Opinion
G060399
10-19-2021
KENT BORGMAN, Plaintiff and Appellant, v. UGA-ASSOCIATION FIELD SERVICES et al., Defendants and Appellants.
Morgan, Lewis & Bockius, Thomas M. Peterson, Barbara A. Fitzgerald, Jason S. Mills, Kathryn T. McGuigan; Reed Smith and Paulo B. McKeeby for Defendants and Appellants. Law Office of James A. Otto and James A. Otto; Law Office of Regina Spurley and Regina A. Spurley for Plaintiff and Appellant.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Santa Clara County No. 2012-1-CV-232891, Mary Arand, Judge. Affirmed.
Morgan, Lewis & Bockius, Thomas M. Peterson, Barbara A. Fitzgerald, Jason S. Mills, Kathryn T. McGuigan; Reed Smith and Paulo B. McKeeby for Defendants and Appellants.
Law Office of James A. Otto and James A. Otto; Law Office of Regina Spurley and Regina A. Spurley for Plaintiff and Appellant.
OPINION
MOORE, ACTING P. J.
This is an appeal and a cross-appeal arising out of plaintiff Kent Borgman's association with defendants Insphere Insurance Solutions, Inc., et al. (collectively Insphere). Prior to his association with Insphere, Borgman was an independent agent for MEGA Life and Health Insurance Company (MEGA). After MEGA changed its business model, he became affiliated with Insphere, MEGA's successor company. Insphere claims Borgman was in an employment relationship with Insphere, and Borgman claims he was an independent contractor. Following the termination of his affiliation, he sued defendants. As relevant here, Borgman alleged conversion. First, he claimed Insphere appropriated parts of Borgman's independent agency, including its goodwill. Second, Borgman alleged he was prevented from taking 15 to 20 boxes that were in Insphere's offices. The jury awarded Borgman damages of $750,000 and the court awarded prejudgment interest under Civil Code section 3336. These findings are the subject of Insphere's appeal. We conclude Borgman's claim for damages was a tenable one and prejudgment interest was properly awarded under section 3336.
All further statutory references are to the Civil Code unless otherwise indicated.
In the cross-appeal, Borgman seeks a new trial as to damages only. He argues attorney misconduct prevented him from having a fair trial, the court abused its discretion on evidentiary issues and erred as to several jury instructions, his damages were inadequate, and he was improperly denied attorney fees. We find that all of Borgman's arguments lack merit.
Accordingly, the judgment is affirmed.
I
FACTS
Despite the hideous over-inclusiveness of this appendix, it is barely cited and nearly useless. Both parties cited principally to the Reporter's Transcript, and failed to provide record references to critical documents referenced during trial. Insphere's appendix is, unfortunately, an example of "'wretched excess.'" (Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050, 1058, fn. 4.) The appendix is 3, 849 pages long, and includes so many irrelevant documents it is impossible to list them all here. A small sample includes over 130 pages relating to pleadings and challenges to pleadings that are now irrelevant, over 300 pages relating to a motion to require an undertaking, and over 1000 pages relating to motions for summary judgment/adjudication of which only one page (the court's ruling) is discussed substantively in the parties' briefs. "We remind all litigants of rule 8.124(b)(3)(A) of the California Rules of Court, which states that an appendix must not '[c]ontain documents or portions of documents filed in superior court that are unnecessary for proper consideration of the issues.'" (Ibid.) Citing to the Register of Actions, rather than including the document itself, is an appropriate way to reference that a document was filed if its contents are unimportant to the issues on appeal.
Defendants were participants in the health insurance business, primarily in the individual market. From 1992 to 2009, Borgman contracted with MEGA through its agency sales division, United Group Association (United), to sell its insurance products as an independent agent. In 1993, he became a District Sales Leader for United in Oregon. He oversaw and mentored a group of agents, and he also received commissions based on sales generated by these agents. He later moved to a similar position overseeing offices in Montana and Idaho. Once he was promoted to Division Sales Leader, Borgman stopped selling to customers directly and became a recruiter, trainer, and developer of new agents. As a Division Sales Leader, he received commissions based on the sales of all United agents in his region. He recruited and trained the agents in his region, but he did not employ them or pay them directly.
As a Division Sales Leader, Borgman was responsible for sharing the cost of sales leads distributed to agents in the region. The leadership in a particular region shared the costs of the leads, and if the leads were profitable, he also shared in a bonus. To participate in the lead program, Borgman signed a "Lead Request and Waiver" agreement under which he agreed that for two years, he would only use the leads he received to promote MEGA's business. He also agreed that the leads were confidential and proprietary, and he agreed to return the leads within 48 hours if his agency agreement terminated.
Borgman also paid for advertising, and he obtained business through referrals. Borgman profited by building residual income as customers bought policies and stayed with the company; he continued to earn a commission as long as the customers renewed their policies. Through his work and over time, Borgman grew his business and supervised an average of about 75 sales agents.
In 2009, in response to changes in the market and in anticipation of the enactment of the Affordable Care Act, MEGA concluded its business model was no longer viable. MEGA stopped selling its own products by early 2010, and as a result, agents like Borgman had no products to sell, although existing policies continued being serviced and Borgman continued to collect commissions.
