Missakian v. Amusement Industry, Inc. ( 2021 )

Filed 9/29/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
CRAIG MISSAKIAN, B296749
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC616089)
v.
AMUSEMENT INDUSTRY, INC.,
et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Rafael A. Ongkeko, Judge. Reversed and
remanded with directions.
Salisian Lee and Richard H. Lee; Law Offices of Craig
Missakian and Craig H. Missakian; Greines, Martin, Stein &
Richland and Timothy T. Coates for Plaintiff and Appellant.
Bashir E. Eustache for Defendant and Appellant
Amusement Industry, Inc.
Tucker Ellis, Marc R. Greenberg for Defendant and
Appellant Allen Alevy.
Professor Laurie Levenson as Amicus Curiae on behalf of
Defendant and Appellant Amusement Industry, Inc.
________________________________________
Former in-house counsel Craig Missakian (Missakian)
filed suit against his former employer Amusement Industry, Inc.
(Amusement) and its founder Allen Alevy (Alevy),1 based on an
oral promise to pay a bonus and share of recovery from
litigation. The jury issued a special verdict in favor of
Missakian on the claims brought against Amusement for breach
of oral contract and promissory fraud, but the jury also made
special verdict findings in favor of Alevy on the sole claim of
promissory fraud brought against him, finding that Alevy did
not make a false promise. The trial court granted judgment
notwithstanding the verdict (JNOV) on Missakian’s promissory
fraud claim against Amusement. Each party filed an appeal.
Amusement appeals from the portion of the judgment
awarding damages for breach of oral contract. Amusement
contends the contract in question is void under Business and
Professions Code section 6147,2 which requires contingency fee
agreements to be in writing. We hold that, regardless of his
status as in-house counsel, Missakian’s oral agreement with
1 Amusement and Alevy were represented by separate
counsel at trial, as they are here on appeal.
2 All statutory references are to the Business &
Professions Code, unless specified otherwise.
2
Amusement is a contingency fee agreement subject to section
6147 and is therefore unenforceable as a matter of law.
Missakian appeals from the order granting JNOV on the
promissory fraud claim. We find the jury’s special verdict to be
inconsistent because it found Alevy did not make a false
promise, but that Amusement (acting only through Alevy) did.
Because the court cannot choose between the jury’s inconsistent
responses, the court should have ordered a new trial as to all
parties rather than JNOV.
Alevy appeals from a postjudgment order denying his
motion for attorney fees. In light of our reversal of the judgment
and remand for a new trial, Alevy’s contentions are moot.
The judgment is reversed, and the case is remanded for a
new trial as to all parties.
FACTUAL BACKGROUND
During the time frame relevant to this case, Alevy was an
owner, officer, and board member of Amusement, with authority
to enter into contracts on behalf of Amusement. Amusement
was a real estate company, and the company was engaged in
ongoing litigation (the Stern Litigation) in New York, stemming
from a real estate deal in which Amusement lost $13 million to
an alleged fraudster. Sometime in the summer of 2010, Alevy
contacted Missakian to discuss the prospect of Missakian
working as an in-house attorney at Amusement, where
Missakian’s duties would include working on the Stern
Litigation.
Alevy offered and Missakian accepted the terms of his
employment at Amusement (the Oral Contract). As general
3
counsel,3 Missakian would receive a salary of $325,000. Once
the Stern Litigation resolved, Missakian would receive a bonus
of $6,250 for each month he had worked on that litigation
(Monthly Bonus), and an additional bonus of ten percent of the
recovery in the Stern Litigation, excluding ordinary litigation
costs (Stern Litigation Bonus). The parties exchanged multiple
written drafts negotiating various details of the Oral Contract,
but they never signed a written contract. Missakian started
working as an employee at Amusement on December 10, 2010,
spending most of his time on the Stern Litigation, but doing
some other work as well.
In March 2011, Missakian learned of the existence of a
draft agreement that significantly altered the terms of the Oral
Contract, specifying that the Stern Litigation Bonus would be
based not on all amounts recovered, but on the balance after
Amusement’s initial $13 million loss and other litigation
expenses (such as in-house and outside attorney fees) had been
deducted. Missakian “blew up” upon discovering this new draft,
but Alevy reassured him that the language was a mistake.
Missakian continued working, periodically inquiring about a
revised agreement. Alevy usually deflected his inquiries.
As the Stern Litigation moved closer to settlement,
Missakian renewed his efforts to reduce the Oral Contract to
writing. He sent a new draft agreement to Alevy on April 7,
2014. Alevy told Missakian he already had a signed agreement
in his personnel file. Upon obtaining the copy (which was dated
December 10, 2010 and was signed by Alevy) from his personnel
3 While there was some dispute over Missakian’s job title,
there is no dispute that Missakian’s job duties involved the
practice of law.
4
file, Missakian believed Alevy and Amusement were trying to
change the Oral Contract, because the version from the file
again contained language that Missakian had disputed in March
2011. Later the same day, Missakian sent an e-mail to Alevy
and Yanki Greenspan, president of Amusement, that included
the following: “When I first saw this agreement I was furious
and almost quit on the spot. I was told that it was a mistake.
Now I see that I was lied to and that it was not a mistake but an
attempt to paper the file without my knowledge. I simply
cannot believe that this was done or that anyone could believe it
would hold up in court. Please understand that if we cannot
resolve the matter this week, I will be submitting my
resignation based on the company’s tortious denial of and
anticipatory breach of our oral agreement that was
memorialized in the writing and upon which I relied in leaving
my previous job.” Missakian and Amusement were unable to
resolve their differences. After he was offered a position in
federal government, Missakian left Amusement, effective
August 1, 2014.
The Stern Litigation settled in February 2015, with
Amusement receiving a settlement of $26 million. Missakian
never received the Monthly Bonus or the Stern Litigation
Bonus.
PROCEDURAL HISTORY
A. Complaint, demurrer, and writ
In April 2016, Missakian filed suit against Alevy and
Amusement, alleging five causes of action: breach of contract,
5
fraudulent inducement, failure to pay wages (Labor Code,
§ 203), declaratory relief, and accounting. The complaint named
Amusement as a defendant for all causes of action. The only
claim naming Alevy as a defendant was the fraudulent
inducement claim.4
Alevy and Amusement filed a demurrer to the complaint
and moved to strike from the complaint all references to the
Stern Litigation Bonus. Both defendants argued that Missakian
was barred from enforcing the Oral Contract, because a
contingency fee agreement is voidable unless in writing, signed
by both parties. The trial court overruled the demurrer, but
granted the motion to strike, reasoning that section 6147 barred
enforcement of an oral contingency fee agreement.
Missakian filed a petition for writ of mandate, seeking
relief from this court. Missakian argued the trial court made
two errors when it granted the motion to strike. First, the court
erroneously construed section 6147 to apply to employee-
attorneys, a question of first impression in California. Second,
contrary to the standard applicable at the demurrer stage, the
court decided a contested factual issue, concluding that
Missakian was an independent contractor earning a fee, rather
than an employee earning wages.
4 The complaint alleges fraudulent inducement, but by
trial, the parties and the court referred to this cause of action as
promissory fraud. We understand the claim of fraudulent
inducement and promissory fraud to be the same. (Lazar v.
Superior Court (1996) 12 Cal.4th 631, 638 [“An action for promissory
fraud may lie where a defendant fraudulently induces the plaintiff to
enter into a contract”].)
6
Ruling on Missakian’s petition, this court offered the
following tentative conclusion: “In reviewing an order
sustaining a demurrer, we take the allegations of the complaint
as true. (Dale v. City of Mountain View (1976) 55 Cal.App.3d
101, 105.) Plaintiff’s complaint alleges that the parties agreed
he would receive ‘a bonus equal to 10% of any and all sums
recovered in the [Stern litigation] or related matters.’ Whether
the bonus constitutes wages or attorney’s fees is a factual
question that cannot be determined on the pleadings. (See, e.g.,
Millsap v. Federal Express Corp. (1991) 227 Cal.App.3d 425,431
[‘Whether a person is an employee or an independent contractor
is ordinarily a question of fact’].)” (Missakian v. Superior Court,
B278773, Nov. 15, 2016.) We issued an alternative writ
directing the trial court to either (a) vacate its order granting
the motion to strike and enter a new order denying the motion
to strike, or (b) show cause why a peremptory writ should not
issue. (Ibid.) The trial court subsequently entered a new order,
denying the motion to strike.
