Opinion
G053383
07-25-2018
SYNETCOM DIGITAL, INC., Plaintiff and Appellant, v. KDC, INC., Defendant and Respondent.
Law Office of Rodney W. Wickers, Rodney W. Wickers, Christina M. Wickers, and Alexandra L. Admans for Plaintiff and Appellant. Cummins & White, James R. Wakefield, and Samantha N. Lamm for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2013-00692328) OPINION Appeal from a judgment of the Superior Court of Orange County, David R. Chaffee, Judge. Affirmed in part and reversed in part. Law Office of Rodney W. Wickers, Rodney W. Wickers, Christina M. Wickers, and Alexandra L. Admans for Plaintiff and Appellant. Cummins & White, James R. Wakefield, and Samantha N. Lamm for Defendant and Respondent.
Synetcom Digital, Inc. (Synetcom) was hired as a subcontractor to provide and install a wireless radio system for the Mesa Consolidated Water District (Mesa). When the project did not proceed as planned, Mesa hired a different company to complete the project. Synetcom filed an action against Mesa and the primary contractor KDC, Inc., alleging several contract-based claims and sought damages for the misappropriation of trade secrets. After Synetcom presented its case-in-chief, the trial court granted two motions for nonsuit to eliminate all of Synetcom's causes of action and entered a directed verdict in KDC's favor on its cross-complaint. Simply stated, the court determined Synetcom could not recover for any action based on a construction contract because it was not a licensed contractor and for this reason it must also return the money it received from KDC. The court also determined there was no evidence presented to support the trade secret claim.
KDC, Inc., doing business as (dba) KDC Systems, Inc., dba Dynalectric will be referred to collectively and in the singular as KDC.
Mesa is not a party to this appeal. The court granted its motion for summary judgment.
On appeal, Synetcom maintains the court erred by weighing the evidence rather than permitting a jury to consider the case. It asserts the action was based on the breach of a professional services agreement, not a construction contract, and because the company uses appropriately licensed engineers, there was no need to also have licensed contractors. It maintains KDC still owes it money for engineering services provided in addition to the duties outlined in their agreement. Synetcom also contends the court should not have excluded testimony from three witnesses. We conclude only the first contention has merit. Because contract interpretation was not a judicial function, we reverse the nonsuit ruling and directed verdict entered on those contract claims related to the agreement (found in both the complaint and cross-complaint). However, the court properly determined there was insufficient evidence presented on the remaining "extra work" oral contracts and trade secret claims to permit a jury to find in Synetcom's favor. We affirm those nonsuit rulings.
FACTS
Mesa wanted to upgrade its wireless radio system for its Supervisory Control and Data Acquisition system (SCADA). The SCADA uses a computer to control and automate various mechanical systems, such as open valves, pressure monitors, and pipeline flow rates found in Mesa's pump stations, treatment facilities, and industrial plants. The SCADA system includes radios and antennas to facilitate communication between remote facilities.
For its upgrade project, Mesa hired an engineering design firm, DLT&V (which later changed its name to Delta Systems Engineering). Mesa executed a professional services contract with DLT&V to prepare design drawings for the radio antennas and radio system.
Mesa invited companies to bid on installing the newly designed radio system. It requested individual bids with respect to each item on a lengthy list of needed "labor, materials, and equipment in according with Drawings and Specifications." Mesa specified that bidders should include a list of any proposed subcontractors also being considered.
KDC submitted a bid on some but not all of the items on the list. It included Synetcom on its list of proposed subcontractors. KDC represented Synetcom's "portion of work" was (1) "Radio equipment material," and (2) "Radio equipment engineering & commissioning." KDC submitted a form certifying the bidder was properly licensed in California "to do the type of work required under the terms of the Contract Documents."
Brien Laufer and Etienne "Steve" Resweber cofounded Synetcom. Laufer "has over 30 years of experience in industrial communications and control systems for heavy industries including electronics engineering consultation, design, development and deployment." Laufer holds FCC licenses, a license from the Board of Professional Engineers, Land Surveyors, and Geologists, an electrical engineer license and a control systems engineer license. Synetcom designs, develops, and "deploy[s] industrial communications products" such as wireless networks for the military, broadband radios for refineries, and automation technology for oil companies.
KDC gave Synetcom/Laufer 13 pages of Mesa's design drawings regarding the SCADA upgrade project and asked for a price quote for the required work. Laufer sought clarification from KDC's estimator and programmer, Jaime Garcia. He noted the following: "[I]t looks like they want high speed radio link to tie all of the repeater sites together. They mention the radio study will determine the final parts selection. Should I quote this as an option since this will probably change after the study?" Garcia told Laufer to prepare the quote "as shown on drawings, if changes are needed there will be a change order to correct the issue."
Synetcom's preliminary estimate, dated October 27, 2009, included pricing for "Remotes", "Repeater Towers", "Tower Crosslinks" with "Antenna parts selected after radio study", "Solar Power Supply", "65' Self Supporting Tower", "Engineering", and "Electrician". Of the $418,665 bid, $100,000 represented "Engineering" work itemized as follows: (1) Final report of "PLC Radio Engineering Study" using licensed professional engineer (PE) and including test equipment and documentation (calculations & maps); (2) final report of "Crosslink Radio Engineering Study" using licensed PE and including test equipment and documentation (calculations & maps); (3) configuration, integration and test of "Factory I & T"; (4) configuration, integration, and test of "65' Tower Field Support" and (5) field support with licensed PE of "Final Commissioning."
In November 2009, Mesa accepted KDC's bid to install the improved SCADA system. Mesa and KDC executed an agreement titled "CONSTRUCTION CONTRACT," which specified KDC, the "contractor" agreed to "furnish all materials and will perform all of the [w]ork for the construction of: [¶] SCADA UPGRADE PROJECT - MC-1864 [¶] in accordance with the drawings and specification for [Mesa] File No. MC-1864 and other Contract documents therefore." The parties refer to this agreement as the "Prime Contract."
The Prime Contract referred to the radio studies that Synetcom included in its bid to KDC. Section 1.17, titled "TESTING" specified four different assessments as follows:
"A. Each control panel furnished under this contract shall be tested in accordance with these specifications prior to delivery. . . [and] in advance of final acceptance testing to allow the DISTRICT or a representative to be present during testing.
"B. Final field antenna height shall be determined by performing a physical radio path survey under the responsibility of the contractor with final approval by the Engineer.
"C. Final remote site radio antenna installation testing shall be performed to determine communications strength which shall be approved by the Engineer prior to demolition of existing RTU and leased line communications. If communication strength is not deemed to be acceptable, Engineer shall work with the contractor to determine appropriate modifications.
"D. Final radio selection for the Wireless WAN high speed 'backbone' (CWTF, Reservoir 2 and Operations Center) shall be determined by performing a physical radio path survey utilizing Firetide Model HotPort 6000-900 dual radios operating in 'bonded' mode and WPA2 encryption enabled under the responsibility of the contractor with final approval by the Engineer."
I. Terms of KDC's Subcontract with Synetcom
After signing the Prime Contract, KDC hired Synetcom for $418,666 to provide and install parts, and perform the multiple tests promised to Mesa for the upgraded radio system. In the agreement (Subcontract), KDC was referred to as "Contractor" and Synetcom was the "Subcontractor." The first sentence of the Subcontract stated, "The contractor has made a contract for construction . . . with Synetcom for the following project: [¶] MCWD SCADA SYSTEMS UPGRADE [¶] which Contract is hereinafter referred to as the Prime Contract and which provides for the furnishing of labor, materials, equipment and services in connection with the construction of the project."
Article 1 defined the "Subcontract documents." (Capitalization omitted.) They included the Subcontract, the Prime Contract, the Prime Contract's drawings and specifications, modifications to the Subcontract, and documents attached to the Subcontract.
Article 14 stated, "The Subcontractor shall execute the following portion of work described in the Subcontract Documents . . . except to the extent specifically indicated in the Subcontract Documents to be the responsibility of others: [¶] Provide and install complete . . . the following systems per plans and all applicable specifications including but not limited to the following; General Provisions sections (1 through 10) . . . Radio Communications Section (17450)." (Italics added.)
The final item on this list was further described in Exhibit D, attached to the Subcontract. Exhibit D, titled "SECTION 17450 [¶] RADIO COMMUNICATIONS," detailed the scope of work, specification for products used, and installation requirements. The job included "configuring and programming" of the radios, a "physical radio path survey" to determine "[f]inal field antenna height" and a second test to determine "communication strength" after everything was installed.
Also relevant to this appeal was Exhibit F, titled "TERMS and CONDITIONS of SALE" contained Synetcom's description of what it understood was included in the scope of its work under the Subcontract. It noted new conduit installation, engineering drawings, networking cables and equipment, external weatherproof packing, and concrete construction were not included as part of the agreement. Synetcom noted the agreed upon terms "assumes that Mesa . . . will provide all required permits for antennas and tower installations."
