Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Santa Clara County Super. Ct. No. CV810361
McAdams, J.
Respondents Bo Wei and Broadtron Technology (hereafter jointly Plaintiffs) sued appellants Great Wall Technology Company, Ltd., ExcelStor Technology Group, ExcelStor Technology, Inc., InchStor Technology, Inc., Eddie Lui, and Samuel Leung (hereafter jointly “Defendants”) for breach of contract, misappropriation of trade secrets, and promissory fraud arising out of an agreement to invest in Plaintiffs’ company. The jury found in favor of Plaintiffs on their breach of contract causes of action, but denied their fraud claims. The court granted Defendants’ motion for nonsuit on the misappropriation of trade secrets cause of action, but denied Defendants’ motion for attorney fees pursuant to Civil Code section 3426.4 on that cause of action.
We shall hereafter refer to Excelstor Technology Group and Excelstor Technology, Inc. as “Excelstor.”
On appeal, Defendants contend Wei cannot recover for wrongful termination as a matter of law, Wei’s damages were speculative, the court abused its discretion when it allowed Wei’s damages experts to testify, the special verdict form improperly allowed Wei to recover twice for breach of contract, and the court erred in denying Defendants’ motion for attorney fees on the misappropriation of trade secrets cause of action. We find no error and affirm the judgment.
Facts
I. Wei’s Background and Formation of Broadtron
Bo Wei was born and educated in China. He came to the United States in 1990 and subsequently obtained a Ph.D. in mechanical engineering with a specialty in disk drive technology. He is listed as an inventor on 12 patent applications.
Between 1995 and 2000, Wei worked for various companies in the disk drive industry. In March 2000, he left his employment with Halo Data Device, where he worked on the development of a one-inch hard disk drive, because he felt the design was moving in the wrong direction and he did not have much opportunity. Later that month, he formed Broadtron Technology.
In April 2000, Wei applied for a patent for an ultra-thin one-inch hard disk drive using parts already available in the marketplace. At the time, the only company that had a one-inch hard disk drive on the market was IBM. The only other company trying to manufacture the product was Halo. The one-inch hard disk drive is used in digital cameras, camcorders and the i-Pod mini.
After he applied for the patent, Wei drew up mechanical design drawings, prepared motor and media specifications, and developed a rough business plan. Eason Ho, who Wei knew from prior employment, joined Broadtron as a shareholder and a director. Ho was in charge of business operations.
In June 2000, Broadtron made efforts to secure investment funding for the one-inch hard disk drive. Wei anticipated obtaining funding in three phases. Initially, he hoped to obtain seed money to come up with a prototype. After the prototype was completed, he hoped to raise $8 million to come up with a working sample and engage in some small volume production. In the third phase, he hoped to raise $20 million to cover the cost of producing the one-inch hard disk drive.
Wei located an investor, the Yunsheng Group of Ningbo, China. Yunsheng agreed to assist Broadtron in developing a prototype, to provide engineering support and cover expenses, and to manufacture the hard disk drive after it was developed. Yunsheng’s commitment to manufacture the product was a “huge” benefit to Broadtron, because it would avoid the cost associated with setting up a manufacturing operation. Andy Yuan joined Broadtron in July 2000 as vice president of engineering. He had over 20 years experience in the disk drive industry.
Yunsheng invested $100,000 in Broadtron in August 2000. It also provided Broadtron a team of engineers that assisted in developing the prototype and in preparing drawings. Wei asked Yunsheng to invest the $8 million needed for the second phase of development. Yunsheng had just gone public. Its representatives told Wei they thought it was too risky to invest so much in one company and be the only investor. Yunsheng asked Wei to locate other investors and agreed to invest $2 million if Broadtron could find other investors.
In September 2000, Broadtron had three employees (Wei, Ho, and Yuan) and three consultants with engineering experience with hard disk drives. The consultants had other jobs, but had agreed to work for Broadtron if it obtained additional funding.
II. Initial Contacts with Great Wall, Kaifa & ExcelStor
In September 2000, Wei approached Kaifa, a business in Shenzhen, China about investing in Broadtron and provided Kaifa with a copy of Broadtron’s business plan. Wei continued his discussions with Kaifa the following month. Kaifa’s representatives said they did not like Yunsheng as a partner because it did not have enough experience in the hard disk drive business. They also anticipated disputes with Yunsheng. Kaifa’s representatives agreed to visit Broadtron in November when they came to the United States for a trade show. By the end of October 2000, Broadtron had completed a mechanical prototype of its one-inch hard disk drive, which represented between five and 10 percent of a working drive that could go into production.
On November 9, 2000, Wei met with M.C. Tam (president and vice chairman of Kaifa), Zhi Wang (chairman of the board of Kaifa and Great Wall Technology (Great Wall)), and Sam Leung (general manager of Great Wall). He showed them the prototype and made a presentation.
The next day, Wang and Leung made a surprise visit to Broadtron. Wei took them into the lab and demonstrated how the prototype functioned. Wang and Leung told Wei Great Wall was extremely interested in the one-inch hard disk drive. They said they had partnered with ExcelStor Technology, a new company in Colorado that was developing a 3.5-inch drive, and they had had problems with ExcelStor’s product. Leung asked Wei to send him a budget plan that included development of both the one-inch and the 3.5-inch drives. Wei sent the budget plan to Leung on November 18, 2000.
At the end of November 2000, Wei met with Leung, Wang, and Tam in Shenzhen. They told Wei they had concerns about investing with Yunsheng. They urged Wei and his team to join ExcelStor and offered Wei the position of chief technology officer. Wei declined; he said he was not looking for employment and was there to raise $8 million for Broadtron. At the end of the meeting, Leung asked Wei to come up with a proposal that included the 3.5-inch drive.
Wei prepared three investment proposals for Great Wall and sent them to Leung on December 1, 2000. About three days later, he presented the proposals to Wang, the chairman of Great Wall and Kaifa. After the meeting, Leung suggested Wei meet with Eddie Lui, the chief executive officer and president of ExcelStor. Wei sent his proposals to Lui and met with Lui in Shenzhen on December 19, 2000.
Lui understood Wei was looking for investors for Broadtron and asked Wei how he would spend the $8 million. Wei told Lui a good engineer would cost $120,000 per year and that he intended to pay John Lee, Broadtron’s new vice president of engineering, $140,000 per year. Wei told Lui he expected his own salary as president of the company to be in the same range as Lee’s. Lui asked Wei about other operating expenses and told him he hoped the entire Broadtron team would join ExcelStor. Wei said that would be impossible. Some of his team members still worked for other companies and Broadtron was looking for investors. Lui told Wei he was not interested in investing in Broadtron; later he told Wei he would consider investing in a new company through ExcelStor.
III. Creation of InchStor
A couple of days later, Leung called Wei and told him Great Wall had decided to invest in the one-inch hard disk drive and the investment would be made through ExcelStor. The next day, Wei met with Wang. Wang told him that Great Wall was publicly traded in Hong Kong and that it would be hard to explain to the shareholders that it had invested in two companies that make hard disk drives (ExcelStor and Broadtron). He said the money for Broadtron would come from Great Wall and be channeled through ExcelStor. Wang told Wei to meet with Lui and Leung to work out the details.
Wei first met with Leung. Leung told Wei that Great Wall did not want to invest in Broadtron because it was a California company and any profits would be subject to state and federal taxes. He suggested they create a new company that would be incorporated in the Cayman Islands with research and development in the United States. Leung also suggested they buy off Yunsheng. Wei estimated they would need $200,000 to buy out Yunsheng. Leung asked how much money Broadtron had and Wei said $80,000. Leung agreed to pay the balance of $120,000 and said the investors would buy Broadtron’s intellectual property.
