Dunlap v. Starz Home Entertainment

 

 

 

 

 

 

 

 

 

 

 

Filed 6/10/13  Dunlap v. Starz Home Entertainment CA2/7

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>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b).  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

SECOND
APPELLATE DISTRICT

 

DIVISION
SEVEN

 

 
>

LINDSAY DUNLAP,               Defendant and Appellant,               v.   STARZ HOME ENTERTAINMENT, LLC,               Plaintiff and Respondent.

B230069         (Los Angeles County       Super. Ct. No. BC373707)

 

 

 

                        APPEAL from a judgment
of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County, Jane Johnson, Judge. 
Affirmed in part and reversed in part.

 

                        Lindsay Dunlap, in pro
per, for Defendant and Appellant.

 

            Romero Law and Alan J. Romero for
Plaintiff and Respondent.

 

 

 

______________________________________

            Lindsay
Dunlap appeals from the judgment entered upon a jury verdict in favor of Starz
Home Entertainment, LLC (Starz) on its complaint against Dunlap alleging causes
of action for breach of contract, fraud and negligent
and intentional misrepresentation arising out of Dunlap’s sale of a license
to certain rights she claimed to own to the “The Man from U.N.C.L.E” and “The
Girl From U.N.C.L.E.” (the UNCLE television series).  Dunlap asserts several errors on appeal.  Specifically she claims that the trial court
erred in failing to dismiss or stay the action based on the forum selection
clause in the parties’ contract that designated New York as the proper forum for any
dispute between the parties.  In
addition, Dunlap argues that the special verdict the jury used in this case
cannot support the judgment because questions in the verdict omitted certain elements
of the claims and/or were biased, ambiguous and confusing.  Finally she argues that the punitive damage
award must be reversed because Starz failed to present sufficient evidence of
her ability to pay the award. 

            As we shall explain, only Dunlap’s
argument on the punitive damage award has merit.  Accordingly, we reverse the award of punitive
damages and affirm in all other respects.

>FACTUAL AND PROCEDURAL
BACKGROUNDhref="#_ftn1"
name="_ftnref1" title="">[1]>

            1. The Parties

            Dunlap was the chairperson and
president of an entity known as Ember Entertainment, Inc. (Ember) when the
events giving rise to this case occurred.href="#_ftn2" name="_ftnref2" title="">[2]  Ember is a California corporation, with its
principal place of business in Los Angeles; and Dunlap is a California resident.  Starz is an entertainment company that
supplies television programming in the href="http://www.adrservices.org/neutrals/frederick-mandabach.php">United
States.  It is also the successor in
interest of Anchor Bay Entertainment, Inc. (Anchor Bay) which was renamed and
reformed as Starz in 2007.  Starz is a Delaware corporation with the
principal place of business in Burbank, California.  Anchor Bay was a Delaware corporation with its
principal place of business in Michigan.

            2. Sale> of Rights to the UNCLE television series

In 2004, Ember contacted Anchor Bay to solicit interest in the
sale of exclusive license for the video and commercial rights (the “rights”) to
the UNCLE television series.  Ember
represented that it owned the rightshref="#_ftn3" name="_ftnref3" title="">[3] to the UNCLE television
series and that it had the exclusive authority and legal capacity to sell those
rights to Anchor Bay.

Thereafter in October 2005, Anchor Bay and Ember entered into a
written agreement for the sale of  the
“exclusive and irrevocable right and license to advertise or otherwise exploit”
the rights to Anchor Bay for a term of seven
years.  At the time it entered the
contract with Ember, Anchor Bay was unaware that any other
entity claimed ownership to or rights in the UNCLE television series.  Between November 2005 through February 2006, Anchor Bay paid a total of $500,000 to
Ember under the agreement for 106 episodes of “Man from U.N.C.L.E” and 29
episodes of “Girl from U.N.C.L.E.”  Anchor Bay also paid Ember an
additional $125,000 for additional “value added” materials.href="#_ftn4" name="_ftnref4" title="">[4]

In April 2006, Anchor Bay learned that Warner Bros.
also claimed to own the exclusive distribution rights to the UNCLE television
series and intended to release DVDs of the series.  By December 2006, Anchor Bay also had expended (in
addition to the payments made to Ember under the agreement) $85,921 in
post-production costs.  It also claimed
that it lost profits of $768,925 in connection with the deal.  In December 2006, Anchor Bay sought a refund from Ember
for the monies it had paid under the contract. 
When those efforts proved unsuccessful, in July of 2007, Starz (as Anchor Bay’s successor in interest),
filed the instant action against Ember and Dunlap.

3.         The Litigation

Starz’ complaint against
Ember and Dunlap alleged causes of action for, among various claims, breach of
contract, fraud, intentional and negligent misrepresentation.  Starz also alleged that Ember operated as the
alter ego of Dunlap.  Dunlap and Ember
failed to respond to the complaint and default was entered against them.  Thereafter, the parties litigated issues
related to the default and service. 

In September 2008, Dunlap
and Ember filed a motion to stay or dismiss the case based on a forum selection
clause in the agreement between Ember and Anchor Bay which designated New York
as the jurisdiction for any disputes between the parties.  The court denied the motion. 

In August 2010 the case
proceeded to a jury trial against Dunlap.href="#_ftn5" name="_ftnref5" title="">[5]  During the trial, Dunlap acted as her own
legal counsel.  At the end of the
presentation of evidence the court ruled that Dunlap was Ember’s alter ego.  The court instructed the jury as to the
relevant law governing the claims and the jury was provided with special
verdict, jointly prepared by the parties containing 25 questions on the causes
of action for breach of contract, negligent and intentional misrepresentation,
and fraud.  The special verdict required
the jury to determine the amount of compensatory damages Starz sustained.  In connection with the intentional misrepresentation
and fraud claims it further asked the jury to determine the amount of punitive
damages to be awarded to Starz. 

The jury returned the
verdict in favor of Starz and awarded a total of $1,479,846 in compensatory
damages for “out of pocket expenses,” “post production expenses” and “lost
profits.”  The jury also awarded Starz
$1.4 million in punitive damages.

