cable companies can prosecute under these criminal statutes whether or not the defendant has ever been criminally charged. It's a win-win. The cable company can become its own police force in order to discourage cable thieves, and the government need not devote resources to that purpose.
So it is here. There would be little disincentive to using false pretenses to "borrow" money if the worst that could happen to the defendant was that he would someday be ordered to return the money. Morris & Stone uses this criminal statute to impose a quasi-criminal remedy on the defendant, providing a much greater disincentive regarding this type of fraud, since the defendant must pay back three times the amount he took.
This judge finally got it, and tripled the damages, awarding our client three times what she had loaned to the defendant. As a huge bonus, the statute provides that the defendant must pay all attorney fees incurred by the plaintiff. Absent a contract provision, you are not entitled to recover attorney fees under a breach of contract case, and rarely under a fraud claim. Since we used this criminal statute, the court also awarded our client her attorney fees.
We might just start wearing badges.
-- Aaron Morris
Appeal Victory --
Morris & Stone Gets Million Dollar Verdict Reversed
A business, we'll call it ACME, suffered a crushing defeat when the plaintiff company in a lawsuit convinced a jury that ACME had caused nearly a million dollars in damages when it allegedly breached a contract between the two businesses. ACME and its trial counsel consulted with our firm to see if anything could be done on appeal.
After a close examination of the record and all the testimony at trial, we agreed to handle the appeal. There was no way to justify the jury's award. The damage award consisted of different components, and they did not make sense when taken together. For example, the jury did not award any future damages on one cause of action, but did on another. But there was no way the defendant could have suffered damages in one instance and not the other, if any damages were suffered at all. Additionally, the judge had handled the admission of the evidence in a very poor manner. We decided to attack the damage award on the basis of a lack of substantial evidence.
By way of background, challenging a verdict by claiming that it was not supported by substantial evidence is usually viewed as a long shot. As set forth in a civil appeal treatise:
"The 'substantial evidence rule' is one of the most formidable hurdles facing appellants after a trial on the merits. When the case was tried on its merits, the court of appeal invokes several presumptions in support of the judgment. All evidentiary conflicts are resolved in favor of the judgment; and, so long as the judgment was supported by "substantial evidence," the appellate court will not reweigh the evidence."
Even the term "substantial evidence" is a complete misnomer. It implies that the verdict will be reversed if the plaintiff cannot show some appreciable amount of evidence, but in reality the verdict will be upheld if plaintiff can show any evidence that supports the verdict. You see, it is the province of the jury to decide whom to believe. Take the case of a traffic accident, where the case comes down to whether a traffic light was red or green. The jury is specifically instructed that even if 20 witnesses testify that the light was green, and only one testifies that the light was red, the jury can find that the light was red. In such a case, the verdict would not be reversed on appeal for a lack of substantial evidence, because the testimony of the one witness is sufficient to support the verdict. This is an essential rule if the advocacy system is going to work. If a case was decided simply by counting the number of witnesses who said one thing versus the number that said the opposite, then a party with no scruples who is willing to pack the witness stand with lying witnesses would always win.
Facing the daunting Substantial Evidence Rule, we took the Court of Appeal through each item of damages, and showed that nowhere in the record did any evidence exist that would support the verdict. The attorneys for the plaintiff company tried valiantly to refute our arguments, pointing to testimony and exhibits that they claimed supported the verdict. In response, we showed why each alleged item of evidence was defective.
After quoting the law on substantial evidence, and explaining that "every substantial conflict in the evidence is to be resolved in favor of the judgment," in a rare move the Court of Appeal reversed the judgment, agreeing that no evidence had been presented to the jurors that could justify the verdict.
-- Aaron Morris
For the Millionth
Time, Listen When We Offer a Walk-Away
It can be hard for some to view a court dispute with the dispassionate eye of a businessperson looking only at the bottom line. Some attorneys, intentionally or not, fuel the litigation fever with unrealistic promises of what can be accomplished. I have suggested repeatedly here and elsewhere that when an offer of a walk-away comes, an attorney and his client should take a very hard look at that offer. The tendency is to say, "if I was willing to walk away, I never would have sued in the first place." But litigation is fluid and changing, and while it might have made perfect sense for you to file an action to, say, fight over ownership of a business, that may no longer be the case if the business has cratered in the interim or you went off and started a new business.
This was a sad case, involving two business partners fighting over ownership of the business. When the client came to us, the court case was already very old, the business had died, and the parties had reached a settlement agreement that should have disposed of the action. Our client had already agreed to pay money to settle the case, but the other side was required to dismiss the complaint and that had not been done.
We were retained, and immediately filed a cross-complaint seeking to force the opposition to honor the agreement and dismiss the complaint. We also saw no reason why our client should be paying anything to the other side, so we took the position that because the agreement had been breached and we were required to weigh in, the money was no longer on the table. "Just dismiss the complaint and walk away", we told opposing counsel. She refused, claiming she was going to get a multi-million dollar judgment against our client. She ran up significant attorney fees for her client, pursing an action over a dead business.
The case then went to a settlement conference. We advised the judge we were willing to walk away if Plaintiff would just dismiss the action. Opposing counsel was outraged. She advised the judge that she was going to win millions of dollars for her client, and that any suggestion that her client would ever dismiss was ridiculous. She stormed off, and ran up more attorney fees for her client.
On the eve of trial, she brought a motion claiming that her client now needed to file a new complaint with new causes of action. The judge granted the motion, and the attorney went off to bill more hours on the case.
On the eve of the new trial date, the attorney again appeared in court, this time on a motion to be relieved as counsel because her client was unable to pay her all her attorney fees. The motion was granted, and her client was left to represent himself. He agreed to dismiss the complaint and walk away with nothing -- not the millions of dollars sought by his attorney, or even the amount set forth in the original settlement agreement. The case was resolved exactly as we had proposed on day one, but only after opposing counsel had run up probably $150,000 in attorney fees for her client.
This case illustrates a point of negotiation that some attorneys never learn. Posturing is not an effective form of negotiation. If an attorney repeatedly claims that she is going to get a judgment that I know is unobtainable and in any event uncollectible, then it's not a viable threat. Through reasonable negotiations, the originally agreed settlement amount might have been returned to the table, but making big threats only made negotiations impossible and accomplished nothing but high attorney fees for her client.
-- Aaron Morris
One of our latest anti-SLAPP victories provides a beautiful illustration of a “stealth” SLAPP suit that the plaintiff’s attorney failed to recognize, to the great expense of his client.
In this case our (future) client’s business partner, we’ll call him Freddy Fraudster, opened a credit card account at a local bank using our client’s personal information. When our client discovered what Freddy had done, he contacted the bank and informed the personnel there that Freddy had committed fraud, and based on this report the bank closed the account and reported the matter to the police. Our client also filed a police report, and filed for a restraining order against Freddy.
Freddy was not happy. He had a long term relationship with the bank, and based on the report by our client, the bank closed his accounts and would have nothing further to do with him. Apparently thinking the best defense is a good offense, and hoping that winning the race to the courthouse might give him some leverage, Freddy filed an action against our client. He claimed that our client had authorized him to open the account, and that the report to the bank was therefore defamatory since it accused him of fraud.
Do you see why Freddy’s action in Superior Court was a SLAPP suit? Opposing counsel didn't, but we recognized that this was a SLAPP suit and successfully brought an anti-SLAPP motion. You see, a SLAPP suit is one that tries to block a person’s right of petition. Freddy’s attorney realized that the report to the police and the application for the restraining order were protected rights of petition, but he mistakenly thought that the report to the bank, requesting that the credit card be cancelled, was not a petition for redress and therefore did not fall under the SLAPP statute because it did not involve any government agency. No doubt, he thought that by suing our client for defamation, he could make all his evil deeds go away and get back in good stead with the bank by offering to dismiss the case if our client would withdraw his remarks to the bank, court and police. Now it sounds like a SLAPP, doesn’t it?
The interpretation of the SLAPP statutes by Freddy’s attorney was far too narrow. Consider. One day you run a credit report on yourself and you find that someone has fraudulently opened a credit card in your name. What is the first thing you are going to do? Call an official government agency? You might do that eventually, but first you are going to call the credit card company and tell them to cancel the card. Thus, contacting the credit card company, or in our case the bank, is a natural part of the entire “right of petition.”
It’s very similar to the litigation privilege. I occasionally see cases where a defendant tries to sue the plaintiff and his attorney, claiming that the demand letter sent by the attorney was defamatory because it falsely claimed the defendant did something illegal. But under Civil Code section 47, anything said in conjunction with litigation is privileged and therefore not defamatory. The demand letter from the attorney takes place before legal action is ever filed, but it is still part of the litigation process.
So it was here. The report to the bank occurred before any “right of petition” was pursued with a government agency, but calling to cancel the credit card was a natural part of that process. If a plaintiff were permitted to SLAPP a defendant by focusing on the activities leading up to the actual right of petition, then the intent of the anti-SLAPP statutes would be subverted. We explained that to the court, and our motion was granted.
-- Aaron Morris
Victory -- The Case of the Custom Motor Coach
This was a relatively small case, but it was particularly satisfying because we obtained a complete victory at a very low cost to the client.
Our client lived in Michigan and owned a very high-end motor home that he wanted to sell. This was no camper shell; it was a motor coach you might expect to see Willie Nelson using for tours. Our client put it up for sale on the Internet, on a Michigan website, and it was soon seen by a prospective buyer in California.
The buyer and our client corresponded many times by email, and eventually agreed on a price. The buyer never traveled to Michigan to see the motor home, but our client had provided innumerable photos. The buyer transferred the funds to our client for the purchase, and arranged for a shipping company to pick up the motor home in Michigan and deliver it to him in California.
The buyer was thrilled with what he received. Over the next year, he sent repeated emails to our client, just to tell him how happy he was with the purchase.
But then a problem developed. Apparently there is a hierarchy in the high-end motor coach world, like you might find among those with private jets. While giving a tour of the motor home to another owner, that person told the buyer that this wasn't a "real" QR3, but rather was a QR2 with the upgraded kitchen option, giving the appearance that it was a QR3 (I'm just making up these model numbers). And apparently in the motor coach world, owning a QR2 is looked down upon.
This was an outrage to the buyer. He had seen the photos of the kitchen, and that was why he thought he was buying a QR3. He never would have purchased a QR2. Never mind that our client had never represented the motor home was a QR3, or that the buyer had never communicated that he had some special need for a QR3. He argued that our client should have known that someone looking at the upgraded kitchen might think it was the QR3, and he should have warned our client that he was actually buying a QR2.
Utter nonsense, of course, but that did not prevent the buyer from serving our client with a summons for an action in Orange County Superior Court. After using the motor home for nearly two years, the buyer was claiming fraud and demanding the return of the entire purchase price. The client contacted us, asking us to represent him in the action. He was surprised when we asked only for a small retainer, but I suspected we could dispose of this action pretty quickly.
I brought a motion to quash the summons for lack of personal jurisdiction. Such motions are tough to win, because jurisdiction is very broad. Clearly our client had sold the vehicle to a resident of California, and under normal circumstances that could have subjected him to jurisdiction here. But the key was method of delivery. The buyer had arranged for delivery of the motor home. If our client had shipped the vehicle to California, then likely there would have been jurisdiction because he would have been targeting this State. But since the buyer had traveled to Michigan (through his shipping company) to make the purchase, our client had never directly targeted the state or "availed himself" of the laws of California.
