Opinion
F071837
01-26-2017
INTEGRATED VOTING SOLUTIONS, INC., Plaintiff, Cross-defendant and Appellant, v. AUTOMATED BALLOT CONCEPTS, LLC et al., Defendants, Cross-complainants and Appellants.
McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Defendants, Cross-complainants and Appellants. Herr Pedersen & Berglund, Leonard C. Herr and Ron Statler for Plaintiff, Cross-defendant and Appellant.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 12CECG01345)
OPINION
APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. Hamilton, Jr., Judge. McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Defendants, Cross-complainants and Appellants. Herr Pedersen & Berglund, Leonard C. Herr and Ron Statler for Plaintiff, Cross-defendant and Appellant.
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In 2007, two companies doing business in the election industry—namely, Integrated Voting Solutions, Inc. (IVS) and Automated Ballot Concepts, LLC (ABC)—entered into a contractual relationship described by them as an alliance (the contract). Under the terms of the contract, each company would provide distinct services to the overall enterprise based on its respective area of capability or expertise. IVS's role was to provide the tangible product (i.e., ballot creation and printing), while ABC's role was primarily marketing, sales and servicing of clients. Profits would be divided between the two business entities according to a formula in the contract. The contract had a duration of approximately five years, expiring on December 31, 2012. On June 1, 2012, six months prior to the contract's expiration date, IVS notified ABC that it was terminating the contract. IVS followed up that announcement by serving its complaint against ABC for breach of contract. ABC subsequently cross-complained for breach of contract, asserting that IVS never paid ABC its contractual share of the net profits earned in connection with the 2012 elections. After a lengthy trial, the trial court concluded that neither party had credibly proven any damages. Therefore, both parties recovered nothing, and neither was deemed to be the prevailing party for purposes of costs and attorney fees. Judgment was entered accordingly.
The contractual relationship between ABC and IVS is also sometimes referred to herein as the ABC/IVS contract or alliance, or simply as the alliance.
ABC appeals, and IVS cross-appeals, from the trial court's judgment. We will reverse the judgment, in limited part, and remand with instructions that the trial court determine certain damage questions and then decide the prevailing party issue anew.
FACTS AND PROCEDURAL HISTORY
Relevant Individuals and Companies
We begin with a brief summary of the key individuals and companies involved in the relevant events. As will be seen, the two contracting parties, ABC and IVS, were business entities primarily run by each company's respective founder. In ABC's case, that person was Frank Kaplan; and in IVS's case, that person was Eric Kozlowski. We elaborate below.
Frank Kaplan was founder and co-owner of ABC, and was the person who signed the contract with IVS on behalf of ABC. ABC was formed by Kaplan in 2007. Prior to that time, Kaplan had obtained considerable sales experience in the election services industry. In 1989, Kaplan helped start a company known as Global Election Systems (Global). Global manufactured voting tabulation equipment and also developed its own software known as Global Elections Management Solutions (or GEMS). Kaplan's main responsibility with Global was in the area of sales, although he did some of the administration and finances. In approximately 2003, Global was acquired by Diebold, Inc. (Diebold). At that time, Kaplan became an employee of Diebold, and his duties mainly involved sales throughout the country of election tabulation systems such as the Accuvote optical scan tabulation system and GEMS. Kaplan left Diebold in 2005, and two years later formed ABC.
Eric Kozlowski formed IVS in 2004, and was the person who signed IVS's contract with ABC. Kozlowski's past experience in the election industry began in the 1980's, when he worked at a business known as The Presort Center, which processed sample ballot booklets and sorted absentee ballot mail for Fresno County. In the mid-1990's, he acquired The Presort Center and operated the business as Central Valley Presort. In 2003, Central Valley Presort entered a subcontract with Diebold to print and insert election ballots and provide envelopes to some election jurisdictions in California. After that subcontract ended in late 2004, Kozlowski formed a new company, IVS, through which he would sell his election printing services. IVS was owned by Kozlowski's wife and sister. By early 2005, through Kozlowski's efforts, IVS had agreements in place to provide ballot printing services for five counties in California. IVS continued to add new clients in 2006 for its ballot printing services.
Two other individuals warrant brief mention, since they are referenced in the parties' appellate briefs and were witnesses at the trial. They are John Elder and Stephen Knecht.
John Elder met both Kaplan and Kozlowski in 1998 while the three of the them were working in the election industry. Elder specialized in absentee voting services as well as in the information technology side of the industry, including some aspects of writing computer software programs for reading and processing absentee ballots and data processing. In December 2005, he became an independent contractor working for IVS. Later, he joined ABC, believing he could make more money there once an alliance was formed with IVS. Elder was the person who first proposed a contractual alliance between IVS and ABC, believing it would be advantageous to all concerned, and he was directly involved in the negotiations.
Stephen Knecht began working in the election industry in the 1980's and became a salesperson for Global in 1992. Knecht continued to focus on sales after Diebold had acquired Global. Knecht left Diebold in 2007, and joined or partnered with ABC to assist with sales.
The Contract
After several months of discussion and negotiation, a signed written agreement was entered into on September 28, 2007, between IVS and ABC. The recitals of the contract set out some of the basic assumptions of the parties regarding their bargain. In relevant part, the recitals stated as follows:
"WHEREAS, ABC has entered into a binding Letter of Intent to form an election services alliance with IVS.
"WHEREAS, ABC will be an independent Contractor providing services to IVS as of June 1, 2007; and
"WHEREAS, IVS will be an independent Contractor providing services to ABC as of June 1, 2007; and
"WHEREAS, ABC provides election services, including direct sales and marketing, certification services, logistical support, ballot printing, election software, absentee voter processing, sample ballots and other related products to public election jurisdictions and private vendors in the voting industry;We note that the term "defined markets," as set forth in the last of the above recitals, was not explained or defined anywhere in the contract.
"WHEREAS, IVS provides election ballot printing and other related services to public election jurisdictions and private vendors in the voting industry; and
"WHEREAS, ABC and IVS desire to enter into a business agreement to mutually provide ballot printing, absentee voter processing services, and other related election services to defined markets ...."
After the recitals, the contract delineates the respective obligations of the parties. The contract required ABC to do, among other things, as follows: (1) assist IVS in obtaining ballot printing certification; (2) provide sales and marketing services; (3) provide customer service and communication; (4) process ballot orders and process absentee voter data; (5) invoice its originated customers for services it provides; and (6) pay agreed profit split to IVS within 30 days after accounts are received. In addition, the contract specifically required that "ABC will keep IVS informed of operations and sales opportunities contemplated in this alliance."
The contract required IVS to do, among other things, as follows: (1) provide proprietary software, which includes automated test deck application and IntegraVote source code, and other processes to streamline election service production for all jurisdictions; (2) provide a minimum of 3 million ballot capacity per 45-day election cycle; (3) provide labor, consumables, equipment, etc., to meet production demands; (4) invoice its originated customers; and (5) pay agreed profit split to ABC within 30 days after accounts are paid.
