Logtale, Ltd. v. Ikor, Inc. ( 2018 )

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT AUG 31 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
LOGTALE, LTD., a British Virgin Islands No. 16-15376
corporation,
D.C. No. 3:11-cv-05452-EDL
Plaintiff-Appellant, Northern District of California,
San Francisco
v.
ORDER
IKOR, INC., a South Dakota corporation; et
al.,
Defendants-Appellees.
LOGTALE, LTD., a British Virgin Islands No. 16-16530
corporation, 16-17127
Plaintiff-Appellee, D.C. No. 3:11-cv-05452-EDL
v.
JAMES CANTON, Dr.,
Defendant-Appellant,
and
IKOR, INC., a South Dakota corporation
and ROSS W. TYE, Dr.,
Defendants.
LOGTALE, LTD., a British Virgin Islands No. 16-16624
corporation, 16-17128
Plaintiff-Appellee, D.C. No. 3:11-cv-05452-EDL
v.
IKOR, INC., a South Dakota corporation
and ROSS W. TYE, Dr.,
Defendants-Appellants,
and
JAMES CANTON, Dr.,
Defendant.
LOGTALE, LTD., a British Virgin Islands No. 16-16656
corporation,
D.C. No. 3:11-cv-05452-EDL
Plaintiff-Appellant,
v.
JAMES CANTON, Dr.; et al.,
Defendants-Appellees.
Before: BERZON and FRIEDLAND, Circuit Judges, and SESSIONS,* District
Judge.
*
The Honorable William K. Sessions III, United States District Judge
for the District of Vermont, sitting by designation.
2
Judge Berzon and Judge Friedland have voted to deny the petition for
rehearing en banc. Judge Sessions recommends denial of the petition for rehearing
en banc. The full court has been advised of the petition for rehearing en banc, and
no judge has requested a vote on whether to rehear the matter en banc. Fed. R.
App. P. 35. The petition for rehearing en banc is DENIED.
Pursuant to Federal Rule of Appellate Procedure 40(a), the panel hereby
GRANTS James Canton’s petition for panel rehearing. The memorandum
disposition dated March 28, 2018 is withdrawn. A new memorandum disposition
is filed concurrently with this order.
Subsequent petitions for panel rehearing or rehearing en banc may be filed.
3
NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 31 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
LOGTALE, LTD., a British Virgin Islands No. 16-15376
corporation,
D.C. No. 3:11-cv-05452-EDL
Plaintiff-Appellant,
v. MEMORANDUM*
IKOR, INC., a South Dakota corporation; et
al.,
Defendants-Appellees.
LOGTALE, LTD., a British Virgin Islands No. 16-16530
corporation, 16-17127
Plaintiff-Appellee, D.C. No. 3:11-cv-05452-EDL
v.
JAMES CANTON, Dr.,
Defendant-Appellant,
and
IKOR, INC., a South Dakota corporation
and ROSS W. TYE, Dr.,
Defendants.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
LOGTALE, LTD., a British Virgin Islands No. 16-16624
corporation, 16-17128
Plaintiff-Appellee, D.C. No. 3:11-cv-05452-EDL
v.
IKOR, INC., a South Dakota corporation
and ROSS W. TYE, Dr.,
Defendants-Appellants,
and
JAMES CANTON, Dr.,
Defendant.
LOGTALE, LTD., a British Virgin Islands No. 16-16656
corporation,
D.C. No. 3:11-cv-05452-EDL
Plaintiff-Appellant,
v.
JAMES CANTON, Dr.; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Elizabeth D. Laporte, Magistrate Judge, Presiding
Argued and Submitted November 15, 2017
San Francisco, California
2
Before: BERZON and FRIEDLAND, Circuit Judges, and SESSIONS,** District
Judge.
This case arises from a $5 million investment that Logtale made in IKOR
after IKOR’s founders, Dr. James Canton and Dr. Ross Tye, claimed to have
developed a new biotechnology. Logtale lost its $5 million after what it alleged
was the mishandling of that investment. Logtale sued 1) IKOR, Canton, and Tye
for breach of contract; 2) IKOR for breach of implied covenant to deal in good
faith; and 3) Canton and Tye for breach of fiduciary duty. The case went to trial,
and the jury awarded $4 million in compensatory damages against the various
Defendants on each of the claims and $1 million in punitive damages against
Canton and Tye.1
After trial, Defendants moved to strike punitive damages on the ground that
**
The Honorable William K. Sessions III, United States District Judge
for the District of Vermont, sitting by designation.
1
As we note in the concurrently filed order, the appeals as they relate to Tye
are dismissed pursuant to his discharge from bankruptcy under 11 U.S.C. § 727.