Wei and Leung discussed setting up a new company and several terms related to the new company’s structure. After they reached an agreement, they discussed their plan with Lui, who agreed to the terms that follow. The parties agreed Great Wall would invest $8 million in the new company through ExcelStor and that $3 million would be invested in the first two months. They agreed it would be a separate company with its own stock and board of directors that may eventually go public or be acquired by Great Wall. They agreed that 20 percent of the new company’s stock would be owned by the employees in the United States, that Wei would be president of the new company and that the company would have its own board of directors consisting of Wei, Leung and Lui. Great Wall offered to provide “turnkey” manufacturing of the one-inch drive and assistance selling the product. Lui realized Wei would have to settle with Broadtron’s existing investor so there would be no legal issues when the new company acquired Broadtron’s intellectual property and agreed to pay $120,000 to buy out Yunsheng.
On January 4, 2001, Wei received a memorandum signed by Lui that set forth the following terms of their agreement: “With the approval of the Board of ExcelStor …, ExcelStor decided to invest in a new company to design and manufacture 1” [hard disk drive]. The new company structure will be:
· Holding company registered in Cayman Island
· U.S. R&D company registered in Delaware U.S.A. with a registered office in California State. This company is 100% hold [sic] by Cayman Island company.
· Cayman Island company’s Authorized Shares 500M @USD0.1
· Paid up capital USD200K
· Plan to invest additional 7.8M according to the milestones of product design and development and approved by the board of Directors of ExcelStor.
· Initial investment of USD200K within first two months and USD1.8M convertible loan from ExcelStor.
· Shares will be issued according to the money invested.
· Employee Stock Option: Allocated 12M shares option (based on USD8M investment) for founder stock option (4M) and employee stock option (8M). A maximum of 15% Issued Stock will be reserved for Employee Stock option. Stock option will be issued in a timely manner with recommendation from the President and approved by Board.
· Board members: Eddie Lui, Bo Wei, Sam Leung, Bernard Fung
· Appointed President: Bo Wei
· Turnkey manufacturing by Great Wall … and/or ExcelStor …
· New company will purchase all the Hard Drive related Intellectual properties from Broadtron … for USD120,000. A purchase agreement will be signed by both parties with a detailed list of all deliverables (Patent, Pending Patent, Drawings, Software, Schematics----- etc.)”
The terms in the memorandum differed slightly from the oral agreement and a previous draft of the memorandum. Wei accepted the changes in the memorandum signed by Lui. Lui expected that Wei would take certain action in reliance on the memorandum and that Great Wall and ExcelStor would rely on the document.
On January 8, 2001, Wei met with representatives of Yunsheng and agreed to pay Yunsheng $80,000 in exchange for Yunsheng’s agreement to release any claims it had against Broadtron for the disk drive design. Broadtron paid the $80,000 to Yunsheng in early February 2001.
The new company contemplated by the agreement was “InchStor.” Employees of Kaifa and ExcelStor assisted Wei in completing the corporate formalities that led to the creation of InchStor. InchStor Technology was incorporated in Delaware on January 9, 2001.
Wei, Lui, and Leung met in Shenzhen the following day. They talked about whom to hire for InchStor, the kind of employment packages to offer, and Wei’s authority regarding the employment offers. Wei did not have authority to offer the employees more than $140,000 per year. They also agreed that Wei’s salary would be the highest in the company and that the employee stock options would follow Silicon Valley standards.
Wei returned from China on January 14, 2001. During the week that followed, he hired six engineers from the Broadtron team to work at InchStor. Their annual salaries ranged from $110,000 to $125,000. Each employee other than Wei had a written employment contract with InchStor that provided that the employment was “at will” and that the employee could be fired with or without cause. Two of the contracts provided that the employees would receive six months severance pay if they were fired without cause. There was no written contract with regard to Wei’s employment with InchStor.
Leung assisted Wei in opening a bank account. Leung sent Wei a letter on Great Wall letterhead dated January 10, 2001, stating that Great Wall had agreed to invest in InchStor’s product. The parties used the letter to rent office space. Wei was also authorized to purchase or rent office furniture. On January 18, 2001, Lui told Wei that his salary should be $150,000 and that he would send Wei a formal written offer soon. Wei received the initial $200,000 from ExcelStor for the operation of InchStor on January 23, 2001.
Leung met with InchStor personnel on January 27, 2001. Leung told them Great Wall had invested in the one-inch hard disk drive and suggested that after they developed the first one-inch hard disk drive, they change the specifications and create a second product that was more like the IBM product. The team agreed this would be a good idea.
InchStor employees began work on the one-inch hard disk drive based on the work that had been done at Broadtron. They used Broadtron’s motor specifications, media specifications and mechanical drawings to continue work developing the product.
Wei closed Broadtron on January 29, 2001, and transferred all of Broadtron’s documents to InchStor, including the patent application, specifications, designs, business contacts and development schedules. Wei did not assign the patent in writing at that time. No formal purchase agreement was ever prepared with regard to the intellectual property.
IV. Disputes Between Wei and Lui Over InchStor
Wei met with Lui and Leung in San Francisco on January 30, 2001. He told them Broadtron was closed and provided a status report on InchStor. Lui asked Wei why he had given the employees so much stock. Wei explained that some of them were co-founders of the company and part of the management team. Lui told Wei he needed to get Lui’s permission before hiring the more senior management and asked Wei to prepare a stock option plan.
The following day, Lui called Wei and told him he was required to get Lui’s written approval before hiring anyone else to work for InchStor, even consultants. Wei believed that if he had to get Lui’s permission to hire, InchStor would not meet its schedules. He thought Lui’s request was unreasonable and reasoned that Lui was only a director of the company and did not have the authority to make such a demand.
On February 2, 2001, Wei sent Lui an e-mail stating: “For the success of InchStor, we need to [sit] down and reach an agreement on how to run this company. If we cannot hire even a consultant and have to get your permission to do so, there is no way we can keep our development schedule. [¶] Our team members quit their jobs, join this start-up company, willing to cut their original salaries, and prepare to work 12 hours a day and six days a week because we believe [in ourselves] and Great Wall. We truly hope you come to help us and not to slow us down.”
Wei met with Lui on February 4, 2001. Lui said he was extremely nervous because he did not have any money on hand for InchStor. He told Wei that Great Wall did not really want to engage in the development of the hard disk drive. Lui told Wei InchStor would have to be a division of ExcelStor. Wei asked, “[D]idn’t we agree before that it would be conducted as an independent company?” Lui responded that he was in charge and told Wei that he could ignore his previous discussions with Wang, Leung and Tam. Lui threatened to fire Wei and stop funding InchStor if he disagreed.
Wei did not think this was acceptable. The next day, he told the InchStor employees what Lui had said and told them InchStor would not be a separate company, and would be a division of ExcelStor. The employees became very angry. The employees told Wei that if they had known this would happen, they would not have left their jobs to work for InchStor.
On February 5, 2001, the employees wrote a letter to Tam, Wang, and Leung. In the letter, they stated that the entire research and development team was worried about the future growth and development of the company because Lui had told Wei that InchStor is only a research and development division of ExcelStor and not an independent company and that if the employees of InchStor did not agree to this arrangement, investment in InchStor would be stopped. They stated that this development contradicted what Great Wall had promised, that they had been engaged in the hard disk drive industry for a long time, and that they had given up employment at other companies to join InchStor. They did this to show the talents and ability of the Chinese and to share in the company’s success. They stated that to accomplish their goals, InchStor “should be a relatively independent entity” and not be placed under the direct management of ExcelStor. Otherwise, given the competitive environment for talent in Silicon Valley, it would be difficult “to maintain a quality and integrated R&D team.”