Dunlap filed a motion for a
new trial making various arguments about the conduct of the trial, the behavior
of the trial judge, and jury deliberations. 
The notice stated the basis of the motion as insufficient evidence to
support the court’s ruling on the alter ego claim.  The trial court denied the motion.

Dunlap appeals.

DISCUSSION

On appeal, Dunlap asserts that the trial court
committed several reversible errors.  She
claims that: (1) the court erred in failing to stay or dismiss the action based
on the mandatory forum selection clause in the parties’ agreement; (2) the
special verdict contained errors and defects that are fatal to the judgment;
and (3) sufficient evidence did not support the award of punitive damages.  We address these claims in turn. 

I.          The Court Did Not Err in Denying Dunlap’s Motion to Dismiss
or Stay Based

            on the Forum Selection Clause.

Dunlap argues that the court erred when it failed to
grant her motion to dismiss or stay the case based on the mandatory forum
selection clause in the agreement between Ember and Anchor Bay.  As we shall explain, we disagree.

A.         Background

Anchor Bay drafted the license agreement between Ember
and Anchor Bay.  It contained the
following provision: “This Agreement shall be binding upon the parties hereto
and shall inure to the benefit of their successors, heirs, and assigns, and
this Agreement and any and all disputes arising hereunder or related hereto
shall be construed under the laws of the State of New York applicable to
agreements to be wholly performed therein. 
Licensor and Licensee consent to the exclusive jurisdiction of the state
and federal courts sitting in the State of New York over any and all matters
arising under or related to this Agreement.” 


The parties litigated various matters relating to
service and default, filed numerous motions and other documents, and had a
number of conferences and court appearances between July 2007 and September of
2008, before Dunlap filed the motion to dismiss or stay based on the forum
selection clause.  Starz opposed the
motion pointing out that none of the parties, witnesses nor evidence relating
to the case had any connection to New York.

During the hearing on the motion in December 2008, the
court expressed a concern that the Starz’s predecessor Anchor Bay had drafted
the contract which included the forum selection clause and yet, Starz opposed
its enforcement.  When questioned about
the clause during the hearing, Starz explained that the forum selection clause had
been included in the contract by accident. 
Starz stated that the contract between Ember and Anchor Bay had been
drafted using a template from another contract, and that the forum selection
clause at issue had been unintentionally left in the final version of the
agreement.

The court denied the motion.  The court’s ruling acknowledged that
ordinarily a mandatory forum selection clause entered into knowingly and
voluntarily by the parties would be given effect.  However, the court also ruled, in pertinent
part: 

 

Here, there seems to be no reasonable
contacts with New York, the chosen forum. 
Because of that, the Court would ordinarily not be inclined to enforce
the forum selection agreement, particularly in view of the long history of this
case in California (having been filed in July 2007).  However, this is an unusual case, one in
which Plaintiff, the drafter of the agreement, seeks to avoid the effect of the
forum selection clause. . . .  [¶]  [I]t is clear that New York lacks a
relationship to the dispute.  In this
case, there is clearly no relationship between the parties or the
transaction.  Plaintiff is a Delaware
LLC.  Plaintiff is suing as the
successor-in-interest to Anchor Bay Entertainment, Inc., which is a Michigan
corporation.  Defendant Ember is a
California corporation.  Defendant Dunlap
is a California resident.  Neither party
suggests that the transaction had anything to do with New York.  [¶] 
Plaintiff cites cases holding that the Court should decline to enforce a
forum selection clause when the chosen state is not affordable or when all
parties and witnesses are California residents. 
Here, it appears that all witnesses are in California.  [¶] 
This case has a history.  The
Court is concerned about the amount of time it has taken to get this case from
filing to ‘at issue’ status.  Defendants
have been evading service, and this motion to dismiss may be read as one more
‘delaying tactic.’  [¶]  Because of the foregoing, and in particular,
the lack of any contacts with New York, the Court is inclined to deny the
motion.

 

B.  Law Governing the Enforceability of a Forum
Selection Clause

            A motion to dismiss or stay
based upon forum non conveniens can be brought on two grounds: a contractual
forum selection clause, or the traditional ground, i.e., that the forum in
which the action was filed is an inconvenient forum.  (Intershop
Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 198.)  Code of Civil Procedure section 410.30 is the
exclusive means for staying or dismissing a case under the forum non conveniens
doctrine.  (See In re Marriage of Taschen (2005) 134 Cal.App.4th 681, 687 [“in
California forum non conveniens motions are governed by statute, not by
policies embedded in case law predating the statute’s enactment”]; >Britton v. Dallas Airmotive, Inc. (2007)
153 Cal.App.4th 127, 132-134.)

            The
defendant, as the moving party, bears the burden of proof on a motion based on
forum non conveniens.  (>Animal Films, LLC v. D.E.J. Productions,
Inc. (2011) 193 Cal.App.4th 466, 472.) 
When the motion is brought on the traditional ground, the defendant
bears the burden to show that the forum selected by the plaintiff “is a
seriously inconvenient forum.”  (>Ford Motor Co.v. Insurance Company of North
America (1995) 35 Cal.App.4th 604, 611.) When the motion is brought on the
ground that there is a mandatoryhref="#_ftn6"
name="_ftnref6" title="">[6]
forum selection clause, the burden is on the plaintiff to show that enforcement
of the clause would be unreasonable under the circumstances of the case. (See >Berg v. MTC Electronics Technologies Co.
(1998) 61 Cal.App.4th 349, 358.)     

            California courts presume the
validity of forum selection clauses and consistently enforce them because they
provide a degree of certainty for both businesses and their customers that
contractual disputes will be resolved in a particular forum.  California courts routinely enforce forum
selection clauses even when the plaintiff lives far from the chosen forum.  (See Intershop
Communications AG v. Superior Court, supra,
104 Cal.App.4th at pp. 196-202 [Hamburg, Germany forum].)  Moreover, a forum selection
clause may be enforced against non-signatories who are
closely related to the contractual relationship.  (Net2Phone,
Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 587-588.)

