Omari v. Kindred Healthcare

Filed 6/7/07 Omari v. Kindred Healthcare CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Judith C. Chirlin, Judge. Affirmed.

Manatt, Phelps & Phillips, Michael M. Berger, Barry S. Landsberg, Benjamin G. Shatz and Joanna S. McCallum for Defendants and Appellants.

Law Offices of Victor L. George, Victor L. George, Wayne C. Smith; Esner, Chang & Ellis, Andrew N. Chang and Stuart B. Esner for Plaintiffs and Respondents.

_____________________________________

INTRODUCTION

Appellants Kindred Healthcare Operating, Inc., Kindred Healthcare Services, Inc. (Kindred), and two Kindred hospitals, Kindred Los Angeles and Kindred Brea, appeal from a judgment entered upon special verdicts finding Kindred liable for breach of contract, fraud and intentional conversion of medical equipment belonging to respondents Tarik Omari and Bio-Tek Technology, Inc., doing business as Tartech.[1] (See appendix A.)[2] The jury also found by clear and convincing evidence that Kindred committed the fraud or conversion by means of malice, oppression or fraud, and awarded punitive damages. (See appendix B.) Kindreds primary contentions are that the fraud verdicts are not supported by substantial evidence, the court erroneously excluded impeachment evidence, compensatory and punitive damages were excessive and the punitive damage award was invalid under California law and the United States Constitution. We reject appellants contentions and affirm the judgment.

PROCEDURAL BACKGROUND

The jury returned a verdict against appellants in the sum of $1,828,113, which included damages for emotional distress in the amount of $500,000. In addition, the jury assessed punitive damages against them in the amount of $3,000,000.[3] After judgment was entered April 18, 2005, appellants timely filed motions for a new trial and for judgment notwithstanding the verdict. Both motions were denied June 21, 2005, and appellants timely filed a notice of appeal July 19, 2005.

FACTS[4]

In 1981, Tarik Omari immigrated to the United States from Israel, where he had been a college instructor in electronics and computer science. While working full time, Omari obtained a masters degree in biophysics in 1988, and in 1990, formed his own company, American Medical Services Company (American Medical), a sole proprietorship which sold and serviced biomedical and radiology equipment in the San Fernando Valley.

American Medical provided services to several Vencor hospitals beginning in 1997, before Vencors name was changed to Kindred in 2000.[5] At that time, American Medical was the primary service contractor for the radiology department at the Kindred hospitals of Los Angeles, Westminster, Brea and Ontario. The chief executive officer (CEO) of Kindred Los Angeles was Judy McCurdy, whom Omari met while providing services between 1997 and 2000. Virgis Narbutas was the CEO of both Kindred Westminster and Kindred Brea, and had previously been CEO of Kindred Ontario. Omari first met Narbutas in 1999, and exchanged greetings with him many times in the cafeteria of Kindred Brea, while providing radiology services for that hospital from 1997 to approximately 2000. On average, Omari would appear personally at one or another Kindred facility weekly to provide services. He never received any complaints about his services.

In 1996, Omari met Ghassan El-Abed, who was then the director of biomedical engineering with the Kindred regional offices. The two became friends, and eventually Omari considered El-Abed his best friend. In 1999, while El-Abed was still employed by Kindred, they began discussing the formation of a biomedical and hemodialysis company. In 2000, after El-Abed left Kindred and while he was employed by Anaheim General Hospital, they incorporated Bio-Tek Technology, Inc., and set about doing business as Tartech, a company Omari had incorporated in 1998. Omari was the CEO and the chief financial officer (CFO), and El-Abed was the secretary of the corporation. Omari and El-Abed did not have a written contract, but agreed that Omari would provide the capital for the venture, and El-Abed would use his contacts to obtain contracts with Kindred hospitals. Omari was to have a 60 percent ownership in the company, and El-Abed was to have a 40 percent interest.

Omari invested $400,000 to start Tartech. He purchased and overhauled five dialysis machines, a portable X-ray machine, a telemetry machine and other equipment and accessories. Omari hired nurses and licensed personnel to service and maintain the medical equipment, as well as a physician to serve as medical director. Tartech also obtained professional liability and workers compensation insurance, as required of Kindred vendors. At first, because only Omari was licensed to maintain the biomedical machinery, the company hired a temporary biomedical technician; in 2001, it hired Richard Damon as a full-time technician.

Like other hospitals, Kindred required vendors such as Tartech to have written protocols and procedures, and Omari hired a consultant to write them. El-Abed recommended Candy Peter and his good friend, Cynthia Duque, doing business together as Peter Duque, and El-Abed represented to Omari that Duque and Peter had the necessary expertise to write a protocol and procedures manual. Omari paid Peter Duque $11,000 to write the manual. At some point after retaining Peter Duque, Omari learned that Duque was employed by Kindred. Duque had been the director of nursing at Kindred Ontario before her promotion in 2000 to the position of chief operating officer (COO) of the Brea facility.[6] Kindred policy forbids employees from entering into separate contracts with vendors or taking money from them.[7] Omari was unaware of that policy.

Tartechs first contract was with Kindred Los Angeles, and was signed by McCurdy in February 2000; later, Tartech obtained contracts from Westminster, Ontario and Brea. Tartechs income from Kindred hospitals increased every month, and according to respondents economist, Tartech could have expected a profit beginning November 2001. However, in November 2001, without Omaris knowledge, El-Abed formed a corporation, International Healthcare Resources, Inc. (IHR), in order to take over Tartechs business. El-Abed filed a statement of domestic stock corporation showing himself as the CEO, secretary and member of the board of directors. Duque was listed as the CFO and the only other director.[8] There were no other officers.