The same day, Wei sent an e-mail to Lui advising him that the employees wanted InchStor to be an independent company, not a division of ExcelStor, and that they had written a letter to Leung, Wang, and Tam. Wei told Lui that he would come to Shenzhen as soon as possible to come up with a solution.
On February 7, 2001, Wei sent an e-mail to Leung outlining the employees’ “basic demands,” which included: (1) that InchStor should be an independent company, at least at this stage; (2) that further funding should not come from ExcelStor; (3) that InchStor shares held by ExcelStor be transferred to one of the other divisions of Great Wall; and (4) that if Great Wall cannot provide the funding that it had committed, that it let InchStor go find its own funding.
During this time, Wei and the InchStor team continued to move forward with the development of the one-inch hard disk drive.
On February 12, 2001, Wei met with Wang in China and gave him a presentation on the progress of the company. Wei also reported on the problem that had developed with Lui and discussed the pros and cons of both operating as an independent company and as a division of ExcelStor. Wang told Wei his proposals were “doable” and instructed him to meet with Lui and Leung the following day.
V. Wei’s Termination
The following day, Wei met with Leung and David Yang, ExcelStor’s vice president of finance. They handed him two letters that were signed by Lui terminating Wei’s employment with InchStor. The letters demanded that Wei turn over all the documents, assets and properties of InchStor to Leung as soon as possible.
Leung told Wei he was being terminated because that is what Lui wanted. Wei tried to speak with Lui. Lui refused to speak with him. Wei told Leung he thought ExcelStor and InchStor had stolen his company. He also suggested that ExcelStor give InchStor to the employees and that they would repay the money it had invested. Leung promised to discuss the issue with Lui. On February 16, 2001, Leung told Wei that Lui would not give him the company and that upon his return to the United States, they would pay Wei an unspecified amount for his services and pay Broadtron an unspecified amount.
Wei met with Leung at InchStor on February 21, 2001. He asked Leung to sign receipts for the InchStor documents and property. Leung signed for all of the property except the Broadtron intellectual property, although he accepted certain specifications that were based on the Broadtron intellectual property. Wei was reimbursed for some of his travel expenses, but never received any wages from InchStor.
VI. Continued Operation and Demise of InchStor
In March 2001, John Lee and two of the InchStor engineers went to China to meet with Lui. Lee assured Lui that they could produce the one-inch hard disk drive. Lui inquired about a 2.5-inch drive and Lee said that they could develop a 2.5-inch product faster if speed was a concern. Lui instructed the group to return to the United States and said that in the meantime he would decide whether to proceed with the one-inch drive or the 2.5-inch drive. He also asked them to assist the ExcelStor group with the development of the 3.5-inch drive. Lui did not communicate with the group further about the development of the one-inch or the 2.5-inch drive. ExcelStor sent InchStor some 3.5-inch drives they were having trouble with for testing. In July 2001, ExcelStor fired the entire InchStor staff.
Procedural History
I. Pleadings
In August 2002, Wei and Broadtron sued Great Wall, ExcelStor, InchStor, Lui, and Leung for breach of contract, fraud, and misappropriation of trade secrets. ExcelStor and InchStor filed a cross-complaint against Wei and Broadtron alleging among other things, fraud and conspiracy to commit fraud. The cross-complainants also requested injunctive relief.
II. Expert Testimony at Trial
The case was tried to a jury for nine days in November 2004. Alan Niebel, a market analyst who has followed the one-inch hard disk drive market since 2000, testified on behalf of Wei. Niebel testified that every one-inch hard disk drive company that has been able to produce a product has been able to penetrate the market. In 2001, the only company manufacturing the one-inch hard disk drive was Hitachi. Hitachi sold its one-inch drive business to IBM in 2003. Cornice and Magicstor, entered the marketplace in 2003 and Seagate entered the marketplace in 2004. Niebel expected three other companies to enter the market in 2005 and 2006. He noted that the product InchStor was developing was very similar to those that had actually entered the market.
Based on historical information up to the time of trial and market projections, Niebel estimated that the InchStor product would have gained an 18 percent market share in 2002 and a 16 percent share in 2003, with its market share dropping each year as more manufacturers entered the market. Niebel projected $10.6 million in revenue in 2002 and $23.5 million in revenue in 2003 for InchStor.
Michael Solt, a professor of finance at San Jose State University, testified regarding Wei’s lost wages and Broadtron’s lost profits. Solt’s calculations were based in part on market information he got from Niebel. Solt estimated that Wei would have earned a salary of $150,000 per year for the first five years of employment with InchStor. This figure is in the ballpark for a chief executive officer in the early phase of a start-up company in Silicon Valley. Solt opined that Wei’s salary would have increased to $250,000 per year for the period 2006 through 2008 and to $500,000 in 2009. Solt prepared a table that contained lost earnings figures for Wei each year for the years 2001 through 2011. The table calculated the present value of future earnings and contained cumulative wage loss information. Solt calculated the present value of Wei’s earnings through 2020 as $1,580,061 and the present value of his stock holdings as $1,246,168. Solt also estimated lost profits for Broadtron for the years 2001 through 2011.
Richard Wilmer, a mechanical engineer with 31 years experience at IBM including work in the disk drive area, testified on behalf of Defendants. He testified that Wei’s business plan was not feasible because of inadequate resources, manpower, and financing. He opined that the development schedule was unrealistic and estimated it would take four years for InchStor to develop the one-inch drive. He stated that $8 million was insufficient to cover project costs from start to a working prototype. He also opined that Wei’s idea was not patentable because the only novel idea on Wei’s device was obvious to those skilled in the state of the art. On cross-examination, Wilmer admitted that the disk drives he had worked on were not small enough for a personal computer. He did not know which companies were making the one-inch drive, other than IBM.
III. Jury Verdicts
After the conclusion of Plaintiffs’ case, the court granted the defendants’ motion for nonsuit on the plaintiffs’ misappropriation of trade secrets cause of action.
The jury concluded that Wei and InchStor had entered into an employment contract that contained a promise not to discharge Wei except for good cause, that InchStor discharged Wei without good cause, and that the damages for InchStor’s breach of the contract were $315,982, the amount Solt had calculated as the cumulative present value of two years wages and benefits from InchStor, less amounts Wei had actually earned. The jury also awarded Wei an additional $213,738 for lost wages and benefits against InchStor and ExcelStor, for a total award for breach of contract of $529,720. The latter amount was the amount Solt had calculated as the cumulative present value of four years of wages and benefits.
The jury awarded Broadtron $120,000 for breach of contract and denied both parties’ claims for promissory fraud.
Defendants moved for attorney fees pursuant to Civil Code section 3426.4 because they had prevailed on Plaintiffs’ trade secrets claim. The court denied the attorney fees motion. The court also denied Defendants’ motions for judgment not withstanding the verdict and new trial. Defendants appeal.
Discussion
I. Standard of Review
Defendants’ appeal is from the underlying judgment; they do not challenge the court’s rulings on the motion for judgment notwithstanding the verdict or the motion for new trial. We review an appeal from a judgment after trial under the substantial evidence standard of review. (Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143 (Jameson).) This standard of review applies to appeals from both jury and nonjury trials. (Ibid., citing Alderson v. Alderson (1986) 180 Cal.App.3d 450, 465.) “ ‘When a trial court’s factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination, . . . .” (Jameson, at p. 143, citing Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) “[W]hen two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court.” (Jameson, at p. 143.) As long as there is substantial evidence, the appellate court must affirm, even if the reviewing justices personally would have ruled differently if they had presided over the proceedings below and even if other substantial evidence supports a different result. (Bowers v. Bernards, at p. 874.)
