St. Monica Development v. Gabrielino-Tongva Tribe CA2/5 ( 2023 )

Filed 7/7/23 St. Monica Development v. Gabrielino-Tongva Tribe CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
ST. MONICA DEVELOPMENT, B302377 c/w B308161
Plaintiff and Appellant, (Los Angeles County
Super. Ct.
v. No. SC091644)
GABRIELINO-TONGVA TRIBE et al.,
Defendants and Respondents.
THE CRANE GROUP, INC., (Los Angeles County
Super. Ct.
Plaintiff and Appellant, No. SC092615)
v.
GABRIELINO-TONGVA TRIBE et al.,
Defendants and Respondents.
GABRIELINO-TONGVA TRIBE, (Los Angeles County
Super. Ct.
Plaintiff and Respondent, No. BC361307)
v.
ST. MONICA DEVELOPMENT et al.,
Defendants and Appellants;
ST. MONICA DEVELOPMENT,
Cross-complainant and
Appellant,
v.
GABRIELINO-TONGVA TRIBE et al.,
Cross-defendants and
Respondents.
APPEALS from a judgment and order of the Superior Court
of Los Angeles County, Yvette M. Palazuelos, Judge. Affirmed as
modified.
Freeman Mathis & Gary, John K. Rubiner; California
Appellate Law Group, Rex S. Heinke; Law Offices of Jonathan
Stein and Jonathan Stein, in pro. per., for Defendant and
Appellant Jonathan Stein and Defendant, Cross-complainant and
Appellant St. Monica Development Company.
The Tym Firm, Ronald D. Tym; Law Offices of Jonathan
Stein and Jonathan Stein, in pro. per., for Defendants and
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Appellants Jonathan Stein and St. Monica Development
Company, and The Crane Group, Inc.
Law Offices of Jonathan Stein and Jonathan Stein for
Plaintiff and Appellant The Crane Group, Inc.
Chora Young & Manasserian, Paul P. Young, Joseph Chora
and Armen Manasserian for Plaintiff, Cross-defendant and
Respondent Gabrielino-Tongva Tribe.
——————————
A three-phase trial was held on three consolidated cases
arising out of contracts to develop casino gaming for the
Gabrielino-Tongva Tribe (the Tribe). Appellants Jonathan Stein
and St. Monica Development Company, LLC (SMDC), appeal
from the judgment after trial in favor of the respondent Tribe and
individual defendants: lobbyist Richard Polanco, attorney
Elizabeth Aronson, and Tribal Council members Sam Dunlap,
Virginia Carmelo, Martin Alcala, Edgar Perez, Shirley Machado,
and Adam Loya.1 On appeal, Stein and SMDC contend: (1) the
trial court’s statement of decision is not entitled to deference,
because the court did not make any of the changes suggested by
Stein and SMDC; (2) the trial court’s findings are not supported
by the evidence, including findings of an attorney-client
relationship between Stein and the Tribe, a right to rescission of
the contract between SMDC and the Tribe based on Stein’s
violation of the California Rules of Professional Conduct,2 fraud,
intentional interference with contract, tortious interference with
1None of the individual defendants have filed a
respondent’s brief on appeal.
2All further references are to the California Rules of
Professional Conduct, unless otherwise stated.
3
prospective economic advantage, conversion, breach of the
covenant of good faith and fair dealing, attorney malpractice, and
breach of fiduciary duty; (3) the compensatory damages awarded
were too speculative and incorrectly calculated; (4) the punitive
damages awarded were not supported by evidence of Stein’s net
worth; and (5) the trial court erred by finding Stein and SMDC
dismissed their claims against the Tribe prior to trial, and by
failing to adjudicate claims in their cross-complaint against the
individual defendants.
We conclude the statement of decision is entitled to the
usual consideration on appeal. The trial court’s finding that an
implied attorney-client relationship existed between Stein and
the Tribe, which allowed for rescission of the agreement based on
Stein’s violation of professional rules, is supported by substantial
evidence, as are the court’s findings of fraud and conversion.
Because we conclude the findings as to rescission, fraud, and
conversion support the remedies provided in the judgment, we
need not address whether these remedies were additionally
supported by the remaining causes of action. The compensatory
damages awarded were not overly speculative, but the calculation
was incorrect. The amount must be reduced from $20,411,067.23
to $19,161,067.23, which was the maximum amount supported by
the evidence. The trial court concluded that Stein was estopped
from objecting to punitive damages based on a lack of evidence of
his net worth because he failed to provide credible evidence of his
net worth in discovery, and no error has been shown. The trial
court’s finding that Stein and SMDC dismissed their claims
against the Tribe was supported by substantial evidence, and
moreover, despite the dismissals, Stein and SMDC were
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permitted to try their claims against the Tribe and the individual
defendants in full.
Appellant The Crane Group appeals from the portion of the
judgment ruling on Crane’s action in favor of the respondent
Tribe, and the individual defendants, Polanco, Aronson, Dunlap,
Carmelo, Alcala, Perez, Machado, and Loya. On appeal, Crane
contends: (1) it did not dismiss its claims against the Tribe; (2)
the trial court’s finding that Crane’s right to payment was
triggered by the threshold amount received by the Tribe, rather
than the total amount paid by investors, was not supported by
the language of the parties’ agreement or the evidence; and (3)
the trial court erred by finding Crane failed to provide evidence to
support its claims for quantum meruit or account stated. We
conclude that the trial court’s finding that Crane dismissed its
claims against the Tribe is supported by substantial evidence.
We modify the judgment by reducing the amount of
compensatory damages from $20,411,067.23 to $19,161,067.23,
and as modified, we affirm.
In a separate appeal from a postjudgment order awarding
attorney fees, which was consolidated for the purposes of appeal,
Stein, SMDC, and Crane contend that: (1) the award of attorney
fees must be reversed if the judgment is reversed on the merits;
(2) the Tribe is judicially estopped from asserting that the
appellants dismissed their claims against the Tribe, because the
Tribe successfully argued it had not entered into a settlement;
and (3) Stein is not liable for attorney fees assessed against
SMDC by contract or as an alter ego of SMDC. We conclude that
the reduction in the amount of compensatory damages did not
alter the trial court’s finding that the Tribe was the prevailing
party. In addition, Stein, SMDC, and Crane failed to raise any
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issue as to judicial estoppel or alter ego in connection with their
appeal from the judgment, and these issues may not be addressed
for the first time on appeal from the postjudgment order
awarding attorney fees. Therefore, we affirm the postjudgment
order awarding attorney fees.
FACTUAL AND PROCEDURAL BACKGROUND
History and Initial Contact with Stein
The indigenous Tongva people of the Los Angeles Basin
became known as “Gabrielinos” based on their association with
the San Gabriel Mission. (Gabrielino-Tongva Tribe v. St. Monica
Development (Nov. 8, 2013, B238603) [nonpub. opn.].) In 1994,
the State of California recognized the Gabrielinos as “the
aboriginal tribe of the Los Angeles Basin.” (Ibid.) There are
several associations of the descendants of the tribe in California.
(Ibid.)
In early 2000, Stein approached Tongva descendent Sam
Dunlap about obtaining federal recognition to facilitate a casino
gaming operation in Los Angeles. Stein represented himself as a
sophisticated transactional lawyer experienced in tribal gaming
and financing. Stein and Dunlap courted a Gabrielino faction led
by Jim Velasquez (the Coastal faction). The Coastal faction is the
predecessor to the Tribe.
In May 2000, Stein’s secretary mistakenly sent an invoice
to Dunlap, and Stein sent a retraction letter explaining that he
would keep a record of his time to establish the legal costs for the
transaction, but no payment was due yet. Specifically, he stated,
“Payment on Stein Structure Financings is often made in whole
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or part from proceeds of the financing. Until that happens, I
keep internal records of my time, to be fair and accurate in
setting the legal costs for each separate financing transaction. If
the transaction fails to go through, this time is often written off.”
Stein formed SMDC, of which he is the sole member, to
develop casino gaming with the Tribe. With the assistance of his
personal counsel, Stein drafted an agreement between “the
Gabrielino-Tongva Nation,” which was also referred to in the
agreement as “the Tongva” or “the Tribe,” and SMDC (the SMDC
agreement). SMDC agreed to assist the Tribe to achieve federal
recognition and develop a casino in Los Angeles County. The
SMDC agreement guaranteed compensation of $25,000 per
month to SMDC, which would be deferred until funds were
available, as well as 10 percent of the “net win” from certain
casino earnings and a significant ownership interest in any
future casino gaming by the Tribe. The SMDC agreement also
contained an attorney fees provision. The SMDC agreement
expressly provided that Stein was not the Tribe’s attorney, and
no attorney-client relationship was created between them.
Stein falsely represented to the Tribe that attorney
Stephen Otto was acting as their lawyer. Stein prepared a tribal
resolution appointing Otto as counsel for the Tribe, although Otto
explicitly declined to accept the position orally and in writing.
Otto sent a letter to the Tribe explaining that he had declined
involvement, because Stein failed to share Otto’s prior
communications.
In March 2001, Stein presented the SMDC agreement to
the Tribe without any other attorney present. Tribal Council
members were not given time to read the document, take it home,
or have a meaningful opportunity for a lawyer to review it. They
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were told that they would be removed from the Tribal Council if
they did not sign the agreement. The Tribe adopted the SMDC
agreement through a resolution drafted by Stein and signed by
several Tribal Council members on behalf of the “Gabrielino-
Tongva Tribe,” including Dunlap and Velasquez. The Tribal
Council members signed the document under duress, without the
benefit of counsel and without understanding the SMDC
agreement.
The following month, a resolution concerning the SMDC
agreement was signed by a substantially different group of Tribal
Council members: Dunlap, Martin Alcala, Shirley Machado,
Virginia Carmelo, and Edgar Perez. The Tribe approved
amendments to the SMDC agreement through a series of
resolutions on behalf of the “Gabrielino-Tongva Tribe” between
April 2001 and May 2006.
Although the SMDC agreement disclaimed an attorney-
client relationship, Stein provided an array of legal services to
the Tribe and acted as the Tribe’s general counsel. In addition to
the resolution that adopted the SMDC agreement, Stein drafted
several other resolutions for the Tribe. He hired attorneys to act
as counsel of record for the Tribe, but directed their work. Stein
hired, supervised, and fired all of the outside counsel for the
Tribe.
The Gabrielino Tribal Gaming Authority was an entity
formed within the Tribe to be responsible for the casino project.
Stein held himself out as the Tribal Development Officer of the
Tribe and the Chief Executive Officer of the Gaming Authority.
All of the Tribe’s books and records were kept at Stein’s law
offices, which is where SMDC was also located.
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A few months after the SMDC agreement was signed, Stein
hired attorney Rae Lamothe to serve as the Tribe’s General
Counsel. In 2002, Stein advised some of the Tribal Council
members to file an action against a different group of Tongva
descendants (the Morales Group) to gain access to membership
information and historical documents that the Morales group had
gathered. Stein filed the lawsuit on behalf of Dunlap, while
Lamothe represented Alcala, Carmelo, and Perez. When it
became clear that the plaintiffs would lose the lawsuit, Stein
withdrew. The individuals lost and incurred expensive litigation
costs. Although he had withdrawn as counsel of record, Stein
insisted on conducting settlement negotiations personally.
Dunlap filed for personal bankruptcy as a result of the judgment.
In an email to Lamothe, Stein explained that Dunlap’s
bankruptcy counsel would serve as attorney of record for the
bankruptcy, but Stein would supervise Lamothe in representing
the Tribe’s interest in Dunlap’s bankruptcy.
Stein provided the Tribal Council with a lengthy legal
memorandum arguing that the Tribe was a state-recognized
tribe, and state-recognized tribes did not need federal recognition
to conduct legal gaming operations on a state Indian reservation
in California, only state approval of the gaming. Stein circulated
versions of the memorandum to political leaders. Under Stein’s
theory, the SMDC agreement would avoid review by the National
Indian Gaming Commission (NIGC), which invalidates
agreements that provide a significant ownership interest to non-
Native Americans in tribal gaming by federally recognized tribes.
Stein hired former state legislator Richard Polanco as a
political advisor and lobbyist for the Tribe. Stein also hired The
Crane Group to lobby for the Tribe in Washington, D.C. In
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March 2005, Crane entered into a written consulting agreement
with the “Gabrielino-Tongva Tribal Nation,” in which Crane
agreed to lobby for the Tribe to obtain federal recognition (the
Crane agreement). The Tribe agreed to pay $12,500 per month to
Crane, but the amount would accrue until the Tribe received
payment of at least $2 million in investment funding. Once an
investor had been secured and $2 million paid, the Tribe would
be required to pay Crane all of the monthly fees that had accrued.
The Crane agreement also contained an attorney fees provision.
A resolution approving the Crane agreement was executed on
March 26, 2005, by Dunlap, Alcala, Machado, Carmelo, and
Perez.
In October 2005, the Tribe held its first election for the
Tribal Council, electing Dunlap, Alcala, Machado, Carmelo,
Perez, and Adam Loya (the Tribal Council). Stein published a
law review article in the University of San Francisco Law Review
about the gaming rights of Indian tribes that had state
recognition but not federal recognition.
