Buckley v. De Jong
Filed 8/7/13 Buckley v. De Jong CA4/1
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COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
JAMES BUCKLEY,
Plaintiff and Respondent,
v.
ARIE DE JONG,
Defendant and Appellant.
D059316
(Super.
Ct. No. 37-2009-00092288-CU-BC-NC)
APPEAL from a judgment of the Superior
Court of
County, David G. Brown, Judge.
Reversed.
Niddrie,
Fish & Addams, David A. Niddrie; White and Bright, Leigh A. Rayner and
Randolph W. Ortlieb for Defendant and Appellant.
Law
Offices of Neal A. Markowitz, Neal A. Markowitz; Lepine Law Group, Amy J.
Lepine, Charles L. Pratt and Sara A. Simmons for Plaintiff and Respondent.
In this
breach of contract case, we reverse the $2.8 million verdict entered in favor
of the plaintiff. The record
demonstrates that jurors, who believed the plaintiff was not entitled to any
damages, compromised their view of the evidence in order to reach a verdict
rather than because they agreed the plaintiff established the right to a
substantial recovery. Our conclusion is
based on the responses the trial court gave the jury to questions they had
during the course of deliberation, affidavits of jurors with respect to what
took place during deliberation, and the fact that the amount awarded was
substantially less than the principal damages theory advanced by the plaintiff
at trial.
We note the plaintiff's theories of both
substantial part on his contention that the defendant failed to properly
compensate him for sums he claimed were due on an earlier agreement, which
itself was contingent on the outcome of contracting decisions made by the
governing boards of local municipalities.
Arguably, these theories of liability and damages are barred by public
policy. Because this defense was not
raised below and because there may be circumstances which relieve plaintiff
from it in whole or in part, we decline to resolve this issue at this
juncture. Rather, on remand, the
defendant may raise public policy as a defense to the plaintiff's claims, and
the plaintiff may fully contest the validity and application of the defense.
FACTUAL BACKGROUND
A. The
Parties
Plaintiff
and respondent James Buckley has spent a good deal of his working career as a
salesman, first in the restaurant equipment business and then later selling and
servicing commercial waste disposal contracts.
In 1988, Buckley became interested in exploiting the possibility of
turning waste into compost and, in particular, a company called Agripost, which
was promoting the concept. As a result
of his experience both selling and managing waste disposal contracts and his
interest in waste-to-compost opportunities, Buckley became very familiar with
the waste disposal industry and collected a substantial amount of information
about trash collection companies in Southern California
and their franchise agreements with local municipalities.
Defendant
and appellant Arie DeJong has owned and managed a number businesses in northern
San Diego County. In 1976, he purchased a small waste management
company and, over time, operating it as Coast Waste, DeJong built it into a
sizeable enterprise with a fleet of trucks and the only waste transfer station
in the north county area. Between 1976
and 1994, DeJong unsuccessfully attempted to get trash hauling contracts in Escondido,
Poway, Encinitas, and a landfill contract with the
cities of Oceanside, Carlsbad
and Escondido.
B.
In 1994, Buckley contacted DeJong and tried to
interest DeJong in participating in an Agripost trash-to-compost venture. Because Agripost had not been successful,
DeJong declined to invest in the venture.
However, DeJong was very impressed by all the
information Buckley had collected with respect to the trash collection business
in Southern California and, in September 1994, DeJong enlisted Buckley's
assistance in obtaining documents relevant to the circumstances under which the
trash franchise in the City of Poway (Poway) had been awarded to one of Coast
Waste's competitor's, Mashburn Sanitation (Mashburn), in 1991.
Without any agreement as to his compensation and
after a great deal of effort on Buckley's part, Buckley obtained copies of the
bids and rate sheets submitted by the bidders on the 1991 Poway
trash franchise. DeJong was pleased with
Buckley's success and asked him to obtain any documentation which would show
that Mashburn had acted unlawfully in obtaining the Poway
trash franchise. This task became quite
time consuming and, according to Buckley, led the parties to enter into a
partnership agreement in January 1995.