II. Wrongful Termination
Defendants contend Wei cannot recover for wrongful termination as a matter of law.
In the absence of a written agreement stating otherwise, employment in California is statutorily presumed to be at-will. (Lab. Code, § 2922.) “An at-will employment may be ended by either party ‘at any time without cause,’ for any or no reason, and subject to no procedure except the statutory requirement of notice.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 335 (Guz), quoting Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 680 (Foley).) “A fortiori, the employer may act peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior warning, fair procedures, objective evaluation, or preferential reassignment.” (Guz, at p. 350.)
Labor Code section 2922 provides: “An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.”
The presumption of at-will employment may be overcome by evidence that “the parties agreed that the employer’s power to terminate would be limited in some way, e.g., by a requirement that termination be based only on ‘good cause.’ ” (Foley, supra, 47 Cal.3d at p. 677; id. at p. 680.) The statutory presumption of at-will employment is strong, but can be overcome by proof that the employer and employee have expressly or impliedly agreed that the employee will be terminated only for good cause. (Guz, supra, 24 Cal.4th at p. 336; Foley, supra, 47 Cal.3d at p. 677.)
In this case, there was no express written employment contract between Wei and InchStor. The parties did not introduce any evidence of employment manuals, handbooks or memos that addressed the issue of Wei’s termination from his employment with InchStor.
“The absence of an express written or oral contract term concerning termination of employment does not necessarily indicate that the employment is actually intended by the parties to be ‘at will,’ because the presumption of at-will employment may be overcome by evidence of contrary intent. Generally, courts seek to enforce the actual understanding of the parties to a contract, and in so doing may inquire into the parties’ conduct to determine if it demonstrates an implied contract. ‘[I]t must be determined, as a question of fact, whether the parties acted in such a manner as to provide the necessary foundation for [an implied contract], and evidence may be introduced to rebut the inferences and show that there is another explanation for the conduct.’ ” (Foley, supra, 47 Cal.3d at p. 677.)
An implied in fact contract not to terminate except for good cause can be shown by the acts and conduct of the parties, interpreted in light of the subject matter and the surrounding circumstances. (Foley, supra, 47 Cal.3d at p. 681.) In each case, the trier of fact examines the totality of circumstances to determine whether the parties’ conduct considered in the context of the surrounding circumstances demonstrates an implied in fact agreement limiting the employer’s termination rights. (Ibid.; Guz, supra, 24 Cal.4th at p. 337.) “ ‘[C]ourts seek to enforce the actual understanding’ of the parties to an employment agreement. [Citation.] Whether that understanding arises from express mutual words of agreement, or from the parties’ conduct evidencing a similar meeting of minds, the exact terms to which the parties have assented deserve equally precise scrutiny. As Foley indicated, it is the ‘nature of [an implied-in-fact] contract’ that must be determined from the ‘totality of the circumstances.’ [Citation.] [¶] Each case thus turns on its own facts. Where there is no express agreement, the issue is whether ‘other evidence of the parties’ conduct has a ‘tendency in reason’ … to demonstrate the existence of an actual mutual understanding on particular terms and conditions of employment.” (Guz, supra, at p. 337.)
In Foley, the court set forth factors the trier of fact may consider in determining whether there was an implied in fact contract to terminate only for good cause. “In the employment context, factors apart from consideration and express terms may be used to ascertain the existence and content of an employment agreement, including ‘the personnel policies or practices of the employer, the employee’s longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.’ [Citations.] Pursuant to Labor Code section 2922, if the parties reach no express or implied agreement to the contrary, the relationship is terminable at any time without cause. But when the parties have enforceable expectations concerning either the term of employment or the grounds or manner of termination, Labor Code section 2922 does not diminish the force of such contractual or legal obligations.” (Foley, supra, 47 Cal.3d at p. 680, fn. omitted.)
The plaintiff has the burden to prove an agreement not to terminate without good cause and thus to rebut the statutory presumption of at-will employment. Whether the plaintiff has succeeded in meeting this burden is for the finder of fact to determine. (Foley, supra, 47 Cal.3d at p. 682.) The jury’s factual findings will be upheld on appeal if they are supported by substantial evidence. “When considering a claim of insufficient evidence on appeal, we do not reweigh the evidence, but rather determine whether, after resolving all conflicts favorably to the prevailing party, and according the prevailing party the benefit of all reasonable inferences, there is substantial evidence to support the judgment.” (Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 464, 465 (Scott).)
A review of the facts and holding in Foley is instructive. The plaintiff in Foley was hired in 1976 as an assistant product manager for a company that marketed computer-based support services. (Foley, supra, 47 Cal.3d at p. 663.) As a condition of employment, the employer asked the plaintiff to sign a confidentiality agreement in which he promised not to compete, to disclose all computer-related knowledge, and to assign any inventions to his employer for one year after his termination. The employee worked for the employer for six years, nine months. (Ibid.) During that time, he received bonuses, raises, awards, promotions and superior performance evaluations. He alleged the officers of the company orally promised him job security as long as he performed adequately. (Ibid.) The employer had established guidelines for termination that included a seven-step process. After the plaintiff informed his employer that his supervisor was under investigation by the FBI for embezzlement, he was terminated. (Id. at p. 664.)
The trial court sustained a demurrer to the plaintiff’s cause of action for breach of an implied in fact promise to discharge only for good cause without leave to amend. The Supreme Court concluded that the plaintiff had sufficiently alleged a breach of an implied contract and reversed. (Foley, supra, 47 Cal.3d at p. 663.) The court held that the factors that contributed to the employee’s expectation that he would not be discharged except for good cause included repeated oral assurances of job security, consistent promotions, salary increases and bonuses, and the company’s personnel policies and procedures. The court stated that the non-competition agreement “may be probative evidence that ‘it [was] more probable that the parties intended a continuing relationship, with limitations upon the employer’s dismissal authority [because the] employee has provided some benefit to the employer or suffers some detriment beyond the usual rendition of services.” (Id. at p. 682.)
Applying our standard of review, we conclude there was substantial evidence that supported the jury’s finding that the parties had entered into an implied in fact contract not to terminate Wei except for good cause. We begin by examining the factors set forth in Foley.
A. Personnel Policies or Practices of Employer
There was little evidence regarding the personnel policies and practices of InchStor. The company was new and had been in existence a little over one month before Wei was terminated. InchStor had not employed any human resources personnel prior to Wei’s termination. A reasonable inference from the evidence was that the company was still in the process of establishing its personnel policies and procedures. No employee handbooks, personnel manuals, or memoranda were in evidence. Such documents may contain at-will provisions and can be relied on as evidence of an express agreement that the employment relationship is at will. (Guz, supra, 24 Cal.4th at pp. 317-318 & p. 340, fns. 10-11.) However, courts “have held that at-will provisions in personnel handbooks, manuals, or memoranda do not bar or necessarily overcome, other evidence of the employer’s contrary intent.” (Id. at p. 339.) Here, there were no employee manuals, handbooks, memoranda or contracts that suggested the parties had agreed that Wei’s employment would be at will. The January 4, 2001 memorandum that set forth the company structure did not state whether Wei’s employment would be at will.
The only evidence remotely related to this issue was the offer letters to the six engineers Wei hired. The offers specified that each of the engineers’ employment was at will. However, two of the engineers received promises of six months’ severance pay in the event of termination. The engineers were offered different combinations of salaries, start dates, numbers of stock options, and severance terms. Lui and Leung told Wei that he would be the highest paid employee in the company with a salary in the range of $140,000. Lui later told Wei his salary would be $150,000 and that he would send him a formal written employment contract. These facts support an inference that the terms of Wei’s employment were to be different than those of the other employees and that his employment would not necessarily be at will.
