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upholding a pro rata refund for plaintiffs who paid to place ads in telephone directories for a specified period of time where "due to massive distribution failures, a substantial percentage of directories were either not delivered or were delivered significantly late"
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A126326 A126786
11-15-2011
AMMARI ELECTRONICS et al., Plaintiffs and Appellants, v. PACIFIC BELL DIRECTORY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Alameda County Super. Ct. Nos. RG05198014, RG05220096)
I.
INTRODUCTION
Named plaintiffs and the approximately 380,000 class members they represent (collectively, plaintiffs) entered into standardized contracts with defendant Pacific Bell Directory (Pacific Bell) to have their advertisements put into the Yellow Pages directories (directories), and to have the directories distributed to potential customers in each plaintiff's geographic distribution area. In plaintiffs' lawsuit, it was alleged that between February 2002 and May 2004, Pacific Bell breached those contracts by failing to deliver a substantial quantity of the directories containing plaintiffs' advertisements to potential customers as agreed. After the jury awarded plaintiffs approximately $17.35 million in damages for Pacific Bell's breach of its distribution obligation under the contracts, the trial court granted judgment for Pacific Bell notwithstanding the jury's verdict (JNOV) on the ground that plaintiffs had failed to produce evidence that they suffered damage as a result of Pacific Bell's 2002-2004 delivery failures.
Named plaintiffs are Ammari Electronics; Mehdi Ammari; Framer's Workshop; Koszdin, Fields, Sherry & Katz, a Law Partnership; and Law Offices of William J. Kropach.
At all times relevant to this case, Pacific Bell operated in California as "SBC Pacific Bell Directory" and "SBC SMART Yellow Pages."
Plaintiffs appeal, first claiming they are entitled to a new trial because the trial court incorrectly interpreted the standardized contract entered into between Pacific Bell and plaintiffs as imposing upon Pacific Bell a " 'best efforts/good faith/due diligence' implied in fact [delivery] obligation." Plaintiffs claim that if the contract had been properly interpreted, and the jury instructed accordingly, the contract would have imposed on Pacific Bell an implied obligation to deliver the directories in accordance with the industry standard for directory deliveries. Plaintiffs believe that if the jury had been properly instructed that Pacific Bell was obligated to meet the industry standard for directory deliveries, it is likely the jury would have required delivery to at least 96 percent of intended recipients; and "the damages would likely have been double the amount of the [jury's] verdict."
If their first argument fails, plaintiffs alternatively claim the court erred in granting JNOV for Pacific Bell. Plaintiffs argue the record contains ample evidence that they were damaged as a result of Pacific Bell's breach of its contractual obligation to act in good faith and to use its best efforts in delivering directories, and that they provided the jury with sufficient evidence to calculate a reasonable estimation of their damages.
We reject plaintiffs' first argument, but conclude that plaintiffs' second argument has merit. Therefore, we reverse the judgment for Pacific Bell with directions to enter judgment on the jury's verdict. The judgment, as reinstated, is affirmed. Because Pacific Bell is no longer the prevailing party, we do not address Pacific Bell's appeal claiming the trial court erred when it held that trial-related travel expenses could not be recovered as costs.
II.
FACTS AND PROCEDURAL HISTORY
For more than 50 years, Pacific Bell has published and distributed directories in separate geographic delivery areas throughout California. Pacific Bell's directories are offered free of charge to business and residential telephone customers within a directory's geographic area. Plaintiffs contracted with Pacific Bell to advertise in at least one of the geographically distinct directory districts throughout California. Some of the plaintiffs advertised in more than one directory.
We use the term "directory district" to refer to a telephone directory identified by geographic area and issue date, e.g., the 2002 Sacramento directory.
Named plaintiffs filed this lawsuit alleging that California businesses paid Pacific Bell to advertise in the directories for the full in-service life of such directories, which is typically 12 months. However, due to massive distribution failures, a substantial percentage of directories were either not delivered or were delivered significantly late. On August 30, 2007, over Pacific Bell's objection, this lawsuit was certified as a class action on behalf of "[a]ll individuals and businesses who had written contracts with Pacific Bell Directory to purchase advertisements in the SBC yellow pages directories that were published and were supposed to be distributed in California . . . at any time between February 1, 2002 and May 30, 2004." It was alleged that during the 29-month class period, plaintiffs and over 350,000 other California businesses purchased more than $2 billion dollars worth of advertising from Pacific Bell.
Pacific Bell petitioned this court for a writ of mandate to overturn the class certification (Case No. A119392). On December 5, 2007, this court summarily denied Pacific Bell's petition. (Order, Ruvolo, P. J.)
Before trial, plaintiffs dismissed certain causes of action and the court granted Pacific Bell's motion for summary adjudication as to others, leaving for trial only plaintiffs' cause of action for breach of contract. This claim alleged that Pacific Bell breached the standardized form "Advertising Contract" (contract) entered into with each plaintiff and class member containing Pacific Bell's promise to "deliver[] its directories within the related directory areas to business and residential telephone customers . . . ." The trial commenced on May 12, 2009, and was conducted in two phases. The court first held a bench trial before a jury was empanelled to interpret the contract, and to determine the contractual standard by which Pacific Bell's delivery performance should be measured. In a written decision, the court held that "the rules of contract interpretation and the extrinsic evidence support the 'best efforts/good faith/due diligence' obligation and do not support an obligation to achieve a quantitative result . . . ."
Pacific Bell argued at trial that it went "above and beyond what the obligation is in the contract" by distributing directories to everyone in the directory district, not just telephone customers.
The case then proceeded to a five-week jury trial. Every facet of Pacific Bell's complex system for delivering directories was described for the jury. Briefly summarized, in order to deliver approximately 30 million directories every year to a vast variety of locations in California, Pacific Bell uses third-party distribution vendors. During the class period, Pacific Bell contracted with two such vendors—Product Development Corporation (PDC) and ClientLogic. ClientLogic, in turn, subcontracted with Turtle Ridge Media Group to perform the hand distribution of California directories. Pacific Bell stipulated that it was legally responsible for the delivery performance of its third-party distribution vendors.
Each time Pacific Bell published a new edition of a directory in a particular area, which was usually every 12 months, Pacific Bell contractually required its third-party distribution vendor to hand deliver a copy of the new directory to all business and residential telephone customers in the directory district. This is known as the "primary delivery" or "initial distribution," and usually takes from 7 to 30 days to complete. After the initial distribution, there is a "secondary distribution," which is used to distribute directories to "new connects" (telephone customers who move to the directory area after initial distribution), telephone booths, access stands (locations where directories are made available to the public for pickup), and to people or businesses who call to request directories during the year. It was estimated that approximately 20 percent of the directories are delivered during secondary distribution.
