Air Serv Corp. v. Flight Services Systems ( 2017 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
AIR SERV CORPORATION, ) No. 74928-5-1
)
Respondent, )
)
v. )
)
FLIGHT SERVICES & SYSTEMS, )
INC., ) UNPUBLISHED OPINION
)
Appellant. ) FILED: May 30, 2017
)
VERELLEN, C.J. — In 2012, Air Serv Corporation filed a complaint against Flight
Services & Systems, Inc.(FSS)for unjust enrichment and quantum meruit, among other
claims. After a bench trial, the trial court entered judgment for Air Serv for $200,000,
including attorney fees, and ordered an additional amount of $35,000 as sanctions for
violations of various court rules. FSS appealed (Air Serv 1), arguing that the trial court
applied the wrong measure of damages, improperly excluded evidence, and erred in
imposing an attorney fees award and sanctions.1 Because this court could not discern
from the trial court's findings the basis for the award, it remanded for further findings on
the existing record. Specifically, this court directed the trial court to "articulate the
specific measure of damages and make precise findings supporting such damages,
1 Air Serv Corp. v. Flight Servs. & Sys., Inc., No. 71103-2-1, slip op. at 1 (Wash.
Ct. App. Apr. 6,2015)(unpublished), http://www.courts.wa.gov/opinions/pdf/711032.pdf,
review denied, 184 Wn.2d 1006 (Sep. 30, 2015)(Air Serv I).
No. 74928-5-1/2
whether under a market value, modified disgorgement of profit, or some other 'rare
circumstances' measure of the value of services appropriate based upon total
circumstances."2
On remand, the trial court clarified, "[A]s the services provided by Air Serv were
unique in nature and neither party established a 'market value [of] the services
rendered,' the court has determined that the measure of recovery it will apply is the
'disgorgement of the profit defendant received as a result of the services rendered.'"3
The court concluded FSS owed Air Serv $143,723.26 for its services. The court also
awarded Air Serv $115,323.22 as terms and sanctions, for a total judgment award of
$259,046.48.
FSS appeals the trial court's decision on remand. Their primary argument is that
disgorgement of profit is not an applicable theory of damages. But disgorgement of
profit is a viable remedy for unjust enrichment when there is no market value available.
Given that neither party established a market value for Air Serv's services and FSS
provided incomplete discovery regarding costs and fixed fees, we conclude the trial
court did not abuse its discretion in computing damages.
FSS's other claims also fail. Therefore, we affirm.
FACTS
The facts of this case were summarized in Air Serv I:
On April 14, 2011, FSS entered into a contract with Delta Airlines to
provide cabin cleaning services at Seattle-Tacoma airport for Delta's
domestic and international flights. FSS was to begin providing these
services on May 17, 2011. In order to provide cleaning services for
2 Id. at 10.
3 Clerk's Papers(CP)at 2523(quoting id. at 4).
2
No. 74928-5-1/3
international flights, FSS was required to obtain a federal compliance
agreement from the United States Department of Agriculture.
Sometime in May 2011, the United States Customs and Border
Protection (CBP) notified Delta that FSS would not be permitted to board
Delta's international flights because it did not have the required
compliance agreement. CBP identified other companies that were in
compliance, including Air Serv. Because FSS was unable to obtain a
compliance agreement for at least another six to eight weeks and Delta
had an immediate need for cleaning services on international flights
beginning the next day, Delta consulted with CBP about having Air Serv
provide temporary services until FSS obtained its own compliance
agreement.
CBP agreed to allow FSS to provide the cleaning services without
the compliance agreement so long as Air Serv supervised those services.
Specifically, Air Serv would be required to supervise the handling and
transfer of trash collected on the plane. Air Serv agreed to do so, and
beginning on May 28, 2011, provided supervision of FSS's handling and
transfer of the trash during cleanings.
Approximately two weeks later, Air Serv proposed to FSS a rate of
$250 per plane for its services. After FSS objected to this amount, Air
Serv proposed a lower rate of $175 per plane. Beginning in July 2011, Air
Serv sent invoices to FSS at this price, for a total of 476 flights that were
serviced during the temporary arrangement.
FSS did not pay the invoices, but Air Serv continued to provide the
temporary services until FSS obtained its federal compliance agreement in
September 2011. On September 2, 2011, Air Serv ceased providing its
supervisory services to FSS. FSS did not pay the invoices, which totaled
$83,300. On September 20, 2011, FSS disputed the amount on the
invoices and informed Air Serv that it would only pay a total of $3,511.10,
based upon an hourly rate of $14.05.
In January 2012, Air Serv filed a complaint against[FSS]seeking
damages for breach of contract, consumer protection act violations, unjust
enrichment, and quantum meruit. The trial court dismissed the consumer
protection and breach of contract claims on summary judgment, finding
that there was no meeting of the minds on the price for the services
rendered by Air Serv. But the trial court granted partial summary
judgment for Air Serv for liability under the unjust enrichment and quantum
meruit theories, with damages to be proven at trial.