The next portion of the contract outlined certain financial terms under the heading, "KEY FINANCIAL POINTS TO AGREEMENT." Paragraph 3 specified certain limitations on cost of service for any vendor printing and services with respect to the printing of ballots. The same paragraph also allowed use of "a 3rd party printing partner or subcontractor" under specified conditions. Paragraph 4 of the contract set forth the formula for the division of net profits between the two parties. Paragraph 4 was prefaced by a statement of IVS's current customer base, which consisted of nine California counties listed in this provision. The accounts receivable from the "current IVS customer base" would be divided between the parties as follows: "Gross Payment minus calculated 'Cost of Service' paid to Vendor; balance divided 50% to IVS and 50% to ABC." The accounts receivable from "all future customers" would be divided between the parties as follows: "Gross Payment minus calculated 'Cost of Service' paid to Vendor; balance divided 33 1/3% to IVS and 66 2/3% to ABC." (Italics added.)
ABC had oral agreements in place with Elder and Knecht. Under those oral agreements, according to the testimony of Knecht, the amounts ABC received under the contract would be shared equally among ABC, Elder and Knecht.
The remainder of the contract contained a number of other important terms. Paragraph 7 set forth mutual promises to protect the other party's confidential information from disclosure. Paragraphs 8 through 10 outlined how a customer support person or print support person would be paid. Paragraph 13 provided that "[t]he Term of this Agreement is until December 31, 2012." Paragraph 15 stated that "IVS commits a minimum of 3 million ballot capacity per 45-day election cycle to ABC with Right of Refusal for accounts of less than 50,000 registered voters." Paragraph 16 stated that "IVS has right of first refusal for 3 million capacity with California customers only." Paragraph 17 gave IVS the "right to match price for printing for customers outside of California up to 3 million total capacity where agreed 'match price' becomes new 'Agreement Rate'." Paragraph 19 was a standard attorney fees provision, entitling the prevailing party to recover, in addition to costs of litigation, reasonable attorney fees as fixed by the court. Finally, paragraph 20 acknowledged that the parties may be doing other business with other persons in the election industry: "The parties to this Agreement may have interests in ventures other than the alliance set forth in this Agreement. The other party shall have no right to the income or proceeds derived from such other ventures."
In summary, reduced to its most basic terms, the essence of the contract was that ABC was to find new customers (i.e., engage in sales and marketing) for the parties' alliance, service existing customers and process data, whereas IVS was to do the printing of ballots, envelopes and other election materials, with the two parties' splitting the net profits. It was a performance based contract in the sense that when printing was done for existing and new customers, ABC and IVS would divide the net profits in accordance with the contract, but if no printing took place, no one got paid. Kaplan and Kozlowski gave similar descriptions of the nuts and bolts of how the division of net profits was processed. After each printing job, the particular county or election jurisdiction was invoiced and then Kaplan and Kozlowski would prepare and exchange spreadsheets until they both agreed on the amount of costs to be deducted, and the remaining profits would be divided between ABC and IVS. Kaplan estimated that at least 95 percent of the time, and perhaps as high as 99 percent of the time, payment was received from the client by IVS, and then IVS would cut a check to ABC for the agreed profit split of either 50 percent or 66? percent, depending on the client.
ABC's Marketing Efforts
The contract had no express best-efforts clause or other minimum standard for the level of sales and marketing that ABC was required to perform under the contract. Kozlowski believed that, during the duration of the contract, Kaplan and ABC did not provide adequate marketing services for the ABC/IVS alliance. While admitting there were significant new accounts gained in California and Colorado in 2007 and 2008, Kozlowski maintained that Kaplan made very little marketing effort, or none at all, after that time. In an effort to refute that assertion, ABC presented evidence of ballot numbers and comparative percentage increases in the years from 2007 to 2012. In the end, since the contract did not contain a best-efforts clause or other benchmark for sales, the trial court did not find that any alleged lack of sales or marketing effort constituted a breach of the contract.
ABC Enters Secret Deal With Paramount
In 2010, in accordance with the terms of the contract, a third party printer located in Florida by the name of Paramount Miller Graphics (Paramount) was utilized by the ABC/IVS alliance to print ballots during 2010 for St. Lucie County in Florida. IVS was aware of this temporary arrangement with Paramount and, in fact, IVS supplied the envelopes for St. Lucie County. After the 2010 St. Lucie job was completed, ABC and IVS split the net profits.
Paramount apparently also operated under the name Paramount Performance Marketing.
In 2011, ABC through Kaplan negotiated separately with Paramount in an effort to gain sales opportunities in Florida, Georgia and Maryland. On June 10, 2011, ABC and Paramount entered into an agreement to jointly pursue election printing business in those three states (the Paramount Agreement). The Paramount Agreement provided that ABC and Paramount would split the profits for their venture, and it further stated that "ABC will keep PARAMOUNT informed of operations and sales opportunities contemplated in this alliance." The Paramount agreement contained a noncompetition provision, along with a related noncircumvention provision. It also contained a "MUTUAL COOPERATION IN GOOD FAITH" clause, which stated in relevant part as follows: "The parties agree to work together in a commercially reasonable, good faith manner, to solicit new business in the States for the ABC/Paramount joint venture during the terms of this Agreement. ABC shall not independently solicit or perform election related business in the States without Paramount's prior consent." (Italics omitted.) The Paramount Agreement was apparently contemplated to be a long-term contractual relationship, with a termination date of December 31, 2016.
The Paramount Agreement made no mention whatsoever of IVS, and Kozlowski testified that Kaplan never told him about the Paramount Agreement. In fact, Kozlowski considered the Paramount Agreement to be evidence that Kaplan had been deceitful. It appeared to Kozlowski that Kaplan, despite his promises, was not marketing on behalf of IVS in those states, but only on behalf of Paramount and ABC. For his part, Kaplan testified that he had intended all along to split any profits received from the Paramount Agreement with IVS, under the contract between ABC and IVS. Kaplan indicated that the Paramount Agreement made sense to him because it would keep Paramount from becoming an independent competitor in those states and perhaps would help the ABC/IVS alliance gain a future foothold.
IVS's Notice of Termination
As noted, the Paramount Agreement with ABC was entered on June 10, 2011. However, approximately six months later, Paramount went out of business. As a result, Paramount did not actually perform any ballot printing for any customers under the short-lived Paramount Agreement, and ABC did not make any money from that agreement.
When Kaplan learned that Paramount was going out of business, he suggested to Kozlowski at the end of 2011 that he should contact the owner of Paramount, John Cummins, to inquire about potentially purchasing Paramount or its assets. Kozlowski met with Cummins in Jacksonville, Florida, and evaluated the worth of the business, its equipment and other assets. As part of Kozlowski's due diligence in considering the purchase of Paramount, he was shown all of the contracts that Paramount had in place. In reviewing those contracts in January 2012, Kozlowski discovered the Paramount Agreement for the first time. Kozlowski was surprised to learn that Paramount and ABC had entered into a long-term, exclusive contract for printing ballots in Florida, Georgia and Maryland, and he concluded that Kaplan had been lying when he claimed to have been marketing on behalf of IVS in those parts of the country.