“Although California has a
public policy in favor of access to its courts by resident plaintiffs, this is
not thwarted by allowing residents to surrender this right voluntarily in the
course of negotiations; “‘[i]n so holding we are in accord with the modern
trend which favors [enforcement] of such forum selection clauses.’”  (Cal-State
Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1678.)  Thus, when a forum selection clause has been
“entered into freely and voluntarily by parties who have negotiated at arms’
length,” the clause will be “given effect, in the court’s discretion and in the
absence of a showing that enforcement of such a clause would be
unreasonable.”  (>Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 496.) 

            Consequently,
a distinction has been drawn between a mandatory and a permissive forum
selection clause for purposes of analyzing whether the clause should be
enforced. A mandatory clause will ordinarily be given effect without any
analysis of convenience; the only question is whether enforcement of the clause
would be unreasonable.  As the Supreme
Court noted in Smith “[m]ere
inconvenience or additional expense is not the test of unreasonableness since
it may be assumed that the plaintiff received under the contract consideration
for these things.”  (>Smith, Valentino
& Smith, >Inc. v. Superior Court, supra, 17 Cal.3d at p. 496.)  On the other hand, when the clause merely
provides for submission to jurisdiction and does not expressly mandate
litigation exclusively in a particular forum, then the traditional forum non
conveniens analysis applies.  (>Berg v. MTC Electronics Technologies Co.,
supra, 61 Cal.App.4th at pp. 358-360.) 


The party seeking to avoid application of
a mandatory forum selection clause ‑‑ in this case, Starz ‑‑
bears a burden to prove unreasonableness. 
(Net2Phone, Inc. v. Superior
Court, supra, 109
Cal.App.4th at p. 588; see Cal-State Business
Products & Services, Inc. v. Ricoh, supra, 12 Cal.App.4th at p. 1680
[the burden of proof falls on the party challenging the validity of the forum
selection clause].) 

“Unreasonable” in the context of mandatory forum
selection clauses has been defined as meaning that the forum selected would be
unavailable, unable to accomplish substantial justice or that choice of forum lacks
a rational basis in light of the facts underlying the transaction.  (Cal-State
Business Products & Services, Inc. v. Ricoh, supra, 12 Cal.App.4th at
p. 1679.)

With these legal concepts in
mind, we turn to the merits.href="#_ftn7" name="_ftnref7" title="">[7]

Here Dunlap asserts that because the clause was
mandatory and did not undermine California public policy, the court should have
given it full effect.  She argues that
the court erroneously applied the traditional forum non conveniens test.  She asserts that New York was the appropriate
forum for the case because it had a substantial connection to the parties and
the transaction and because New York is an entertainment capital.  She also points out that the parent company
of Anchor Bay was located near New York—in New Jersey and that the checks that
were issued from Anchor Bay to Ember were sent from Newark, New Jersey.

In our view, the trial court
did not base its holding on an inaccurate application of the law or improper
view of the evidence.

            Contrary to Dunlap’s contention, the trial court did not
apply the traditional forum non conveniens test to decide the motion.  Although the court made reference to the
location of evidence and witnesses, that was not the emphasis of the court’s
analysis.  Instead, the court’s chief
rationale as reflected in the court’s comments at the hearing and in the
written ruling centered on whether it was reasonable to enforce the clause in
light of the circumstances of the case. 
Specifically, the court cited the forum’s lack of connection to the
case.  The court found New York had no
rational connection to the transaction—a finding borne out by the record—which
is an appropriate consideration under the prevailing law.  Furthermore, under the reasonableness test
the court was not precluded from considering where the parties were domiciled,
where the contract was negotiated and consummated, and where the claims
arose.  (See Furda v. Superior Court (1984) 161 Cal.App.3d 418, 426 [considering
the location where one of the parties was domiciled, where the contract was
negotiated and performed and torts occurred in making the reasonableness
determination].)  The court also properly
considered Dunlap’s delay in seeking to raise the issue of the forum selection
clause.  (Trident Labs, Inc. v.  Merrill
Lynch Commercial Finance Corp. (2011) 200 Cal.App.4th 147, 155-156 [finding
that under the circumstances of the case a delay of more than 19 months in
bringing the motion to enforce a mandatory forum selection clause made the
enforcement of the clause unreasonable].) 
The evidence in the record supports the court’s conclusion that New York
was an unreasonable forum, and none of the arguments made by Dunlap below or
before this court undermine that conclusion.

            Finally, in contrast to other cases
involving mandatory forum selection clauses in which enforcement is justified
because the parties negotiated the selection of the
forum or the plaintiff received consideration in exchange for agreeing to
litigate in a distant forum, here the designation of New York as the forum for
any disputes was an unintentional drafting error.  Selection of New York as the chosen forum was
not the result of an arm’s length, bargained for exchange between the parties
or even a knowing and voluntary surrender of choice by either side.  It was selected through inadvertence.  Consequently, the primary rationale for
enforcing mandatory forum selection clauses is not served in this case.

In sum, we conclude that Starz satisfied its burden to prove
it would be unreasonable to enforce the forum selection clause.  In view of the deferential standard of review
and considering all of the evidence, the trial court did not commit reversible
error in denying the motion to dismiss or stay the case based on the forum
selection clause in the agreement.

II.        Any
Omissions, Ambiguities or Errors in the Special Verdict Were Harmless. 

            >A.         Background

            The special verdict used in this
case, prepared jointly by the parties contained 25 questions.  Question Nos. 1-6 pertained to the claim for
breach of contract; question Nos. 7-11 centered on the negligent
misrepresentation cause of action; the claim for intentional misrepresentation
was addressed in question Nos. 12-16; questions numbered 17-24 related to the
fraud claim and question No. 25 asked the jury to determine the amount of
punitive damages.  The amount of  compensatory damages the jury found for each
cause of action was identical – for each of the four causes of action the jury
found in favor of Starz and imposed liability against Dunlap in the amount
of  $625,000 for lost profits, $85,921
for post production expenses and $768,925 for lost profits, for a total
compensatory damage award of $1,479,846. 
The court subsequently entered a judgment for the compensatory damages
for Starz in the amount of 
$1,479,846. 