Throughout the timeframe relevant to this litigation, Pacific Bell paid Certified Audit of Circulations (CAC), a third-party nonprofit auditor, to conduct delivery verification surveys to gauge the success of the distribution for each directory published and distributed in California. CAC performed surveys not only for Pacific Bell, but also for other phone book companies, newspapers, and advertisers. CAC performed each survey after notification that the initial delivery had been completed. The same audit methodology was used throughout California. After the third-party distribution vendor completed the initial delivery, CAC telephoned a random sample of residences and businesses within the directory area. Among other things, the survey respondents were asked whether or not they received a directory. CAC expressed the survey results as a percentage of businesses and residences who received directories in each directory district. CAC ensured that the number of calls provided statistically significant audit results with a two to three percent margin of error. Plaintiffs' statistical and survey expert, Michael Sullivan, Ph.D., confirmed that CAC's methodology conformed to generally accepted survey practice, and that the CAC scores were valid and reliable measures of the percentage of directories that were actually delivered in each directory district.
There was overwhelming evidence that Pacific Bell relied on these CAC delivery verification surveys for various purposes, including to measure the effectiveness of its third-party distribution vendor's performance. Many documents showed that Pacific Bell required its distribution vendor to ensure that at least 96 percent of the telephone customers in each directory district receive a directory as measured by the CAC scores.
Whether or not Pacific Bell breached its delivery obligation to plaintiffs during the relevant timeframe was a hotly contested issue at trial. However, on appeal, Pacific Bell does not challenge the jury's finding that with respect to certain directory districts, Pacific Bell breached its delivery obligation. In its own words, Pacific Bell concedes that considering the evidence presented at trial "the jury could have properly found" that Pacific Bell failed to "use[] good faith and best efforts in delivering its directories." This concession reflects the fact that there was evidence of ongoing, severe problems in delivering directories, including many documented, out-of-court admissions by Pacific Bell's own distribution managers acknowledging delivery failures.
Illustrative examples include written acknowledgement that Pacific Bell's third-party distribution vendor "fail[ed] to perform at the basic competency level" and that emergency procedures needed to be implemented. There was evidence that Pacific Bell terminated PDC after criticizing its delivery effort during the first half of the class period. Likewise, Pacific Bell terminated the replacement distributor, ClientLogic, for "failure to perform" one year into a three-year distribution contract, after repeated criticism of its delivery performance. Plaintiffs argued that despite knowledge of delivery failures, Pacific Bell continued to bill plaintiffs in full for advertising charges, with the exception that the few advertisers who became aware of delivery failures and complained about them were given a partial refund of their advertising charges.
As to damages, in order to obtain class certification, plaintiffs agreed to forego damages based on the specific impact on particular plaintiffs—such as lost profits— acknowledging that this measure of damages would be difficult to prove or measure on a class-wide basis. Instead, the class sought damages in the form of a refund for a portion of their advertising charges. The refund amount was calculated based on the difference between the percentage of residences and businesses that should have received timely delivery of directories but did not, and the percentage of residences and businesses that actually received timely delivery of directories. Under plaintiffs' damages model, all class members advertising in a specific directory would receive a fixed refund of a percentage of the total advertising charges paid to Pacific Bell for that directory in proportion to the delivery shortfall. In accordance with this approach, the trial court articulated the damage formula as follows: "[A]ssuming liability, the jury will determine what level of distribution [Pacific Bell] would have achieved if it had used its 'best efforts and due diligence' and then determine the pro rata rebate, if any, based on that figure."
During the relevant timeframe, Pacific Bell distributed 163 different directories, specific to each year and in each directory area. This required the jury to separately evaluate Pacific Bell's delivery performance for each of the 163 directories at issue. Consequently, the verdict form was structured so that the jury had to determine with respect of each of the 163 directories whether Pacific Bell breached its contractual obligation to the plaintiffs and caused injury to them, and if so, in what amount.
Not surprisingly, deliberations consumed three days. At their conclusion, the jury returned a verdict in plaintiffs' favor as to 66 of the 163 directory districts for which plaintiffs had claimed a breach of contract, and specified a separate damage award for each of the 66 different districts totaling approximately $17.35 million. After the jury returned its verdict, the trial court directed the clerk not to enter judgment on the verdict. The court then granted Pacific Bell's motion JNOV. The court acknowledged that the record contained evidence supporting the jury's verdict that Pacific Bell had breached the contract by failing to deliver directories in good faith using best efforts and due diligence, although a contrary finding would also have been supported. Nevertheless, the court believed the record contained "no evidence either as to the class as a whole or as to those members of the class who advertised in any of the particular 163 directories that class members were harmed by any breach by Pacific Bell." Judgment was entered for Pacific Bell on June 30, 2009.
The motion originally was made in the form of a motion for directed verdict at the close of the evidence, but the trial court deferred ruling on it until after the jury rendered its verdict. While the parties and the trial court continued to refer to the motion, which was ultimately granted as one for a "directed verdict," as we explain later in this opinion, procedurally it became a motion for JNOV by the time it was considered by the court.
After the court entered judgment for Pacific Bell, plaintiffs filed this appeal. Pacific Bell filed a separate appeal from the court's postjudgment order granting in part plaintiffs' motion to tax costs.
III.
DISCUSSION
A. Did the Trial Court Properly Interpret Pacific Bell's Contractual Delivery Obligation?
The basis of plaintiffs' breach of contract claim was that the uniform standardized contract that each of the plaintiffs entered into with Pacific Bell contained a promise, express or implied, to deliver directories containing plaintiffs' advertisements to business and residential telephone customers and that Pacific Bell breached that promise, causing them damages. Paragraph 5 of the written contract contains the simple assertion that "[Pacific Bell] delivers its directories within the related directory areas to business and residential telephone customers . . . ." Both sides acknowledge that Paragraph 5, as drafted by Pacific Bell, contains a delivery obligation, but with no express standard by which Pacific Bell's performance under the contract could be measured.
Paragraph 5 reads in relevant part: "Publisher delivers its directories within the related directory areas to business and residential telephone customers, with the exception that Business-to-Business directories (where offered) are delivered to business telephone customers. The distribution of directories or sections of directories to public telephone stations shall be at the discretion of the Publisher."