On June 1, 2012, Kozlowski sent Kaplan an email giving notice that IVS was terminating the contract with ABC. Specifically, the email stated as follows: "IVS is terminating our contract with [ABC] immediately. Under the terms of the contract, please delete all electronic information in respect to IVS including but not limited to all emails, contracts, pricing info, certification letters, insurance information, and invoices. Cease all communications with our customers, take down any reference to us from the information on your web site, return all hard copies of information, cease use of all integravote and test deck programs, provide us with anyone whom you have shared our information with, and inform all of your employees or subcontractors. Remove ABC's listing from the approved printers list at the California Secretary of State as IVS now owns the equipment and the facility in Jacksonville. ABC is no longer authorized to use Paramount as a print partner. IVS is pursuing legal action for ABC's intentional breach of the contract." Kozlowski testified at trial that ABC breached the contract by, among other things, entering into the Paramount Agreement, which Kozlowski believed gave him the right to terminate the contract.
IVS's Complaint and ABC's Cross-complaint
IVS filed its original complaint against ABC on April 24, 2012, and a first amended complaint on June 12, 2012 (the complaint). IVS alleged that ABC committed several breaches of the contract, including failure to adequately perform marketing for the ABC/IVS alliance, failure "to give IVS the first right of refusal for east coast printing," and that "ABC ... entered into agreements with vendors on behalf of ABC without the consent of IVS ... despite the fact that IVS was to receive 33% of any profit that ABC made and IVS was to receive a first right of refusal." The complaint was not served on ABC until June 2012, shortly after the notice of termination.
According to ABC's opening brief in this court, the only reason IVS would have waited until June 2012 to give notice of termination and serve the complaint was so that all of the work by the ABC/IVS alliance relating to the 2012 California and Colorado primary elections would be completed and invoices sent out to the customers.
ABC filed a cross-complaint and, on October 16, 2012, a first amended cross-complaint (the cross-complaint). The cross-complaint alleged that IVS had received the proceeds of the ABC/IVS alliance for the 2012 elections, but failed or refused to pay ABC its agreed division of those proceeds under the contract, including for pre-June 1, 2012 efforts concerning the 2012 Spring and primary elections. ABC's cross-complaint also alleged that further damage would result after the November 2012 elections, because IVS would presumably also fail to pay ABC its agreed division of the amounts IVS would receive relating to said fall elections.
The Trial on the Merits and Statement of Decision
On July 2, 2014, a lengthy court trial was commenced on both the complaint and the cross-complaint. To prove the claims in its complaint, IVS introduced evidence purportedly showing that ABC's alleged breach (i.e., entering into the Paramount Agreement) resulted in damages to IVS. In support of its cross-complaint, ABC introduced testimony that IVS never paid ABC its division of the net profits received for the 2012 elections, including amounts that were invoiced for the spring and primary elections prior to the June 1, 2012, notice of termination. On August 21, 2014, after 22 court days of trial proceedings, the parties rested in their evidentiary presentations, and the trial court directed that closing briefs be filed. After closing briefs were filed, the trial court took the matter under advisement.
A proposed statement of decision was filed on December 17, 2014. Both parties submitted objections to the proposed statement of decision. On January 23, 2015, the trial court issued its final statement of decision (the statement of decision). In the trial court's minute order to which the statement of decision was attached, the trial court summarized the gist of its decision: "IVS proved that ABC breached its contract, [but] it failed to prove any resultant damages. ABC failed to prove its Cross-Complaint and takes nothing as a result. As neither party succeeded in proving their claims, the court finds that neither prevailed."
In its statement of decision addressing IVS's complaint, the trial court found that ABC breached the contract by entering into the Paramount Agreement, noting that although the contract was not exclusive, key provisions of the contract and of the Paramount Agreement were in direct conflict because there was no way for ABC to "'serve two masters'" regarding those key provisions. The trial court explained: "When Kaplan signed the contract with Paramount, he effectively made it impossible for him ... to perform under their contract" with IVS regarding election business opportunities in Georgia, Maryland and Florida. The trial court illustrated this conflict by setting out a comparison of two sets of provisions in the contract with similar provisions in the Paramount Agreement: First, the trial court observed that the contract provided "ABC will keep IVS informed of operations and sales opportunities contemplated in this alliance"; while the Paramount Agreement stated "ABC will keep PARAMOUNT informed of operations and sales opportunities contemplated in [the] alliance" between ABC and Paramount. Second, the trial court observed that the contract gave IVS a "right to match price for printing for customers outside of California up to 3 million total capacity"; whereas, the Paramount Agreement stated ABC "shall not independently solicit or perform election related business in the States [Georgia, Maryland and Florida] without Paramount's prior consent."
The trial court misspelled Kozlowski in its statement of decision. We have corrected the spelling.
In further explaining its finding that ABC breached the contract by entering into conflicting contractual responsibilities with Paramount, the trial court asked a series of questions: "If ABC was disallowed from soliciting business in the 'States' without PARAMOUNT's permission, how would ABC both keep IVS informed AND give it the first right of refusal on printing? How could Kaplan 'inform' Kozlowski that there was an excellent sales opportunity in a County in Georgia without violating the PARAMOUNT Agreement? How could Kozlowski have 'matched price' in Georgia, for instance, when by the later entered PARAMOUNT contract, Kaplan was not allowed to offer the business to IVS?" According to the trial court, after Kozlowski's discovery of the secret contract with Paramount, Kozlowski "had every right to believe that the IVS/ABC contract was no longer feasible. Therefore, it was within his power ... to seek damages from ABC for its material breach." However, such damages were never persuasively proven by IVS. As the trial court explained, although "IVS attempted to elicit evidence of monetary damage during trial, it failed to meet its proof burden in convincing the court of same." (Italics added.) In short, because IVS did not credibly or adequately prove damages resulting from the existence of the Paramount Agreement, IVS's cause of action for breach of contract failed.
Turning to ABC's cross-complaint, the trial court explained that ABC also failed to credibly prove damages. Specifically, the trial court stated as follows in its statement of decision: "ABC, in its cross-complaint, argues that it is owed $1.2 million dollars because of the termination of the agreement. However, due to the Court's above noted factual finding that Mr. Kaplan's testimony was significantly lacking in credibility and further complicated by having as its expert on monetary loss the CFO of ABC's attorney's law firm and thus one with a financial stake in the outcome, it was difficult to believe the claim. As has become a popular [saying] in the modern political lexicon, the situation described above made for very poor optics. The court was also unpersuaded that ABC participated in the business that generated the supposed $1.2 million dollars. [¶] In short, the Court did not find any compelling evidence that Mr. Kaplan had any part of the sale(s) which is/are the subject of the $1.2 million." In conclusion, the trial court held that "ABC failed to prove its Cross-Complaint and takes nothing as a result." (Italics added.)
The trial court explained in its statement of decision why it found Kaplan to be lacking in credibility: "Considering the testimony as a whole, the court found it difficult to fully appreciate what Kaplan did for the benefit of IVS and the 'alliance.' Did he bring some printing business? Of course. But, more than anything, the evidence revealed that he took advantage of the large, well-equipped and operated printing business of IVS and enjoyed very generous financial benefits by the association—with very little exertion on his part. Simply put, the testimony painted a portrait of Mr. Kaplan as a very slick operator who was constantly scheming and seeking out deals that would fatten his pocket whether or not it was to the detriment of his business partner(s). [¶] Simply put, the court found Mr. Kaplan's testimony lacking in credibility." In further support, the trial court pointed to the example of one printing company owner, Kevin Timken, who testified that he refused to do further business with Kaplan after learning that Kaplan did not operate with integrity or honesty in his past dealings with Timken.