El-Abed and Duque put their plan into action two days after Omari left the country in mid-December 2001 for a family vacation in Israel. El-Abed submitted contract documents to the four Kindred hospitals under contract with Tartech, in order to begin the process of obtaining approval of IHR as a vendor, representing to the hospitals that Tartech had simply changed its name to IHR.[9] Such an approval process normally takes several weeks, and is overseen by the COO -- in Breas case, Duque. The CFO must also approve the contract prior to the CEOs final approval. The CFO at Brea was John Browne, who, along with Duque, was responsible for verifying compliance with Kindreds vendor requirements checklist.[10] Although the checklist included liability and workers compensation insurance policies, it was apparent on the certificate of insurance El-Abed submitted to the accounting department that IHR had no liability insurance prior to January 1, 2001, and no workers compensation insurance at all.

El-Abed informed the accounting department that he would be submitting invoices with the new company name, and Duque assured the person responsible for payment of invoices, Tanzmeister, that El-Abeds information was correct.[11] Tanzmeisters note forwarding the contract to Narbutas contained the notation, Cynthia states all OK. Narbutas signed the contract January 8, 2002, although it was deemed effective November 1, 2001.

In mid-December 2001, El-Abed personally met with McCurdy, CEO of Kindred Los Angeles, who agreed to renew Tartechs contract under the new company name.[12] McCurdy told El-Abed that she liked the services performed by Damon, and would do whatever it takes to keep him. Although not clear from the record how IHR became a vendor for Kindred Westminster, by late December Tartech had been replaced by IHR, and outstanding invoices for services performed by Tartech as of November 1, 2001, were paid to IHR by Kindred Westminster, Brea, Los Angeles and Ontario. El-Abed offered jobs to Tartechs employees, and by the end of December 2001, most of them were employed by IHR, paid with the money diverted from Tartech. Thereafter, IHR provided the services Tartech had previously provided, using Tartechs equipment and employees, including licensed biomedical technician, Richard Damon.

On December 27, 2001, El-Abed hosted a holiday luncheon for Kindred staff to celebrate his new company. He purchased gifts for them -- an iPod for the director of nursing, a Palm Pilot or Blackberry for Narbutas, an expensive pen set for Browne, perfume for Tanzmeister, and for Duque, a cell phone with service included.[13]

Before leaving for his vacation in mid-December 2001, Omari had signed several blank checks and left them with El-Abed to be used for Tartech expenses during his absence. El-Abed admitted writing one of the checks to cash for $3,000 and depositing it into his personal account. When the check was returned due to insufficient funds, the bank telephoned Omari in Israel to inform him that there were no more funds in his account and that several checks had been returned unpaid. Omari called El-Abed, who behaved as though he did not know what was happening, and said it must be a mistake. Omari cut his vacation short and returned.

Once home, Omari discovered El-Abeds fraud. In a panic, Omari called his friend Nizar Marouf, told him that his partner had taken everything, and asked him for help. The next morning, January 2, 2002, they visited three of the affected hospitals together -- Los Angeles, Brea and Ontario. Marouf drove, because Omari was an emotional wreck. Omari took with him the articles of incorporation and the statement of domestic stock corporation for Bio-Tek Technology, Inc. The documents showed Omari as the CEO, CFO, director and majority shareholder, and El-Abed as secretary and director.[14]

At Kindred Brea, they asked to see CEO Narbutas, but were sent to accounts payable, where Omari showed Tanzmeister the corporate documents. Tanzmeister sent them to see COO Duque, to whom Omari emotionally explained that his partner El-Abed had somehow changed the accounts and contracts. Duque smiled, told him to relax and not to worry, and promised to investigate and correct any mistake. She did not reveal her role in IHR, and behaved as though she knew nothing of El-Abeds fraud. In the days following the meeting, Omari telephoned Duque and Narbutas to inquire about the investigation, but neither of them ever took or returned his calls.

Omaris third visit on January 2 was to Kindred Los Angeles, where he spoke to the CFO, Katherine Rodriguez, in accounts payable. Rodriguez accompanied Omari and Marouf to CEO McCurdys office, where Omari showed her the corporate documents, and explained that there had been no name change, that Tartech was still active, and that he was the president and majority shareholder. Without revealing that she had entered into a vendor contract with IHR the week before, McCurdy said she would investigate and get back to him. When Omari did not hear from McCurdy, he telephoned and asked about the investigation. She swore at him and hung up. She called him back a day or two later, apologized for her rudeness, and again promised to investigate. Although Omari left messages for her, she never called back.

On January 15, 2002, McCurdy sent a letter notifying Tartech that its contract with Kindred Los Angeles was cancelled as of January 1, 2002, the day before she had met with him.[15] The next day, El-Abed wrote a letter to McCurdy, agreeing to be responsible for all financial disputes that might arise from Kindreds termination of Tartechs contract. McCurdy admitted that her only investigation into the conflict consisted of talking to El-Abed, but denied asking El-Abed for a hold-harmless agreement. McCurdy testified that she cancelled the Tartech contract in order to hire Richard Damon, who was by then working for IHR. Damon was essential to the hospital, because it was expecting an accreditation survey by the Joint Commission on Accreditation of Hospitals, and would not have been able to pass the accreditation review without him. She later recruited Damon to work directly for the hospital, telling her CFO Rodiguez in a February e-mail message, We must keep Richard -- pull out the stops as we cannot get along without him.[16]

On January 2, 2002, the same day Omari visited the hospitals, Narbutas addressed a letter to El-Abed at Tartechs office, notifying Tartech that its contract with Kindred Westminster was terminated, effective February 1, 2002. One week later, Narbutas gave his final approval to the IHR contract with Brea, deemed effective November 1, 2001. Three days later, on January 11, 2002, Omari wrote Narbutas, explaining that Tartech had never ceased to exist, that Tartech had not changed its name or ownership, and that the attempt to transfer its assets to another company was unauthorized. Omaris letter demanded reversal of the transfer and immediate release of all payments owed Tartech. At approximately the same time, El-Abeds attorney sent Narbutas a letter entitled, Notice of Non-Affiliation, also dated January 11, 2002, which claimed that the affiliation between El-Abed, IHR and Tartech had been formally severed, and that any statements made by Omari against El-Abed and IHR were false and made with ill will. Narbutas received both letters and understood there was a problem, but did not contact Omari, follow up, or investigate further.