Therefore, the parties agreed that the court would conduct a bench trial to define what performance standard Pacific Bell would be held to under Paragraph 5. (See Rest.2d Contracts, § 204 ["When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court"].) The court's resolution of this issue would establish a level of expected performance to help the jury determine whether Pacific Bell was in breach of its delivery obligation under the contract. The parties submitted written argument and documentary evidence on this issue, but no live testimony was presented.
In arguing the contract interpretation issue, plaintiffs first emphasized that any ambiguity in a contract of adhesion must be construed against the drafter, in this case Pacific Bell. (Civ. Code, § 1654.) They theorized that the contract's omission of any language defining Pacific Bell's delivery obligation should be analyzed under "missing term principles," or under the doctrine of "intentional ambiguity." Plaintiffs suggested several performance standards that should be used to fill any gap in the actual language used in the contract: Specifically, they claimed Pacific Bell should be required either to: (1) deliver directories to 100 percent of business and residential telephone customers, (2) deliver directories to 96 percent of business and residential telephone customers, or (3) achieve a minimum CAC score of 96 percent on deliveries to business and residential telephone customers.
In support of these proposed delivery standards, plaintiffs submitted documentary evidence showing Pacific Bell had made public statements to the effect that directories would be delivered "to every home and business," which they claim led plaintiffs to believe "in the absence of specific limiting language" that Pacific Bell's contractual delivery obligation would be delivery to 100 percent of business and residential telephone customers. Alternatively, plaintiffs supported their 96 percent delivery benchmark with evidence that this was "the minimum industry standard," meaning delivery to 96 percent of the intended recipients was "considered acceptable in the industry, while scores below 96% were considered deficient." Additionally, plaintiffs claimed that Pacific Bell "expected a 96% CAC score from [its delivery] subcontractors . . . and decided to terminate those subcontractors in part because they failed to meet that level of performance."
There was conflicting evidence on the industry standard for directory deliveries. While plaintiffs' industry expert indicated that the industry standard required delivery to 96 percent of businesses and residences, Pacific Bell's industry expert indicated that the industry standard was simply to make "reasonable efforts."
In response, Pacific Bell claimed the express language of Paragraph 5 was not reasonably susceptible to any of the "fixed, numerical delivery effectiveness obligation[s]" proposed by plaintiffs. It was first pointed out that the contract contained an integration clause in Paragraph 2, precluding the addition of any new terms. Pacific Bell accused plaintiffs of using the "guise" of a " 'missing term' to slip a fixed performance obligation into a fully integrated written Advertising Contract that does not expressly state one." Pacific Bell explained that due to the vagaries of delivering directories, Pacific Bell "cannot control the ultimate effectiveness of any delivery." (Original italics.) For instance, the directories are free and sometimes refused, and sometimes delivery is impeded by unforeseen conditions like extreme weather or architectural barriers such as locked doors and security gates. Consequently, "[Pacific Bell] would never agree to a fixed delivery effectiveness obligation, and it did not do so here."
Paragraph 2 states this contract "shall constitute the entire agreement" between the parties and that Pacific Bell "shall not be bound by any agreement or understanding not expressed herein." Paragraph 2 also states, "The terms and conditions of this contract may not be modified, except by a writing signed by Advertiser and [Pacific Bell executives]."
Additionally, to the extent plaintiffs were relying on documentary evidence showing Pacific Bell had high performance goals for delivering directories, "[s]etting a performance target is significantly different than fixing a contract obligation." Pacific Bell asserted that no one contemplated that the failure to achieve a particular benchmark, such as a 100 percent or 96 percent delivery goal, would result in it breaching its contractual obligation to its advertisers. At most, Pacific Bell claimed it was obligated to deliver its directories consistent with the covenant of good faith and fair dealing which, as a matter of law, is implied in every contract.
In its written ruling, the trial court found "the rules of contract interpretation and the extrinsic evidence support the 'best efforts/good faith/due diligence' obligation and do not support an obligation to achieve a quantitative result . . . ." Thus, the court interpreted Paragraph 5 to include the implied good faith standard: "Publisher [will in good faith use its best efforts and due diligence to deliver] directories within the related directory areas to business and residential telephone customers . . . ." While the court held its interpretation required "[Pacific Bell] to do more than refrain from unfairly interfering with the class's contractual right to delivery of the phone books," it also made clear " 'the best efforts/good faith/due diligence' obligation" does not "support an obligation to achieve a quantitative result . . . ."
The jury was instructed in accordance with the court's ruling that, "[f]or each directory area, to recover damages from Pacific Bell Directory for breach of contract, plaintiffs and the class members must prove both of the following: Number one, that Pacific Bell Directory failed to deliver directories in that directory area in good faith using best efforts and due diligence as required by the advertising contract and, two, the plaintiffs and class members were harmed by that failure. . . . The contracts do not require Pacific Bell Directory to achieve any particular result in terms of number or percentage of directories delivered."
Because there was no conflicting extrinsic evidence introduced as to the meaning of the pertinent contract provisions, the parties agree that the trial court's interpretation is subject to our de novo review. (See City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395.)
On appeal plaintiffs argue that the trial court erred in holding that the contract only required Pacific Bell to act in good faith using due diligence and its best efforts. They claim the judgment should be reversed and a new trial ordered to determine the applicable industry standard, and then if Pacific Bell's delivery performance fails to meet the industry standard, the jury should award appropriate damages. Plaintiffs' argument further surmises that if the jury awards damages based on the industry standard for delivering directories, instead of the "best efforts/good faith/due diligence" standard, plaintiffs will likely be awarded "more than double the $17.5 million verdict the jury actually returned."
Plaintiffs do not dispute that, in California, every contract has an implied covenant to perform contractual obligations, like Pacific Bell's obligation to deliver directories, in "good faith." (Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 43; Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 683 (Foley); see Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 484 ["[W]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing"].) In describing this duty, California courts have used the terms "good faith" and "best efforts" interchangeably. (See Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1120; Third Story Music, Inc. v. Waits (1995) 41 Cal.App.4th 798, 805 ["Although the contract does not promise in so many words that the licensee will use its best efforts, ' "such a promise is fairly to be implied" ' "].)
The contracting parties here were bound by this good faith duty even if the expected levels of performance were not specifically addressed in the contract itself. The implied covenant in such a situation does not vary or add a new term to the parties' agreement. Rather, "the concept of a duty of good faith [has] developed in contract law as 'a kind of "safety valve" to which judges may turn to fill gaps and qualify or limit rights and duties otherwise arising under rules of law and specific contract language.' [Citations.]" (Foley, supra, 47 Cal.3d at p. 684.)