B. Length of Service
Length of service alone does not create an implied-in-fact contract that the employment is not at will. However, the length of the employment may be relevant to the question of whether there was sufficient time for conduct to occur that would create rights against termination at will. (Guz, supra, 24 Cal.4th at pp. 341-342.) Unlike the employee in Foley, Wei had only been with the company a short period of time. Leung told Wei that Great Wall would invest in his company through ExcelStor on December 21, 2000. InchStor was incorporated on January 9, 2001, and Wei was terminated on February 13, 2001, approximately five weeks later.
C. Practices of the Industry
There was no evidence of industry practices with regard to the employment of high-tech company presidents in Silicon Valley, other than a comment by Wei’s expert that $150,000 per year was in the range of compensation for a company president during the start-up phase of the company.
D. Actions or Communications by Employer and Independent Consideration
There was evidence of actions or assurances by InchStor and ExcelStor, coupled with significant consideration by Wei, that supported the jury’s finding of an agreement not to terminate Wei except for good cause. Wei provided consideration beyond the usual rendition of services in an employer/employee relationship. Wei was the owner and founder of Broadtron. When he first entered into discussions with Great Wall and Kaifa, he was looking for investors, not employment. He declined Wang and Tam’s offer of employment with ExcelStor as chief technology officer. After he turned down their offers of employment, Wei, Great Wall, and ExcelStor agreed to go into business together to develop Wei’s design for the one-inch hard disk drive by creating InchStor.
After Great Wall agreed to invest in the product through ExcelStor, Wei acted in reliance on its promise and took steps to close Broadtron and create the new company, InchStor. According to the January 4, 2001 agreement, Wei was promised employment as the company president and that he would be on InchStor’s board of directors. He was also promised stock in the company as one of its founders. InchStor was to be separate and independent from ExcelStor. As a condition of the agreement, Wei was required to settle with Yunsheng so that the intellectual property could be transferred to InchStor. He spent $80,000 of Broadtron’s money, its remaining cash, to settle with Yunsheng. Wei hired the engineering team he put together for Broadtron to work for InchStor. The parties agreed that Broadtron’s intellectual property would be transferred to InchStor. Wei took steps to transfer the intellectual property and InchStor’s team began its work using drawings and specifications that had been developed at Broadtron. Wei abandoned further development of the one-inch hard disk drive and transferred all development efforts to InchStor. Wei closed the Broadtron office and opened up a new office for InchStor. He also ceased efforts to find new investors for Broadtron.
Wei did more than provide services to Defendants. He turned his idea, his company and the company’s assets over to them. Like the non-competition agreement in Foley, this was “probative evidence that ‘it [was] more probable that the parties intended a continuing relationship, with limitations on the employer’s dismissal authority [because the] employee has provided some benefit to the employer or suffers some detriment beyond the usual rendition of services.” (Foley, supra, 47 Cal.3d at p. 682.) It was reasonable for the jury to infer from the circumstances of this case, where the agreement contemplated that Wei would abandon his existing business and transfer everything connected to Broadtron to InchStor, and where Wei was promised control of the new company as its president and as a member of its board of directors, that the parties intended a continuing relationship with limitations on the employer’s dismissal rights.
Defendants argue that the independent consideration provided by Wei has no impact on the analysis and cannot be considered as a factor in determining whether the parties had an implied in fact contract limiting the employer’s termination rights. They rely on the following language from Scott, supra, 11 Cal.4th at page 464: “The fact that the employer’s implied promises are not matched by independent consideration on the employee’s part is of no significance.” Defendants misinterpret this language from Scott. In Scott, the court simply states that independent consideration is not required to find an implied contract not to terminate without good cause. However, the fact that independent consideration is not required does not mean that the fact finder cannot consider independent consideration of the type presented here in determining whether the parties have entered into such a contract.
The defendants in Foley argued that “courts should not enforce employment security agreements in the absences of evidence of independent consideration and an express manifestation of mutual assent.” (Foley, supra, 47 Cal.3d at p. 678.) The court noted that the historical basis for imposing such restrictions had eroded with the development of modern contract law and concluded that the limitations were inappropriate in the modern employment context. (Ibid.) The court explained, “there is no analytical reason why an employee’s promise to render services, or his actual rendition of services over time, may not support an employer’s promise both to pay a particular wage (for example) and to refrain from arbitrary dismissal.” (Id. at p. 679.) The court stated that “factors apart from consideration and express terms may be used to ascertain the existence and content of an employment agreement, including ‘the personnel policies or practices of the employer, the employee’s longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.’ ” (Id. at p. 680, italics added.) In addition to examining the factors set forth above, the court in Foley concluded that the non-competition agreement the employee signed was valuable consideration that supported a finding that the employer had agreed to limit its termination rights. (Id. at p. 682.) Thus, Foley held that the fact finder may consider the contract’s express terms and any independent consideration in addition to the four factors set forth by the court.
Defendants rely on Carter v. CB Richard Ellis, Inc. (2004) 122 Cal.App.4th 1313. The employee in Carter had worked for her employer for 30 years. (Id. at p. 1317.) She was originally hired as a word processing secretary. After a series of promotions, she attained the position of administrative manager. (Ibid.) In 1997, the company went through a major reorganization and changed its management structure. The employee’s position was eliminated in the reorganization, as were the positions of other administrative managers. The employee was offered a new position at the same salary, but without the opportunity to earn the bonus she had received in the past. She was later offered a promotion. She resigned instead and sued her employer for breach of an implied agreement not to demote without good cause. (Id. at pp. 1319-1320.) The employee prevailed at trial and the employer made a motion for judgment notwithstanding the verdict, which the trial court denied. (Id. at p. 1317.)The appellate court concluded that there was no evidence the employer had contractually limited its right to reorganize its administrative operations and that the court should have granted the motion for judgment notwithstanding the verdict. (Id. at pp. 1326-1329.) Defendants argue that like the employer in Carter, investors in a start-up company cannot be said to have limited their ability to replace an executive during the formative stages of the company. In our view, Carter is distinguishable, since it did not involve the independent consideration that supported the jury’s finding of an implied agreement not to terminate except for good cause.
For these reasons, we conclude there was substantial evidence that supported the jury’s finding of an implied contract not to terminate except for good cause.
In a footnote, Defendants assert the court “gave a legally incorrect jury instruction on Wei leaving Broadtron on [the independent consideration] issue when citing the standard Foley CACI jury instruction No. 2403.” At trial, Defendants told the court they had no objections to the instructions given. Moreover, this contention is not supported by reasoned argument or citation to authority. We therefore conclude the contention has been forfeited. (People v. Stanley (1995) 10 Cal.4th 764, 793.)
III. Damages Issues
Defendants contend Wei was not entitled to damages for lost profits because his damages were speculative as a matter of law. Citing two cases in which the courts concluded that the evidence of lost profits was too speculative, Defendants argue the evidence of lost profits in this case was too speculative. Wei argues that he was not awarded damages for lost profits and that although Plaintiffs presented evidence of lost profits for Broadtron, they only sought lost wages for Wei. Wei also asserts there was substantial evidence that supported the jury’s award of lost earnings to Wei and points out that the jury did not award Broadtron lost profits. Defendants also contend the court erred in admitting evidence from Plaintiffs’ damages experts.
A. Damages Awarded to Wei
Defendants contend the judgment in favor of Wei must be reversed because the damages awarded were speculative.