MEGA's parent company created a different company based on a new business model, which became Insphere. Insphere represented outside insurance companies, unlike MEGA, which sold its own policies. Insphere sold policies for companies such as United Health and Aetna.
Certain of MEGA's independent contractors were given employment opportunities with Insphere, including Borgman. It was contested as to whether Borgman retained independent contractor status or became an employee. Dan Garrison, Senior Vice President of Care Relations with Insphere, testified that Insphere brought MEGA contractors in as employees: "I think with the new business model we certainly needed to have more control from a governance oversight perspective of our local markets." Garrison testified that in 2010, as part of the transition, Insphere assumed the local branch office leases, although it was voluntary for independent sales agents like Borgman to turn over his lease. Insphere also made offers to purchase office furniture and equipment from the offices where they were assuming the leases; acceptance was, again, voluntary.
Borgman was informed of these changes, along with other Division Sales Leaders, at a series of meetings in Dallas in October 2009. According to Borgman, he was told that he would be paid "a base salary, based on our own particular earnings. Plus we were going to continue on as an independent agent, independent contractor form and receive 1099 income on all the sales that we do."
Borgman testified that he asked MEGA's president, Jack Heller, "are you going to pay us for what we built[?] You know, I had well over [$1.5] million of hard expenses." Borgman described Heller's response as "a little deflective but he said we're going to take care of you." Borgman testified at trial that he repeatedly asked Heller how he was going to compensate Borgman and others in his position for what they had built.
The parties dispute whether Borgman became an employee of Insphere as of January 2010, or whether Borgman continued to run his own business under different conditions. An offer of employment was extended to Borgman in October 2009. Borgman admitted at trial that he signed this offer on October 20 and testified at both his deposition and during trial that he became an employee as of January 2010. He reviewed the document before he signed it and understood he was accepting an offer of employment.
The employment offer specified that as of January 2010 he would be an Agency Manager and that became his title as of that date. The offer specified a base salary which was paid to him by Insphere starting in January 2010. The offer also specified he was an at will employee.
Borgman also received commissions as part of his compensation, as well as other benefits such as vacation time. Insphere withheld taxes on his salary, which they did not do while he was an independent contractor. For 2010 and 2011, he received W-2 forms from Insphere at the end of the year. He was also provided with a company computer, and he transferred information from his personal laptop to the Insphere computer.
Borgman further testified that once he became an employee, he no longer had expenses such as office rental, equipment, and furniture. Insphere paid those expenses, as well as paying for sales leads. Ultimately, Borgman reached an agreement to sell Insphere certain office furnishings for $18,105. In 2010, Insphere purchased new equipment for use in Borgman's offices, including computers.
Borgman testified he was not required to accept this offer, but did so. Insphere did not take over any bank accounts. As a result of the change of business structure, employees such as assistants became employees of Insphere rather than employees of the independent contractors like Borgman.
Kent Schooler, Director of Agent Contracts for Insphere, testified that in addition to the employment letter, Borgman also signed a base agent contract because he was eligible to "write personal business if he chose to. . . . He had the possibility of selling a policy himself." Borgman also received an addendum that gave him the ability to receive commissions on sales made by other agents in his reporting chain. Borgman also continued to receive commissions on previously sold MEGA policies if they renewed. Tax forms showed that Borgman received $184,541.44 in "nonemployee compensation" in 2010, $55,887.21 in 2011, and $31,552.27 in 2012, and continued to receive smaller amounts in 2013 and 2014.
According to Schooler, this did not alter Borgman's status as an employee, but Borgman claims the opposite, averring that the employment letter was "superceded" [sic] by the base agent contract. The evidence Borgman points to in support of this claim is the testimony of his expert, a lawyer who testified regarding contract interpretation. He also points to the testimony of a former sales manager, Jo Taylor, called a Zone Manager. She testified she did not understand how individuals in Borgman's position starting in 2010 could be both employees and independent contractors, and that "it just didn't make any sense." She also testified, however, that Borgman was an independent contractor "for a time . . . then we became employees."
After the January 2010 transition, Borgman and others began to complain that Insphere was taking their business. Borgman was terminated from his employment at Insphere in April 2011, and at the same time, his independent contractor agreement was terminated. Borgman refers to this as "the taking," as Insphere informed him that it was maintaining all property in Borgman's office. Borgman now claims "the 'taking'" began in October 2009 when he entered into the agreement to sell his office space, equipment, and furniture. The "final act" of conversion was on April 15, 2011, with "the 'taking'" of Borgman's alleged property, computer, files, as well as his "intangible goodwill."
Borgman also claimed that he had 15 to 20 boxes of documents in his office that he left there because he was in charge of the office. Nobody had stopped him from removing these files previously, but he felt that he had no reason to do so. He described the contents of the boxes as "all the information, the individual transmittals on all the people that we had sold to over the years," but he had no index or itemized list of the contents of the boxes. He claimed, at trial, that the boxes included information relating to sales leads, client information, and sales force information.
Borgman also contends that when Insphere retained his files, it took his "goodwill," basing this assertion on testimony from Taylor. The cited testimony states Taylor's view that Insphere took on the goodwill of "people like Mr. Borgman." Further, Borgman claims stock options were taken from him.