In Exhibit F, Synetcom referred to its agreement to perform radio studies. It stated, "8. Radio engineering study to be completed prior to installation." And, "9. Section 17450 radio specifications to be reviewed for engineering changes with customer after each radio study."
Synetcom also clarified several items required additional information and engineering studies. "**10. Crosslink radio parts list incomplete and antenna parts not specified. Engineering study required. [¶] **11. Solar Power Supplies may be insufficiently specified and require detailed engineering design (size may change)."
The Subcontract contained a liquidated damages provision. Synetcom agreed to complete all the above listed work within 200 days from the date specified on KDC's "Notice to Proceed." Failure to complete the work within this set time period would result in $1,500 damages for each consecutive calendar day.
II. The Lawsuit
Mesa encountered several problems with the radio system upgrade project. In addition to having difficulty obtaining permits, the design for the new radio system did not work. Mesa obtained new design drawings and gave them to KDC, who in turn asked Synetcom to determine how much it would cost to implement the changes. Synetcom gave KDC spreadsheets containing pricing information and reports it claimed included engineering designs. KDC did not pay Synetcom for these additional items.
For reasons that will be set forth in more detail below, Mesa changed the Prime Contract to replace KDC/Synetcom with a different company, Tesco Systems (Tesco), who designed and installed a radio system that worked. Thereafter, Laufer looked at the equipment Tesco installed and determined Tesco must have used Synetcom's trade secrets in redesigning the system.
Synetcom filed a lawsuit against Mesa and KDC. It alleged KDC misappropriated trade secrets and gave them to Tesco. It raised several claims related to its theory KDC breached an oral agreement to pay Synetcom for the extra work it performed on the SCADA upgrade project. Specifically, the operative complaint contained the following causes of action: Two claims for violation of Business and Professions Code section 17200 [trade secret misappropriation & contract breach], breach of contract, breach of the covenant of good faith and fair dealing, breach of implied warranty of plans and specifications, breach of oral contract, and common count.
KDC filed a cross-complaint against Synetcom for unjust enrichment and unfair business practices. It sought $68,375.70, a sum representing KDC's payment to Synetcom for work and materials because Synetcom was not a properly licensed contractor.
At a jury trial, Synetcom presented evidence from several witnesses. The trial court refused to allow expert testimony from electrical engineer, Wesley Kent Masenten, or testimony from lay witnesses Julio Frank Jiminez and Resweber.
After Synetcom rested its case, the court granted KDC's oral motion for nonsuit on the trade secrets claim. In a nutshell, the court determined there was no evidence to support Synetcom's claim Tesco used Synetcom's work product. It reasoned, "[i]t is entirely likely that Tesco did their own work, so they would have out of necessity been so substantially similar anyhow because of the limitations of the project . . . ." It commented, "what I heard was . . . Laufer testifying he drove out to these sites and he looked, and based upon looking without actually going in or being able to go in and review any documents that Tesco prepared . . . he concludes that [Tesco] must have used his [proposed design]. I'm sorry, but that is pure unadulterated speculation. Nothing more. [¶] I understand [Laufer] is a professional engineer. He gets some credit for being able to observe things. But in the absence of a review of . . .Tesco's documents, I don't know, at this point you're asking the trier of fact . . . to make a call based upon [Laufer] going, well it looks like my stuff, so it must be my stuff. [¶] And yet what we know is that Tesco was engaged based upon some engineering provided by the other firm, DLT&V, to do this construction project, to do this installation. [¶] . . . [I]f this was a reverse work back where we start with Tesco and their documents, and their documents have Synetcom documents contained within in their files, then you might have something. But right now, too much of this is by guess and by golly with respect to Tesco's misappropriation."
Next, KDC filed a written motion for nonsuit and directed verdict on the remaining contract-based claims. It argued Synetcom was not a licensed contractor and therefore the Subcontract was void under Business and Professions Code section 7028.15. KDC recognized the court was struggling with the question of whether the Subcontract should be considered an engineering services contract, in which case a contractor's license would not be needed. It argued the plain terms of the contract said nothing about engineering services. The Subcontract specified Synetcom was to purchase materials and install them pursuant to the engineering design created by a different company (DLT&V). In addition, all of Synetcom's work needed to be approved by Mesa's engineer.
KDC stated there was no ambiguity in the contract, but should this court consider parol evidence, there were four witnesses who agreed Synetcom was not hired to provide engineering services. KDC recognized there were two witnesses with different opinions, but it maintained this evidence was not credible. Finally, KDC argued liability based on the theory of breached oral contracts would be barred by the statute of limitations.
In granting the nonsuit, the trial court referred to the documents listed in Article I of the Subcontract, and provisions stating any change to the Subcontract's terms must be made in writing. The court noted much of the case was based on verbal orders. As for the issue of whether the agreement was a construction contract or engineering service contract, the trial court found dispositive exhibit F. The court concluded this document confirmed the Subcontract was not an engineering services contract because in four different paragraphs, Synetcom understood that engineering work was to be performed by a different company.
The court explained, "Otherwise, I don't think that we would have seen paragraph 7, 'Engineering drawings not included[]' or paragraph 8, 'radio engineering study to be completed prior to installation[]' or paragraph 10, 'crosslink radio parts list incomplete and antenna parts not specified[,] engineering study required[]' [¶] [and] paragraph 11, ' solar power supplies may be insufficiently specified and require detailed engineering design.' [¶] All these paragraphs, I think, are Synetcom's acknowledgment that the engineering was going to be done by someone else."
The trial court concluded, "[W]e know from the evidence in this trial, the general contract requires the contracting party, and by extension the subcontractor, to have a contractor's license in order to perform the work." It understood Synetcom's theory the actual work involved engineering services. It stated, "I have looked at this, and I have listened to the evidence that has been presented in this case forward, backwards, upside down[.] I ultimately conclude that it has to be by analogy because I can't find a better way of doing it, that this contract is not unlike a contract that one would make with an electrician for the installation of an electrical system in a new home, or for that matter rewiring a home. [¶] Someone else, I guess we will call them the electrical engineer for lack of a better word, designs the system to be installed. The electrician is engaged for the purpose of installing the electrical system, i.e., running the wires, putting in the panel, putting in a new subpanel, deciding based [not] upon . . . its own [expertise], but based upon the electrical engineer's plans that the voltage requirements are for the home and so the panel has the right number of voltage, the amperage, if you will, a 200 AMP panel versus a 100 AMP panel. You get the picture. [¶] After installing those things and testing to make sure that when you put a plug into a receptacle, that the plug works, if there is power there."
Applying this analogy to this case, the court reasoned as follows: "Here, by analogy, we have [Synetcom] who was engaged not to do the engineering work, and the evidence is very clear that another company, DLT&V, was engaged by Mesa for the purpose of doing the electrical engineering for this project. [¶] And [Synetcom] was engaged for the purpose of testing and to make sure there was connectivity, I guess we're going to call it. I just, in my simplicity say, making sure that when you turn on the radio, it connects with the antenna downstream, and then it connects with the next antenna downstream so that everything comes back to a central system. Again, not unlike what you find in a house with an electrical system."
The court noted, "[W]hat I see here is a lack of acknowledgment of Mesa's participation in this whole thing, because Mesa is not an unlimited supply of money, i.e., we're doing this on a budget. And so we can't have the [$]400,000 . . . project turn into the 100 million dollar project." It added, "[W]hat I see is . . . Laufer trying to recast his role, not as the contractor, but as some sort of subordinate engineer or primary engineer, because he said he didn't like the way the project was engineered. But that was not his call as the contractor. [¶] And he, I think, failed to recognize and acknowledge his role in this entire proceeding. [¶] [H]ere we are today, because . . . Laufer got ahead of himself, and he never, never obtained in writing any approval for the so-called change orders that he is now claiming for compensation."
The trial court made the following final rulings: (1) the contract required a contractor's license, and because Synetcom was not properly licensed the work it performed cannot be compensated; (2) the issue of compensation related to subsequent oral contracts is "overrun by the license issue" and almost all barred by the statute of limitations; (3) there can not be recovery on the oral contracts due to the failure to comply with the Subcontract's requirement Synetcom obtain prior approval in writing for extra work. For these reasons, the court granted the motion for nonsuit and excused the jury. It then granted a directed verdict with respect to the liability portion of the cross-complaint. Because the parties stipulated as to how much money was paid to Synetcom, and the court had ruled Synetcom required a contractor's license, the trial court determined there was nothing left to litigate.
DISCUSSION
Synetcom raises the following contentions on appeal: (1) the court erred in granting two motions (one oral and one written) for nonsuit and; (2) it erred in excluding testimony at trial. We address each issue separately below.