Consequently, the trial court was fully justified in reading the implied covenant into the parties' contract, and plaintiffs do not claim otherwise. Instead, they disparage this performance standard as requiring nothing more than "[Pacific Bell] to 'try hard' regardless of its lack of success in actually delivering directories." Plaintiffs claim this court should "uphold the contract by implying a term" that "[Pacific Bell] would deliver books in accordance with whatever standards for delivery prevail in the industry."
Our Supreme Court has emphasized that the "freedom to contract as [the parties] deem fit" is a fundamental principle in contract law. (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1193.) Thus, it is "our obligation . . . to give effect to the language the parties chose, not the language they might have chosen." (Ibid.; see Code Civ. Proc., § 1858 ["In the construction of [an] . . . instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted"].)
Therefore, courts are careful not to rewrite contracts for parties and will not read anything into contracts by way of implication except on grounds of obvious necessity and where it is indispensible to effectuate the intention of the parties. " ' "[I]mplied covenants are not favored in the law; and courts will declare the same to exist only when there is a satisfactory basis in the express contract of the parties which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties to the contract made" [citation].' [Citation.]" (Frankel v. Board of Dental Examiners (1996) 46 Cal.App.4th 534, 545.) In other words, " '[n]othing may be added by way of implication except that which is necessary to carry out the intentions of the parties, as derived from the agreement itself and not merely from the circumstances under which it was made . . . [.] And, in the construction of such an agreement it will be conclusively presumed that it expresses their entire understanding.' [Citation.]" (A.B.C. Distrib. Co. v. Distillers Distrib. Corp. (1957) 154 Cal.App.2d 175, 185 (A.B.C. Distrib. Co.). In Aozora Bank, Ltd. v. 1333 North California Boulevard (2004) 119 Cal.App.4th 1291, this division emphasized that "[a] contract term will be implied only when 'it is so obvious that the parties had no reason to state [it].' [Citation.]" (Id. at p. 1296.)
This reluctance to imply additional terms into a written contract is heightened where the contract includes an integration clause, such as the one here, providing that the written terms "shall constitute the entire agreement" between the parties, and the parties "shall not be bound by any agreement or understanding not expressed herein." The parol evidence rule "generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument intended by the parties thereto as the final expression of their agreement. [Citations.]" (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912, fn. 4.) Of significance to this case, "in construing a contract which purports on its face to be the complete expression of the entire agreement between the parties, courts will not add another item about which the agreement is silent." (Wm. E. Doud & Co. v. Smith (1967) 256 Cal.App.2d 552, 558; accord, Southern Cal. Gas Co. v. Ventura etc. Co. (1957) 150 Cal.App.2d 253, 257.)
Plaintiffs here claim there is an "ambiguity" in the contract because it does not contain a provision which would provide a standard for gauging whether or not Pacific Bell has successfully carried out its obligation to deliver directories. Therefore, they argue that an additional term should have been imported into the contract based on the supposed ambiguity. However, the writing in the present case is not "ambiguous" in the sense that the writing has a term or terms reasonably susceptible to one or more meaning—the customary definition of ambiguous. (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 648; Bionghi v. Metropolitan Water Dist. (1999) 70 Cal.App.4th 1358, 1365-1366.) Moreover, the contract is not "missing" a performance standard, as plaintiffs suggest, but rather, the contract is intentionally silent on that issue. The undisputed extrinsic evidence shows that Pacific Bell deliberately omitted including a performance standard in the contract because of the myriad of unforeseen circumstances it could encounter in delivering millions of directories in a state as diverse as California.
A contract is not rendered ambiguous because it omits a term or provision which would have made the contract more economically beneficial for a party. In fact, the failure of a contract to include such a term is ordinarily accepted as a persuasive indication that the parties did not intend the term to be part of the contract. For example, in Levi Strauss & Co. v. Aetna Casualty & Surety Co. (1986) 184 Cal.App.3d 1479 (Levi Strauss), an employee fraudulently obtained loans in Levi Strauss's name, a loss reimbursable to Levi Strauss under an insurance policy issued by Aetna. The fraud occurred in Argentina, where the local currency "was suffering from an exceedingly high rate of inflation." (Id. at p. 1482.) As a result, the value of the Argentine peso "was plummeting" between the time of the loss and the time when Levi Strauss submitted its claim to the defendant insurer. (Id. at p. 1483.) The policy was silent as to whether the currency exchange rate at the time of loss or at the time the claim was submitted was applicable. As relevant here, Levi Strauss argued the insurance contract was ambiguous regarding the rate of exchange, and the more advantageous date-of-loss exchange rate should be applied. (Id. at p. 1485.) The defendant insurer argued, on the other hand, that the insurance contract intentionally did not mention the valuation of a foreign money loss because the policy was not meant to insure against a decline or fluctuation in value of a foreign currency. (Ibid.)
The appellate court rejected Levi Strauss's argument that the contract was ambiguous because it was silent as to the valuation of a foreign currency loss and reiterated the rule that a court cannot insert a contract provision where a contract is intentionally silent on an issue. " 'Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.' [Citation.] A contract extends only to those things concerning which it appears that the parties intended to contract. [Citations.] In construing a contract, the court's function is to ascertain and declare what, in terms and substance, is contained in that contract, and not to insert what has been omitted. [Citation.] The court does not have the power to create for the parties a contract which they did not make, and it cannot insert in the contract language which one of the parties now wishes were there. [Citation.] Courts will not add a term about which a contract is silent. [Citation.]" (Levi Strauss, supra, 184 Cal.App.3d at pp. 1485-1486, italics omitted.)
Numerous cases recite these principles of contract interpretation. (See, e.g., Sharpe v. Arabian American Oil Co. (1952) 111 Cal.App.2d 99, 103 ["matters which were intentionally omitted may not be added under the guise of interpretation"]; Stockton Dry Goods Co. v. Girsh (1951) 36 Cal.2d 677, 681 ["A condition cannot be read into a contract as to which the parties might well be deemed to have remained intentionally silent."]; see also California R. Co. v. Producers R. Corp. (1938) 25 Cal.App.2d 104, 109 [reciting the general rule that a trial court cannot add a contractual term where the omission of that term might have been intentional on the part of the original contracting parties].)
We conclude it would be fundamentally unfair not to respect the parties' clearly expressed intent to be bound only by the terms of the written contract by creating new obligations not included in the express language of the contract. (See A.B.C. Distrib. Co., supra, 154 Cal.App.2d at p. 185 ["Matters which were intentionally omitted from a contract may not be added under the guise of interpretation"].)