3
No. 74928-5-1/4
At trial, Air Serv presented evidence of how it arrived at the $175
price per plane that was invoiced but ultimately rejected by FSS. loan
Nguyen, who handled pricing for Air Serv, testified that the pricing was
based on labor, equipment, associated profit, and liability, i.e., the financial
and operational risk involved in allowing FSS to use its compliance
agreement. Nguyen explained the breakdown of the first quote of $250
per plane as $60 for labor of three people, $30 profit, $10 for equipment
and fuel maintenance, and $150 for risk of liability. He further testified that
he lowered the price to $175 per plane to take into account that Air Serv
would be providing supervisory services rather than actual cleaning based
upon $20 for labor, no costs for equipment or fuel, a reduced price of $5
for profit, and $150 for liability risk. Air Serv also presented testimony, and
the trial court found, that FSS told Air Serv it would pay the $175 per plane
charge and that Air Serv relied upon that representation.
In support of its unjust enrichment theory based on disgorgement of
profits, Air Serv presented evidence of reviews FSS received on the Delta
contract during the period of time that Air Serv performed work for FSS.
Air Serv presented invoices that FSS sent to Delta showing total charges
for all services, domestic and international, of approximately $414,000.
The charges for services itemized as "international" flights on these
invoices totaled $77,730.50. The invoices also listed additional charges,
including "fixed fees." These were likely for services that were provided
for both international and domestic flights but were not parsed out by FSS,
despite discovery requests to do so.
Air Serv also acknowledged in its trial brief, in its response to the
half-time motion, and in closing argument that disgorgement of profits FSS
received from its contract with Delta would normally require reducing the
gross revenues by any "costs" FSS incurred to generate those revenues.
Because FSS had refused to provide any cost information in interrogatory
answers or document production and refused to arrange for a speaking
agent able to address that topic, the court entered an order compelling
discovery on costs. FSS did not provide any information on costs and
instead took the position that it did not maintain cost information specific to
the Seattle-Tacoma operation. As a result, no evidence of costs was
produced in discovery or presented at trial.[4]
The trial court entered findings and conclusions "[q]uantifying the undisputed
services" and concluding that FSS owed Air Serv "the reduced amount of $175/flight or
$83,300 along with all associated attorney's fees and costs under both theories of
4 Air Serv I, slip op. at 1-7.
4
No. 74928-5-1/5
quantum meruit and unjust enrichment."6 Specifically, the court awarded Air Serv
$116,700 in attorney fees "as terms," for a total judgment award of $200,000.6 The
court ordered $35,000 in additional sanctions against FSS based on "numerous
violations of the rules of the Court, including, but not limited to CR 11, CR 26(g),
CR 37(b) & (d), CR 56(g) and the court's local rules."7
In Air Serv 1, FSS argued the trial court applied the wrong measure of damages.
This court concluded the trial court's findings were inadequate for review of FSS's
claim.8 "Because the trial court did not identify a precise theory of damages or make
findings of a reasonable value of the services or how the court arrived at such a
reasonable value of the services," this court remanded for additional findings.6 This
court directed the trial court to "articulate the specific measure of damages and make
precise findings supporting such damages, whether under a market value, modified
disgorgement of profit, or some other 'rare circumstances' measure of the value of
services appropriate based upon total circumstances."1°
This court further concluded the trial court's findings lacked the specificity
required to support the terms and sanctions award." Therefore, this court remanded
"to allow the court to make additional findings on the existing record to determine an
5 CP at 2291.
6 CP at 2407, 2409-10.
7 CP at 2410.
8 Air Serv 1, slip op. at 10.
9 Id.
10 id.
Id.
5
No. 74928-5-1/6
appropriate award."12 This court noted, Tin addition to findings that the hourly rates
and itemized time are reasonable, the lodestar analysis should include more details
supporting any award of attorney fees as terms."13
On remand, Air Serv requested both parties be allowed to provide proposed
amended findings of fact and conclusions of law consistent with this court's opinion.14
On January 20, 2016, the trial court granted Air Serv's motion and allowed both parties
to submit proposed amended findings of fact and conclusions of law.15 Air Serv timely
submitted its proposed amended findings of fact and conclusions of law, while FSS
elected to not submit anything further.16 On February 19, 2016, the trial court entered
its amended findings of fact, conclusions of law and order for sanctions.17
The trial court clarified, "[A]s the services provided by Air Serv were unique in
nature and neither party established a 'market value [of] the services rendered,' the
court has determined that the measure of recovery it will apply is the 'disgorgement of
the profit defendant received as a result of the services rendered.'"15 The trial court
detailed how it calculated the profit FSS earned as a result of Air Serv's services and
12 Id. at 13.
13 Id.
14 CP at 2458-62.
15 CP at 2520-21.
16 CP at 2484 ("The parties already provided this Court with their proposed
findings of fact and conclusions of law after trial, which the Court reviewed and
considered before issuing its final findings of fact and conclusions of law[]. A new
round of proposed findings and conclusions would serve no further beneficial
purpose.").
17 CP at 2522-38.
18 CP at 2523(quoting Air Serv I, slip op. at 4).
6
No. 74928-5-1/7
concluded FSS owed Air Serv $143,723.26.19 The trial court also provided more
detailed findings associated with the award of sanctions and attorney fees.2° The court
awarded Air Serv $115,323.22 as terms and sanctions, for a total judgment award of
$259,046.48.21
FSS appeals the trial court's amended findings of fact and conclusions of law.
ANALYSIS
I. LEGAL CHALLENGES TO DAMAGES AWARD
FSS asserts a broad based challenge to the trial court's award of damages.
FSS's primary argument is the trial court erred in applying a disgorgement of profit
theory of damages under unjust enrichment. FSS claims a disgorgement of profit is not
an applicable theory of damages. But this court already ruled in Air Serv I that a
disgorgement of profit is a viable theory of damages for unjust enrich ment.22 FSS
makes no argument under RAP 2.5(c) that this court should reconsider its prior opinion,
and we find no reason to do so.