The court agreed, and the case was dismissed.
-- Aaron Morris
Victory -- "If You Sue Me, I'll Sue You!"
This case was especially satisfying because it was not a classic anti-SLAPP case involving defamation, but we persuaded the judge that the matter fell under the anti-SLAPP laws.
SLAPP stands for Strategic Lawsuit Against Public Participation. A "SLAPP suit" is one designed to silence a defendant, to prevent him from criticizing the plaintiff or, in this case, to keep him from taking a matter to court. Here, our (future) client had entered into a settlement agreement with the defendant in a prior action. The settlement agreement required the defendant company to pay damages to our client, and contained a confidentiality agreement. Two years after the settlement agreement was signed, the defendant had still not paid the damages to the plaintiff, so he retained our firm to sue to collect the money due under the agreement.
After the defendant company could not be persuaded to pay the money voluntarily, we filed an action for breach of contract, attaching a copy of the settlement agreement. The defendant answered the complaint and also filed a cross-complaint, claiming that it was a breach of the confidentially agreement to attach the settlement agreement to the complaint. Incidentally, counsel for defendant had discussed with me his intention to cross-complain on this basis, and I had warned him that would be a really bad idea. He did so anyway.
The reason the cross-complaint was a bad idea is because it was a SLAPP. Do you see why? Remember again what SLAPP stands for – Strategic Litigation Against Public Participation. Defendant had breached the settlement agreement, so clearly we were entitled to sue for breach of that contract. That is the public participation – taking a case before a court for redress of a grievance. By turning around and cross-complaining that our client had breached the agreement by revealing its contents in court, Defendant was in essence suing our client for suing. Attempting to punish someone for suing should always raise SLAPP concerns, but defense counsel filed the cross-complaint anyway, even after my warnings. We filed our anti-SLAPP motion against Defendant/Cross-Complainant for the cross-complaint.
So let’s run this case through the two-prong, anti-SLAPP analysis. Our burden was to show that the speech was protected under the anti-SLAPP statute. The speech here was the complaint itself, with the settlement agreement attached. Filing a complaint is a specifically protected activity under the anti-SLAPP statute, and comments made in conjunction with litigation are protected under Section 47. There was no issue that our complaint was a protected activity.
That takes us to the second prong, by which the plaintiff, here the cross-complainant, must show a reasonable likelihood of success on the merits of the case, even if the speech is a protected activity. Our client was required to keep the agreement confidential in exchange for payment of the damages. But the company never paid the money, so our client was excused from performance. Further, to sue for breach of contract, a plaintiff must allege the terms of the agreement. Here, there was no way to allege a breach of contract without specifying the terms of that agreement. The company argued we should have sought to bring the complaint under seal so no one would ever know the terms, but there is not such obligation required under the law.
But the company had an even more fundamental issue with its cross-complaint. The elements of a breach of contract claim are (1) a contract; (2) a breach of that contract; (3) performance by the plaintiff; and (4) damages from the breach. The company was alleging breach of contract, but it had utterly failed to perform. I attached a declaration from our client saying he had never been paid, and the company could say nothing to refute that point. Thus, the company could never prevail on its breach of contract claim because it could not satisfy the performance element.
The court granted our anti-SLAPP motion, threw out the cross-complaint, and the company is on the hook for more than $15,000 in attorney fees.
-- Aaron Morris
Victory -- The Case of the Outraged City Council
In this case, our (future) client addressed a city council meeting on a matter she felt was important to the city. Specifically, the city had been rocked by some controversy involving city council members, and our client was speaking to the issue of how the newly-elected council members should go about performing their duties. To illustrate the point, she cited the example of a former council member who had taken money from special interests. The city council member in question took umbrage with the accusation that she had acted unethically, and sued our client for defamation for the comments she had made at the city council meeting. We were retained to fight the defamation action.
It is seldom that we are presented with such a clear SLAPP suit. SLAPP stands for Strategic Lawsuit Against Public Participation. What better example of public participation is there than a citizen addressing their city council? Indeed, under Civil Code section 47, any comments made during a "legislative proceeding" are absolutely privileged (meaning they can never be defamatory). Better yet from the standpoint of an anti-SLAPP motion, section 425.16(e)(1) provides that statements made before a legislative proceeding are protected speech.
So let’s run the facts through the two prongs of the anti-SLAPP analysis. First, as counsel for the defendant, it was our burden to show that the speech was protected within the meaning of the anti-SLAPP statute. That was a no-brainer in this instance, since the words were spoken at a city council meeting. And since the conduct falls under a specific anti-SLAPP section of 425.16, there was no need to show that the topic was a matter of public interest. "Any matter pending before an official proceeding possesses some measure of ‘public significance’ owing solely to the public nature of the proceeding, and free discussion of such matters furthers effective exercise of the petition rights § 425.16 was intended to protect." (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1118.)
Our having shown that the speech was protected, the second prong of the anti-SLAPP analysis requires plaintiff to show a reasonable likelihood of success on her claim, which in this case would be impossible. Since section 47 makes speech at a city council meeting absolutely privileged, the speech by definition cannot constitute defamation.
So a slam-dunk anti-SLAPP motion, right? Not quite.
A SLAPP motion puts a stay on all discovery, which is one of the primary benefits of an anti-SLAPP motion because it keeps the plaintiff from using the discovery process as a sledgehammer to try to wear down the defendant. In this case, counsel for Plaintiff had served discovery prior to the anti-SLAPP motion, and argued that the court should permit that discovery prior to ruling on the anti-SLAPP. There is authority for the proposition that a plaintiff should be permitted to conduct discovery to determine whether the defendant acted with malice, because that takes away certain privileges under section 47. However, there is no malice exception for words spoken at a city council meeting, so no amount of discovery by the Plaintiff could have revealed information that would have defeated the anti-SLAPP motion.
Nonetheless, the court granted Plaintiff’s request for discovery, and that added two months to the process. It could have been that the court just did not understand the authorities we provided, but more likely the court was bending over backwards to give the plaintiff access to discovery, specifically because the judge knew she was going to grant the motion, and did not want Plaintiff to have any possible basis for appeal. In that sense, the judge might have done us a favor, but it is frustrating to deal with a frivolous action for an additional two months. We were successful, though, in greatly limiting the discovery. The court denied Plaintiff’s request to take our client’s deposition.
As expected, the discovery revealed nothing useful to the Plaintiff. Instead, the Plaintiff attempted to argue that the conduct by Defendant was "illegal" and therefore not protected. This was another instance where there is authority for the proposition being claimed, but that legal theory had no application to the case at hand. In the case of Flatley v. Mauro, an attorney had sent threatening letters to someone, threatening to sue him if he did not pay a large settlement to a client. Normally, a letter from an attorney in anticipation of litigation would be protected speech under the litigation privilege, but the Flatley court ruled that the attorney’s letters had risen to the level of extortion, and were therefore illegal and unprotected.
Plaintiff was trying to say that our client’s speech at the city council meeting was illegal and therefore unprotected according to Flatley. And how could speech at a city council meeting ever be illegal, you ask? According to Plaintiff, it was illegal because the city council’s own guidelines state that comments should be civil, and in Plaintiff's opinion Defendant’s comments had not been civil.
Predictably, the court understood that even if the words were interpreted to be rude, a city council’s guidelines do not amount to law, and violating them does not amount to criminal conduct. The court granted our anti-SLAPP motion, striking the defamation complaint and entering judgment in our favor. The court also awarded us over $18,000 in attorney fees against the Plaintiff.
-- Aaron Morris
victory for free speech.
One problem we had to overcome in order to prevail in this action was the fact that the director was so well regarded that witness after witness talked glowingly about him during the trial. That was great to show the falsity of the statements published by the defendant doctor, but it also showed that the Plaintiff had not suffered a significant loss of reputation since the witnesses still loved him. The jurors later explained that this love-fest was the reason they awarded a relatively moderate amount of compensatory damages, but during the trial this left me to wonder if they were fully appreciating the malice behind what defendant had done. Not to worry; the jury came roaring back in the punitive damages phase and made very clear with the amount of punitive damages that the defendant doctor needed to be punished for her conduct. In closing argument I had explained that cases like this actually promote freedom of speech and the marketplace of ideas that we hold so dear in America, because those ideals are not served by knowing falsity. The jury apparently agreed.
As the icing on the cake, the judge then granted our request for injunctive relief, prohibiting the doctor from defaming our client in the future. Although each instance of defamation is actionable, repeatedly suing a serial defamer is not the best solution because of the expense and delay in getting to trial. With an injunction from the court, the doctor can actually be jailed if she repeats her false claims about our client and is found to be in contempt of court for defying the court’s order.
-- Aaron Morris
You would think attorneys
would do a little research on the opposing counsel,
but apparently not.
-- Aaron Morris
You are Offered a Walk-Away, Listen
Perhaps because the adrenaline and endorphins flow during a courtroom battle, I become very thoughtful in the calm that follows. I won a small but satisfying court victory today in an Internet defamation case, and it made me realize how much the process mirrors a scene from a movie I just saw.
The movie was Taken, which I thought was very good. Even if you haven’t seen the movie, you probably saw the scene to which I refer since it was shown in the trailers. The main character, who we come to learn is some sort of retired Über-spy, is on the phone with his teenage daughter when she is kidnapped. He hears the bad guy pick up the phone, and he calmly gives the following speech:
I don’t know who you
are, and I don’t know what you want.
Most every Internet defamation case I handle starts with such a moment. Not nearly so dramatic, of course, and there are no deaths involved if the defendant doesn’t listen to me, but the concept of a choice is the same.
Most of my defamation clients aren’t seeking money initially; they just want the bad guy to stop defaming them. My marching orders are usually just to get the person to take down the comments. So I write to the bad guy, explaining that this does not need to go any further. He strayed from the path and said and did some things he shouldn’t have, but if he just takes down the posts and walks away, “that will be the end of it.”
That is the moment in time. I am affording the prospective defendant the opportunity to avoid sending his life in a bad direction in terms of time and finances. I am less of an advocate and more of a care giver, just trying to convince the patient to stop engaging in self-destructive behavior. But he makes the ultimate decision whether to accept that help, or to continue on his destructive path.
In Taken, the kidnapper could not help himself and responded by saying, “good luck.” He did not take the skill set seriously enough, thinking he would be impossible to find. Today’s defendant also did not take the skill set seriously enough, thinking since he lived across the country we would never pursue him. He was one of a few on-line competitors with my client, and had engaged in some trash-talking that escalated into defamatory comments about my client’s business practices. All he had to do was take down the false statements and walk away and that would have been the end of it. He refused, and today a judge ordered him to take down the false statements, and to pay our client over $200,000.
Pick your battles. If you want to take on a plaintiff that you feel is trying to shake you down, then I’m with you one hundred percent. But don’t get into a court battle just to prove who has the bigger . . . lawyer. The defendant in today’s case had no moral high ground. He knew what he was saying about my client was untrue, so why on earth wouldn’t he take the opportunity to walk away? As a famous philosopher once sang, “You’ve got to know when to hold them, know when to fold them, know when to walk away and know when to run.”
-- Aaron Morris
What Part of
"Without Cause" Don't You Understand?
We prevailed on a somewhat humorous motion brought by the opposition.