B. Pretrial motions
Before trial, the parties filed several motions in limine
raising the issue of the Oral Contract’s enforceability under
section 6147 or rule 3-300 of the California Rules of Professional
Conduct (rule 3-300). All parties agreed that Missakian was an
employee, and that any contract was oral, not written.
Referencing this court’s alternative writ, the trial court found
that the questions of contract terms and breach were factual
questions for the jury. It granted Missakian’s motions in limine
7
on the oral contract question, and denied Amusement and
Alevy’s motions on the same issue.
C. Special verdicts after trial
The parties went to jury trial on two causes of action:
breach of oral contract and promissory fraud. The jury found
that Amusement had breached the Oral Contract. For
Amusement’s failure to pay the Stern Litigation Bonus, the jury
awarded Missakian $2.25 million, and for the failure to pay the
Monthly Bonus, the jury awarded $275,000.
On the promissory fraud claim, the jury ultimately
entered a special verdict in favor of Alevy, but against
Amusement.5 It made special verdict findings that while Alevy
made a promise to Missakian, he intended to keep the promise
when made. However, the jury found against Amusement on
the promissory fraud claim, finding it made a false promise, and
awarded Missakian $750,000 in compensatory damages. The
jury further found that Amusement acted with malice,
oppression, and/or fraud, and awarded $1,750,000 in punitive
damages against Amusement.
D. Amusement’s posttrial motions
After the jury returned its verdict, Amusement filed
motions for new trial and JNOV. The trial court denied
Amusment’s new trial motion, as well as the portion of the
5 In our discussion of Missakian’s promissory fraud claim,
infra, we include additional detail about the special verdict
forms and the jury’s responses.
8
JNOV motion relating to Missakian’s breach of contract claim.
The court granted Amusement’s JNOV motion as to the
promissory fraud claim, explaining “that because Defendant
Alevy was found not liable for fraud, neither should defendant
Amusement have been found liable for fraud. The court agrees
with Amusement that Plaintiff’s sole theory of promissory fraud
began and ended with his dealings with Defendant Alevy. . . . If
Alevy did not make a false promise, as the jury found, whatever
reliance Plaintiff had was not based on anything false.”
Rejecting Missakian’s argument that there was evidence of
arguably fraudulent acts or statements by other individuals
acting on behalf of Amusement, the court explained that the
jury was not instructed on that “different (and unpled) fraud
theory.” Finding that there was no substantial evidence to
support Amusement’s liability for promissory fraud, the court
granted JNOV in part, as to the promissory fraud and punitive
damage judgment against Amusement.
E. Alevy’s motion for attorney fees
Alevy filed a motion to recover his attorney fees based on
the Oral Contract’s fee provision. The trial court denied Alevy’s
motion, explaining that because Missakian’s sole claim against
Alevy—fraudulent inducement—is a tort claim, not a contract
claim, attorney fees were not available under Civil Code section
1717. Alternatively, even if Civil Code section 1717 applied to
Missakian’s fraudulent inducement claim, it would be
incongruous and inequitable to hold Missakian liable for
9
attorney fees when he had prevailed on his breach of contract
claim, brought against Amusement only.6
DISCUSSION
A. Breach of oral contract
Amusement appeals from the judgment, arguing that
Missakian cannot prevail on his breach of contract claim
because the Oral Contract between Missakian and Amusement
is voidable under section 6147.7 Missakian counters that section
6147 does not apply to in-house attorneys who represent their
employers in litigation, because in-house attorneys are paid
wages, not fees. We conclude that the Oral Contract was a
contingency fee agreement subject to the requirements of section
6147. Under the circumstances of this case, the fact that
Missakian was an in-house attorney working for Amusement did
not relieve him of the obligation to comply with section 6147,
including the requirement to put the specifics of this
contingency fee agreement into a writing signed by both parties.
Accordingly, the Oral Contract is voidable, and judgment should
6 While not at issue on this appeal, Missakian sought and
obtained an attorney fee award after prevailing on his breach of
oral contract claim against Amusement.
7 As Amusement correctly points out, this court’s 2016
alternative writ order never directly addressed the question of
whether an attorney employed as in-house counsel must comply
with section 6147 to enforce an employment agreement’s bonus
provision, when the bonus is contingent on the outcome of
litigation.
10
have been entered against Missakian on the breach of oral
contract cause of action.
1. Standard of review
The interpretation of a statute is a question of law that we
review de novo. (Smith v. LoanMe, Inc. (2021) 11 Cal.5th 183,
190.) “Our fundamental task in interpreting a statute is to
determine the Legislature’s intent so as to effectuate the law’s
purpose. We first examine the statutory language, giving it a
plain and commonsense meaning. We do not examine that
language in isolation, but in the context of the statutory
framework as a whole in order to determine its scope and
purpose and to harmonize the various parts of the enactment. If
the language is clear, courts must generally follow its plain
meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend. If the statutory
language permits more than one reasonable interpretation,
courts may consider other aids, such as the statute’s purpose,
legislative history, and public policy.” (Coalition of Concerned
Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733,
737.)
11
2. The statutory scheme
Section 61478 “belongs to a trio of related statutes
governing fee contracts between lawyers and their clients.
8 The full text of section 6147 reads: “(a) An attorney who
contracts to represent a client on a contingency fee basis shall, at
the time the contract is entered into, provide a duplicate copy of
the contract, signed by both the attorney and the client, or the
client’s guardian or representative, to the plaintiff, or to the
client’s guardian or representative. The contract shall be in
writing and shall include, but is not limited to, all of the
following: [¶] (1) A statement of the contingency fee rate that the
client and attorney have agreed upon. [¶] (2) A statement as to
how disbursements and costs incurred in connection with the
prosecution or settlement of the claim will affect the contingency
fee and the client’s recovery. [¶] (3) A statement as to what
extent, if any, the client could be required to pay any
compensation to the attorney for related matters that arise out of
their relationship not covered by their contingency fee contract.
This may include any amounts collected for the plaintiff by the
attorney. [¶] (4) Unless the claim is subject to the provisions of
Section 6146, a statement that the fee is not set by law but is
negotiable between attorney and client. [¶] (5) If the claim is
subject to the provisions of Section 6146, a statement that the
rates set forth in that section are the maximum limits for the
contingency fee agreement, and that the attorney and client may
negotiate a lower rate. [¶] (b) Failure to comply with any
provision of this section renders the agreement voidable at the
option of the plaintiff, and the attorney shall thereupon be
entitled to collect a reasonable fee. [¶] (c) This section shall not
apply to contingency fee contracts for the recovery of workers’
compensation benefits. [¶] (d) This section shall become
operative on January 1, 2000.”
12
[Citations.] Section 6146 restricts the use of contingency fee
agreements in medical malpractice actions; section 6147
regulates the form and content of contingency fee agreements
outside the medical malpractice context; and section 6148 applies
to fee agreements that do not involve a contingency fee.
[Citation.] These statutes ‘operate to ensure that clients are
informed of and agree to the terms by which the attorneys who
represent them will be compensated.’ [Citations.]” (Pech v.
Morgan (2021) 61 Cal.App.5th 841, 850.) Sections 6147 and 6148
“were enacted to benefit and protect clients . . . by informing
them at the outset of the representation in a signed writing, inter
alia, of the amount of attorney fees they will incur under fee for
service and contingency fee agreements.” (Chodos v. Borman
(2014) 227 Cal.App.4th 76, 101–102 (Chodos); see also Leighton v.
Forster (2017) 8 Cal.App.5th 467, 483.)
An oral contingency fee agreement cannot be enforced by
an attorney. Under section 6147, a contingency fee agreement
must be in writing, signed by both parties, and include, among
other statutory disclosures, “[a] statement of the contingency fee
rate that the client and attorney have agreed upon,” and “[a]
statement as to how disbursements and costs incurred in
connection with the prosecution or settlement of the claim will
affect the contingency fee and the client’s recovery.” (§ 6147,
subd. (a)(1) and (a)(2).) Section 6147, subdivision (b), provides:
“Failure to comply with any provision of this section renders the
[contingency fee] agreement voidable at the option of the
plaintiff, and the attorney shall thereupon be entitled to collect a
reasonable fee.” “If the contingency fee agreement is void, there
is no contingency fee arrangement. ‘A void contract is no contract
at all; it binds no one and is a mere nullity. [Citation.]
13
Consequently, such a contract cannot be enforced. [Citation.]’