In Air Serv 1, this court explained that the measure of recovery for unjust
enrichment to a faultless claimant is either "(1)'the amount which the benefit conferred
would have cost the defendant had it obtained the benefit from some other person in
plaintiffs position,' or (2)'the extent to which the other party's property has been
increased in value or his other interests advanced.'"23 "When services have been
19 CP at 2527-30.
29 CP at 2530-36.
21 CP at 2537, 2567-69.
22 Air Serv 1, slip op. at 10.
23 Id. at 4(quoting Young v. Young, 164 Wn.2d 477, 487, 191 P.3d 1258 (2008))
(internal quotation marks omitted).
7
No. 74928-5-1/8
provided, the first measure is typically represented by the market value of the services
rendered, while the second measure involves disgorgement of the profit the defendant
received as a result of the services rendered."24
The Air Serv 1 court noted that the parties had "presented limited evidence to the
trial court" to establish the measure of recovery for unjust enrichmenit.28
On market value, Air Serv took the position that the services were unique
and that there was no market. In its discovery responses, FSS pointed to
a single example of a "subcontractor" for cleaning services and alleged a
custom and practice in the industry. But in depositions, FSS's designated
speaking agent Robert P. Weitzel could not recall the names of any
companies that provided such services in the past and could not recall or
was not aware of the responses of other companies to FSS's inquiries to
provide the service Air Serv provided. While Weitzel stated he was aware
of one prior occasion when FSS was involved in a similar arrangement
long ago, he could not recall which company was involved or the price for
such services. Because FSS did not provide discovery related to a market
value, the trial court granted Air Serv's motion in limine to preclude FSS
from offering evidence of market value.[28]
The Air Serv 1 court further noted that the trial court found
• "FSS received $77,730.50 in direct revenue due to Air Serv's actions from June
to August 2011, and a total amount of $77,439.09 for fixed fees."27
• "[T]otal revenues (domestic and international) FSS received from Delta were over
$400,000."28
• "FSS intentionally failed to provide information regarding costs."29
24 Id. (citing Young, 164 Wn.2d at 487-88).
25 Id. at 5.
26 Id.
27 Id. at 8.
28 Id.
29 Id.
8
No. 74928-5-1/9
But the trial court "made no finding or conclusion that because FSS intentionally
withheld cost information, these revenues were the best the trial court could do to arrive
at a disgorgement figure."3° Specifically,
• "There was no finding that $77,730.50, the full amount of direct revenue from
international flights supervised by Air Serv from June through August, was a
reasonable figure for revenue for all flights serviced (rounding off to exclude 15
additional flights in May and 10 additional flights in September)."31
• "There was no finding of what portion of the fixed fees was properly allocated to
work supervised by Air Serv and on what basis."32
• "There was no finding and no direct evidence that FSS was in any real jeopardy
of losing its entire contract with Delta if it was unable to clean the international
flights so that $400,000 total gross revenue paid by Delta has any significance in
a disgorgement of profits theory."33
This court acknowledged "the parties provided the trial court with limited information
regarding value and profit," but concluded the trial court "must articulate the specific
measure of damages and make precise findings supporting such damages."34
On remand, the trial court did exactly that. The trial court clarified, "[A]s the
services provided by Air Serv were unique in nature and neither party established a
'market value [of] the services rendered,' the court has determined that the measure of
recovery it will apply is the 'disgorgement of the profit defendant received as a result of
the services rendered."35 The trial court made the following additional findings:
30 Id.
31 Id.
32 Id.
33 Id.
34 Id. at 10.
35 CP at 2523(quoting id. at 4).
9
No. 74928-5-1/10
10. Without Air Serv, or another authorized vendor's supervision,
FSS would have been unable to provide cleaning services to any of
Delta's international flights at SeaTac Airport. FSS was unable to identify
any other authorized vendor that was willing to assist it by providing
supervision for any of the Delta flights. So without Air Serv's services,
FSS would have been unable to service the international flights for Delta.
The court finds that disgorging the profit FSS received related to Air Serv's
services on the 476 flights provides for an appropriate remedy for FSS's
unjust enrichment.
11. The court further finds that FSS purposely acted to deceive Air
Serv. FSS made numerous representations to Air Serv that it was willing
to pay Air Serv for its services, but the record shows that FSS never
intended to uphold these representations. FSS was not an innocent
recipient of Air Serv's services. Thus, the disgorgement of all of FSS's
gains related to Air Serv's services is also appropriate due to FSS's
purposeful conduct. Therefore the court will not allow FSS to keep any
profit it received relating to Air Serv's services.
12. Air Serv requested FSS to provide information sufficient to
demonstrate its profit from the flights Air Serv serviced... . FSS refused
to provide [revenue and cost] information even after this court compelled
FSS to provide information relating to the revenues and costs associated
with FSS's cabin cleaning services provided to Delta. . . .
13. FSS's failure to provide additional information related to its
costs and revenues was intentional. .. . The court finds FSS intentionally
withheld this information and failed to abide by this court's order
compelling such information. Due to FSS's violation of this court's order,
the court will evaluate the evidence re revenue and costs in the light most
favorable to Air Serv.