Our client is an Engineer who was hired by a company pursuant to an employment agreement. The agreement provided that if our client was terminated without cause, he would receive a year's wages. The company breached the agreement by terminating our client without cause and failing to pay the severance. We sued for breach of contract.
Defendant filed a
demurrer, which is a motion that claims the
complaint fails to allege sufficient facts to state
a claim, or is unclear. A demurrer for
"uncertainty" is proper
when the defendant truly cannot figure why he, she
or it is
being sued. Here the complaint alleged very
clearly that the
plaintiff, our client, was terminated without cause, and that
the company was therefore required to pay the
How can one provide more detail about how a termination was without cause? That's like alleging that Diet Coke is sugar free, and the other side asking for more details about how it is free from sugar. Maybe if we had used stronger words? "Plaintiff was absolutely, positively fired without cause." Or perhaps, "Plaintiff was really, really, really fired without cause, and that's no lie."
I wish I could credit my brilliant oral advocacy, but in overruling the demurrer, the court did not even invite argument. The court said the complaint was fine and ordered the defendant to answer.
-- Aaron Morris
"You Can't Sue Me, I Have the RIGHT to Defame You!"
One of our current defamation suits involves a man that was accused of being a pedophile. He is not a pedophile, and the defendant freely admits that she does not really think he is a pedophile. Indeed, the Defendant says that our client has never done anything that would warrant her making such a claim. But that doesn’t stop her from making the claim anyway, because she doesn’t like him. That’s why we are suing her for defamation.
Here’s where the case gets stranger. Even though Defendant admits our client is not a pedophile, her attorney brought an anti-SLAPP motion claiming that our complaint should be thrown out because Defendant’s false statements are protected speech. Confused? Let me see if I can walk you through the logic.
A Strategic Lawsuit Against Public Participation (”SLAPP”) is a lawsuit or a threat of lawsuit that is intended to intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. Winning the lawsuit is not necessarily the intent of the person filing the SLAPP. The plaintiff’s goals are accomplished if the defendant abandons the criticism to make the lawsuit go away.
To guard against the use of lawsuits designed to quash free speech, California very wisely passed an anti-SLAPP statute, and was the first State to do so. Many other States have filed similar law. California Code of Civil Procedure Section 425.16 provides a quick procedure a defendant can use to stop a SLAPP suit. Rather than goes through a year of costly litigation, a defendant can bring a simple motion to strike the complaint. The court then decides whether the speech in question is protected free speech.
Section 425.16 applies to causes of action “against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue.” (§ 425.16, subd. (b)(1).) Such acts include: “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.”
So, the first three types of protected speech arise from the traditional forums – statements made in places like court, during a city council meeting or at some other public forum. The fourth criteria can be outside a public forum, such as on a blog on the Internet, but that section requires that the matter being discussed concern a “public issue.” There are many competing court decisions that have tried to define what constitutes a public issue.
In our case, defense counsel argued that the Defendant’s false claim that Plaintiff is a pedophile is protected speech because stopping that behavior is a matter of public interest. He actually argued with a straight face that even when the accusation is a complete lie, one can accuse another of being a child molester and be protected from suit because the subject matter is so important. So, under defense counsel’s approach, certain topics would automatically enjoy heightened free speech protection, regardless of the circumstances. This obviously would make the job of defamers easier, because we could simply create a list of topics we find are important enough to be matters of “public interest” and the defamer could falsely accuse intended victims of those items, knowing the speech is protected.
The judge didn’t think that was a very good idea either. Motion denied. Defamatory speech is not protected speech under the anti-SLAPP statute.
This was a sad but necessary case by our client against her sister and her sister's business partner. The defendant sister happens to be an attorney. She grew tired of the legal profession and decided to join a construction business. She went to our client and asked to borrow $60,000 to invest in the business. That loan was followed by a $65,000 loan and then an additional $90,000 loan, for a total of $225,000.
Since the loans were being made to her sister, our client provided all this money with no written documentation; all the agreements were oral. That always presents an issue at jury trials. Inevitably, when I ask the jurors prior to the commencement of trial if they will be able to enforce an oral agreement, half answer no. There is this common misunderstanding that oral agreements are unenforceable. I've never really understood why that myth is so pervasive, since most agreements are oral, and people enter into oral agreements on an almost daily basis. "Joe, if you buy the coffee today, I'll pay for it tomorrow." That's an enforceable oral agreement, albeit one that would probably not make it to court.
Our client did later convince the defendants to sign two promissory notes, but they reflected only a portion of the total amount owed, claimed that the (now defunct) business was liable for the debt, and did not include the agreed interest. My fear was that the natural preference for written agreements would cause the jurors to ignore the evidence on the oral agreements, and instead just award the smaller amounts set forth in the written promissory notes. My other fear was that the jury would not appreciate that our client was suing her sister, even though she had done everything to avoid bringing the suit, including offering to accept small monthly payments. In fact, during voir dire some of the jurors had confessed that they would have a problem being impartial since they felt one family member should not sue another.
My fears were unwarranted. I not only persuaded the jurors to award the full amount owed under the oral agreements, I convinced them that the failure to repay the loans amounted to fraud and conversion. The jury returned a verdict exceeding one million dollars, including $500,000 in punitive damages. I spoke to the jurors at length after the trial, and without exception they all expressed remorse that one sister had to sue another, but agreed there had been no alternative. Several of the jurors hugged our client and a few cried, they felt so bad for her.
This case also serves to illustrate the wisdom of our mantra, "less is more" as applies to trial presentation. We took over this case shortly before trial when the client became disenchanted with the manner in which former counsel was handling the case. One of our client's former counsel had drafted a complaint that included TWELVE causes of action, including a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO). In other words, counsel contemplated going to court and arguing to the jury that by failing to repay the money borrowed from our client, defendants had risen to the level of a criminal organization guilty of racketeering. Many attorneys think this sort of overreaching is somehow clever and shows their legal prowess, but in front of a jury it just hurts the client's credibility.
This case needed to be prosecuted as a simple case, where someone placed too much trust in her sister. We stripped away and dismissed all the superfluous causes of action, leaving only breach of contract, fraud and conversion, and prevailed under those simple claims.
[UPDATE -- December 10, 2008] The rules governing trials provide that a plaintiff may dismiss a cause of action "without prejudice" (meaning it can be re-filed later) at any time prior to commencement of trial. As set forth above, we greatly streamlined the trial by dismissing a number of causes of action prior to trial. Defendants didn't like that for some reason (I guess they wanted to be sued on more grounds), and brought in two law firms to try to get the dismissals without prejudice changed to dismissals with prejudice. Opposing counsel from both defense firms valiantly briefed and argued the motion, but the court followed the law. Motion denied.
[UPDATE -- January 5, 2009] Defendants still won't accept responsibility for what they did, and are grasping at ways to reverse the million dollar verdict we obtained. Defense counsel brought a total of four motions -- two motions for new trial and two motions for a judgment notwithstanding the verdict. Defense counsel gallantly briefed and argued the motions, claiming the evidence did not support the jury's verdict. Motions denied.
[UPDATE -- January 21, 2009] The prevailing party at a trial is entitled to recover the court costs, and submits a Memorandum of Costs setting forth the amounts. Those costs are automatically added to the judgment unless the other side objects by way of a Motion to Tax Costs. Only certain costs are recoverable, but there is somewhat of a catch-all category that permits a party to seek other "reasonable and necessary" expenses. Amateur attorneys try to cram every conceivable cost into this category, only to buy themselves a motion to tax that they must then oppose. I've seen attorneys seek the cost of lunch during a deposition, claiming the lunch had been a reasonable and necessary cost of litigation, only to then bill their client thousands fighting over the cost of that sandwich.
Applying our "less is more" philosophy to the Memorandum of Costs, we are very conservative, listing only those costs that are clearly recoverable. In this way, we usually avoid a Motion to Tax Costs, and if the opposing counsel does bring such a motion they only end up looking foolish for trying to reduce an already conservative cost memorandum.
We applied this technique to the costs in this case, but in their continuing effort to challenge everything, one of the defendants brought a motion challenging the $12,741.04 in costs. We were easily able to show that our Memorandum of Costs had been a gift to the defendant, and the court agreed. Motion denied.
-- Aaron Morris
A Victory for Fairness
Proof that no good deed goes unpunished; at least until we make it right.
A man, we'll call him Jerry, was new to this country, and unemployed. He looked up a distant relative for help, who we will call Amar. First Amar acted as matchmaker, and introduced Jerry to a woman he eventually married. Next, at the request of Jerry, Amar agreed to set up Jerry in a dry cleaning business so that he would have a job. Under the agreement, Amar would buy the business and Jerry would run it. They would be 50/50 partners, splitting all income and any profits from the eventual sale of the business. Amar signed the lease and the loan documents because Jerry had no credit, but Amar had his own full time job and had little involvement with the dry cleaning business.
Jerry ran the business for more than seven years. Two years after the sale of the business, soil and groundwater contamination was found at the site from the dry cleaning chemicals. The landlord sued Amar because only his name was on the lease, and received a mid, six-figure judgment/settlement in Federal court for the clean-up costs. Jerry refused to pay any portion of the clean-up costs, claiming that he had no liability since he had not signed the lease.
After trying for years to persuade Jerry to pay half of the clean-up costs, Amar was forced to sue, and retained Morris & Stone to handle the trial. Defendant Jerry, and his attorney Michael O'Callaghan (who did a very good job at trial and always acted in a professional manner), relied on three arguments. First, they contended that in the partnership agreement, Amar had agreed to be responsible for "all debts and liabilities of the partnership." Next, they contended that Jerry had not been a part of the Federal action, and therefore could not be expected to pay any part of that judgment/settlement. Finally, they contended that since another party had operated the business after the sale, it could not be determined who was responsible for the contamination.
At the jury trial, we argued that Amar's agreement to be responsible for all the debts did not contemplate ground contamination, especially since as between the partners, Jerry would be the contaminator. Next, we made clear that while Jerry was not a party to the Federal action, the defense of that action by Amar was for the benefit of the partnership. Finally, we showed through photos and the application of common sense that it was more likely than not that Jerry had contributed to the ground contamination.
The jury agreed with us, and entered a verdict requiring Jerry to pay for half of the clean-up costs, past and future. This result was all our client ever wanted.
"It is obvious that Pallorium is a collateral casualty in the war on spam." That is how Superior Court Judge Geoffrey T. Glass ended his ten page minute order in the case of Pallorium, Inc. v. Jared, ruling in favor of our client, Defendant Joe Jared (who granted us permission to discuss this important case by name).
Jared was operating a website that offered a free database of reported spammers gleaned from a number of sources, as well as a means to check for open relays. An open relay is a server which can be hijacked and used by spammers to anonymously transmit their messages. Blocking a spammer by site name or address is ineffective if the spammer can run the messages through an open server.
Jared wrote a software program that allowed users to servers to see if they were open. Someone performed such a test on Pallorium's site, and it came back positive. Therefore, with no action by Jared, Pallorium's site was listed as an open relay. Once so designated, Pallorium’s e-mail messages were blocked by a number of Internet Service Providers who had chosen to use Jared’s database. Pallorium denied that it ever had an open relay and sued Jared for the damages allegedly caused by Jared’s efforts to block spam.
Steven Rambam (aka Steven Rombom), a principal of Pallorium, predicted that he would have a judgment against Jared by the end of the year, but it was not to be so. Jared had been handling his own defense, but just weeks before the trial was set to commence, he retained our firm to represent him at trial. Aaron Morris filed a number of motions and persuaded the court to have a limited trial on the issue of immunity under the Communications Decency Act.