            B.         Governing
Law

            “[A] special verdict is that by
which the jury finds the facts only, leaving the judgment to the Court.  The special verdict must present the
conclusions of fact as established by the evidence, and not the evidence to
prove them; and those conclusions of fact must be so presented as that nothing
shall remain to the Court but to draw from them conclusions of law.”  (Code Civ. Proc., § 624.)

            “‘Unlike a general verdict (which
merely implies findings on all issues
in favor of the plaintiff or defendant), a special verdict presents to the jury
each ultimate fact in the case.  The jury
must resolve all of the ultimate facts presented to it in the special verdict,
so that “nothing shall remain to the court but to draw from them conclusions of
law.”  [Citation.]  [¶] 
The requirement that the jury must resolve every controverted issue is
one of the recognized pitfalls of special verdicts.  “The possibility of a defective or incomplete
special verdict, or possibly no verdict at all, is much greater than with a
general verdict that is tested by special findings . . . .”  [Citation.]’ 
[Citation.]”  (>Myers Building Industries, Ltd. v. Interface
Technology, Inc. (1993) 13 Cal.App.4th 949, 959-960, original italics>.)

            Potentially defective special
verdicts are subject to “a multilayered approach.”  (Zagami,
Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1091.)  Prior to the jury’s discharge, the trial
court is obliged upon request to ask the jury to correct or clarify a
potentially ambiguous or inconsistent verdict. 
(Ibid.)  If the verdict is merely ambiguous, a party’s
failure to seek clarification of the verdict before the jury is discharged may
work a forfeiture of the purported defect on appeal.  (Id.
at p. 1092, fn. 5.)  However, absent forfeiture,
courts may properly interpret a “merely ambiguous” verdict in light of the
pleadings, evidence, and instructions.  (>Ibid.) 
In contrast, if the special verdicts are “hopelessly ambiguous” or
inconsistent, failure to seek clarification from the jury does not create a
forfeiture, and the proper remedy is ordinarily a retrial on the issues
underlying the defective verdict.  (>Id. at p. 1092.)

            “A special verdict is ‘fatally
defective’ if it does not allow the jury to resolve every controverted issue.”  (Saxena
v. Goffney (2008) 159 Cal.App.4th 316, 325 (Saxena).)  “If a fact
necessary to support a cause of action is not included in such a special
verdict, judgment on that cause of action cannot stand.”  (Behr
v. Redmond (2011) 193 Cal.App.4th 517, 531 (Behr) [reversing the judgment on the misrepresentation claim
because the verdict did not include an essential element on that claim,
specifically, that the defendant made a misrepresentation]; >Saxena, supra, 159 Cal.App.4th at pp. 325-326 [verdict form failed to ask
the jury to determine whether the plaintiff failed to provide any consent at
all to medical procedure, and thus the verdict failed to include an essential
element to support a judgment for the plaintiffs on the battery claim]; see
also Myers Building Industries, Ltd. v.
Interface Technology, Inc., supra, 13 Cal.App.4th at pp. 959-962 [striking
a punitive damage award because the special verdict asked the jury to make
findings on a breach of contract claim only, not on any tort claims]; >Fuller-Austin Insulation Co. v. Highlands
Ins. Co. (2006) 135 Cal.App.4th 958, 1004-1006 [liability finding reversed
because special verdict failed to make a reasonableness finding essential to
liability].)  “When a special verdict is
used and there is no general verdict, we will not imply findings in favor of
the prevailing party.”  (>Behr v. Redmond, supra, 193 Cal.App.4th at p. 531.)

            Finally, “we analyze the special
verdict form de novo.”  (>Saxena v. Goffney, supra, 159
Cal.App.4th at p. 325; see also City of
San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th
668, 678 [“‘[A] special verdict’s correctness must be analyzed as a matter of
law’”].)

            C.        Dunlap’s
Claims

            Dunlap challenges the jury’s special verdict in several
respects.  Specifically,  she claims that certain questions in the
verdict form were biased, conclusory, confusing and/or ambiguous.  She also asserts the special verdict failed
to include all findings required to support a judgment in Starz’ favor on the
causes of action for breach of contract, negligent misrepresentation and
intentional misrepresentation. 

                        1.         Challenges
to Question Nos. 23 and 24 in the Special Verdict

                                    Relating to Damages Based on
Confusion, Ambiguity or Bias.

            Dunlap complains that question No. 23href="#_ftn8" name="_ftnref8" title="">[8] in the special verdict is
confusing and ambiguous because it allowed the jury to treat Dunlap and Ember
as separate entities for the purpose of punitive damages while elsewhere in the
verdict form the other questions assumed that liability could be found for both
Dunlap and Ember based on the acts of either (e.g., Question No. 5: “Did Ember
Entertainment or Lindsay Dunlap fail
to do something that the written agreement required either one to do?”).  

            Dunlap’s complaint is not well
taken.  Because the court found that
Ember was the alter ego of Dunlap – a finding which Dunlap does not challenge
on appeal – it does not matter whether Dunlap and Ember were listed separately
in questions or assumed to be responsible for each other’s acts.  Under either construction of questions,
Dunlap was ultimately responsible for her individual acts and the acts of her
alter ego, Ember.  Thus any ambiguity or
confusion in question 23 or the other questions where Ember and Dunlap’s actions
are posed with the conjunctive “or” is harmless.  It is not reasonably likely that absent the
purported ambiguity in these questions Dunlap would have obtained a better
result in the trial.  (See >Cassim v. Allstate Ins. Co. (2004) 33
Cal.4th 780, 801-802 [harmless error standard of People v. Watson (1956) 46 Cal.2d 818 applies to civil cases].)