16. Although it is not entirely clear from the invoices from FSS to
Delta how much direct revenue FSS received due to Air Serv's efforts on
flights in May 2011, FSS admitted it could have provided this requested
information in its CR 30(b)(6) deposition. Due to FSS's intentional refusal
to detail this information, the court will infer that each flight serviced by
FSS in May 2011 provided FSS direct revenue of $145.60. Air Serv
assisted on 15 flights in May 2011, so the direct revenue received by FSS
due to Air Serv's services is $2,184.
17. Although it is not entirely clear from the invoices from FSS to
Delta how much direct revenue FSS received due to Air Serv's efforts on
flights in September 2011, FSS admitted it could have provided this
10
No. 74928-5-1/11
requested information in its CR 30(b)(6) deposition. Due to FSS's
intentional refusal to detail this information, the court will infer that each
flight serviced by FSS in [September] of 2011 provided FSS direct
revenue of $199.20. Air Serv assisted on 10 flights in [September]2011,
so the direct revenue received by FSS due to Air Serv's services is
$1,992.00.
18. In total, this court finds FSS received $81,906.50 in direct
revenue due to the services Air Serv provided on international flights.
19. FSS received additional revenue due to Air Serv's services
detailed on the invoices as ``fixed fees.' FSS admitted that this revenue
was in part due to the international flights serviced by Air Serv. FSS
however failed to provide any indication of what amount of thesefixed
fees' were due to domestic flights.
20. FSS intentionally failed to provide Air Serv information
sufficient to determine what percentage of the ``fixed fees' were attributable
to the domestic flights. As FSS failed to provide this information, although
compelled by court order to do so, the court will not make any '
assumptions as to what extent the 'fixed fees' include revenue from
domestic flights. Instead as an appropriate sanction, the court will infer
that all of the revenue due to the ``fixed fees' was paid to FSS due to the
services on the international flights.
24. In total, the court finds FSS received $61,816.76 in ``fixed fees'
while relying on the services provided by Air Serv to be able to clean
international flights.
1
25. FSS failed to provide any evidence of costs, although it was
ordered to do so by the court. The court finds FSS's failure to abide by
the court's order intentional and will not deduct any amount from the
revenue amounts in calculating profit.
26. The profit FSS received due to Air Serv's services is calculated
by adding the amount of direct revenue ($81,906.50) and ``fixed fees'
attributable to Air Serv's efforts ($61,816.76) minus the costs that FSS
demonstrated at trial (0.00). Accordingly, the court orders defendant to
pay plaintiff $143,723.26.[361
36 CP at 2526-30.
11
No. 74928-5-1/12
First, FSS argues the "trial court committed legal error by changing the measure
and amount of damages on remand."37 FSS claims this "[c]ourt did riot remand to have
the trial court come up with another measure and amount of damages."38 FSS distorts
this court's opinion in Air Serv I, which expressly provided the trial court could apply a
I
disgorgement of profit theory of damages.39 Here, the amended findings support a
disgorgement of profit theory of recovery for unjust enrichment. The findings illustrate
why the trial court applied the Air Serv I court's accepted theory of damages and why
the trial court fashioned the award in the manner it did—based on the limited discovery
provided by FSS. Therefore, FSS's argument fails.
Second, FSS asserts the "reasonable value measure used for the original
judgment is clear from the record."49 But the Air Serv I court remanded the case
expressly because the court could not "discern from the trial court's findings the basis
1
for the award."'" "Specifically, other than reciting that the issue was to determine the
reasonable value of services rendered by Air Serv to FSS, the court did not identify any
particular theory of damages."42 On remand, the trial court properly made findings
regarding lack of market value.
Third, FSS argues Air Serv's "resurrected claim on remand of disgorgement of
gross revenues is barred by claim splitting."43 We disagree. Air Serv advanced a
1
37 Appellant's Br. at 20.
38 Id.
38 Air Serv I, slip op at 10.
40 Appellant's Br. at 21.
41 Air Serv I, slip op. at 1.
42 Id. at 7.
43 Appellant's Br. at 22.
12
No. 74928-5-1/13
disgorgement of profit theory of recovery for unjust enrichment all along 44 For the
same reason, we reject FSS's argument that the "[e]lection of remedies doctrine bars
[Air Serv]from switching to its new disgorgement theory."45 Contrary to FSS's
contention, Air Serv did not "switch theories after the appeal."46
Fourth, FSS argues "Oludicial estoppel prevents [Air Serv]from changing its
theory to disgorgement of gross revenues."47 "'Judicial estoppel is an equitable doctrine
that precludes a party from asserting one position in a court proceeding and later
1
seeking an advantage by taking a clearly inconsistent position.'"48 Here, Air Serv
consistently advanced its unjust enrichment theory based on disgorgement. Therefore,
judicial estoppel does not apply.
Fifth, FSS asserts the "trial court erred by not applying established legal
principles for determining the proper measure of damages."'" FSS cites'to several
cases recognizing that trial court judges often determine damages based on a market
value of the services provided. But here, it was already determined that no "market
rate" was established during tria1.50 As this court explained in Air Serv I, "On market
value, Air Serv took the position that the services were unique and that there was no
44 See Air Serv I, slip op. at 6.
45 Appellant's Br. at 23.
46 Id. at 24.
47 Id.
48 Arkison v. Ethan Allen, Inc., 160 Wn.2d 535, 538, 160 P.3d 13(2007)(quoting
Bartley-Williams v. Kendall, 134 Wn. App. 95, 98, 138 P.3d 1103(2006).
