Holdings v. General Atlantic Partners

Filed 06/20/06 R4 Holdings v. General Atlantic Partners 46

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Corey S. Cramin, Judge. Affirmed.

Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, Peter C. Sheridan and Andrew Baum for Plaintiffs and Appellants.

Paul, Weiss, Rifkind, Wharton & Garrison, Steven B. Rosenfeld, Sririjpa Samanta, John Vagelatos; Gaims, Weil, West & Epstein, Barry G. West and Corey E. Klein for Defendants and Respondents General Atlantic Partners 46, L.P., General Atlantic Partners 54, L.P., GAP Coinvestment Partners L.P., GAP Coinvestment Partners II, L.P., General Atlantic Partners, LLC and William E. Ford.

Snell & Wilmer, Richard A. Derevan, William S. O'Hare and Marc L. Turman for Defendants and Respondents Tickets.com, Inc., International Capital Partners, Inc., Ventana Express, LLC, W. Thomas Gimple, Nicholas E. Sinacori and C. Ian Sym-Smith.

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Plaintiffs R4 Holdings, LLC (R4) and Hill International, Inc. (Hill) appeal a judgment following a jury verdict and bench trial in which R4 succeeded in proving a breach of contract, but did not recover any damages. Plaintiffs contend the trial court erred in (1) refusing to give a jury instruction on Civil Code section 1642;^[1] (2) instructing the jury on section 3358;^[2] (3) ruling in defendants' favor on the breach of fiduciary duty cause of action; (4) directing a verdict on plaintiffs' fraudulent concealment cause of action.

We conclude the trial court did not err in refusing plaintiffs' requested instruction. Based on our independent review of the contracts at issue, the evidence did not support an instruction on section 1642. We also conclude the instructions based on section 3358 were accurate statements of the law, and applicable to the case based on the evidence presented. We also conclude substantial evidence supports the trial court's rejection of plaintiffs' breach of fiduciary duty claim. Finally, we conclude the trial court did not err in granting a directed verdict on the fraudulent concealment claim because plaintiffs failed to introduce substantial evidence the alleged concealment harmed them. We therefore affirm the judgment.

I

Factual and Procedural Background

In 1984, Larry Schwartz founded Artsoft, which provided software for theaters to use in selling tickets and fundraising.^[3] In 1987, Irvin Richter purchased a majority interest in Artsoft and became the company's chairman and CEO, with Schwartz remaining as president. The company received money and loan guarantees from Hill, a construction management company Richter owned. Artsoft was later renamed Hill Arts & Entertainment. In 1998, Ventana Express, LLC (Ventana) invested $3 million in the company and received the right to appoint two members to the company's board of directors. Ventana appointed Ian Sym-Smith and Tom Gephart to fill the two seats, and W. Thomas Gimple was brought in as Chief Executive Officer At Ventana's request, Hill Arts & Entertainment sold its assets to a new entity, Entertainment Express, and Richter placed his personal stock holdings into R4, an entity formed for this purpose.

In 1977, Entertainment Express changed it name to Advantix. That same year, International Capital Partners, Inc. (ICP) invested in the company. ICP received one board seat, and appointed Nicholas E. Sinacori as its representative. At that point, R4 had the right to appoint three members to the board, and appointed Richter, his wife Janice, and his son David. In 1998 and 1999, General Atlantic Partners LLC (GAP) invested a total of $37 million through various legal entities in Advantix, which was then losing money. At the time of its initial investment, GAP believed Advantix's board of directors was too large and each investor group had too many representatives on the board. To prepare for an eventual initial public offering (IPO), GAP believed Advantix should reduce the size of its board, but add board members with experience in publicly-traded companies.

Although the other shareholders readily agreed to reduce their board seats, Richter initially balked. The parties reached a compromise, with R4 receiving an unfettered right to name one board member, and the right to designate a second board member who â€