Unsuccessful in his own communications with Brea, Westminster and Los Angeles, Omari retained an attorney, Mr. Motaz M. Gerges. On January 31, 2002, Gerges wrote to the hospitals and the corporate offices, explaining El-Abeds fraud and naming COO Duque as his coconspirator. The letter demanded payment of specified invoices totaling more than $60,000, and informed Kindred that the equipment used in providing the services remained the property of Tartech.[17] Gerges expressed the opinion that Duque had intentionally harmed Omaris business in retaliation for his demand for repayment of sums lent to her to buy her house.

When Narbutas read the claim that Duque had taken money from a vendor, he notified Steve Turner, Kindreds regional vice-president, who asked him to investigate. Narbutas testified that his concern was Duques behavior, and he could not recall whether he mentioned the conflict between Omari and El-Abed to Turner. With Browne as a witness, Narbutas called Duque into his office and asked her whether she had taken the money, but claimed not to have spoken to her about the Tartech-El-Abed conflict. When she admitted having borrowed the money, Narbutas suspended her and reported the admission to human resources and legal counsel in Louisville, Kentucky, where it was decided that she would be terminated for violating company policy. On February 14, 2002, before Narbutas could fire her, Duque resigned. Before she left, however, she unlocked a door to a room in a deserted wing of the hospital for El-Abed, and he and an IHR employee moved Tartechs machines there. As for the Omari-El-Abed conflict, Narbutas did nothing to investigate, except suggest to Browne that he kind of look into it.

Browne testified that Narbutas defended Duque until she resigned. After Browne was asked to look into the matter, he forwarded both letters from Omaris attorney to corporate counsel in Louisville.[18] He retrieved from Tanzmeister the unpaid disputed invoices and, though aware of Tartechs claims, continued to pay IHR, without determining whether the Tartech invoices listed in Gergess two letters had been paid. He then prepared a letter for Narbutass signature, cancelling IHRs contract with Brea, effective March 14, 2002.[19]

By the time the IHR contract was cancelled, Browne had received a copy of Gergess letter informing the hospital that the equipment used by IHR at the hospital, including five dialysis machines, belonged to Tartech, and he knew that the equipment was still located at the hospital. Without informing Gerges or Omari, Browne telephoned El-Abed on March 7, 2002, and invited him to pick up the equipment.[20] El-Abed came with Norry the same day Browne telephoned, and Browne watched as they drove the equipment out of the parking lot in a U-Haul truck.[21] Two months later, on advice of counsel, Browne telephoned El-Abed to ask him to return the equipment to Omari. El-Abed refused. In fact, it was too late -- El-Abed and Duque had already shipped all but one item to the Philippines, where Duque had negotiated a sale.

Omari testified that the cost of purchasing and refurbishing the stolen dialysis machines was $110,200. The cost of purchasing and refurbishing the X-ray machine and purchasing accessories was $87,000. Omaris expert witness, economist Phillip Allman, testified that based upon past expenses and income, Tartechs expected lost profit was approximately $1.2 million through the time of trial. Appellants presented no expert testimony.

The parties stipulated to several facts: Tartech owned all the hemodialysis machines and other medical equipment released by Kindred to El-Abed; McCurdy, CEO of Kindred Los Angeles, Narbutas, CEO of Kindred Brea, and John Browne, CFO of Kindred Brea, were all officers and managing agents of Kindred, and all their actions were taken within the scope of their employment; the net worth of the whole corporate Kindred organization was $1.4 billion at the time of trial.[22]

DISCUSSION

1. Contentions

We summarize appellants five primary assignments of error, leaving the many subcontentions to such time that they become relevant to our discussion. The first assignment of error is that the punitive damage award was excessive, contrary to California law, and unconstitutional under the guideposts set forth in State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408 (State Farm). In the second, appellants claim the fraud verdicts were not supported by substantial evidence. In appellants third assignment of error, they contend the damages awarded for Omaris emotional distress were excessive and unsupported by substantial evidence, and that emotional distress damages are not recoverable for conversion of business equipment. In the fourth, appellants contend that the economic damages awarded were excessive and not supported by substantial evidence. Finally, appellants contend that the trial court abused its discretion in excluding a document offered to impeach Omaris testimony regarding the cost of overhauling dialysis machines, and in denying the motion for new trial on that ground.

In addition to the contentions just summarized, appellants have included contentions and argument in at least 10 of the 33 footnotes in the opening brief and eight of the 28 footnotes in the reply brief. Each point in an appellate brief must be stated under a separate heading or subheading summarizing the point. (Cal. Rules of Court, rule 8.204(a)(1)(B).) As the placement of argument in a footnote does not comply with this rule, we disregard it. (See Santa Teresa Citizen Action Group v. State Energy Resources Conservation & Development Com. (2003) 105 Cal.App.4th 1441, 1451; Western Aggregates, Inc. v. County of Yuba (2002) 101 Cal.App.4th 278, 290.)