48 Appellant's Br. at 25.
50 Air Serv I, slip op. at 5, 9.
13
No. 74928-5-1/14
market."51 FSS, on the other hand, "did not provide discovery related to a market
value."52 Therefore,"the trial court granted Air Serv's motion in limine to preclude FSS
1
from offering evidence of market value."53 FSS already challenged the trial court's
ruling precluding it from offering evidence of market value in Air Serv I, and this court
determined FSS's challenge lacked merit.54 "FSS did not make an offer of proof of
evidence relating to industry standard or a market rate. Indeed, the record reveals that
the claimed 'industry standard' was based on statements in declarations submitted by
FSS that FSS was later unable to verify."55
During oral argument on the motion in limine, the court asked counsel for
FSS if there was going to be testimony on this issue, to which counsel
responded, "I don't recall any testimony on market rate." The court again
asked what evidence FSS had relating to industry standards or market
rate, and counsel responded, "I don't think anybody has testified to
industry standards or market rate," at which point the court noted,"Then
you're... conceding."[561
Because there was no evidence of a market value, the trial court had no basis to
award market value damages.
Sixth, FSS argues the trial court erred by imposing a "disgorgement of total gross
revenues without deduction for expenses and costs as an apparent sanction."57 But the
trial court expressly found:
51 Id. at 5.
52 Id.
53 Id.
54 Id. n.11.
55 Id. at 16-17.
56 Id. at 16 n.39 (quoting Report of Proceedings(RP)(June 25, 2013) at 267,
269).
57 Appellant's Br. at 33.
14
No. 74928-5-1/15
Although FSS's counsel maintained at trial that FSS did not have cost
information and FSS responded evasively in written discovery, during
FSS's deposition FSS admitted it did have information sufficient to show
its costs and could further detail its revenue associated with specific dates
the airplanes were serviced. The court finds FSS intentionally withheld
this information and failed to abide by this court's order compelling such
information.m
To the extent FSS argues that the trial court failed to engage in a proper Burnet
v. Spokane Ambulance69 inquiry in finding FSS failed to provide cost information, the
trial court's original findings included: "FSS's failure to provide information related to its
costs and revenues was intentional."60 And FSS failed to raise this argument before this
court in Air Serv 161 or before the trial court on remand. Because the remand was
limited to the existing record and the issue could have been resolved on the first appeal,
we decline to address it now.
FSS also argues the trial court erred in allocating 100 percent of fixed fees to
international flights. FSS claims the court disregarded testimony from Air Serv that
"only 60-65% of fixed fees could be allocated to international planes."62 But FSS makes
no showing that the trial court improperly disregarded Air Serv's testimony. Rather, the
trial court expressly found:
20. FSS intentionally failed to provide Air Serv information
sufficient to determine what percentage of the "fixed fees" were
attributable to the domestic flights. As FSS failed to provide this
55 CP at 2527.
59 131 Wn.2d 484, 933 P.2d 1036 (1997).
69 CP at 2291 1112.
61In Air Serv 1, FSS challenged the trial court's failure "to conduct the inquiry
required by Burnet v. Spokane Ambulance before excluding evidence as a discovery
sanction" but "challenge[d] only the exclusion of evidence of industry standard and
market rate." Air Serv 1, slip op. at 13, 16 n.38.
62 Appellant's Br. at 34.
15
No. 74928-5-1/16
information, although compelled by court order to do so, the court will not
make any assumptions as to what extent the "fixed fees" include revenue
from domestic flights. Instead as an appropriate sanction, the court will
infer that all of the revenue due to the "fixed fees" was paid to FSS due to
the services on the international flights.[63]
FSS asserts that damages under unjust enrichment would not normally exceed
the amount that would have been gained by contract. This argument fails for several
reasons: FSS failed to raise this argument before this court in Air Serv 1 or before the
trial court on remand; FSS cites no authority to support its argument" Restatement
(Third) of Restitution and Unjust Enrichment§ 51(2011) acknowledges that recovery
under unjust enrichment may exceed the amount that would have been gained by
contract; and "trial courts have broad discretionary powers to fashion equitable
remedies and we review the trial court's consideration of the equities for abuse of
discretion."65
Here, the trial court had limited options in determining the measure of recovery
for unjust enrichment. Given the lack of evidence of market value and FSS's intentional
failure to provide discovery of cost information or separate domestic versus international
fixed costs, the trial court did not abuse its discretion in focusing on disgorgement of
*revenues. FSS cannot frustrate the trial court by limiting the information necessary to
calculate profit. We conclude it was not an abuse of discretion for the trial court to take
into consideration all of these circumstances and impose a disgorgement of "direct
63 CP at 2528(emphasis added).
64 "Where no authorities are cited in support of a proposition, the court is not
required to search out authorities, but may assume that counsel, after diligent research,
has found none." DeHeer v. Seattle Post-Intellioencer, 60 Wn.2d 122, 126, 372 P.2d
193(1962).
65 Arzola v. Name Intelligence, Inc., 188 Wn. App. 588, 596, 355 P.3d 286(2015).
16
No. 74928-5-1/17
revenue ($81,906.50) and 'fixed fees' attributable to Air Serv's efforts ($61,816.76)
minus the costs that FSS demonstrated at trial (0.00)."66
Seventh, FSS argues the damages award is "punitive."67 FSS's argument is
based on its misguided belief that it was required to pay too much. Here, the trial court
had limited information relating to FSS's profits due to FSS's intentional failure to
provide essential information. The fact that FSS's failure to provide information
inevitably worked to its detriment does not mean the trial court acted punitively in
assessing damages.