See In re Eber, 687 F.3d 1123, 1128 (9th Cir. 2012) (“If and when a debtor is
granted discharge, . . . § 362’s automatic stay dissolves and is replaced by a
permanent injunction under § 524.”); see also 11 U.S.C. § 524(a)(1)-(2) (stating
that a discharge under Section 727 “voids any judgment at any time obtained, to
the extent that such judgment is a determination of the personal liability of the
debtor” and “operates as an injunction against the commencement or continuation
of an action . . . to collect, recover or offset any such debt as a personal liability of
the debtor”). For convenience, however, when discussing events in the district
court and arguments made on appeal, this memorandum disposition refers to
Defendants collectively.
3
there was insufficient evidence of their financial condition, and the court granted
this motion. Logtale appealed.
Defendants then moved for judgment as a matter of law and/or a new trial on
the grounds that the jury instructions on damages were erroneous, the awards of
compensatory damages were duplicative, and there was insufficient evidence to
support the compensatory damages awards. Logtale also moved for attorney’s fees
and costs. In the same order, the district court granted in part and denied in part
Defendants’ motion for judgment as a matter of law and/or a new trial, concluding
that the compensatory awards were duplicative and thus reducing them but
rejecting Defendants’ other arguments. The district court also awarded Logtale
fees and costs.
Defendants appealed from that order and from the judgment on the ground
that the court erred in granting a number of Logtale’s motions in limine at trial.
Logtale also appealed, challenging the decision to reduce compensatory damages.
1. “To reverse on the basis of an evidentiary ruling,” the panel must
determine that the district court committed an error and that the error was
prejudicial. McEuin v. Crown Equip. Corp., 328 F.3d 1028, 1032 (9th Cir. 2003).
Defendants contend that the district court prejudicially erred in granting Logtale’s
motions in limine. Specifically, they argue that the excluded evidence was
relevant because it impeached Norman Wai, Logtale’s founder, and Bing Wong,
4
Wai’s acquaintance, by showing their bias.
Here, even if Defendants could show error, they cannot show prejudice. “A
reviewing court should find prejudice only if it concludes that, more probably than
not, the lower court’s error tainted the verdict.” Tennison v. Circus Circus Enters.,
Inc., 244 F.3d 684, 688 (9th Cir. 2001). Here, the jury certainly knew that Wai
was biased—he was Logtale’s founder. And even if the jury had believed that
Wai’s and Wong’s testimony should be entirely disregarded because of bias, the
documentary evidence and the testimony of Canton and Tye themselves provide
ample support for the jury’s verdict. We therefore cannot conclude that the jury’s
verdict was tainted by the exclusion of the evidence challenged on appeal. We
thus AFFIRM the district court’s decision to grant Logtale’s motions in limine.
2. Defendants contend there were a number of errors in the jury’s awards of
compensatory damages, but we are not persuaded.
Defendants first contend that the jury instructions on compensatory damages
were erroneous. But Defendants stipulated to the jury instructions and therefore
affirmatively waived any objection. See Gilchrist v. Jim Slemons Imports, Inc.,
803 F.2d 1488, 1493 (9th Cir. 1986). We therefore AFFIRM the district court’s
decision to deny Defendants’ motion for judgment as a matter of law on this
ground.
Defendants also argue, and the district court agreed, that the jury’s awards of
5
compensatory damages were duplicative and not supported by the evidence. We
disagree. Although a failure to make a Rule 50(a) motion normally forecloses a
Rule 50(b) motion, we review Defendants’ Rule 50(b) challenge to the jury’s
verdict on the sufficiency of the evidence for plain error. E.E.O.C. v. Go Daddy
Software, Inc., 581 F.3d 951, 961-62 (9th Cir. 2009) (applying plain error despite
the absence of a Rule 50(a) motion).2 We reverse a jury verdict for plain error
“only if such plain error would result in a manifest miscarriage of justice.” Go
Daddy Software, Inc., 581 F.3d at 961 (quoting Janes v. Wal-Mart Stores, Inc., 279
F.3d 883, 888 (9th Cir. 2002)).
Logtale often presented the same facts to support its various claims. But
when asked by the district court, the jury specifically explained that it intended
these amounts to be cumulative (i.e., a total of $4 million). The jury could have
concluded—and, given that its damages figures make more sense as fractions of a
whole than as independent figures, likely did conclude—that damages for each
claim were the same, and that the amount should be distributed among the various
claims so as to avoid duplicative damages. Alternatively, the jury might have
considered the evidence and allocated the aggregate harm caused by the
2
Logtale argues that the panel should decline altogether to review
Defendants’ Rule 50(b) arguments. We need not evaluate Logtale’s support for
that position, however, because even reviewing for plain error, Defendants’ Rule
50(b) arguments fail.
6
Defendants in a way that provided independent support for each claim.3 For
example, the jury could have treated Defendants’ failure to provide financial
statements as a breach of contract; the payment of consulting fees to Tye and
Canton as a breach of fiduciary duty; and the removal of Wai from the board as a
breach of good faith. Either way, the damages assessed could reasonably have
been grounded in the evidence, nonduplicative, and not excessive.