Buckley testified at trial that he and DeJong agreed Buckley was
"to bust -- or to expose that there was some corruption or whatever in Poway
on that bid . . . and if [DeJong] got [the Poway
franchise], we'd be partners. That was
the sum total."
At the time DeJong made this agreement with
Buckley, DeJong was also engaged in efforts to obtain contracts that had been
awarded to Mashburn by the cities of Encinitas and Escondido. DeJong sued Mashburn with respect to
Mashburn's successful Encinitas bid; in Escondido,
DeJong sponsored a ballot initiative which would require competitive bidding on
the city's refuse collection franchises.
Shortly after Buckley and DeJong reached their partnership agreement
with respect to Buckley's work on the Poway trash
contract, they agreed to expand the agreement to include work DeJong wanted
Buckley to do on the lawsuit against Mashburn and the Escondido
initiative. Thus, according to Buckley,
he would become DeJong's partner on any trash contract DeJong obtained from Poway,
Encinitas or Escondido.
With respect to Poway,
Buckley obtained information that showed Mashburn had made unlawful campaign
contributions to members of the Poway City Council. This information led to a Fair Political
Practices Commission complaint and fine.
Buckley also initiated litigation against the City of Encinitas
and obtained information from the city about Mashburn's successful bid for the
contract there. Finally, Buckley
assisted the campaign consultant DeJong retained to support the Escondido
initiative. DeJong paid Buckley on an
hourly basis for the work he did and reimbursed him for his expenses.
None of DeJong and Buckley's efforts to obtain
trash contracts in Poway, Encinitas or Escondido
were successful: DeJong's lawsuit
against Mashburn was dismissed on Mashburn's demurrer, Poway
did not reopen its trash contract and the Escondido
trash initiative was rejected by voters.
In 1997, DeJong sold Coast Waste to U.S.A. Waste
Management (U.S.A. Waste). The sale
included a covenant which prevented DeJong from competing in the north county
area for a period of five years. Buckley
testified that at some point after the sale, DeJong told him that DeJong was
able to obtain a premium of $10 million on the sale because of the work Buckley
had performed. According to Buckley,
DeJong received the premium because Buckley's work in exposing Mashburn's
improprieties increased the amount Mashburn was willing to pay for Coast Waste
and, hence, the amount DeJong was able to extract from the successful
purchaser, U.S.A. Waste. Buckley
believed that under the terms of their partnership agreement, DeJong should
have paid him one-half of the $10 million premium.
C. 2005
Agreement
After he sold Coast Waste,
DeJong maintained contact with Buckley and, in 2005, again asked Buckley for
help. At that time, DeJong was
sponsoring a study being conducted by students at California
State University
at San Marcos (CSSM). The aim of the
study was to compare the cost of trash collection in municipalities who awarded
trash contracts in an open competitive bidding process with the cost in
municipalities, such as the City of San Marcos
(San Marcos), which used a closed
process to award trash contracts. DeJong
hoped to use the study to convince the San Marcos City Council to adopt an open
bidding process on its trash contracts.
DeJong asked Buckley to help the CSSM students
with the trash study. Buckley was very
reluctant to help DeJong because he believed DeJong still owed him half of the
$10 million premium DeJong had received on the Coast Waste sale. According to Buckley, he was also concerned
that the effort to convince San Marcos
to open its bidding process would not be successful unless DeJong took a very
aggressive approach and was among, other things, willing to engage in
litigation with San Marcos. For his part, DeJong preferred to take a more
"diplomatic" approach and use the CSSM study to lobby the San Marcos
City Council.
Buckley testified that in light of his concerns
about what he believed he was owed for his previous work and the likelihood
DeJong's preferred diplomatic approach would not be successful, he demanded
that, in exchange for Buckley's help, DeJong pay Buckley $5 million when it
became apparent the diplomatic approach had been unsuccessful. According to Buckley, DeJong verbally agreed
to his terms; Buckley testified that the agreement was not put in writing
because both DeJong and Buckley had been subject to harassment and intimidation
when contesting the Poway, Encinitas and Escondido
trash contracts.
For his part, DeJong denied making such an
agreement with Buckley and testified that he only expected to pay Buckley on an
hourly basis when the project was complete.