I. Standard of Review for Nonsuit
"A defendant is entitled to a nonsuit if the trial court determines that, as a matter of law, the evidence presented by plaintiff is insufficient to permit a jury to find in his favor. [Citation.] 'In determining whether plaintiff's evidence is sufficient, the court may not weigh the evidence or consider the credibility of witnesses. Instead, the evidence most favorable to plaintiff must be accepted as true and conflicting evidence must be disregarded. The court must give "to the plaintiff['s] evidence all the value to which it is legally entitled, . . . indulging every legitimate inference which may be drawn from the evidence in plaintiff['s] favor."' [Citation.] A mere 'scintilla of evidence' does not create a conflict for the jury's resolution; 'there must be substantial evidence to create the necessary conflict.' [Citation.]" (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291 (Nally).)
"In reviewing a grant of nonsuit, we are 'guided by the same rule requiring evaluation of the evidence in the light most favorable to the plaintiff.' [Citation.] We will not sustain the judgment '"unless interpreting the evidence most favorably to plaintiff's case and most strongly against the defendant and resolving all presumptions, inferences and doubts in favor of the plaintiff a judgment for the defendant is required as a matter of law."' [Citations.] Keeping in mind the foregoing standard of review, we now turn to the merits." (Nally, supra, 47 Cal.3d at p. 291.)
II. Trade Secret Cause of Action
As stated above, the court granted KDC's oral motion for nonsuit on the first cause of action for unfair business practices (Bus. & Prof. Code, § 17200) based on KDC's alleged misappropriation of trade secrets. The statute prohibits unfair or fraudulent business practices, regardless of whether they are specifically made unlawful by some other law. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.)
Synetcom maintains that under California's Uniform Trade Secrets Act (Civ. Code, § 3426 et seq., hereinafter UTSA), "[a] trade secret is misappropriated if a person (1) acquires a trade secret knowing or having reason to know that the trade secret has been acquired by 'improper means,' (2) discloses or uses a trade secret the person has acquired by 'improper means' or in violation of a nondisclosure obligation, (3) discloses or uses a trade secret the person knew or should have known was derived from another who had acquired it by improper means or who had a nondisclosure obligation or (4) discloses or uses a trade secret after learning that it is a trade secret but before a material change of position. (Civ. Code, § 3426.1, subd. (b).)" (Ajaxo Inc. v. E*Trade Group, Inc. (2005) 135 Cal.App.4th 21, 66.)
The threshold issue to be decided is whether the information at issue is a trade secret. "[T]he test for a trade secret is whether the matter sought to be protected is information (1) that is valuable because it is unknown to others and (2) that the owner has attempted to keep secret. [Citation.] The first element is the crucial one here: in order to qualify as a trade secret, the information 'must be secret, and must not be of public knowledge or of a general knowledge in the trade or business.' [Citation.]" (DVD Copy Control Assn. Inc. v. Bunner (2004) 116 Cal.App.4th 241, 251.)
III. Expert Testimony
Synetcom asserts it would have prevailed on the trade secret claim if the trial court had allowed its retained expert, Masenten, to testify. It contends Masenten would have opined Tesco's final design copied Synetcom's recommended design. Synetcom maintains the reason the court did not allow Masenten to testify was because he changed his opinion testimony from what he expressed in his deposition. It argues the court's ruling was an abuse of discretion because the majority of Masenten's trial testimony was consistent with his deposition testimony and "within the scope of the deposition testimony." It asserts the legal authority supporting exclusion does not apply. (Jones v. Moore (2000) 80 Cal.App.4th 557, 565 ["When an expert deponent testifies as to specific opinions and affirmatively states those are the only opinions he intends to offer at trial, it would be grossly unfair and prejudicial to permit the expert to offer additional opinions at trial"].) Synetcom adds there would be no prejudice because KDC was not surprised by any minor inconsistencies with Masenten's testimony.
After carefully reviewing the appellate record, it appears Synetcom misunderstood the court's primary reason for excluding Masenten's testimony. Although the court noted there was some contradiction between the deposition and trial testimony, its decision was based on the conclusion Masenten's expert opinion lacked foundation.
On direct examination, Masenten testified about his training and experience. Masenten admitted he had no experience with SCADA, but lots of experience with control systems and radios. Based on this background information about the level of expertise, Synetcom stated it would like to qualify Masenten as an expert. Without ruling on this request, the court told Synetcom to proceed with expert-related questions.
Masenten stated he reviewed the Subcontract, Synetcom's test reports, and "much of the follow-on testing." He also considered Synetcom's final report, supplementary documentation related to specific tests, DLT&V's drawings, and KDC's drawings regarding antenna installations. He opined the SCADA "was a well-defined system where very little, if any, leeway was provided" to Synetcom to select "elements." When counsel asked questions about whether Masenten believed the SCADA system would work, the court sustained multiple objections due to lack of foundation.
When asked if Tesco's system worked, the court sustained KDC's objection for vagueness. Masenten clarified he believed Tesco's system worked after reviewing Tesco's final reports about the system. He did not personally inspect the final installed SCADA system. The trial court excused the jury after KDC complained Tesco's reports were inadmissible.
The court reviewed basic trial court procedure protocol with the attorneys. The court stated counsel had adequately covered the expert's background, experience, and what he reviewed to formulate his opinions. It explained what was missing was foundation for those opinions, i.e., how did the expert formulate his opinions. "I don't know what . . . Masenten did other than he looked at some documents. Did he do any calculations? . . . Did he go and check on any other sources of information? . . . These are things that are still lost in translation here. [¶] With respect to . . . the post dispute work that was done by Tesco, why is that relevant here? . . . That is not material that can be introduced into evidence."
The court asked Masenten what was the basis for his opinion Tesco used information prepared by Laufer/Synetcom. He replied Synetcom made several recommendations to fix "the problem" and Tesco used those solutions. When questioned further about the basis for this opinion, Masenten conceded he had no document showing "they specifically used the data" and it was "certainly" possible the engineers at Tesco were good and did their own "workout."
KDC's counsel read a portion of Masenten's deposition in which he said he only reviewed Tesco's test results "'which I believe was what they had built and installed.'" In his deposition, counsel asked, "'there has been some testimony that Tesco merely designed and installed what Synetcom recommended. Is that what you learned in your . . . findings?'" Masenten replied, "No." He explained, "'It was not what Synetcom recommended totally. They made changes.'" He clarified Tesco used a different kind of radio from the one Laufer suggested.
The court stated an expert cannot "testify contrary-wise" to an opinion expressed in his deposition. The court then scheduled an Evidence Code section 402 hearing. During a short recess, the court read Masenten's entire deposition transcript. When the proceedings resumed, the court made the following comments. First, based on the contents of the deposition there was no foundation for Masenten's opinion Tesco utilized Synetcom's intellectual property (in the form of design and specifications). Second, the court was concerned portions of the deposition undermined the foundational support for the expert's opinion testimony.
In response to the court's comments, Synetcom asked Masenten to list in more details all the documents he reviewed before forming an opinion about the SCADA system. Masenten stated he considered one radio manufacturer's recommendation to use a "5.8 gigahertz frequency" receiver, and Mesa's letter providing information about a "450 megahertz band" as an alternative. He also reviewed Tesco's design, including their receivers and frequency bands. When counsel asked Masenten to state his opinion about whether Tesco used Synetcom's design, the court sustained KDC's foundation objection.
Synetcom's counsel asked Masenten if he performed any other analysis regarding the two designs. Masenten replied he found it "interesting" that Tesco had come to the same conclusion as Synetcom about what receivers to use, and he compared the test results generated by Synetcom and Tesco. Counsel again asked Masenten to give an opinion about whether Tesco used Synetcom's design, and the court sustained KDC's foundation objection. The court then permitted KDC's' counsel to voir dire the witness.
During the Evidence Code section 402 examination, Masenten admitted he did not know the actual antenna heights or where the antenna were installed for this project. Counsel read a portion of Masenten's deposition where he stated the DLT&V original design plan specified antenna heights and Masenten did not know if those heights were different from the ones recommended by Synetcom or from the ones actually used by Tesco. Masenten admitted Tesco did not use the same radios specified or suggested by Synetcom.
After further questioning, Masenten stated there were no documents showing Synetcom recommended a particular radio, but his opinion was based on a conversation he had with Laufer. This response was stricken as containing hearsay and lacking relevance. Counsel asked Masenten one last time to state his opinion about whether Tesco used Synetcom's design. The court sustained KDC's objection on the basis of lack of foundation. Synetcom determined it had no further questions for the witness.