B. Procedural History
Restricting our discussion to pertinent procedural details only, we note the second amended complaint is the operative complaint (complaint). It alleged 12 causes of action, including six claims for Labor Code violations, the violation of Business and Professions Code section 17200, fraud in the inducement, negligent representation, conversion, accounting, and wrongful termination in violation of public policy. In contrast to his claims at trial, the complaint alleged Insphere and its agents had falsely represented to Borgman that he was an independent contractor from 1997 onward. It alleged that on October 16, 2009, Insphere told Borgman he had never "'owned'" his California office that it all belonged to Insphere, who took ownership of his clients, policies, files, and sales agents. In the causes of action for Labor Code violations, he alleged he was an employee, and further, apparently a nonexempt employee entitled to meal breaks, rest periods, and overtime pay.
Insphere demurred to all causes of action except those for conversion and accounting. Borgman did not file an opposition. The court sustained the demurrer and gave Borgman leave to amend. No amended complaint appears to have been filed. Accordingly, all that remained were the causes of action for conversion and accounting; Borgman apparently did not pursue the accounting claim at trial.
A jury trial began in January 2017. The jury entered an unspecified damage award of $750,000 in Borgman's favor. Insphere sought judgment notwithstanding the verdict, which was denied by the court. Borgman sought new trial or additur, which was taken off calendar, as the hearing was set beyond the statutory 60-day timeframe. The court also denied Borgman's motion for attorney fees. The court awarded Borgman his costs, including prejudgment interest in the amount of $315,000.
Both parties appealed.
II
DISCUSSION
A. Appeal
Whether we view Insphere's appeal as one from the judgment or one from the denial of their motion for judgment notwithstanding the verdict, the standard of review is the same. "When findings of fact are challenged in a civil appeal, we are bound by the familiar principle that 'the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,' to support the findings below. [Citation.] We view the evidence most favorably to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor. [Citation.] Substantial evidence is evidence of ponderable legal significance, reasonable, credible and of solid value. [Citation.] However, '[s]ubstantial evidence . . . is not synonymous with "any" evidence.' [Citation.] Instead, the evidence must be '"substantial" proof of the essentials which the law requires.'" (Oregel v. American Isuzu Motors, Inc. (2001) 90 Cal.App.4th 1094, 1100.)
We reject Borgman's claim that Insphere has waived any issue of substantial evidence by failing to set forth the facts in accordance with that standard of review. Insphere's opening brief, contrary to Borgman's claims, does not set forth only its version of the evidence or omit references to conflicting evidence, nor does Borgman provide any examples of such omissions. The fact that Insphere did not summarize the testimony of every witness is not relevant, as the testimony of every witness was not pertinent to the issues in this appeal. Nor, as Borgman's counsel suggested at oral argument, is an appellant required to detail every step of a lengthy procedural history in order to maintain an argument about substantial evidence. Further, we find that Insphere did a far better job of avoiding unsupported factual assertions and hyperbole than Borgman did in his briefs.
To the extent Insphere claims the trial court committed errors of law, we review such issues de novo. (Roberts v. United Health Care Services, Inc. (2016) 2 Cal.App.5th 132, 149.)
1. Conversion Claim Regarding Aspects of Borgman's Agency
Insphere first claims that Borgman's conversion action must fail as a matter of law because there was no "wrongful taking." "To prove conversion, a plaintiff must establish three elements: (1) 'plaintiff's ownership or right to possession of property,' (2) 'defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession,' and (3) damages." (Fong v. East West Bank (2018) 19 Cal.App.5th 224, 231.) "'"It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use."'" (Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1507.)
As this case is governed purely by state law, we see no reason to rely on federal authority, as Insphere does rather heavily. District court orders are particularly unpersuasive in the face of contradictory California precedent.
"Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant's good faith, lack of knowledge, and motive are ordinarily immaterial." (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)
At common law, conversion was limited to tangible personal property "capable of being identified and taken into actual possession." (Payne v. Elliot (1880) 54 Cal. 339, 340-341.) The remedy at that time was trover. "But the fiction on which the action of trover was founded, namely, that a defendant had found the property of another, which was lost . . . has been by most courts discarded; so that the action no longer exists as it did at common law, but has been developed into a remedy for the conversion of every species of personal property." (Id. at p. 341.) A conversion claim, therefore, "lies for bank notes sealed in a letter [citation]; for negotiable instruments [citation]; for a judgment [citation]; for a promissory note which has been paid [citation]; for copies of a creditor's account [citation]; for a writ of execution issued on a judgment [citation]; and for certificates of shares of stock." (Ibid.)
"'In substance it (trover) is a remedy to recover the value of personal chattels wrongfully converted by another to his own use."' (Olschewski v. Hudson (1927) 87 Cal.App. 282, 287-288.)
Thus, under this modern understanding of conversion, the tort includes the "taking of intangible property rights when 'represented by documents such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts.' [Citation.] As one authority has written, 'courts have permitted a recovery for conversion of assets reflected in such documents as accounts showing amounts owed, life insurance policies, and other evidentiary documents. These cases are far removed from the paradigm case of physical conversion; they are essentially financial or economic tort cases, not physical interference cases.'" (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 209-210.)