Respondents suggest that rather than follow appellants order of discussion, the contentions regarding the punitive damage award should be discussed last. We agree that the more logical approach is to begin with whether substantial evidence supports the jurys findings of fraud, as the remaining contentions depend, in part, upon the resolution of that issue and issues relating to it. Indeed, all of appellants other issues are more easily discussed prior to punitive damages. Thus, we begin with appellants second assignment of error, that the fraud verdicts were not supported by substantial evidence, after which we discuss the third and fourth assignments of error, before finally turning to punitive damages. We also discuss some of appellants subcontentions -- not summarized here -- out of order where warranted.

2. Substantial Evidence -- Fraud and Conversion

Appellants contend that several fraud elements were unsupported by substantial evidence.[23] Respondents contend that appellants inadequate summary of the evidence, consisting mostly of the evidence supporting appellants contentions, has resulted in a forfeiture of their substantial evidence claim. The only evidence relevant to a substantial evidence review is that evidence which supports the prevailing parties, and a proper summary disregards the appellants evidence. (Campbell v. Southern Pacific Co., supra, 22 Cal.3d at p. 60.) We agree with respondents that, contrary to the proper standard of substantial evidence review, appellants summary casts the most favorable light on the evidence favoring their position, and they have drawn all inferences necessary to support their arguments, rejecting those apparently drawn by the jury. (See Nestle v. City of Santa Monica, supra, 6 Cal.3d at p. 925.)

For example, appellants contend there is no evidence of intentional misrepresentations or concealment by McCurdy, Narbutas and Browne. However, they fail to discuss McCurdys promise to investigate Omaris claims, or her concealment of the fact that she had just signed a contract with IHR, and intended to do whatever was necessary in order to keep the services provided by Damon, whose technical expertise was necessary to permit Kindred Los Angeles to pass the accreditation review. Nor do they discuss evidence suggesting Browne facilitated El-Abeds removal of the equipment after he knew it belonged to Tartech, and without notifying Omari.

Contrary to the events as described by appellants, Kindred officers were informed as early as January 2, 2002, that Tartech had not simply changed its name, and that Omari was alleging that El-Abed had stolen his business. By mid-January, El-Abed had admitted to Kindred in his notice of non-affiliation that the two companies were separate entities. By the end of January, Kindred officers knew Tartech was claiming entitlement to the equipment that it had installed. In January, February and March 2002, Kindred continued to pay IHR instead of Tartech for work performed using Tartech equipment; in March 2002, without notifying Omari, Kindred turned that equipment over to El-Abed. Kindred officers falsely promised Omari they would investigate and correct any mistake, but from January 2, 2002 through mid-March 2002, other than the Ontario CEO, Kindred officers failed to investigate, and ignored Omaris and his attorneys pleas for assistance.

Appellants contend that the facts do not show the officers conduct was fraudulent, apparently meaning that the evidence did not show fraudulent intent. [F]raudulent intent must often be established by circumstantial evidence. . . .  [It] has been inferred from such circumstances as defendants . . . failure even to attempt performance, or his continued assurances after it was clear he would not perform.  (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30.) Here, Kindreds fraudulent intent may be found in their officers false promises to investigate, their concealment of the fact that they intended to pay El-Abeds company notwithstanding Tartechs contractual entitlement and their intentional return of equipment owned by Tartech to El-Abed.

Appellants contend that there was no justifiable reliance, and quoting Witkin, they define reliance as an immediate cause of [the plaintiffs] conduct which alters his legal relations. (See 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, 808, p. 1164.) Appellants quote does not define justifiable reliance; it defines actual reliance, which is an element of fraudulent inducement; actual reliance is presumed when material facts are misrepresented or concealed. (See Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at pp. 976-977.)

Appellants suggest that Omaris ineffectual actions to protect himself show an absence of reliance, because he did, in fact, act by retaining an attorney and making demands. Appellants further suggest that Omaris reliance was unjustified because he should have been aware of any fraudulent concealment by the time the equipment was sold. What appellants have described is, more realistically, a failure to act -- had Omari known all the facts, he could have taken court action or retrieved the equipment before Kindred released it to El-Abed. Reliance may consist of forbearance. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 174.) A plaintiffs failure to protect himself is not deemed unjustifiable unless his conduct . . . in the light of his own intelligence and information was manifestly unreasonable. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.) Whether Omaris forbearance was reasonable was a question of fact for the jury to resolve, and any failure to take action before it was too late was not manifestly unreasonable. (See id. at pp. 1239-1240.)

In addition, appellants argue that Omari was fully aware that Duques work on Tartechs procedures manual and her acceptance of a loan constituted ultra vires misbehavior on her part -- that she was a double agent. However, the record fails to disclose that Omari knew of Duques position when he lent her money. Moreover, appellants disregard Omaris testimony that he was unaware of Kindreds policy or of the fact that Duque was employed by Kindred when he employed her as a consultant.

Appellants would have this court disbelieve Omari, and believe only those witnesses whose credibility was apparently rejected by the jury -- and by the trial judge, who, in denying appellants motion for new trial based upon alleged attorney misconduct in calling the defense witnesses liars, stated: Quite frankly, that is a mild word for some of the defense witnesses. This Court has been on the bench for 20 years and cannot remember a case where it appeared that so many of the defense witnesses were making it up as they go along. The jurors obviously agreed.