[Citation.]” (Fergus v. Songer (2007) 150 Cal.App.4th 552, 573
(Fergus).) “[W]hile both [section 6147 and section 6148] provide
that a failure to comply with their requirements renders an
agreement voidable at the client’s option, both also specify that,
where an agreement is voided, the attorney remains ‘entitled to
collect a reasonable fee.’ [Citations.]” (Huskinson & Brown v.
Wolf (2004) 32 Cal.4th 453, 460.) While seeking payment on a
quantum meruit theory, the terms of the invalid agreement will
very rarely provide the basis for calculating the quantum meruit
award. (Chodos, supra, 227 Cal.App.4th 76 [reversing use of
lodestar multiplier based on invalid oral agreement]; Fergus,
supra, 150 Cal.App.4th at p. 558, fn. 1.)
3. Contingency fees
The plain language of section 6147 imposes requirements
on “an attorney who contracts to represent a client on a
contingency fee basis.” (§ 6147, subd. (a).) The California
Supreme Court has described attorney fees as “the consideration
that a litigant pays or becomes liable to pay in exchange for legal
representation.” (Trope v. Katz (1995) 11 Cal.4th 274, 282
(Trope).) The court in Arnall v. Superior Court (2010) 190
Cal.App.4th 360 (Arnall), considered the definition of “contingent
fee” as a matter of first impression, explaining that since section
6147 itself does not define the term, the court would “look first to
the term’s ‘plain meaning’ for guidance on these questions.
[Citation.]” (Id. at pp. 369–370.) The Arnall court focused on the
elements of risk and success as the hallmarks of a contingency
fee, explaining: “[t]he term ‘contingency fee contract’ is ordinarily
14
understood to encompass any arrangement that ties the
attorney’s fee to successful performance[.]” (Id. at p. 370)
Similarly, discussing contingency fees generally, the court in
Chodos, supra, 227 Cal.App.4th at page 95, footnote 9, explained
that both contingency fee arrangements and cases pursued under
fee-shifting statutes pose some level of “contingent risk,”
referring to “the risk an attorney voluntarily assumes by
agreeing to base the payment of fees on the successful outcome of
the case, and not simply the risk of nonpayment, which exists in
every representation of a client by an attorney.” In Ketchum v.
Moses (2001) 24 Cal.4th 1122, 1132–1133, the California
Supreme Court discussed the role of contingency fees and
contingent risk in the context of calculating the lodestar on a fee
award: “‘“[a] contingent fee contract, since it involves a gamble
on the result, may properly provide for a larger compensation
than would otherwise be reasonable.”’”
Dictionaries and treatises further support our
understanding that the term “contingency fee” generally refers to
compensation tied to the client’s success. Black’s Law Dictionary
defines “contingent fee” or “contingency fee” as “[a] fee charged
for a lawyer’s services only if the lawsuit is successful or is
favorably settled out of court. Contingent fees are us[ually]
calculated as a percentage of the client’s net recovery (such as
25% of the recovery if the case is settled, and 33% if the case is
won at trial).” (Black’s Law Dict. (11th ed. 2019).) According to
the Restatement Third of the Law Governing Lawyers, a
contingency fee contract “is one providing for a fee the size or
payment of which is conditioned on some measure of the client’s
success. Examples include a contract that a lawyer will receive
one-third of a client’s recovery and a contract that the lawyer will
15
be paid by the hour but receive a bonus should a stated favorable
result occur.” (Rest.3d Law Governing Lawyers, § 35, com. a, p.
257; see also 1 Witkin, Cal. Proc. (5th ed. 2008, Attorneys, § 176,
p. 245.) The Merriam-Webster Unabridged Dictionary defines
“contingency fee” as “a fee for services (as of a lawyer or agent) to
be paid in the event of success in a particular transaction usually
as a specified percentage of the sum realized for the client or
principal.” (Merriam-Webster's Unabridged Dict. (2021)
[as of Sept. 28,
2021], archived at .)
4. The role of in-house counsel
Next, we turn to the initial portion of section 6147, stating
it covers “[a]n attorney who contracts to represent a client on a
contingency fee basis,” (§ 6147, subd. (a), italics added.) As the
California Supreme Court has already recognized, an in-house
attorney representing a company in court occupies a role
equivalent to the role of private counsel engaged to represent the
client. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084,
1093 (PLCM).)
In PLCM, a legal malpractice insurance company prevailed
in a lawsuit brought by the insurance company against its
insured (an attorney) for a deductible payment. The insured
cross-complained, asserting bad faith and related claims. The
insurance company was represented in the litigation by its
parent company’s in-house attorneys. After the insurance
company prevailed, it sought an award of attorney fees under
Civil Code section 1717, which makes contractual attorney fee
16
provisions reciprocal for all contracting parties and treats awards
of such fees similarly to the award of statutory attorney fees. The
insured argued that attorney fees for in-house counsel were not
available under Civil Code section 1717, relying on Trope, supra,11 Cal.4th at page 282, which held that self-represented litigants
were not entitled to attorney fees. (PLCM, supra, 22 Cal.4th at
pp. 1089–1090; Trope, supra, 11 Cal.4th at pp. 280–285.) The
PLCM court disagreed, pointing out that Trope expressly
declined to answer the question of whether in-house counsel fees
could be recovered. (PLCM, supra, 22 Cal.4th at p. 1093; Trope,
supra, 11 Cal.4th at p. 291.)
The PLCM court concluded that the cost of representation
by in-house attorneys fell within the scope of attorney fees
available under Civil Code section 1717, basing its reasoning on
the nature of the work involved and the function of in-house
attorneys in the litigation. In-house attorneys providing legal
representation to the company “do not represent their own
personal interests and are not seeking remuneration simply for
lost opportunity costs that could not be recouped by a nonlawyer.
A corporation represented by in-house counsel is in an agency
relationship, i.e., it has hired an attorney to provide professional
legal services on its behalf.” (PLCM, supra, 22 Cal.4th at p.
1093.) The similarities between in-house attorneys and privately
retained attorneys favored construing Civil Code section 1717 to
include costs associated with in-house attorneys: “The fact that
in-house counsel is employed by the corporation does not alter the
fact of representation by an independent third party. Instead,
the payment of a salary to in-house attorneys is analogous to
hiring a private firm on a retainer.” (PLCM, supra, 22 Cal.4th at
p. 1093.) An organization cannot represent itself, and so must
17
rely either on in-house or privately retained attorneys. “We
discern no basis for discriminating between counsel working for a
corporation in-house and private counsel engaged with respect to
a specific matter or on retainer. Both are bound by the same
fiduciary and ethical duties to their clients. (See General
Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1190
[(General Dynamics)].) Both are qualified to provide, and do
provide, equivalent legal services. And both incur attorney fees
and costs within the meaning of Civil Code section 1717 in
enforcing the contract on behalf of their client.” (PLCM, supra,
22 Cal.4th at p. 1094.)9
In Gutierrez v. G & M Oil Co., Inc. (2010) 184 Cal.App.4th
551 (Gutierrez), the defendant company sought mandatory relief
from a default judgment entered against it, citing the attorney
fault provision in Code of Civil Procedure section 473. In the
litigation, the company’s in-house attorney (who held dual titles,
as vice-president and general counsel) elected not to hire outside
counsel, instead opting to personally represent the company in a
class action lawsuit. The in-house attorney did not inform
anyone else in the company about the lawsuit, and then failed to
take any action to defend the case, respond to multiple notices of
default, produce ordered discovery, or contest entry of a four-
million-dollar judgment. The class plaintiffs opposed relief from
default, arguing that the in-house attorney’s misconduct must
be imputed to the company, thereby making mandatory relief
under Code of Civil Procedure section 473 unavailable.
(Gutierrez, supra, 184 Cal.App.4th at pp. 554–557.)
9We discuss General Dynamics in more detail in
connection with Missakian’s arguments, infra.
18
The appellate court declined to read into Code of Civil
Procedure section 473 an implied exemption for in-house
attorneys based solely on the fact that the in-house attorney also
held the title of a corporate officer. The court explained: “There
is a distinction between corporate counsel who provide ‘strictly
legal services’ to a corporation, and corporate counsel who ‘step
out’ of their role as ‘legal advisor’ and provide services of a
‘nonlegal business nature.’ (Friedman, Cal. Practice Guide:
Corporations (The Rutter Group 2009) ¶ 6.1.1, p. 6–1 [], italics
omitted.) In this case, the in-house ‘general counsel’ was only
acting in his capacity as a lawyer, and providing only services of
a legal nature, and was most certainly not acting in any role as
a corporate officer. . . . Because he was a lawyer, acting as a
lawyer, there is no need for us to carve out, in this case, any
implied exception . . . .” (Gutierrez, supra, 184 Cal.App.4th at p.