In April 2006, former California Supreme Court Justice
Cruz Reynoso wrote a letter to the California Legislative Counsel
stating that he had been retained by the Tribe to perform a legal
analysis of the Tribe’s gaming rights. The California
Constitution stated that the Governor could negotiate compacts
for certain gaming activities by “federally recognized Indian
tribes on Indian lands in California in accordance with federal
law,” and in the next sentence concluded, accordingly, those
gaming activities were permitted on “tribal lands subject to those
compacts.” In Reynoso’s opinion, the provision was ambiguous
because it referred to Indian lands in the first sentence and tribal
lands in the second sentence. Reynoso argued the ambiguity
10
should be interpreted to allow gaming activities by all California
Indian tribes, including tribes that were state recognized but not
federally recognized.
Former California Supreme Court Justice Armand Arabian
also provided a letter to the California Legislative Counsel
opining that the California Constitution contained an ambiguity
because of the use of “Indian lands” and “tribal lands.” He opined
that proposed draft legislation was within the power of the
Legislature to enact.
In the spring of 2006, attorney Lamothe stopped working
with the Tribe and attorney Liz Aronson became the Tribe’s
Assistant General Counsel.
The Libra Investment
On May 20, 2006, Libra Securities, LLC, a Los Angeles
investment fund managing several institutional investors,
entered into an agreement with “the Gabrielino-Tongva Tribe, a
tribal sovereign for the Gabrielino aboriginal tribe of Los Angeles
Basin, formerly known as the San Gabriel Bank of Mission
Indians and now recognized by Legislative Resolution Chapter
146 of the California Code” (the Libra agreement). Stein hired an
experienced tax and corporate lawyer to assist the Tribe with the
financing transaction, directed her work, and fired her days
before the Libra agreement was scheduled to close. Stein
handled the closing on behalf of the Tribe.
The Libra agreement stated that the Tribe wanted to
establish Las Vegas-style casinos in Los Angeles County to
conduct gambling activities. Libra agreed to invest funds in
exchange for an interest in the revenue. Libra agreed to make a
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one-time payment to the Tribe of $900,000 and an initial
investment of $1,250,000. In addition, Libra committed for a one-
year period, subject to extension, to invest an additional
$19,000,000, subject to satisfaction or waiver of certain
conditions. For an additional payment of $900,000, Libra could
extend the time period of the commitment for an additional year.
There were four conditions precedent to further funding.
The first condition was that “[Senate Bill No.] 175 or
substantially similar legislation[ ] has been passed into law (i.e.,
by virtue of being signed into law by the Governor of the State of
California or otherwise).” The exhibits attached to the agreement
included a document appearing to be Senate Bill No. 175 (Senate
Bill 175), introduced by Senator Edward Vincent, as amended in
the Assembly and the Senate. Among other provisions, the
document proposed to create a state Indian reservation at
Hollywood Park in Inglewood for the Gabrielino-Tongva Tribe,
and interpreted existing language in the California Constitution
to allow gaming on tribal lands, such as the Gabrielino-Tongva
reservation at Hollywood Park.
The remaining conditions were that (1) no material change
had occurred, (2) the Tribe was, and continued to be, recognized
by the State of California as an Indian tribe, and (3) if required
by Senate Bill 175 or any other legal requirement, the Libra
agreement was approved by the Bureau of Indian Affairs under
the Department of the Interior of the United States. The Tribe
and the Gaming Authority must deliver a certificate attesting
that each of the conditions precedent to funding had been
satisfied in all material respects.
The Tribe represented that the only known groups of
persons claiming to be the legitimate governing body of the
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Gabrielinos were: (1) the San Gabriel faction led by Anthony
Morales, (2) a Beaumont group led by the Blount family, (3) a
West Los Angeles group led by Robert Dorame, and (4) the
Coastal faction led by Velasquez.
The Tribal Council members believed the document
attached to the Libra agreement as exhibit B was an actual bill
drafted by a member of the State Senate or his staff. The Tribal
Council members were not aware that the document was a crude
draft prepared by Stein that was never introduced in the
Legislature.
In May 2006, the Tribe adopted a resolution to amend the
SMDC agreement that was signed by the Tribal Council. On
May 22, 2006, the Tribe received its portion of the first tranche of
investment funding from Libra. Certain expenses provided for in
the Libra agreement were deducted prior to funding, so the total
amount received by the Tribe was $1,805,889, which the Tribe
was required to spend in accordance with an approved budget.
Legislative Counsel Opinion
The same day that the Tribe received funds, the California
Legislative Counsel issued an opinion to Senator Vincent that the
Tribe was not a state recognized tribe, and even if it were, a state
recognized tribe could not engage in gaming without federal
recognition. The opinion stated in a footnote, “the state of
California may recognize a tribe that is not federally recognized,
but it has not done so.” The opinion expressly concluded, “the
Legislature has no power to authorize a non-federally recognized
Indian tribe to operate slot machines, lottery games, and banking
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and percentage card games in California, even if the state gives
the tribe the designation of a state-recognized tribe.”
Stein learned about the Legislative Counsel’s opinion the
following day. Although he believed it was material to the Libra
agreement, he did not transmit the opinion to Libra for several
months.
Disputes Begin in Summer 2006
On July 15, 2006, Stein wrote an email to Aronson and the
elected Tribal Council members about Dunlap’s request for
reimbursement of $18,000. Stein argued that the approved
budget for the first tranche of investor funds did not allow
payment to Dunlap, so a payment to Dunlap could cause the
investors to look unfavorably on the investment. He added, “We
recently suffered a huge defeat in Sacramento. On August 9, our
next report to investors is due. It may include facts that will sour
them on this investment, as we previously assured them that
[Senate Bill No.] 175 was authored by Senator Vincent and would
be introduced publicly, a major step towards the casino. In the
August 9 report, we are likely going to state that Sen. Vincent
refused to author [Senate Bill No.] 175 and that it will not be
publicly introduced this legislative session.”
Disputes arose between the Tribal Counsel, Stein, and
Aronson throughout the summer of 2006. Aronson accused Stein
of billing and double-billing legal costs from his law practice to
the Tribe’s Libra funds and unreasonably delaying finalization of
a settlement with the Morales group. Stein asked Aronson to
resign, and on behalf of the Tribe, drafted a termination letter
and resolution terminating her.
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At a meeting on September 9, 2006, at Stein’s office, Stein
demanded that the Tribal Council fire Aronson, and when they
refused, he said that he quit. The Tribal Council carried the
documents that they could out of Stein’s law office, but many
documents were left behind, including individual tribal member
records and financial records. Stein delivered a letter to the
Tribal Council resigning his positions in the tribal
administration. Stein later told the Tribal Council that he had
frozen the Tribe’s funds for two weeks and would return the
funds to the Libra investors.
The Tribe met with Libra. Libra assured the Tribe that
their actions were acceptable as long as they abided by the
contract.
Stein wanted the Tribal Council to replace Aronson with
attorney Jim McShane with the law firm of Sheppard Mullen
Richter and Hampton, LLP. On September 19, 2006, Stein
introduced McShane to the Tribal Council. The Tribe ultimately
hired McShane without referring to Stein in their retainer
agreement.
On September 26, 2006, Stein wrote an email to the Tribal
Council setting a deadline the following day for several matters.
He advocated to be the sole signatory on certain financial
accounts, but cautioned against having an individual Tribal
Council member as a sole signatory without insurance. After
explaining several actions to be taken, Stein stated, “If we miss
the deadline, then I will be forced to send a letter to Libra which I
will draft today, explaining the damage and other factors which
your meeting with [Libra] may have glossed over. I earnestly
wish to avoid any letters as our dirty laundry should stay at
home. I also do not wish to endanger the $2.5 million funding
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that hangs in the balance.” He signed the email as Chief
Executive Officer of the Gabrielino Tribal Gaming Authority.
On September 27, 2006, Stein wrote an email stating that
representatives for Libra had drafted and revised a memorandum
requesting $2.5 million for the Tribe. Stein was waiting for the
final copies from Libra.
On September 29, 2006, Stein wrote an email to the Tribal
Council and Libra stating that the effort to establish the
Gabrielino Casino and Resort was officially dead in the water.
He had not been paid $120,000 that was past due, and there had
been no commitment for payment of future contributions.
Instead, the Tribal Council had paid itself, and records showed
$20,000 might be missing from the account. More than $100,000
in additional funds were in the sole and exclusive control of a
non-tribal third party with no business relationship to the Tribe
or the Tribal Gaming Authority. Of the political checks that had
been written, two checks were correct, three checks were in the
wrong amounts, two checks might be duplicates, all of the
payments were late, and Stein had not been paid.
Later that day, the Tribal Council wrote a letter to Stein
directing him to “immediately suspend all of [his] activities and
those of [SMDC] on behalf of the Tribe and the Tribal Gaming
Authority.”
The next day, Stein sent an email to the Tribal Council
acknowledging receipt of the Tribe’s termination letter. He
suggested working together until December 15, at which time he
would step aside. He wanted the Tribe to commit to pay
$500,000 in political contributions, as well as payments to
himself for several items. He added, “Also, per my contract, if I
leave Dec 15 (by your choice or mine, with or without cause), here
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is what happens: [¶] $2 million is immediately due SMDC from
the Tribe and, hopefully, Libra could finance that. [¶] My 10
[percent] slot revenue interest remains intact. I need an estoppel
certificate to assure that. [¶] The only difference is, instead of
working 7 days a week and waiting for my money, I don’t work
and I get far more money immediately. You pay me and the new
CEO, instead of just me. [¶] I will probably spend 2007 on
sabbatical in Rome and Europe, unless I were paid to stay and
consult with your new team. Thus there would be no need to
worry about me ‘bad mouthing’ the Tribe in Sacramento after I
left on good terms.”
At a Tribal Council meeting on October 3, 2006, McShane,
as outside counsel for the Tribe, told Stein that the Tribe had
accepted his letter of resignation, and to the extent that Stein
claimed not to have resigned, the Tribe was terminating him.
Demand Letters and Contact with Tribe Members
On October 5, 2006, attorney Geoffrey Long, on behalf of
Stein and SMDC, wrote a letter to the Tribal Council and
McShane, demanding payment of $2,464,535.96, plus additional
amounts.
The Tribe’s membership records were highly confidential
documents, which individually belonged to the members, but
collectively belonged to the Tribe. Stein retained possession of:
the confidential individual tribal membership records,
membership lists, and contact information for the members;
tribal letterhead, website, cell phones, and computers; and all the
government filings that Stein had caused to be filed on the
Tribe’s behalf.
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In October 2006, Stein used the Tribe’s confidential
membership list without the Tribal Council’s consent to contact
the membership directly. He sent a letter to each member of the
Tribe on Tribal Council letterhead that listed Alcala, Carmelo,
Dunlap, Loya, Machado, and Perez as the Tribal Council
members. Stein stated that the Tribal Administration Office was
designed to act as a “check and balance” on the Tribal Council
and supervise the use of investor funds. Stein had raised $21
million for the Tribe in May 2006, but the Tribal Council refused
to authorize a letter announcing the funding agreement to the
membership. He added, “This letter is sent without their
authorization.” Stein stated that for the past five years, he paid
the expenses of the Tribe and made all of the decisions on the
casino project, subject to final approval by the Tribal Council.
He stated, “My assistant, Barbara Garcia, is the Tribal
Administrator. Barbara answers the Tribal Administration
Office phone and keeps membership records. With the excellent
work of the Tribal Council, we built up tribal membership to over
1900 Gabrielinos. Your membership records are secure, private
and computerized. Each of you has your own manila folder for
BIA and personal documents.”
Stein claimed to have been fired because of his repeated
requests to verify the amounts held in the Tribe’s checking
account and to complete a routine financial audit. The
signatories on the Tribe’s accounts were changed without his
knowledge. Check books and bank records had been removed
from the Tribal Administration Office.
Stein touted his organizational achievements, including
nonpartisan Tribal Council elections in the fall of 2005. He
stated, “I worked this summer with Assemblyman Tom Umberg
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(D-Garden Grove), who introduced [Assembly Bill No.] 1561.
[Assembly Bill No.] 1561 would establish a California State
Indian Reservation at Hollywood Park, allow the Tribe to conduct
gaming there without federal recognition, and establish a casino
with 7500 slot machines (subject to negotiation of a tribal
compact). [¶] The first page of the bill summary for [Assembly
Bill No.] 1561 is enclosed.”
In conclusion, Stein pleaded, “Despite my hard and diligent
work, I have been fired by the Tribal Council, for arguing for a
‘check and balance’ on their authority. [¶] I organized elections
in October 2005, raised $21 million in May 2006, introduced
gaming legislation in August 2006, conducted the first
independent financial audit in September 2006, and was fired on
October 3, 2006. Is that good for the Tribe? [¶] I ask your help.
If you support an independent Tribal Administration Office that
can operate as a ‘check and balance’ on the Tribal Council, please
sign and return the letter enclosed. [¶] If you support the Tribal
Administration Office’s work on the casino project, which I
designed, funded, hired all the professionals, and now supervise,
then please sign and return the letter. [¶] Although your
response to this letter does not bind the Tribal Council, it will let
them know what the Tribal Members think and want. Thank
you and feel free to call Barbara with any questions.”
Stein terminated the Tribal Council members’ cell phone,
email, and website access. When individual Tribal Council
members requested the return of records to the Tribe, Stein’s
office refused.
On October 23, 2006, attorney Long sent another demand
letter enclosing a complaint that SMDC intended to file if the
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Tribe refused to engage in settlement negotiations. Long sent a
final demand letter on November 2, 2006.