This brings us to plaintiffs' argument that, whether or not expressed in the contract, "this standardized contract should be interpreted to meet the Class Members' objectively reasonable expectation that [Pacific Bell's] deliveries would meet industry standards, whatever those standards might be." Plaintiffs point to "evidence from which a correctly instructed jury could have found that the industry standard was results-based: delivery to 96% of homes and businesses, as measured by industry-approved survey data." By this argument, plaintiffs seek to establish a new, material term of a fully integrated unambiguous contract—a 96 percent performance standard—when such a term was intentionally omitted from the parties' contract because Pacific Bell believed it could not guarantee a quantified level of directory deliveries.
However, it is elementary contract law that evidence of industry custom or usage, such as industry standards, is admissible only " 'as an instrument of interpretation' " to reflect the parties' intent; it may not be used " 'to create a contract.' " (Miller v. Stults (1956) 143 Cal.App.2d 592, 601.) As the court explains in People v. Caldwell (1942) 55 Cal.App.2d 238, "[c]ustom or usage may be received to prove methods adopted by a trade, industry or business, and is admissible for the purpose of proving the intention of parties to a contract which could not be done without the aid of extrinsic evidence." (Id. at p. 254, italics added.)
Although generally evidence of industry custom or usage can be invoked, as a general rule, " 'only to interpret, not create contractual terms,' " California law recognizes that " 'a reasonable usage may supply an omitted term or otherwise supplement an agreement.' [Citation.]" (Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 889 (Varni); Midwest Television, Inc. v. Scott, Lancaster, Mills & Atha, Inc. (1988) 205 Cal.App.3d 442, 451 [industry practice is admissible to supply missing term]; see also Code Civ. Proc., § 1856, subd. (c).) However, in such a case the critical question "is whether usage is being used to impermissibly create a contractual term . . . or whether it is being used to supply an intended but omitted term . . . ." (Varni, supra, at p. 889, italics added.) In attempting to answer that question, "[c]ertain rules have clearly emerged through case law which serve as a guide," including the principle that "where the parties contradict each other on whether a certain term was part of a contract based on their precontract discussions, usage or custom is not admissible to prove that one party's version of the terms of the contract was more probable. [Citations.]" (Id. at pp. 889-890.) In other words, evidence of industry custom or usage cannot be used as a "substitute for a meeting of minds of [the] parties as the basis of a contractual relationship." (Morris v. Aerojet-General Corp. (1960) 183 Cal.App.2d 609, 614.)
Thus, while industry custom or usage evidence can be used to supply intended but omitted terms or to explain an ambiguity in language used in the contract, as evidenced by the cases cited by plaintiffs, it cannot be used to create a contractual obligation that was intentionally omitted as part of the contract. This principle is illustrated by Levy v. State Farm Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, where the appellate court precluded the creation of a contract term based on a purported industry standard that was not contemplated by the parties. In that case, even strictly construing an insurance contract against an insurer, the court held that it had no power to add an obligation to meet an industry standard for automobile repairs when the auto insurance contract "did not purport to obligate State Farm to follow any particular industry standard, but required State Farm only to 'restore the vehicle to its pre-loss condition.' " (Id. at p. 6.) In so holding, the Levy court cited the general proposition that a court " ' "may not, under the guise of strict construction, rewrite a policy to bind the insurer to a risk that it did not contemplate and for which it has not been paid." [Citation.]'. . ." (Id. at p. 7.)
Plaintiffs rely on Denver D. Darling, Inc. v. Controlled Environments Construction, Inc. (2001) 89 Cal.App.4th 1221, 1236-1237 [custom and usage in building industry relied on in interpreting ambiguous contract]; High Plains Genetics Research v. J.K. Mill-Iron Ranch (S.D. 1995) 535 N.W.2d 839, 844 [failure to achieve "good results" interpreted with reference to industry standards]; Northeast Drilling v. Inner Space Services, Inc. (1st Cir. 2001) 243 F.3d 25, 38 [interpretation of the term "diggable" made with reference to industry standards]; Stevens Construction Corp. v. Carolina Corp. (Wis. 1974) 217 N.W.2d 291, 297 [parol evidence admissible to clarify ambiguous terms in written agreement].)
Even more to the point is White Point Co. v. Herrington (1968) 268 Cal.App.2d 458 (White Point), where the parties were unable to agree on certain material terms in the escrow instructions of an agreement for purchase and sale of real estate. (Id. at p. 460.) The trial court "attempted to substitute for the parties' incapacity to agree, judicial standards of fairness" and supplied the missing term by reference to general custom and usage in similar transactions. (Id. at p. 467.) The appellate court found this was error because "[t]he court in this role in fact constructed, on the basis of judicial notice taken of legal custom and usage, a new agreement between the parties." (Id. at p. 468.) Because there was no meeting of the minds on this important issue, the trial court could not, in essence, create a contract for the parties by reference to custom and usage. (Ibid.; accord, Roskamp Manley Associates, Inc. v. Davin Development & Investment Corp. (1986) 184 Cal.App.3d 513, 520.)
Plaintiffs in this case urged the trial court to do the same thing the judge improperly did in White Point—supply an intentionally omitted term based on prevailing practices in the industry. However, this amounts to imposing a material term that Pacific Bell never bargained for or intended. As precedent suggests, the court cannot do this. Accordingly, after conducting our de novo review of the contract interpretation issue raised below, we reach the identical conclusion as did the trial court: "[P]aragraph 5 of the contract is not reasonably susceptible to an interpretation that [Pacific Bell] is obligated to achieve a 100% delivery result, a 96% delivery result, or a 96% CAC score delivery result. Interpreting the contract to add any of these quantitative performance promises would import a material new term to which the language of this integrated written agreement is not reasonably susceptible."
Because we conclude the trial court was correct in its interpretation of Pacific Bell's delivery obligation under the contract, we need not discuss whether plaintiffs suffered prejudice as a result of the court's adoption of a good faith/best efforts/due diligence standard for judging Pacific Bell's delivery performance and in instructing the jury that the "contracts do not require Pacific Bell Directory to achieve any particular result in terms of number or percentage of directories delivered." At this juncture, we simply note that plaintiffs were permitted to introduce evidence, cross-examine witnesses, and present argument supporting their theory that Pacific Bell's failure to achieve delivery to all businesses and residences (or to meet its internal and industry minimum standard of delivery to 96 percent of intended recipients) was proof that it failed to use its best efforts and due diligence in delivering directories. Consequently, it does not appear that the court's contract interpretation ruling hindered plaintiffs in their "ability to place [their] full case . . . before the jury." (Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 983.)