The measure of damages for breach of contract is that amount that will compensate the aggrieved party for “all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result” from the breach. (Civ. Code, § 3300.) “ ‘It is often said that damages must be “foreseeable” to be recoverable for breach of contract. The seminal case announcing this doctrine, still generally accepted as a limitation on damages recoverable for breach of contract, is Hadley v. Baxendale (1854) 156 Eng.Rep. 145. First, general damages are ordinarily confined to those which would naturally arise from the breach, or which might have been reasonably contemplated or foreseen by both parties, at the time they made the contract, as the probable result of the breach. Second, if special circumstances caused some unusual injury, special damages are not recoverable therefor unless the circumstances were known or should have been known to the breaching party at the time he entered into the contract.’ ” (Resort Video, Ltd. v. Laser Video, Inc. (1995) 35 Cal.App.4th 1679, 1697 (Resort Video).)
“The general rule is that the measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment.” (Parker v. Twentieth Century-Fox Film Corp. (1970) 3 Cal.3d 176, 181-182.) Such damages include “not only the periodic monetary earnings of the employee but also the other benefits to which he [or she] is entitled as a part of his [or her] compensation.” (Wise v. Southern Pac. Co. (1970) 1 Cal.3d 600, 607.) Like other contract cases, damages resulting from the breach of an employment contract must be both foreseeable and reasonably certain. (Martin v. U-Haul Co. of Fresno (1988) 204 Cal.App.3d 396, 409.)
The amount of damages is a fact question, committed first to the discretion of the jury and next to the discretion of the trial judge on a motion for new trial. (Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1067.) The trial court’s ruling is entitled to deference “ ‘because having been present at the trial, the [court] was necessarily more familiar with the evidence.’ ” (Ibid.) We review the jury’s award of damages under the substantial evidence standard. (Ibid.)
We begin our analysis by examining the nature of the damages awarded to Wei. Defendants contend they are speculative because they are based on lost profits by InchStor. At trial, Wei relied on the testimony of economist and financial analyst Solt. Wei’s counsel had asked Solt to calculate Wei’s economic losses and determine Broadtron’s lost profits. Solt prepared two spreadsheets entitled “Estimate of Lost Earnings for Bo Wei” and Estimate of Lost Profits for Broadtron/InchStor.” The first spreadsheet had Solt’s calculations for Wei’s lost salary and benefits from 2001 through 2011, less any earnings he earned after his termination, and calculated the present value of the losses. It also contained a figure for the present value of Wei’s lost wages and benefits for the period 2012 through 2020. The spreadsheet set forth Wei’s cumulative wage loss year by year. The jury was instructed that Wei sought lost wages and Broadtron sought lost profits. In closing argument, Plaintiffs’ counsel asked for lost wages and benefits as damages for Wei. He also asked for contract damages for Broadtron including the $120,000 Defendants agreed to pay for the intellectual property plus the $80,000 Broadtron paid to Yunsheng to get out of its investment contract.
In different sections of the special verdict form, the jury awarded Wei: (1) damages for lost wages for two years of employment against InchStor only and (2) damages for lost wages for four years of employment against InchStor and ExcelStor. The parties agree the jury’s damages award to Wei was based on the numbers Solt had used in his spreadsheet for Wei’s lost wages for two years and four years respectively.
The jury awarded Broadtron $120,000.
On appeal, Defendants do not challenge the award in favor of Broadtron.
There was substantial evidence that supported the jury’s award of two and four years lost wages and the amount of the lost wages awarded. In preparing his calculations, Solt assumed Wei’s starting salary would be $150,000 and that Wei would remain at that rate of pay for the first five years with the company. Wei had testified that Lui had agreed to pay him $150,000 per year and that he was to be the highest paid employee in the company. InchStor’s employment contract with Lee was in evidence. InchStor had agreed to pay Lee $140,000 per year. Solt testified that $150,000 per year was in the ballpark for a chief executive officer during the early stages of a start-up company in Silicon Valley. Although Solt’s calculations included the value of Wei’s stock options, it does not appear the jury awarded Wei anything for the value of his stock options. Thus, there was substantial evidence that supported the jury’s award of lost wages based on a salary of $150,000 per year.
Wei argues it “was not necessary for the jury to find that InchStor would be immediately profitable for it to reasonably have concluded that Wei would have been employed for 2 to 4 years, but for defendant’s breach of the agreements. There was substantial evidence from which the jury could reasonably conclude that Wei would have continued to be employed with InchStor for 2 to 4 years, regardless of whether InchStor ever made a profit during that time frame.” We agree. Defendants had agreed to employ Wei in a new venture to develop a new product that would not immediately generate a profit. Defendants agreed to fund the project with the $8 million that Wei needed in the second phase of the project to come up with a working sample and engage in some small volume production. They also agreed to assist with manufacturing and marketing in the third phase. Lee estimated that it would take 18 months to make three or four one-inch prototypes suitable to start manufacturing. Defendants asked the InchStor team to work on other projects exploring production of the 2.5- and 3.5-inch drives. The defense expert, Wilmer, testified that it would take up to four years to get a prototype of the one-inch drive ready for production. This evidence supported the jury’s finding that Wei would have been employed for four years.
Defendants cite Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870 (Kids’ Universe) and Resort Video, supra, 35 Cal.App.4th 1679. First, both cases are inapplicable since they involve the calculation of damages for lost profits, not lost wages, which was the measure of damages the jury awarded in this case. Second, in Kids’ Universe, the trial court granted summary judgment in a contract action in which the plaintiff sought only damages for lost profits. The Court of Appeal affirmed, concluding that the plaintiff’s evidence did not establish a triable issue to a reasonable certainty that the plaintiffs’ new Internet business would have made a profit because the plaintiff’s evidence was too speculative. Defendants argue the evidence here was more speculative that in Kids’ Universe. We disagree. Unlike the toy retailer in Kids’ Universe, who had never attracted any investors and did not have a credit line, Broadtron had attracted an investor (Yunsheng), had money in the bank to pay off Yunsheng, and a promise from a new investor (Great Wall through ExcelStor) to fund the development of the one-inch drive for $8 million and to provide manufacturing and marketing support. Third, as set forth above, substantial evidence supported the jury’s conclusions that Wei would have earned $150,000 per year and that four years was a reasonable period of employment.
B. Admission of Expert Evidence Regarding Damages
Defendants contend the trial court abused its discretion when it admitted expert evidence on damages. They argue that expert testimony was inadmissible because it was not based on any facts that were introduced in the case and rested entirely on estimates and unfounded assumptions. They contend the expert evidence was prejudicial because it was the only basis for Wei’s damages claims.
We review the trial court’s rulings regarding the admissibility of evidence under the deferential abuse of discretion standard. (City of Ripon v. Sweetin (2002) 100 Cal.App.4th 887, 900.) “[T]he appropriate test of abuse of discretion is whether or not the trial court exceeded the bounds of reason, all of the circumstances before it being considered.” (In re Marriage of Connolly (1979) 23 Cal.3d 590, 598.) Appellate courts will disturb discretionary trial court rulings only upon a showing of a clear case of abuse and a miscarriage of justice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.)
At trial, Defendants made a motion in limine to exclude Solt’s testimony with regard to both Broadtron’s lost profits claim and Wei’s lost wages claim on the ground that the evidence was too speculative. The trial court denied the motion, stating that it would instruct the jury that damages must be reasonably certain and Defendants could argue that the damages here were not reasonably certain. After Solt testified, Defendants moved to strike the testimony of both Niebel and Solt on the grounds that their testimony was not based on any evidence in the case, was hearsay upon hearsay, and was speculative. The court denied the motion.