555.) The Gutierrez court emphasized that “representing clients
in court is the quintessential legal service performed by an
attorney, in-house or outside.” (Gutierrez, supra, 184
Cal.App.4th at p. 564.) The Gutierrez court then turned to the
meaning of the statute at issue: “There is no differentiation in
the statutory text between attorneys and in-house attorneys, . . .
and there is nothing in the language or structure of section 473
to require an implied differentiation. As we have seen from
General Dynamics and PLCM, in-house counsel do have an
attorney-client relationship with their corporations, and as we
have seen from PLCM, in-house attorneys do represent their
employers. It therefore follows that the legislative intent in
enacting the mandatory provision of [CCP] section 473 was to
protect corporations represented by in-house counsel as much as
19
any other class of litigants represented by counsel.” (Gutierrez,
supra, 184 Cal.App.4th at p. 564.)
5. Analysis
Given the terms of the Oral Contract at issue in this case,
most significantly the Stern Litigation Bonus, and cognizant of
Missakian’s principal role as an attorney representing
Amusement in the Stern Litigation, we readily conclude that he
acted as “[a]n attorney who contract[ed] to represent a client on a
contingency fee basis.” (§ 6147, subd. (a).) Similar to Code of
Civil Procedure section 473 discussed in Gutierrez, section 6147
has no express language exempting in-house attorneys, nor does
the statute’s plain language support an implied exemption.10
Despite the foregoing, Missakian argues for a wholesale
exemption for in-house attorneys from the requirements of
section 6147. We disagree. Missakian contends section 6147
does not apply to in-house attorneys’ employment agreements,
10 This lack of any exception stands in contrast to the
provision covering non-contingent fees, section 6148. Under
section 6148, a signed writing is not required if the client is a
corporation, or if the client knowingly states, in writing, that a
writing concerning fees is not required. (§ 6148, subd. (d)(3) and
(d)(4).) Section 6450, subdivision (b)(8), prohibits paralegals
from setting their own fees, but goes on to clarify that “[t]his
paragraph does not apply to fees charged by a paralegal in a
contract to provide paralegal services to an attorney, law firm,
corporation, governmental agency, or other entity . . . .” If the
Legislature intended to exempt in-house attorneys from the
requirements of section 6147, it could have included similar
language.
20
because in-house attorneys are paid “wages,” not “fees,” and the
use of the word “fees” reflects the Legislature’s intent to exempt
in-house attorneys. In support of this argument, he cites to
Labor Code section 200, subdivision (a), and its broad definition
of “wages.”11 Reference to this Labor Code definition, however,
offers little assistance in interpreting section 6147. Even if a
particular form of compensation meets the definition of “wages”
under the Labor Code, it may also meet the definition of a
“contingency fee” in section 6147. The usual and common-sense
meaning of the term fee is broad enough to encompass
compensation paid to an in-house attorney, and a review of cases
makes that clear. (See, e.g., PLCM, supra, 22 Cal.4th at p. 1093
[“payment of a salary to in-house attorneys is analogous to hiring
a private firm on a retainer”]; Lolley v. Campbell (2002) 28
Cal.4th 367, 373 [“California courts have routinely awarded fees
to compensate for legal work performed on behalf of a party
pursuant to an attorney-client relationship”]; Trope, supra, 11
Cal.4th at p. 282 [“the usual and ordinary meaning of the words
‘reasonable attorney’s fees’ is the consideration that a litigant
pays or becomes liable to pay in exchange for legal
representation”].)
Missakian attempts to bolster his argument for a narrow
reading of the term “fee” by pointing to two cases—General
Dynamics, supra, 7 Cal.4th 1164, and Chyten v. Lawrence &
Howell Investments (1993) 23 Cal.App.4th 607 (Chyten)—that he
11 Labor Code section 200, subdivision (a), states: “‘Wages’
includes all amounts for labor performed by employees of every
description, whether the amount is fixed or ascertained by the
standard of time, task, piece, commission basis, or other method
of calculation.”
21
claims demonstrate the Legislature’s awareness of case law
drawing a sharp distinction between the contractual rights of in-
house attorneys and privately retained attorneys. While both
cases draw a distinction between in-house and privately retained
attorneys in situations where the client ends the attorney-client
relationship, we find nothing in the reasoning of either case to
support reading section 6147 narrowly to exclude in-house
attorneys from its requirements. Instead, both cases underscore
that in-house attorneys are in an attorney-client relationship
with their employers, and redress for any wrong done by an
employer to an in-house attorney must preserve and protect, to
the extent possible, the attorney-client relationship with all its
legal, ethical, and professional obligations.
Both Chyten and General Dynamics were decided against
the backdrop of the holding in Fracasse v. Brent (1972) 6 Cal.3d
784 (Fracasse), that when a client discharges an attorney, the
attorney cannot sue for breach of contract, but rather is limited to
a quantum meruit recovery. “In doing so, we preserve the client’s
right to discharge his attorney without undue restriction, and yet
acknowledge the attorney’s right to fair compensation for work
performed.” (Id. at p. 791.) Fracasse involved a traditional
contingency fee agreement between a personal injury attorney
and an individual client. (Id. at p. 786.)
In Chyten, an attorney negotiated a five-year written
contract for an in-house counsel position, including a clause that
required the employer to pay contractual damages if the attorney
was terminated without cause. (Chyten, supra, 23 Cal.App.4th at
pp. 610–611.) The company fired the attorney, who obtained a
jury verdict for breach of the employment contract. On appeal,
the company pointed to Fracasse to argue that the attorney’s
22
damages were limited to quantum meruit, not contract damages.
(Id. at p. 611–612.) The appellate court disagreed, noting that
the contract “was freely negotiated between parties of relatively
similar sophistication and bargaining power,” and “involved
terms typical of an employer-employee relationship and not
typical of attorney-client contingent fee contracts.” (Id. at p. 613.)
Although “the parties had a confidential relationship and [the
attorney] had professional obligations which an attorney owes to
a client, their business relationship was very different from that
involved in Fracasse.” (Id. at p. 612.) The contract’s termination
clause did not deprive the company of its right to remove an
attorney from representing it in an action or proceeding; instead,
the clause provided the measure of compensation applicable after
the company’s decision to terminate the attorney from his
salaried position. (Id. at p. 615 & fn. 3.) Fracasse was
distinguishable because it involved a contingent fee for
representing a client in a specific proceeding, and the rules
limiting a client’s exposure to duplicative liability on a
contingency fee contract stemmed from a desire to protect the
client from the risk of excessive or double payment for a single
result. (Id. at pp. 615–616.) Because the facts of Chyten involved
a written employment contract, we see nothing in that opinion’s
reasoning to support Missakian’s argument that section 6147
does not apply to in-house attorneys. In fact, the case
underscores the need for a contingency fee agreement to be
reduced to writing in compliance with section 6147 to ensure that
the terms of the agreement are clear to both parties from the
beginning.
In General Dynamics, the California Supreme Court upheld
an in-house attorney’s right to bring tort and contract claims for
23
wrongful discharge against an employer in certain circumstances.
(General Dynamics, supra, 7 Cal.4th at p. 1169.) Like Chyten,
General Dynamics involved an attorney who claimed he had been
wrongfully terminated. (Id. at p. 1171.) The opinion includes “an
extended and nuanced disquisition of the role of in-house
attorneys.” (Gutierrez, supra, 184 Cal.App.4th at p. 559.) The
General Dynamics court discussed the increasing numbers of in-
house attorneys and the unique confluence and potential conflicts
inherent in that role, particularly with respect to an attorney’s
professional and ethical duties. (General Dynamics, supra, 7
Cal.4th at pp. 1171–1173.) The court’s decision was heavily
qualified to emphasize that the holding was based on facts that
were unlikely to have an adverse impact on the central values of
the attorney-client relationship. The opinion explains: “because
so-called ‘just cause’ contractual claims are unlikely to implicate
values central to the attorney-client relationship, there is no valid
reason why an in-house attorney should not be permitted to
pursue such a contract claim in the same way as the nonattorney
employee. Our conclusion with respect to the tort cause of action
is qualified; our holding seeks to accommodate two conflicting
values, both of which arise from the nature of an attorney’s
professional role—the fiducial nature of the relationship with the
client, on the one hand, and the duty to adhere to a handful of
defining ethical norms, on the other. As will appear, we conclude
that there is no reason inherent in the nature of an attorney’s
role as in-house counsel to a corporation that in itself precludes
the maintenance of a retaliatory discharge claim, provided it can
be established without breaching the attorney-client privilege or
unduly endangering the values lying at the heart of the
professional relationship.” (Id. at p. 1169, italics added.) The
24
court distinguished Fracasse, but emphasized the importance of
the attorney-client relationship. (Id. at p. 1178.) As the
Gutierrez court later noted: “The important thing about General
Dynamics for our purposes is that there is no way one can read it
without coming away with this basic thought: In-house attorneys
employed as attorneys for their employer do indeed have an
attorney-client relationship with their employers.” (Gutierrez,
supra, 184 Cal.App.4th at p. 559.)