Buckley worked on the CSSM study and provided
approximately 45 hours of assistance. As
Buckley predicted, when the study was complete and presented to the San Marcos
City Council, the city council declined to alter its trash bidding
process. When DeJong told Buckley that
the effort had been unsuccessful and asked Buckley to send him an invoice,
Buckley's lawyer responded on his behalf with a demand for the $5 million
Buckley believed was due. DeJong did not
honor the demand.
PROCEDURAL HISTORY
A. Breach
of Contract Causes of Action
Buckley filed a complaint against DeJong in which
he alleged claims for breach of contract, breach of the covenant of good faith
and fair dealing, and quantum meruit. By
way of an amended complaint, Buckley alleged that DeJong's obligation to pay him
$5 million arose when San Marcos
refused to adopt a competitive bidding process for trash contracts.
At trial, Buckley dismissed all his causes of
action except for two breach of contract causes of action.
B. Verdict
According
to juror affidavits filed in support of DeJong's later motion for a new trial,
the jury had considerable difficulty reaching a verdict. While the majority of jurors wanted to award
Buckley $5 million, a minority did not want to award him any damages. One juror suggested that they compromise, and
this suggestion led to a series of questions posed by the jury to the trial
court. The jury first asked the trial
court whether it was bound by Buckley's demand for $5 million; the trial court
responded by telling the jury to reread its instruction as to the elements of a
cause of action for breach of contract.
The
foreman then conducted a series of votes on diminishing amounts of damages in
an effort to find a figure which would garner nine votes. The foreman reached $2.5 million and instead
of gaining votes began losing them. The
jury then sent the trial court a second question which expressly asked the
trial court whether the $5 million in damages Buckley requested was
"negotiable" or "does it have to be $5 million or
nothing?" The trial court responded
by telling the jury that it did not have to find $5 million in damages or
nothing but that any amount had to be agreed to by nine of the jurors.
The jury
then deliberated for an additional three hours and sent the trial court a note
stating that "[W]e are at an impasse.
7 to 5. Require further
instruction from the court." The
trial court referred the jury to its previous answer and stated: "Please continue to
deliberate." After reading the
trial court's answer, the jury foreman then began a series of votes starting at
$2.5 million and increasing the amount of damages with each unsuccessful
vote. When the amount reached $2.8
million, nine jurors voted in the affirmative, and the jury promptly returned a
verdict in that amount without any further deliberation.
C. Postrial
Proceedings
Following
the verdict, DeJong moved for a new trial on, among other grounds, his
contention that the jury had returned an improper compromise verdict. DeJong pointed out that at trial, Buckley had
repeatedly argued that under the terms of his agreement with DeJong, he was
owed $5 million.
Relying on testimony the founder of Agripost had
given to the effect that it had cost him between $2 and $3 million to open a
trash-to-compost facility, Buckley argued that the jury could have relied on
that testimony to determine that he had suffered $2.8 million in damages. The trial court agreed with Buckley and
denied the motion for new trial.
DeJong filed a timely
DISCUSSION
I
In his principal arguments on appeal, DeJong
argues that the jury's verdict was an improper compromise or, in the
alternative, a chance verdict. We agree
that the jury improperly compromised in reaching its verdict and accordingly
reverse the judgment.
A.
Contrary
to Buckley's contention, when as here, a motion for new trial is made on the
grounds a verdict was the product of jury misconduct, we review the trial
court's ruling de novo. "'In
reviewing the denial of a motion for new trial based on jury misconduct, the
appellate court "has a constitutional obligation [citation] to review the
entire record, including the evidence, and to determine independently
whether the act of misconduct, if it occurred, prevented the complaining party
from having a fair trial."
[Citations.]'
[Citation.]" (
Concrete Construction Co. (1991) 234 Cal.App.3d 1724, 1745, italics
added; see also People
v. Cumpian (1991) 1 Cal.App.4th 307, 311.)
B.