On February 24, 2015, the trial court entered judgment pursuant to its statement of decision. Notice of entry of judgment was filed on March 2, 2015. On April 15, 2015, ABC filed its notice of appeal. On May 1, 2015, IVS filed its notice of cross-appeal.
DISCUSSION
I. Each Party's Burden as Appellant or Cross-appellant
Preliminarily, we point out an appellant's burden on appeal. A judgment or order of a trial court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) Because a trial court's judgment or order is presumed to be correct, reversible error must be affirmatively shown. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) Thus, an appellant must affirmatively show prejudicial error based on adequate legal argument and citation to the record. (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 556-557.)
II. Standard of Review
Issues of whether there was a breach of contract or whether damages occurred as a result of the breach are questions of fact for the trier of fact to determine. On appeal, the trial court's findings on such issues are reviewed under the substantial evidence test. (Ash v. North American Title Co. (2014) 223 Cal.App.4th 1258, 1268.) Under that test: "'"'[T]he power of an 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 must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor ...." [Citation.]' [Citations.] [¶] Moreover, we defer to the trier of fact on issues of credibility. [Citation.] '[N]either conflicts in the evidence nor "'testimony which is subject to justifiable suspicion ... justif[ies] the reversal of a judgment, for it is the exclusive province of the [trier of fact] to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends.'"'" (Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 968.) In summary, when considering a claim of insufficient evidence on appeal, we do not reweigh the evidence, reconsider the credibility of witnesses, or resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom. Rather, we decide if there was substantial evidence to support the judgment. (Leff v. Gunter (1983) 33 Cal.3d 508, 518; Overton v. Vita-Food Corp. (1949) 94 Cal.App.2d 367, 370; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 365, pp. 421-424.)
Substantial evidence, however, is not the same as any evidence. "'"[I]f the word 'substantial' [is to mean] anything at all, it clearly implies that such evidence must be of ponderable legal significance. Obviously the word cannot be deemed synonymous with 'any' evidence. It must be reasonable ..., credible, and of solid value ...."'" (Doe v. University of Southern California (2016) 246 Cal.App.4th 221, 249; see Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633 (Kuhn).) The evidence "'"must actually be 'substantial' proof"'" of the matter at issue in the case. (DiMartino v. City of Orinda (2000) 80 Cal.App.4th 329, 336 (DiMartino).) Further, "[I]t is essential to the integrity of the judicial process that a judgment be supported by evidence that is at least substantial. An appellate court need not 'blindly seize any evidence ... in order to affirm the judgment. The Court of Appeal "was not created ... merely to echo the determinations of the trial court. A decision supported by a mere scintilla of evidence need not be affirmed on review."'" (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 652 (Roddenberry).)
A further refinement in how we apply the standard of review is indicated here, at least to the extent that one or both of the parties have appealed from failure-of-proof findings by the trial court. As explained in Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456 at page 465 (Sonic): "'We generally apply the familiar substantial evidence test when the sufficiency of the evidence is at issue on appeal. Under this test, "'we are bound by the established rules of appellate review that all factual matters will be viewed most favorably to the prevailing party [citations] and in support of the judgment .... "In brief, the appellate court ordinarily looks only at the evidence supporting the successful party, and disregards the contrary showing." [Citation.] All conflicts, therefore, must be resolved in favor of the respondent.'" [Citation.] [¶] 'But this test is typically implicated when a defendant contends that the plaintiff succeeded at trial in spite of insufficient evidence. In the case where the trier of fact has expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as [merely] whether substantial evidence supports the judgment.'" That is so because, among other things, the trier of fact, in considering whether the party bearing the burden of proof at trial met that burden, was entitled to make credibility determinations and to reject evidence or testimony it found to be unworthy of credence. (Id. at pp. 465-466, citing Oldenburg v. Sears, Roebuck & Co. (1957) 152 Cal.App.2d 733, 742 [trier of fact is the exclusive judgment of the credibility of the evidence and can reject evidence as unworthy of credence]; Hicks v. Reis (1943) 21 Cal.2d 654, 659-660 [provided it does not act arbitrarily, a trial court is entitled to reject in toto the testimony of a witness, even if that testimony is uncontradicted].)
"'Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding."'" (Sonic, supra, 196 Cal.App.4th at p. 466, italics added; accord, Valero v. Board of Retirement of Tulare County Employees' Assn. (2012) 205 Cal.App.4th 960, 965-966.) In considering the above question, we also keep in mind the principle that the trial court's judgment is presumed to be correct on appeal, and we indulge all intendments and presumptions in favor of its correctness. (Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769-770.)
III. Appeal by ABC
In its appeal, ABC challenges the trial court's conclusion on the cross-complaint for breach of contract that ABC failed to prove IVS owed money to ABC under the contract. According to ABC, even after deference is given to the trial court's credibility findings, there remained other evidence of such a character that the trial court could not reasonably conclude that ABC was not damaged. As we discuss below, we agree with ABC.
Preliminarily, we note the basic principles of law in causes of action for breach of contract. "[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) [the] plaintiff's performance or excuse for nonperformance, (3) [the] defendant's breach, and (4) the resulting damages to the plaintiff." (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821, citing Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) In proving damages, "[i]t is essential to establish a causal connection between the breach and the damages sought." (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 870, p. 956.) "'The basic object of damages is compensation, and in the law of contracts the theory is that the party injured by breach should receive as nearly as possible the equivalent of the benefits of performance.'" (Lisec v. United Airlines, Inc. (1992) 10 Cal.App.4th 1500, 1503-1504; 1 Witkin, supra, § 869 at p. 956; see Civ. Code, § 3300 [damages measured as "the amount which will compensate the party aggrieved for all the detriment proximately caused [by the breach], or which, in the ordinary course of things, would be likely to result therefrom"].) This means that recoverable damages are those that could fairly and reasonably be seen as arising naturally from a breach. (Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 469.) Thus, where lost profits occur as a natural and direct consequence of the breach of the contract, they may be recovered. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 470.) "'"It is sufficient that it be shown as a reasonable probability that the profits would have been earned except for the breach of the contract."'" (Ibid.)
A. Profit Splits for the 2012 Spring and Primary Elections
IVS gave notice of termination of the contract on June 1, 2012, and there is no dispute that before said notice of termination, both parties had continued in their contractual alliance and enterprise. Because of this fact, ABC separately analyzes the damage question for the periods of time before and after June 1, 2012. As to the earlier time frame, ABC argues there is uncontested evidence that IVS failed to pay ABC the agreed profit split under the contract on amounts that IVS received for the 2012 Spring and primary elections—amounts that were attributable to the pre-June 1, 2012, activities of the parties. According to ABC, even assuming that IVS had adequate grounds to terminate the contract on June 1, 2012, the amounts already earned by ABC (i.e., its share of net profits for the 2012 Spring and primary elections) prior to termination were not forfeited and must be accounted for on the issue of damages. We note the basic legal premise of ABC's argument appears to be sound. For example, in Martin v. Burris (1922) 57 Cal.App. 739 at page 742, the Court of Appeal explained that in the parties' contractual joint enterprise in that case, although the defendant's breach of the agreement "justified the plaintiff's termination thereof," it "did not work a forfeiture" of the plaintiff's "interest in the assets acquired prior to the notice of termination." The same would be true here.