            Dunlap further complains that
question No. 24href="#_ftn9"
name="_ftnref9" title="">[9] in the special verdict is
biased and conclusory because “it presumes that there are damages and does not
present the possibility that there are no damages.”  However, Dunlap did not object to the
question in the trial court.  This is
exactly the type of error that could have been remedied at the drafting stage
or clarified after the jury returned the verdict.  Any bias or presumption in the question could
have been corrected by including the additional language Dunlap proposes in her
opening brief: “What are the damages, if any . . . .”  Because the special verdict was jointly
prepared by the parties,href="#_ftn10"
name="_ftnref10" title="">[10] and because defect could
have been cured below, we will not consider Dunlap’s complaint on appeal.  (See Mardirossian & Associates, Inc. v. Ersoff (2007) 153
Cal.App.4th 257, 276-277 [refusing to consider a complaint that the questions
in the special verdict omitted information when the complaint was not first raised
in the trial court]; Thompson Pacific
Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 550
[finding that cross-defendant waived any complaint that jury was not asked to
determine an element of one of the claims when no objection on that basis was
made in the trial court]; see Jones v. Wagner (2001) 90
Cal.App.4th 466, 481 [“‘[A]s a general rule issues not raised in the trial
court cannot be raised for the first time on appeal.’”]; see also >Lynch v. Birdwell (1955) 44 Cal.2d 839,
851 [where defendants did not object at trial to error in verdict form, “it
appears to be the settled rule that they have waived their right to complain as
to its form”]; Jensen v. BMW of North
America, Inc. (1995) 35 Cal.App.4th 112, 131 [“BMW waived any objection to
the special verdict form by failing to object before the court discharged the
jury”].)

            In any event, as written the
instruction is neither inconsistent with other instructions nor hopelessly
ambiguous, and thus we interpret it in light of the pleadings, evidence, and
instructions.  In the jury instructions
the jury was informed that Starz had to prove damages as an affirmative element
of the fraud claim.  Starz presented
evidence of damages – out of pocket expenses, production costs and lost profits
– it sustained as a result of Dunlap’s fraud. 
The jury was also told that it was to follow the instructions on the law
to answer the questions in the special verdict. 
We assume that the jury followed those instructions and therefore must
have found that Starz proved its fraud damages otherwise the jury would have
entered a zero for each of the categories of damages listed in question 24.

                        2.         Challenges to Question
Nos. 1-16 in the Special Verdict

                                    Relating to the Causes of Action
for breach of contract,

                                    Negligent misrepresentation and
intentional misrepresentation.

            Dunlap argues that the questions in the special verdict
relating to the breach of contract claims are defective because they omit the
element of causation.  She asserts that
the questions relating to negligent misrepresentation claims cannot support the
judgment because the verdict failed to require the jury to determine whether
Starz’ reliance on Dunlap’s representations was justified or reasonable.  Finally, with respect to the intentional
misrepresentation claims, Dunlap complains that the questions assumed the
element of reliance and also failed to require a determination on the issue of
whether the reliance was justified.  She
also complains that some of the questions relating to these three causes of
action were confusing, out of logical sequence and/or assumed that Starz had
suffered damage. 

            We do not reach the merits of any of
Dunlap’s arguments relating to questions    
1-16 in the special verdict pertaining to the causes of action for
breach of contract, negligent misrepresentation and intentional
misrepresentation.  Even were we to
assume that she preserved these claims for appeal and that they are
meritorious, any errors asserted are harmless. 
Other than her complaint relating to the issue of fraud damages in
question 24 which we have rejected elsewhere, infra, at this point Dunlap does not argue that questions
pertaining to the fraud cause of action omit elements of the claim.  Consequently, because the amount of compensatory
damages awarded on all four causes is
the same, the findings on fraud are sufficient standing alone to support the
judgment for compensatory damages without reference to the other causes of
action.  Thus, it is not reasonably
probable that in the absence of any errors in questions 1-16 in the special
verdict, a different result would have been reached in the trial court. 

            In view of all of the foregoing, we
conclude that Dunlap’s complaints concerning the special verdict do not warrant
reversal.

III.       Sufficient Evidence Does Not Support the
Award of Punitive Damages.

            Dunlap
contends the evidence presented during the trial was insufficient to support
the jury’s award of $1.4 million in punitive damages against her.href="#_ftn11" name="_ftnref11" title="">[11]  As we shall explain, we agree.

            >A.         Governing
Law

            “In a civil
case not arising from the breach of a contractual obligation, the jury may
award punitive damages ‘where it is proven by href="http://www.mcmillanlaw.com/">clear and convincing evidence that the
defendant has been guilty of oppression, fraud, or malice.’  (Civ.Code, § 3294, subd. (a).)”  (Roby
v. McKesson Corp. (2009) 47 Cal.4th 686, 712.)  In reviewing a challenge to an award of
punitive damages, courts traditionally “determine whether the award is
excessive as a matter of law or raises a presumption that it is the product of
passion or prejudice.”  (>Adams v. Murakami, supra, 54 Cal.3d at pp. 109-110.) 
To make this determination, courts consider three factors: (1) the
degree of reprehensibility of the defendant’s conduct; (2) the amount of href="http://www.fearnotlaw.com/">compensatory damages awarded; and (3) the
defendant’s financial condition or wealth. 
(Neal v. Farmers Ins. Exchange
(1978) 21 Cal.3d 910, 928; Bullock v.
Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 690, fn. 18.)

            Dunlap does
not raise any issue on appeal with respect to the evidence of her conduct or
the relationship between the compensatory damages and the award of punitive
damages.  She challenges only the
evidentiary showing regarding their financial condition.

            “We review
the trial court’s award of punitive damages for substantial evidence.”  (Baxter
v. Peterson (2007) 150 Cal.App.4th 673, 679.)  A punitive damages award cannot be sustained
absent meaningful evidence of the defendant’s financial condition.  (Adams
v. Murakami, supra, 54 Cal.3d at
p. 109; Baxter v. Peterson (2007) 150
Cal.App.4th 673, 680.)  Indeed,
“[b]ecause the important question is whether the punitive damages will have the
deterrent effect without being excessive, an award that is reasonable in light
of the first two factors, reprehensibility of the defendant’s conduct and
injury to the victims, may nevertheless ‘be so disproportionate to the
defendant’s ability to pay that the award is excessive’ for that reason
alone.  [Citation.]”  (Rufo
v. Simpson (2001) 86 Cal.App.4th 573, 620.) 
The plaintiff has the burden of presenting evidence and the burden of
proof regarding the defendant’s financial condition.  (Adams
v. Murakami, supra, 54 Cal.3d at
p. 123; Bankhead v. ArvinMeritor, Inc.
(2012) 205 Cal.App.4th 68, 83, fn. 9.) 