Later in the proceedings, when the court was considering the nonsuit motion, Synetcom complained about the court refusing to let Masenten give his opinion about whether Tesco used Synetcom's design. The court stated, "Absolutely, because . . . Masenten had no evidentiary support. I appreciate experts who not only review documents but then do the work necessary to obtain information necessary in order to form conclusions and opinions. [¶] The problem here is that I sustained the objections to his stating an opinion because there was not evidentiary foundation. He basically looked at some documents and said on that basis I assume . . . that somehow the Synetcom information got to Tesco. [¶] But then he also, from what we know, testified that there were significant differences between that which Tesco designed and that which Synetcom was recommending. [¶] And, so, again, . . . Masenten, a very fine man, I like him a lot, but I can't allow testimony to be given based upon no support whatsoever other than a guesstimate that is not expert testimony." (Italics added.)
Contrary to Synetcom's contention on appeal, Masenten's opinion testimony was excluded primarily because it lacked evidentiary foundation. Every objection to questions seeking Masenten's opinion on design misappropriation was sustained for lack of foundation. While the court noted Masenten's testimony differed somewhat from his deposition testimony, this problem was secondary to the foundation objection.
Synetcom's briefing on appeal does not address whether the court's rulings regarding lack of foundation were an abuse of discretion. (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773 [standard of review].) Instead, it entirely focused on the issue of whether Masenten's testimony significantly conflicted with the opinions stated in his deposition. Because Synetcom provides no legal analysis on the lack of foundation ruling excluding the testimony, we deem the matter waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785, ["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"].) We will not speculate as to what argument Synetcom could try to raise regarding the lack of foundation ruling. Masenten's opinion testimony there was a misappropriation of Synetcom's SCADA design was properly excluded.
IV. Motion for Nonsuit - Trade Secrets
In its appeal, Synetcom argues the court did not acknowledge the "substantial evidence provided" that Tesco used its design. It lists the following facts: (1) Synetcom copyrighted its radio engineering studies; (2) Mesa "confirme[d]" Synetcom's redesign work; (3) DLT&V "confirme[d] receipt of Synetcom's design recommendations"; (4) Synetcom provided additional recommendations to Mesa related to SCADA's different sites; (5) Synetcom provided a new radio system design to KDC and Mesa; (6) Mesa prepared a memo that indicated there was a new project completion date because of a "redesign" of the radio system due to permit requirements and they now had a "'workable system'"; (7) in February 2012 Tesco began working on the radio system and in March prepared a report for the project; (8) the final project used different materials from those DLT&V recommended and some of the same materials Synetcom recommended.
We agree with the trial court's conclusion that none of the above facts tended to prove Tesco used Synetcom's design. The first six facts established Synetcom created, copyrighted, and gave redesign recommendations to Mesa and KDC. The last two facts indicated Tesco successfully built a new radio system. There is not a single piece of evidence suggesting these two events were linked. There is only speculation Tesco used Synetcom's redesign recommendations. As conceded by Synetcom's own expert, it was "certainly" possible the skilled engineers at Tesco were good and did their own "workout." Tesco's system was not identical to Synetcom's proposed design and Tesco used a different radio, suggesting it made its own design without referring to Synetcom's recommendations.
Moreover, the first requirement for a trade secret action is that the information is not generally known, which is often satisfied when there is a compilation of data such as confidential information in customer lists. (See Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521-1522.) Courts will not protect information that is generally known in the industry and when no steps were taken to keep the information secret. Synetcom noted these studies were copyrighted but does not explain the significance of this fact. We found no authority, and Synetcom cites to none, holding all copyrighted documents are also trade secrets, particularly when the purported secret was publicly disclosed. It cites to no evidence the information contained in the radio studies was not generally known by others in the industry. To the contrary, Masenten opined Tesco's engineers had the skill and knowledge to independently come up with the same design. In light of all of the above, nonsuit was properly granted.
V. Motion for Nonsuit - Written Contract Claims
As stated above, the court granted KDC's motion for nonsuit after concluding the written Subcontract was for construction work, for which Synetcom was not properly licensed. We begin our analysis by briefly reviewing rules regarding licenses in California. A. General Law Regarding Contractor Licenses
Business and Professions Code section 7031, subdivision (a), provides that, with exceptions not relevant here, "[N]o person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person." "The purpose of this section is to 'protect the public from incompetence and dishonesty in those who provide building and construction services.' [Citation.] The section 'advances this purpose by withholding judicial aid from those who seek compensation for unlicensed contract work.' [Citation.]" (Phoenix Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp. (2017) 12 Cal.App.5th 842, 847-848.)
All further statutory references are to the Business and Professions Code, unless otherwise indicated.
Synetcom admits it was not licensed to perform construction work. Thus, section 7031 precluded it from bringing any claim for work that required a contractor's license. In this appeal, Synetcom argues the Subcontract was for engineering services, which did not require a contractor's license. Synetcom maintains it is a radio engineering company hired to perform engineering services in connection with Mesa's project to upgrade its wireless radio system. Resolution of the issue of whether the Subcontract was for construction work or engineering services requires interpretation of the Subcontract. B. General Rules Regarding Contract Interpretation
We find it helpful to first review a few well-settled legal concepts used for contract interpretation. "The basic goal of contract interpretation is to give effect to the parties' mutual intent at the time of contracting. [Citations.] When a contract is reduced to writing, the parties' intention is determined from the writing alone, if possible. [Citation.] 'The words of a contract are to be understood in their ordinary and popular sense.' [Citations.] [¶] Extrinsic evidence is admissible to prove a meaning to which the contract is reasonably susceptible. [Citations.] If the trial court decides, after receiving the extrinsic evidence, the language of the contract is reasonably susceptible to the interpretation urged, the evidence is admitted to aid in interpreting the contract. [Citations.] Thus, '[t]he test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.' [Citation.]" (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955.)
"When the meaning of the words used in a contract is disputed, the trial court engages in a three-step process. First, it provisionally receives any proffered extrinsic evidence that is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. [Citations.] If, in light of the extrinsic evidence, the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid the court in its role in interpreting the contract. [Citations.] When there is no material conflict in the extrinsic evidence, the trial court interprets the contract as a matter of law. [Citations.] This is true even when conflicting inferences may be drawn from the undisputed extrinsic evidence [citations], or that extrinsic evidence renders the contract terms susceptible to more than one reasonable interpretation. [Citations.] If, however, there is a conflict in the extrinsic evidence, the factual conflict is to be resolved by the jury. [Citations.]" (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1126-1127; Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 291 (Warner) [it is a "'judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence'"].) C. Analysis
Here, the court properly recognized the Subcontract contained many technical words and terminology familiar only to people in the wireless communication radio industry. The parties appear to agree the trial court correctly decided to consider extrinsic evidence to assist with interpretation because the meaning of the contract language was disputed, i.e., did the scope of work described in the agreement contemplate engineering services? In granting the nonsuit motion, the trial court concluded interpretation of the Subcontract was a judicial determination, and relying on extrinsic evidence ruled it was a contract for construction work. As will be explained below, we conclude this ruling was erroneous because there was a conflict in the extrinsic evidence, and a material factual conflict turned upon resolution of a credibility issue. A jury must resolve the factual conflict, and for this reason, nonsuit should not have been granted.
In the respondents' brief, KDC argues the court's ruling must be affirmed because contract interpretation "'is a judicial function.'" It points to select portions of the Subcontract using the term "construction." As noted by KDC, the first line of the Subcontract specifies, "The contractor has made a contract for construction . . . with Synetcom for the following project . . . ." (Italics added.) The Subcontract defined the project as a SCADA radio system upgrade, memorialized in the Prime Contract "which provides for the furnishing of labor, materials, equipment and services in connection with the construction of the project." (Italics added.) These introductory sentences plainly state the Subcontract was for construction work, but it also mentions services "in connection" with construction. The nature of these "services" are undefined and there is nothing in the Subcontract's introductory paragraphs indicating whether the parties were referring to engineering services. The parties agreed one "service" Synetcom agreed to provide was testing the radios and radio frequency after adjusting antenna heights, but disagreed if these radio studies should be considered engineering services.
KDC explains four out of six witnesses agreed the scope of work outlined in the Subcontract was for construction work, not engineering services. It maintains the court properly discounted two witnesses who opined the Subcontract was for engineering services. Specifically, Laufer's testimony was properly rejected because it was based on his subjective belief. And testimony from Jaime Garcia, KDC's estimator, could be disregarded because it was "nothing more than speculation, surmise and guesswork."
This argument ignores the fact we are not reviewing a jury verdict for substantial evidence, where the trier of fact is free to make credibility calls and give more weight to some testimony than others. As KDC acknowledges in its briefing, there was a clear conflict in the extrinsic evidence. KDC does not offer us any case authority providing an exception to well-established contract law: It is not a judicial function to interpret a contact when that determination turns on the credibility of conflicting extrinsic evidence. (Warner, supra, 2 Cal.3d at p. 291.) KDC fails to appreciate our limited standard of review in this appeal concerning the grant of a nonsuit motion. We will not sustain the judgment "'"unless interpreting the evidence most favorably to plaintiff's case and most strongly against the defendant and resolving all presumptions, inferences and doubts in favor of the plaintiff a judgment for the defendant is required as a matter of law."' [Citation.]" (Nally, supra, 47 Cal.3d at p. 291, italics added.)
