Defendant lender challenged the sufficiency of the evidence in the verdict from the Superior Court of Sonoma County (California), that found defendant liable for its denial to provide promised long-term loans in plaintiff stockholder and cross-complainant borrower’s fraud action, and awarded damages later reduced by remittitur. Plaintiff and cross-complainant sought to reinstate the full amount awarded by the jury. After the conclusion of the parties closing statements, the jurors were presented with civil jury instructions.
Overview
Plaintiff stockholder and cross-complainant borrower instituted a fraud action against defendant lender for its denial to provide promised long-term financing to cross-complainant’s business. The jury found in favor of plaintiff and cross-complainant and awarded compensatory and punitive damages. The trial court granted defendant’s motion for a new trial, conditioned on plaintiff’s and cross-complainant’s acceptance of a remittitur. The remittitur was accepted. Defendant sought review and argued that there was insufficient evidence to support the finding of fraud. Plaintiff and cross-complainant sought to reinstate the full damage award. The appellate court found that cross-complainant’s misguided expectation of long-term financing failed to satisfy the element of justifiable reliance for a fraud action. Moreover, there was no causal connection between plaintiff’s damages and defendant’s alleged promise of long-term financing. The appellate court reversed the trial court’s judgment because there was insufficient evidence for the jury finding of an implied promise by defendant to lend money or the essential requirement of justifiable reliance by plaintiff or cross-complainant.
Outcome
The appellate court reversed the trial court’s judgment in favor of plaintiff stockholder and cross-complainant borrower because there was insufficient evidence for the jury finding of an implied promise by defendant lender to provide long-term financing or the essential requirement of justifiable reliance by plaintiff or cross-complainant. The appellate court dismissed plaintiff and cross-complainant’s cross-appeals as moot.
Procedural Posture
Plaintiff buyer filed suit against defendant sellers, alleging they sold equipment that was the source of a patent infringement claim against the buyer by a third party. The Superior Court of Santa Clara County, California, sustained the sellers’ demurrers, finding, inter alia, insufficient facts to state a cause of action for fraud or unfair competition and lack of subject matter jurisdiction on a breach of contract claim. The buyer appealed.
Overview
The buyer argued that its claims were erroneously dismissed because they were properly brought in state court and stated viable causes of action. The court was not convinced that the claims based on the parties’ purchase contracts had to be adjudicated in federal court pursuant to 28 U.S.C. § 1338(a). It was not necessary to determine whether the buyer actually infringed the patent of the third party, an entity not involved in the present action. If the matter went to trial, the central question would be only whether the sellers breached the contract with the buyer, which turned upon a judicial construction of the purchase orders in dispute and the application of contract law to the specific facts surrounding the controversy. Accordingly, the contract-based causes of action could proceed in state court. The buyer did not allege that any defendant made a representation that was incomplete or misleading; it did not assert concealment of material facts known or accessible only to the sellers; and it did not claim active concealment preventing discovery of the litigation. The cause of action for unfair competition could not be sustained on the allegations of the complaint.
Outcome
The court reversed the trial court’s judgment and remanded the matter for further proceedings solely on the contract-related causes of action.