"We recognize that the common law of conversion, which developed initially as a remedy for the dispossession or other loss of chattel [citation], may be inappropriate for some modern intangible personal property, the unauthorized use of which can take many forms. In some circumstances, newer economic torts have developed that may better take into account the nature and uses of intangible property, the interests at stake, and the appropriate measure of damages. On the other hand, if the law of conversion can be adapted to particular types of intangible property and will not displace other, more suitable law, it may be appropriate to do so." (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 124-125 (Fremont).) In Fremont, the court held a cause of action for conversion was sufficiently pleaded where the complaint alleged the unauthorized taking of an intangible property interest not merged with or reflected in tangible property. (Id. at pp. 125-126.)
Borgman identifies the property allegedly converted as "goodwill, sweat equity, client relationships, and brand recognition." We find "sweat equity" too amorphous a concept to be recognized here, and "client relationships and brand recognition" both fall under the more general category of goodwill. "The 'good will' of a business is the expectation of continued public patronage." (Bus. & Prof. Code, § 14100.) "The good will of a business is property and is transferable." (Bus. & Prof. Code, § 14102; see Bus. & Prof. Code, § 16601.) "Courts have long accepted that goodwill may be measured by the capitalized value of the net income or profits of a business or by some similar method of calculating the present value of anticipated profits." (People ex rel. Dept. of Transportation v. Muller (1984) 36 Cal.3d 263, 271, fn. omitted.)
We disagree with Insphere that Borgman is claiming Insphere wrongfully took his business as a result of MEGA's decision to change its business model.
Indeed, goodwill can be so valuable that it is included in a narrow exception to the general California law prohibiting covenants not to compete. This exception recognizes that when a business's goodwill is sold, it would be "'unfair' for the seller to engage in competition which diminishes the value of the asset he [or she] sold." (Monogram Industries, Inc. v. Sar Industries, Inc. (1976) 64 Cal.App.3d 692, 698.) Further, goodwill is recognized as an asset capable of being divided in the context of division of community property. (In re Marriage of Finby (2013) 222 Cal.App.4th 977, 985.) Accordingly, we have no difficulty finding that goodwill is the kind of intangible property that is subject to conversion. (Fremont, supra, 148 Cal.App.4th at pp. 119-126.)
Insphere asserts that property is not subject to conversion unless it can be "precisely defined," but does not provide a direct citation for this proposition. The case Insphere relies on states that the rights of possession and exclusive use must be certain, but it does not state what the property itself must be. An identifiable amount of money, for example, may be subject to conversion. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) So can "a net operating loss" that is capable of ascertainment. (Fremont, supra, 148 Cal.App.4th at pp. 125-126.) We find that a business's goodwill also falls into this category. Whether the value of the goodwill was properly proved at trial is a separate question from whether it can be proved.
Insphere's next claim is that once Borgman accepted its offer of employment, no wrongful taking was possible. Because Borgman chose to become an employee and continue selling Insphere's products, Insphere reasons, the consequences were voluntary and not wrongful. Customers, for example, would do business with Insphere rather than Borgman's agency, and agents would be affiliated with Insphere rather than Borgman. The changes that occurred, they maintain, were with Borgman's consent pursuant to the October 20 employment offer.
The evidence, however, demonstrated that while Borgman primarily had an employment relationship with Insphere after January 2010, the relationship, according to an Insphere witness, also included the provisions of the base agent contract in order to allow Borgman "to write personal business if he chose to" and receive commissions from other agents. Accordingly, the evidence supports that not every asset of Borgman's agency business was voluntarily turned over or sold to Insphere. Borgman presented evidence that in April 2011, while on Insphere business in Dallas, Insphere locked Borgman's office and prevented further access to all property therein.
The jury, as factfinder, had the ability to conclude that not all of Borgman's agency business ended with his employment by Insphere and that Borgman continued to own at least some part of what was formerly his independent business, which Insphere never purchased. Accordingly, the jury could reasonably find that part of Borgman's property in his agency was converted by Insphere, and there was substantial evidence to support that finding based on the testimony presented at trial.
Finally, Insphere claims that Borgman's conversion claim must fail as a matter of law because he did not have the exclusive right to possess the property converted. Insphere points to the noncompetition clause with respect to sales leads, which stated that Borgman was not permitted to induce or attempt to induce a client to leave MEGA, and his agreement to return leads once his contract ended. But given that Borgman continued to operate independently in some capacity, the scope of his ownership in the property was a factual issue for the jury, not one that can be decided as a matter of law. The jury's implied findings on these issues are supported by substantial evidence; indeed, Insphere does not claim otherwise.
2. Conversion Claim of Bankers' Boxes
The bankers' boxes were tangible property capable of conversion. Borgman testified at trial that the boxes included information relating to his sales over the years as well as leads, client information, and sales force information. The jury could reasonably find from the evidence that these documents belonged to Borgman and that Insphere wrongfully took possession of them. Insphere's suggestion that someone who has a large amount of property unexpectedly taken must provide an index of every item taken before recovering for conversion is incorrect and would lead to gross injustice if adopted. We find the comparison to a case where a precise amount of cash was taken is inapposite. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384.) We also conclude that Borgman presented sufficient evidence to support the jury's findings with regard to the value of the documents as reflected in the overall value of the business.
3. Prejudgment Interest
Insphere next argues that prejudgment interest should not have been awarded by the court following the judgment. They argue the jury did not make the proper factual findings regarding the date and value of the converted property.