Missakian contends that finding section 6147 applicable to
in-house attorneys would lead to an untenable situation, where
all in-house attorneys would be stripped of any statutory
protections relating to their compensation arrangements,
regardless of whether the agreement was in writing or not.
According to Missakian, if all in-house counsel employment
contracts were considered “fee” agreements, they would be
subject to Rule of Professional Conduct 1.5, which prohibits
lawyers from charging unconscionable or illegal fees and
describes the factors for determining whether a fee is
unconscionable. Missakian then paints a worst-case scenario
where “every employment contract would have to be evaluated
for unconscionability using the cited factors” and an employer
would be free to unilaterally reduce an in-house counsel’s salary
based on the employer’s subjective valuation of the attorney’s
services. We disagree that our plain language reading of the
term “contingency fee” in section 6147, and the application of
section 6147 to the Oral Contract here, would have such
tumultuous results.
The dual status of in-house counsel—acting as both
employee and attorney—and the dual status of the company—
acting as both employer and client—can pose some challenging
25
questions about when one role takes precedence over another.
However, in the context of interpreting and applying section
6147, there is no persuasive reason to separate the two roles. A
company can occupy its status as an employer and a client
simultaneously, and we see no reason why its status as an
employer should result in less protection for it as a client for
purposes of section 6147. Similarly, an in-house attorney’s status
as an employee should not relieve the attorney of his or her
statutory obligation to reduce a contingency fee agreement to a
writing that meets the requirements of section 6147.12 Applying
section 6147 to prevent all attorneys—including in-house
attorneys—from enforcing oral contingency fee agreements serves
valid public policy goals and is consistent with the purpose of the
statute, which is to ensure that the person or entity agreeing to
pay for legal services and the attorney providing those services
have a mutual written understanding of the details of the
contingent payment. (See Arnall, supra, 190 Cal.App.4th at p.
373 [“when a statute protects the public by denying compensation
to parties who fail to meet regulatory demands, the statute
12 We recognize that there may be compensation
arrangements between an in-house counsel and counsel’s
employer that present difficult questions regarding whether a
particular arrangement is correctly characterized as “on a
contingency fee basis.” We do not attempt to address how
section 6147 might apply to every circumstance where an in-
house attorney’s compensation incorporates an incentive
payment based on some measure of the employer’s success and
to every functional role that a particular in-house attorney may
occupy while earning such compensation. But, as noted above,
we have no difficulty concluding that the Oral Contract, as
described by Missakian, falls within section 6147.
26
constitutes a legislative determination that compliance outweighs
any resulting harshness”].)
The very existence of section 6147 reflects that contingency
fees warrant stricter regulation than more traditional payment
arrangements. Under a traditional model of compensation, an
attorney would either be billing the client on a regular basis or
receiving a regular salary. In contrast, under a contingency fee
agreement, there is no regular course of conduct to reflect the
parties’ mutual understanding of the fee agreement, as the
payment obligation does not accrue until the contingency comes
to pass, which can be years after the agreement was reached.
Further, once the contingency is met, a contingency fee
agreement will reduce the client’s recovery, often by a substantial
amount. Requiring both the attorney and the client to consent in
writing to the details of the contingency fee agreement minimizes
the potential for later disagreement and litigation over the
details of the agreement. (See § 6147, subd. (a)(2) [requiring
agreement to include a “statement as to how disbursements and
costs incurred in connection with the prosecution or settlement of
the claim will affect the contingency fee and the client’s
recovery”]; Pech, supra, 61 Cal.App.5th at p. 850 [attorney fee
statutes operate to ensure clients are informed of and agree to
how attorneys will be compensated].)13
13 We disagree with the concurrence’s statement that a
significant factor in determining the scope of section 6147 is
whether the contingency fee arrangement is made at the
“inception of the attorney-client relationship.” The concurrence
agrees that section 6147 applies to Missakian, an attorney
whose compensation included a contingent component from the
27
Because the Oral Contract is voidable under section 6147,
the judgment in favor of Missakian on his breach of oral contract
claim must be reversed.14
“outset” of his employment at Amusement. However, where a
hypothetical, long-term in-house counsel is promised the same
fee for the same role, the concurrence inexplicably suggests
section 6147 would be inapplicable. The statutory language
obligates an attorney to provide the client with a written
contingent fee agreement “at the time the contract is entered
into” (§ 6147, subd. (a)), not just at the start of an attorney-
client relationship. The proposed temporal factor is also
contrary to the very case the concurrence cites in support—
Chodos, supra, 227 Cal.App.4th at pages 101–102. The Chodos
court concluded section 6147 bars an attorney from enforcing an
alleged oral contingency fee agreement negotiated in the midst
of the attorney-client relationship (id. at pp. 89–90, 98, 101–
102); the statute’s reach is not limited to contingency
agreements made at the “outset” of the relationship, as the
concurrence suggests. Finally, to the extent that the
concurrence criticizes a broader reading of our opinion as
“unrealistic and likely to invite mischief,” we emphasize that the
purpose of the statute is to benefit and protect clients, not to
protect attorneys. (Id. at p. 101.)
14Having concluded that Missakian cannot enforce the
Oral Contract containing the contingency fee, it is not necessary
to address Amusement’s alternative contentions that the Oral
Contract violated State Bar Rule 3-300, or that Missakian’s
voluntary departure precludes him from seeking payment of the
contingency fee. We also do not express any opinion on
Missakian’s ability to seek quantum meruit.
28
B. Promissory fraud
Missakian’s appeal seeks to reverse the court’s JNOV
order and reinstate judgment in his favor on his promissory
fraud claim against Amusement. Alternatively, he contends the
verdict is inconsistent and a new trial is necessary against both
Amusement and Alevy. Amusement contends that JNOV was
correctly granted, and that there is no inconsistency in the jury’s
special verdict because there was no substantial evidence to
support a finding of promissory fraud. Alevy contends that no
new trial is warranted based on inconsistent verdicts, but in any
event, Missakian’s request for a new trial is untimely and
waived as to Alevy based on Missakian’s failure to move for a
new trial against Alevy in the trial court.
We conclude the trial court erred by crediting one of two
inconsistent special verdict responses, and a new trial on
Missakian’s promissory fraud claim is necessary.
1. Legal framework and standard of review
The elements of fraud are misrepresentation, knowledge
of falsity, intent to induce reliance on the misrepresentation,
justifiable reliance on the misrepresentation, and resulting
damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638
(Lazar).) Promissory fraud is a subspecies of fraud, and an
action may lie where a defendant fraudulently induces the
plaintiff to enter into a contract, by making promises he does not
intend to keep. (Ibid.) “[T]he intent element of promissory
fraud entails more than proof of an unkept promise or mere
failure of performance.” (Riverisland Cold Storage, Inc. v.
29
Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169,
1183 (Riverisland); Lazar, supra, 12 Cal.4th at p. 638 [a
promissory fraud claim “does not depend upon whether the
defendant’s promise is ultimately enforceable as a contract”].)
“[P]romissory fraud requires proof of ‘(1) a promise made
regarding a material fact without any intention of performing it;
(2) the existence of the intent not to perform at the time the
promise was made; (3) intent to deceive or induce the promisee
to enter into a transaction; (4) reasonable reliance by the
promisee; (5) nonperformance by the party making the promise;
and (6) resulting damage to the promise[e].’ [Citation.]”
(Gruber v. Gruber (2020) 48 Cal.App.5th 529, 540.)
A trial court may grant the defendant a JNOV only if no
substantial evidence supports a verdict in the plaintiff’s favor.
(Webb v. Special Electric Co., Inc. (2016) 63 Cal.4th 167, 192.)