Libra provided a letter of support for the Tribe stating that
nothing was wrong with the actions taken with respect to the
contract, and the Tribal Council distributed copies to its
membership.
Litigation Filed and Stein’s Attempt to Usurp Control of
the Tribe
A. The Tribe’s Complaint
On November 2, 2006, the Tribe filed the instant action
against Stein, the Law Offices of Jonathan Stein, and SMDC
(case number BC361307). The Tribe’s operative fourth amended
complaint alleged causes of action for: (1) conversion; (2) breach
of fiduciary duty; (3) misappropriation of trade secrets; (4) breach
of confidence; (5) intentional interference with economic
relationships; (6) negligent interference with economic
relationships; (7) breach of contract (SMDC only); (8) breach of
the implied covenant of good faith and fair dealing (SMDC only);
(9) legal malpractice (Stein and Law Offices only); (10)
declaratory relief; (11) violation of Penal Code section 502,
subdivision (c); (12) unfair competition; (13) rescission per
California Rules of Professional Conduct, Rule 3-300 (Stein and
Law Offices); (14) alter ego liability; and (15) fraud.
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B. SMDC Complaint
That same day, on November 2, 2006, SMDC filed a
complaint against “Gabrielino-Tongva Tribe,” Gabrielino Tribal
Gaming Authority, Libra, attorney Aronson, lobbyist Polanco, the
law firm Sheppard Mullen, and each of the Tribal Council
members (case No. SC091644). In May 2007, SMDC filed an
amended complaint against “Gabrielino/Tongva Nation, also
known as Gabrielino-Tongva Tribe, also known as Gabrielino
Tribal Gaming Authority,” Libra, Aronson, Sheppard Mullen,
Polanco, and each of the Tribal Council members.
Dunlap later filed a cross-complaint in SMDC’s action
against Stein, the Law Offices, SMDC, and individual
defendants.
C. Effort to Take Control of the Tribe
Stein sent a letter to the membership of the Tribe
anticipating a meeting on November 18, 2006, to introduce a
newly formed “Financial Oversight Committee” and his intent to
call for a recall election of the Tribal Council. No recall election
was held.
On December 17, 2006, at Stein’s direction, a member of
the Tribe named Linda Candelaria filed a statement of
unincorporated association under the name “Gabrielino-Tongva
Tribe.” The agent for service of process was Stein’s legal
assistant, and the entity’s business address was Stein’s law office.
21
D. Crane Complaint
In January 2007, Crane terminated its agreement with the
Tribe. On January 31, 2007, Stein filed a complaint on behalf of
The Crane Group against “Gabrielino-Tongva Tribe,” Gabrielino
Tribal Gaming Authority, Aronson, Polanco, and each of the
Tribal Council members (case No. SC092615). The Crane Group
complaint alleged causes of action for breach of contract,
intentional and negligent interference with contractual relations,
fraudulent conveyance, negligence, account stated, quantum
meruit, and declaratory relief. The actions brought by the Tribe,
SMDC, and Crane were eventually found to be related and
consolidated.
E. Actions on Behalf of the Tribe
In February 2007, the Tribal Council members held a
convention to ratify the constitution of the “Gabrielino/Tongva
Nation.” Meanwhile, a group that included Candelaria (the
Candelaria Group) held elections in the spring of 2007 on behalf
of the “Gabrielino-Tongva Tribe.”
In March 2007, Stein and the Candelaria Group entered
into an agreement under which the Candelaria Group agreed
that the Tribe was estopped from denying an obligation to pay
$2,700,897.65 under the SMDC agreement.
F. Stein and SMDC Cross-complaint
On August 20, 2007, Stein and SMDC filed a cross-
complaint in the Tribe’s action against “Gabrielino/Tongva
22
Nation, also known as Gabrielino-Tongva Tribe, also known as
Gabrielino Tribal Gaming Authority,” Aronson, Polanco, and each
of the individual Tribal Council members. The cross-complaint
alleged several causes of action, including breach of contract,
fraudulent conveyance, indemnity, apportionment, contribution,
and declaratory relief. No proof of service of the summons and
cross-complaint were filed as to any cross-defendant.
On September 26, 2007, Stein and SMDC filed another
cross-complaint in the Tribe’s action against “Gabrielino/Tongva
Nation, formerly known as Gabrielino-Tongva Tribe, formerly
known as Gabrielino Tribal Gaming Authority,” Aronson,
Polanco, and each of the individual Tribal Council members. The
cross-complaint alleged causes of action for indemnity,
apportionment, contribution, and declaratory relief only. Proof of
service was attached.
In 2008, Stein published a law review article in the Santa
Clara Law Review, providing a survey of state-recognized tribes
and state recognition processes across the United State.
Settlements, Doe Defendants, and Dismissals
A. Purported Settlement of the Tribe’s Claims
On September 28, 2007, SMDC filed an amendment to its
complaint naming “Gabrielino/Tongva Nation” in place of Doe
defendant 1.
On October 30, 2007, Stein and SMDC entered into a
settlement in which the Candelaria Group agreed to settle the
Tribe’s claims against Stein and SMDC for $1,000. Candelaria
signed the agreement on behalf of the “Gabrielino-Tongva Tribe,”
23
and represented that her group had the authority to settle the
Tribe’s claims.
Stein and SMDC filed a motion for entry of judgment
pursuant to the settlement agreement, as provided under Code of
Civil Procedure section 664.6. On April 1, 2008, the trial court
granted the motion to enforce the settlement agreement as to the
settling entity. The court noted there was little evidence in the
record before the court of continuity between the various
unincorporated associations purporting to conduct affairs for the
Tribe. One entity expressly assumed liability to SMDC under the
SMDC agreement as a successor in interest to the contracting
party and settled claims against the predecessors in interest,
while the other entity alleged it was the contracting party, but
refused to admit liability to SMDC. The trial court dismissed all
actions by or against the settling entity as to Stein, and SMDC.
The court noted the question was whether the non-settling
entity was the real party in interest as to the Tribe’s complaint
and SMDC’s complaint. If not, the Tribe’s complaint should be
dismissed based on the settlement. However, by alleging that it
was the contracting party, the non-settling entity contended it
was the real party in interest as to all of the consolidated actions.
SMDC was not entitled to dismissal of any claims that the non-
settling entity might have in the consolidated actions. Because
the non-settling entity alleged that it succeeded to the benefits
and burdens of the SMDC agreement, none of the parties named
as “tribes” in any consolidated action may be dismissed.
24
B. Dismissals from SMDC’s Complaint
On April 30, 2008, SMDC filed a dismissal of all causes of
action against the Tribe that had been stated in SMDC’s
complaint. After filing additional dismissals, the remaining
causes of action in SMDC’s complaint were claims against
“Gabrielino/Tongva Nation,” as substituted for Doe defendant 1,
and claims against the individual defendants for intentional and
negligent interference with contract, and fraudulent conveyance.
C. Dismissals from Stein and SMDC’s Cross-
complaint
Also on April 30, 2008, SMDC dismissed all causes of action
against “Gabrielino-Tongva Tribe” stated in the September 26,
2007 cross-complaint.3 The causes of action alleged in the
September 26, 2007 cross-complaint against the individual
defendants continued to be total indemnity, equitable indemnity
and apportionment, contribution, and declaratory relief.
D. Settlement and Dismissals from Crane Complaint
On April 24, 2008, Crane filed an amendment to its
complaint substituting “Gabrielino/Tongva Nation” in place of
Doe defendant 8. A few days later, on April 30, 2008, Crane filed
3 The request for dismissal incorrectly referred to the filing
date of the cross-complaint at issue as September 27, 2007.
25
a dismissal of all causes of action against “Gabrielino-Tongva
Tribe” in its complaint.
Years later, on September 25, 2011, Crane entered into a
settlement agreement under which the Candelaria Group
acknowledged the Tribe’s debt to Crane in the amount of
$386,492. On October 19, 2011, Crane filed another dismissal of
all causes of action in its complaint against “Gabrielino-Tongva
Tribe,” as well as those against Gabrielino Tribal Gaming
Authority.
As a result of additional dismissals, the causes of action
remaining in Crane’s complaint were claims against
“Gabrielino/Tongva Nation,” as substituted for Doe defendant 8,
and claims against the individual defendants for intentional and
negligent interference with contract, and fraudulent conveyance.
Summary Judgments and Appeals
On September 26, 2008, the trial court granted Polanco’s
motion for summary judgment as to SMDC’s complaint, Crane’s
complaint, and SMDC and Stein’s cross-complaint. (St. Monica
Development Co. v. Polanco (July 19, 2010, B211466) [nonpub.
opn.].) Another panel of this appellate court ultimately reversed
the summary judgment ruling, finding that triable issues of fact
existed concerning the identities of the tribal associations.
On October 14, 2008, SMDC obtained an entry of default in
its action against “Gabrielino/Tongva Nation, a California
unincorporated association, a successor in interest to Gabrielino-
Tongva Tribe, aka Doe No. 1” and Crane obtained an entry of
default in its action against “Gabrielino/Tongva Nation, a
California Unincorporated Association, aka Doe #8.”
26
Stein and SMDC filed motions for summary judgment of
the Tribe’s complaint, arguing that they had settled all claims
with the “Gabrielino-Tongva Tribe,” judgment had been entered
by the trial court, and the claims pursued by the Tribe should be
dismissed. They claimed the entity remaining in litigation was a
breakaway group called “GT Nation,” which came into existence
after Stein was terminated as an officer of the Tribe.
The Tribal Council denied that it was a breakaway group,
attesting that it was the tribal entity which had contracted with
SMDC, hired and fired Stein, filed the instant lawsuit, and had
sole authority to prosecute or settle the Tribe’s lawsuit. The trial
court granted the summary judgment motions. The court
concluded that the Tribe failed to submit evidence raising a
triable issue of fact as to why the settlement agreement, which
plainly called for dismissal of the Tribe’s action against SMDC
and Stein, was not determinative. The Tribe appealed the
judgments.
On appeal in that matter, Stein and SMDC contended they
were entitled to judgment as a matter of law, because the tribal
entity that sued them entered into a written agreement settling
all of its claims against them. In an unpublished opinion,
another panel of this appellate court concluded that the evidence
was rife with disputed issues of material fact, including whether
the Candelaria Group had authority to settle the plaintiff’s
claims in the instant case against Stein and SMDC. Stein and
SMDC had not met their burden on summary judgment, and the
judgments were reversed. (Gabrielino-Tongva Tribe v. St.
Monica Development (Nov. 8, 2013, B238603) [nonpub. opn.].)
27
Claims Pending for Trial
The action was reassigned to Judge Yvette M. Palazuelos.
The Tribe sought an order that the only claims pending for trial
were those in the Tribe’s complaint against Stein, the Law
Offices, and SMDC. After a hearing on July 29, 2014, Judge
Palazuelos issued an order concerning the claims for trial.
Stein and SMDC argued the Tribal Council members had
authority to act for “Gabrielino/Tongva Nation,” which SMDC
substituted in its complaint in place of a Doe defendant. Defaults
had been entered against “Gabrielino/Tongva Nation” with
respect to SMDC’s complaint and Crane’s complaint, and Stein
and SMDC argued that “Gabrielino/Tongva Nation” was not the
real party in interest for purposes of the Tribe’s complaint.
The Tribe responded that its identity was “Gabrielino-
Tongva Tribe,” the name under which it had commenced the
litigation. The Tribal Council refused to relinquish its tribal
name to the Candelaria Group, and a dispute existed between the
parties as to whether the party’s name had changed during the
course of the action. Default was improper, because the Tribe
filed an answer to SMDC’s complaint under the party name that
it had used throughout. Stein and SMDC could not obtain
defaults against the Tribe for refusing to give up its name and
refusing to assume the name that Stein and SMDC wanted it to
use. Through a fictitious name designation, Stein and SMDC
implied that the Tribe was a new party to the action, when the
Tribe had been an active participant since the inception of the
litigation. Doe amendments were appropriate when a claimant
was truly ignorant of the defendant’s true name. There was no
evidence that “GT Nation” was the Tribe’s name. Stein and
28
SMDC could not obtain a default against the Tribe by referring to
it as “GT Nation,” when the Tribe had commenced litigation as
“Gabrielino-Tongva Tribe” and filed an answer in at least one
case.
The court concluded the defaults were inoperative against
the Tribe, and the claims in the Tribe’s complaint could proceed
to trial. Stein argued that the real party in interest and the
Tribal Council’s authority to act for the Tribe were disputed
issues to be established at trial. In addition, if the Tribe was the
real party in interest, Stein argued, the Tribe was liable for the
claims against it. The dismissals never applied to the Tribe; they
applied to the Candelaria Group.
The court concluded, due to the triable issues of fact
concerning the identity of the real party in interest and the
settlement agreement, the defendants’ claims could proceed to
trial as well. The court noted that after trial, the court might
conclude the claims in the SMDC complaint and the operative
cross-complaint did not survive, but for purposes of going
forward, the court allowed the claims in the SMDC complaint and
the operative cross-complaint to proceed to trial. The court
similarly allowed Crane’s claims to move forward.
Trial
A trial began in June 2016, and was conducted in three
phases. In the first phase, on July 5, 2016, the jury found the
Tribe, also referred to during trial as the Dunlap Faction, had
standing and the capacity to sue in the instant action.