At the beginning of trial, Wei sought damages for lost wages and Broadtron sought damages for lost profits. Given the nature of the damages claimed, it was reasonable for the court to admit expert testimony regarding Broadtron’s lost profits claim. As the court explained in, Kids’ Universe, “ ‘although generally objectionable for the reason that their estimation is conjectural and speculative, anticipated profits [for an unestablished business] dependent upon future events are allowed where their nature and occurrence can be shown by evidence of reasonable reliability. [Citations.] All of these [cited] cases recognize and apply the general principle that damages for the loss of prospective profits are recoverable where the evidence makes reasonably certain their occurrence and extent.’ ” (Kids’ Universe, supra, 95 Cal.App.4th at p. 883, citing Grupe v. Gluck (1945) 26 Cal.2d 680, 693.) “ ‘Lost anticipated profits cannot be recovered if it is uncertain whether any profit would have been derived at all from the proposed undertaking. But lost prospective net profits may be recovered if the evidence shows, with reasonable certainty, both their occurrence and extent. [Citation.] It is enough to demonstrate a reasonable probability that profits would have been earned except for the defendant’s conduct. [Citations.]’ Moreover, … a plaintiff is ‘not required to establish the amount of its damages with absolute precision, and [is] only obliged to demonstrate its loss with reasonable certainty.’ ” (Kids’ Universe, at pp. 883-884.) “When the operation of an unestablished business is prevented, … prospective profits may be shown in various ways. The Restatement Second of Contracts, section 352, comment b, at page 146 provides, ‘[I]f the business is a new one or if it is a speculative one … damages may be established with reasonable certainty with the aid of expert testimony, economic and financial data, market surveys and analyses, business records of similar enterprises, and the like.’ Similarly, the Restatement Second of Torts, section 912, comment d at page 483 states, ‘When the tortfeasor has prevented the beginning of a new business … all factors relevant to the likelihood of the success or lack of success of the business or transaction that are reasonably provable are to be considered, including general business conditions and the degree of success of similar enterprises.’ ” (Id. at p. 884.)
Defendants argue the expert testimony was inadmissible because it was not based on any facts or evidence that were introduced in the case and rested entirely on estimates and unfounded assumptions.
The jury awarded Wei damages for the four-year period from 2001 through 2004. Niebel was the founder of a market research company that tracked the flash card and removable storage market. Niebel has been analyzing the market for the one-inch hard disk drive since its introduction in 2000. Niebel provided information regarding the companies that had entered the market since 2000, including market share, industry average selling prices, number of units sold, and average cost per unit sold. Niebel’s testimony was based in part on historical information regarding what actually occurred in the marketplace up to the time of the trial, which took place in November 2004. Niebel also made projections for the period 2005 through 2011. Niebel testified regarding the result of his research and prepared charts showing the results of his analyses, which were in evidence.
Solt based his testimony in part on the work done by Niebel. In addition, Solt did independent research regarding salaries for chief executive officers in start-up companies and relied on publicly available information like SEC filings to estimate Broadtron’s lost profits. Like Niebel, he relied on actual market figures for the period 2001 through 2004. He reviewed Wei’s business plan. Thus, there is no merit to Defendants’ contention that there were no facts before the jury that supported the expert testimony. The necessary facts regarding the expert’s research were introduced through the expert witnesses.
Even if we were to conclude that the evidence of lost profits was speculative and should not have been admitted, any error in admitting the evidence was harmless. We begin by noting that the testimony of both experts was subject to vigorous cross-examination by Defendants. In closing argument, Plaintiff did not specifically request damages for lost profits. The jury may have discredited the evidence regarding lost profits, since it did not award lost profits to Broadtron. As set forth above, there was other evidence that supported the jury’s finding regarding Wei’s lost wages, including the testimony of Wei, Lee’s employment contract, and Wilmer’s testimony regarding the amount of time it would take to develop the one-inch hard disk drive.
For all these reasons, we conclude the trial court did not abuse its discretion when it admitted the expert testimony regarding damages.
IV. Special Verdict Form
Defendants argue the judgment must be reversed because of problems with the special verdict form. They contend there is no correlation between the special verdict form, the evidence and the complaint. They argue the special verdict form allowed Wei to recover under two separate sections even though he only had a single contract claim and that the verdicts in sections A and C of the form cannot be reconciled. Plaintiffs contend there was no double recovery here and the verdicts in sections A and C of the form can be reconciled.
The special verdict form was divided into six sections (Sections A through F). Each section of the form addressed a different cause of action or claim.
Section A addressed Wei’s claim for breach of an employment contract. The first question under Section A inquired: “Did Bo Wei enter into an employment relationship with any of the following defendants: ExcelStor, InchStor?” (Italics added.) The jury answered “yes” and indicated that Wei had “entered into an employment contract with … InchStor.” (Italics added.) The jury also found that InchStor had promised not to discharge Wei except for good cause, that Wei had substantially performed his duties, that InchStor had discharged Wei without good cause, and that the damages for the breach of the “employment contract” were $315,982. (Italics added.)
Section B addressed Broadtron’s claim for breach of contract and asked: “Did Broadtron enter into a contract with any of the following defendants for the purchase of its intellectual property: ExcelStor, InchStor?” The jury responded “yes” and indicated that Broadtron had entered into “a contract to purchase its intellectual property” with “InchStor.” The jury concluded that InchStor had breached the contract and awarded Broadtron $120,000.
Section C was entitled “Bo Wei Claim Breach of Contract” and inquired: “Did Bo Wei enter into an agreement with any of the following defendants: Great Wall, ExcelStor, InchStor?” (Italics added.) The jury answered “yes” and indicated that Wei had entered into a contract with all three defendants listed. The jury concluded that ExcelStor and InchStor had breached the agreement and that Wei was entitled to $529,720 in contract damages, less the amount awarded for breach of the employment contract ($315,982).
Sections D, E and F addressed the parties’ claims for promissory fraud. The jury denied all the promissory fraud claims.
The record does not reveal which party or parties prepared the special verdict form. After the jury retired to deliberate, defense counsel objected to the special verdict form on the record. Defense counsel stated: “[Plaintiffs’ counsel] on the employment claim seemed to argue to the jury that it was only against InchStor. While the special verdict form has a couple defendants there[.] [O]n the … Broadtron IP, I think it was only argued against InchStor although ExcelStor was mentioned there. [¶] On the investment contract I think there was complete agreement by both parties that the operative document was Exhibit 6. Again, that’s only between ExcelStor and Mr. Wei,….” (Italics added.) Defense counsel also complained that the special verdict form named five defendants in the promissory fraud claims while the “only argument could be only against ExcelStor and Mr. [Lui]” and that the presence of three other parties may cause confusion.
Exhibit 6 was the January 4, 2001 memorandum signed by Lui, the content of which is set forth on pages 6 and 7 of this opinion.
The gist of defendants’ objections to the special verdict form was that too many defendants were listed for the various causes of action. Defendants did not complain that Sections A and C were duplicative or that the special verdict form set forth more than one contract claim for Wei. In fact, based on the express wording of the special verdict form and defense counsel’s comments, defendants expressly acknowledged that Wei had two types of contact claims, one for breach of an employment contract that contained an implied agreement not to terminate except for good cause and one for breach of the investment contract that was set forth in the January 4, 2001 memorandum, which was admitted as Exhibit 6.
Inconsistent verdicts are against the law. The proper remedy in such cases is a new trial. (Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344.) Both parties cite Lambert v. General Motors (1998) 67 Cal.App.4th 1179 (Lambert). Defendants cite Lambert for the proposition that “[s]pecial verdicts that cannot be reconciled require granting of a new trial.” Plaintiffs cite Lambert for the proposition that inconsistent verdicts must be harmonized if there is any possibility of reconciliation under any possible application of the evidence and instructions.