At trial, Pallorium was very ably represented by Woodland Hills attorney Gary Kurtz. Kurtz argued that Jared was liable on at least two grounds. He claimed Jared had acted in bad faith in the manner he checked for open servers and for failing to maintain a system to correct any errors. Morris argued that the Communications Decency Act was specifically designed to protect people and entities that seek to block spam, and that imposing a requirement that any spam blocking system must have an "appeal process" would eviscerate the purpose of the Act. If such were the law, spammers could beat any anti-spam system by spamming it with demands for removal from the list. Anyone seeking to develop a spam filter would need the resources to hire a staff to investigate all the claims by spammers that they are not really sending spam.
The court adopted the latter interpretation of the Act. "The Court rejects the argument that Jared’s bad faith is shown by the inefficiencies of his methodology . . . efficacy is not a consideration in determining good faith," Judge Glass stated. The court ruled in favor of Jared, thereby throwing out the case. Rambam thank you ma'am.
This case presented some challenges, because by the time Jared retained our firm, the time had long since passed for bringing motions to dispose of the action. Morris set a motion for judgment on the pleadings for the first day of trial. We knew the motion had little chance of being successful because that particular motion cannot be supported with evidence, and the proof that Jared was entitled to immunity under the Communications Decency Act required significant evidence. However, the motion had the intended result. The motion was successful in piquing the Court's interest. Judge Glass continued the trial so that motion could be fully briefed and opposed, and then ordered a trial on just the issue of immunity under the Communications Decency Act. That trial lasted less than eight hours and resulted in a victory for our client Jared. It is likely that even with a contrary judgment at this bifurcated trial on the affirmative defense, Jared would have prevailed at the trial on the merits. Rambam testified that his business was disrupted because so many e-mails had been blocked by Jared's filter, but he did not produce any such e-mails, offering instead only some sort of compilation of three e-mails. Also, under cross-examination by Morris, Rambam conceded that he had other means to send e-mails, so it is doubtful Pallorium could have proven any damages.
The victory against Pallorium is gratifying, but there is a larger issue here. Pallorium argued that the Communication Decency Act was designed to punish spammers, but not to protect spam blockers. Kurtz advanced the interesting argument that a party that strives to block spam is only protected if the spam filter is content based. In other words, if the filter can successfully block offensive e-mail of a specific type, that effort is protected, but it could not be too broad. We disagreed, and argued that spam is inherently objectionable, and that a filter designed to block spam -- regardless of content -- is protected.
By way of analogy, we posited the example of emails coming from Russia. A great deal of spam comes from Russia, so if an Internet user knows that any message coming from Russia is almost certainly spam (since he knows no one in Russia), can he be offered a spam filter that would block all messages from Russia, regardless of content? Pallorium argued that such a filter would not be protected under the Communications Decency Act, because it made no effort whatsoever to determine the content of the messages, and therefore would block even legitimate messages. We responded that there is no God-given right to deliver unwanted emails, and that people like Jared should be permitted to assist people in blocking messages by whatever criteria they deem appropriate. The court agreed with our position. And while this is a trial court decision and therefore affords no precedent, such victories bolster the fight against spam.
The complete minute order can be found here.
[UPDATE] The court had ordered that counsel for Jared was to prepare the formal judgment, and Pallorium would then have ten days to object to that proposed judgment. Counsel for Pallorium filed no objection to the proposed judgment and instead filed a document attacking the court's tentative decision. We'll give counsel credit for chutzpah in making these arguments. The court had found immunity under two sections of the Communications Decency Act, one of which required a showing of "good faith." Pallorium argued that by sending e-mails to servers to test whether they were open, and then creating a database based on what he found, Jared was in essence illegally entering these servers for an illegal, nefarious purpose and could not have been acting in good faith. Of course Judge Glass rejected this argument out of hand. In the first place, it is wrong, but even more problematic it was never raised at trial. Parties to a trial cannot wait until after the court rules and then bring up arguments they could have made at trial. Judgment was entered in favor of Jared.
[UPDATE] Not surprisingly, Pallorium did not go quietly into the night. It was clear from his statements at trial that Rambam was taking the case very personally. Pallorium filed an appeal, making the same claims it had made in objecting to the the trial court's tentative decision. Pallorium's counsel, Gary Kurtz, argued that the judgment in favor of Jared denied Pallorium the right to a jury trial and was defective because of Jared's alleged bad faith, again claiming that testing someone's server to see if it is an open relay somehow amounts to criminal conduct. Kurtz went for an emotional approach, trying to show the potential for mischief if someone is permitted to block e-mail based on their own definition of what constitutes spam. Pallorium continued to argue that the Communications Decency Act only protects content-based spam filters. It claimed that Jared's filter should not be protected because he had decided to block any e-mails coming from an open relay. Kurtz argued that such an over-inclusive filter could block legitimate e-mails, and therefore should not be protected. In one of our favorite passages, Kurtz makes the following emotional appeal in Pallorium's brief:
"Should a California Court immunize the conduct of the Society for Historical Review (or some other Neo-Nazi organization) if it decided to block the e-mail of the Simon Wiesenthal Center? Should a California Court immunize the conduct of the North-American Man-Boy Love Association (or some other pedophile society) if it decided to block the e-mail of the National Center for Missing and Exploited Children? Should a California court immunize the conduct of Al Qaida if it decided to block the e-mail of the C.I.A.?"
Sounds great, but this extreme language does not withstand the slightest scrutiny. Jared did not block a single e-mail going to others. Jared designed an e-mail filter for his own use and like anyone was free to set whatever restrictions he wanted on that filter. For example, you can set your e-mail system to receive e-mails only from those people listed in your address book. Can a spammer now sue you because you are blocking his efforts to explain to you the virtues of Viagra? If your spouse decides to make use of your filter, are you now liable because you have distributed a spam filter that could keep her from receiving messages from the C.I.A.? Of course not, and no emotional hypothetical will change that fact. Imagine what your inbox would contain if spam filters were limited in the manner Pallorium proposed. The intellectually honest question is, "can a company or person dictate what you do with your e-mail?"
After noting the diligence of our firm, the California Court of Appeal affirmed the judgment in favor of Jared. The Communications Decency Act immunizes "a provider . . . of an interactive computer service" who makes available to "others the technical means to restrict access to material . . . the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected." As the Court said, "whether Jared's filter was over-inclusive is irrelevant so long as he deemed the material to be 'obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable.'"
The complete Opinion of the Court of Appeal can be found here.
[UPDATE] "The ego is not master in its own house." -- Sigmund Freud.
Even a unanimous opinion by the Court of Appeal did not convince Rambam of the error of his ways. Counsel for Pallorium filed a Petition for Review with the California Supreme Court. Unlike an appeal to the Court of Appeal, which must be considered by the court if any party decides to file one, an appeal to the Supreme Court is left to the discretion of that court. A Petition for Review is not an appeal per se, but rather is a request to the Supreme Court, asking it to agree to hear the appeal.
The Petition is doomed to failure if the problems so far are any indication. Pallorium missed the deadline for filing the Petition, and had to seek relief from the untimely filing. Permission to file a late Petition was granted, but the Petition that Pallorium then filed was missing pages and bore the wrong case number. Pallorium then had to file an errata, asking the Court to insert the missing pages. We predict the Supreme Court will not accept the matter for review.
[UPDATE] As we predicted, after receipt of our Answer to the Petition, the California Supreme Court unanimously denied review. Jared now has a complete victory, with every judicial officer that has examined the case agreeing that he acted properly.
After the Internet became an everyday part of our lives, Congress was faced with some crucial decisions. Take the example of someone that creates a website with a chat room or bulletin board. Let's assume the website was created by a movie buff as a forum by which others could join him in discussions about the latest and greatest films. The site becomes popular; so popular that the webmaster cannot read all the messages that are posted. Then one day, someone comes on the website and posts horrible, defamatory statements about a director of one of the movies. The director learns about the message, and since there is no way to determine who posted the messages, he sues the website operator. Should the website operator be liable for messages that are posted by others? How about if the director first demands that the website operator delete the messages? Should the operator be held liable for refusing to remove the defamatory messages?
In a wise move (even a broken clock is right twice a day), Congress decided to pass a law that would preserve the free expression of ideas on the web. Under the Communications Decency Act, a website owner who operates an interactive computer service (one where people can read and post messages) is immune from liability for anything posted on the website by others. A number of attorneys are having trouble with this concept, thinking the old common law definitions of defamation should still apply, but we are doing our best to educate them.
We recently educated the law firm of Bowman & Brooke on the finer points of the Act. Our client operates a friendly website that posts news and has a message board dealing with automobiles. A thread was started on the message board by a user, discussing the author of a number of books about collectible cars. Someone took exception to the author's books, claiming that he did not know what he was talking about and stating that he had been involved in some shady sales transactions with cars that were not what they were represented to be. Just as in our hypothetical above, the author contacted our client and demanded the the messages be removed from the bulletin board. Our client made the editorial decision not to remove the messages, determining that as a matter of policy it should not be involved in censoring the comments of subscribers to the website. The book author sued, claiming that by refusing to remove the comments, our client had ratified the comments and was thereafter responsible for them.
We defeated the lawsuit with a single motion. We sought summary judgment, claiming that our client was not only immune from liability for the messages, but that it was also immune for refusing to remove them. We argued that the Communications Decency Act would be rendered meaningless if a duty of investigation was imposed on website operators. The Act recognized that bulletin boards could not exist if the operator had to monitor and approve every message that was posted. We pointed out that the same is true if an operator must investigate every complaint about posted messages. Such a result would chill the free expression of ideas since, to avoid potential liability, website operators would soon determine that the safest course of action would be to delete any offending messages. Any potentially controversial message, even if it was just someone's opinion that a book was bad, would soon be deleted. Even worse, website operators would soon determine that message boards create too much work and exposure to liability, and remove them from their sites. This would create a dangerous impediment to the free flow of ideas. Plaintiff's counsel, Jeffrey A. Swedo, a very fine attorney by all indications, argued that even if the Act does provide protection for messages posted by someone else, the website operator must be held liable for refusing to remove the content since by doing so, he in essence "aids and abets" the person who posted the messages.
The court, Judge Robert Gallivan presiding, agreed with our interpretation of the Act and entered judgment in favor of our client. Note that this does not leave the author without a remedy. Under the Act, the creator of the content remains liable under standard defamation theories, but the web site operator must be free to offer a forum for the unfettered exchange of ideas and information.
Our (future) client was in the business of buying land and building real estate projects, mostly apartment complexes. He took an investor under his wing, formed a partnership, and made him hundreds of thousands of dollars. However, the investor grew dissatisfied with splitting the profits and formed his own company. The parties entered into an agreement whereby the investor would wind down certain ongoing partnership projects and pay to our client his percentage of the profits, which were estimated to be substantial. A year later, the investor had not paid any money to our client and refused to provide an accounting.
The client retained us to sue for an accounting and the money owed to him. We soon found to our amazement that the vast majority of the projects had been undertaken on nothing but a handshake. Trusting to a fault, the client had even permitted the partner to hold all properties in his name alone. Beyond the accounting, which was a daunting task in and of itself, we had to first prove that our client was entitled to share equally in any profits.