The six witnesses were not discussing matters that obviously sounded like construction work, such as pouring concrete or installing an oven. They each offered a different opinion about the skills involved in adjusting antennae heights, conducting radio studies, and configuring wireless radios. Moreover, all of the witnesses had some connection to one of the parties in this case, strongly suggesting there could be subjective opinion testimony in favor of the company each party worked with. KDC does not explain why Mesa or DLT&V's engineers were more qualified or trustworthy than Synetcom's engineers.
KDC included in its briefing what it considered the relevant portions of each witness's testimony. For example, Alex Paik, KDC's former project manager, testified that testing the radio equipment did not require engineering services. "They had no engineering to do on this project[.] It was an engineered job. DLT&V engineered this job for Mesa . . . and that engineered product was to be tested by KDC and Synetcom[, and] those results were to be turned over to [Mesa to decide if] they were going to go either forward with the project, or make changes to get the results that they wanted."
Leanne Leonhardt, a civil engineer and Mesa's project manager, testified Synetcom's scope of work under the subcontract "was to perform a radio connectivity study to determine that the connectivity was available between the sites as listed in the plans and [specifications]." Synetcom was expected to "configure the antennas and the radios" to make sure they "would all talk to each other." She explained it is "a type of engineering study, but it is not engineering as part of the construction contract. They have to perform some engineering calculations to make those connect; but, that is part of their construction contract." Additionally, she testified the radio studies were not engineering studies because Synetcom simply mounted temporary antennas and radios on ladders and measured whether there was connectivity. She explained, "They didn't design anything. This is just comparing connectivity. Engineering is more than just doing connectivity."
Robert McVicker was Mesa's district engineer for the project. He described the difference between a professional services contract and a construction contract. "A professional services contract is typically done with an engineer or other service provider that provides a service such as creating a design or report or something like that. Whereas a construction contract is after you had the professional services prepare[] the design and bid documents, they would show exactly what needs to be constructed and what work needs to be done. And that would be a construction contract, with line items for each item that you constructed." He stated Mesa's Prime Contract with KDC was a construction contract and Mesa had a service contract with DLT&V.
Brian Downing was an electrical engineer and president of DLT&V. He explained that after designing the radio system project, he advised Mesa that DLT&V did not have the equipment necessary to "do the actual field testing" to verify the final antenna height. He stated, "Therefore, it was described as a performance specification. And we knew that there might be some changes to the final antenna heights, and we indicated that on some of the drawings and then in the specification as well."
In summary, project managers/engineers working for KDC, Mesa, and DLT&V agreed the Subcontract required Synetcom to perform construction work. These witnesses referred to the overall project in general terms. They did not explain why the duty to perform radio studies and the configuration of parts would not require engineering skills. They focused on the fact the party who created the original design, DLT&V, obviously had a professional services contract with Mesa. No one explained why it should be inferred that there could only be one party hired for engineering services.
Laufer offered a much more detailed explanation regarding why certain obligations listed in the Subcontract called for engineering skills and services. He explained Synetcom's portion of the work was different from KDC's jobs under the Prime Contract. As explained by Mesa's engineer, "KDC was performing all the civil work, which would be concrete work, trenching, installing the poles[,] . . . mounting them to boxes[] . . . [and preparing] the RTU cabinets." Laufer explained KDC's portion of the contract with Mesa was for construction work and it hired Synetcom for engineering services specified in the Subcontract.
For example Exhibit D, "SECTION 17450 [¶] RADIO COMMUNICATIONS," required several different types of engineering services. Section 2.01, subdivision (C), required Laufer to provide a "radio-modem [that] shall have built-in diagnostics for noise level, signal level, receive rate, disconnects, temperature, and built-in RF signal detection test." Laufer explained, "That gets in the area of what we call radio frequency interference. And that is a real science in itself that requires a very high level of engineering effort to get that right. Interference on a system like this is difficult to mitigate."
Part 2 of the exhibit described in detail the types of radios, antenna, and other parts needed to build the radio system with "frequency hopping technology, approved by the FCC, under Part 15 rules." Laufer stated section 2.01, subdivision (A)'s specifications called for engineering services. It provided, "The Ethernet spread spectrum radio-modem shall be designed to operate within the 902 to 928 MHz band, employing frequency hopping technology, approved by the FCC, under Part 15 rules." Laufer stated this provision refers to licensure specified in federal regulations, which allows certain antenna sizes, transmitter powers, and levels of performance. Laufer explained the regulations place limits on how the system can be built, and it requires engineering services to make sure the system is installed correctly and complies with federal laws. He stated, "This is important because what they're describing here to an engineer is its ability to mitigate interference. A lot of these types, especially in an urban area like where Costa Mesa is, you have got to co-locate these radios with other systems that are operating with in the same frequency bands."
Laufer acknowledged that many of the parts listed in Part 2 of Exhibit D, identified a certain manufacturer's brand for him to purchase and install. For example, Section 2.02 stated the remote antenna would be a broadband Yagi-type and listed three "[a]cceptable [m]anufacturers." However, he explained the document also listed many specifications for each antenna. With respect to the remote antenna, the agreement required a certain frequency range, input power, lightening protection, gain, front to back ratio, connector, mounting hardware, "VSWR," and impedance. Laufer stated that after purchasing each part, he took it back to his laboratory to determine if it fulfilled all the listed specifications. He opined conducting these tests were a necessary step in the pre-installation process and required engineering skills and services.
Laufer testified Part 3 of Exhibit D, titled "EXECUTION," also required engineering services. He pointed to several provisions, including section 3.01, subdivision (A), which required Synetcom to "coordinate with all trades to insure proper installation and connection of this equipment." He stated there are often changes made to the system and this provision meant installation would require engineering services.
Similarly, section 3.01, subdivision (C), which required Laufer to configure and program the radios called for engineering services. Laufer stated, "There is a real science to programming these radios correctly . . . and that requires a knowledgeable engineer to set them up so they will work." When questioned about the "real science," Laufer elaborated as follows: "I don't want to get too technical, but you can adjust the speed of a radio. You can adjust it up or down. If you change the speed of the radio, it performs a little bit differently. The faster the radio runs, the less operating range you get out of it. [¶] So, let's say . . . you set up a radio so it is operating at speed 'A,' we will call it, and it is going to work for one mile. Let's say you try to increase the speed of the radio so it runs faster, we will call it speed 'B', they you may only get a quarter of a mile range out of the same radio. [¶] You have to know how to set these up correctly or you're going to have problems in the field where the radios aren't going to be reliable."
Laufer testified section 3.01, subdivision (D), required Synetcom to use engineering services to determine the correct "[f]inal antenna height" by "performing a physical radio path survey." Laufer stated that although the results of the survey were to be approved by Mesa's engineer, the "radio study" required engineering services. Laufer stated the study could not be performed by a technician. Likewise the "radio antenna installation testing" outlined in section 3.01, subdivision (D), required engineering services. That provision specified that if the communication strength was unacceptable, "Engineer shall work with the contractor to determine appropriate modifications." Laufer stated this provision "meant that if the signal strength was determined to be inadequate, then parts of the system would have to be reengineered [by him] to make it acceptable."
Laufer stated section 3.01, subdivision (F), also called for engineering services. It provided, "Upon final installation of radio and antenna system, the Contractor shall coordinate with system integrator to test the RE signal connections with an inline watt meter. Radio output power and reflected standing wave ratio shall meet the radio manufacturer's specifications and recommendations. A failure of this test shall require repair or replacement of any defective antenna, cable, radio, or connections by the Contractor." Laufer explained, "These are engineering terms, but what we were talking about here is an experienced engineer would have to figure out whether the antennas are working correctly." He added the watt meter is not an electrician's job, but rather an engineering task. He stated, "If you look at the words 'standing wave ratio,' that is the parameters than an engineer would use to determine antenna performance. And an electrician or technician wouldn't know how to solve these types of problems. It really belongs in the hands of an experienced communications engineer."
Laufer also discussed Exhibit F (Synetcom's "TERMS and CONDITIONS of SALE"), attached to the Subcontract (hereafter Sale Contract). Laufer testified this document "define[d] our work on this contract." He explained the bid submitted to KDC contemplated only one radio study. This is the same radio study specified in Exhibit D, section 3.01, subdivision (D), discussed above. Synetcom's Sale Contract stated in item No. 8 that Synetcom agreed to the following: "'Radio engineering study to be completed prior to installation.'" Laufer interpreted No. 8 as referring to his duty to perform a radio study before final installation of the radio system, not as the court interpreted it, as an acknowledgement the study was to be conducted by Mesa's engineer.