In passing upon the propriety of a JNOV order, appellate courts
view the evidence in the light most favorable to the party who
obtained the verdict and against the party to whom JNOV was
awarded. (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 546
(Hasson), overruled on other grounds by Soule v. General Motors
Corp. (1994) 8 Cal.4th 548.)
An order granting JNOV “cannot be dependent on another
of the jury’s verdicts in the case.” (Stillwell v. The Salvation
Army (2008) 167 Cal.App.4th 360, 375 (Stillwell); see also Shaw
v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344 (Shaw).
The law contemplates the entry of a judgment that is in accord
with the special verdict. (Code Civ. Proc., § 625.) “If the special
verdict is not ‘hopelessly ambiguous,’ the court may interpret
the verdict ‘“from its language considered in connection with the
pleadings, evidence and instructions,”’ and counsel’s argument
30
to the jury. [Citations.]” (Fuller v. Department of
Transportation (2019) 38 Cal.App.5th 1034, 1038 (Fuller); Singh
v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338, 358
(Singh) [trial court must try to resolve any inconsistency “in
light of the jury instructions and the evidence”].) Before a
judgment on a special verdict may be entered, the “jury’s special
verdict findings must be internally consistent and logical.” (City
of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005)
126 Cal.App.4th 668, 681 (D.R. Horton).) A special verdict’s
findings are inconsistent when they are contradictory on a
material issue necessary to sustain the judgment. (Zagami, Inc.
v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1092
(Zagami); D.R. Horton, supra, 126 Cal.App.4th at p. 682.)
“On appeal, we review a special verdict de novo to
determine whether its findings are inconsistent.” (Singh, supra,
186 Cal.App.4th at p. 358.) “Where there is an inconsistency
between or among answers within a special verdict, both or all
the questions are equally against the law. [Citation.] The
appellate court is not permitted to choose between inconsistent
answers. [Citations.]” (D.R. Horton, supra, 126 Cal.App.4th at
p. 682; Trejo v. Johnson & Johnson (2017) 13 Cal.App.5th 110,
124 (Trejo).) If the special verdict is inconsistent, the proper
remedy is to order a new trial. (Trejo, supra, 13 Cal.App.5th at
p. 124; Stillwell, supra, 167 Cal.App.4th at pp. 375–376; Shaw,
supra, 83 Cal.App.4th at p. 1344.)
31
2. Summary of trial, jury instructions, and jury
deliberations
a. Trial
In Missakian’s opening statement, his attorney told the
jury that Missakian would testify he would not have started at
Amusement unless he had a concrete deal on the terms of his
employment, including the Stern Litigation Bonus and the
Monthly Bonus. Explaining Missakian’s theory of promissory
fraud, Missakian’s counsel stated “the idea is that the
defendant, or defendants here, would be Mr. Alevy would have
made a promise or representation that not only did he not keep,
but that there was an immediate repudiation of that promise.
[¶] In other words, he did something behind plaintiff’s back, or
that would be our contention, that was completely contrary to
the promise that was just made.” Missakian’s counsel further
explained that Missakian would testify that he met with Alevy,
Alevy made him the offer, including the terms of the salary and
the bonuses, and that Missakian and Alevy shook hands on the
deal. Thereafter, the evidence would show an exchange of e-
mails with different versions of a written agreement, fine-tuning
certain terms. Counsel outlined that the evidence would show
later incidents gave Missakian pause. In March 2011, he
discovered a different version of his draft agreement with
changes so egregious he would not have accepted employment
on the terms outlined. Alevy assured Missakian that the
version he had just seen was a mistake. Later, Missakian
wanted to make sure “Alevy is going to follow through on his
word and honor the parties’ agreement about the compensation,”
32
but it became clear to Missakian that Alevy and Amusement
were not going to pay the Stern Litigation Bonus, and he
eventually left Amusement and accepted different employment,
with a drop in pay.
Amusement’s opening statement focused on the theory
that there was never a meeting of the minds on the terms of an
agreement, and the parties’ inability to agree on the terms of a
written agreement demonstrated that there was never an oral
agreement, particularly with respect to the details of the Stern
Litigation Bonus.
Missakian’s case-in-chief consisted of testimony by
Missakian and three Amusement employees called as adverse
witnesses. Two of the Amusement employees testified to
making changes to the draft agreement, but there was no
testimony that anyone other than Alevy made any promises on
behalf of Amusement to Missakian before he started working
there in early December 2010.
After the close of Missakian’s case-in-chief, Alevy’s
attorney moved for non-suit, arguing that there was no evidence
Alevy had any intent to defraud Missakian when he made the
offer of employment. The court denied the motion, noting that
“plaintiff’s theory is he was offered certain terms and he took
the job based on the terms offered.”
At the start of defendants’ case, Alevy’s attorney made an
opening statement emphasizing that the case was very simple; it
concerned a lawyer who did not get an agreement in writing so
it would be clearly understood by both sides. Instead, there was
a misunderstanding. Missakian blew up and decided to leave,
but the decision to leave was his own. The defendants presented
testimony from three Amusement employees, as well as video
33
testimony from Missakian’s deposition. Missakian offered brief
rebuttal testimony from himself and a former Amusement
attorney.
In closing argument, Missakian’s attorney reminded the
jurors of the questions posed at the outset of the case, including
whether “Mr. Allen Alevy on behalf of himself and also for
Amusement, did they make promises to Mr. Missakian that the
defendants did not intend to keep?” Alevy’s closing argument
focused on the fact that Missakian claimed to have entered into
a handshake deal with Alevy on October 27, 2010, but then the
parties continued to negotiate afterwards. On the fraud claim,
Missakian learned in March 2011 that there was a materially
different draft agreement, but he continued working until
August 2014 and did not sue until April 2016. Despite his
training and education, Missakian did not clarify the details of
the parties’ agreement in writing, but Alevy’s proposed edits
showed he consistently considered the Stern Litigation Bonus to
be based on the net recovery, meaning it would be calculated
after expenses were deducted. The negotiations demonstrated
that Alevy never thought that he would defraud Missakian, but
that he only expected to pay the Stern Litigation Bonus net of
the $13 million Amusement had lost. Amusement’s closing
argument followed similar themes, emphasizing that there had
been no meeting of the minds on the terms of an agreement, and
that Alevy had insisted on the term “net” from the first written
draft.
Missakian gave his own rebuttal closing argument,
painting himself as a talented, hardworking litigator who
successfully turned the Stern Litigation around, while Alevy and
other Amusement employees were making changes to the draft
34
agreement in the shadows. While Amusement claimed there
was a misunderstanding about changes to the terms of the
agreement, the jury never heard from Alevy, and the changes
revealed the company’s false intent, because Alevy never used
the term “net profit.”
b. Jury instructions
Most of the jury instructions were taken from the Judicial
Council of California Civil Jury Instructions (CACI). The court
gave CACI No. 1902 (false promise), referring to the defendants
collectively in the introduction and as to each element. The
introduction started: “Mr. Missakian claims he was harmed
because defendants Amusement and Mr. Alevy (“Defendants”)
made a false promise.” Then each element also referred to
“Defendants” collectively.
For CACI No. 3948 (Punitive damages – individual and
corporate defendants [corporate liability based on acts of named
individual] – bifurcated trial [first phase]), the instruction
addressed Alevy’s individual liability and then Amusement’s
corporate liability. The first paragraph stated, “If you decide
that Mr. Alevy’s conduct caused Mr. Missakian’s harm, you
must decide whether that conduct justifies an award of punitive
damages against Mr. Alevy and, if so, against Amusement.” For
Alevy, the court instructed, “You may award punitive damages
against Mr. Alevy only if Mr. Missakian proves by clear and
convincing evidence that Mr. Alevy engaged in that conduct
with malice, oppression, or fraud.” After defining those terms,
the instruction continued,: “You may also award punitive
damages against Amusement based on Mr. Alevy’s conduct if
35
Mr. Missakian proves one of the following by clear and
convincing evidence. . . .” The instruction went on to describe
different scenarios where Alevy’s conduct resulted in harm to
Missakian.
c. Initial special verdict
The jury’s special verdict responses on the contract claim
found that Amusement had breached the Oral Contract and
failed to pay the Stern Litigation Bonus and the Monthly
Bonus.15 The jury awarded Missakian combined breach of
contract damages of $2,525,000.
On Missakian’s promissory fraud claim, the jury’s
responses on the initial special verdict form were ambiguous.