            The
evaluation of a defendant’s financial condition must be considered in light of
the purposes of punitive damages: to punish the defendant and deter the
commission of wrongful acts.  (>Neal v. Farmers Ins. Exchange, supra, 21
Cal.3d at p. 928, fn. 13.) These policies are not served if the defendant’s
wealth allows him to absorb the award with little or no discomfort.  (Id.
at p. 928.)  The “‘wealthier the
wrongdoing defendant, the larger the award of exemplary damages need be in
order to accomplish the statutory objective.’ 
[Citation.]”  (>Adams v. Murakami, supra, 54 Cal.3d at p. 110.) 
Conversely, “‘the function of punitive damages is not served by an award
which, in light of the defendant’s wealth and the gravity of the particular
act, exceeds the level necessary to properly punish and deter.’”  (Ibid.;
see also Rufo v. Simpson, supra, 86
Cal.App.4th at p. 620.)  Indeed, “[t]he
purpose is to deter, not to destroy.”  (>Adams v. Murakami, supra, 54 Cal.3d at p. 112.)

            There is no
established method or standard for determining a defendant’s financial
condition when evaluating an award of punitive damages.  (Bankhead
v. ArvinMeritor, Inc., supra, 205 Cal.App.4th at p. 79.)  Although the defendant’s net worth is
commonly used in assessing punitive damages, it is not the exclusive
measure.  (Rufo v. Simpson, supra, 86 Cal.App.4th at p. 621.)  Standing alone, neither net worth, nor
assets, nor income is sufficient to support punitive damages.  (See Zaxis
Wireless Communications, Inc. v. Motor Sound Corp. (2001) 89 Cal.App.4th
577, 582 [net worth too easily manipulated to be the sole standard for ability
to pay]; Lara v. Cadag (1993) 13
Cal.App.4th 1061, 1065 [evidence of earnings is not by itself sufficient].)  Moreover, absent other measures of ability to
pay, evidence of profits wrongfully obtained by the defendant is also
inadequate.  (Robert L. Cloud & Associates, Inc. v. Mikesell (1999) 69
Cal.App.4th 1141, 1152.)  To obtain a
meaningful understanding of the defendant’s wealth, evidence of liabilities
should normally “accompany evidence of assets, and evidence of expenses should
accompany evidence of income.”  (>Baxter v. Peterson, supra, 150
Cal.App.4th at p. 680; see also Kenly v.
Ukegawa (1993) 16 Cal.App.4th 49, 57.) 
Ultimately, “‘[w]hat is required is evidence of the defendant’s ability
to pay the damage award.’”  (>Baxter v. Peterson, supra, 150
Cal.App.4th at p. 680; see also Adams v.
Murakami, supra, 54 Cal.3d at p. 112.) 
In addition, the defendant’s wealth is to be measured as of the time of
the trial on punitive damages.  (>Washington v. Farlice (1991) 1
Cal.App.4th 766, 777; Zhadan v. Downtown
Los Angeles Motor Distributors, Inc. (1979) 100 Cal.App.3d 821, 839.)

            >B.         Analysis
of Punitive Damages Award Against Dunlap

            On appeal
Starz argues that it presented sufficient evidence to support the award of
punitive damages.  Starz points out that
it had paid Dunlap/Ember $625,000 under the contract between November 2005 and
February 2006.  It also cites evidence
that Dunlap purchased a home in Malibu in 2004 for $3 million and owned another
home in Pacific Palisades which she purchased for over $1 million.href="#_ftn12" name="_ftnref12" title="">[12]  At some point in the mid-2000s, Dunlap took
out a home equity line of credit on the Malibu home for two increments of $1.3
million each, and she lent those funds to Ember.  Dunlap testified that Ember still owed her
about $1.3 million.  Starz presented
evidence that between 2007 and 2010 an investor lent Dunlap about $300,000 for
the UNCLE television series project. 
Other evidence was presented that Dunlap signed checks on Ember accounts
for expenses related to her house, including payments on the home equity loans,
housekeeping, utilities, groceries, personal entertainment and credit
cards.  Dunlap testified that she drove a
2003 jaguar with 80,000 miles on the odometer. 
In addition, when Dunlap was the president of Ember she had received
cashier’s checks from Ember in the amount $25,000 and $26,099.70.  Starz also presented evidence that during
trial Dunlap had in her possession a check (written on an Ember account) for
$20,000 in her possession, which Dunlap said was to be used to pay attorney
fees.

            During
closing argument, Starz’ counsel asked the jury to award $2 million in punitive
damages against Dunlap because “she has a multimillion dollar house in
Malibu.  She’s owed millions of
dollars.  She drives a Jaguar.  She’s indicated that she ‘hobnobs’ with
Steven Spielberg and James Cameron.” 

 

            In our
view, Starz did not carry its burden to prove Dunlap’s financial condition
during the trial.  The evidence in the
record is insufficient to demonstrate Dunlap’s overall ability to pay the
punitive damage award.  Although the
substantial evidence standard is deferential to the fact finder, “this does not
mean we must blindly seize any evidence in support of the respondent in order
to affirm the judgment. . . .  ‘[I]f the
word “substantial” [is to mean] anything at all, it clearly implies that such
evidence must be of ponderable legal significance.  Obviously the word cannot be deemed
synonymous with “any” evidence.  It must
be reasonable . . . , credible, and of solid value . . . .’  [Citation.]” 
(Kuhn v. Department of General
Services (1994) 22 Cal.App.4th 1627, 1633.)

            There are
several problems with Starz’ evidence of Dunlap’s financial condition.  Preliminarily, the evidence was superficial
and of limited relevance to the punitive damage determination.  The evidence Starz cites on appeal to prove
Dunlap’s financial ability to pay a punitive damage award was presented during
the trial in the context of proving that Ember was Dunlap’s alter ego—that over
the years Dunlap used Ember (and its accounts) as her personal bank account to
pay her expenses and finance her lifestyle. 
For example, Starz presented evidence that Dunlap borrowed money from
the equity in her home and placed it in Ember’s account and wrote checks to
herself on Ember’s account.  Starz also
presented evidence that Dunlap wrote checks on Ember’s accounts for such items
as remodeling projects at her home in Malibu, housekeeping and her
entertainment expenses.  While this
evidence clearly showed that Dunlap directed the transfer of money out of
Ember’s accounts, it has minimal probative value to the issue of Dunlap’s
overall financial condition. 