B. Did the Trial Court Properly Order Judgment in Pacific Bell's Favor?
As already noted, the court directed the clerk not to enter judgment on the jury's verdict, and instead granted Pacific Bell JNOV. Notwithstanding evidence supporting the jury's finding that the contract had been breached, the court found that judgment should be entered for Pacific Bell because plaintiffs had failed to prove they had been harmed by any actions on Pacific Bell's part. In the court's words, "the record contains no evidence either as to the class as a whole or as to those members of the class who advertised in any of the particular 163 directories that class members were harmed by any breach by [Pacific Bell]." Plaintiffs claim the court erred in ordering judgment for Pacific Bell because "[t]he evidence at trial, along with all reasonable inferences drawn therefrom, was more than sufficient to establish both the fact and the amount of damages."
We first consider Pacific Bell's threshold claim that, in spite of the fact that this issue comes to us in the context of the trial court's granting Pacific Bell's deferred motion for a directed verdict, "the appropriate standard of review is that for a JNOV appeal." As a technical matter, we agree with Pacific Bell that it is more appropriate to characterize the court's ruling as granting JNOV, since the court's ruling was rendered after the jury returned its verdict, and that is how the court's ruling has been characterized in this appeal. (See Fountain Valley Chateau Blanc Homeowner's Assn. v. Department of Veterans Affairs (1998) 67 Cal.App.4th 743, 750 (Fountain Valley).) However, in considering the issue before us, this is a distinction without a difference because both a motion for JNOV and a motion for directed verdict challenge whether the evidence was sufficient to prove the claims or defenses asserted by the opposing party. (Hauter v. Zogarts (1975) 14 Cal.3d 104, 110; Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 877-878; Moore v. City & County of San Francisco (1970) 5 Cal.App.3d 728, 733-734.) Consequently, the "motions are analytically the same and governed by the same rules." (Fountain Valley, supra, at p. 750; Garretson v. Harold I. Miller (2002) 99 Cal.App.4th 563, 568 (Garretson); Alexander v. State of California ex rel. Dept. of Transportation (1984) 159 Cal.App.3d 890, 896; Estate of Sargavak (1949) 95 Cal.App.2d 73, 75.)
In this case, the court was prudent to defer ruling upon Pacific Bell's motion for directed verdict, which was made at the close of the evidentiary phase of trial, until after the jury rendered its verdict. "The power of a court to delay, in effect, ruling upon a motion for directed verdict in reliance upon the power to grant judgment notwithstanding the verdict is particularly efficacious. In the event an appellate court should disagree with the trial court's view of the legal sufficiency of the evidence, the reversal of the judgment notwithstanding the verdict can result in the reinstatement of the jury verdict. This avoids the necessity of a time consuming and costly retrial and potential second appeal, as would be required where a nonsuit or directed verdict is reversed." (Beavers v. Allstate Ins. Co. (1990) 225 Cal.App.3d 310, 328, fn. 6.)
"Ordinarily, when reviewing a JNOV, an appellate court will use the same standard the trial court uses in ruling on the motion . . . ." (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284.) " ' "The trial court's discretion in granting a motion for judgment notwithstanding the verdict is severely limited." [Citation.] . . . " 'The trial judge cannot reweigh the evidence [citation], or judge the credibility of witnesses. [Citation.] If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for judgment notwithstanding the verdict should be denied. [Citations.] "A motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied." '" '. . ." (Garretson, supra, 99 Cal.App.4th at p. 568, quoting Hansen v. Sunnyside Products, Inc. (1997) 55 Cal.App.4th 1497, 1510.)
Given the jury's unchallenged finding that Pacific Bell breached the contract it entered into with plaintiffs, it is axiomatic that plaintiffs were entitled to recover their consequential damages. "Any breach of contract, whether total or partial, causing measurable injury, gives rise to a claim for damages. [Citations.]" (Brawley v. J.C. Interiors, Inc. (2008) 161 Cal.App.4th 1126, 1134.)
Under the doctrine of partial restitution, a party who pays in full for goods or services only partially received is entitled to recover as damages the difference in value between what was paid for and what was actually received. (E.A. Robey & Co. v. City Title Ins. Co. (1968) 261 Cal.App.2d 517, 523; see also Kossler v. Palm Springs Developments, Ltd. (1980) 101 Cal.App.3d 88, 102 [a contracting party "is entitled to a reduction in the contract price to compensate for whatever deficiencies exist"].) Using this measure of damages, plaintiffs sought a pro rata refund of the advertising fees they paid to Pacific Bell during the class period because the contract, which the court interpreted to require "best efforts/good faith/due diligence" in delivering directories, was only partially performed. In considering a dispute similar to the one before us, a federal court has endorsed this measure of damages. (Olympia Hotels Corp. v. Johnson Wax Dev. Corp. (7th Cir.1990) 908 F.2d 1363, 1372 [breach of contract by hotel management firm based on its failure to "use its best efforts to make the hotel a success" could justify a "refund [of] a portion of the management fees that [the plaintiff] had paid under the contract"].)
Pacific Bell has not challenged this measure of damages, and the court itself confirmed that a partial refund of the advertising fees plaintiffs paid Pacific Bell was an appropriate measure of damages in this case. In an order denying Pacific Bell's motion for summary adjudication, the court acknowledged that "[i]f Plaintiffs prove a common breach of contract, then Plaintiffs can prove the fact of damage by showing that the members of the class did not receive the advertising exposure anticipated by the contractually required delivery of the directories."
It was generally understood that in order to prove damages, plaintiffs had to produce two categories of evidence for each of the 163 directory districts at issue: (1) the level of directory deliveries Pacific Bell would have achieved if it had, in good faith, used its best efforts and due diligence as required by the contract; and (2) the distribution Pacific Bell actually achieved. The net amount plaintiffs paid to Pacific Bell in advertising fees for each directory district was established by stipulation of the parties. With these figures, a pro rata rebate of advertising fees for less than full performance could be determined by calculating the difference between the percentage of businesses and residences that should have received timely delivery of directories and the percentage of businesses and residences that actually received timely delivery of directories. This shortfall would then be multiplied by Pacific Bell's net revenue from advertising sales for the directory district at issue to determine the amount of the pro rata refund to plaintiffs who advertised in that directory.
In granting JNOV for Pacific Bell, the court essentially found that plaintiffs had failed to establish an adequate evidentiary basis by which the jury could calculate damages. The deficiencies of proof noted by the court went to two aspects of plaintiffs' proof of damages. First, in attempting to establish a "best efforts" baseline for delivery performance, the court noted plaintiffs' expert did not "endorse any particular percentage as appropriate," instead leaving the jury to "find that different percentages might be appropriate for different books." However, the court believed there was no evidentiary basis "that would permit the jury to make such distinctions."