In the trial court, Buckley objected to the juror
affidavits DeJong submitted on the grounds they improperly purported to reflect
the mental processes of the jurors. (See
Evid. Code, § 1150; In
re Stankewitz (1985) 40 Cal.3d 391, 398.) Arguably, because Buckley never obtained a
ruling on his objections, the objections are deemed overruled and waived on
appeal. (See Demps v. San Francisco Housing Authority (2007) 149 Cal.App.4th
564, 576.) However, in the context of
motions for summary judgment, the harsh waiver rule has been severely
criticized and recently abandoned. (See
512, 532.) Accordingly, we decline to
follow it here and instead reach the merits of Buckley objections.
"The Legislature has declared that evidence
of certain facts is admissible to impeach a verdict: 'Upon an inquiry as to the validity of a
verdict, any otherwise admissible
evidence may be received as to statements made, or conduct, conditions, or
events occurring, either within or without the jury room, of such a character as is likely to have influenced the verdict
improperly.' (Evid. Code,
§ 1150, subd. (a), italics added.)
It is settled that jurors are competent to prove 'objective facts' under
this provision. [Citation.] By contrast, the Legislature has declared
evidence of certain other facts to be inadmissible for this purpose: 'No evidence is admissible to show the
condition, or event upon a juror either in influencing him to assent to or
dissent from the verdict or concerning the mental processes by which it was
determined.' (Evid. Code, § 1150,
subd. (a), italics added.) Thus, jurors
may testify to 'overt acts' -- that is, such statements, conduct, conditions,
or events as are 'open to sight, hearing, and the other senses and thus subject
to corroboration' -- but may not testify to 'the subjective reasoning processes
of the individual juror . . . .'
[Citation.]
"Among the overt acts that are admissible and
to which jurors are competent to testify are statements. [Evidence Code] [s]ection 1150, subdivision
(a), expressly allows proof of 'statements made . . . either within
or without the jury room . . . .'" (In re
Stankewitz, supra, 40 Cal.3d at
pp. 397-398; see also People v. Pierce
(1979) 24 Cal.3d 199, 208.)
Here, the
bulk of the statements set forth in DeJong's juror affidavits are admissible
under Evidence Code section 1150 in that they set forth statements made by the
foreman and other jurors during deliberations and the voting procedure adopted
by the jury foreman following the trial court's responses to the jury's
questions. However, some portions of the
affidavits are objectionable in that they purport to set forth the reasoning
employed by two jurors who initially were unwilling to award substantial
damages and later voted to award Buckley $2.8 million. We have not relied on those objectionable
statements in determining whether the jury reached an improper compromise
verdict.
C. Compromise
Verdicts
1. Legal
Principles
Where the
record shows a verdict was probably the result of prejudice, sympathy or
compromise, or that for some other reason the liability issue was not actually
determined by the jury, the verdict
must be set aside in its entirety. (8
Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court,
§ 106 et seq., pp. 700-701.) The
question of whether a verdict was the result of improper compromise usually
arises in cases where the damages awarded are inadequate as a matter of law,
and the trial court must determine whether a new trial on the issue of
liability, as well as damages, must be ordered.
In such instances, where in addition to the inadequacy of damages other
circumstances show the probability of a compromise verdict, a new trial on both
liability and damages is required. (See
Cal.App.4th 834, 841; Shaw v. Hughes
Aircraft Co. (2000) 83 Cal.App.4th 1336, 1346; Wilson v. R.D. Werner Co. (1980) 108 Cal.App.3d 878, 883.)
Indicators
of a compromise verdict are: (1) a close verdict; (2) jury requests for
readback and jury questions; (3) jury indecision whether the plaintiff should
recover a certain amount or nothing; (4) a subsequent jury election to straddle
and award a compromise recovery in a lesser amount than that to which the plaintiff
would be entitled if the plaintiff prevailed; and (5) lengthy
deliberations. (Leipert v. Honold (1952) 39 Cal.2d 462, 468-470;
2. Legal
Analysis
Although
the circumstances here do not fit entirely within the rubric of cases where a
compromise verdict has been found, in that the $2.8 million verdict the jury
returned here is not so small and out of proportion to the evidence of damages
as to be inadequate as a matter of law, in other material respects, the record
establishes a convincing case the verdict represents an improper compromise by
jurors who, although they did not believe Buckley was entitled to any recovery,
felt compelled to reach a verdict that would have the support of nine members
of the jury.