We went to court and persuaded the judge to order the matter to an arbitrator for an accounting prior to trial. We then convinced the defendant and his counsel to make the accounting binding, so that we would not have to attempt the nearly impossible task of presenting an accounting case to a jury. The other side jumped at this chance because the defendant and his accountant had maintained all the records, and he was no doubt convinced that we would be unable to overcome any accounting he presented to the arbitrator. We even agreed that the defendant could prepare the accounting, reserving the right to prepare our own if we disagreed with the figures.
The accounting presented by defendant was a sight to behold. Every remaining property had been sold, yet according to his creative accounting our client still owed him in excess of $1 million, and he cross-complained for that amount. Imagine his attorney's shock when we announced that we would accept his accounting for purposes of the binding arbitration/accounting.
There is a legal maxim which states that a witness that is untruthful in one part of his testimony should be disbelieved in the rest of his testimony. We showed four or five key points in the accounting that were false, and thereby reduced defendant's credibility to zero. Indeed, the arbitrator even refused to accept defendant's testimony that he had incurred expenses in selling a home the parties had built on spec. Although it was reasonable to assume that costs were incurred, by that point the arbitrator was unwilling to listen to anything the defendant had to say.
Then, using defendant's own accounting, we established step by step how much he owed to our client for each project. You see, as creative as the accounting was, defendant had the sense not to lie about facts that could easily be checked through public records, such as the sale prices of the properties. The arbitrator's accounting awarded every penny we asked for.
Defendant and his counsel did everything imaginable to fight the arbitrator's findings, even claiming that a "binding accounting" only meant that said accounting would be presented to the jury to either be accepted or rejected. The case went all the way to trial, at which point our motions in limine (evidentiary motions heard just prior to trial) cut off any possible defense the defendant could offer. In a very unusual move, the defendant and his counsel stipulated to entry of judgment in our client's favor in the full amount we sought.
We soon discovered a possible reason defendant had stipulated to entry of judgment. We received a call from his accountant, stating that he had been authorized by the defendant to meet with us to discuss settlement. We responded that while we were always amenable to discussing the matter, those discussions would have to be limited to payment arrangements; we would not agree to any reduction in the amount since we now held a judgment. He was outraged and began screaming into the phone. It turned out that his "offer" was going to be that our client could walk away without paying the defendant anything. After all, he was the one that had prepared the creative accounting presented at the arbitration, and he was standing by his claim that our client owed defendant more than $1 million. According to the accountant, if forced to, defendant would appeal the case, get it reversed (difficult to do with a stipulated judgment), sue our client and this time win the $1 million. "In any event," he yelled, "I have ways to bury his assets so deep that you will never see a dime of your judgment!" No doubt, he had offered this pearl of wisdom to the defendant, who felt his accountant would make him judgment proof. Within two months, we had recovered the full amount of the judgment, nearly half a million dollars.
We mailed the accountant a dime.
The Morris Law Firm Wins Large Judgment from Client's Former Counsel
An employee of Pacific Bell suffered horrible sexual harassment and discrimination when she transferred to a position in the installation department, a formerly all-male enclave. She hired an attorney to represent her against her employer. Pursuant to the fee agreement, he would be paid one-third of "all money recovered" in the action, including any money awarded as damages and attorney fees. The jury was appropriately shocked by the conduct of Pacific Bell (now SBC), and awarded significant damages. However, when the judgment was paid by SBC, the attorney refused to turn over any portion of the judgment awarded as "attorney fees", claiming the fee agreement was silent on how those fees should be split, and claiming entitlement to100 percent of those fees. In other words, the agreement provided that everything would be added together and the attorney would get one third. When he saw the significant attorney fees awarded by the court, he wanted to rewrite the fee agreement so that he would receive all of the attorney fees plus one-third of the damages. But attorney fees are awarded to reimburse the plaintiff for the fees she had to pay to recover the damages, so the attorney's claim made no sense; he was being paid twice.
The client retained our firm to recover the money that was owed to her. Despite the clear breach of the fee agreement, we offered to honor that agreement and permit the attorney to keep his one-third. He refused, so we were forced to take the matter to court. Defendant fought vigorously to have the matter decided prior to trial, but all the efforts were defeated. At trial, the jury agreed that the attorney had breached the agreement with our client, and entered a verdict of nearly half a million dollars, which we collected in full a few days later.
The Morris Law Firm Wins $69,500 at Trial Without Calling a Single Witness
Because of our efficiency, and the ability to scale our representation, we can handle smaller cases in a cost efficient manner. Some firms never learn how to do this, handling all cases in the same manner. A client will get a six-figure fee bill, whether the matter involves $50,000 or $500,000. We don't work that way, as this case illustrates.
Our client loaned over $57,000 to a friend, and the friend then refused to repay the money. That normally would be a simple case to prove, but there were some major problems. First, the payments to defendant had been made over a number of years, most of them in relatively small amounts, giving the impression that they might have been gifts (which is what the defendant was contending). Next, the agreement was entirely oral; there was nothing in writing to prove that the money was a loan. Finally, and most problematic, the breach of the agreement appeared to have occurred many years before, and the statute of limitations on an oral agreement is just two years. We banked on being able to prove the matter on the strength of our client's testimony, plus some limited written discovery.
The defendant was ably represented by Thomas M. Davis of Wilson, Borror, Dunn & Davis. He argued throughout the case that we would never be able to prove that the money was a loan, and contended that the case would be barred by the statute of limitations. That conviction died on the day of trial. After a pre-trial conference with the judge during which Aaron Morris set forth how he would prove the case, defendant agreed to a stipulated judgment in the full amount sought by our client -- $69,500. Judgment was entered in our client's favor without ever calling a witness, and with very nominal attorney fees.
Our client was on his way to work early one morning, when he received a frantic phone call from his bookkeeper. His business was cash intensive, and it was the practice of the bookkeeper to run a daily activity report at the beginning of each day. On this particular day, it was discovered that $50,000 was missing from two accounts, and that the checks our client had written to customers were bouncing as a result. Our client called Bank of America to report what he thought must be a theft, only to learn that it was Bank of America that had closed his accounts and seized the funds. When he asked why, he was told, "because we can, that's why." He asked only for an explanation and a letter of apology that he could show to his customers, but Bank of America refused.
When we became involved, Bank of America offered a number of excuses for its conduct, from computer errors to a claim that the accounts had been closed because of "suspicious activity." It was not until we sued and conducted discovery that we uncovered an internal document revealing the real reason Bank of America had taken the $50,000 without notice. Although it had never had any problems with our client, Bank of America had decided that our client's business was too check intensive, requiring too much work for the bank and potentially exposing the bank to losses. We never claimed that Bank of America had to maintain our client's accounts, but there was no reason Bank of America could not have provided advanced notice so our client could have closed the accounts in an orderly manner. We repeated our client's request for a letter of explanation, so that our client could undo some of the harm to his business reputation, but Bank of America still refused, steadfastly arguing that it had every right to act as it did. We were left with no option but to sue.
Bank of America was ably represented by Ivanjack & Lambirth, which took the position that Bank of America was permitted to close the accounts pursuant to its disclosure statement, and therefore whatever the motivation of Bank of America, and whatever harm Bank of America might have caused, we could not establish liability because Bank of America was permitted to do what it did. When opening a deposit account at Bank of America, the customer signs a signature card which also acts as an agreement between the customer and Bank of America. The signature card states "the written information we give you is part of this agreement and tells you the current terms of our deposit accounts" and that the agreement can be changed at any time. Although it is Bank of America's policy to provide the other "written information" whenever a customer opens an account, the new customer may or may not receive this other information, depending on whether the Bank of America employee remembers to provide a copy. As a result, a new customer may enter into a contract with Bank of America, without ever having read the agreement or knowing its terms. Contained in the other, unnamed document is language which purports to give Bank of America the right to seize a customer's funds without cause and without warning.
Unfortunately for Bank of America, our client had never been provided a copy of this "other information" so it was not a part of the agreement. The jury was outraged by the conduct of Bank of America, and awarded our client $227,162. (This amount grew to $264,162 by the time we were done.) We successfully argued that Bank of America had harmed our client's business reputation by leading the check recipients to believe he had written bad checks, when in fact it was Bank of America's conduct that prevented the checks from clearing.
One humorous and very telling moment in the trial occurred during closing arguments. Bank of America's accounting expert, a CPA from a big-eight accounting firm, had testified that our client suffered no more than $17,000 in damages, and had prepared large blow-ups to show his calculations.
He was a fantastic witness, telling how his firm is
the firm that certifies the Oscar votes. Just
a very likable guy that everyone in the courtroom
wanted to invite to their next barbeque.
The first phase of Mr. Morris' closing argument ended at the lunch break, and at lunch a betting pool was started among the trial watchers as to how counsel for Bank of America would handle this devastating math error. There was no denying the error, so most assumed counsel for Bank of America would acknowledge it and then try to put a positive spin on it, stating perhaps that while this did change the ultimate calculation, the expert was not stating that Bank of America was actually liable for any damages. Others in the pool bet that he would just ignore the whole argument and never mention the error. No one bet on what actually happened. In his closing argument, opposing counsel put up the error, and argued, in essence, that if the expert said that 10 x 10 = 1, the jury should accept that as his expert opinion, and that there had not been any showing that 10 x 10 was not equal to 1.
The jury completely rejected the damage calculation by Bank of America's expert, and adopted the calculation by our expert, to the penny.
[UPDATE 1] Bank of America could not accept the judgment by the jury, and brought four post-trial motions asking the court to either reduce the judgment, or throw it out altogether. Bank of America abandoned one of the motions -- a motion for new trial -- since with that motion it ran the risk that plaintiff would be awarded even greater damages. However, Bank of America's counsel apparently did not realize that without a motion for new trial, they would not be able to challenge the amount of the award on appeal. The other three motions were denied by the court, leaving the full judgment in place. In a moment of candor, Bank of America's counsel stated in open court that "Mr. Morris is one hell of a good attorney." At least, on that, we agree.
[UPDATE 2] Still unable to understand the basis for the judgment, Bank of America appealed that judgment and the rulings on the motions discussed above. At trial, we had demonstrated that our client lost customers because of what Bank of America had done. We then showed that, on average, a certain number of potential customers would be lost through negative referrals for every existing customer that was lost. Bank of America argued on appeal that it should somehow be "credited" for those customers that were not lost since they could not have possibly given any negative referrals. Not only did this argument not make sense, it was not a proper matter for appeal since Bank of America had failed to bring a motion for new trial. The Court of Appeal rejected all of Bank of America's arguments, and affirmed the judgment in full. The opinion of the Court of Appeal can be seen here.
[UPDATE 3] Appellate Victory: A new attorney came into the picture at Bank of America, and apparently brought a fresh perspective. Bank of America made the wise decision not to pursue an appeal to the California Supreme Court. The bank paid the judgment in full, plus an additional $37,000 in interest and fees.
[UPDATE 4] This latest update has nothing to do with Morris & Stone, but we could not resist adding it to this section. The Los Angeles Times reports that 71-year-old Gloria Wicker of Clovis, New Mexico was hospitalized after receiving a letter from Bank of America informing her that her account had been frozen because she was dead! Wicker suffered chest pains "as she tried for hours to get through an aggravating series of automated phone messages to prove she was alive," the Los Angeles Times reported. Bank of America was finally persuaded to recognize that Wicker was alive and to release her funds. No doubt if the matter had gone to trial, Bank of America would have argued that it has the contractual right to declare a customer dead, or that without the testimony of an expert it must be assumed that the customer is dead.