The jury found defendants Alevy and Amusement intended to
perform the promise, meaning Amusement and Alevy were not
liable for promissory fraud, but the special verdict instructions
still permitted the jury to make findings on the availability of
punitive damages.16 In response to the punitive damages
15 The parties initially submitted competing special
verdict forms, but came to agreement on a joint form at the
court’s direction.
16 After answering yes to the first question (“Did
defendants make a promise to Mr. Missakian?”), the jurors were
correctly directed to continue to question two. But when they
answered yes to the second question (“Did defendants intend to
perform this promise when they made it?”), the instructions
incorrectly directed the jury to continue to question three, about
whether defendants intended for Missakian to rely on the
36
question “Has [Missakian] proved by clear and convincing
evidence that Defendant(s) Amusement Industry, Inc. and/or
Allen Alevy acted with malice, oppression and/or fraud?” the
jury answered “yes” as to Amusement but “no” as to Alevy.
d. Revised special verdict
At a conference outside the presence of the jury,
Missakian asked the court to use a revised special verdict form
in light of the instructional error and the inconsistency between
the jury’s responses on promissory fraud and punitive damages.
The attorneys for Amusement and Alevy objected, arguing that
a revised form was unnecessary because the jury’s responses
made it clear that they found no promissory fraud. The
attorneys further argued that the availability of punitive
damages was a legal question that made the jury’s response on
malice, oppression, and fraud irrelevant. Alevy’s attorney also
argued that the jury’s responses had exonerated Alevy entirely.
promise. The instructions should have directed the jury to stop
upon affirming that defendants intended to perform on the
promise made, and only continue to subsequent questions upon
finding that defendants did not intend to perform. A similar
transposing of the directions for yes and no answers appeared in
the instructions following question five (“Did defendants
perform the promised act?”): when the jury answered “no,” they
were instructed to stop, rather than instructed to continue on to
question six about harm. On the initial form returned, the jury
did not enter any responses to the questions about the
compensatory damages incurred by Missakian on the
promissory fraud claim. Regardless of the jury’s responses on
the promissory fraud claim, the verdict form also permitted the
jury to answer a special verdict on punitive damages.
37
The court decided to have the jury complete a revised form. As
the jury was returning to the courtroom, and while changes
were being made to the special verdict form, Alevy’s attorney
pointed out that the special verdict form did not separate the
two defendants on the promissory fraud claim, Amusement and
Alevy. Missakian agreed to separate revised verdict forms for
each defendant. The court denied Alevy’s oral motion for a
mistrial, but acknowledged that the court and the parties
together bore responsibility for providing proper special verdict
forms and the court should have scrutinized the initial form
more closely. Over objections by Amusement and Alevy, the
court instructed the jury to complete the revised special verdict
forms for promissory fraud and punitive damages only.
The jury’s responses on the revised special verdict forms
found in favor of Alevy but against Amusement on Missakian’s
promissory fraud claim and on punitive damages. Responding
to the first two questions on the promissory fraud claim against
Alevy, the jury found Alevy made a promise, and Alevy intended
to perform the promise when made. In contrast, the jury found
that Amusement made a promise, but that Amusement did not
intend to perform the promise when made. On punitive
damages, the jury again found that Missakian had proven
malice, oppression, and/or fraud as to Amusement, but not as to
Alevy.
3. Analysis
Missakian and Amusement each contend that the jury’s
special verdict responses mandate that judgment should be
entered in their favor and against the opposing party on the
38
promissory fraud claim. Exercising de novo review, we find the
special verdict responses to be inconsistent. Because the law
does not permit a court to choose between two inconsistent
responses, we conclude the trial court erred by granting JNOV
in favor of Amusement based on the jury’s special verdict
response as to Alevy. We remand the case for a new trial.
a. The special verdict was inconsistent
The jury’s responses on the revised special verdict forms—
that Amusement made a false promise, but Alevy did not—are
contradictory on a material issue. From opening statements,
through the presentation of evidence, closing arguments, and
jury instructions, Missakian presented, and defendants
contested, only a single theory of the case: that Alevy, acting for
himself and as Amusement’s agent, made the promise upon
which Missakian relied. (Fuller, supra, 38 Cal.App.5th at p.
1038; Singh, supra, 186 Cal.App.4th at p. 358.) While evidence
of what other Amusement employees said and did both before
and after Missakian and Amusement reached an oral agreement
may have provided some circumstantial evidence of
Amusement’s intent, it does not negate the inconsistency at the
heart of the jury’s special verdict responses. Missakian framed
the case solely on Alevy’s promises, and never argued to the jury
that Amusement made any misrepresentations through anyone
other than Alevy. The jury made inherently inconsistent factual
findings at the core of the promissory fraud case in returning a
special verdict that Amusement made a false promise, but that
Alevy did not.
39
Missakian contends the jury’s two opposing findings
should be reconciled. He argues that the words and actions of
other Amusement employees supported the jury’s finding that
Amusement did not intend to keep its promise, even though the
jury also found that Alevy did intend to keep his promise.
(Hasson, supra, 19 Cal.3d at pp. 540–541.) The argument is
flawed in two ways. First, the obligation to reconcile opposing
findings in order to preserve the jury’s verdict “applies only to
inconsistencies between general and special verdicts, and
inconsistencies between special findings rendered in support of a
general verdict.” (Mendoza v. Club Car, Inc. (2000) 81
Cal.App.4th 287, 303; Trejo, supra, 13 Cal.App.5th at p. 124, fn.
5.) Here, we are determining whether two special verdict
responses are inconsistent. “With a special verdict, unlike a
general verdict or a general verdict with special findings, a
reviewing court will not infer findings to support the verdict.”
(Singh, supra, 186 Cal.App.4th at p. 358.)
Second, as described above, Missakian’s argument is at
odds with the pleadings and theory of the case reflected in
counsels’ arguments and the jury instructions. (Fuller, supra,
38 Cal.App.5th at p. 1038; Singh, supra, 186 Cal.App.4th at p.
358.) The possibility that Amusement’s promise and intent
would be different than Alevy’s promise and intent was never
contemplated by the parties and their attorneys, nor was that
possibility mentioned in the pleadings, trial briefs, opening
statements, or closing arguments to the jury. In fact, the initial
special verdict form referred to defendants collectively, such that
it was not contemplated the jury would even have the
opportunity to make different findings for Amusement and
Alevy. Only in the midst of deliberations, after unrelated
40
problems arose with the special verdict form, did Alevy’s
attorney request that the verdict form be split between the two
defendants. This request was made in an apparent attempt to
insure Alevy’s non-liability for punitive damages. This revision
to the special verdict form did not transform the case from the
sole factual theory on which it had been tried.
Amusement also contends the trial court’s grant of its
JNOV motion should be affirmed because there was no
substantial evidence to support a promissory fraud judgment
against Amusement. But Amusement’s framing of its argument
in the guise of a substantial evidence claim is disingenuous: to
argue no substantial evidence, Amusement necessarily relies on
the trial court’s decision to accept the verdict against Alevy over
the verdict against Amusement. Explaining its reasoning for
granting Amusement’s JNOV motion, the trial court credited the
jury’s response that Alevy had not misrepresented his personal
intent to carry out the promises made. Accepting this finding,
the trial court then reasoned that, since Alevy was the only
person alleged to have made the representations on which
Missakian had relied, Amusement could not logically be held
liable for promissory fraud. The trial court stated: “If Alevy did
not make a false promise, as the jury found, whatever reliance
[Missakian] had was not based on anything false.” Because a
court cannot choose between two inconsistent special verdicts,
Amusement’s reliance on the trial court’s reasoning to make its
substantial evidence argument only serves to highlight the
inconsistency between the two special verdict responses.
Reviewing the evidence, opening statements, closing
arguments, and jury instructions, we conclude there is no way to
resolve the inconsistency between the two findings. In light of
41
this material inconsistency, it was an error for the trial court to
credit the jury’s finding as to Alevy and rely on that aspect of
the verdict to grant JNOV in favor of Amusement. Amusement
was “no more entitled than [Missakian] to have the favorable
verdict credited and the unfavorable one disregarded.” (Shaw,
supra, 83 Cal.App.4th at p. 1346.)17 Where findings on material
issues conflict, a special verdict cannot stand. (D.R. Horton,
supra, 126 Cal.App.4th at p. 682.) “‘An inconsistent verdict may
arise from an inconsistency between or among answers within a
special verdict [citation] or irreconcilable findings . . . . [Under
those circumstances,] all the questions are equally against the
law.’” (Trejo, supra, 13 Cal.App.5th at p. 124.)
b. Based on the inconsistent special verdict, a
new trial is warranted
Alevy contends that by choosing not to seek a new trial
under Code of Civil Procedure section 659, Missakian waived
any retrial against Alevy. However, “‘[a] motion for a new trial
is not, generally, a condition precedent to an appeal. Generally
speaking, any error of law can be raised on an appeal even
though a motion for new trial has not been made.’”