Laufer stated Synetcom contemplated it would need to conduct additional radio studies and he wanted to clarify in the Sale Contract that additional testing would cost more money. Therefore, Synetcom put asterisks by Nos. 10 and 11 in its Sale Contract. The document provided the following specifications:
"**10. Crosslink radio parts list incomplete and antenna parts not specified. Engineering study required.
"**11. Solar Power Supplies may be insufficiently specified and require detailed engineering design (size may change)."
With respect to No. 10, Laufer explained the products list (Exhibit E, section 2.02) listed two different antenna types. "They're both in what I call the 900 megahertz band, frequency range 806 to 960 megahertz. That is the frequency range for that antenna, operating frequency. [¶] And they had the same things for item 'B.' And these two antennas really apply to the first radio choice, which is the Freewave HT plus radio, but they do not apply to the other radio because it operates on a different frequency. So these antennas will not work on the Firetide radio." Thus, No. 10 refers to the need for connectivity studies using different radios. Laufer anticipated he would perform those engineering studies as part of the installation process.
Laufer admitted DLT&V was hired to serve as Mesa's engineer on the project. He stated that in December 2010, he received Leonhardt's e-mail saying DLT&V was reviewing the radio survey and "'will make any needed design changes.'" Laufer admitted during his trial testimony, "we did not do any engineering drawings on this job because it was exempted in our contract . . . ." As explained by one engineering expert, Masenten, the Subcontract "was a well-defined system where very little, if any, leeway was provided. The only leeway provided to Synetcom in terms of a selection of elements, was basically and actually for all practical purposes, the instillation that affected its performance or effectively the location and the height of the antennas. Every other piece in that document was defined by KDC." Laufer conceded Mesa did not expect Synetcom to provide additional design drawings, but the subcontract called for engineering services in the form of radio studies and testing of the equipment to ensure it met DLT&V's specifications.
Garcia was the second witness who opined the Subcontract required engineering services. He was KDC's estimator and programmer when Mesa was upgrading its SCADA system, but he no longer worked there. KDC argues there was no evidence to support Garcia's opinion testimony and it should be disregarded because he had difficulty hearing. The testimony is comprised of the following brief exchange:
"[Synetcom's Counsel]: [Garcia] just a quick question. Did you understand that the Synetcom subcontract required engineering services?
"[Garcia]: It what now?
"[Synetcom's Counsel]: That the Synetcom subcontract required engineering services?
"[KDC Counsel]: Objection. . . .
"The Court: You can answer.
"[Garcia]: Did I understand that what now? Sorry. Sorry. I work in a loud building with a lot of noise and my eyesight and hearing is going.
"The Court: And we have two very soft-spoken lawyers to boot.
"[Synetcom's Counsel]: Did you understand that the Synetcom subcontract required engineering services?
"[Garcia]: Yes.
"[Synetcom's Counsel]: And did you check to see that Synetcom had an engineering license?
"[Garcia]: No."
The above shows Garcia understood his hearing limitations and asked counsel to speak louder before he was ready to answer the question. After he understood the nature of the question, he gave an unequivocal answer. We fail to see how his statement is any different from the subjective generalized opinions offered by Mesa's and KDC's other employees.
In summary, the trial court considered a great deal of extrinsic evidence on the scope of work contemplated by the Subcontract. The court found dispositive the testimony of a handful of witnesses and the language of paragraphs 7, 8, 9, 10, and 11, which it interpreted as Synetcom's acknowledgment engineering work was going to be done by someone else. This interpretation ignores the extrinsic evidence presented by Laufer and Garcia. Laufer testified he wrote those five paragraphs to clarify its bid included one engineering study and he anticipated performing additional studies that would cost extra. Laufer cited specific provisions of the agreement as requiring Synetcom to provide engineering services and other entities were performing the construction work. The jury should have been allowed to weigh the credibility of Laufer's and Garcia's interpretation of the technical terms of the contract against the generalized opinions offered by the other four witnesses. Due to the conflict in extrinsic evidence, interpretation of this contract was not a judicial function and the trial court improperly granted the nonsuit motion.
VI. Motion for Nonsuit - Oral Contract Claims
Synetcom maintains KDC owed it $202,000 for extra work performed on the contract. Most of the work related to additional testing after Synetcom's initial test revealed the system did not work.
In July 2010, Synetcom performed and submitted to Mesa the results of its first radio study. The study was 56 pages long and included an overview of the radio path engineering, GPS coordinates, maps, "optional repeater sites," "theoretical path calculations," measurements, recommendations, conclusions, and nine photographs. The report concluded, "From our study it was determined that the antenna heights at [two locations] are not sufficient to facilitate broadband (2.4 or 5.8 GHz) radio coverage." It offered several recommendations to improve the design of the system, one of which was as follows: "Based on our measurements and analysis, a reasonable compromise will be to co-locate the entire system in the 900 MHz ISM band using two different radio types[.]" "Our final recommendation is that a comprehensive (hardware/software) integration and test program be completed—prior to system field installation and factory acceptance test. This approach will increase efficiency and reduce risk during installation and commissioning." The concluding paragraph stated the study results allowed Synetcom to "develop a list of recommendations" and a "reliable system" was "technically feasible even with the imposed antenna height restrictions and local interference" if the recommendations were followed. In other words, Synetcom concluded DLT&V's design would not work but could be fixed.
In August 2010, KDC asked Synetcom to conduct an additional radio study using low profile antennas. Synetcom tested 19 sites and recommended two different reduced profile antennas configurations using a 20 foot pole, and "a Patch antenna" at three specific locations.
Several days after submitting the additional radio study, DLT&V sent Synetcom four sets of drawings. Mesa prepared a document stating the project was behind schedule due to problems obtaining permits from the City of Newport Beach and Southern California Edison (SCE), and changes to approved sites in the City of Costa Mesa. Mesa noted Synetcom was working with DLT&V to address radio interference issues.
A few weeks later, Mesa's engineer prepared a "Request for Information" (RIF) asking Synetcom about using a low profile antenna at one of the sites. Thereafter, Mesa and KDC used RIF's to request additional engineering tests. In September 2010, Mesa provided revised drawings with new antenna heights to Synetcom, and it responded by stating the next broadband radio engineering study would cost $50,415. Mesa replied it would not pay the additional cost, or authorize a change order, because Synetcom's original radio study did not use the antenna heights specified in the "original contract." Laufer sought clarification on what was meant by the term original "contract heights." He explained the heights stated in Mesa's letter were not included in any of the documents in his possession. Laufer testified he later determined Synetcom did not receive all the pertinent and relevant documents from KDC when he first started working on the project. Laufer explained he did not realize this omission or appreciate the extent of the problem, and consequently he highlighted in the Sale Contract only a few obvious deficiencies related to incomplete parts specifications listed in Exhibit F, noting additional radio studies could be required.
In October 2010, DLT&V sent KDC approximately 23 drawings. KDC demanded Synetcom perform another radio survey. It threatened to impose $1,500 a day in liquidated damages if Synetcom did not start the study immediately.
At the end of November 2010, Synetcom completed a radio study at three sites, using Mesa's requested antenna heights. In December, Mesa's engineer sent DLT&V a letter clarifying KDC/Synetcom was hired to construct the system using DLT&V's design plans. "[A]ny deviations from those plans and specifications cannot be made without a written directive from Mesa and a completed change order." It warned DLT&V to not ask Synetcom to design the radio system because there was no approval for this extra work. Mesa accepted some of the antenna heights and asked Synetcom to perform another test using the type of radio specified in the Prime Contract. In December, Laufer stated he went to KDC's shop and obtained a copy of the Prime Contract.
In December 2010, Leonhardt sent an interoffice memo stating Mesa was still having trouble obtaining permits and she outlined other troubles with the project. She wrote, "The contractor began to perform the required radio survey to determine the final heights of the antenna. During this survey, many changes were made to improve the system and eliminate the need for installation of antenna on SCE poles. [¶] During this time Mesa's design consultant, DLT&V experienced considerable turnover and the key members of the team are no longer with the company. This has created a knowledge void that Mesa and DLT&V are working to overcome. As a result, the approval of the radio survey was delayed. Mesa determined the contractor had not performed the survey per the contract and that they must re-survey the backbone portion . . . to determine the final heights of the antenna. It was also determined that an omission on the contract documents required a change order to adequately complete the survey. Mesa opted to rent a lift to be used for the survey in lieu of preparing a change order to the contractor. The contractor provided an operator for [one] day at no expense to Mesa. Unfortunately the survey required [three] days of work. Mesa has prepared a change order for [two] days of man-lift operator time. [¶] The contractor is eager to complete this project as [is] Mesa . . . . Mesa informed the contractor that a no-cost change order would be granted to the contractor once the permits were received and the field portion of the work ready to begin."