With respect to the amount of damages awarded, it
is significant that, as DeJong points out, although the amount is substantial,
there is no evidentiary or theoretical support for a $2.8 million award. In this regard, we note that during her
rebuttal argument to the jury, Buckley's counsel told the jury there was no
evidence to support any claim for any amount other than Buckley's demand for $5
million: "So what money? The only number we have heard is $5
million. That's the only number." In discussing a response to one of the jury's
question, Buckley's counsel again reiterated the limited nature of the damages
evidence Buckley presented: "That's
what I said in my rebuttal: There was no
evidence to support any claim for any amount other than the 5
million." In arguing against
providing the jury with any response which permitted a lesser amount of
damages, Buckley's counsel emphasized that Buckley had dismissed his quantum
meruit claim precisely to avoid a smaller verdict.
The only theory which arguably supports a $2.8
million verdict is one which was never presented to the jury: the proposition
DeJong did not promise to pay Buckley $5 million but instead promised to pay
Buckley an amount sufficient to start a trash-to-compost facility. Although there is considerable evidence
Buckley planned to use the money he believed he would be receiving from DeJong
to start a trash-to-compost facility, Buckley never testified that the amount
due on his agreement with DeJong was tied to the amount needed to go into the
trash-to-compost business. Rather,
Buckley consistently testified, and his counsel urged, that DeJong simply
promised to pay Buckley $5 million.
Thus, although, as we have indicated, this is not
a case where the damages are inadequate as a matter of law, the evidence
presented by Buckley and the theory of liability he argued are at such odds
with the result reached by the jury, a similar inference of improper compromise
arises.
In addition to the inference of compromise which
arises from the sharp disparity between the verdict on the one hand and the
evidence and argument on the other, the manner in which the jury deliberated
provides important additional and powerful indicia of a compromise verdict. The jury's questions to the trial court are
unmistakable evidence that the jurors were sharply divided over whether Buckley
should recover a certain amount or nothing.
As we have noted, the record shows that after asking two questions about
whether they were bound to award $5 million or nothing and being advised that
they could award a lesser amount, the jury nonetheless reported that, after
still further deliberation, they had reached a seven to five impasse. Thus, the record shows that very shortly
before the jury returned its verdict, it was clearly divided between those who
wanted to award nothing and those who wanted to award substantial damages. (See Lauren
H. v. Kannappan, supra, 96
Cal.App.4th at p. 841.)
The inference of compromise is reinforced by the
fact the jury deliberated for nine hours over three days as well as by the
closeness of the eventual nine to three verdict. (See Leipert
v. Honold, supra, 39 Cal.2d at
pp. 468-470.) The voting process used by
the jury foreman also strongly suggests some of the assenting jurors compromised
their views of liability. There is no
dispute in the record that, as reported by the juror affidavits submitted by
DeJong, the jury foreman attempted to achieve a verdict first by having the
jurors vote on diminishing damages amounts and then, when that was
unsuccessful, conducting votes on increasing amounts of damages. In a case where the evidence and theory
advanced by the plaintiff permit a range of damages and there is no sharp
difference among the jurors as to liability, such a voting process might
suggest an honest attempt to achieve a principled consensus. Here, however, where there was no evidence or
theory that suggested a range of damages, and there was clear evidence the jury
was at an impasse between those who wanted to award nothing and those who
wanted to award substantial damages,
the voting method adopted by the jury foreman strongly suggests that the
eventual verdict was the result of improper bargaining rather than any
conviction based on what jurors believed the evidence supported.
The sequence of events before and after the jury
notified the trial court it was at an impasse is also of some import. After the jury reported that, notwithstanding
several hours of deliberations and two earlier questions of the trial court, it
was still at an impasse, rather than declaring a mistrial and releasing the
jurors, the trial court responded by instructing the jury to continue
deliberating. Shortly thereafter and, by
virtue of voting on an increasing level of damages, a verdict was
returned. This sequence of events gives
rise to a clear inference the verdict was a compromise driven by a desire to
complete deliberations, rather than by any conviction the amount awarded was
proper.
In sum, based on our
convinced the jury's verdict was probably the result of improper bargaining or
compromise, and the judgment entered on the verdict must be reversed.