Repair Shop "KAO'd" After Trying to Hide Behind Technicality
This case has an unusual fact pattern. A woman contacted a business called Kao's TV Repair when her big screen television went on the fritz. The repairperson came to her home, looked at the television and presented her with an estimate, which bore the name "Kao's TV Service." He then asked the (very diminutive) woman to assist him with loading the big screen television into his truck. During that process, she suffered a back injury and ended up suing the repair shop.
The repair shop was a sole proprietorship. The woman's attorney was asleep at the switch when he prepared the complaint, and as a result used only the name that appeared on the repair estimate. Unfortunately, Mr. Kao had never formally registered that name. When he was served with the complaint, he chose to ignore it. The woman obtained a fairly significant default judgment, but for almost a year nothing was done to collect the judgment. When an effort was finally made to collect, the mistake in the name was discovered. The difference in the name was very problematic. As it was stated, the judgment was unenforceable since there was no entity by the name "Kao's TV Service." However, there was also no ability to start the action over with the correct name since the statute of limitations had long since passed.
We were retained by the client to clean up this mess. With a single motion, we persuaded the court to amend the judgment to name both Mr. Kao and his business. Counsel for the defendant argued that since the named defendant did not exist, the judgment was a nullity. We refuted that argument by proving that Mr. Kao had known about the action the entire time, but was merely trying to hide behind the misstated name.
The Case of the Oral Parachute
We were retained to represent a company manager, who had left his position to work for a smaller company. Concerned that he would be giving up his job security, he entered into an oral agreement with his future employer, whereby he would receive a certain sum of money if he were fired without cause within the first five years. Sure enough, the company went through some difficult times, and the manager's position was eliminated. The company denied that there was any "golden parachute" agreement, and we were retained by the manager to sue for the promised money.
This case presented a real problem. You may have heard the expression, "an oral contract is not worth the paper it is not written on." In reality, that is not the law. An oral contract is difficult to enforce because of the problems of proof it presents, but under the law an oral contract is every bit as enforceable as a written agreement.
That said, the simple fact is that most people think oral agreements are unenforceable. In fact during voir dire (jury questioning before the trial) almost every juror stated that it was their understanding that you could not sue to enforce an oral agreement -- it had to be in writing. Making things worse, the agreement seemed implausible. This was not the sort of industry that offers such a generous severance package.
Aaron Morris handled the trial, and was opposed by the Los Angeles firm of Rexon, Freedman, Klepetar & Hambleton, which had three attorneys present during the trial, each doing a fine job of representing the client. After a relatively short trial, the jury returned a substantial six-figure verdict for our client. Rexon, Freedman, Klepetar & Hambleton appealed the verdict, but we persuaded the Court of Appeal to dismiss the appeal on procedural grounds.
Interestingly, having seen the way we handled this case and the trial, and the result we achieved, the defendant company (the one we just successfully sued) subsequently retained our firm to represent it in a number of matters. There is no higher praise than having the opposing party hire you after a trial.
This is one of our favorite cases because all of the wrongdoers, including opposing counsel, got their just desserts.
Our client had been involved in a commercial real estate transaction some ten years earlier. Millions of dollars had been distributed, but one disgruntled investor argued about a small sum of money that was held in an escrow account for expenses. He claimed it should be distributed, while our client asserted that it was owed to him, the general manager. The parties agreed to submit the matter to arbitration, but when the day came for the hearing the investor refused to participate in the process, and thereafter sued for the approximately $35,000 in the escrow account. Pretending not to be able to find our client, the plaintiff received permission from the court to serve the complaint by publication. This procedure is somewhat of a legal fiction, which permits a plaintiff to "serve" a defendant by publishing a notice in a newspaper. That may have been fine a hundred years ago in small communities where everyone read the same paper, but now these notices are never seen by the defendants. Our client had no idea he was being sued.
Having "served" the defendant without his knowledge, the plaintiff was able to go to trial unopposed. Although the amount in controversy was just $35,000, the unopposed complaint resulted in a judgment equaling over $2 million. (With no opposition, plaintiff was able to claim everything from emotional distress to loss of profits he would have received if only he had had the $35,000 to invest.) Incredibly, despite having filed declarations with the court that the defendant was impossible to find, the day after obtaining the judgment the plaintiff was able to serve the defendant with that judgment.
We were retained at this point by the defendant to vacate the $2 million judgment. We contacted opposing counsel, and told him that we expected him to voluntarily vacate the judgment, and to agree not to take the funds from the escrow account. He orally agreed to vacate the default and agreed in writing not to seize the escrow funds. Then he reneged on both promises. We were forced to bring a motion to vacate, and told him that if he did not return the escrow funds, we would not only file a cross-complaint against his client, we would name him in the suit since he had assisted in stealing (in civil law it is called "conversion") the escrow funds.
Opposing counsel refused to return the funds to escrow, and fought us on the motion to vacate. He accused us of "posturing" and said that no judge would ever permit us to file a lawsuit against opposing counsel during litigation. He also said we would never have the judgment vacated because doing so requires a showing of possible success, and we could not meet that standard.
He was wrong on both counts. Our motion to vacate was granted, and the court rejected motion after motion brought by opposing counsel trying to dispose of our cross-complaint against him. At first opposing counsel was so incredulous, that he simply refused to recognize the judgment had been vacated. He continued his collection efforts and refused to cooperate in the discovery process. The result was thousands of dollars in sanctions against him, and a suspension from the practice of law by the State Bar.
We opted for a bench trial, and when the matter was done, not only did we defeat the claim against our client, the court entered judgment against the plaintiff/cross-defendant in the amount of $60,000 for actual damages, and an additional $100,000 in punitive damages for stealing the escrow funds. Most satisfying to us because of his reprehensible theft of the escrow funds, the court awarded $78,000 in damages against opposing counsel plus an additional $3,000 in sanctions.
[UPDATE 1] The plaintiff/cross-defendant in the action appealed the judgment, claiming that his attorney's incompetence had resulted in the award. The case presented an interesting issue. California law used to state that when an attorney made a mistake, that mistake was imputed to the client, since the attorney is an agent of the client. In other words, if the attorney was at fault, so was the client. That law was changed, and if an attorney is willing to file a declaration stating that he or she made a mistake, under most circumstances the trial court must grant relief from the mistake. This is referred to as a "mea culpa" declaration.
In this case, the attorney filed not one, but two lengthy declarations spelling out all of the problems he had encountered while representing the client in this case. The declarations were a sight to behold. He claimed to have suffered four computer crashes, a divorce, friends dying, partnership problems, and innumerable other life-altering situations. He even accused us of being at least partially responsible for the death of his paralegal, stating that he had lost his will to live when he failed to answer our discovery requests on time. However, even faced with these heartfelt declarations, we were able to persuade the trial court not to grant the plaintiff's motion to vacate. It was from this ruling that the plaintiff/cross-defendant was appealing.
Here is how we successfully opposed the motion to vacate and won on appeal. A mea culpa declaration must state that the judgment or order is the result of the attorney's "mistake, inadvertence, surprise or neglect." In the declarations, the attorney listed a hundred reasons why he was not able to represent the client properly, but hidden among these myriad excuses were statements indicating that he had intentionally handled the case in the manner he had because he believed that the court had no jurisdiction since the parties had agreed to arbitration. (What he failed to realize was that even if the parties had agreed to arbitration, by filing a complaint and conducting discovery, he had waived his client's right to arbitrate the matter.) We were able to bring these statements out of hiding and show them to both the trial court and the Court of Appeal. We persuaded both courts that the law permitting an attorney to file a mea culpa declaration did not apply to intentional acts. If the law was interpreted that way, then an attorney would be free to try one strategy, and if it failed, file a mea culpa declaration stating his interpretation of the law had been a mistake in order to get relief and try another strategy. Both courts agreed, and the Court of Appeal affirmed the ruling of the trial court and the underlying judgment.
[UPDATE 2] While the plaintiff/cross-defendant had appealed the judgment, the attorney had pursued a different course. He filed yet another complaint, claiming that the judgment against him was a result of a "fraud on the court." Still sticking to his failed trial strategy, the attorney claimed that since the matter was subject to arbitration, it was fraud for us to permit the court to enter judgment in our client's favor. It was a ridiculous claim, and we disposed of the case with a demurrer. We later successfully brought a motion for sanctions, asserting that the complaint had been filed in bad faith. The attorney then appealed both the dismissal of his complaint and the award of sanctions. The Court of Appeal rejected the attorney's arguments, stating again that an attorney cannot seek relief from his own failed trial strategy, and certainly is not entitled to equitable relief.
[UPDATE 3] We next heard from the attorney when he faxed a document to us, because it had previously been mailed to the wrong address. Having missed the deadline for seeking review by the California Supreme Court, the attorney wrote to the Supreme Court asking for relief from this mistakes, again blaming the omission on computer problems. The silence from the Supreme Court was deafening. With that, and the judgment now paid in full, the matter is concluded.
The Third Time Isn't Always the Charm.
A simple case with a humorous ending.
Our client was sued by a former business associate for an alleged breach of contract. The plaintiff's name was "Ngo" -- pronounced "no." Keep that in mind -- it's important to the punch line.
The case was completely without merit but for reasons not important to this story, the plaintiff felt compelled to bring the action in a misguided attempt to save face. We managed to have the case dismissed just by calling plaintiff's counsel and explaining the facts. Plaintiff apparently suffered "dismisser's remorse" because she then hired a new attorney and filed the action again, only to then dismiss it again once we spoke to her new attorney. (This was not a settlement situation. She was voluntarily dismissing the complaint "without prejudice" which meant she was free to file it again.)
Third time is the charm. She found yet another attorney to file the action, but when we called this one to explain reality to him, he wouldn't listen. He said he was well aware that we had "brow-beaten" two prior attorneys into dismissing the case, but that he would not succumb. He said he would never dismiss this case. Far from being a frivolous action, he claimed that this was one of the strongest he had ever seen. He had already invested substantial time in the case based upon his client's promises that she would not under any circumstances dismiss the case. Each time we tried to explain the facts, he accused us of posturing and said that he would terminate the conversation if we continued with this behavior. We were reminded of a child that sticks his fingers in his ears and says, "la, la, la, la" to prevent hearing something he doesn't want to hear.
The plaintiff lasted a little more than an hour at her deposition. After the first break, her attorney asked for a meeting, and said that his client had instructed him to dismiss the case. This time we were able to extract a dismissal with prejudice so that she could not file the action again.
We sent a brief letter to the attorney after the action was over. It said simply, "Next time, just say Ngo."
The Morris Law Firm Saves the Life of a Client
This was one of our more sobering calls of late. A gentleman in his 70s called, stating that he had two days to live and asking if we could help him. He was two days late in receiving badly needed dialysis, but the hospital was refusing treatment because he had never applied for Medi-Cal and could not provide any information to help track his Social Security information. Without the Social Security information, no Medi-Cal, and without Medi-Cal, no dialysis. We made a few calls on a pro bono basis, persuading the hospital to continue treatment while we solved the paperwork snafus and getting the feds to put a rush on the paperwork. Within hours he was back on dialysis, and the client credits The Morris Law Firm with saving his life.
Let's Consider That for a Moment . . .