In January 2011, Synetcom was asked to perform another test of the system using Firetide radios, as specified in the Prime Contract. Synetcom determined the system would not work with that particular radio system. Over the next few months, Synetcom gave Mesa multiple spreadsheets and surveys regarding design alternatives for the project. Laufer explained with every change to the system "you have to go back and redo the engineering. There is no way around it if you want it to work." Laufer sent KDC a letter stating the engineering design had "changed significantly from the original concept" and he requested detailed instructions and a change order for the additional work. Synetcom did not receive a change order, and thereafter, the dispute between the parties escalated. Mesa eventually hired a new contractor to complete the design and install the radio system.
The trial court determined KDC was not responsible for paying Synetcom's performance of additional work because the Subcontract required any change orders to be in writing. On appeal, the parties dispute if this contract provision was waived. A. Writing Requirement
Article 10, subdivision 10.1 of the Subcontract prohibited Synetcom from performing any extra work unless it obtained written permission. Specifically, it provided, "Subcontractor shall make no changes in the work covered by this Agreement without written direction from the Contractor. Subcontractor shall not be compensated for any change which is made without such written direction."
Article 10, subdivision 10.2 provided: "The Subcontractor may be ordered in writing by the Contractor . . . to make changes in the work within the general scope of this Subcontract consisting of additions, deletions or other revisions . . . . The Subcontractor, prior to the commencement of such changed or revised work, shall submit promptly to the Contractor written copies of a claim for adjustment to the Subcontract sum and Subcontract time for such revised work in a manner consistent with requirements of the Subcontract [d]ocuments."
KDC asserts, and Synetcom does not dispute, there is no evidence showing KDC ordered Synetcom in writing to make work changes. There is also no evidence Synetcom, before commencing additional work, submitted a claim for an adjustment to the Subcontract. Instead, Synetcom asserts this provision of the contract was waived by the parties' conduct. B. Waiver
As noted by Synetcom, "California courts generally have upheld the necessity of compliance with contractual provisions regarding written 'change orders.' [Citations.] However, California decisions have also established that particular circumstances may provide waivers of written 'change order' requirements. If the parties, by their conduct, clearly assent to a change or addition to the contractor's required performance, a written 'change order' requirement may be waived. [Citations.] (Weeshoff Constr. Co. v. Los Angeles County Flood Control Dist. (1979) 88 Cal.App.3d 579, 589 (Weeshoff).) It asserts there was evidence the parties, by their conduct, waived the contractual provision that required a written change order. Pointing to evidence KDC threatened Synetcom with liquidated damages if it did not comply, Synetcom argues this kind of pressure was sufficient to waive the writing requirement.
KDC acknowledges the Weeshoff decision and its progeny, but asserts there is also a line of case authority holding provisions in a public works contract cannot be waived or orally modified. (Citing Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104 (Katsura).) In the Katsura case, an engineer contracted with a city for $18,485 worth of consulting services. (Id. at p. 106.) "The contract required that any modifications were only to be made by mutual written consent of the parties." (Ibid.) The city paid the engineer $15,565 during the project, but refused to pay the final invoice for an additional $23,743.75 "because it was beyond the maximum contract price and included work that was not authorized by the contract." (Id. at pp. 106-107.) The engineer sued the city for breach of contract, maintaining the contract's written modification requirement was orally modified to include extra work based on change order requests made by the city's associate engineer and an outside consultant. (Id. at pp. 107-108.)
The court in Katsura determined the contract could not be orally modified, concluding: "Persons dealing with a public agency are presumed to know the law with respect to any agency's authority to contract. [Citation.] '"One who deals with the public officer stands presumptively charged with a full knowledge of that officer's powers, and is bound at his . . . peril to ascertain the extent of his . . . powers to bind the government for which he . . . is an officer, and any act of an officer to be valid must find express authority in the law or be necessarily incidental to a power expressly granted."' [Citation.]" (Katsura, supra, 155 Cal.App.4th at p. 109.)
The court explained, "There is no provision in the City charter for execution of oral contracts by employees of the City who do not have requisite authority. The alleged oral statements by the associate city engineer and project manager are insufficient to bind the City. '"No government, whether state or local, is bound to any extent by an officer's acts in excess of his . . . authority."' [Citations.]" (Katsura, supra, 155 Cal.App.4th at p. 109.) The court noted, "We are not unsympathetic to the seeming unfairness of denying payment for work done in good faith by one who has no actual knowledge of the restrictions applicable to municipal contracts. . . . [¶] However, [the engineer in this case] was not the victim of an innocent mistake. He admitted that, at the time he performed the extra work, he knew it was outside the scope of the contract. Moreover, he had actual knowledge of the process for obtaining authorization for extra work." (Id. at p. 111.)
The court in Katsura rejected the engineer's reliance on Weeshoff, supra, 88 Cal.App.3d 579, stating, "the continuing viability of Weeshoff is questionable. In pronouncing that 'California decisions have also established that particular circumstances may provide waivers of written "change order" requirements,' and '[i]f the parties, by their conduct, clearly assent to a change or addition to the contractor's required performance, a written "change order" requirement may be waived,' the [Weeshoff] court cited cases involving private parties, not public agencies. [Citation.] Since its publication 28 years ago, no case has cited Weeshoff for this point. This is understandable as it is contrary to the great weight of authority, cited above, to the contrary." (Katsura, supra, 155 Cal.App.4th at p. 111.)
A few years later, a different appellate court reached the same conclusion. P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, concerned a breach of contract action arising between a contractor and a city seeking to redesign a municipal golf course. On appeal, the city sought to overturn the jury's award of $109,093 for the contractor's extra work on the grounds there was no written change order as required by the contract. The court reversed the judgment, concluding, "Unlike private contracts, public contracts requiring written change orders cannot be modified orally or through the parties' conduct. Thus, even if [the contractor's] evidence pertaining to the oral authorizations of a city employee for extra work is fully credited, [the contractor] cannot prevail. The [trial] court erred by submitting the matter to the jury; it should have granted the City's motion for nonsuit." (Id. at p. 1335.) The court reiterated the Katsura court's criticism of Weeshoff as "'contrary to the great weight of authority. . . .'" (Id. at p. 1342; see also G. Voskanian Construction Inc. v. Alhambra Unified School Dist. (2012) 204 Cal.App.4th 981, 990-991 [in general contractor's breach of contract action against school district, requirement change orders must be in writing could not be waived or orally modified].)
Synetcom argues these legal principles do not apply because KDC contracted with the public agency, and the primary contract was not provided until after it performed out of scope work without a change order. It provides no case authority or legal analysis to support these theories. As noted by KDC, the Prime Contract plainly stated Mesa was a public agency "subject to the provisions of law relating to public contracts." The Subcontract incorporated the terms of the Prime Contract. Laufer testified Synetcom was in the business of providing "engineering services to three different industry groups . . . [and w]e do a lot of work for public utilities, electric, power and water utility." Laufer/Synetcom was no stranger to working with public agencies. Synetcom requested payments for additional work several times. We conclude the court correctly applied the law, holding the requirement change orders must be in writing could not be waived. C. Statute of Limitations for Oral Contracts
Synetcom argues the court improperly treated the extra work as being disconnected from the Subcontract and characterized it as arising from oral contracts. It concludes the court erroneously barred recovery for the extra work by applying the two- year statute of limitations applicable to oral contracts. (Code Civ. Proc., § 339, subd. (1).) It maintains all causes of action in the complaint are premised on the written contract, subject to the four-year statute of limitations. (Code Civ. Proc., § 337, subd. (1).) It asserts the complaint was timely filed within the four-year deadline.
This argument is entirely premised on Synetcom prevailing on its argument the writing requirement was waived. We have ruled waiver does not apply in this case. Because Synetcom does not provide an alternative argument suggesting the oral agreements for extra work were not barred by the two year statute of limitations, we find no reason to disturb the court's ruling.
VII. Exclusion of Testimony
Synetcom maintains the trial court improperly excluded the testimony of Julio Frank Jiminez and Resweber. We disagree. A. Jiminez's Opinion Testimony
Jiminez was an employee of Firetide, a radio manufacturer. He testified that during the SCADA project, Synetcom requested he conduct a "path profile" and "link analysis" regarding the Firetide radio being considered for the upgraded system. Jiminez stated Laufer provided all the data regarding the project and information regarding the planned "signal path between the antennas." Jiminez analyzed the data and prepared a report (exhibit 88). He explained Laufer asked him "to provide path profiles and an engineering analysis of his stipulated data so that he could make whatever determination he was after. Jiminez admitted he did not independently verify any of the data provided. Synetcom did not designate Jiminez as an expert witness.