However, the rule stated in Lambert does not apply here. In Lambert, the court held: “The first principle of inconsistent general and special verdicts is that they must be harmonized if there is any ‘possibility of reconciliation under any possible application of the evidence and instructions. If any conclusions could be drawn thereunder which would explain the apparent conflict, the jury will be deemed to have drawn them.’ [Citation.] Furthermore, ‘if inconsistent special findings are rendered, one of which supports, and the other of which tends to negate, the general verdict, the latter will stand.’ ” (Lambert, supra, 67 Cal.App.4th at p. 1183, italics added.) “First, the rule stated in Lambert applies only to inconsistencies between general and special verdicts, and inconsistencies between special findings rendered in support of a general verdict. (Lambert, supra, 67 Cal.App.4th at p. 1183; [Code Civ. Proc.,] § 625.) This is because special findings are ‘ “primarily and principally for the purpose of determining whether the general verdict is or is not against law.” ’ (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 540 [overruled on other grounds in Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 574-580].) For this reason, no presumption is given in favor of special findings and every reasonable intendment is given in favor of the general verdict.” (Mendoza v. Club Car, Inc. (2000) 81 Cal.App.4th 287, 302-303.) The “rule of reconciliation does not apply to inconsistencies between questions in a special verdict because … ‘ “there is no presumption in favor of upholding a special verdict.” ’ ” (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 678-679.) Here, as in Mendoza, there was no general verdict inconsistent with a special verdict or special findings. The alleged inconsistency here is between two findings within a special verdict. Accordingly, the rule from Lambert has no application. (Mendoza, supra, 81 Cal.App.4th at p. 303.) A “special verdict’s correctness must be analyzed as a matter of law. [Citation.] This is because a special verdict is far more susceptible to defect than a general verdict, which can be tested with special findings.” (Ibid.)
In our view, there is no merit to Defendants’ contentions that the special verdict form was defective because it allowed Wei to recover on two separate contract claims or that the verdicts in Sections A and C were inconsistent.
As the parties acknowledged in the trial court, Wei had entered into an investment agreement with Great Wall in which Great Wall agreed to invest in the development of Wei’s one-inch hard disk drive design through its subsidiary, ExcelStor. The memorandum setting forth the company structure and the terms of the investment agreement was signed by Lui in his capacity as president and CEO of ExcelStor. The agreement provided that ExcelStor would invest in a new company rather than Wei’s existing company (Broadtron) and that Wei would be appointed president of the new company. The investment contract included a promise to employ Wei as an officer of the new company. However, Wei’s employment relationship was with the new company, InchStor, not Great Wall or ExcelStor. Since ExcelStor was not Wei’s employer, the jury could reasonable have concluded, as the parties acknowledged at trial, that there were two contracts, the investment contract with ExcelStor and the employment contract with InchStor.
The fact that Wei was awarded damages for wage loss in both sections A and C does not establish that the claims were the same. Damages for wage loss are awardable in all types of contract and tort cases and are not limited to employment cases. It was not unreasonable for the jury to conclude that ExcelStor’s breach of the investment contract resulted in a loss of earnings to Wei and that InchStor’s breach of its employment agreement with Wei also resulted in Wei’s loss of income and benefits. The jury clearly stated its intent with regard to the damages when it advised the court that a portion ($315,982) of the $529,720 it awarded on the investment contract claim duplicated the award on the employment contract claim. For these reasons, we perceive no inconsistency that requires a new trial.
V. Attorney Fees
Defendants contend the trial court abused its discretion when it denied their motion for attorney fees pursuant to Civil Code section 3426.4.
All further statutory references are to the Civil Code.
Section 3426.4, a provision of the Uniform Trade Secrets Act (§ 3426 et seq.), provides in relevant part: “If a claim of misappropriation is made in bad faith, …, the court may award reasonable attorney’s fees and costs to the prevailing party.” “[B]ad faith for the purposes of section 3426.4 requires objective speciousness of the plaintiff’s claim, as opposed to frivolousness, and its subjective bad faith in bringing or maintaining the claim.” (Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1262 (Gemini).) With regard to the issue of subjective bad faith, the Gemini court explained: “ ‘Good faith, or its absence, involves a factual inquiry into the plaintiff’s subjective state of mind [citations]: Did he or she believe the action was valid? What was his or her intent or purpose in pursuing it? A subjective state of mind will rarely be susceptible of direct proof; usually the trial court will be required to infer it from circumstantial evidence.’ [Citation.] ‘ “[B]ad faith” means simply that the action or tactic is being pursued for an improper motive. Thus, if the court determines that a party had acted with the intention of causing unnecessary delay, or for the sole purpose of harassing the opposing side, the improper motive has been found, and the court’s inquiry need go no further.’ ” (Id. at p. 1263.)
We review the trial court’s ruling on a motion for attorney fees pursuant to section 3426.4 for an abuse of discretion. The trial court’s exercise of discretion on such a motion will not be disturbed on appeal unless it exceeds the bounds of reason. (Gemini, supra, 95 Cal.App.4th at p. 1262.)
The fourth cause of action of the complaint alleged all defendants misappropriated Broadtron’s trade secrets. Plaintiffs alleged Defendants intended to obtain an unfair advantage in the microdrive market by wrongfully acquiring Broadtron’s technology and to destroy competition in the market by preventing Broadtron and its founders from developing the disk drive technology in competition with ExcelStor. According to the record, Plaintiffs provided discovery on the trade secrets claim.
At trial, Defendants made a motion in limine to exclude evidence of trade secrets damages on the grounds that Plaintiffs did not provide such evidence in discovery. Plaintiffs argued that that value of the trade secrets was $120,000, the value the parties had placed on the intellectual property in the investment agreement. The court denied the motion in limine.
At trial, Wei testified that the InchStor engineers began their work on the one-inch hard disk drive using the drawings, specifications, and prototype developed by Broadtron.
At the conclusion of Plaintiffs’ case, Defendants made a motion for nonsuit on the misappropriation cause of action. At that time, Plaintiffs argued that for there to be a misappropriation of trade secrets, they must be obtained by improper means and that if Broadtron’s secrets were obtained by fraud, that is an improper means. Plaintiffs acknowledged an overlap between the misappropriation theory and the fraud theory and argued that Defendants never intended to perform when they entered into the investment agreement with Plaintiffs. The court granted the motion for nonsuit on the misappropriation of trade secrets cause of action.
In opposition to the motion for attorney fees, Plaintiffs’ counsel filed a declaration in which he stated that he believed that the timing of the breach of contract was sufficient for the trier of fact to conclude that Defendants did not intend to perform the contract when they made it and that he believed that it was implied in the circumstances under which Broadtron’s intellectual property was disclosed to defendant (as part of the investment contract) that the information was confidential. He also stated that he believed in good faith that there was sufficient evidence to warrant prosecution of the trade secrets claim and that the claim was not included for any reason other than he believed it was meritorious.
There is nothing in the record that suggests the misappropriation claim was prosecuted for an improper motive such as causing unnecessary delay or harassing the opposing side. Unlike Gemini, where the appellate court affirmed an award of attorney fees under section 3426.4, there was no express finding that the Plaintiffs acted in bad faith in pursuing the trade secrets claim. (Gemini, supra, 95 Cal.App.4th at p. 1255.)
For these reasons, we conclude the court did not abuse its discretion when it denied attorney fees under section 3426.4.
Disposition
The judgment is affirmed.
WE CONCUR: Bamattre-Manoukian, Acting P.J., Duffy, J.