Appellants statement of facts recites testimony that was apparently rejected by the jury, omitting contrary evidence. For example, appellants cite Duques testimony that she did not have the authority to determine whether a vendor should be paid, from which appellants argue that Duque could not have arranged to have IHRs invoices paid. However, the evidence showed that she did, in fact, arrange to have IHRs invoices paid -- Duque assured Tanzmeister the name change was all OK, an assurance communicated directly to CEO Narbutas. Duque later told Norry that she had arranged for the payment of the Tartech invoices to IHR. Appellants also suggest that a change in vendor name and federal identification number did not prompt suspicion of El-Abed, because Kindred officers testified they believed it to be a simple name change -- testimony the jury was not required to believe. Further, they disregard evidence that one such officer was Browne, who later helped El-Abed misappropriate Tartechs equipment. Similarly, appellants argue that Kindred officers did not know Omaris relationship to Tartech, suggesting, as they did at trial, that the Kindred officers did not know Omari, and were acquainted only with El-Abed. They reference McCurdys testimony that she had never seen Omari before January 2, 2002, but disregard Omaris testimony that he had known McCurdy since 1997, when he was the vendor doing business as American Medical, and that he had exchanged greetings many times with Narbutas at Brea.

It is the province of the jury, not the appellate court, to judge of the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, [and] to resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom. [Citations.](Leff v. Gunter (1983) 33 Cal.3d 508, 518.) In doing so, a jury is not required to believe the testimony of any witness, even if uncontradicted. (Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1028.) It is well settled that the trier of fact may accept part of the testimony of a witness and reject another part even though the latter contradicts the part accepted. [Citations.] . . . [T]he jury properly may reject part of the testimony of a witness, though not directly contradicted, and combine the accepted portions with bits of testimony or inferences from the testimony of other witnesses thus weaving a cloth of truth out of selected available material. [Citations.] (Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 67-68.)

In reviewing for substantial evidence, we begin with the presumption that the record contains evidence to sustain every finding of fact. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) It is appellants burden to demonstrate that it does not. (Ibid.) Appellants do not meet their burden by pointing out all the inferences that might have been drawn in their favor, while inviting this court to reject any contrary inferences. (See Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429.) Appellants must show not only that their inferences are reasonable, but also that all contrary inferences are unreasonable -- and they must do so upon a complete and fair recitation of all the evidence most favorable to respondents. (Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1658.)

Appellants do not challenge the sufficiency of the evidence as to conversion. Respondents contend that the conversion findings alone support the award of damages, and any defect in the fraud findings may be disregarded. We agree. The special verdict form, to which appellants did not object, did not require the jury to allocate damages between the fraud and conversion causes of action. The general verdict rule . . . provides that where several counts are tried, a general verdict will be sustained if any one count is supported by substantial evidence and is unaffected by error, despite possible insufficiency of evidence as to the remaining counts. [Citation.] The rule is based on the assumption that the jury found on the cause of action or theory which was supported by substantial evidence and as to which there was no error, an assumption that may be proven incorrect by the special verdict or response to special interrogatories. [Citation.] (Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1157.)

Appellants do not contend that the special verdict form shows that different amounts were awarded as to the fraud and conversion counts. Instead, they challenge the economic damages award as excessive, because it included both the value of the equipment and consequential damages. They contend that Civil Code section 3336 allows one measure or the other, not both. Assuming arguendo that appellants interpretation of section 3336 is correct, they have failed to preserve this issue for appeal. To preserve for appeal a challenge to separate components of a plaintiffs damage award, a defendant must request a special verdict form that segregates the elements of damages. [Citations.] (Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 1158.)

Moreover, substantial evidence supports the fraud verdicts. Duque concealed from Omari until he was out of the country her plan to assist El-Abed in the takeover of Tartech. Thereafter, she facilitated the plan by assuring Tanzmeister that the new contract with IHR represented merely a name change. Finally, before Omari was aware of her complicity, she promised to investigate his claim that El-Abed was trying to steal his business, and promised to correct any mistakes. The jury understandably concluded she had no intention of fulfilling these promises. A false promise -- one made without intention to perform -- is the equivalent of a misrepresentation of fact. (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1238.) Before leaving Kindred, Duque, without notifying Omari, also assisted El-Abed in secreting Tartechs equipment in a locked storage room, from which El-Abed later removed it.

Duque was not alone among the officers whom the jury could reasonably have concluded misrepresented and concealed material facts from Omari to his detriment. CEO McCurdy, after promising to investigate Omaris claims on January 2, failed to do so, and failed to disclose that she had already signed a new contract with El-Abed -- the party Omari claimed was stealing his business and misleading the hospital into diverting payments due Tartech. Far from investigating Omaris complaint, on January 15, McCurdy cancelled Tartechs contract with Kindred Los Angeles, retroactive to the day before she promised to investigate his complaint. The jury was entitled to conclude that McCurdy, like Duque, misrepresented her intentions on January 2, induced Omaris reliance on her promise to investigate, and did so to ensure the retention of technician Richard Damon who, by then, was employed by IHR and who, in McCurdys words, we cannot get along without. Omari, unaware of McCurdys true intentions, failed to take steps to stanch the flow of payments to IHR, and failed to protect his equipment from being returned to El-Abed.

The jurys findings that officers of Kindred concealed facts from Omari was further supported by the evidence of CFO Brownes conduct. He had before him evidence that Tartech had not undergone a name change, that El-Abed was attempting to take over Omaris business and that payments due Tartech as the holder of the existing contracts were being made instead to El-Abeds company, IHR. Browne continued to authorize payments to IHR, despite having been notified of unpaid invoices due Tartech. Further, after being advised that the medical equipment belonged to Tartech, Browne, without notifying Omari, contacted El-Abed and invited him to pick up Tartechs equipment. The jury was entitled to find such concealment material, and that it was a substantial factor in causing Omaris damages. We may not reject those findings. (See Crawford v. Southern Pacific Co., supra, 3 Cal.2d at p. 429.)