II
For
the guidance of the parties and the trial court on remand, we briefly discuss
an issue which arose on appeal.
As we have discussed,
according to Buckley, under his 1994-1997 agreements with DeJong, he was to
receive a partnership interest in any successful trash collection franchise
DeJong obtained in Poway, Encinitas or Escondido. Buckley described his agreement with respect
to Poway as follows: "If we broke
up the City of Poway and Arie was to get the bid, we would become equal
partners and he would put up the money for the franchise." This description of the nature of his
agreement with DeJong gave rise to questions we posed to the parties, to wit:
1) was Buckley's work with respect to Poway, Encinitas and Escondido contingent
on DeJong being awarded trash contracts by those cities; and 2) would such a
contingent agreement violate public policy.
(See Crocker v. United States
(1916) 240 U.S. 74, 79-80; Gov. Code, § 86205.)
There is
little doubt that, as described by Buckley, his compensation under the 1994-1997
agreements was contingent on DeJong being awarded the respective municipal
trash contracts. Moreover, a very
substantial argument can be made that such an agreement was void as against
public policy. The United States Supreme
Court explained the law's unwillingness to enforce such agreements in
U.S. 45: "Agreements for
compensation contingent upon success, suggest the use of sinister and corrupt
means for the accomplishment of the end desired. The law meets the suggestion of evil, and
strikes down the contract from its inception.
[¶] There is no real difference in principle
between agreements to procure favors from legislative bodies, and agreements to
procure favors in the shape of contracts from the heads of departments. The introduction of improper elements to
control the action of both, is the direct and inevitable result of all such
arrangements." (
Significantly such agreements are void even if the
parties act without any corrupt motive or intent: "[A]ll [such] agreements
for pecuniary considerations to control the business operations of the
Government . . . or the ordinary course of legislation, are void as
against public policy, without reference
to the question, whether improper means are contemplated or used in their
execution." (
At this
juncture, we do not believe it is appropriate to resolve the question of
whether the 1994-1997 contracts were void as against public policy. This defense was not litigated in the trial
court and, hence, Buckley did not have the opportunity to fully contest its
application to the 1994-1997 agreements and his claims against DeJong based on
the parties' later 2005 agreement. In this
regard, the record here does not permit us to definitively determine whether
any public policy defect in the earlier agreements, if it exists, also effects
the later agreement.
Thus, on
remand, DeJong may, along with other defenses, attack Buckley's claims on
public policy grounds, and Buckley may fully contest application of that
defense.
DISPOSITION
The judgment is reversed and
remanded. DeJong to recover his costs of
appeal.
BENKE, Acting P. J.
WE CONCUR:
McINTYRE,
J.
O'ROURKE,
J.
Because the jury's compromise
verdict requires that we reverse the judgment and remand the case for further
proceedings, we do not reach the remaining issues DeJong raises on appeal. In particular, we do not consider DeJong's
contention there was no meeting of the minds with respect to the 2005
agreement. We note that, contrary to
DeJong's argument, there was evidence, in the form of testimony from Buckley,
of the terms of an agreement and DeJong's express assent to those terms. At trial, Buckley testified that in 2006,
DeJong agreed to his terms:
"Q: I believe you had told us that [DeJong]
eventually did agree to your terms, right?
"A: Right."
According to Buckley, DeJong's
assent came in a telephone conversation.
Buckley described those terms in the following testimony:
"Q: If Mr. DeJong's way worked and he was
successful and he convinced them, when was your money due?
"A: Not until it was presented to the city on the
agenda, and it was a resolution passed stating they would open the city's competition.
"Q: And if his way did not work, when was your
money due?
"A: As soon as we found out, as soon as it was
known that his way would not work."
Buckley also testified at his
deposition, which was introduced at trial and at trial itself, that the amount
due was $5 million:
"'[Q]: [Y]ou don't know at which of these locations
it was that Mr. DeJong promised you $5 million, true?
"'[A]: Correct.'"
In
short, Buckley testified that DeJong expressly agreed he would pay Buckley $5
million if: 1) the San Marcos City Council agreed to open bidding, or 2) it
decided it would not open bidding.