Stein requested a bench trial for the remainder of the case.
The second phase of the trial was frequently suspended over the
29
next two years, primarily due to Stein’s health issues. Crane
participated in the trial.
The Tribe’s gaming expert, Phil Hoag, testified that if the
Tribe were federally recognized, the SMDC agreement would be
invalidated and unenforceable under federal regulations due to
the ownership interest of a non-tribe member.
The Tribe’s ethics expert, Arthur Margolis, opined that
there was an attorney-client relationship between Stein and the
Tribe, despite statements in the SMDC agreement that no
attorney-client relationship was created. He explained Stein’s
numerous violations of the Rules of Professional Conduct and
breaches of his fiduciary duties to the Tribe.
Stein testified as to the following. Although the state
recognized the Gabrielinos as a tribe, it never took the next step
to recognize a single governing body. Libra was an investment
bank that organized multiple investment funds. Stein negotiated
the substance of the agreement with Libra’s representatives
Sammy Lai and Jess Ravich. Libra was required to provide $2.15
million under the agreement, and could fund, within its
discretion, up to $21 million. Libra was not required to provide
any particular amount after $2.15 million. There was an agreed
budget for the first $2.15 million, and the Libra agreement
expressly prohibited use of the investor funds for any purpose
other than the agreed budget. To obtain another $2 million, the
Tribe had to submit a new budget, and Libra had absolute
discretion over whether to fund the new budget.
Senator Vincent agreed to introduce legislation with the
language that Stein put in his draft legislation, which was
attached to the Libra agreement as exhibit B. Stein told the
Tribal Council that Senator Vincent would “gut-and-amend”
30
Senate Bill No. 175 in the form shown in exhibit B. The
document was sent to the Legislative Counsel, but never became
a prebill. The Legislative Counsel’s May 22, 2006 opinion was a
preliminary opinion in response to the document Stein drafted as
Senate Bill No. 175. Generally, the Legislative Counsel releases
a preliminary opinion, and after negotiations, issues a final
opinion. Stein admitted that the Legislative Counsel opinion
made it less likely that Stein’s draft would become legislation,
because Stein had to negotiate with the Legislative Counsel and
get Senator Vincent to “put the bill over the desk to become
public.” In Stein’s view, however, the Legislative Counsel opinion
was a little bump in the road and not a big deal. Senator Vincent
told Stein that he was facing substantial pressure not to put the
legislation forward publicly from tribes that had casino
operations and he would be committing political suicide to do so.
In Stein’s September 27, 2006 email to Libra and others, he
was concerned about whether political contributions that had
been promised would be made by a deadline on September 30,
2006. Stein stated, “In addition, I was hoping that we would
actually move forward and begin the next phase with the
investors because that’s a phase process. To get money in
January, you’ve got to start early, and this was already the end of
September.” When asked if there was a realistic possibility as of
September 27, 2006, that the Tribe was getting the next tranche
from the Libra investors, Stein answered that there was not.
Stein had been hoping there was, but it was not a realistic hope
because of the Tribe’s subsequent actions. When asked what
evidence he had that Libra would not have paid the next tranche,
Stein said a Libra representative told him that Libra would wait
until the dispute was resolved.
31
Attorney McShane testified as well. Stein told McShane
that future tranches of money may become available, but if the
investors perceived problems, they did not have an obligation to
advance further funds.
Stein’s attorney Kenneth Sulzer testified. SMDC named
Libra as a defendant in its complaint because Libra had provided
funds to the Tribe and said they would consider more. If Libra
gave more funding to the Tribe, SMDC wanted to make sure to be
paid out of the additional funding. Because of the dispute
between SMDC and the Tribe, it was clear that SMDC would not
be paid from any funds that the Tribe received from Libra, so the
complaint was a mechanism to resolve the dispute between
SMDC and the Tribe without those funds disappearing. SMDC’s
desire was to work everything out and keep the money flowing,
but not get cut out of the deal.
Tribal Council member Carmelo testified that in 2001, five
groups of Gabrielino tribe members were operating separately.
The Libra agreement provided a smaller initial investment to
help the Tribe in their effort to seek federal recognition. The
Tribe believed it had state recognition, and that from state
recognition, the Tribe would be able to have gaming in California.
Once funds came in and the Tribe was discussing a new budget
for the following year, people were fighting over where to spend
the money and the budget for funds that were going to come in.
Tribal Council member Loya testified. Under the Libra
agreement, the first tranche of funds was to “secure our process.”
Another tranche was going to come in soon after, as long as
everything checked out, including the Tribe’s accounts and
balances, and the Tribe submitted budgets that Libra approved.
32
He believed the Libra agreement was intended to fund the casino,
not the federal recognition process.
Daniel Crane, the lobbyist who owns Crane, testified about
Crane’s right to payment under the Crane agreement and the
evidence to support quantum meruit. In June 2006, Crane
accepted $50,000 from the Tribe as the first installment of the
amount owed under the Crane agreement, and Stein assured him
that additional payments would be made. There was a
reasonable expectation at that time that additional investment
money would be forthcoming. Crane believed the value of the
services that his company rendered was $262,000, plus interest.
The trial court asked several questions about the work conducted
by Crane after receiving payment from the Tribe. Crane stated
that his firm does not track the time spent on work for any client;
he could not estimate how much time Crane spent working on
matters for the Tribe during 23 months of the Crane agreement.
He added, “It would require considerable effort to go back and
reconstruct my time.” Crane described several activities that
were performed to benefit the Tribe. The court asked if there was
any corroboration of the hours and the work performed. Crane
stated there was not, because relationships were built over many
years, but an agreement could be reached in minutes, so the
hourly billing model did not provide fair compensation. Even
though the Crane agreement contemplated the potential for
quantum meruit recovery, Crane admitted that the firm did not
keep time sheets for any client and did not have time records to
support their work.
33
Punitive Damages Phase, Judgment, and Statement of
Decision
On November 8, 2018, the trial court ruled in favor of the
Tribe and against Stein, Law Offices, and SMDC, on all causes of
action in the Tribe’s complaint. The court found Stein, Law
Offices, and SMDC acted with malice, oppression, and fraud, so
held a third phase of trial on the issue of punitive damages,
described in more detail in the discussion.
On August 27, 2019, the trial court issued a statement of
decision. The court noted that the following pleadings were at
issue: the Tribe’s fourth amended complaint, Stein and SMDC’s
September 26, 2007 cross-complaint, SMDC’s amended
complaint, Dunlap’s cross-complaint, and Crane’s complaint. In
footnotes, the court explained the dismissals of parties from the
various pleadings. The court also noted the original cross-
complaint that Stein and SMDC filed in the Tribe’s action on
August 20, 2007, was never served. The court found there was no
evidence that the Tribe was “state recognized” or that the State of
California had state recognized tribes.
The court found Stein had committed multiple acts of fraud
against the Tribe. Stein committed fraud when he attached a
document as exhibit B to the Libra agreement that purported to
be a California Senate Bill authored, introduced, and amended by
Senator Vincent. Exhibit B led the Tribe, through Carmelo, to
believe the Tribe could operate casino gaming in California
because actual legislation had been introduced on the Tribe’s
behalf. Stein failed to disclose to the Tribe that two days after
the Libra agreement was executed, the California Legislative
Counsel issued an opinion to Senator Vincent that the
34
Legislature had no power to authorize a non-federally recognized
Indian tribe to engage in gaming activities, even if the tribe were
recognized by the state.
Stein’s July 15, 2006 email acknowledged his
representation that exhibit B to the Libra agreement was
authored by Senator Vincent was a lie. Although he told the
Libra investors that the legislation was authored and introduced
by a lawmaker, he had lied. Stein admitted at trial that he
drafted the document attached as exhibit B. The Tribe did not
know whether Senate Bill No.175 had been introduced by
Senator Vincent until Stein revealed in the email that he had lied
to the Libra investors.
Stein also committed fraud by accusing the Tribal Council
of stealing funds and freezing their bank accounts when he had
no good faith basis to do so, and after he ceased to have actual
authority over any aspect of the Tribe. He committed fraud by
omission when he failed to advise the Tribe of the basic fact that
the SMDC agreement would be rejected by the federal gaming
authority if the Tribe achieved federal recognition, and he failed
to advise them because it was against Stein’s own interest.
In addition, Stein committed fraud when he caused
Candelaria to file a statement of unincorporated association
claiming to be a representative of the Tribe, when he had no good
faith basis to believe that she had a right to do so. He falsely
represented to members of the Tribe that the Candelaria Group
acted for the Tribe, knowing the representation to be false, and
continued to do so even after the jury found the Tribe, as
represented by the Tribal Council, was the real party in interest
in the case. Stein had no reasonable basis to believe his
representations to be true, but made them knowingly in order to
35
defraud tribal members, potential members, the public, former
investors, potential investors, and the court. Stein made these
false representations to usurp all of the Tribe’s legal rights and
obligations. The court found “Stein damaged the Tribe by
deceiving the Tribe’s members about the split between Stein and
the Tribe thereby causing the Libra investors, who had
committed to supporting the Tribe, [to withdraw] financial and
other support. The loss is more than $18,000,000 which had been
pledged by the Libra investors but was lost because of Stein’s
fraudulent conduct.” The Tribe also suffered a loss of reputation,
as it was forced to deny Stein’s charges that the Tribal Council
members had stolen money from the Tribe.
The court found the language of the SMDC agreement
disclaiming an attorney-client relationship was not dispositive,
and instead, the extensive facts and the law strongly supported
finding an attorney-client relationship was created based on the
intent and the conduct of the parties. Stein had numerous
conflicts of interest. He had a conflict when he advised the Tribe
that it did not need to achieve federal recognition to engage in
gaming. He violated rule 3-310 when he failed to advise the
Tribe that he had an adverse interest. He violated rule 3-300 by
failing to advise the Tribe when he acquired a financial interest
adverse to the Tribe’s interest, that he had to give the Tribe a
meaningful opportunity to consult with another lawyer.
Even if Stein were not acting as the Tribe’s lawyer, he
breached his fiduciary duties to the Tribe through his acts as an
officer of the Tribe. He breached his duty of candor. He also
breached his fiduciary duties by pursuing a strategy that would
not achieve federal recognition for the Tribe because it would
affect his rights to recover future gaming revenue. He acted in
36
his own interest and against the tribe’s interest because it would
be more financially advantageous to him in the long run, despite
the Tribe’s express desire for federal recognition. Other conduct
that breached Stein’s fiduciary duties included sending letters to
the Tribe membership without the Tribal Council’s consent or
knowledge, freezing the Tribe’s bank account, and demanding the
Libra investors pay him instead of the Tribe. Stein was also
liable for malpractice based on the same advice,
misrepresentations, and actions.
The court found Stein was liable for conversion of the
Tribe’s property. Stein admitted that he retained possession of
the Tribe’s membership and financial records after his
relationship was unambiguously terminated. He used the
information, computers, and documents for his own purposes,
including sending letters to financial institutions and the
membership to disparage the Tribal Council and gain support for
himself. He has not returned the records or computers. The
court found the Tribe’s damages were established because the
Tribe had not been able to use their property for 12 years,
diminishing the value of some items and depriving the Tribe of
the opportunity to conduct business with others or pursue federal
recognition. Stein was also liable for breach of confidence and
misappropriation of trade secrets in the form of the confidential
membership records.
Stein was liable for intentional interference with the
Tribe’s economic relationships and prospective economic
relationships. Stein and SMDC interfered with the Tribe’s
contract with the Libra investors. Stein intentionally disrupted
the relationship with Libra when he did not get to spend the
Libra money in the way that he wanted. He threatened to send
37
the money back to Libra, rather than continue working with the
Tribe. Once Stein’s dispute started with the Tribe, Stein and
SMDC wanted Libra to pay Stein any monies owed by the Tribe
to Stein. Stein and SMDC insisted that they be first in line for
payment. By refusing to withdraw until the monies were paid,
even though Stein was aware that he had no right to payment
from the Libra funds, Stein interrupted the Libra agreement.
Because Libra did not deviate from the original intention of its
agreement with the Tribe, which had nothing to do with payment
to Stein, and did not want to pay Stein, Stein’s threat came to
fruition. The court added, “Stein’s demand to Libra also revealed
that Stein and [his attorney] Sulzer had a high degree of
confidence that the $18 million that Libra had promised to the
Tribe would be forthcoming imminently.”
The court found Stein interfered with the Tribe’s
prospective economic advantage for the same reason. The future
economic prospect was the funding that Libra promised to invest
in subsequent tranches. Stein wanted the Tribe and Libra to
promise to use subsequent tranches to pay him or he would
disrupt the relationship. He did disrupt the relationship. The
damages were the remainder of the $21 million of Libra funds
that Libra had promised to the Tribe but that were cut off
because of Stein.