The language of this appellate opinion indicates an exception to this rule may exist if the contract itself clearly provides for a forfeiture, but that was not the case here.
In regard to accrual of damages, it is helpful to recapitulate how the contract functioned. Again, ABC's role was primarily marketing, sales and customer service, while IVS's role was primarily the printing of ballots and other election materials. Based on the express terms of the contract, for all election-related printing work performed for the ABC/IBS alliance by IVS, there was to be a profit split between ABC and IVS. For the nine specific customers that IVS already had when the contract was entered, the profit split was 50/50. For any future or additional customers, the profit split was 66? percent for ABC and 33? percent for IVS. Thus, once the printing work was completed on a particular job, nothing remained to be done for each party to be entitled to their split of profits other than sending out the invoices, receiving payment from the customers and subtracting the applicable cost of services. As noted, virtually all of the invoicing and collection of payments from customers was done by IVS, who would then typically cut a check to ABC for its split of the net profits.
On the issue of damages, Kaplan testified at trial that ABC did not receive any of the agreed profit split from IVS for any of the 2012 elections. Kaplan further testified that, based on the invoices that had been produced and also on spreadsheets prepared from the invoices, he believed that ABC was owed approximately $1.2 million by IVS for all of 2012. Similarly, ABC's retained expert, Michael Graves, who is a certified public accountant, reviewed and analyzed the contract provisions and the invoices IVS sent to customers for the 2012 elections. Where costs had to be estimated, he used comparable numbers from prior elections. Based on his analysis, Graves concluded that IVS owed ABC a total of $1,212,411.74 under the contract for the 2012 elections. Of that amount, $33,747.49 was for the Spring 2012 election, $542,162.41 was for the primary election, and $636,501.84 was for the general election in 2012. Graves prepared a detailed schedule of the invoices according to whether they related to the spring election, the primary election or the general election in 2012. The 2012 Spring and primary election invoices referenced in Graves's analysis are all dated between March and the end of May 2012, prior to the termination of the contract.
As noted ante, the trial court appears to have rejected the testimony of both Kaplan and Graves on the issue of ABC's damages, based on lack of credibility. The gist of ABC's argument on appeal is that, even after deference is given to the trial court's credibility determinations, other evidence presented in the case in the form of Kozlowski's own admissions at trial clearly established that ABC was damaged. We now turn to a review of that other evidence.
Additionally, the trial court stated that "[t]he court was ... unpersuaded that ABC participated in the business that generated" or "had any part of the sale(s)" that were the basis for ABC's asserted damages of $1.2 million for all the 2012 elections. These statements reflect a misunderstanding on the trial court's part, because (1) there was no condition in the contract that the new accounts under the ABC/IVS alliance had to be directly based on particular conduct or degree of sales effort on ABC's part in order for profit splits to apply and (2) there was no dispute that the invoices referenced by Graves, Kaplan, and Kozlowski were the correct invoices for the 2012 elections and referenced the correct customer accounts of the ABC/IVS alliance. The only issues were the precise measure of damages (i.e., profit splits after cost of service deducted) owed to ABC, and the extent to which such damages were forfeited due to ABC's breach and the notice of termination.
At trial, Kozlowski testified that the invoices for the June primaries in Colorado and California for the 2012 election cycle were sent out and that IVS got paid. He also expressly admitted that ABC was not paid any monies from the amounts IVS received for those elections. Two excerpts of his testimony at trial reveal that what Kozlowski admitted under oath about the failure to pay ABC for the 2012 primary elections was clear, specific and unequivocal. Kozlowski testified as follows:
"Q. It's true that you've been paid for the June 2012 election, correct?Later, on that same day of the trial, Kozlowski testified as follows:
"A. Yes.
"Q. And you haven't paid Mr. Kaplan or ABC for that election, correct?
"A. I believe he had been paid already by the amount we already—
"Q. You did not pay him any of the proceeds you collected for the June 2012 election, correct?
"A. No.
"Q. No, you did not?
"A. I did not."
"Q. Do you recognize Exhibit 77?
"A. These appear to be the invoices from IVS to the different counties for the June primaries in California and Colorado, of 2012. [¶] ... [¶]
"Q. These are the invoices that IVS sent out?
"A. Yes, they are.
"Q. To its customers?
"A. Yes.
"Q. For the June 2012 election cycle?
"A. For Colorado and California primaries, yes.
"Q. And again, you did not pay ABC any monies for the June 2012 election cycle, correct?
"A. I did not pay ABC anything for the June election cycle, no."
In fact, at trial Kozlowski estimated the amount he believed would have been owed to ABC, if the contract had not been breached. Based on his review of the relevant invoices and Kaplan's tax returns, and after comparing some of the numbers in 2012 with the data in 2008, Kozlowski testified as follows regarding the entirety of 2012 (i.e., the spring, primary and November elections):
"Q. Do you have an estimate of, if ABC did not breach the agreement prior to 2012, how much money they would have received in 2012 for services performed?
"A. Based off of the percentage decreases, I would say it would have been somewhere in the neighborhood of [$]950,000 to $1 million.
"Q. And then you subtract out the amounts that were already paid[, that is, to Elder and Knecht?]
"A. That have already been paid?
"Q. And how much is that?
"A. [$]290,000.
"Q. To Elder and to Knecht?
"A. Correct."
It is clear from the above testimony that Kozlowski's theory of the case was that the breach of contract by ABC either (a) completely excused IVS from having to pay any profit splits in 2012, including for the period before the notice of termination, or (b) even if damages were owed to ABC, the amount of damages were less than what was claimed by ABC. Consistent with that position, IVS's posttrial brief argued that "the most money that ABC would have received in 2012 if it did not breach the Agreement is $950,000 minus the amount already paid which is $290,000, for a total of $660,000.00" Again, these statements of monies that would have been owed relate to all of 2012, without distinguishing the spring and primary elections (i.e., the pretermination election services) from the November elections (the posttermination election services). Nonetheless, as accurately pointed out by ABC in its opening brief: "[B]ut for Kozlowski's erroneous conclusion that IVS did not have to pay ABC [any of] the agreed profit split [in 2012] because ABC allegedly breached the Agreement, it is undisputed that ... monies are owed to ABC per the Agreement." (Fn. omitted.)
In addition, we note that IVS's cross-appeal argues, in regard to its breach of contract claim against ABC, that ABC owes it $259,000 in damages because, based on Kozlowski's testimony, that sum was the total amount of money that IVS had paid to ABC after the Paramount Agreement was entered by ABC on June 11, 2011. Kozlowski did not claim this sum was part of the 2012 election cycle, but simply stated that it was paid sometime after June 11, 2011. If IVS had actually paid ABC for all of the work for the 2012 Spring and primary elections, then IVS would surely have asked for that money back as well. It has not done so, presumably because those amounts were never paid.