Finally, FSS alleges several other legal errors on appeal. They are not
compelling. Several of FSS's arguments rely on FSS's incorrect assertion that the trial
court used a "reasonable value measure" of recovery in its original judgment. Others
are based on FSS's incorrect premise that a disgorgement of profit is an invalid remedy.
But as explained above, FSS devotes no argument under RAP 2.5(c) as to why this
court should reconsider its opinion in Air Serv I. Because the amended findings of fact
and conclusions of law are consistent with the Air Serv I opinion and applicable law, we
conclude FSS's legal challenges fail.
II. "FACTUAL"CHALLENGES TO DAMAGES AWARD
FSS alleges the trial court committed numerous errors of fact in assessing
damages. But with the exception of assignment of error 4, FSS fails to identify the
specific findings of fact it challenges. FSS therefore failed to comply with RAP 10.3(g),
which specifies a "separate assignment of error for each finding of fact a party contends
66 CP at 2529-30 ¶j 26.
67 Appellant's Br. at 16.
17
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was improperly made must be included with reference to the finding by number."
Moreover, many of FSS's assignments of error couched in terms of factual
challenges overlap with the legal challenges already addressed in this opinion, attack
the discretionary rulings by the trial court in determining damages, raise arguments
rejected in Air Serv I, or are irrelevant to the trial court's award of damages under a
disgorgement of profit theory of unjust enrichment.
Where, as here, "a trial court has weighed the evidence in a bench trial, appellate
review is limited to determining whether substantial evidence supports its findings of fact
and, if so, whether the findings support the trial court's conclusions of law.”68
Substantial evidence exists when there is a sufficient quantity of evidence
to persuade a fair-minded, rational person that a finding is true. We
review only those findings to which appellants assign error; unchallenged
findings are verities on appeal. On appeal, we view the evidence in the
light most favorable to the prevailing party and defer to the trial court
regarding witness credibility and conflicting testimony.(691
This court reviews a trial court's award of damages for abuse of discretion.7°
This court also reviews a trial court's evidentiary rulings for abuse of discretion.71 A trial
court abuses its discretion "only 'on a clear showing' that the court's exercise
68 Heqwine v. Longview Fibre Co., Inc., 132 Wn. App. 546, 555, 132 P.3d 789(2006).
69 Id. at 555-56 (internal citations and footnote omitted).
7° Staff Builders Home Healthcare, Inc. v. Whitlock, 108 Wn. App. 928, 932, 33
P.3d 424 (2001); see also Harmony at Madrona Park Owners Ass'n V. Madison
Harmony Dev., Inc., 160 Wn. App. 728, 737, 253 P.3d 101 (2011)("Mathematical
certainty is not required, and a fact finder has discretion to award damages that are
within the range of competent evidence in the record.").
71 Mutual of Enumclaw Ins. Co. v. Greqq Roofing, Inc., 178 Wn. App. 702, 728,
315 P.3d 1143(2013).
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No. 74928-5-1/19
of discretion was 'manifestly unreasonable, or exercised on untenable grounds, or for
untenable reasons."72
Assignment of Error 1. FSS argues the trial court erred by finding liability for both
unjust enrichment and quantum meruit. If FSS wished to raise this issue, it should have
done so in its prior appeal. Here, in the trial court's amended judgment, the court only
entered judgment on the unjust enrichment claim.73
Assignment of Error 2. FSS argues the trial court erred in denying FSS's motion
in limine "and objections concerning [Air Serv]'s untimely disclosure of its disgorgement
theory."74 But the record demonstrates FSS had long been informed that Air Serv
intended to seek the benefit conferred on FSS.75 Therefore, it was not manifestly
unreasonable to allow Air Serv to pursue a disgorgement of profit theory.76
72 T.S. v. Boy Scouts of America, 157 Wn.2d 416, 423, 138 P.3d 1053(2006)
(quoting State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26,482 P.2d 775 (1971)).
73 Compare CP at 2568 ¶ 1 with CP at 2410 IN 1, 2.
74 Appellant's Br. at 2.
75 See CP at 5-6 ("44. Air Serv has conferred a benefit upon FSS which FSS
knowingly accepted. 45. The circumstances make it unjust for FSS to retain the benefit
conferred by Air Serv. 46. Air Serv believes Delta conferred a benefit upon FSS which
FSS knowingly accepted and would not have been attained without Air Serv's
performance of services. 47. The circumstances make it unjust for FSS to retain the
benefit conferred upon it by Delta. 48. FSS should be ordered to pay to Air Serv the
benefits it realized from Air Serv's services."; CP at 44("FSS has failed to provide any
document responsive to document request No. 30 relating to the costs associated with
the services it provided Delta. Such information is not only relevant but vital to Air
Serv's claim for unjust enrichment"); CP at 353-54("FSS did recently produce invoices
that it provided Delta, however Air Serv is still unable to derive the amount FSS
benefitted due to Air Serv's services. Moreover, FSS has not provided a single
document from which Air Serv can determine FSS's costs in providing services. Of
course, both FSS's revenues and costs are relevant to 'value of the benefit [it]
retained.").
76 See Mutual of Enumclaw, 178 Wn. App. at 728 ("Therefore, we will overturn
the trial court's ruling on the admissibility of evidence only if its decision [is] manifestly
unreasonable, exercised on untenable grounds, or based on untenable reasons.").