            In
addition, the evidence elicited at trial provided only a limited picture of
Dunlap’s assets, and revealed almost nothing about her liabilities.  The evidence Starz cites does not show
Dunlap’s current financial condition
as of the time of trial.  The trial took
place in March 2010.  Most of the
evidence Starz presented concerning Dunlap’s financial condition was several
years old, dating to the 2003-2007 time period (i.e., at some point in the
mid-2000s she represented in a loan application that she was earning $100,000 a
month).  According to Dunlap she was no
longer employed by Ember, having left the company in 2008.  Dunlap testified that she had no money of her
own at the time of trial.  There was no
evidence presented concerning Dunlap’s current
income.  Also there was no evidence
of the current value of her homes, car, or her other current assets or
expenses.  Starz did not present evidence
of any other current liabilities or any indebtedness (or current equity)
attached to either of Dunlap’s homes.  (>Kelly v. Haag (2006) 145 Cal.App.4th
916, 917 [even if defendant currently owned properties, absence of evidence of
encumbrances or other liabilities on them defeats punitive damages
award].)  Moreover, other than Dunlap’s
claim that Ember still owed her $1.3 million, there was no evidence as to
whether she could or would ever collect those funds from Ember.  The record is also unclear as to the status
of the funds that had been lent to Dunlap by the investor for the UNCLE
television project between 2007 and 2010. 


            We note
that Starz presented evidence that it had given Dunlap $625,000 under the
contract at issue in the case, but those funds (assuming that they were still
available to Dunlap in 2010) standing alone cannot support the jury’s punitive
damage award.  (See Kenly v. Ukegawa, supra, 16 Cal.App.4th 49, 56, [holding that a
punitive damages award could not be made “solely on the basis of proof of the
profit reaped by a defendant as the result of the fraud”].)   

            In short,
even viewing the record in the light most favorable to the judgment,

there was insufficient evidence from which the trier of
fact—or this court on appeal—could determine whether Dunlap would be able to
pay the award of $1.4 million in punitive damages at the time of trial.  (See, e.g., Baxter v. Peterson, supra, 150 Cal.App.4th 673, 681 [“In sum,
although the record shows that [defendant] owns substantial assets, it is
silent with respect to her liabilities. 
The record is thus insufficient for a reviewing court to evaluate
[defendant’s] ability to pay $75,000 in punitive damages.”]; >Kelly v. Haag, supra, 145 Cal.App.4th at
p. 917 [“[W]ithout any evidence [defendant] still held the assets, or of the
amounts of his liabilities, the $75,000 award is unsupported by substantial
evidence and excessive.”].)  “Without
such evidence, a reviewing court can only speculate as to whether the award is
appropriate or excessive.” (Adams v.
Murakami, supra, 54 Cal.3d at p. 112.)

            Finally,
because our reversal is based solely on insufficiency of the evidence, we
conclude that we must strike the punitive damages award from the judgment, and
that no retrial of the punitive damages issue is warranted.  ‘“When the plaintiff has had full and fair opportunity
to present the case, and the evidence is insufficient as a matter of law to
support plaintiff’s cause of action, a judgment for defendant is required and
no new trial is ordinarily allowed, save for newly discovered evidence. . .
.  Certainly, where the plaintiff's
evidence is insufficient as a matter of law to support a judgment for
plaintiff, a reversal with directions to enter judgment for the defendant is
proper. . . .  [¶]  . . . 
[A] reversal of a judgment for the plaintiff based on insufficiency of
the evidence should place the parties, at most, in the position they were in
after all the evidence was in and both sides had rested.’ (McCoy v. Hearst Corp. (1991) 227 Cal.App.3d 1657, 1661; accord, >Bank of America v. Superior Court (1990)
220 Cal.App.3d 613, 626-627.)  In another
context, our Supreme Court explained in Silberg
v. Anderson (1990) 50 Cal.3d 205, 214, that ‘[f]or our justice system to
function, it is necessary that litigants assume responsibility for the complete
litigation of their cause during the proceedings.’”  (Kelly
v. Haag, supra, 145 Cal.App.4th at p. 919.)

            Here, as in
Baxter v. Peterson, supra, 150
Cal.App.4th at page 681, Starz had “‘a full and fair opportunity to present
[its] case for punitive damages, and [Starz] does not contend otherwise.’  (Kelly
v. Haag, supra, 145 Cal.App.4th
at p. 919.)  When a punitive damage award
is reversed based on the insufficiency of the evidence, no retrial of the issue
is required.”  Likewise in >Robert L. Cloud & Associates, Inc. v.
Mikesell, supra, 69 Cal.App.4th at page 1154, the court reversed a punitive
damages award because there was no evidence of the defendant’s financial
condition, and it did not remand for retrial. 
In view of this case law, we reverse the punitive damages from the
judgment without ordering retrial.

 

 

 

 

>DISPOSITION

 

            The judgment is reversed insofar as the punitive damages
award is concerned.  In all other
respects, the judgment is affirmed.  Each
party is to bear its own costs on appeal.

 

 

                                                                                                            WOODS,
Acting P. J.

 

I concur:

 

 

                        JACKSON, J.

 

 

ZELON, J.,
Dissenting:

 

 

I respectfully dissent.

In this case, plaintiff Starz
drafted and presented to defendant Ember an integrated license agreement.  That agreement, entered by Starz and Ember,
through Dunlap, was not limited to California, but covered a broad territory
which included the United States, Canada, and US military installations around
the world.  The language put forward by
Starz, and accepted by Ember, expressly provided:  “any and all disputes arising hereunder or
related hereto shall be construed under the laws of the State of New York
applicable to agreements to be wholly performed therein.  Licensor and Licensee consent to exclusive
jurisdiction of the state and federal courts sitting in the State of New York
over any and all matters arising under or related to this Agreement.”