Under section 3336: "The detriment caused by the wrongful conversion of personal property is presumed to be: [¶] First - The value of the property at the time of the conversion, with the interest from that time, or, an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted; and [¶] Second - A fair compensation for the time and money properly expended in pursuit of the property." (Italics added.)
The first sentence in section 3336 includes an "or" - the measure of damages is either the value of the property at the time it was converted, plus interest (the first provision), or an amount sufficient to compensate for the loss, which does not include interest (the second provision). "As a general rule, the value of the converted property is the appropriate measure of damages, and resort to the alternative occurs only where a determination of damages on the basis of value would be manifestly unjust. [Citation.] Accordingly, a person claiming damages under the alternative [second] provision must plead and prove special circumstances that require a measure of damages other than value, and the jury must determine whether it was reasonably foreseeable that special injury or damage would result from the conversion." (Lueter v. State of California (2002) 94 Cal.App.4th 1285, 1302.) Because that is not applicable here, the measure of damages in this case is the first provision - the value of the property at the time it was converted, plus interest. Prejudgment interest is calculated after the verdict. (Irving Nelkin & Co. v. South Beverly Hills Wilshire Jewelry & Loan (2005) 129 Cal.App.4th 692, 694, 702-703.)
Insphere argues that to award prejudgment interest, the jury must make specific findings regarding the date of conversion and the value of the converted property on that date. The cases it cites are either factually inapposite or simply do not state that proposition. (Minor v. Christie's Inc. (N.D.Cal., July 12, 2010, No. C 08-05445 WHA) 2010 WL 2735040, p. *8 [first provision of § 3336 not presented to jury]; Moreno v. Greenwood Auto Center (2001) 91 Cal.App.4th 201, 210 [sole issue was loss of use]; Carey v. Glenco Citrus Products (1965) 235 Cal.App.2d 572, 581-582 [overall retrial as to damages]; and Niles v. Edwards (1891) 90 Cal. 10 [simply not on point].) They cite no cases requiring specific jury findings, nor do they cite to a proposed verdict form requesting such specific findings.
There was evidence before the jury as to the time of the conversion alleged; unlike many cases, it did not involve a straightforward taking of all the property at once, but was described as a process that lasted from September 2010 to 2011. The verdict form states the conversion occurred after September 2010 and the damages were $750,000. The jury was not asked any other pertinent questions. We find the jury's findings were sufficient to support an award of prejudgment interest, to which Borgman was entitled under the portion of Civil Code section 3336 that authorizes an award of "[t]he value of the property at the time of the conversion, with the interest from that time . . . ."
Insphere also contends that Borgman's damages were too uncertain to qualify for prejudgment interest. To the extent they cite cases under section 3287, the general statute regarding prejudgment interest, we find those cases inapplicable. Some of the cases that do apply section 3336 do not stand for the proposition Insphere asserts or predate the adoption of that provision. (Hamer v. Hathaway (1867) 33 Cal. 117 [§ 3336 adopted in 1872]; Lynch v. McGhan (1907) 7 Cal.App. 132 [does not address claim that property's value was uncertain].)
That leaves Insphere with one case supporting its contention, Friedman v. Renz (1939) 31 Cal.App.2d 71. That case involved shares of stock that had been assigned by William D. Spruance to Renz as collateral to secure the payment of $2,200 and interest. Spruance repaid the $2,200 with interest, but Renz refused to return the stock, claiming he had sold it for $600. Spruance assigned his rights in the stock to Friedman, who sued Renz, seeking damages of $7,218. The trial court determined the highest value of the stock between the date of conversion and the trial date was $8,421 and entered judgment for Friedman. (Id. at p. 72.) But this amount was based on two large blocks of stock by the corporation pursuant to special permits, not the market value. (Id. at p. 73.)
The court reviewed the two possible measures of recovery under the first sentence of section 3336 - the first provision, which allows for the value of the property at the time of conversion with interest, or the second provision, an amount that would indemnify the injured party for the loss which is the natural, reasonable and proximate result of the wrongful act and could not have been averted. "In a proper case, and where the property in question is of a fluctuating value, the recovery of the highest market value therefor between the date of the conversion and the trial of the action will doubtless be the measure of damages, providing one seeking damages has acted with reasonable diligence. [Citations.] We deem this to be the proper measure of damages herein, and means the price the stock would command in the open market." (Friedman v. Renz, supra, 31 Cal.App.2d at p. 73.) The court went on to find that on the date of conversion, the highest market value was $4 per share, and that was the amount Friedman was entitled to recover. (Id. at p. 74.)
Thus, the takeaway from this case is not, as Insphere claims, that prejudgment interest is unavailable where the value of the converted property fluctuated, but that a plaintiff was entitled to the greater of the two measure of damages in an appropriate case. "Respondent herein is entitled to recover damages pursuant to his election at the trial . . . ." (Friedman v. Renz, supra, 31 Cal.App.2d at p. 74.) And as we have already stated, the measure of damages in this case was the first provision, as damages under the second, under modern case law, require pleading and proof of "special circumstances that require a measure of damages other than value, and the jury must determine whether it was reasonably foreseeable that special injury or damage would result from the conversion." (Lueter v. State of California, supra, 94 Cal.App.4th at p. 1302.)