17 Alevy contends that Shaw, supra, 83 Cal.App.4th at
page 1347, supports the argument that the jury’s finding of non-
liability as to him personally precludes a finding of liability as
against Amusement. While that may be true in a case involving
a general verdict, as was the case in Shaw, the same principle
does not apply when a jury has rendered inconsistent special
verdicts, as they have here. (Ibid., fn. 4 [unappealed general
verdict in favor of employee defendant on defamation claim
supports reversal of defamation claim against employer].)
42
(Mendoyama, Inc. v. County of Mendocino (1970) 8 Cal.App.3d
873, 878.) Here, Missakian appeals the validity of the judgment,
and our de novo review finds the special verdict responses to be
inconsistent. Our determination that the findings were
inconsistent makes both special verdict responses invalid. (See,
e.g., Zagami, supra, 160 Cal.App.4th at p. 1094 [when two
findings are inconsistent, both are equally against the law].)
Missakian adequately preserved a new trial against Alevy, as
well as Amusement, by appealing from the defective judgment.
(Morris v. McCauley’s Quality Transmission Service (1976) 60
Cal.App.3d 964, 973 [despite no motion for new trial, ordering
new trial after finding inconsistent verdicts].)18
Because we find the special verdict responses are
inconsistent, both special verdict responses—the one against
Amusement and the one in favor of Alevy—are invalid, and
Missakian’s claims against both defendants are subject to a new
trial.
C. Alevy’s motion for attorney fees
Based upon Alevy having prevailed in the trial court on
the sole cause of action against him (i.e., promissory fraud),
Alevy appealed the trial court’s denial of his motion for attorney
fees under Civil Code section 1717 and Code of Civil Procedure
18 Alevy asserts, without authority or elaboration, that
Missakian’s selection of the jury’s award of contract damages
over the lower promissory fraud and punitive damages award
precludes a retrial on the promissory fraud claim. We reject this
unsupported assertion.
43
section 1021. Our reversal of the judgment and remand of the
matter for a new trial renders Alevy’s appeal moot.
DISPOSITION
The judgment is reversed, and the case is remanded for a
new trial as to all parties. In the interests of justice, each party
shall bear their own costs on appeal.
MOOR, J.
I concur:
EGERTON, J.*
* Justice of the Court of Appeal, Second Appellate District,
Division Three, assigned by the Chief Justice pursuant to article
VI, section 6 of the California Constitution.
44
Missakian v. Amusement Industry, Inc. – B296749
RUBIN, P. J. – Concurring:
I agree with the result the majority opinion reaches. I
write separately only to urge that the opinion be read narrowly,
confined for the most part to facts similar to the present case.
The majority’s analysis, although undoubtedly correct when
applied here, should not be interpreted as a blanket rule that
governs all in-house attorney arrangements. There are many
corporate counsel relationships that, in my view, are not subject
to Business and Professions Code section 6147.
It is fairly non-debatable that in-house counsel are on the
same footing as their outside retained counterparts, at least for
most purposes. For example, the attorney-client privilege itself
applies. “The privilege protects communications between legal
professionals within the law firm representing the client
(Fireman’s Fund Ins. Co. v. Superior Court (2011)
196 Cal.App.4th 1263, 1273–1274), communications between a
business entity and its in-house counsel acting in a legal
capacity (Alpha Beta Co. v. Superior Court (1984)
157 Cal.App.3d 818, 825), and communications made during
preliminary consultation, regardless whether the attorney is
ultimately retained. . . .” (See Bank of America, N.A. v. Superior
Court (2013) 212 Cal.App.4th 1076, 1099.) As our Supreme
Court has unequivocally stated, “We reject any suggestion that
the scope of the privilege should be diluted in the context of in-
house counsel and their corporate clients. Members of corporate
legal departments are as fully subject to the demands of the
privilege as their outside colleagues.” (General Dynamics Corp.
v. Superior Court (1994) 7 Cal.4th 1164, 1190.)
I also agree with the majority that in-house counsel are
attorneys for purposes of determining an award of statutory or
contractual attorney’s fees. (See PLCM Group, Inc. v. Drexler
(2000) 22 Cal.4th 1084, 1093.) And, I agree that in-house
counsel should be treated the same as retained outside counsel
for the attorney fault provision in Code of Civil Procedure
section 473. (See Gutierrez v. G & M Oil Co., Inc. (2010)
184 Cal.App.4th 551, 554–557.) These holdings fit comfortably
within the purposes of the applicable statutes and contractual
principles.
But I see substantial differences in salary/compensation to
in-house counsel, on the one hand, and contingency fee
compensation based on success or failure in standalone
litigation, on the other. The reasons are fairly self-evident. As
our Supreme Court has stated plainly: “A private corporation
with an office of general counsel and a large corporate legal staff
is not in any material sense analogous to the personal injury
plaintiff of limited means who seeks representation in a single
matter.” (General Dynamics Corp. v. Superior Court, supra,
7 Cal.4th at p. 1178.)
It is precisely that difference that requires a narrow
reading of the majority’s opinion. Its holding should not be
treated as an invitation to meld the diverse types of
compensation available to in-house counsel with the free-
standing contingency agreement often found in personal injury
representation. A fair reading of the record here is that
Amusement hired Missakian to handle two related pieces of
litigation (the Stern litigation) and as part of his compensation
Missakian was to receive “a bonus equal to 10% of any and all
sums recovered in the [Stern litigation] or related matters less”
2
certain other fees and costs. To be sure, this initial interest
developed into an agreement to act as in-house counsel. But
from the outset of Missakian’s employment as Amusement’s
counsel, part of his compensation was contingent, as that term
is used in Business and Professions Code section 6147. That
fact is not insignificant. Business and Professions Code sections
6147 and 6148 were “enacted to benefit and protect clients, such
as the one sued by attorney here, by informing them at the outset
of the representation in a signed writing, inter alia, of the
amount of attorney fees they will incur under fee for service and
contingency fee agreements. (Chodos v. Borman (2014)
227 Cal.App.4th 76, 101–102 (Chodos); italics added.)
I do not suggest that the timing of the contingency fee
arrangement alone is dispositive. Nevertheless, that the
percentage arrangement here was reached at the inception of
the attorney-client relationship is a significant factor in my
agreement with the majority that section 6147 applies.1
1 The timing of a percentage fee arrangement is a factor,
and not an unimportant one. In Chodos the court found the
client’s failure to execute a contingency fee agreement while
litigation was pending was a factor in its conclusion to reduce a
quantum meruit jury award. Chodos did not involve in-house
corporate counsel; plaintiff had represented his client in two
divorce actions and one related lawsuit. (Chodos, supra,
227 Cal.App.4th at p. 82.) Chodos was properly decided but it is
not particularly helpful factually to the present appeal. As a
corollary to Chodos, I agree that generally section 6147 would
invalidate an oral modification of a written contingency fee
agreement covered by the statute.
3
The contingency fee agreed upon at the incipiency of the
attorney-client relationship here is a factor that distinguishes
the present case from those involving long standing employment
relationships that regularly or periodically include percentage-
based compensation, I give as examples: (1) the previously hired
in-house counsel without a written employment agreement who
one year is promised by the company that, if he or she is
successful in reducing the amount of attorney’s fees charged the
company by outside counsel, the company will pay the in-house
lawyer a 10 percent bonus based on the reduced amount of fees;
and (2) in-house counsel, also without a written agreement, who
is directed to represent the company as a plaintiff in litigation
and is promised, in addition to regular salary, 10 percent of any
recovery.
There are many other compensation structures that
experienced in-house counsel could imagine. To insist that those
attorneys already hired must ask their employer for a written
agreement covering percentage compensation is unrealistic and
likely to invite mischief. Nor is it in keeping with the language
or the policies of Business & Professions Code section 6147. I
see the present case sufficiently different from the examples I
have given, and, for that reason, I concur.
RUBIN, P.J.
Ultimately, it is the totality of the circumstances of the
attorney-client relationship – not just the inclusion of a
contingency element – that, in my view, determines whether
section 6147 should apply in the in-house counsel setting.
4