As noted ante, we agree with ABC that the notice of termination of contract by IVS did not cause ABC to forfeit its share of net profits attributable to the pretermination election services and accounts receivable for the same. (Martin v. Burris, supra, 57 Cal.App. at p. 742.) Consequently, Kozlowski's unequivocal admissions of failure to pay ABC its profit split for the primary elections in California and Colorado, along with his statement of total amounts that would otherwise be owed for 2012 (under his mistaken view that all payments were excused), demonstrated as a matter of law that ABC proved it was damaged to some extent in regard to the profit splits for the 2012 primary elections at least and possibly also the spring elections. This evidence was both "'"(1) uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding."'" (Sonic, supra, 196 Cal.App.4th at p. 466, italics added; accord, Valero v. Board of Retirement of Tulare County Employees' Assn., supra, 205 Cal.App.4th at pp. 965-966.)
In its reply brief on appeal, IVS responds that the conclusion we have reached above is unwarranted because, according to IVS, there was evidence that ABC was paid by IVS for the 2012 Spring and primary elections and, therefore the judgment must be upheld under the substantial evidence test. Specifically, prior to Kozlowski's admissions that ABC was not paid any monies from the amounts IVS received for the June 2012 primary elections, Kozlowski was asked whether IVS had complied with the provision of the contract that "IVS will pay the agreement profit split per service to ABC within 30 days after accounts are paid," to which Kozlowski's response was: "All the way up until June 1st of 2012." We do not believe that this isolated remark constituted substantial evidence that ABC was paid all that it was due for the spring and primary elections. Whatever he may have meant by that stray comment, Kozlowski later clarified by his specific admission under oath, not once but twice, that IVS did not pay ABC for the June 2012 primaries in Colorado and California.
Additionally, we note that many of the primary election invoices were sent out in late May 2012 and, therefore, as of June 1, 2012, not all of the sums could possibly have been received, nor profits paid out, by IVS. A review of the invoices indicates that some of the payments from customers came in after June 1, 2012.
As we have noted above, substantial evidence is not synonymous with any evidence. Rather, to be substantial it must be "'"reasonable ..., credible, and of solid value ...."'" (Doe v. University of Southern California, supra, 246 Cal.App.4th at p. 249; see Kuhn, supra, 22 Cal.App.4th at p. 1633.) The evidence "'"must actually be 'substantial' proof"'" of the matter at issue in the case. (DiMartino, supra, 80 Cal.App.4th at p. 336.) "[I]t is essential to the integrity of the judicial process that a judgment be supported by evidence that is at least substantial. An appellate court need not 'blindly seize any evidence ... in order to affirm the judgment.... "A decision supported by a mere scintilla of evidence need not be affirmed on review."'" (Roddenberry, supra, 44 Cal.App.4th at p. 652.) Under this standard, the isolated remark by Kozlowski was not substantial evidence that all profit splits attributable to the 2012 Spring and primary elections were fully paid to ABC. In light of Kozlowski's clear, specific, subsequent admissions to the contrary, his earlier remark cannot be considered reasonable, credible or of solid value on the point at issue.
Accordingly, the judgment on the cross-complaint is reversed and remanded, with instructions that the trial court determine how much is owed to ABC under the contract for the 2012 Spring and primary elections.
B. Profit Splits for the 2012 General Election
It is undisputed that IVS did not pay ABC any profit splits relating to the general election in November 2012. The general election accounts were completed and invoiced by IVS after the June 1, 2012, notice of termination of the contract, but before the December 31, 2012, expiration date originally set forth in the contract. In the present appeal, ABC argues that it was entitled under the contract to its share of the proceeds received by IVS for the general election in 2012. IVS, as respondent, counters that the contract was justifiably terminated on June 1, 2012, and, therefore, no division of profits for such posttermination election services was appropriate.
In its statement of decision, the trial court denied recovery on ABC's cross-complaint based on its conclusion that no contractual damages were proven by ABC, which necessarily included any alleged damages relating to the general election. As explained ante, the trial court's decision was largely a result of its finding that neither Kaplan nor ABC's expert, Graves, were credible. At the same time, the trial court appears to have agreed with IVS's position that a serious breach had occurred on ABC's part—namely, ABC's conduct of entering and keeping secret its deal with Paramount that directly conflicted in certain respects with the ABC/IVS contract. According to the trial court, that breach by ABC was "material," and it permitted Kozlowski to reasonably believe "that the IVS/ABC contract was no longer feasible." (Italics added.) The trial court even suggested that, at the time the Paramount Agreement was entered, full performance by the parties was rendered impossible or hindered. Finally, the trial court also emphasized the fact that "Kaplan was doing his best to 'hide' the PARAMOUNT [Agreement] from Kozlowski."
The question not explicitly answered by the trial court is whether, under the circumstances, IVS was permitted to terminate the contract on June 1, 2012. "The law sensibly recognizes that although every instance of noncompliance with a contract's terms constitutes a breach, not every breach justifies treating the contract as terminated. [Citations.] Following the lead of the Restatement of Contracts, California courts allow termination only if the breach can be classified as 'material,' 'substantial,' or 'total.'" (Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051 (Superior Motels).) Whether a partial breach of a contract is material depends on the "'importance or seriousness thereof and the probability of the injured party getting substantial performance.'" (Brown v. Grimes (2011) 192 Cal.App.4th 265, 278, citing 1 Witkin, supra, Contracts, § 852, pp. 938-940; see Superior Motels, supra, at p. 1051.) The question of whether a breach is material, such that the injured party may terminate the contract, is ordinarily a question of fact for the trier of fact to determine. (Brown v. Grimes, supra, at p. 277; Superior Motels, supra, at pp. 1051-1052.)
We agree with IVS's argument that this portion of the judgment may be affirmed on the ground that ABC's breach was material, as found by the trial court and, therefore IVS had adequate grounds for terminating the contract on June 1, 2012. In other words, substantial evidence supported the trial court's finding that the breach was material. As rightly pointed out by the trial court, the Paramount Agreement was in direct conflict with the ABC/IVS contract in regard to marketing and sales in the three states mentioned in the Paramount Agreement. As the statement of decision explained, ABC assumed obligations with Paramount that would, if followed, prevent full performance under the ABC/IVS contract. ABC was effectively binding itself to an exclusive alliance with IVS's competitor (i.e., Paramount) in the three states covered by the Paramount Agreement, rather than remaining free to pursue marketing and sales for IVS there.
In response, ABC argues that the Paramount Agreement represented merely a potential breach of one or more terms of the contract, not an actual breach, since no bids or business transactions with election jurisdictions were actually conducted under the Paramount Agreement. We disagree with ABC's assessment of its conduct. An important term of the ABC/IVS contract was that "ABC will keep IVS informed of operations and sales opportunities contemplated in this alliance." The Paramount Agreement represented a new venture that would have likely impacted the availability of sales opportunities and/or operations under the ABC/IVS alliance and, therefore, ABC should have informed IVS of the same. Since, as the trial court recognized, the ABC/IVS contract was not exclusive and did not specify an objective standard for how much marketing had to occur, it appears that this "keep IVS informed" provision was the only vehicle in the contract by which IVS would be able to keep track of whether ABC was conducting itself in a manner consistent with the parties' contractual expectations. In its statement of decision, the trial court stressed the fact of Kaplan's active concealment of the existence of the Paramount Agreement: "Kaplan was doing his best to 'hide' the PARAMOUNT [Agreement] from Kozlowski. Kaplan not only kept this new agreement secret from Kozlowski, he also purposely failed to disclose the ABC/IVS agreement to PARAMOUNT and failed to inform Kozlowski of his new agreement with PARAMOUNT."