Second, the court noted that "plaintiffs' only evidence on [Pacific Bell's] actual performance for each delivery area is the CAC score for each book." While acknowledging plaintiffs presented evidence demonstrating "that [Pacific Bell] regularly utilizes the CAC score data for various purposes," the court believed that the CAC scores "inherently understate[d] the number of books actually delivered."
The criticism of proof of damages expressed by the court related to whether there was an adequate evidentiary basis for quantification of plaintiffs' damages, not whether plaintiffs were damaged at all. Where, as here, plaintiffs are clearly damaged by a breach of contract—they paid for advertising distribution services that they did not receive— they will not be denied recovery simply because precise proof of the amount of damage is not available. (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 14, fn. 3.) In Long Beach Drug Co. v. United Drug Co. (1939) 13 Cal.2d 158, our Supreme Court declared: "The fact that the amount of damage may not be susceptible of exact proof or may be uncertain, contingent, or difficult of ascertainment does not bar the recovery. [Citations.]" (Id. at p. 174; Smith v. Mendonsa (1952) 108 Cal.App.2d 540, 543.) "The law only requires that the best evidence be adduced of which the nature of the case is capable [citation], and the defendant whose wrongful act gave rise to the injury will not be heard to complain that the amount thereof cannot be determined with mathematical precision. [Citation.]" (Stott v. Johnston (1951) 36 Cal.2d 864, 876 (Stott); accord, Hacker etc. Co. v. Chapman V. Mfg. Co. (1936) 17 Cal.App.2d 265, 271.)
As numerous courts have recognized, all that is required is some reasonable basis of computation be used, and damages so computed are sufficient even if the result reached is only an approximation. (Acree v. General Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 398 (Acree); Milton v. Hudson Sales Corp. (1957) 152 Cal.App.2d 418, 434 (Milton); Stott, supra, 36 Cal.2d at p. 875; GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 873-874 (GHK Associates); Guntert v. City of Stockton (1976) 55 Cal.App.3d 131, 143 ["[t]hese general parameters avoid harsh and overly technical demands for certainty of proof"].)
In proving damages, plaintiffs presented evidence of a "best efforts" baseline, including evidence of the industry standards, Pacific Bell's own internal policies and standards for delivery, Pacific Bell's promotional materials, Pacific Bell's standards for its third-party distribution vendors and Pacific Bell's historic performance. Although the issue has not received much attention in California, courts from other jurisdictions have taken similar factors into consideration when determining whether a best efforts obligation has been satisfied. (See First Union v. Steele (Md.Ct.App. 2003) 838 A.2d 404, 448 [holding that the jury was properly allowed to consider objective factors such as industry standards and behavior of comparable parties when analyzing a party's "best efforts" performance]; Carlson Distributing v. Salt Lake Brewing (Utah Ct.App. 2004) 95 P.3d 1171, 1179 [stating that comparison between the bound party and another party is allowed when "evidence of [another party's] efforts would bear in some meaningful way on [the obligated party's] capabilities to perform similarly"].)
Plaintiffs argued to the jury that this evidence would support a baseline standard of performance that could fall anywhere between delivery to 96 percent of intended recipients, which plaintiffs claimed was the industry standard, to delivery to 100 percent of intended recipients. As plaintiffs concede, the jury rejected this argument. Instead, in rendering its verdict, it appears the jury used a 94.5 percent composite score as a baseline for all directory districts except for the 2002 Los Angeles directory where a 89.5 percent score was used, and the 2003 San Francisco directory where a 89.6 percent score was used.
Tested by the standards set out in these cases, and viewing plaintiffs' evidence in the most favorable light as we are required to do under our standard of review, we conclude plaintiffs' evidence was sufficient to support the jury's baseline determination. The complexity of calculating damages in this case should not obscure the fact that there was "some reasonable basis of computation of damages" to support the jury's award; and the overall evidentiary basis for the damage award was not so speculative as to render it invalid. (GHK Associates, supra, 224 Cal.App.3d at p. 873; see, e.g., Acree, supra, 92 Cal.App.4th at p. 398 [holding jury "was presented with a reasonable basis for computing damages" to 14,000 class members after jury found corporation that financed automobile purchases breached its contract by overcharging for insurance premiums].)
It is true, as the trial court pointed out, that plaintiffs' expert never pinpointed an exact percentage of deliveries that would constitute a best efforts delivery performance for all directory districts under all circumstances. Instead, plaintiffs presented the jury with a range of values, between 96 percent and 100 percent. This failure to quantify a uniform performance benchmark for each and every directory district was to be expected, however, as the court had instructed the jury, in accordance with its ruling on the interpretation of the parties' contract, that "[t]he contracts do not require Pacific Bell Directory to achieve any particular result in terms of number or percentage of directories delivered." Letting the jury resolve this question based on a wide range of factors conformed to the instructions the jury was given and provided " 'some reasonable basis of computation of damages' " even if the results reached were only " 'an approximation.' " (Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1585.)
Additionally, in granting JNOV for Pacific Bell, the trial court found the CAC scores for each directory district did not afford the jury a proper evidentiary basis for evaluating Pacific Bell's overall delivery performance. To recap, based on data collected by phone surveys for each directory district, CAC calculated separate delivery scores for residences and businesses and then combined those scores into a composite score representing the percentage of residences and businesses that received a directory during the initial hand delivery phase of directory distribution.
While acknowledging plaintiffs presented evidence demonstrating "that [Pacific Bell] regularly utilizes the CAC score data for various purposes," several factors were identified which led the court to conclude that CAC scores "do not truly reflect the number of books delivered." First, the court noted the CAC telephone surveys measured only the initial hand-delivery phase of Pacific Bell's directory distribution effort and that CAC surveys do not account for any of Pacific Bell's secondary distribution efforts, such as delivery to access stands or to new telephone customers. Also, the court pointed out that the CAC scores used by plaintiffs at trial had not been adjusted to remove the incorrect or mistaken "no receipt" responses to the telephone survey asking if the person surveyed had received a directory.
The foundation for admitting the CAC scores was provided by plaintiffs' statistical expert, Dr. Sullivan, who testified that the CAC methodology and approach to surveying directory deliveries produced a reliable, reasonably precise, and statistically accurate measure to a 95 percent confidence level. Moreover, plaintiffs' industry expert, James Desser, testified that CAC scores were widely used by "all members of the industry" to evaluate the effectiveness of their distribution efforts. Also, extensive evidence was presented that Pacific Bell executives, as well as others in the industry, had regularly used and relied upon CAC delivery verification surveys to measure the percentage of homes and businesses that had received directories.