The court sustained several objections to questions seeking Jiminez's opinions about the results of his analysis/tests. Synetcom asserts this ruling was erroneous because Jiminez was a percipient witness and his testimony regarding the test results were not offered as expert opinion. It argues on appeal, "Jimenez's testimony would simply corroborate . . . Laufer's engineering analysis and conclusions, and was not offered as expert testimony. To the extent that . . . Jimenez was also an expert on Firetide radio systems, that was not the basis for his testimony. [¶] This testimony was provided to aid the trier of fact in understanding the problems encountered by Synetcom on the SCADA project, which resulted [in changes] in Synetcom's work and required Synetcom to show MESA that the radios selected by DLT&V would not support the system as it had been designed."
We have carefully reviewed the testimony at issue: The court sustained objections to the following questions: (1) "[A]s a result of this work that you did, presented by these analysis, were you able to determine whether or not the Firetide radio would perform in this environment?" (2) "What do the exhibits tell you [about the determination Laufer was seeking]?" (3) "What did you convey to . . . Laufer as the results of this analysis?" (4) "Did you tell . . . Laufer anything as a result of this analysis?" and (5) Did you tell . . . Laufer what the results of your analysis was?" With respect to this last question, the court told Jiminez he could answer "yes or no" but not discuss the results. It appears the court permitted Jiminez to describe the circumstances under which he was hired, the data he received, and that he prepared and sent Laufer a report. The court would not allow Jiminez to offer his opinion about the viability of the design or the results of his tests.
We find no error. The court properly allowed Jiminez to testify about information he perceived as a lay witness. Specifically, he told the jury about his limited involvement in the radio upgrade program on behalf of Synetcom. Whether the Firetide radio would work in the SCADA project called for an expert opinion.
Ordinarily a witness must testify to facts, not opinions. An exception exists for expert witnesses. (Evid. Code, § 801.) Nonexperts are allowed to state opinions in limited situations. (Evid. Code, § 800.) "Lay opinion testimony is admissible where no particular scientific knowledge is required, or as 'a matter of practical necessity when the matters . . . observed are too complex or too subtle to enable [the witness] accurately to convey them to court or jury in any other manner.' [Citations.]" (People v. Williams (1988) 44 Cal.3d 883, 915.) We agree with the trial court that Jiminez's opinion required the scientific analysis and specialized interpretation of test results, and could only be reached due to his knowledge, engineering training and experience, which was clearly beyond common experience.
Jiminez was not designated as an expert. Code of Civil Procedure section 2034.300 provides, "the trial court shall exclude from evidence the expert opinion of any witness that is offered by any party who has unreasonably failed to . . . (a) List that witness as an expert under [s]ection 2034.260." (Code Civ. Proc., § 2034.300.)
Moreover, noticeably missing from Synetcom's argument is any demonstration as to why exclusion of this evidence requires reversal of the judgment. It provides no analysis of prejudice, i.e., a reasonable probability it would have obtained a more favorable result if Jiminez's opinions had not been excluded. Evidentiary error will not warrant reversal unless there has been prejudice, and it is the appealing party's burden to demonstrate that prejudice. (See Cal. Const., art. VI, § 13 ["No judgment shall be set aside, . . . in any cause, on the ground of . . . improper admission or rejection of evidence, . . . unless . . . the error complained of has resulted in a miscarriage of justice[]"]; Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1678 [appellant's burden to demonstrate prejudice under California Constitution].) B. Resweber's Testimony
Laufer and Resweber co-founded Synetcom. Resweber was Synetcom's CEO. He explained Laufer's specialty was to provide "engineering services for industrial radio systems" and his specialty was maintaining and developing products for the systems. After discussing his background and experience, Resweber stated his involvement with Mesa's SCADA project "primarily was early on reviewing the . . . proposed contract that [they] received from KDC." Thereafter, "My role was from time to time consulting with [Laufer] when he had certain engineering challenges that he wanted to discuss." He added that during the job he "was simply the middle man" and would forward calls to Laufer.
When Synetcom's counsel asked Resweber to discuss exhibit No. 68, the court sustained KDC's counsel's objection the question was cumulative because the same document was introduced and described during Laufer's testimony. The court told the jury, "Just so you all understand, in our practice we have an issue called 'cumulative evidence.' Basically with the idea is you do not call multiple witnesses to testify about the same thing. So here we have already been over exhibit No. 68 in some detail with . . . Laufer. I do . . . not propose, therefore, to have . . . Resweber go over the same document again. You have heard about it. [¶] So, to the extent that . . . Resweber would say, me too, I don't think that is a good use of your time. . . . Next question."
The next question concerned exhibit No. 59, also discussed by Laufer during his testimony. The court asked if there was something different Synetcom's counsel was going to elicit about the document. It sustained KDC's cumulative objection when Synetcom's counsel only offered to "respond about the contents of the document." Counsel did not suggest Resweber's testimony would be different from Laufer's description of the Synetcom's invoice to KDC (exhibit No. 59).
KDC's counsel objected to questions about another invoice (exhibit No. 70) on different grounds. After Resweber stated he did not review that particular invoice before Laufer sent it to KDC, the court sustained KDC's lack of foundation objection.
The next question concerned yet another invoice (exhibit No. 71). The witness did not answer counsel's question about it after KDC's counsel objected on the grounds the testimony would be cumulative. The court added, Laufer testified about this invoice "just the other day."
Resweber answered questions about how much money KDC owed Synetcom. The court overruled KDC's cumulative objections to questions about whether Synetcom suffered lost profits from the Subcontract and about the value of Laufer's additional work on the project.
With respect to exhibit No. 72, Resweber described over KDC's objection the contents of the document. It was a "notice of change that Synetcom provided to KDC . . . based on additional work that [Aquil] Husain was requesting from Synetcom." Resweber stated Synetcom's attorney prepared the document and Resweber reviewed it before it was sent. The court sustained KDC's objection to questions about the purpose of this document, stating, "Laufer testified extensively about this."
Next, the court sustained KDC's hearsay objections to questions about whether Resweber knew what kind of design information and "ideas" Laufer provided KDC about the radio system. The court ruled Resweber's "understanding" would be based on his discussions with Laufer. And finally, the court sustained a relevancy objection to Synetcom's question about how much DLV&T was paid for their radio design. Synetcom stated it had no further questions.
On appeal, Synetcom argues Resweber "was precluded from testifying about his own experiences and observations during [the] Subcontract performance." It maintains, "Resweber was involved in portions of the engineering work and the negotiations with KDC." As described above, Resweber was permitted to testify about his involvement in the negotiations and that from "time to time" Laufer consulted with him regarding engineering work. The court did not entirely preclude Resweber from testifying about his own experiences. It sustained objections only with respect to testimony that would have been cumulative of Laufer's testimony.
Synetcom does not appear to dispute the excluded testimony was cumulative, but rather suggests it should have been allowed because the court later ruled there was insufficient evidence to support Synetcom's case against KDC. It argues Resweber's cumulative testimony was actually "corroborat[ing]" evidence "of engineering services" needed to support Synetcom's case. It also asserts the court abused its discretion in sustaining an objection for lack of foundation. These arguments are waived due to the lack of supporting record citations and pertinent legal authority. The court sustained objections to cumulative testimony regarding four different exhibits and lost profits. Synetcom fails to identify what part of this large amount of testimony would not have been cumulative, but rather corroborating evidence Laufer provided engineering services. It provides no legal authority to support its theory cumulative evidence was admissible in this case. With respect to the foundational objection to exhibit No. 70, Synetcom offers no legal analysis to support its theory Resweber could testify about a document he did not prepare or review. In light of the above, we conclude these arguments are waived (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979). In any event, we have ruled the judgment must be reversed for a different reason, i.e., a jury must resolve the dispute of whether the Subcontract called for engineering services.
DISPOSITION
We reverse the judgment entered in favor of KDC and against Synetcom on KDC's cross-complaint. We reverse the court's order granting the motion for directed verdict and we remand the cross-complaint for further proceedings.
We reverse the judgment entered in favor of KDC on Synetcom's complaint. The contract-related causes of action stated in Synetcom's operative complaint contained allegations relating to both the written contract and subsequent oral agreements. We reverse the trial court's nonsuit ruling to remove from the jury's consideration any allegations relating to the parties' written contract, contained in the first cause of action for violation of Business and Professions Code section 17200, third cause of action for breach of contract, fourth cause of action for breach of the covenant of good faith and fair dealing, fifth cause of action for breach of implied warranty of plans and specifications, and the seventh cause of action for common count-goods and services rendered. We recognize these causes of action also contained allegations relating to the payment of extra work, not memorialized in writing, and we affirm the trial court's nonsuit ruling removing those allegations from the jury's consideration. Finally, we affirm the nonsuit ruling entered on Synetcom's second cause of action for violations of Business and Professions Code section 17200, misappropriation of trade secrets.
In the interests of justice, neither party shall recover costs on appeal.
O'LEARY, P. J. WE CONCUR: BEDSWORTH, J. THOMPSON, J.