Therefore, we REVERSE the district court’s decision to grant in part
Defendants’ motion for judgment as a matter of law because the damages were not
clearly duplicative. We also AFFIRM the district court’s denial of Defendants’
motion for judgment as a matter of law with respect to Defendants’ argument that
there was insufficient evidence to support the awards. As a result, the jury’s
awards of compensatory damages against IKOR and Canton are reinstated.4
3. A Rule 52(b) motion is not appropriate in a jury trial. See 9C Charles
Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2571 (3d ed.
2017). Therefore, although Defendants labeled their motion to strike punitive
damages for lack of evidence as a Rule 52(b) motion, we construe it as a Rule
3
Defendants argue that such an action by the jury would violate the jury
instructions, but they cite nothing in the jury instructions prohibiting such an
allocation, nor do they cite any persuasive authority on this point.
4
Because Tye was discharged from bankruptcy, and because the
compensatory damages awards were not joint and several, the award of
compensatory damages against Tye is not reinstated.
7
50(b) motion. See, e.g., Andersen v. United States, 298 F.3d 804, 807 (9th Cir.
2002) (“The substance of the motion, not its form, controls its disposition.”); see
also Fed. R. Civ. P. 50(a) (stating that judgment as a matter of law is appropriate if
“the court finds that a reasonable jury would not have a legally sufficient
evidentiary basis to find for the party on that issue”). Because Defendants did not
raise their argument in a Rule 50(a) motion, we review the jury’s award of punitive
damages for plain error. Go Daddy Software, Inc., 581 F.3d at 961-62.5
We agree with Defendants that California law requires something more than
a showing of profits and that Logtale did not make the requisite showing. But we
decline to reverse the jury’s punitive damages verdict for plain error here because
Defendants have not shown a manifest miscarriage of injustice. Go Daddy
Software, Inc., 581 F.3d at 961. Logtale may well have been able to present
evidence supporting the punitive damages award had Defendants filed a Rule 50(a)
motion in a timely fashion. The amount of punitive damages awarded was
relatively modest, and Defendants’ history of business ventures suggests, though it
does not prove, the ability to pay that amount. Therefore, we REVERSE the
district court’s decision to strike punitive damages and reinstate the award of
5
As previously noted, we decline to reach Logtale’s argument that a Rule
50(b) motion is completely foreclosed by a failure to make a Rule 50(a) challenge
to sufficiency of the evidence. See supra note 2.
8
punitive damages against Canton.6
4. Section 1717 of the California Civil Code allows for recovery of
attorney’s fees provided for by contract. Here, only the Stock Purchase Agreement
(“SPA”) contained a fees provision. Canton did not sign the SPA, and he is
therefore not liable for attorney’s fees. IKOR, however, did sign the SPA. Even
though the jury did not specifically find that the SPA was breached, given the close
and express connection specified in the SPA between the contracts and the
expansive language of the fees provision which allowed for recovery of a
prevailing party’s fees and costs incurred to “enforce[e] any right of such
prevailing party under or with respect to this Agreement,” it does not matter which
of the contracts the jury believed had been breached. IKOR is liable for fees and
costs.
IKOR is also liable for the entirety of the non-taxable expenses awarded by
the district court. Non-taxable expenses may properly be included in an attorney’s
fees award. See Trs. of Constr. Indus. & Laborers Health & Welfare Tr. v.
Redland Ins. Co., 460 F.3d 1253, 1258 (9th Cir. 2006) (“‘[R]easonable attorney’s
fees’ include litigation expenses only when it is ‘the prevailing practice in a given
community’ for lawyers to bill those costs separately from their hourly rates.”
6
Because Tye was discharged from bankruptcy, and because the punitive
damages awards were not joint and several, the award of punitive damages against
Tye is not reinstated.
9
(quoting Missouri v. Jenkins, 491 U.S. 274, 286-87 (1989))). Defendants argue,
however, that Logtale is not entitled to any award based on such expenses because
Logtale provided no documentary evidence to support such an award. This
argument is not persuasive, because Logtale did provide such documentation.
Therefore, we AFFIRM the district court’s award of attorney’s fees and costs
against IKOR and REVERSE the district court’s award of attorney’s fees and costs
against Canton.
All appeals with respect to Tye are DISMISSED. The decision to strike
punitive damages at issue in Appeal No. 16-15376 is REVERSED and punitive
damages against Canton are reinstated. The decision to grant Logtale’s
motions in limine and the decision to deny in part Defendants’ motion for
judgment as a matter of law at issue in Appeal No. 16-16530 are AFFIRMED.
The decision to grant in part Defendants’ motion for judgment as a matter of
law at issue in Appeal No. 16-16656 is REVERSED and the compensatory
damages awards against IKOR and Canton are reinstated. The decision to
grant Logtale fees and costs at issue in Appeal No. 16-17127 is AFFIRMED in
part and REVERSED in part, and IKOR, but not Canton, is liable for fees
and costs.
Costs on appeal in each of these Appeals are taxed against Defendants
IKOR and Canton.
10