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No. 74928-5-1/20
Assignment of Error 3. FSS argues the trial court erred in finding Air Serv's
services were unique. We disagree. There is substantial evidence to support that the
services provided by Air Serv were unique.77
Assignment of Error 4. FSS argues the trial court erred in finding FSS never
made any payment to Air Serv for its services.78 But in FSS's answer to Air Serv's
complaint, it admitted it never paid Air Serv for its services.79 FSS's argument fails.
Assignment of Error 5. FSS argues the trial court erred in finding Air Serv "relied
on a representation it would be paid in full and FSS deliberately misled" Air Serv.8° But
Air Serv's general manager testified that FSS "assured me ... we would be paid in
full."81 Regardless, this finding is immaterial to the trial court's award of damages for
unjust enrichment.82
77 Air Serv's vice president of finance testified that "the only concern we had was
liability. And because of, again, the potential of the $250,000 fine, as well as revocation
of our license. And based on the fact that FSS was willing to begin servicing
international aircraft without that compliance agreement, we were very nervous that they
would ... break the law, have improper procedures. And we, being the holders of the
license, were 100 percent at risk of any and all penalties associated with those
violations." RP (June 24, 2013) at 82. Air Serv's general manager Gilbert Green, who
testified that he had been in the aviation industry nearly 38 years, testified that he was
first contacted regarding FSS not having a compliance agreement when "the director of
Delta Airlines... called . . . stating that would it be possible for Air Serv to assist FSS in
a manner that I had not been familiar with." RP (June 25, 2013) at 273. When asked
whether Green, in his experience as general manager, had ever heard of another
company working as a subcontractor under Air Serv's compliance agreement, Green
testified he had "[n]ever heard of such a thing." RP (June 25, 2013) at 274.
78 See CP at 2526 411 6.
79 See CP at 4("27. FSS has not paid Air Serv for any of its services.") and CP at
33("27. Admit.").
88 Appellant's Br. at 3.
81 RP (June 25, 2013) at 284.
82 See Arzola, 188 Wn. App. at 596 (the trial court has broad discretionary
authority to fashion equitable remedies).
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No. 74928-5-1/21
Assignment of Error 6. FSS argues the trial court erred "in finding FSS did not
have access to alternative vendors and that it 'refused' to provide any cost information"
to Air Serv.83 But FSS provided no evidence that any other vendor would agree to
provide the services Air Serv performed. Indeed, FSS admitted it discussed attaining
the services performed by Air Serv with other compliant companies, but it was unable to
provide any price that any other company ever has charged for the services at issue.84
There is sufficient evidence that FSS failed to provide cost information as ordered by
the trial court and later acknowledged it had cost information.
Assignment of Error 7. FSS argues the trial court erred in its computation of
FSS's "total (gross) direct revenues of $81,906.50."85 But this court already recognized
that the record reflects FSS received $77,730.50 in direct revenue for the flights
between June and August.86 FSS could have provided information to determine the
amount of revenue it received for the flights in May and September, but chose not to.87
Therefore, it was not manifestly unreasonable for the trial court to engage in such an
analysis of revenues on these facts.
Assignment of Error 8. FSS argues the trial court erred in its computation of
FSS's "total (gross)fixed fees of $61,816.76 for domestic and international flights and
then allocating 100% to international flights."88 We conclude the trial court's
83 Appellant's Br. at 3.
84 CP at 1678-79.
85 Appellant's Br. at 3.
86 Air Serv I, slip op. at 8.
87 See CP at 2527-28.
88 Appellant's Br. at 3.
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No. 74928-5-1/22
determination that the fixed fees be attributed to the international flights was not made
on untenable grounds. FSS admitted the fixed fees included revenues from
international flights, but failed to provide any estimate as to what portion of those
revenues were received due to domestic flights, despite being ordered to do so.
Assignment of Error 9. FSS argues the trial court erred in its computation of
FSS's "total gross revenues of $144,723.26 and then wrongfully awarding 100% to [Air
Serv] without deduction for any costs and expenses."88 But as noted above, FSS
presented no evidence to the trial court that it incurred any costs, and the trial court
found this failure to provide cost information intentional. Indeed, in Air Serv I, this court
indicated that FSS's intentional withholding of cost information could be a reason for the
trial court to conclude that no costs should be included in the profit calculation.° We
conclude it was not manifestly unreasonable for the trial court to engage in such an
analysis of damages on these facts.
III. CHALLENGES TO SANCTION AWARD
FSS argues the trial court erred in awarding monetary sanctions pursuant to
CR 26(g), CR 37(b),(d), CR 56(g), and local court rules "without specifically identifying
any objectionable conduct or deficiencies."81 The imposition and amount of sanctions
are matters within the broad discretion of the trial court.92 "If an appellate panel cannot
ascertain what reasons prompted a trial court's ruling, it is impossible to determine
89 Appellant's Br. at 3.
90 See Air Serv I, slip op. at 8-9.
91 Appellant's Br. at 49.
92 Cascade Brigade v. Econ. Dev. Bd. for Tacoma-Pierce County, 61 Wn. App.
615, 619, 811 P.2d 697(1991).
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No. 74928-5-1/23
whether the ruling is based on untenable grounds or is manifestly unreasonable."93
Here, however, a plain reading of the trial court's order on remand reveals the trial
court's reasoning for imposing sanctions and demonstrates that the trial court followed
the Air Serv 1 court's direction to provide more specificity in the findings leading to the
award of sanctions.