While it may be true no accounts or income were obtained pursuant to the Paramount Agreement, we note there was testimony from Jon Cummins, the previous owner of Paramount, that Kaplan appeared at conferences in Florida representing Paramount, not IVS.
An additional factor tending to substantiate the conclusion that the breach was material was the extraordinary importance in the election services industry of maintaining the highest level of trust and reputation for ethical integrity. The trial court apparently thought this was significant, since it quoted at length from the testimony of another ballot printer, Kevin Timken, on why he had severed his relationship with Kaplan after discovering how Kaplan operated. Timken stated: "I made an active choice to sever my relationship with him, because; one, it's very important inside the county clerk associations to have your integrity. People will not do business with you if you don't have that." The inference is clear: if a vendor remains associated with someone who operates unethically in the election industry, the vendor's future in that industry may be at risk. Other testimony at trial confirmed this trust factor is essential in the election industry. Karen Rhea, Kern County Elections Division Chief, whose job requires her to recommend which vendors will be used to perform election services such as ballot printing, testified that in "[e]lections, everything about our industry is trust-based." That is not surprising, since as Rhea affirmed, the industry is one where customers select vendors by word of mouth, recommendations from other counties, and an understanding of the vendor's ethics. Here, by acting in a manner the trial court viewed as duplicitous, Kaplan and ABC arguably violated this trust aspect, which further substantiates that the breach was more than simply a minor or partial breach.
Related to this issue of the election industry being trust based, it was also noted by Rhea that "Elections is a very small community." Another witness, also noting the elections business is a small community, observed that at some level, "everybody knows who everybody is."
In opposition, ABC argues that there could be no material breach in this case because (1) IVS ultimately failed to prove that any actual damages (i.e., monetary losses) resulted therefrom, and (2) Paramount went out of business at the end of 2011 and, therefore, by the time the contract was terminated there was no longer a conflicting agreement still in effect. Although these are not insignificant points, on balance, we believe the facts and circumstances discussed above are nevertheless sufficient in this unique case to uphold the trial court's finding that the breach was material. In short, the existence of a material breach was supported by substantial evidence. Consequently, the record supports IVS's right to terminate the contract on June 1, 2012. As a result, we conclude there was a sufficient grounds and adequate substantial evidence to uphold the portion of the trial court's judgment denying damages relating to the 2012 general election.
Whether or not the Paramount Agreement was in effect on June 1, 2012, the agreement still provided compelling evidence that Kaplan was willing to, and did, secretly go behind IVS's back and enter exclusive and conflicting deals with competitors without IVS's knowledge, thereby violating the "keep IVS informed" clause and also permitting the inference that ABC/Kaplan could not be trusted further in the ABC/IVS alliance.
IV. Cross-appeal by IVS
In IVS's cross-appeal, it argues that because the trial court found that ABC materially breached the contract, some measure of damages should have been awarded, even if only nominal damages.
As to actual or compensatory damages, IVS makes a perfunctory argument that the trial court erred in failing to award one or more of the following damage claims asserted by IVS at trial: (1) the sum of $259,000, which Kozlowski testified was paid to ABC at some indefinite time after ABC entered the Paramount Agreement in June 2011; (2) the sum of $1,000,000 for liquidated damages based on IVS's assertion that ABC violated the contract's confidentiality provisions; and (3) the sum of $5,000 on an improperly calculated bill.
We reject IVS's claim of reversible error on the question of actual damages. To begin with, and contrary to IVS's contention, the trial court did not say that no evidence was produced on the issue of damages, but rather it held that IVS failed to present persuasive or convincing evidence. Specifically, the statement of decision reads: "Though IVS attempted to elicit evidence of monetary damage during trial, it failed to meet its proof burden in convincing the court of same." It is basic that a trier of fact is entitled to weigh evidence and assess credibility in deciding whether or not a party has succeeded in proving an issue. Moreover, "[a] trial judge is not required to blindly believe a witness nor to find in accord with his testimony merely because such testimony is uncontradicted or unimpeached by the party against whom he testified." (Xum Speegle, Inc. v. Fields (1963) 216 Cal.App.2d 546, 556-557, citing Kurtz v. Kurtz (1961) 189 Cal.App.2d 320, 324-325.) Unless the trial court's credibility finding is shown to be arbitrary or irrational by the record—i.e., there were no matters or circumstances present that could have reasonably impacted the credible value of the testimony—we will affirm. (See Hunter v. Schultz (1966) 240 Cal.App.2d 24, 33-34; La Jolla Casa deManana v. Hopkins (1950) 98 Cal.App.2d 339, 345-346; accord, Adoption of Arthur M. (2007) 149 Cal.App.4th 704, 717; Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 391.) As briefly explained below, IVS has failed to show any such error.
On the specific question of misuse of confidential information, the trial court stated in its statement of decision: "[T]he court, upon the evidence presented, could not find [IVS's] evidence preponderated on the issue of misuse of confidential information."
It is unclear from our reading of IVS's opening brief whether it is actually challenging the trial court's discrete decision that IVS failed to persuasively prove that ABC misused confidential information. Although mentioned initially, that issue is not analyzed in the discussion section of IVS's brief. To the extent IVS is making such a challenge, its cross-appeal fails to adequately explain why the trial court reversibly erred on that point. No meaningful discussion or legal argument is made on that issue or the nature of the substantial evidence in the record bearing upon it. For that reason, the issue is forfeited on appeal. (See Nelson v. Avondale Homeowners Assn. (2009) 172 Cal.App.4th 857, 862 [waiver of issue where lack of adequate legal or factual analysis in appellant's brief]; Tilbury Constructors, Inc. v. State Comp. Ins. Fund (2006) 137 Cal.App.4th 466, 482 [same]; Placer County Local Agency Formation Com. v. Nevada County Local Agency Formation Com. (2006) 135 Cal.App.4th 793, 814-815 [same]; see also People v. Turner (1994) 8 Cal.4th 137, 214, fn. 19 ["To the extent [the] defendant perfunctorily asserts other claims, without development and, indeed, without a clear indication that they are intended to be discrete contentions, they are not properly made, and are rejected on that basis."].)
Regarding the other two pieces of evidence cited by IVS, consisting of Kozlowski's testimony as to the damage claims of $259,000 and $5,000, we find no basis upon which to second-guess the trial court's finding that damages were not persuasively proven. As correctly pointed out by ABC, the testimony of Kozlowski on these damage claims were unsupported by any corroborating documentary evidence. The trial court had a rational basis for being unconvinced. Accordingly, IVS's arguments on the issue of actual damages are rejected.