Cases sometimes are won or lost on a word. Consider this sexual harassment case we handled.
Our client was a middle manager at a company, in a position that involved a great deal of contact with the company's customers. She had worked there ten years and had a file folder full of thank you letters from satisfied customers. She had always enjoyed glowing performance reviews.
When her immediate supervisor was replaced, she continued to receive praise from her new boss, until one day when he made a pass at our married client, and she rebuffed him. Things turned instantly cold. In stark contrast to the one formal review he had given her, now it was as though she was the most incompetent manager imaginable. He put her on a 30 day action plan, but her performance was so bad (according to him) that he did not let her finish out the 30 days. After ten years of exemplary performance, our client was fired just three weeks after she rejected her supervisor's advances. We are very selective about the discrimination claims we undertake, but this was one of the clearest cases of quid pro quo sexual harassment we had ever seen.
At his deposition we asked the supervisor if he had ever received any complaints from customers about our client. He answered that he had received "thousands." Most attorneys would feel compelled to follow up on such an outrageous statement, but we quickly moved on, hoping to let this answer remain unexplained.
At trial, we called the supervisor as our first witness, even before our own client. We wanted the jury to see immediately that the supervisor had absolutely no credibility, and could offer no plausible explanation for the termination. If he changed his "thousands" answer he would look like he was trying to sandbag the plaintiff at the deposition, and if he stuck to that answer he would look like a fool.
He stuck to his answer, and claimed that in the six months that our client had worked for him, he had received "thousands" of customer complaints. So, we took him through the math. "Thousands" plural has to mean more than one thousand, so we were talking about at least two thousand. Considering days off for weekends and holidays, our client only worked 132 days during that six months. Thus, receiving thousands of complaints for 132 days meant that the supervisor had received more than 15 customer complaints about our client per day. He was obviously a saint to keep her on as long as he did. But could he produce a single document, whether an internal memo or a letter from a customer that would tend to show this incredible number of complaints? No. Keeping in mind that every customer is given an evaluation form to complete, could he produce even one customer complaint? No.
The final nail in the coffin for the defendants was what should have been an innocent internal memo. A meeting had been held to discuss company business, and minutes were taken. Our client had kept a copy of the memo because it said, "Thanks to [our client] for the great job she did on the Smith project." When we subpoenaed the defendants' records they produced this document, but in their desire to make certain they did not produce a single document that said anything positive about our client, they had altered this document to eliminate this slight praise. We showed the altered document to the jury, and watched the blood drain from opposing counsel's face (whom we believe truly did not know the document had been altered by his clients). Between the "thousands" remark and this altered document, nothing the defendants said during this trial would be believed.
Opposing counsel approached the bench and requested a recess "to revisit the possibility of settlement." Our client was thrilled with the substantial settlement amount. Plus, we had presented the trial in a manner that avoided ever putting our client on the stand and subjecting her to cross-examination.
"But, But Your Honor . . ."
The Morris Law Firm started the year with a major victory that will go a long way toward better defining contract law in the employment context. The California Court of Appeal granted an appeal brought by The Morris Law Firm, thereby reversing a summary judgment entered in the Los Angeles County Superior Court.
Here are the facts of the case. A high ranking manager at a large company was persuaded to leave that company to go to work for what was a smaller company, but one with a "family atmosphere." He was told that he would have a job for life. Indeed, the new company made him promise that he would not leave for at least 15 years. Since he was giving up a long term position with solid job security, the parties verbally agreed that he could only be terminated for good cause.
Two days after he reported for work, he was handed an employment package -- the same package that is distributed to entry level employees. He was told that much of it did not apply to him since he held a managerial position. Nonetheless, he was told to sign all of the forms even if they did not appear to apply to him.
One such form was entitled "Clarification Statement." This form stated that it was an application for employment, and included language to the effect that if the employee were ever hired, he would be hired as an "at-will" employee no matter what other representations were made to him. In other words, no matter what the company might promise, it would still be free to fire him without cause.
Our client had been hired to replace a retiring manager, who stayed on to assist with the transition. Apparently, that manager started to have second thoughts about retiring, and consequently took the position that the new manager was not up to the task (despite glowing reviews by the owners of the company). The old manager announced that he would stay on, and since the company did not need two people in that position, they fired our client. Our client sued for breach of his employment agreement on the grounds that he had been fired without good cause. The defendant company brought a motion for summary judgment, claiming that the Clarification Statement made clear that he was an at-will employee, and could therefore be fired without cause. The trial court agreed and granted the motion, thereby ending the case without it ever being decided on the merits. Incredibly, the client's attorneys advised him that it would not be worthwhile to pursue an appeal.
Fortunately, the client heard about us through one of our existing clients, and contacted us for a second opinion. The vast majority of appeals are not successful, but under the facts of this case, we recommended that the client appeal the court's ruling on the summary judgment motion. He retained our firm to handle the appeal.
While it may seem obvious that the case was wrongly decided, in fact the trial court's decision was in line with many appellate decisions. Inexplicably, appellate courts have lost sight of contract principles when it comes to employment cases. They are willing to accept documents signed after the agreement is entered into as evidence that the parties did not mean what they said. To win the day, we hit hard on basic contract principles, and reminded the appellate court that whatever the Clarification Statement said, it could not "rewrite" the express agreement that had already been entered into between the parties. That express, oral agreement provided that the manager could only be fired for good cause.
The respondents argued vigorously that the Clarification Statement left no doubt that the manager was an at-will employee. In their appeal brief, counsel for respondents adopted a tone of distain, claiming there was no basis for the appeal and asserting that we had not made the "right" arguments. At oral argument, Respondents' counsel grew noticeably agitated as it became clear that this Appellate Court was going to keep contract principles firmly in mind, and ever more apparent that respondents' arguments were going down in flames. The Court of Appeal was unanimous in reversing the summary judgment.
As a result of our representation of the client on appeal, he will now have his day in court, and the defendants will be forced to honor their agreement.
[UPDATE] Because of our victory on appeal, the case was sent back to the trial court for trial. We removed the former judge from the case -- a standard practice when you have had a judge's ruling reversed by the Court of Appeal -- and the new judge set the matter for a quick court date. With the trial date approaching, defendants agreed to settle the case for a substantial amount. Considering our client's former counsel had lost the case on summary judgment and advised the client not to bother to appeal, it was quite satisfying that we were able to correct the trial court's error and obtain significant damages for the client.
Our client was a manufacturer's representative, entitled to commissions for an order he had brought to the defendants in this case, who we will refer to as Erie Corp and CS Corp. We were adamant that the commissions were owed, because the very purpose of the agreement between our clients and the defendants was that our client was to bring business opportunities to the defendants. The order that our client had brought in resulted in millions of dollars in sales by the defendants. Defendants claimed that no commissions were due, because the order our client brought in was, in essence, just a promise to buy. They argued that since the order did not specify quantities, delivery dates, etc., it was not an order at all. A complicating factor was that our client worked for Erie, but Erie had prepared the agreement with our client so that it indicated our client was working for CS Corp. To win, we needed to make the jury understand that our client worked for both Erie Corp and CS Corp. The defendants were represented by James McCarthy from Katz, Teller, Brant & Hild, a large Cincinnati, Ohio firm, and Robert D. Rose from Rose & Associates, who joined Sheppard, Mullin, Richter & Hampton during this action. Our client was represented by Aaron Morris from our firm, and Susan Gentile from the Law Offices of Susan Gentile.
As to the issue of the commissions, the equities were so strongly in favor of our client, that we probably could have phoned-in that part of the case. Our client labored for a number of years to bring a big customer to the defendants, and two days after the agreement was entered, defendants "terminated" our client, while at the same time offering him a new, identical contract with that one big customer omitted. Counsel for defendants could do little but try to make hyper-technical arguments concerning the wording of the contract.
The much more difficult part concerned getting the jury to recognize that Erie Corp was also liable to our client, albeit under different theories, even though the written contract was seemingly with CS Corp. Both companies were owned by the same person, and we had prepared an elaborate presentation showing that while he claimed the contract was between our client and CS Corp, not Erie, he never really observed that distinction. We called him as a witness during our case presentation to lay out these facts, but he made the argument better than we could have ever hoped. Frustrated by the repeated questioning about the distinctions between CS Corp and Erie, he said repeatedly that they are one in the same. Then, in an effort to paint a picture that in his mind would make the questions seem foolish, he said that the two corporations negotiate by having him sit on one side of a table, and then he runs around to the other side of the table to answer his own questions, etc. We couldn't have said it better. In fact, that was precisely the image we had intended to use to show how silly the defendants were being when they tried to argue that Erie was not liable to our client for the services he had performed. The witness just beat us to it.
We drew a very intelligent jury, that saw through all of the smoke defense counsel tried to create. The jury awarded $500,000 to our client after just a few hours of deliberations -- an amount that will likely grow to approximately $725,000 on claims that remain to be decided by the court.
Humorous moments: Trials are no laughing matter, especially one as contentious as this. Inevitably, however, moments of levity creep in, sometimes by design as a means to break the tension, other times due to an unintended result. This trial seemed to have a disproportionate number. One of the best came from one of defendants' witnesses, a manager at Erie Corp that was called for reasons that never became apparent from his testimony. To his credit, although his testimony did not appear at all meaningful in the context of the trial, he seemed fairly candid in most of his responses. On cross-examination, Aaron Morris was taking him through a hypothetical question concerning the cost of manufacturing parts. He was writing a list of all the costs involved in manufacturing this hypothetical part, and when he reached labor costs, he asked the witness to provide the cost for manufacturing the part. The witness answered, "Well, with Erie Corp the labor costs would be about five cents." Since plaintiff was suing for the very reason that Erie Corp failed to pay commissions that were due, it was very telling that a manager from the company was testifying to how cheap the company is. Another very humorous moment came when the president of Erie Corp, who was trying so hard to convince the jury that what our client had provided was not an order, referred to it as an order during testimony and had to be corrected by his attorney.
There was a very strange and funny moment when defense counsel tried something in this closing that absolutely backfired. One common technique used by attorneys during trial is to try to create some sort of class envy, hoping it will influence the jury. Most often it is the plaintiff's attorney that will try to imply that the poor plaintiff has been harmed, and since the defendant is so rich, why not award the money requested? This technique is improper, since it is asking the jury to award damages for reasons other than the facts of the case. If a plaintiff is not owed money, it does not matter how wealthy the defendant is. In this case, defense counsel tried to employ this technique, making references to the exclusive neighborhood where the plaintiff lives, and showing how much money he had already been paid by the defendants on other orders. He even showed the small town where one of the defendants is located, to imply that making this company pay the amount requested would destroy the town, we suppose. Then one of the defense attorneys did something remarkable. He took out a check from one of the defendants, and wrote it out to our client in the amount he had requested. He then projected it on the wall to make it look huge, and said, "This is what this case is about -- the plaintiff is asking you to write a check like this." Of course, this gave us the ability to say to the jury in our closing, "Well, they've already made out the check, have them pass it over to us, and we'll be done."
We could have shut this all down at any time with an objection, but we suspected this approach was doing far more harm than good to the defendants' case. We were right. Every juror we spoke to following the case stated they had been offended by this approach. As one juror put it, "Did they think we are trailer trash? Did they think we would look at that check and say, 'Huuuwee, I ain't never seen a number that big!'"