First, the trial court detailed the documents filed in violation of CR 11 and
described the specific deficiencies of each document.94 Second, the court specified
how FSS failed to obey the trial court's discovery order.95 Third, the court specified the
topics that FSS failed to prepare for in its deposition.96 Fourth, the court identified the
improper certification of discovery responses and explained its basis for determining
how FSS and/or its counsel knew the responses to be false.97 Fifth, the court specified
which declarations filed by FSS in support of its summary judgment motion were made
in bad faith." Sixth, the court detailed that statements made regarding the whereabouts
of a certain witness and statements made regarding prior proceedings were either
inaccurate or misleading.99 Finally, the court explained precisely how FSS violated
each local court rule.103
93 Dexter v. Spokane County Health Dist., 76 Wn. App. 372, 377, 884 P.2d 1353(1994).
94 CP at 2530-33 11 27.
95 CP at 2533 11 28.
96 CP at 2533-34 1129.
97 CP at 2534 11 30.
98 CP at 2534-35 11 31.
99 CP at 2535 1132.
100 CP at 2535-36 If 33.
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No. 74928-5-1/24
Similarly, the record supports numerous FSS discovery violations. First, FSS
failed to submit proper supplemental responses and produce documents requested by
Air Serv after being ordered by the trial court to do so.101 Second, FSS failed to prepare
for numerous designated topics at its deposition.102 The trial court recognized FSS's
failure to come prepared to its deposition and ordered FSS to submit to another
deposition, which FSS refused to attend.103 Third, FSS and its counsel violated CR
26(g), as the record demonstrates FSS and its counsel knew or should have known that
their verifications to discovery responses were in violation of the rule.104 Fourth, FSS
witness John Kim admitted at trial that his previously filed declaration contained false
statements, and he provided testimony to demonstrate that the declaration of FSS
witness Robert P. Weitzel was misleading.105 Therefore, substantial evidence supports
the trial court's sanctions pursuant to CR 56(g). Finally, the record contains substantial
evidence to support the finding that FSS failed to comply with the trial court's local rules,
which FSS does not challenge on appea1.1°6
FSS also argues "sanctions are not permitted here since [Air Serv]failed to
provide advance notice to FSS of its intent to seek sanctions" pursuant to CR 26(i).107
101 S CP at 359-61,1614-18, 2275-84, 2296-98, 2303-04.
102 See CP at 2295-96, 2303.
103 See CP at 1537.
1 S
" CP at 359, 2295, 2304.
105 RP (June 24, 2013) at 242-43, 248-49; see also CP at 2304-05.
106 S CP at 2299-300; see also Demelash v. Ross Stores, Inc., 105 Wn. App.
508, 527, 20 P.3d 447(2001)("We generally will not review an issue, theory or
argument not presented at the trial court level. The purpose of this rule is to afford the
trial court an opportunity to correct errors, thereby avoiding unnecessary appeals and
retrials." (citation omitted)).
107 Appellant's Br. at 58.
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No. 74928-5-1/25
Because FSS failed to raise this issue before the trial court, we decline to consider it.
Regardless, Air Sent did provide FSS notice of many of its violations."
Finally, FSS claims the trial court did not conduct a lodestar analysis in assessing
attorney fees and costs. Because the amended findings reflect that the trial court
calculated a lodestar analysis, FSS's claim fails.
IV. BIAS
As in Air Sent 1, FSS argues the trial judge exhibited bias and therefore, if this
court remands, it should be to a new judge." But remand is not appropriate, and FSS
fails to establish bias. "Litigants 'must submit proof of actual or perceived bias to
support an appearance of impartiality claim.'-no
V. APPELLATE COSTS
Air Sent requests an award of attorney fees and costs on appea1.111 Air Sent
argues this court "should award Air Sent its fees and costs as FSS appeals the trial
court's award of fees on issues relating to discovery."112 Air Sent relies on Washington
Motorsports Limited Partnership v. Spokane Raceway Park, Inc.113 But in Washington
Motorsports, "the sole reason" for the appeal was "the discovery violation that led to the
108 See CP at 366-67, 1614-15; RP (June 25, 2013) at 378-85.
109 See Air Sent 1, slip op. at 17.
113 GMAC v. Everett Chevrolet, Inc., 179 Wn. App. 126, 154, 317 P.3d 1074(2014)(quoting Magana v. Hyundai Motor Am., 141 Wn. App. 495, 523, 170 P.3d 1165(2007), rev'd on other grounds, 167 Wn.2d 570, 220 P.3d 191 (2009)).
111 See RAP 18.1.
112 Respondent's Br. at 48.
113 168 Wn. App. 710, 282 P.3d 1107(2012).
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No. 74928-5-1/26
sanction of attorney fees against counsel."114 Here, the discovery sanction was not "the
sole reason" for FSS's appeal.
Air Serv also requests an award of attorney fees under RAP 18.9 for a frivolous
appeal. An appeal is frivolous where it presents no debatable issues or legitimate
arguments for an extension of law.115 While FSS presents several issues on appeal
that are not supported by the facts or the law, it also presented some debatable issues.
Accordingly, we conclude Air Serv is not entitled to attorney fees and costs on appeal.
Affirmed.
WE CONCUR:
cik c•fj,C=C—
114 Id. at 719.
115 Harrington v. Pailthorp, 67 Wn. App. 901, 913, 841 P.2d 1258 (1992).
26