3. Vicarious Liability

Appellants contend that notwithstanding the jurys contrary conclusion, Duque did not act within the scope of her employment with Kindred, and her fraud cannot, therefore, be imputed to Kindred.[24] We disagree.

Under the doctrine of respondeat superior, an employer is vicariously liable for the torts of its employees committed within the scope of the employment. (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296 (Lisa M.).) An employees actions need not benefit the employer; an employees willful, malicious and even criminal torts may fall within the scope of his or her employment for purposes of respondeat superior, even though the employer has not authorized the employee to commit crimes or intentional torts. (Id. at pp. 296-297.) The employer is liable not because the employer has control over the employee or is in some way at fault, but because the employers enterprise creates inevitable risks as a part of doing business. [Citations]. (Bailey v. Filco, Inc. (1996) 48 Cal.App.4th 1552, 1559.) [A]n employer is liable for risks arising out of the employment. [Citations.] [] A risk arises out of the employment when in the context of the particular enterprise an employees conduct is not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employers business. [Citations.] In other words, where the question is one of vicarious liability, the inquiry should be whether the risk was one that may fairly be regarded as typical of or broadly incidental to the enterprise undertaken by the employer. [Citation.] [Citation.] Accordingly, the employers liability extends beyond his actual or possible control of the employee to include risks inherent in or created by the enterprise. (Perez v. Van Groningen & Sons, Inc. (1986) 41 Cal.3d 962, 968; see also, Hinman v. Westinghouse Elec. Co. (1970) 2 Cal.3d 956, 960.)

Appellants argue that Duques fraud cannot be imputed to Kindred, because [a]n employer is not liable to a participant in an employees ex cathedra scheme. Appellants rely upon several authorities which discuss circumstances under which the knowledge of an agent may be imputed to the principal. (E.g., First Nat. Bank v. Reed (1926) 198 Cal. 252, 258; Meyer v. Glenmoor Homes, Inc. (1966) 246 Cal.App.2d 242, 264; People v. Parker (1965) 235 Cal.App.2d 86, 93.) We do not disagree with the principle relied upon in those cases, viz., that [a] corporation is not chargeable with the knowledge of an officer who collaborates with an outsider to defraud it. (Meyer v. Glenmoor Homes, Inc., supra, at p. 264, quoting People v. Parker, supra, 235 Cal.App.2d at p. 93, and citing First Nat. Bank v. Reed, supra, 198 Cal. at p. 258.) However, appellants have pointed to no evidence of Omaris complicity in Duques fraud; thus, these cases are inapposite.

Where an employee has committed a fraud within the scope of employment, the corporate employer will be held liable even if the employee committed the fraud entirely for his or her own purposes, and even if the employer is entirely innocent and has received no benefit from the transaction, unless the party defrauded has notice that the employee has acted entirely for his or her own purposes. (Hartong v. Partake, Inc. (1968) 266 Cal.App.2d 942, 960.) This principle is illustrated in Rutherford v. Rideout Bank (1938) 11 Cal.2d 479, cited by respondents. There, a bank manager had made fraudulent representations to induce the plaintiff to sell her real property to a third person. (Id. at p. 482.) The court rejected the banks defense that its manager acted pursuant to an independent purpose of the purchaser and his own, and that the particular transaction was not authorized by the bank. (Id. at pp. 483-484.) Here, Duque engaged in a scheme to defraud Omari and used her position as COO of Kindred to facilitate the name change, thus diverting payment of Tartechs invoices to IHR. By the time Omari discovered Duques fraud, it was too late.

Relying on Saks v. Charity Mission Baptist Church (2001) 90 Cal.App.4th 1116 (Saks), appellants contend the evidence showed that Omari knew Duques acts were her own and unauthorized by Kindred. In Saks, the plaintiff was denied recovery for damages caused when he was fraudulently induced by an employee to enter into a contract with the employer, knowing that the acts of the employee were in conflict with the interests of the employer. (See id. at pp. 1137-1140.) Appellants attempt to compare the facts of Saks with those of this case by arguing that Omari knew and co-authored Duques material conflict of interest in all of her dealings with him -- illicit dealings that resulted in his hospital contracts -- and he repeatedly asserted her solely personal motivation when confronting Kindred. The evidence was to the contrary. Omari testified that Duque was introduced to him by El-Abed, that he learned only after he retained Peter Duque that she was employed by Kindred, and that he was unaware of Kindreds policy prohibiting employees from accepting loans from vendors. Moreover, the fact that Omari may have suspected Duques motivation related to his request that she repay the money she owed does not make him complicit in her fraudulent conduct. Indeed, Omari did not know -- because Duque had concealed from him -- that she was in partnership with El-Abed to transfer Tartechs contracts with Kindred to El-Abeds company. Instead, she assured Omari that she would investigate his complaints and rectify the situation. Far from being complicit in her scheme, he was the victim of it.

Citing Lisa M., supra, 12 Cal.4th 291, 298-299, and Farmers Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992, 1004-1005, appellants argue that no liability is imposed upon an employer if an employee engages in an independent tort for her own purposes, or as a result of a personal quarrel. . . . Appellants argument is an overstatement of the exception to vicarious liability; in fact, liability is the norm, with a few exceptions in instances where the employee has substantially deviated from his duties for personal purposes. (Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 218 (Mary M.).) To determine whether a particular set of facts falls into one of those few exceptions, it is necessary to examine the employees conduct as a whole, not simply the tortious act itself. [Citation.] The fact that an employee is not engaged in the ultimate object of his employment at the time of his wrongful act does not preclude attribution of liability to an employer. [Citation.] . . . [T]he proper inquiry is not whether the wrongful act itself was authorized but whether it was committed in the course of a series of acts of the agent which were authorized by the principal. (Id. at pp. 218-219.)