Borgman did not proceed under the second provision of section 3336, and the goodwill of Borgman's business was capable of ascertainment on a given date. Indeed, Insphere's proposed jury instructions included CACI No. 2102, on the "Presumed Measure of Damages for Conversion," which reflects that damages are the fair market value of the property at the time of conversion. Accordingly, we find Borgman's damages were sufficiently certain to permit for his recovery under the first provision of section 3336 and to recover prejudgment interest.
B. Cross-Appeal
Borgman seeks a new trial alleging myriad errors. Insphere describes the cross-appeal as "a scattershot of arguments . . . that alternatively cast blame on [Insphere], the trial court, and the jury." We must agree. The cross-appeal is replete with arguments that fail to demonstrate error, establish prejudice, or both.
1. Attorney Misconduct
Borgman's first claim is that Insphere engaged in attorney misconduct so egregious that it warrants a new trial. "The law, like boxing, prohibits hitting below the belt. The basic rule forbids an attorney to pander to the prejudice, passion or sympathy of the jury." (Martinez v. Department of Transportation (2015) 238 Cal.App.4th 559, 566.) Attorney misconduct also "implies a dishonest act or an attempt by an attorney to persuade the court or jury by the use of deceptive or reprehensible methods." (People v. Gomez (1976) 63 Cal.App.3d 328, 338.) A showing of attorney misconduct requires a demonstration of bad faith. (Ibid.)
"Attorney misconduct is an irregularity in the proceedings and a ground for a new trial. [Citation.] . . . However, to preserve for appeal an instance of misconduct of counsel in the presence of the jury, an objection must have been lodged at trial and the party must also have moved for a mistrial or sought a curative admonition unless the misconduct was so persistent that an admonition would have been inadequate to cure the resulting prejudice." (Garcia v. ConMed Corp. (2012) 204 Cal.App.4th 144, 148.) In addition to demonstrating attorney misconduct occurred, the party advancing the argument must show prejudice. (Id. at p. 149.)
While we review the prejudice determination independently, the standard for whether misconduct occurred is less clear. (Garcia v. ConMed Corp., supra, 204 Cal.App.4th at p. 149.) Ultimately, it does not matter in this case, because even under independent review, the standard most favorable to Borgman, we find no misconduct.
Borgman's first alleged instance of conduct purportedly so egregious that it demands a new trial is Insphere's alleged violation of a motion in limine prohibiting Borgman from introducing evidence of Insphere's financial condition. "Yet, INSPHERE'S counsel secretly knew that they would solicit testimony about INSPHERE'S financial condition and how that resulted in the decision to take BORGMAN'S property."
The cited testimony, however, says no such thing. It is part of the testimony of Dan Garrison, Senior Vice President of Care Relations with Insphere. The roughly three pages of testimony cited explain the individual health care market as it existed prior to 2010 and MEGA's role in it. Garrison discussed market pressures that occurred as larger companies entered the individual market. Garrison never mentions Insphere's "financial condition" nor does he mention Borgman. As we discuss post, admitting this testimony was not an abuse of discretion. It was also not misconduct, nor did it violate any court ruling on a motion in limine. Nor did Borgman object to it as such. We find no misconduct.
Borgman's next claim of misconduct is that "INSPHERE falsely portrayed BORGMAN as an employee while hiding a superseding contract which stated that BORGMAN was an independent contractor, secretly knowing that BORGMAN could not be both an employee and independent contractor at the same time." He claims "INSPHERE lied to the jury" on this point. While there was certainly a dispute about Borgman's status - which Borgman himself contributed to with his testimony that he "accept[ed] an offer of employment" - any claim of misconduct on this point is specious. There is not the slightest indication of bad faith on Insphere's part. This was a genuine issue of fact at trial, and testimony was elicited on both sides.
Borgman next contends that Insphere committed a dishonest act by arguing the case was subject to a two-year statute of limitations. Again, this comes nowhere close to misconduct. Insphere, like any party, was entitled to offer an argument to the court on a relevant legal issue. His disagreement that a different statute of limitations should apply demonstrates neither dishonesty nor bad faith. Like Borgman's other claims of misconduct, this claim is entirely without merit.
2. Evidentiary Issues
We review evidentiary issues for abuse of discretion. (Hernandez v. County of Los Angeles (2014) 226 Cal.App.4th 1599, 1613.) Even where evidence has been erroneously excluded or admitted, the judgment or decision shall not be reversed unless the reviewing court believes the error resulted in a miscarriage of justice. (Cal. Const., art. VI, § 13; Evid. Code, §§ 353, 354.)
a. Evidence Regarding Borgman's Business
Borgman first claims the court did not allow evidence of his "historical financial performance data." He claims the court prohibited him "from informing the jury of the size and actual volume of business and profits done by BORGMAN; introducing any evidence of business performance that would establish that 'Borgman Insurance Agency' was well managed; had an effective sales force; the existence of a stable market; or goodwill."
The citation he points to in the record, however, says none of that. The court ruled that it would not admit an exhibit because it included "earnings set forth in a document almost a decade before" as the court did not see how it "can help the jury evaluate the business as of the date of the alleged conversion, so 13 will not be admitted." Presumably this refers to exhibit 13; if this document is included somewhere in the record, Borgman does not cite to it. To the extent he challenges the exclusion of this document, he has waived the argument by failing to cite to it in the record. (Jones v. Superior Court (1994) 26 Cal.App.4th 92, 99.)