The SMDC agreement was subject to rescission because
Stein violated important ethical rules subjecting transactions
between attorneys and clients to strict scrutiny for fairness and
full disclosure. Stein violated rule 3-300 by acquiring an interest
that guaranteed 10 percent of future casino gaming revenue to
SMDC, as well as by drafting the SMDC agreement and Tribe
resolutions. The Tribe members who reviewed the SMDC
38
agreement did not understand it, and it was not explained in a
manner that they could understand. They were not given copies
to review, so had no meaningful opportunity for an independent
lawyer to explain it to them. Stein misled the signatories about
whether they had an outside lawyer representing them. Stein
did not overcome the presumption that the SMDC agreement was
without adequate consideration, and therefore, the result of
undue influence. If Stein had complied with the rule,
independent counsel would have explained to the Tribe that the
goals of federal recognition and casino operations were
incompatible under the SMDC agreement because of the sole
proprietary interest rule that invalidates SMDC’s interest. The
sole proprietary interest rule is intended to protect Native
American tribes from the type of unfairness embodied in the
SMDC agreement. The fact that Stein sought to evade the rule
by not pursuing federal recognition, which was an important goal
of the Tribe, compounded the unfairness. Therefore, the court
voided the SMDC agreement at the Tribe’s election.
The SMDC agreement was voidable and subject to
rescission, but alternatively, Stein breached the SMDC
agreement, as well as the implied covenant of good faith and fair
dealing. In addition, Stein and SMDC were liable for unfair
competition in violation of Business and Professions Code section
17200, based on the claims stated against Stein, including
unlawfully retaining the Tribe’s books and records,
misappropriation of trade secrets, and fraud. As a result, the
Tribe was entitled to restitution of the amount paid to Stein and
SMDC under the SMDC agreement.
The court found the entity that Stein created for the
Candelaria Group existed for the sole purpose of attempting to
39
deceive tribe members and the public about the true identity of
the Tribe, and usurp the Tribe’s legal rights and obligations.
Stein, SMDC, and the Law Offices were alter egos. The
Law Offices were merely a “doing business as” (d.b.a.) entity for
Stein. Stein, the Law Offices, and SMDC shared the same
address on Santa Monica Boulevard. They used the same staff
services, even though the legal assistant was employed solely by
the law office. Stein appointed his legal assistant as a “Tribal
Administrator” for the Tribe, and she reported to Stein for all of
the various entities. Stein was the sole shareholder and manager
of SMDC. SMDC is inadequately capitalized and has no assets
whatsoever. Stein disregarded corporate formalities on behalf of
SMDC. Stein paid expenses for the Tribe out of SMDC funds or
his own pocket. Stein, SMDC, and the Law Offices were one and
the same, and must be treated that way for purposes of liability.
Stein’s documentation to support his quantum meruit claim
was heavily redacted and simply totaled hours that he claimed he
worked on behalf of the Tribe. The court was not persuaded that
the document represented work that Stein performed on behalf of
the Tribe alone and for which he would be entitled to
compensation under the SMDC agreement.
The court found by clear and convincing evidence that
Stein’s conduct, individually and through his alter egos, was
fraudulent, despicable, oppressive, and malicious. Extensive
evidence of fraud against the Tribe beginning from the inception
of the relationship was at the center of the case, as described in
more detail in the discussion of punitive damages below. The
court awarded $7 million in punitive damages.
The court concluded Stein and SMDC’s August 20, 2007
cross-complaint was filed, but never served. There was no proof
40
of service, despite the court having given Stein leave to file proof
of service years after the cross-complaint was filed. Even if the
cross-claims were not inoperative for failure to serve it, however,
the court found the SMDC agreement was voidable and subject to
rescission by the Tribe, so Stein and SMDC’s breach of contract
claim was extinguished. The remaining claims for account stated
and quantum meruit were also extinguished, because Stein failed
to provide any persuasive evidence that he did the work that he
claimed. He submitted two incomplete, heavily redacted
documents that had no indicia of reliability and failed to
persuade the court. Stein failed to carry his burden that he did
the work claimed, and he refused to provide unredacted copies of
the documents. The court inferred that unredacted copies likely
contained evidence that Stein billed work for other legal clients
and wrongfully charged the Tribe, or that Stein performed
extensive legal work for the Tribe as the Tribe’s lawyer.
Crane failed to submit competent, persuasive evidence that
it performed any work for the Tribe at all. Daniel Crane testified
that he did some federal work for the Tribe, but was unable to
show any tangible work product that he produced for the Tribe or
any evidence that he had actually done any work for the Tribe.
The court concluded Crane failed to carry its burden to show it
had done the work claimed. In addition, Crane’s contract with
the Tribe stated no money was due until the Tribe received more
than $2 million in investment funds. The Tribe received only one
tranche of investment funds totaling $1.8 million. Because the
Tribe never acquired more than $2 million in investor funds, due
to Stein’s interference with the Libra agreement, the obligation to
pay Crane was never triggered.
41
On the Tribe’s complaint, the court found in favor of the
Tribe and against Stein, Law Offices, and SMDC, jointly and
severally, as to all causes of action. The SMDC agreement was
rescinded and void. The court enjoined the defendants from
retaining possession or control of any files, documents, or other
property belonging to the Tribe, including the Tribe’s
membership records, financial records, internet domain name,
and website. The defendants were also enjoined from using the
Tribe’s confidential information, including membership records
and financial information. Stein, Law Offices, and SMDC were
also prohibited from: contacting or soliciting any member of the
Tribe for any purpose relating to any tribal membership or casino
gaming project; disclosing or disseminating any of the Tribe’s
confidential information; destroying or otherwise making
unavailable to the Tribe any documentary, computer, or other
evidence relevant to the litigation in the defendants’ control;
holding themselves out to be the office of, or affiliated with, the
Tribe; or executing on any order or writ for the Tribe’s property.
The court ordered the defendants to deliver all of the Tribe’s
information, computers, and electronic equipment within 30 days
of service of the judgment.
On the causes of action for conversion, breach of fiduciary
duty, misappropriation of trade secrets, breach of confidence,
intentional and negligent interference with economic
relationships, legal malpractice, violation of the Penal Code,
unfair competition, and fraud, the court ordered judgment in
favor of the Tribe and against Stein, Law Offices, and SMDC,
jointly and severally, in the amount of $20,411,067.23. The
statement of decision erroneously stated the calculation of
damages was based on $21,000,000, minus $800,000 attributed to
42
Libra, $161,067.23 paid to the Tribe, and $50,000 paid Crane.
On the declaratory relief cause of action, the court declared that
the Tribe was the real party in interest with standing to pursue
the litigation. On the cause of action for alter ego liability, the
court found Stein, Law Offices, and SMDC were alter egos, jointly
and severally liable for the obligations of each other. The Tribe
was entitled to recover attorney fees and costs. In addition,
Stein, Law Offices, and SMDC acted with malice, oppression, and
fraud.
On Stein and SMDC’s September 26, 2017 cross-complaint,
the court found in favor of Aronson, Polanco, and each of the
Tribal Council members, and against Stein, Law Offices, and
SMDC.
On SMDC’s complaint, the court found in favor of Aronson,
Polanco, and each of the Tribal Council members on all causes of
action. On Dunlap’s cross-complaint, the court found against
Dunlap on all causes of action.
On Crane’s complaint, the court found against Crane on the
causes of action for interference with contractual relations and
fraudulent conveyance, in favor of Aronson, Polanco, and each of
the Tribal Council members.
The court ordered Stein, the Law Offices, and SMDC,
jointly and severally, to pay punitive damages of $7 million to the
Tribe.
That same day, on August 27, 2019, the trial court entered
judgment consistent with the statement of decision. Stein and
SMDC filed a motion for new trial, which was denied by Judge
David S. Cunningham, III. Stein, SMDC, and Crane filed a
timely notice of appeal from the judgment.
43
DISCUSSION
Standard of Review
The substantial evidence standard of review applies to
appeals challenging factual findings in a jury or bench trial.
(Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th
138, 143.) “Under this deferential standard of review, findings of
fact are liberally construed to support the judgment and we
consider the evidence in the light most favorable to the prevailing
party, drawing all reasonable inferences in support of
the findings.” (Thompson v. Asimos (2016) 6 Cal.App.5th 970,
981.) “A single witness’s testimony may constitute substantial
evidence to support a finding. [Citation.] It is not our role as a
reviewing court to reweigh the evidence or to assess witness
credibility.” (Ibid.)
“ ‘A judgment or order of a lower court is presumed to be
correct on appeal, and all intendments and presumptions are
indulged in favor of its correctness.’ [Citation.] Specifically,
‘[u]nder the doctrine of implied findings, the reviewing court
must infer, following a bench trial, that the trial court impliedly
made every factual finding necessary to support its decision.’ ”
(Thompson v. Asomos, supra, 6 Cal.App.5th at p. 981.)
“Matters presenting pure questions of law, not involving
the resolution of disputed facts, are subject to de novo review.”
(Shewry v. Begil (2005) 128 Cal.App.4th 639, 642.)
44
Statement of Decision
Stein and SMDC contend that the statement of decision
should not be afforded any deference on appeal, because the trial
court adopted the statement of decision proposed by the Tribe
without making any of the changes suggested by Stein and
SMDC. Although Stein and SMDC have failed to explain the
relevance of their contention as to any specific issue, we conclude
their analysis is incorrect.
Under Code of Civil Procedure section 632, upon a party’s
request after trial, the court must issue a statement of decision
“explaining the factual and legal basis for its decision as to each
of the principal controverted issues at trial.” Under Code of Civil
Procedure section 634, if the statement of decision does not
resolve a controverted issue or is ambiguous, and the omission or
ambiguity was brought to the attention of the trial court, “it shall
not be inferred on appeal . . . that the trial court decided in favor
of the prevailing party as to those facts or on that issue.”
Even when the procedures specified in Code of Civil
Procedure sections 632 and 634 have been followed, the “trial
court is not required to respond point by point to the issues posed
in a request for statement of decision. The court’s statement of
decision is sufficient if it fairly discloses the court’s determination
as to the ultimate facts and material issues in the case.” (Golden
Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372,
1379–1380.) “In addition, ‘[e]ven though a court fails to make a
finding on a particular matter, if the judgment is otherwise
supported, the omission is harmless error unless the evidence is
sufficient to sustain a finding in favor of the complaining party
45
which would have the effect of countervailing or destroying other
findings.’ ” (Thompson v. Asimos, supra, 6 Cal.App.5th at p. 983.)
“The trial court is specifically authorized to designate a
party to prepare the statement of decision [citations] and thus is
required only to review the statement and any objections thereto
and to make or order to be made any corrections, additions, or
deletions it deems necessary or appropriate.” (Miramar Hotel
Corp. v. Frank B. Hall & Co. (1985) 163 Cal.App.3d 1126, 1129.)
In this case, the trial court provided the proper statutory
procedures. There is no evidence that the trial court did not read
the statement of decision prepared by the Tribe or review the
objections made by Stein and SMDC. Stein and SMDC have not
shown that any finding in the statement of decision failed to
properly reflect the decision of the trial court. In fact, Stein and
SMDC contend this court may review their contentions on appeal
de novo because the facts are undisputed.
Rescission of the SMDC Agreement
Stein contends the trial court erred in rescinding the
SMDC agreement based on a violation of former rule 3-300 for
several reasons: (1) there was no implied attorney-client
relationship, because the SMDC agreement expressly provided
that Stein was not the Tribe’s attorney; (2) the requirements of
former rule 3-300 were met, and the Tribe affirmed that the
SMDC agreement was valid, binding, and enforceable, or waived
its right to rescind; and (3) even if the SMDC agreement were
properly rescinded, SMDC was entitled to compensation. We
conclude substantial evidence supports the trial court’s findings
on rescission.
46
A. Implied Attorney-client Relationship
Stein’s first contention is that no attorney-client
relationship existed between himself and the Tribe. However,
substantial evidence supports the trial court’s finding of an
implied attorney-client relationship.
The practice of law includes providing legal advice and
preparing legal instruments and contracts that secure legal
rights, in addition to performing services in court. (Benninghoff
v. Superior Court (2006) 136 Cal.App.4th 61, 68.) An attorney-
client relationship can only be created by express or implied
contract. (Koo v. Rubio’s Restaurants, Inc. (2003) 109
Cal.App.4th 719, 729.)
A lawyer may provide nonlegal services without creating an
attorney-client relationship or may limit the scope of
representation to certain matters, but a contract provision that
purports not to create an attorney-client relationship does not by
itself prevent the existence of an attorney-client relationship.
(Benninghoff v. Superior Court, supra, 136 Cal.App.4th at p. 73 &
fn. 10.) It is the legal effect of an instrument, rather than the
label that the parties place on their relationship, that determines
the nature of the agreement. (Ibid.; see State Bar Standing Com.
on Prof. Responsibility and Conduct, Formal Opn. No. 1999–154
[lawyer performing nonlegal services may disclaim intent to
provide legal services, but disclaimer is not effective if lawyer in
fact performs legal services or offers legal advice].)
“In determining the existence of an attorney-client
relationship we should ask whether the ‘totality of the
circumstances’ so indicate. [Citation.] ‘The question of whether
47
an attorney-client relationship exists is one of law. [Citations.]
However, when the evidence is conflicting, the factual basis for
the determination must be determined before the legal question
is addressed.’ ” (Koo v. Rubio’s Restaurants, Inc., supra, 109
Cal.App.4th at p. 732.)
In this case, the trial court found the language of the
SMDC agreement disclaiming an attorney-client relationship was
not dispositive. Extensive facts strongly supported finding an
attorney-client relationship was created based on the intent and
the conduct of the parties. From the beginning, Stein stated that
he kept internal records of his time for a fair and accurate
measure of the legal costs to be charged against each financing
transaction. Stein hired all of the Tribe’s outside attorneys,
supervised their work closely, and fired them. At times, Stein
drafted documents for the Tribe and was the sole attorney to
provide advice about important legal transactions. Tribe
members believed Stein was acting as the Tribe’s attorney, and
when tribe members referred to Stein as the Tribe’s attorney, he
did not correct them. There was ample evidence of an implied
attorney-client relationship from the parties’ intent and conduct.