Substantial evidence supports the jurys conclusion that Duques fraud was committed in the course of duties authorized by Kindred. (See Mary M., supra, 54 Cal.3d at pp. 218-219.) Duque and Narbutas testified that Duque, as COO, was subordinate only to CEO Narbutas. Duque testified that all her duties at Kindred Brea were managerial and involved verifying regulatory compliance by vendors, including dialysis venders such as Tartech, and that she reviewed all clinical contracts and made clinical recommendations prior to review by the CFO and execution by the CEO. Narbutas testified that Duque was his right-hand person, whose job duties as COO included ensuring that the hospital operated according to regulatory requirements and advising him regarding clinical policies and procedures. She reviewed all vendor contracts, advised the CEO and monitored vendor performance. Browne testified that he and Duque both reviewed vendor contracts. Duque made recommendations to Narbutas and had the power to block any contract to which she had a clinical objection. Although Narbutas had final approval authority of hospital contracts, he relied upon Duques recommendations. In short, Duque basically approved contracts, including IHRs contract with Kindred Brea, before they were presented to the CEO. Indeed, it was Duque who confirmed that the name change from Tartech to IHR was proper. Moreover, it was Duque to whom Omari was sent when he complained that his contracts with Kindred Brea were not being honored, and it was Duque who falsely assured him any mistakes would be rectified.

Thus, Duque used her authority as COO, the CEOs right-hand person, and advisor to hospital administration regarding vendor contracts and performance, to assure Tanzmeister (and through her, Narbutas) that IHR was just a name change and to arrange to have Tartechs invoices paid to IHR. Contrary to appellants argument, substantial deviation is lacking, because Duques fraud was accomplished by conduct incident to her duties, and thus was reasonably foreseeable by Kindred. (See Bailey v. Filco, Inc., supra, 48 Cal.App.4th at pp. 1559-1560.) That she did not perform her duties in a manner authorized by Kindred or that benefited Kindred is of no moment. (See Perez v. Van Groningen & Sons, Inc., supra, 41 Cal.3d at pp. 968-969.) We conclude that substantial evidence supports the finding that Duque committed fraud within the scope of her employment by Kindred; thus, the fraud was properly imputed to Kindred under the doctrine of respondeat superior.

4. Damages for Emotional Distress

Appellants contend that the verdict for emotional distress damages must be reversed, because the fraud cause of action was not supported by substantial evidence, and because emotional distress damages are not recoverable for conversion, unless the property converted had great sentimental value. We reject both contentions.

Emotional distress damages are recoverable for intentional fraud not involving the sale of property. (See Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 798-800; Sprague v. Frank J. Sanders Lincoln Mercury, Inc. (1981) 120 Cal.App.3d 412, 417.) Thus, as appellants failed to meet their burden to justify a reversal of the fraud verdict, Kindreds fraud supported recovery of emotional distress damages.

Moreover, we reject appellants contention that conversion cannot support a recovery of damages for emotional distress. In general, a plaintiff who as a result of a defendants tortious conduct loses his property and suffers mental distress may recover not only for the pecuniary loss but also for his mental distress. (Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 433-434.) Such damages are recoverable for conversion, so long as it was intentional. (Gonzales v. Personal Storage, Inc. (1997) 56 Cal.App.4th 464, 475-477.) Although appellants repeatedly characterize the conversion as negligent, the jury found it to have been intentional, and appellants do not directly challenge that finding.[25]

Appellants further contend that $500,000 for emotional distress was excessive, because the evidence showed, at most, that Omari was merely angry and unhappy, which can be said of all litigants. They claim the only evidence of Omaris mental suffering was his testimony that he saw a psychiatrist and took medication for a period of time. This understates the evidence the jury was entitled to consider. Nizar Marouf testified that when Omari called him January 1, 2002, he was in a state of panic. The next day, Omari was such an emotional wreck that Marouf insisted upon driving Omari to the hospitals. When Omari tried to explain the facts to Duque, she had to calm him down. McCurdy testified that when she spoke to Omari January 2, 2002, he was pretty intense. Omari testified that as a result of this incident, he was treated by a psychiatrist for the first time in his life. He was placed on Valium, Prozac and other medications, none of which he had ever taken before. Although he was no longer on medication at the time of trial -- some three and one-half years after the events giving rise to the lawsuit -- he broke down while recalling the events, and testified to how my life turned upside down as a result of appellants conduct. The weight to give such evidence was for the jury, and the reviewing court is not authorized to interfere with the jurys judgment, unless the amount of the award was so grossly disproportionate to the economic damages as to raise a presumption that it was the result of passion and prejudice. (Pistorius v. Prudential Insurance Co. (1981) 123 Cal.App.3d 541, 552.)

Appellants suggest the award was grossly disproportionate to the economic damages. On appeal, it is the appellants burden to show the verdict is so plainly and outrageously excessive as to suggest, at the first blush, passion or prejudice or corruption on the part of the jury. [Citations.](McNulty v. Southern Pacific Co. (1950) 96 Cal.App.2d 841, 846.)[26] Appellants attempt to meet their burden consists of a reference to a case in which the emotional distress award was more than three times the economic loss. (E.g., Merlo v. Standard Life & Acc. Ins. Co. (1976) 59 Cal.App.3d 5, 16-17.) Here, on the other hand, the emotional distress award was just over one-third the economic damages. We conclude that appellants have failed to carry their burden.