He does cite to a short brief which discusses exhibit 13, but does not include the exhibit itself.
Moreover, Borgman was given the opportunity to present testimony about the value of his business. Borgman's expert testified on this point, and contrary to Borgman's claim that the entirety of his "damages evidence was reduced to a few tax returns, which have nothing to do with the actual value of the business assets that were converted by INSPHERE," his expert testified that the tax returns were "accurate and sufficient" information from which he could estimate the value of the business's goodwill. Contrary to his claims on appeal, Borgman presented sufficient evidence to the jury to explain his expert's valuation.
Borgman also claims he was prevented from introducing evidence of "sales volume, goodwill, and variety of other factors" that were pertinent to the value of his business. He does not specify what evidence he tried to introduce, nor does he cite to portions of the record where he tried to introduce such evidence. Such claims are too amorphous for this court to review.
Prior to trial, the court also granted Insphere's motion in limine to exclude evidence regarding Borgman's loss of future income. Given that the measure of damages for conversion is the value of the property at the time of the conversion, this was not an abuse of discretion. Borgman's future lost income was simply not relevant and therefore not admissible.
b. Evidence of Insphere's Financial Condition
Borgman also asserts the court allowed Insphere to introduce testimony "about its fina[n]cial condit[i]on as an excuse for conversion." The rest of this section of his opening brief, however, is dedicated to the issues mentioned above, and he does not discuss it further in this section.
In the section on punitive damages, Borgman points out that the court overruled his objections to Garrison's testimony. He argues that Garrison improperly testified regarding "the financial reasons for the conversion." In response, Insphere asserts, and is supported by the record, that "Garrison simply explained the competitive pressures that caused the company to change its business model and cease selling its own underwritten insurance products." We agree. Garrison merely provides context regarding the insurance market in the relevant period. As discussed ante, he offered no specific testimony about Insphere's finances, its financial condition, or "the financial reasons for the conversion."
While Borgman asserts these opinions were "irrelevant and unduly prejudicial," he does not provide any legal argument to support these contentions. "When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived." (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)
3. Adequacy of Damages
Borgman correctly asserts that "inadequate damages" is grounds for a new trial. We review this claim for substantial evidence, which, as we indicated ante, requires us to "view the evidence most favorably to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor." (Oregel v. American Isuzu Motors, Inc., supra, 90 Cal.App.4th at p. 1100.) Borgman claims that the "undisputed evidence" established that the "replacement cost for his purchased property as at least $5.9 million," and therefore, the jury's award of $750,000 was inadequate.
As we also discussed with respect to Insphere's appeal, the typical measure of damages for conversion is "[t]he value of the property at the time of the conversion . . .; and [¶] . . . fair compensation for the time and money properly expended in pursuit of the property." (§ 3336; Virtanen v. O'Connell (2006) 140 Cal.App.4th 688, 708.) It is not the "replacement cost" of the property.
Further, Borgman's $5.9 million number apparently comes from adding the value of his business's goodwill in 2009 ($1,558,510), 2010 ($1,667,605.70), and 2011 ($1,174,338.10) together, the total of which was approximately $5 million according to his expert's testimony, with the remainder apparently attributable to Borgman's own testimony about the value of the sales leads and client information. There was no testimony or other evidence supporting Borgman's present assertion that the value of his lost goodwill was cumulative, however, nor can we envision how adding the purported value of the goodwill together makes any sense in terms of quantifying Borgman's damages. The goodwill of the business is only valuable when it is sold - as Borgman's own expert testified, "Goodwill is an amount that a willing buyer is ready to pay to acquire another business." Borgman could have only sold his business once, in 2009, 2010, or 2011, but not in all three years. Thus, Borgman's estimate of his damages was wildly inflated from the start.
Further, Borgman's expert valued the business based on past income tax returns and assumed a growth rate of 7 percent. This, however, reflected a business model that no longer existed as of 2010. "'Whatever the proper measure of damages may be, in a given case, the recovery therefor is still subject to the fundamental rule that damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery.'" (Lueter v. State of California, supra, 94 Cal.App.4th at p. 1302.) Borgman's evidence is too speculative to claim he was entitled to a greater amount of damages as a matter of law.
"[T]he jury is entrusted with vast discretion in determining the amount of damages to be awarded." (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 64; see Hope v. California Youth Authority (2005) 134 Cal.App.4th 577, 595.) This court may only reverse for a new trial on damages if the "jury clearly should have reached a different verdict." (Code Civ. Proc., § 657, subd. 7.) Borgman has failed to meet this high standard. Rather, the award supports that the jury found that while Borgman became an Insphere employee in 2010, he continued to maintain a smaller independent business, and it valued the goodwill plus the value of the banker's boxes at a total of $750,000. This was a reasonable measure of damages when all the facts are considered, and it does not conflict with the evidence.
4. Jury Instructions
Borgman next argues the court erred by not instructing the jury on strict liability and punitive damages. We review questions of instructional error de novo. (Mansur v. Ford Motor Co. (2011) 197 Cal.App.4th 1365, 1373.) In a civil case, erroneous jury instructions are not inherently prejudicial. "A judgment may not be reversed for instructional error in a civil case 'unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.' (Cal. Const., art. VI, § 13.)" (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580.)