This leaves only the issue of nominal damages. As stated in Civil Code section 3360: "When a breach of duty has caused no appreciable detriment to the party affected, he may yet recover nominal damages." In breach of contract causes of action, it is well established that "in the absence of a showing of actual damages, nominal damages are available." (Midland Pacific Building Corp. v. King (2007) 157 Cal.App.4th 264, 275; see Kenyon v. Western Union Tel. Co. (1893) 100 Cal. 454, 458 (Kenyon).) "A plaintiff is entitled to recover nominal damages for the breach of a contract, despite inability to show that actual damage was inflicted upon him ...." (Sweet v. Johnson (1959) 169 Cal.App.2d 630, 632.) In fact, nominal damages are "presumed as a matter of law to stem merely from the breach of a contract." (Ibid., italics added; accord, Robinson v. Raquet (1934) 1 Cal.App.2d 533, 544 ["In actions for breach of contract nominal damages are presumed to follow as a conclusion of law from proof of the breach."]; Kenyon, supra, at p. 458 ["[t]he failure to perform a duty required by a contract is a legal wrong independently of actual damage sustained," entitling party to whom performance was due to nominal damages].) Here, in light of the trial court's finding that ABC materially breached the contract, IVS had a right to an award of nominal damages.
The general rule is that "the failure to award nominal damages is not alone ground for reversal of a judgment or for a new trial ...." (Sweet v. Johnson, supra, 169 Cal.App.2d at p. 633.) One exception to the general rule is where the award of nominal damages would have a bearing on the award of costs. "'[W]here a judgment is erroneous only because it fails to give nominal damages it will not be reversed unless nominal damages in the given case would carry costs.'" (Ibid.) Another exception is where an object of the action involves vindication of a permanent right, and the award would further that purpose. (Ibid.) It does not appear the general rule applies in the present situation. If we granted this portion of the relief sought in IVS's cross-appeal, the nominal damages issue would not be the sole or exclusive ground for reversal of the judgment and, therefore, the general rule precluding reversal unless an exception is shown does not apply. That is, there is a single judgment in this matter, and it is already being reversed for other reasons articulated above—i.e., to determine the amount of damages sustained by ABC in regard to the 2012 spring and primary elections. Assuming that the reason for the general rule stated above is to preserve the finality of judgments and to conserve judicial resources, those interests would not be affected here, since the judgment is already being reversed. In light of these considerations, a reversal based on failure to award nominal damages may be granted in this case without needing to find that an exception to the general rule exists.
In response to the cross-appeal, ABC makes two arguments that the issue of nominal damages was waived or forfeited. The first such argument is that IVS waived its right to nominal damages by failure to raise it in a motion for new trial. That particular waiver rule applies to claims of excessive or inadequate damages, and is based on the theory that trial courts are in a better position than appellate courts to resolve disputes over the proper amount of damages. (Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 759.) "[I]f ascertainment of the amount of damages turns on the credibility of witnesses, conflicting evidence, or other factual questions, the award may not be challenged for inadequacy or excessiveness for the first time on appeal." (Jamison v. Jamison (2008) 164 Cal.App.4th 714, 719-720.) We think it is doubtful that this waiver rule applies in the present context because the question of whether nominal damages should have been awarded did not depend upon credibility of witnesses or conflicting evidence, but simply followed presumptively from the fact that a breach was found. In this respect, it was not a question of an allegedly excessive or inadequate amount of actual damages, for which a new trial would ordinarily have to be sought, but a failure to include any nominal damage award at all, which is typically an insignificant sum (see 1 Witkin, supra, Contracts, § 878, pp. 965-966), awarded as a matter of principle due to fact of the breach (see Kenyon, supra, 100 Cal. at p. 458), and not based on actual damages. We reject this first argument for waiver.
ABC's second argument for waiver is a closer call. ABC argues that the issue of nominal damages was forfeited by IVS's failure to properly raise it in the trial court by other available means, such as by an objection to the proposed statement of decision. (See Keener v. Jeld-Wen, Inc. (2009) 46 Cal.4th 247, 264-265 [explaining rationale of forfeiture rule]; In re Marriage of Hinman (1997) 55 Cal.App.4th 988, 1002; 9 Witkin, supra, Appeal, § 400, p. 458 ["An appellate court will ordinarily not consider procedural defects or erroneous rulings in connection with relief sought or defenses asserted, where an objection could have been, but was not, presented to the lower court by some appropriate method."].) The trial court's proposed statement of decision (issued on December 17, 2014) had stated that "[A]lthough IVS proved that ABC breached its contract vis-à-vis the contract with Paramount and was therefore within its right to terminate, it failed to prove any resultant damages." The proposed statement of decision also found IVS to be the prevailing party, even though no damages were awarded. Thereafter, the parties had an opportunity to file objections to the proposed statement of decision, and each did so on January 6, 2015. IVS objected to the proposed statement of decision on the ground that "it fails to indicate why [IVS] is not entitled to damages from [ABC] from the date that [ABC] entered into the Agreement with Paramount ...." Although IVS's objection was plainly concerned with why no damages were awarded, it did not specifically mention nominal damages by name. On the other hand, IVS's objection could be construed as including all forms of damage to which it would ordinarily be entitled as a result of the breach, which would logically include nominal damages. On balance, although IVS should have been more specific in its objection, we are unable to discern a clear forfeiture of IVS's ability to raise the issue of nominal damages on appeal.
In the final version of the statement of decision, that result was changed to a determination that neither party prevailed. The reason for the trial court's change on that issue is not conspicuous, but it may have been in response to ABC's objection to the proposed statement of decision that "If IVS did not prevail on its breach of contract claim because it failed to prove any damages, why did the Court determine IVS to be the prevailing party?"
We conclude that IVS is entitled to an award of nominal damages. Accordingly, the trial court's finding that IVS recovered nothing under its complaint is reversed, and the matter is remanded to the trial court with instructions to award IVS a small sum as nominal damages on its breach of contract claim against ABC.
V. Prevailing Party
On the question of which party prevailed in the action for purposes of costs and attorney fees, the trial court found that neither prevailed because both sides failed to prove their claims and recovered nothing: "As neither party succeeded in proving their claims, the court finds that neither party prevailed." In light of our opinion, the premise for the trial court's decision on that issue will no longer be correct after the case is remanded, in that (1) the trial court will decide how much ABC is entitled to recover on its cross-complaint relating to the 2012 Spring and primary elections and (2) IVS will recover nominal damages on its complaint. Under the circumstances, we leave the resolution of the prevailing party issue to the sound discretion of the trial court following remand.
DISPOSITION
The judgment is reversed, in part, and the case is remanded to the trial court for the limited purposes of (1) determining from the record the amount of damages ABC should recover on its cross-complaint for breach of contract for the 2012 Spring and primary elections, (2) awarding IVS a sum for nominal damages on its complaint for breach of contract, and (3) making a prevailing party determination for purposes of contractual attorney fees. Each party shall bear their own costs on appeal.
We are not ordering a new trial on ABC's damages, but directing the trial court to determine ABC's damages from the record. However, in regard to that issue and the prevailing party issue, the trial court may, in its discretion, require further briefing or hearings, or other proceedings that the trial court believes are necessary to resolve such issues, including if deemed by the court to be necessary to clarify the existing record on certain discrete points, limited submittals of additional evidence. --------
/s/_________
KANE, J. WE CONCUR: /s/_________
LEVY, Acting P.J. /s/_________
GOMES, J.