B. Former Rule 3-300
Stein contends that even if an attorney-client relationship
existed, the requirements of former rule 3-300 were met. We
conclude substantial evidence supports the trial court’s finding
that Stein’s violation of former rule 3-300 permits rescission of
the SMDC agreement.
Former rule 3-300, which has been revised and renumbered
as current rule 1.8.1, governs an attorney’s obligations when
48
entering into a business transaction with a client. At the time
that the parties executed the SMDC agreement, former rule 3-
300 provided: “A member shall not enter into a business
transaction with a client; or knowingly acquire an ownership,
possessory, security, or other pecuniary interest adverse to a
client, unless each of the following requirements has been
satisfied: [¶] (A) The transaction or acquisition and its terms are
fair and reasonable to the client and are fully disclosed and
transmitted in writing to the client in a manner which should
reasonably have been understood by the client; and [¶] (B) The
client is advised in writing that the client may seek the advice of
an independent lawyer of the client's choice and is given a
reasonable opportunity to seek that advice; and [¶] (C) The
client thereafter consents in writing to the terms of the
transaction or the terms of the acquisition.”
A “ ‘transaction between an attorney and client which
occurs during the relationship and which is advantageous to the
attorney is presumed to violate that fiduciary duty and to have
been entered into without sufficient consideration and under
undue influence.’ [Citation.] As explained long ago in Felton v.
Le Breton (1891) 92 Cal. 457, 469: ‘While an attorney is not
prohibited from having business transactions with his client, yet,
inasmuch as the relation of attorney and client is one wherein the
attorney is apt to have very great influence over the client,
especially in transactions which are a part of or intimately
connected with the very business in reference to which the
relation exists, such transactions are always scrutinized by
courts with jealous care, and are set aside at the mere instance of
the client, unless the attorney can show by extrinsic evidence
that his client acted with full knowledge of all the facts connected
49
with such transaction, and fully understood their effect; and in
any attempt by the attorney to enforce an agreement on the part
of the client growing out of such transaction, the burden of proof
is always upon the attorney to show that the dealing was fair and
just, and that the client was fully advised.’ ” (BGJ Associates v.
Wilson (2003) 113 Cal.App.4th 1217, 1227–1228.)
The SMDC agreement provided Stein with a substantial
financial interest adverse to the Tribe’s interest in obtaining
federal recognition, yet Stein did not explain his adverse interest
or give the Tribe a reasonable opportunity to seek the advice of
an independent attorney. Instead, Stein misrepresented that
attorney Otto was acting as the Tribe’s counsel, knowing that
Otto expressly refused to represent the Tribe. The trial court
concluded that Stein deliberately lied to the Tribe about Otto
acting as their lawyer to induce the Tribe to sign the SMDC
agreement without the benefit of counsel and to take advantage
of the Tribe. When Stein presented the SMDC agreement to the
Tribe, the Tribal Council members were not given time to read
the document, take it home, or have a meaningful opportunity for
an independent lawyer to review it. They signed the document
under duress, without the benefit of counsel, and without
understanding that Stein’s interest was adverse to the Tribe’s
goal of federal recognition. Substantial evidence supported the
trial court’s conclusion that Stein violated former rule 3-300, and
as a result, the SMDC agreement was voidable by the Tribe.
50
C. Waiver
Stein further contends that the Tribe waived its right to
rescind, because the Tribe knew all the facts on which rescission
was sought, but delayed rescinding. This is incorrect.
“The general rule is that a defrauded party must exercise
his election to rescind with reasonable promptness after
discovering the fraud. A delay in rescission is evidence of a
waiver of the fraud and an election to treat the contract as
subsisting. Any acts indicating an intent to abide by the contract
are evidence of an affirmance thereof and of a waiver of the right
to rescind.” (Le Clercq v. Michael (1948) 88 Cal.App.2d 700, 702.)
The trial court’s implied finding that the Tribe did not
delay in rescinding the agreement is supported by substantial
evidence. There was no evidence that an independent lawyer
explained the consequences of the SMDC agreement to the Tribe
prior to litigation, including Stein’s conflict of interest and that
federal recognition was incompatible with the SMDC agreement,
because SMDC’s interest would be invalidated. There is no
evidence that the Tribe delayed rescission of the SMDC
agreement once the Tribe understood the basis for rescission.
Resolutions prepared by Stein, or by attorneys under Stein’s close
direction, adopting and ratifying amendments to the SMDC
agreement were no substitute for a meaningful opportunity to
obtain the advice of an independent attorney about the
consequences of the agreement. Substantial evidence supports
the trial court’s conclusion that the Tribe did not delay in seeking
rescission.
51
D. Unjust Enrichment
Stein further contends that by rescinding the SMDC
agreement and denying any measure of compensation to Stein,
the Tribe was unjustly enriched. The trial court found, however,
that Stein failed to introduce credible evidence necessary to
recover compensation. Stein’s documentation for his quantum
meruit claim was heavily redacted and simply totaled hours that
he claimed to have worked on behalf of the Tribe. The trial court
concluded the documentation did not represent work that Stein
performed solely on behalf of the Tribe and for which he would be
entitled to compensation under the SMDC agreement. On
appeal, Stein failed to address the trial court’s express findings
and instead based his argument for compensation on the same
quantum meruit documentation that the trial court rejected
below. No error has been shown.
Fraud
Stein and SMDC contend the trial court’s finding that they
are liable for damages caused by a series of fraudulent acts
designed to deceive the Tribe is not supported by substantial
evidence. We disagree.
A. Misrepresentations
The elements of fraud are: a misrepresentation (false
representation, concealment, or nondisclosure); knowledge that
the misrepresentation is false; intent to induce reliance on the
misrepresentation; justifiable reliance; and damages as a result
52
of the misrepresentation. (Cohen v. Kabbalah Centre Internat.,
Inc (2019) 35 Cal.App.5th 13, 20; Small v. Fritz Companies, Inc.
(2003) 30 Cal.4th 167, 173.)
The trial court identified a series of misrepresentations
Stein made in as part of a scheme to defraud the Tribe and usurp
its rights. For example, Stein represented that exhibit B to the
Libra agreement was gaming legislation drafted by the office of a
California State Senator. Stein knew this representation was
false, because he created the draft, which had never been
introduced as legislation on behalf of the Tribe. He intended the
parties to the Libra agreement to rely on his representation that
Senator Vincent had authored the legislation. The Tribe was
justified in relying on Stein’s representation, because although
the draft attached to the Libra agreement was incomplete, it
showed that legislation had been introduced and amended
previously. There was no indication that prior versions of the
legislation did not relate to the Tribe. As a result of Stein’s
misrepresentation that exhibit B was legislation authored and
supported by a State Senator, the Tribe entered into an
agreement that provided Libra with substantial revenue rights in
exchange for investment funding, and the Tribe agreed to
conditions in the Libra agreement that required enactment of
exhibit B or similar legislation.
In addition, Stein misrepresented in the Libra agreement
that the Tribe was a “state recognized” Indian tribe. Stein knew
his representation was false, but the Tribe justifiably relied on
Stein’s counsel and expertise. Based on Stein’s
misrepresentation, the Tribe provided revenue rights to Libra in
exchange for funding that was conditioned on the fact that the
Tribe had been and continued to be recognized by the State of
53
California as an Indian tribe. Stein’s misrepresentations about
state recognition damaged the Tribe by diverting resources from
the effort to attain federal recognition.
Stein made additional false representations when he sent
letters accusing Tribal Council members of malfeasance and
registered an unincorporated association in the name of the
Tribe, creating confusion that hindered the Tribe’s ability to
conduct its affairs with tribe members, Libra, the court, and the
public. Stein was aware that the Candelaria Group did not
control the Tribe’s rights and obligations, but he intended to
deceive tribe members and others in order to assert control of the
Tribe’s rights. Tribe members reasonably relied on his false
representations. Ultimately, a jury trial was required to resolve
the identity issues that Stein created. The trial court’s
conclusion that the Tribe was damaged because the Libra
investors declined to provide further funding as a result of Stein’s
false representations about the identity and actions of the Tribe,
was supported by substantial evidence.
B. Lost Funding
Stein and SMDC contend that the Tribe was not damaged
by Stein’s fraudulent acts, because additional Libra funding was
contingent on conditions that the Tribe did not and could not
fulfill. We conclude substantial evidence supports the trial
court’s finding that the Tribe would have received additional
investment funding in the absence of Stein’s fraudulent actions.
In addition, Stein contends the Tribe failed to show it could have
54
built a profitable casino, but no damages were awarded for lost
profits.
“ ‘There are two measures of damages for fraud: out of
pocket and benefit of the bargain. [Citation.] The “out-of-pocket”
measure of damages “is directed to restoring the plaintiff to the
financial position enjoyed by him prior to the fraudulent
transaction, and thus awards the difference in actual value at the
time of the transaction between what the plaintiff gave and what
he received. The ‘benefit-of-the-bargain’ measure, on the other
hand, is concerned with satisfying the expectancy interest of the
defrauded plaintiff by putting him in the position he would have
enjoyed if the false representation relied upon had been true; it
awards the difference in value between what the plaintiff
actually received and what he was fraudulently led to believe he
would receive.” ’ (Alliance Mortgage Co. v. Rothwell (1995) 10
Cal.4th 1226, 1240 (Alliance Mortgage); see Lazar v. Superior
Court (1996) 12 Cal.4th 631, 646 [‘Because of the extra measure
of blameworthiness inherent in fraud, and because in fraud cases
we are not concerned about the need for “predictability about the
cost of contractual relationships” [citation], fraud plaintiffs may
recover “out-of-pocket” damages in addition to benefit-of-the-
bargain damages.’].)” (Moore v. Teed (2020) 48 Cal.App.5th 280,
287–288 (Moore).)
“Alliance Mortgage and other authorities have recognized
that where the defrauding party stands in a fiduciary
relationship with the victim of fraud, a ‘broader’ measure of
damages may be awarded than simply ‘out-of-pocket’ losses.”
(Moore, supra, 48 Cal.App.5th at p. 289.) “Under Civil Code
section 1709, a defendant who willfully deceives a plaintiff with
the intent to induce him to alter his position to his detriment ‘is
55
liable for any damage which he thereby suffers.’ Civil Code
section 3333, the general tort damage measure, provides that the
‘measure of damages . . . is the amount which will compensate for
all the detriment proximately caused thereby, whether it could
have been anticipated or not.’ ” (Ibid.)
“ ‘Whatever its measure in a given case, it is fundamental
that “damages which are speculative, remote, imaginary,
contingent, or merely possible cannot serve as a legal basis for
recovery. [Citations.]” [Citations.] However, recovery is allowed
if claimed benefits are reasonably certain to have been realized
but for the wrongful act of the opposing party.’ ” (Moore, supra,
48 Cal.App.5th at p. 292.)
In this case, Libra agreed to provide funding in exchange
for an interest in the Tribe’s future gaming revenue, and $19
million remained to be received by the Tribe. The amount stated
in the contract was not speculative or imaginary. Stein and
SMDC contend that Stein’s fraud did not prevent the Tribe from
receiving additional funds, because funding was contingent on
conditions that the Tribe did not and could not fulfill. Stein
cannot, however, defeat the Tribe’s claim for damages by relying
on conditions included in the agreement as a result of his fraud,
including the failure to pass legislation substantially similar to
exhibit B, or conditions that his fraud prevented the Tribe from
fulfilling, such as the dispute he created over control of the Tribe.
Stein and SMDC have not identified any condition outside of
those related to Stein’s misrepresentations that independently
prevented the Tribe from receiving further funding under the
Libra agreement.
In addition, substantial evidence supports the trial court’s
finding that the Tribe would have received the additional funding
56
set forth in the Libra agreement, because either the conditions
listed in the agreement were not prerequisite to further funding,
or Libra impliedly waived the conditions. The parties’
communications with Libra in the summer of 2006 show that the
passage of successful legislation and the other conditions listed in
the Libra agreement were not required to be met before Libra
would provide further funding to the Tribe. Stein was aware that
Senator Vincent refused to introduce legislation on behalf of the
Tribe and no legislation had been passed, but he worked with
Libra and the Tribe to submit a request for the next tranche of
funding in September 2006. Legislation was introduced by a
different legislator and the legislative process continued. On
September 26, 2006, Stein stated that disputes over the Tribe’s
expenditures endangered the next $2.5 million in funding from
Libra, which hung in the balance. In other words, Stein did not
believe that any prerequisite condition in the Libra agreement
prevented the Tribe from receiving additional funding other than
the dispute that he created over the use of the funds. Several
conditions in the Libra agreement had not been met when the
Libra representatives completed revisions to the Tribe’s request
for further funding. When the Tribe met with Libra in
September 2006, Libra assured the Tribe that despite Stein’s
statements, there were no problems with the Tribe’s actions as
long as the Tribe followed the contract. From these
communications, we conclude that none of the parties considered
the Tribe’s expenditures, the failure to pass legislation, or any
other condition stated in the Libra agreement to be an obstacle to
the receipt of further investment funds. Either Libra never
considered the contract conditions to be prerequisites to further
funding, or Libra impliedly waived compliance with the
57
conditions. When Stein created confusion about control of the
Tribe, Libra reasonably relied on Stein’s false representations to
decline to provide further funding until the disputes were
resolved. The limited term of the Libra agreement expired before
the disputes were resolved. Stein and SMDC’s fraudulent acts
directly caused Libra to decline to provide further funding to the
Tribe. The Tribe was entitled to recover the amount of the Libra
agreement under the measure of damages for fraud.