As to strict liability, Borgman's opening brief fails to include any argument that the lack of an instruction resulted in prejudice. He asserts, in a one paragraph argument, that the instruction should have been given, but nothing further. He attempts to argue prejudice in his reply brief, but we do not consider arguments raised for the first time in a reply brief. (Schubert v. Reynolds (2002) 95 Cal.App.4th 100, 108.) We therefore find he has waived this argument. (Jones v. Superior Court, supra, 26 Cal.App.4th at p. 99.)
With respect to punitive damages, we note that such damages are appropriate if there is "clear and convincing evidence" that the defendant is guilty of "oppression, fraud, or malice." (§ 3294, subd. (a).) Contrary to his assertions in this appeal, the trial court denied Borgman's request for this instruction because it did not find there was "any evidence of malice, oppression, or fraud."
We agree the evidence was not sufficient to support a punitive damages claim. While Borgman cherry-picks through the evidence to argue otherwise, the overall picture painted by the evidence is that MEGA went through a messy, difficult transition of its business model. Its actions were at times confusing, inconsistent, and heavy-handed. But none of the evidence rises to the level of oppression, malice, or fraud.
The cases Borgman cites are simply not on point. He appears to suggest that the mere act of conversion is sufficient to support a punitive damage claim. But the cases cited do not support that conclusion. In Haines v. Parra (1987) 193 Cal.App.3d 1553, Parra was convicted of grand theft for stealing money from Haines, and the court granted summary judgment in Haines's favor following the conviction, including an award of $25,000 in punitive damages. (Id. at p. 1556.) Although the court stated that a jury award of punitive damages would have been supportable under the facts of the case, such an award was inappropriate in the context of a summary judgment motion. It was strictly the province of the jury, not the court, to decide whether punitive damages were appropriate. The summary judgment on punitive damages was reversed and a trial on that issue was ordered. (Id. at pp. 1560-1561.)
In Templeton Feed and Grain v. Ralston Purina Co. (1968) 69 Cal.2d 461, 471-472, an abuse of process case, the court noted that "Templeton presented sufficient evidence to indicate that Ralston had deliberately abused the process of the court with the intention of injuring Templeton or with reckless disregard of the consequences to Templeton." We do not find such evidence here.
Neither of these cases support Borgman's argument, that a finding of conversion alone is enough to support a jury instruction for punitive damages. Conversion, as Borgman repeatedly pointed out in another context, does not require any particular mental state on the defendant's part. (See Welco Electronics, Inc. v. Mora, supra, 223 Cal.App.4th at pp. 208-209.) Without evidence to support a prima facie showing of oppression, malice, or fraud, we find the court did not err in declining Borgman's request for an instruction on punitive damages.
5. Attorney Fees
Borgman sought attorney fees on the grounds that they were authorized by a contract between the parties. He points to a provision in a 2010 commission agreement: "Indemnification and Hold Harmless: I agree to indemnify and hold harmless Insphere and any Insurance Company from and against any claim, damage, loss, expense, cost or liability (including, but not limited to, attorneys' fees) that Insphere may incur in recovering from Me any property belonging to Insphere or any indebtedness owing to Insphere. I further agree to indemnify and hold harmless Insphere and any Insurance Company from and against any claim, damage, loss, expense, cost or liability (including, but not limited to, attorneys' fees, settlement payments, judgments and/or fines) resulting or arising, indirectly, from any (a) breach of this Contract or any Guidelines, (b) violation of law or regulation, (c) failure to comply with any court, governmental or regulatory order, or (d) act or omission of Me or anyone acting on My behalf."
We apply the ordinary rules of contract interpretation to determine whether a contract provides for attorney fees. (Exxess Electronixx v. Heger Realty Corp. (1989) 64 Cal.App.4th 698, 708.) This provision does not evidence an intent to provide for attorney fees to either party in a lawsuit against the other. The first sentence provides for indemnification by Borgman for costs associated with recovery of property or debt to Insphere. The second sentence is a provision to indemnify Insphere in the event of a claim by a third party based on Borgman's conduct. Attorney fee and indemnification provisions are not the same. (See, e.g., Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949.) The intent of the provision is clear from both the title of the provision and its language.
Nonetheless, Borgman claims we should read this as a contractual attorney fee provision that should be deemed mutual under section 1717. That section states: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs." (§ 1717, subd. (a).)
As is evident, however, this is not an "action on a contract," it is a tort claim for conversion, which was the only cause of action that remained after multiple rounds of pleadings and the sole claim litigated at trial. Section 1717 does not apply to tort claims. (Santisas v. Goodin (1998) 17 Cal.4th 599, 615.) We reject Borgman's claim that it should be deemed to encompass torts by the plain language of the provision, largely for the same reason we do not interpret it as an attorney fee provision at all. Absent a contractual provision or a statute, Borgman is not entitled to attorney fees. (Code Civ. Proc., § 1021.)
III
DISPOSITION
The judgment is affirmed. Each party shall bear their own costs on appeal.
WE CONCUR: FYBEL, J. ZELON, J. [*]
[*] Retired Justice of the Court of Appeal, Second Appellate District, Division Seven, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.