The strengths and weaknesses of the CAC scores were thoroughly explored during trial through direct and cross-examination and argument by counsel. The jury was well aware that the CAC scores measured only the initial delivery phase, which involved a comprehensive process by which Pacific Bell's distribution vendor saturates the entire directory area by hand delivering directories to every home and business. The jury also knew that approximately 20 percent of Pacific Bell's directories were distributed during the secondary distribution phase and that the effectiveness of Pacific Bell's secondary distribution effort was not reflected in the CAC scores. In its computation of damages, the jury was told by plaintiffs' counsel that it could, if it wished, simply discount plaintiffs' requested damages to reflect the 20 percent of directories distributed during the secondary distribution phase.
The CAC scores were also criticized by Pacific Bell at trial because a "no" response to the CAC telephone survey did not conclusively show that the person was not delivered a directory. Instead, a "no" response could mean that the person simply did not know, could not recollect, or did not receive a directory due to a set of circumstances entirely out of Pacific Bell's control, such as the delivery person being locked out by a security gate. On this basis, Pacific Bell argued to the jury that the CAC scores relied upon by plaintiffs were "loaded with false negatives."
Ultimately, the court rejected the CAC survey results in their entirety because the court perceived technical flaws in the way the survey was conducted—even though there was evidence that the survey conformed to generally accepted survey principles. This approach conflicts with the proposition that "[o]nce a survey has been shown to conform to 'conventional methodology,' its arguable deficiencies usually are said to affect its weight rather than its admissibility. [Citation.]" (See Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1083 (dis. opn. of Johnson, J.).)
We observe that the CAC survey evidence survived several motions in limine. Before the first phase of the trial, the court denied an attempt to bar testimony from plaintiffs' statistical expert, Dr. Sullivan, finding him qualified to offer expert witness testimony about the reliability of the CAC survey evidence under Evidence Code section 801. Pacific Bell made a similar motion to exclude plaintiffs' industry expert, James Desser, from offering testimony pertaining to the CAC scores. The court denied the motion, indicating "[t]he jury may consider evidence pertaining to CAC scores in deciding whether [Pacific Bell] met its contractual obligation to deliver" directories and "in determining any appropriate damages." In these evidentiary rulings, the judge noted that "[Pacific Bell] is not precluded from engaging in thorough cross examination . . . in all appropriate areas."
In our view, the jury's findings and resulting verdict should not be discredited simply because certain aspects of the CAC survey results were uncertain or problematic. Even though the CAC survey results may not have described with mathematic precision exactly how many directories were actually put in the hands of business or residential consumers in each directory district; these inadequacies do not make the CAC survey results fatally flawed, irrelevant, or unhelpful to the jury. (See Pye v. Eagle Lake Lumber Co. (1924) 66 Cal.App. 584, 591 ["manifest impossibility of [proving damages] definitely necessitated resort to the less complete but practically sufficient evidence given in this case"].) As noted, in proving the amount of damages, plaintiffs need only introduce the "best evidence [that can] be adduced of which the nature of the case is capable . . . ." (Stott, supra, 36 Cal.2d at p. 876.)
While an ideal CAC survey result would account for all of the directories delivered during the secondary delivery phase and all of the survey respondents who mistakenly reported that they did not receive a directory, it is undisputed that such a survey does not exist. As plaintiffs themselves candidly admitted to the jury, "[w]e've tried our best with the CAC scores because it's the only empirical information that anybody has."
Quoting a treatise that addresses the point, one federal district judge court observed: "[O]ne must keep in mind that there is no such thing as a 'perfect' survey. . . . Like any scientific method related to statistics in the social sciences, every survey, no matter how carefully constructed and conducted, has some potential flaws somewhere. The proper approach is to view such evidence with some understanding of the difficulty of devising and running a survey and to use any technical defects only to lessen evidentiary weight, not to reject the result out-of-hand." (Conagra, Inc. v. Geo. A. Hormel & Co. (D.Neb. 1992) 784 F.Supp. 700, 722; accord, People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal.App.4th 1253, 1276 ["Except for a complete census of the entire population to which each person responds, no survey is perfect regardless of its size and no survey's results can be deemed accurate with certainty"].)
Pacific Bell was free to, and did, present its critique of the CAC scores to the jury, culminating in its argument that "all the evidence demonstrates you cannot rely on CAC scores to determine either whether distribution was good or to measure damages." The fact that the jury awarded plaintiffs substantially less than the lowest amount of damages they requested reflects that the jury did not engage in a wholesale acceptance of plaintiffs' damages calculations, and that Pacific Bell's criticisms of the CAC survey results may well have resonated with the jury. In any event, having presented the best available evidence for computing damages, the deficiencies of the CAC survey results were matters for the jury's consideration in weighing the evidence. (See Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 490 [" 'It is for the trier of fact to accept or reject this evidence, and this evidence not being inherently improbable provides a substantial basis for the trial court's award' . . ."].)
At trial, plaintiffs estimated their range of damages to be from $36.9 million to $115.3 million. As noted, the jury awarded plaintiffs approximately $17.35 million in damages, which plaintiffs concede could have reflected the jury's endorsement of Pacific Bell's claim that "the CAC methodology understated [Pacific Bell's] actual delivery performance . . . ."
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In conclusion, we find that the trial court erred in granting JNOV for Pacific Bell based on the court's belief that plaintiffs had not provided sufficient proof of damages. Once plaintiffs established a pecuniary loss as a result of Pacific Bell's breach of contract, "the fact that it [was] difficult to correctly measure the damage" should not have barred plaintiffs from any recovery. (Caspary v. Moore (1937) 21 Cal.App.2d 694, 699.) Under such circumstances, "[a]s long as there is available a satisfactory method for obtaining a reasonably proximate estimation of the damages, the defendant whose wrongful act gave rise to the injury will not be heard to complain that the amount thereof cannot be determined with mathematical precision. [Citations.]" (Noble v. Tweedy (1949) 90 Cal.App.2d 738, 746.)
IV.
DISPOSITION
The order granting judgment for Pacific Bell notwithstanding the verdict is reversed. The matter is remanded to the trial court with directions to reinstate the jury's verdict and enter judgment accordingly. The judgment, as reinstated, is otherwise affirmed. The parties are to bear their own costs on appeal.
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RUVOLO, P. J.
We concur:
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REARDON, J.
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SEPULVEDA, J.