Stein further contends that in order to establish damages
from the loss of the Libra investment, the Tribe had to show that
it would have been able to build a casino and that the casino
would have been profitable. This is incorrect. The Tribe provided
valuable revenue rights to Libra in exchange for investment
funding, which was not dependent on the Tribe constructing a
profitable casino and which did not require the Tribe to
reimburse funds if a casino were not built. The Tribe was
entitled to recover the amount of the Libra investment that they
did not receive as a result of Stein’s fraudulent acts. No amount
was awarded as lost profits of the planned casino operation.
The compensatory damages based on the lost investment funding
were not too speculative.
Calculation of Compensatory Damages
Stein contends the compensatory damages award of
$20,411,067.23 is not supported by substantial evidence. The
Tribe concedes in its respondent’s brief that the statement of
decision erroneously described the calculation of damages based
on the full amount of the Libra investment of $21,000,000, minus
$800,000 received from Libra, $161,067.23 paid by the Tribe to
58
SMDC, and $50,000 paid Crane. We conclude the amount of
compensatory damages must be reduced to reflect the evidence of
damages at trial.
The undisputed evidence established that the Tribe
received the initial round of investment funding provided under
the Libra agreement, and the trial court found that Stein’s
fraudulent actions prevented the Tribe from receiving the
remaining anticipated funding totaling $19 million. Further
evidence showed the Tribe paid $161,067.23 to SMDC under the
SMDC agreement that the Tribe was entitled to recover based on
rescission of the SMDC agreement. No basis has been provided
on appeal, however, for including the Tribe’s payment of $50,000
to Crane in the damages calculation. The Tribe did not bring an
action against Crane, and Crane was not an alter ego of Stein.
Although the trial court found Stein was liable for breach of
fiduciary duty, no argument has been made on appeal that Stein
was required to reimburse the Tribe for the payment made to
Crane. The amount of compensatory damages awarded in the
judgment must be reduced to $19,161.067.23, the total amount of
compensatory damages supported by the evidence.
Punitive Damages
Stein and SMDC contend that the award of punitive
damages is not supported by evidence of Stein’s net worth. We
conclude no error has been shown.
59
A. Additional Facts
The trial court scheduled the punitive damages phase to
begin on December 10, 2018. The court assumed that the Tribe
requested financial documents prior to trial, so ordered Stein, the
Law Offices, and SMDC to disclose financial records to the Tribe
no later than November 15, 2018. The court ordered the parties
to appear for the trial, as well as the accountants for Stein, the
Law Offices, and SMDC.
Stein obtained new counsel. In response to the court’s
order, Stein produced bank records for one account and two credit
cards for the year 2018. He submitted a statement to the court
that he would not appear for the punitive damages phase due to
his medical condition, and he waived his right to appear
personally for the remainder of the trial, but he offered to
respond to written questions under oath.
On December 10, 2018, the Tribe objected that Stein failed
to comply with the court’s order to disclose financial records. For
example, no records of his real property assets had been provided.
Stein’s attorney argued that the Tribe failed to take the steps
necessary to prepare for the punitive damages phase of trial. The
Tribe had not filed and served a notice to appear asking for
specific records relevant to the punitive damages phase of trial.
The attorney argued that the court’s order to produce financial
records was also vague. Financial records were bank statements
or brokerage statements. Judgments obtained by the Law Offices
and property deeds were not financial records. The Tribe argued
that the court’s order to produce information made it was
incumbent on the parties to meet and confer to fulfill the order.
Stein’s attorney offered to provide further discovery. The trial
60
court allowed the Tribe to request production of 15 categories of
documents and to propound 50 questions for Stein to answer in
writing.
Trial on the issue of punitive damages began on April 5,
2019. The Tribe requested a punitive damages award of $10
million. In discovery responses, Stein claimed to own one percent
of a single property in Santa Barbara. Stein provided verified
responses to discovery under penalty of perjury that he had never
had an ownership interest in a property on Ashland Avenue in
Santa Monica, which was held in his wife’s name. The Tribe
argued, however, that Stein had significant property holdings in
his own name in California. The Tribe asked the court to take
judicial notice of the fact that Stein owned three real properties
in California, despite his representations in discovery. An
interspousal transfer deed Stein provided in discovery showed he
transferred his interest in the Ashland Avenue property to his
wife on May 7, 2012, during the pendency of the litigation. Stein
and his wife were listed as joint owners of real property on
Murrell Road in Santa Barbara, an address that Stein listed for
himself at one point during litigation, with an assessed value of
$1 million. In addition, Stein and his wife acquired another
property in Santa Barbara on January 7, 2019. The purchase
price was $830,000, and the mortgage for the property was
$580,000.
The Tribe’s attorney noted that when Stein apologized to
the court on January 22, 2016, for being underprepared, his
excuse was that he was managing a seven-figure transaction as
part of overseeing the American branch of his father-in-law’s
business, as well as negotiating a seven-figure settlement in a
case in New Orleans. In addition, Stein had filed an action
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against a former client for $400,000 in unpaid fees. The client’s
cross-complaint had alleged payment of $750,000 to Stein. A
2017 notice of settlement in the fees case included a
confidentiality provision, which prevented the Tribe from
learning additional information. The Tribe inferred from the
numbers alleged in the pleadings that Stein earned
approximately $1 million in a single year from one client. The
Tribe noted that Stein had not described any income from his
father-in-law’s Chinese companies and Chinese assets in
America. He also had not provided any responses about the
settlement of litigation in New Orleans. The Tribe argued that
the court could reasonably infer Stein’s annual income was $2
million or $3 million per year.
Stein’s attorney responded that the Tribe’s evidence
amounted to speculation, rather than evidence of net worth.
Assets owned by Stein’s family members were not evidence of
Stein’s net worth. Having a case that generated a large
settlement or managing another person’s assets did not cause the
assets to belong to the attorney. The Tribe had not even shown
that Stein had the ability to pay the judgment of approximately
$20 million that had been ordered. The records provided in
discovery showed Stein’s income was $750,000 in some years and
far less after expenses and taxes in other years.
B. Statement of Decision
In the statement of decision, the trial court found by clear
and convincing evidence that Stein’s conduct, individually and
through his alter ego SMDC and his law office, was fraudulent,
despicable, oppressive, and malicious. His fraud against the
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Tribe began from the inception of the relationship. He told the
Tribal Council that attorney Otto would serve as their general
counsel to advise them on the SMDC agreement after Otto
expressly told Stein that he would not serve in that role. The
fraud continued when Stein gave the Tribe advice that they were
a state recognized tribe, and that their status could give them the
right to engage in gaming in California without federal
recognition. The fraud continued after the relationship ended
and litigation started, when Stein took the Tribe’s identity using
their membership records, registered a different group under
their name, and tried to settle the instant lawsuit. Evidence of
fraud was extensive and at the center of the case.
The court also found Stein engaged in oppressive and
malicious conduct. Stein located the Tribe’s offices in his law
office and gave his legal assistant the job of Tribal Administrator
in order to control the Tribe’s legal and financial affairs. Among
Stein’s worst actions was his failure to return the Tribe’s original
birth and family records after he resigned and was fired. By
keeping the records, he prevented the Tribe from pursuing
federal recognition, which was a 25-to-30-year process. Nearly 15
to 20 years later, Stein had still not returned the records.
Stein was a recidivist, as he targeted other Native
American groups to prey upon. Repeated actions may be
punished more severely than isolated incidents. He also used his
status as a lawyer in a position of trust as a weapon against a
less sophisticated client, and used litigation as a weapon against
the Morales Group and the Tribe.
During the punitive damages phase, Stein failed to provide
evidence of his assets and failed to be candid about his assets
under oath. He provided little evidence of his net worth. Stein
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refused to take the stand or appear on April 5, 2019, to answer
questions regarding his financial condition, so the Tribe had no
meaningful opportunity to cross-examine him on this topic. He
presented only a chart to illustrate his net worth, which had no
supporting information and was unreliable. Relying on other
information in the record, the court found Stein had ample ability
to pay a multi-million dollar judgment. On the record on July 22,
2016, Stein represented that he was involved in several “seven
figure” transactions and settlements, including substantial
transactions that Stein handled for his father-in-law’s office in
China and settlements in legal matters. In discovery responses
during the punitive damages phase, Stein failed to describe the
income received from his father-in-law, Chinese assets in
America, or any of the very high net value matters that he was
engaged in that he had described to the court on the record on
July 22, 2016. The court considered his prior statements and
concluded Stein was untruthful about his ability to pay a
judgment or punitive damages.
The court placed a value on the holdings that Stein
previously mentioned equal to $3 million. Stein’s family had
substantial real estate holdings as well. Stein had significant
property holdings in California in his own name, which showed
his discovery responses had been less than candid. Stein
transferred ownership of a property in Santa Monica to his wife
on May 7, 2012, during the pendency of the litigation. He and his
wife were listed as joint owners of property in Santa Barbara
assessed at $1 million. Stein stated the properties were largely
in his wife’s name or belonged to his wife’s family, but he lived at
the properties and did not report any rent. Stein had been
undeterred from his lawless behavior, evasiveness, and
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untruthfulness to opposing parties and the court. He was not
sorry or contrite, had no misgivings about anything that
occurred, refused to change his conduct, and was undeterred.
The court found a $7 million punitive damages award was
appropriate, which was a third of the compensatory damages
awarded.
C. Applicable Law
Punitive damages are recoverable in fraud actions
involving intentional misrepresentations. (Alliance Mortgage,
supra, 10 Cal.4th at p. 1241.) The United States Supreme Court
has developed “a set of substantive guideposts that reviewing
courts must consider in evaluating the size of punitive damages
awards: ‘(1) the degree of reprehensibility of the defendant’s
misconduct; (2) the disparity between the actual or potential
harm suffered by the plaintiff and the punitive damages award;
and (3) the difference between the punitive damages awarded by
the jury and the civil penalties authorized or imposed in
comparable cases.’ [Citation.] A trial court conducts this inquiry
in the first instance; its application of the factors is subject to de
novo review on appeal.” (Nickerson v. Stonebridge Life Ins.
Co. (2016) 63 Cal.4th 363, 371–372.)
“ ‘Evidence of a defendant’s financial condition is a legal
precondition to the award of punitive damages. [Citation.] We
examine the record to determine whether the challenged award
rests upon substantial evidence. [Citations.] If it does not, and if
the plaintiffs had a full and fair opportunity to make the
requisite showing, the proper remedy is to reverse the award.’ ”
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(Farmers & Merchants Trust Co. v. Vanetik (2019) 33 Cal.App.5th
638, 647–648.)
“The ultimately proper level of punitive damages is an
amount not so low that the defendant can absorb it with little or
no discomfort [citation], nor so high that it destroys, annihilates,
or cripples the defendant.” (Rufo v. Simpson (2001) 86
Cal.App.4th 573, 621–622.)
“ ‘[I]f a plaintiff is unable to provide the court with evidence
due to the defendant’s failure to comply with discovery
obligations, then punitive damages may be awarded without the
requisite evidence.’ ” (Farmers & Merchants Trust Co. v. Vanetik,
supra, 33 Cal.App.5th at p. 650.) “In Mike Davidov Co. v.
Issod (2000) 78 Cal.App.4th 597, the appellate court held that a
trial court may permit the discovery of a defendant’s financial
condition after liability has been determined, even if the plaintiff
did not file a motion for pretrial discovery of financial condition.
[Citation.] After the trial court ruled in favor of the plaintiff in a
bench trial, it ordered the defendant to bring records regarding
his net worth to the court the next day. [Citation.] The
defendant failed to do so, and the trial court awarded punitive
damages to the plaintiff using a multiplier of the compensatory
damages. [Citation.] ‘So long as the trial court allows the
defendant sufficient time, following a determination of liability,
to collect his or her financial records for presentation on the issue
of the amount of such damages to be awarded, there is nothing
prejudicial or unfair about using such a process to try the issue of
the amount of punitive damages.’ ” (Farmers & Merchants Trust
Co., at p. 651.)
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D. Analysis
Stein and SMDC contend in a single sentence in their
opening brief that the conduct at issue was not reprehensible and
the Tribe did not suffer damages. The trial court found the
conduct was reprehensible, however, because among other
conduct, Stein withheld the Tribe’s original records and was a
recidivist who repeatedly targeted Native American groups. As
discussed above, substantial evidence supports the trial court’s
finding that the Tribe was damaged.
Stein and SMDC’s primary challenge to punitive damages
is their contention that the amount of the award was excessive
and not supported by evidence of Stein’s net worth. The trial
court concluded the evidence that Stein and SMDC provided to
the Tribe in discovery about Stein’s financial condition was not
credible. Although insufficient credible, admissible evidence was
presented about the current financial condition of Stein, Law
Offices, and SMDC, the trial court found Stein and SMDC were
estopped from complaining about the absence of evidence because
they failed to produce credible evidence of their finances. Stein
had not provided evidence of any compensation for the significant
work that he represented he performed to manage the American
branch of his father-in-law’s Chinese company. He transferred
substantial assets to his wife’s name during the pendency of the
litigation, and the amount of punitive damages assessed was
reasonably related to the amount of compensatory damages.
