Pick Three...

Eng v. Brown, No. D071773 (D4d1 Mar. 22, 2018)

Appellant in this case violated a rule of thumb that applies to appealing an adverse civil judgment in California: It does not matter how many times the trial court messed up, absent extraordinary circumstances, an appellant should pick, at most, the three best issues to raise on appeal and concentrate on them. If a reversal isn’t in the cards on your top three issues, the chances that it could be on issues six or seven are fleetingly slim. Plus, when too many issues are raised, the word limits on the briefs lead to underdeveloped arguments that aren’t very convincing.

In this case—a business dispute over a busted up joint venture to run a restaurant in San Diego’s Gaslamp Quarter—plaintiff raises nine issues. As tends to happen in these throw-everything-at-the-wall-type appeals, the Court dutifully marches through them on the way to an affirmance. On the upside, however, there are some interesting issues raised there that usually don’t make it into anyone’s top three, so the appellant’s loss is all of our education.

I’m not really in the mood to go into all of the ins and outs of the partnership dispute here. Suffice it to say, like many partnership disputes, it’s pretty messy. 

But a key thing to understand the procedural disputes on appeal is that the parties’ dealings started out as an oral common law partnership. And then an S-corporation was formed, maybe under different terms. Plaintiff contended that the partnership survived the incorporation. Defendants contested that a partnership was ever formed, and in any event that the incorporation effectively subsumed the partnership and the legal relations entailed in it. The jury found that a partnership did, in fact, exist, but that it terminated on the formation of the corporation.

As the Court explains in an introductory section, in this situation, we’re dealing with something called “supersession,” which is an affirmative defense to partnership-based claims. The defendant bears the burden of showing the incorporation of an entity to conduct the business of the partnership. If it does, there’s a presumption that the partnership terminated. The burden then shifts back to the plaintiff to show that the parties nonetheless had a pre-incorporation agreement that the partnership and its obligations would persist, notwithstanding the incorporation. 

Now that we’ve learned something about partnership law, on to the procedural issues...

First, Plaintiff appeals two motions in limine: (1) for a finding that a partnership had been formed as a matter of law; and (2) for an order excluding any evidence that it was superseded by the incorporation. 

(1) sounds more like a summary judgment motion or partial directed verdict than an in limine. And even if an in limine motion was appropriate procedurally, since there was some evidence to dispute that all the elements of a common law partnership were proven, Plaintiff wasn’t entitled to that kind of ruling.

Plaintiff’s argument in (2) is based on the fact that Defendants didn’t plead supersession as an affirmative defense. The trial court denied the motion on the basis that supersession was not an affirmative defense. Although that was error, once the evidence started coming in, the court figured out its mistake on the burden issue and permitted Defendants to amend their answer to add it. So even had it correctly assessed the burden issue on the in limine motion, it wouldn’t have made any difference.

Next, Plaintiff argues it was error to let Defendants amend to plead supersession. No doubt, the amendment happened late—during trial. But Code of Civil Procedure § 576 permits amendments “after commencement of trial.” Irrespective of the dispute about who bore the burden of proof, Defendants consistent position throughout the litigation was that the corporation superseded whatever partnership might have existed. Defendants argued the point on summary judgment and it was subject to ample discovery. Given that consistency, there’s no prejudice to Plaintiff to permitting the late amendment, particularly given that the need to plead was caused by the trial court’s late recognition that supersession was, in fact, an affirmative defense.

Third, Plaintiff says he was entitled to a directed verdict on the supersession defense. But as noted, Defendant’s burden on this point was only to prove that a corporation had, in fact, been formed to take over the pre-incorporation business. Because that shifted the burden back to plaintiff to show that the parties agreed to continue the partnership, Defendants had no obligation to offer any affirmative evidence of an agreement specifically to terminate the partnership. And although Plaintiff offered some evidence of an agreement for the partnership to continue post-incorporation, that evidence wasn’t so strong that any reasonable jury would have required to believe it. 

Fourth and fifth, Plaintiff argues that the court should have instructed the jury that Defendants were required to prove that the parties specifically intended that the corporation supersede and terminate the partnership. Plaintiff also wanted an instruction on specific intent. But, as we just addressed, that’s not an entirely correct statement of the law, so the trial court wasn’t required to give instructions on it.

Sixth, Plaintiff objects to the way the trial court handled a juror question during deliberations. The jury had asked if all corporations are partnerships, to which the court responded by referring the jury back to the instructions. Plaintiff suggests a few ways the response could have been better. But he didn’t make those suggestions to the trial court, so he forfeits this argument for appeal. And in any event, the statement of the law in the referenced instruction was correct.

Seventh, Plaintiff appeals the trial court’s refusal to permit him to amend his complaint during trial to bring a breach of fiduciary duty claim in his capacity as a corporate stockholder, as opposed to partner. Unlike Defendant’s amendment, this was a new theory, and it was based on facts that had been known since the beginning of the litigation. Moreover, the trial court didn’t deny the amendment; it took it under submission pending the evidence at trial. By the end of the trial, Plaintiff had moved on and conceded in connection with a directed verdict motion that it was not claiming a corporate duty theory. At which time the trial court denied the amendment based on the concession. That wasn’t error.

Eighth, Plaintiff challenges the denial of a motion to exclude the testimony of a defense expert under Evidence Code § 352. The theory here seems to be that the testimony was irrelevant because it wasn’t offered to rebut the testimony of any of Plaintiff’s experts. But nothing precludes a party from offering testimony on a topic that its opponent declines to. That doesn’t make the testimony irrelevant.

And finally, Plaintiff claims the trial court wrongfully denied his ex parte application for disclosure of contact information for the jurors under Code of Civil Procedure § 237. Unlike most jurisdictions California law permits a losing party to seek a new trial by impeaching the validity of a civil jury verdict with juror affidavits. In furtherance of that possibility, § 237 provides a means to obtain the contact information for jurors so that they may be interviewed. To obtain the information, the moving party must establish good cause for the disclosure. 

That was not met here, for two reasons. First, Courts have read a diligence requirement into § 237’s good cause standard—a party demanding contact info must show that it made reasonable efforts to contact the jurors without resorting to the court. Plaintiff here didn’t do that, so his request was appropriately denied.

And even had he been diligent, good cause is still lacking. Although a jury verdict can be impeached, the ability to do so is limited by Evidence Code § 1150. Under § 1150, jurors can permissibly testify about overt acts they observed, but they cannot testify about their subjective reasoning in the deliberations. Here, Plaintiff’s stated purpose to interview the jurors was to obtain evidence that they were confused about the jury instructions. That is precisely the kind of subjective testimony that is inadmissible under §1150. So there was no good cause.

Affirmed.