The funniest moment, though, came in two parts. We were offering into evidence a business card that Erie Corp had printed up for our client, as one of many exhibits offered to show that our client was, in fact, working for Erie. Clearly this exhibit was relevant, and there was no possible way defendants were going to keep it out. However, they must have felt it was very damaging because they fought very hard to do just that. They brought a pretrial motion to exclude the card and they objected at the time of trial -- both without success. Apparently frustrated by their inability to prevent the card from being used in evidence, they decided on another tactic. Our client also gives out a business card that lists just his name and phone number, this one printed on a small box of "Beechies" gum (similar to "Chiclets"). They are very popular with his customers, and have become sort of a trademark. During cross-examination of our client, defense counsel asked him if he recalled the business card that had come into evidence, showing he worked for Erie Corp. Then he said, "But that isn't your only business card, is it? Isn't it true that you are INFAMOUS for giving out another type of business card.?" He started to pull something out of an envelope, and we could not imagine what "infamous" card they were talking about until out came the Beechies gum. Except perhaps to show that plaintiff works for companies other than Erie Corp, we cannot imagine why defense counsel thought these "gum cards" were relevant, nor why they would describe them as "infamous", but it gave everyone a good laugh. But the real fun came at the end of trial. Since the "gum cards" had become such a on-going joke during the trial, our client had brought in several of them on the final day. After the jury had reached its verdict and been excused, the jurors came over to congratulate our client and his attorneys and to ask questions, as is often the case. Our client pulled out his gum cards and began handing them out to the jury. Over the din of the exchange taking place between the jurors and other people in the courtroom, one of the defense attorneys began shouting at the judge, who was already leaving the courtroom. He was upset that plaintiff was handing out what he described as "gifts" to the jurors. Aaron Morris responded that it was defense counsel that had described these as "business cards" and it certainly could not be improper for a party to hand out business cards. The judge just rolled his eyes and said, "There is no motion before me" as he exited the court.
[UPDATE 1] Defendants brought what is called a Rule 50 motion, seeking a new trial or judgment based on several claims of error. Defendants' motion was denied in all regards. Even though they utterly lost the action, one of the defendants sought costs and attorney fees, arguing that plaintiff had failed to prevail on one of several different theories of liability. The court denied that motion as well. Instead, the court added costs, attorney fees and certain other damages to the judgment for plaintiff, increasing the total judgment to over $725,000.
[UPDATE 2] There is something to be said for tenacity, but at this point defendants must be feeling rather punch drunk from the repeated beatings. A defendant can keep the plaintiff from collecting a judgment by appealing the judgment and posting a bond. This protects the plaintiff, who is paid by the bonding company at the conclusion of the appeal. Defendants did not want to follow that procedure, and instead brought a motion for permission to put the money in an interest bearing account, with their own attorneys as the signatories! Not surprisingly, the motion was denied.
[UPDATE 3] A small victory for the opposition? Defendants appealed to the Ninth Circuit. Although we won on all but one of the arguments, defendants did prevail on an ancillary issue that reduced the $725,000 judgment by approximately $80,000. However, court documents reveal that Defendants spent $140,464 in costs and attorney fees to achieve that $80,000 reduction in the judgment, for a net loss to Defendants of $54,915. Given their track record in the case, that was probably grounds to break out the champagne.
[UPDATE 4] The two defendant corporations are owned by the same person, and the owner testified at trial that they are "interchangeable." In fact, he testified that the primary purpose of CS Corp was just to shield Erie from liability. Any distinction between these two entities was a mere fiction, and to claim that one could be a winner if the other one lost was just sophistry. Nonetheless, since one entity had managed to reduce the judgment slightly on appeal, Defendants renewed the 2001 motion for attorney fees, claiming that CS Corp had prevailed in the action. Whatever merit that motion might have had, Defendants threw it out the window be seeking to recover every penny spent by both entities defending the action. In an amazing syllogism, Defendants claimed that they are distinct entities for purposes of determining if one is a prevailing party, but that they are the same entity for purposes of calculating attorney fees. Thus, even though Erie lost, Defendants claimed they were entitled to recover the entire amount of $478,147 they spent on attorney fees and costs. The trial court denied the motion in full on the basis that it was defective for failing to specify the fees spent by the different parties. The court further stated, in essence, "what part of 'DENIED' didn't you understand the last time you brought this motion?"
Humorous detail: You are probably familiar with the use of "[sic]". When quoting someone who misspells a word or makes a grammatical error, you insert [sic] to indicate that you recognize the error, but that you are providing an exact quote. Defense counsel in this case loves to use [sic]. In our fee bills, we use semi-colons to separate the individual cost items. In a sentence, the word following a semi-colon is not capitalized. However, that rule does not apply to a list which is merely using semi-colons as a separator. Nonetheless, defense counsel could not resist putting a "[sic]" after every single such instance when we moved for attorney fees. Thus, when we brought the motions, we loaded them up with these costs lists, knowing that opposing counsel would feel compelled to quote them and put a "sic" after every single item, and knowing that this sort of nonsense really irritates judges. We can't say that it was a factor, but we won every motion for attorney fees. But we never would have anticipated how far defense counsel would go in their desire to point out perceived grammatical errors. In their second unsuccessful motion for fees, defense counsel quoted an earlier ruling by the judge. Yes, even in quoting the judge, defense counsel felt compelled to put a "sic" in his quote. Now that is a great strategy. You are attempting to persuade a judge to award nearly half a million dollars in attorney fees, and as a part of your persuasive argument you take a moment to tell him that he is an ungrammatical dunderhead. Again, there is no way to know if it was a factor, but the judge denied the motion in very strong, clear terms.
[UPDATE 5] The first week of April, we received a notice from the United States Court of Appeal for the Ninth Circuit, notifying us that the latest appeal submitted by CS Corp would not be scheduled for oral argument. We have to admit that this was a little disconcerting. Not because we thought there was any chance that CS Corp would prevail, but we were concerned that perhaps we had missed something in terms of scheduling oral argument. The usual procedure is that the court sends out notice, asking if the parties want oral argument. Our first thought was that opposing counsel had failed to properly serve us with the notice from the court, which had occurred on a number of occasions during the matter. We decided to contact the court the following Monday to see what had occurred. There was no hurry, because it generally takes months before an appeal is decided. However, on Monday, our answer came in the mail. The Court of Appeal had decided unanimously that the appeal brought by Katz, Teller, Brant & Hild and Sheppard, Mullin, Richter & Hampton on behalf of CS Corp was so utterly without merit, that the parties would not even be given the opportunity to argue the matter. The Court affirmed the trial court's decision and threw out CS Corp's appeal in a half-page decision. We had argued all along that Erie and CS Corp were the same entity, and the Court of Appeal got the message. It stated simply that "The appeal is without merit. . . . [CS Corp's] interests at all times were aligned with those of its related co-defendant company, [Erie]. . . . [CS Corp] was not a prevailing party on any claim under any statute authorizing fees."
[UPDATE 6] We hope we were not somehow responsible for these subsequent shenanigans by Sheppard Mullin. We defeated their crazy claim for attorney fees, so perhaps in an effort to make up that lost revenue, Sheppard Mullin made another ridiculous claim for attorney fees in an unrelated case, and was slapped down hard by the court. Los Angeles Superior Court Judge John Shook said that Sheppard Mullin was not entitled to the $1 million it billed the City of South Gate on a relatively simple criminal defense matter. "The court finds that the fees charged the City by Sheppard Mullin were more than excessive and unreasonable transcending beyond the stratosphere into deep outer space," Shook said in a highly critical 18-page ruling. Shook said Sheppard Mullin engaged in "unreasonable and unnecessary measures" to defend the case. The judge concluded that Sheppard Mullin overstaffed the case with inexperienced attorneys, pursued misguided litigation strategies and sent South Gate confusing and redacted legal bills.
"On second thought, can we have the $9000?"
Lest we be accused of posting only our victories, here is a case that we actually lost (although, as you will see, we did not really lose when measured by the result received).
Our client obtained the patent for a very impressive product, and sought investors to help with the costs of manufacturing and marketing this new invention. One investor grew impatient with the pace of the marketing efforts and sued our client for 24 million dollars.
After we were retained, we performed an independent audit of the records of our client and all the money that the investor had contributed, and determined that for various reasons our client did, in fact, owe the plaintiff $8,250. With our client's permission, we called opposing counsel and offered to pay $9,000 in exchange for dismissal of the case; the extra being for the time and trouble of filing the case. You can imagine opposing counsel's response. He accused us of acting in bad faith, and said that he had "irrefutable" evidence that would support his damages claim of $24,000,000.
The trial was handled by Aaron Morris, who witnessed one of the greatest examples of posturing in the history of litigation. Counsel for the plaintiff adopted the theme that the case was so clearly in favor of his client, that any time spent defending against the action was an affront to justice and a waste of the court's time. When asked if he wanted to present an opening statement, opposing counsel responded, "No, the facts in this case are so clear that no opening is necessary." Then, when asked to call his first witness, counsel responded, "I don't even need to call any witnesses." He tried to win the entire case based on a bizarre motion, claiming that since our answer to the complaint denied that plaintiff had suffered $24 million in damages, we had, in effect, admitted that he had suffered $23,999,999.99 in damages. The judge was not impressed, and denied the unnamed motion.
The action proceeded, with counsel for plaintiff (unsuccessfully) objecting to every document we offered and every question we asked, claiming, in essence, that since it did not fit in with his theory of the case, it must necessarily be improper. Our client testified that the accounting showed plaintiff was owed $8,250, but no more. After both sides had rested, plaintiff's counsel again refused to offer any closing argument, stating it was "unnecessary." Aaron Morris presented the closing argument for defendant, after which plaintiff's counsel again waived the opportunity to present his final closing, stating that, "I didn't hear Mr. Morris say anything that needs to be rebutted."
The judge stated that, for the first time ever in all the years that he had been a judge, he was going to rule from the bench. (Normally, judges take the case "under advisement" to consider the evidence, and then issue a ruling a few days later.) He found for plaintiff, but denied all damages except for the $8,250 we had conceded. He also denied any prejudgment interest on the $8,250, because we had always offered to pay that amount, but plaintiff would not accept it. Our client could not have been happier with this "loss."
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Aaron Morris is a Partner with the law firm of Morris & Stone, LLP, located in Tustin, Orange County, California. He can be reached at (714) 954-0700, or firstname.lastname@example.org. The practice areas of Morris & Stone include employment law (wrongful termination, sexual harassment, wage/overtime claims), business litigation (breach of contract, trade secret, partnership dissolution, unfair business practices, etc.), real estate and construction disputes, first amendment law, Internet law, discrimination claims, defamation suits, and legal malpractice.
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The Orange County law firm of Morris & Stone provides Internet litigation and civil lawsuit legal services to clients in Southern California, in Orange County, Riverside County, San Diego County, and Los Angeles County; in cities including Newport Beach, Los Angeles, San Diego, Irvine, Costa Mesa, Laguna Beach, Laguna Niguel, Huntington Beach, Santa Ana, Mission Viejo, Orange, Fountain Valley, Tustin, Anaheim, and Fullerton. For practice areas not handled by Morris & Stone, be sure to visit Best Orange County Lawyers. For news on business litigation, Internet Defamation and SLAPP Law, visit Aaron Morris' blogs. See also Legal Articles, California SLAPP Law, and Wrongful Termination Copyright 2008 - 2011. Morris & Stone, LLP. All Rights Reserved.