Although months of proceedings in
this case involving service of process and the entry of, and relief from,
defaults preceded the motion to enforce this mandatory forum selection clause,
Ember had not been served until shortly before the motion was filed; the motion
was its first responsive pleading.  Starz
opposed the motion, claiming, among other grounds, that Ember was in default at
the time of filing and did not have the capacity to seek the relief; that
Dunlap was not a party to the agreement and thus could not enforce it; and that
enforcement would be unfair, unreasonable, and unconscionable.  Included in its opposition was a footnote
which read “Starz suspects that “New York” was inadvertently inserted via a
form contract template.”  No evidence was
cited in support of that posited suspicion, nor did any of the declarations or
documents attached to the opposition provide any evidence of the suspected
inadvertence.  There was no indication
that Starz had ever informed Dunlap or Ember, prior to this dispute, that it
believed this provision of the contract was inserted in error.  Starz, as a result, failed to provide the
defendants any opportunity to assert their intent in accepting this provision
of the agreement.

At the hearing
on December 8, 2008, the trial court expressed concern that Starz, as the
contract’s drafter, was opposing the enforcement of the very provisions it had
drafted.  In response, counsel for Starz
argued that the footnote “set forth that it was a mistake that it was put
in.  It was a holdover from another
contract.”  This statement, presumably
inadvertent, mischaracterized the footnote; in any event, it was made without any
evidentiary basis.  The court nonetheless
appeared to accept this explanation.  The
remainder of the hearing addressed the reasonableness of enforcing the clause
in light of the location of the parties and witnesses.  The court stated that it was denying the
motion on reasonableness grounds.

California Law Favors Enforcement of Forum Selection Clauses

“Both the United States Supreme
Court and the California Supreme Court have recognized that ‘[f]orum selection
clauses play an important role in both national and interstate commerce.’”  (Net2Phone,
Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 587-588 (>Net2Phone); citing M/S Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1, 10 [92 S.Ct.
1907, 32 L.Ed.2d 513]; Smith, Valentino
& Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 496.)  “Such clauses provide a degree of certainty,
both for businesses and their customers, that contractual disputes will be
resolved in a particular forum. 
[Citation.]  California courts
routinely enforce forum selection clauses even where the chosen forum is far
from the plaintiff’s residence.  (See,
e.g., Intershop Communications AG v.
Superior Court (2002) 104 Cal.App.4th 191, 196-202 [Hamburg, Germany,
forum]; CQL Original Products, Inc. v.
National Hockey League Players’ Assn. (1995) 39 Cal.App.4th 1347, 1355-1356
[Ontario, Canada, forum].)”  (>Net2Phone, at pp. 587-588; see >Schlessinger v. Holland America (2004)
120 Cal.App.4th 552, 558 [“[b]oth California and federal law presume a
contractual forum selection clause is valid and place the burden on the party
seeking to overturn the forum selection clause”].)  When a forum selection clause has been
“entered into freely and voluntarily by parties who have negotiated at arm’s
length,” the clause will be enforced “in the absence of a showing that
enforcement of such a clause would be unreasonable.”  (Smith,
Valentino & Smith, Inc. v. Superior Court, supra, 17 Cal.3d at p. 496.) 
In those circumstances, the party seeking to avoid application of the
forum selection clause bears a “substantial burden” to prove
unreasonableness.  (CQL Original Products, Inc. v. National Hockey League Players’ Assn.,
supra, 39 Cal.App.4th at p. 1354; Net2Phone,
supra, 109 Cal.App.4th at p. 588.)href="#_ftn13" name="_ftnref13" title="">[13]

The trial
court’s determination whether enforcement of a forum selection clause is
reasonable is generally reviewed for abuse of discretion.  (Net2Phone,
supra, 109 Cal.App.4th at p. 588; America
Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, pp. 7-9; but see >Cal-State Business Products & Services,
Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1680 [applying substantial
evidence standard of review].)

The Record Does Not Provide a Basis For the Ruling

This record is silent as to any
legal or evidentiary basis for the trial court’s exercise of discretion.  The substantial burden on Starz, as the party
seeking to avoid enforcement of the forum selection it had made, was to provide
evidence “to demonstrate that the contractually selected forum would be
unavailable or unable to accomplish substantial justice or that no rational
basis exists for the choice of forum.”  (>Intershop Communications AG v. Superior
Court (2002) 104 Cal.App.4th 191, 199.)

Starz provided neither evidence,
nor argument, that New York is not available as a forum.  Starz also failed to provide any evidence
that the courts in New York would be unable to accomplish substantial
justice.  Instead Starz only asserted,
but did not demonstrate, that the clause was a mistake, and argued that its
enforcement would be unreasonable, in that the disputed payment was made in
California, the witnesses are located in California, and that none of the
parties do business in New York.  The
court relied on the fact that the parties had no New York connection, and that
it believed Dunlap’s health would make proceeding in New York difficult.href="#_ftn14" name="_ftnref14" title="">[14]

As to the first factor, Starz made
no showing that the asserted lack of current contacts to New York made the
choice of a New York court to apply New York law to the dispute
unreasonable.  No party has asserted that
the choice of law should not, or cannot, be enforced.  Nor was any evidence presented to overcome
Dunlap and Ember’s presumed intent, in entering the agreement requiring the
application of New York law, to obtain the benefits of the enforcement of New
York law in any disputes between the parties. 
Accordingly, that connection to New York is undisputed.

The second factor also cannot
support the ruling.  This is purely a
matter of inconvenience to the defendants in the case.  However, “neither inconvenience nor
additional expense in litigating in the selected forum is part of the test of
unreasonability.”  (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12
Cal.App.4th 1666, 1679.)  In any event,
the parties who would be inconvenienced most are the parties seeking to enforce
the clause, who were presumably able to weigh that factor against the benefit
of the agreed to forum.

In sum, I do not believe that Starz
met its burden of establishing a basis for the trial court to ignore the
mutually agreed to contractual provision mandating that this dispute be
resolved by a New York court applying New York law.  I would reverse.

 

 

 

                                                                                                >ZELON, J.