5. Economic Damages

Appellants contend the economic damages awarded were excessive and not supported by substantial evidence. First, they contend that contract damages should have been limited to 30 days, because the contract allowed for termination at the will of Kindred upon 30 days notice. Appellants do not claim to have requested an instruction so limiting contract damages, and they did not request a special verdict allocating damages between the contract and tort causes of action or in any other way segregating the elements of damages. Thus, they have not preserved this issue for review. (Greer v. Buzgheia, supra, 141 Cal.App.4th at p. 1158.)

Moreover, appellants do not contend -- and have not shown -- that economic damages due to the breach of contract were awarded in addition to the amount of fraud or conversion damages. As there is nothing to suggest in the instructions, evidence or verdict that respondents were permitted to recover duplicative damages, appellants have not shown error. (See Tavaglione v. Billings, supra, 4 Cal.4th at pp. 1157-1158.)

Appellants also contend that respondents should not have been permitted to recover damages for lost future profits, because Tartech did not yet have a history of making a profit. As appellants did not object to the admission of evidence of future profits, and they did not request a special verdict form segregating the damages based upon lost profits from other items of damage, they have forfeited this contention. (Heiner v. Kmart Corp. (2000) 84 Cal.App.4th 335, 346.)[27]

6. Exclusion of Impeachment Evidence

Appellants contend the trial court abused its discretion in excluding an exhibit offered to impeach Omaris testimony that he overhauled the five dialysis machines. Omari testified that in order to start up Tartech, he purchased five dialysis machines for $60,000, and then overhauled and enhanced them himself at a cost of approximately $50,000, for a total investment of $110,200 for the machines. In cross-examination, in order to impeach that testimony and show that the machines were purchased already refurbished for a total of $60,000, appellants proffered what purported to be an offer to sell the equipment to Tartech for $12,000 per machine, unsigned by the offeree. A handwritten note at the bottom of the signature page requested the addition of a complete refurbishing of the machines.

Respondents counsel objected on the ground that the document had not been produced in discovery. In a sidebar conference, Kindreds attorney represented that he had received the document two weeks before from El-Abed. Respondents counsel confirmed that the discovery request had called for [a]ll documents related to the machinery . . . purchased by Tartech. El-Abed represented to the court that the handwritten notations were his, and that the original, with the same handwritten notations, was eventually signed. The trial court excluded the exhibit, finding it had not been produced in discovery, appeared suspicious, and lacked indicia of reliability.[28]

Appellants contend the court prejudicially erred in penalizing Kindred for another defendants discovery transgression. They offer no excuse for their failure to produce the exhibit, called for in discovery, during the two weeks appellants admittedly had it. More important, the exhibit simply did not impeach Omaris testimony. It consisted of an unsigned offer by a third party. Appellants do not suggest the documents were otherwise admissible, and the court was well within its discretion in excluding the evidence.[29] (See Dart Industries, Inc. v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059, 1078.)

7. Punitive Damages -- Officer or Managing Agent

Appellants contend that punitive damages could not be awarded under California law, because there was no evidence of malice, oppression or fraud on the part of an officer or managing agent of Kindred.[30] Civil Code section 3294, subdivision (a), provides that punitive damages may not be recovered unless it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. . . .[31] As relevant here, a corporate employer may be liable for punitive damages due to the conduct of an employee only if the act of oppression, fraud or malice was committed by an officer, director or managing agent of the corporation. (Civ. Code, 3294, subd. (b).)

Appellants argue that the jurys finding that Duque was an officer or managing agent of Kindred was not supported by substantial evidence.[32] We need not reach appellants contention that Duque was not a managing agent, because she was clearly an officer, and the statute requires conduct by either a managing agent or an officer. (Civ. Code,  3294, subd. (b); cf. White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573 [officer is in the same category as managing agent].)

Appellants assert that Duques title of officer did not make her an officer. They rely on Cruz v. HomeBase (2000) 83 Cal.App.4th 160, in which the appellate court held that the title, supervisor, did not necessarily mean that the supervisor was a managing agent. The court did not hold, even by implication, that an officer is not necessarily an officer. (See id. at pp. 167-168.) Duques title was certainly evidence that she was an officer. Moreover, the testimony was not simply that her title was chief operations officer; Duque and Narbutas testified that she was the chief operations officer. Further, Duques position in the hospital was second only to the CEOs, and appellants stipulated that the CEO and the CFO were officers. The jurys conclusion that Duque was an officer is supported by the evidence, and we are not authorized to reject it. (See Nestle v. City of Santa Monica, supra, 6 Cal.3d at p. 925.)

Appellants contend that Duques conduct was not so despicable as to support punitive damages. As respondents note, fraud alone supports the imposition of punitive damages. (Las Palmas Associates v. Las Palmas Center Associates, supra, 235 Cal.App.3d at p. 1239.) Thus, punitive damages are supported by the fraud findings in the special verdicts, supported by substantial evidence that Duque committed fraud. Despicable conduct is an element of malice, not fraud. (Civ. Code, 3294, subd. (c).)[33] As appellants did not request a special verdict form that would have required the jury to specify which ground -- malice, oppression or fraud -- justified punitive damages, we assume that it found whichever ground or grounds support the award, and rejected any that do not. (See Tavaglione v. Billings, supra, 4 Cal.4th at p. 1157.)[34]

For the same reason, we need not reach appellants contention that the conversion verdict could not support punitive damages. The special verdict form did not ask the jury to a