Stein chose not to appear and testify during the punitive
damages phase of the trial, which could have provided clarity
about the missing information. The trial court did not abuse its
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discretion in finding that Stein and SMDC were estopped from
objecting to the lack of evidence of net worth.
Conversion and Remaining Theories
Stein and SMDC contend that the trial court’s findings on
conversion are not supported by substantial evidence, because
the Tribe was not deprived of any documents. Stein and SMDC
simply rely on their own evidence, however, contrary to the
standard of review on appeal. The trial court found Stein and
SMDC withheld records that should have been returned to the
Tribe, and substantial evidence supports the trial court’s finding.
Stein withheld and used the Tribe’s records to contact tribe
members directly, without the Tribe’s authorization. No error
has been shown as to the finding of conversion.
Because the remedies provided to the Tribe in the
judgment are fully supported by the trial court’s findings on the
claims for rescission, fraud, and conversion, we need not consider
whether the same remedies were equally supported under other
theories of recovery.
Dismissal of SMDC Complaint and Cross-complaint
Stein and SMDC contend that the trial court incorrectly
concluded SMDC dismissed claims against the Tribe from its
complaint, and Stein and SMDC dismissed claims against the
Tribe from the September 2007 cross-complaint. We agree with
the trial court that the claims alleged against the Tribe were
dismissed from both the SMDC complaint and the September
2007 cross-complaint.
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When Stein and SMDC filed their pleadings, they were
aware of the identity of the party that they intended to name as a
defendant. As their pleadings acknowledged, that party had been
referred to at different times during the parties interactions as
the Gabrielino-Tongva Nation or the Gabrielino-Tongva Tribe.
The SMDC agreement that Stein drafted in 2001 referred to the
contracting party as the “Gabrielino-Tongva Nation,” but the
resolutions adopting the agreement and subsequent amendments
to the agreement were executed on behalf of the “Gabrielino-
Tongva Tribe.” SMDC’s complaint was brought against the
“Gabrielino-Tongva Tribe,” but its amended complaint named the
“Gabrielino/Tongva Nation, also known as Gabrielino-Tongva
Tribe, also known as Gabrielino Tribal Gaming Authority.” The
September 2007 cross-complaint was brought against the
“Gabrielino/Tongva Nation, formerly known as Gabrielino-
Tongva Tribe, formerly known as Gabrielino Tribal Gaming
Authority.”
Stein and SMDC were aware that the elected Tribal
Council members executed resolutions adopting amendments to
the SMDC agreement, terminated Stein, and caused the Tribe to
file litigation against Stein and SMDC. After litigation
commenced, Stein and SMDC entered into a settlement
agreement with a different group of tribe members. Stein and
SMDC chose to file notices dismissing all their claims against the
entity named in their pleadings as “Gabrielino-Tongva Tribe”
without any qualification or limitation. The jury’s finding that
the Tribe had standing to litigate the claims in the Tribe’s
complaint did not restore claims that Stein and SMDC dismissed
from their pleadings. SMDC’s substitution of “Gabrielino/Tongva
Nation” for a Doe defendant during the course of litigation was
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not effective to refer to the Tribe, because the Tribe was already a
named defendant in the litigation.
We note that the trial court allowed Stein and SMDC to
present their claims at trial. After a full trial on the merits, the
trial court not only found the claims against the Tribe had been
dismissed, but that their claims failed on the merits as well.
Stein and SMDC contend that the trial court failed to rule on
indemnity claims in the cross-complaint against the individual
defendants. However, the trial court expressly listed the
September 2007 cross-complaint as a pleading for determination
at trial, and found against Stein and SMDC on the claims in the
cross-complaint against the individual defendants. Stein and
SMDC have not met their burden on appeal to show error as to
any claim against the individual defendants that was presented
to the trial court for determination.
Dismissal of Crane Complaint
Crane similarly contends that it did not dismiss claims
against the Tribe, but only dismissed the Candelaria Group. This
is incorrect. Crane filed an action against the “Gabrielino-Tongva
Tribe”, and individual defendants based on the Crane agreement.
The named defendant in Crane’s lawsuit was the contracting
party, and Crane subsequently dismissed all claims against
“Gabrielino-Tongva Tribe.” At the time that Crane filed its
dismissal, Crane was aware competing groups claimed authority
to act for the Tribe, but Crane did not qualify or limit its
dismissal. The Candelaria Group was not a party to the Crane
agreement and was not named as a defendant in Crane’s lawsuit.
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Crane asserts that two earlier unpublished opinions in this
case establish as law of the case that the Tribe split into two
groups. This is incorrect. Both opinions expressly found triable
issues of material fact required the appellate court to reverse
summary judgments; neither case affirmed a finding of fact made
by the trial court. After further proceedings in the trial court, the
jury found that the Tribe had standing and the capacity to sue.
The jury’s finding did not affect Crane’s dismissal of claims
against the Tribe.
Although the trial court ultimately found Crane’s claims
against the Tribe had been dismissed, Crane was permitted to
present its claims at trial. The court found against Crane on the
merits as well. The Crane agreement provided for monthly fees
to accrue “until such time as the Tribe secures an Investor for the
proposed casino and gaming establishment and receives payment
of at [least] $2 million. Once an investor has been secured and
the $2 million has been paid, the Tribe will pay [Crane] all
previous monthly fees accrued and the subsequent monthly fees
on a monthly basis” until a specific date. The trial court found
the payment term of the Crane agreement was not triggered,
because the Tribe did not receive $2 million in investment
funding. The evidence supported finding that the Tribe received
less than $2 million from the first tranche of investment fundings
and no further funding.
To the extent the provisions of the Crane agreement were
ambiguous, the trial court’s finding that payment was required
when the Tribe received funding of $2 million was supported by
substantial evidence. Crane contends that by making a partial
payment of $50,000, the Tribe waived its right to rely on the
condition necessary for the remaining payments, but the evidence
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showed that Stein unilaterally paid the funds to Crane on behalf
of the Tribe. There was no evidence of waiver by the Tribe of the
prerequisite conditions to payment.
The trial court’s finding that Crane failed to provide proof
necessary to recover on claims for quantum meruit or account
stated were also supported by substantial evidence. Crane
admitted that the firm did not keep the type of time records
necessary to establish a quantum meruit claim. He did not
attempt to reconstruct the time spent to support the claims.
Crane’s claims remaining for trial were against the
individual defendants for intentional and negligent interference
with contract, and fraudulent conveyance. The trial court found
in favor of Carmelo, Alcala, Perez, Machado, Loya, Dunlap,
Aronson, and Polanco as to the causes of action remaining on the
Crane complaint. On appeal, Crane has not identified any error
with respect to the claims alleged against the individual
defendants.
Attorney Fees Award
In a consolidated appeal, Stein, SMDC, and Crane appeal
from a postjudgment order awarding attorney fees to the Tribe.
We conclude that no error has been shown.
A. Additional Facts and Procedural History
In December 2019, the Tribe filed a motion for attorney fees
and costs, seeking attorney fees of $2,148,428.74 and costs of
$103,637.93 from Stein, SMDC, and Crane, jointly and severally.
In opposition to the motion for attorney fees and costs, Crane,
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Stein, and SMDC argued that the Tribe was not the prevailing
party for purposes of an award of attorney fees under Civil Code
section 1717, subdivision (b)(2), because the claims against the
Tribe were voluntarily dismissed. The Tribe replied that
although the claims against the Tribe had been dismissed, Crane,
Stein, and SMDC prosecuted the claims through trial, and the
court adjudicated the claims in favor of the Tribe. On
September 15, 2020, the trial court entered an order awarding
attorney fees of $469,427.50 against Stein and SMDC, and
attorney fees of $11,900 against Crane. The request for costs was
denied.
B. Reduction in Compensatory Damages
Stein, SMDC, and Crane contend that if the judgment is
reversed on the merits, the postjudgment order awarding
attorney fees must be reversed as well. Although we have
concluded above that the amount of compensatory damages must
be reduced and the punitive damages eliminated, this
modification does not affect the determination that the Tribe was
the prevailing party in the underlying action for the purposes of
the attorney fees provisions of the parties’ contracts.
C. Dismissal of Claims
Stein, SMDC, and Crane contend that the trial court
incorrectly found that they dismissed their claims against the
Tribe. As discussed above, however, the trial court’s finding that
Stein, SMDC, and Crane dismissed their claims against the Tribe
is supported by substantial evidence.
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They further contend that the claims in the cross-complaint
were not adjudicated against the individual defendants, but as
stated above, the claims in the cross-complaint that were
presented at trial for determination were fully adjudicated in
favor of the individual defendants.
For the first time on appeal from the postjudgment order
awarding attorney fees, Stein, SMDC and Crane contend that the
Tribe was judicially estopped from arguing that claims against
the Tribe were dismissed. They failed to raise this contention on
appeal from the judgment and cannot raise it for the first time in
connection with the postjudgment order. (See City of Los Angeles
v. Metropolitan Water Dist. of Southern California (2019) 42
Cal.App.5th 290, 310 [party who failed to appeal from trial
court’s substantive ruling on standing cannot attempt to raise
same fact-dependent arguments in appeal from postjudgment
order awarding attorney fees].) We note, however, that the Tribe
consistently argued in the trial court that the claims against the
Tribe had been dismissed and the only claims pending for trial
were those brought by the Tribe.
We also note that Stein, SMDC, and Crane have not raised
any argument on appeal that they are not liable for attorney fees
under Civil Code section 1717, subdivision (b)(2), because they
voluntarily dismissed their claims against the Tribe. Although
the claims were dismissed, Stein, SMDC, and Crane successfully
argued in the trial court that the identity of the party that they
dismissed, as well as the merits of their claims against the Tribe,
were issues for trial.
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D. Alter Ego
The appellants contend Stein is not liable for attorney fees
assessed against SMDC, but the trial court’s judgment in this
case found Stein to be the alter ego of SMDC. Stein did not
challenge the alter ego finding in his appeal from the judgment,
which the Tribe expressly stated in the respondent’s brief in
connection with that appeal. After failing to raise his fact-
dependent arguments about the trial court’s alter ego finding on
appeal from the judgment, Stein cannot attempt to raise his
contentions in the appeal from the postjudgment order awarding
attorney fees. (See City of Los Angeles v. Metropolitan Water
Dist. of Southern California, supra, 42 Cal.App.5th at p. 310.)
There was substantial evidence that SMDC operated as Stein’s
alter ego as well.
Disentitlement Doctrine
The Tribe filed a motion with this appellate court seeking
to dismiss the appeals brought by Stein and SMDC under the
disentitlement doctrine based on Stein’s actions in cases in other
courts. We decline to exercise our discretion to dismiss the
appeals.
“Under the disentitlement doctrine, a reviewing court has
inherent power to dismiss an appeal when the appealing party
has refused to comply with the orders of the trial court.
[Citation.] ‘ “Appellate disentitlement ‘is not a jurisdictional
doctrine, but a discretionary tool that may be applied when the
balance of the equitable concerns make it a proper sanction.’
[Citation.]” [Citation.]’ [Citation.] The rule applies even if there
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is no formal adjudication of contempt. [Citation.] The
disentitlement doctrine ‘is particularly likely to be invoked where
the appeal arises out of the very order (or orders) the party has
disobeyed.’ [Citation.] Moreover, the merits of the appeal are
irrelevant to the application of the doctrine.” (Ironridge Global
IV, Ltd. v. ScripsAmerica, Inc. (2015) 238 Cal.App.4th 259, 265.)
“ ‘The power to dismiss an appeal for refusal to comply with
a trial court order has been exercised in a variety of
circumstances, including: where a parent had taken and kept
children out of the state in violation of a divorce decree
[citations]; where a husband had failed to pay alimony as ordered
in an interlocutory judgment of divorce [citation]; where a party
in a civil action was a fugitive from justice and in contempt of the
superior court for failure to appear on criminal charges after
being released on bail [citation]; and where defendants willfully
failed to comply with trial court orders regarding a receivership.
[Citation.] Moreover, the inherent power to dismiss an appeal
has been exercised in several cases where a party failed or
refused to appear for a judgment debtor examination.’ ”
(Ironridge Global IV, Ltd. v. ScripsAmerica, Inc., supra, 238
Cal.App.4th at pp. 265–266.)
Courts do not apply the disentitlement doctrine lightly,
thus depriving an appellant of the right to appeal. (Findleton v.
Coyote Valley Band of Pomo Indians (2021) 69 Cal.App.5th 736,
756–757.) We decline to apply the disentitlement doctrine in this
case, having decided instead to consider the issues on the merits.
Therefore, the Tribe’s motion to dismiss the appeals brought by
Stein and SMDC based on the disentitlement doctrine is denied.
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DISPOSITION
The judgment is modified to reduce the amount of
compensatory damages awarded from $20,411,067.23 to
$19,161,067.23. The judgment, as modified, and the
postjudgment order awarding attorney fees are affirmed.
Respondent Gabrielino-Tongva Tribe is awarded its costs on
appeal.
NOT TO BE PUBLISHED.
MOOR, J.
We concur:
RUBIN, P. J.
KIM, J.
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