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Elite Power, Inc., et al v. Steven K. Zinnel

February 9, 2012


(Super. Ct. No. 34200900046504CUBTGDS)

The opinion of the court was delivered by: Raye , P. J.

Elite Power v. Zinnel



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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

A bitter falling-out between business partners resulted, as it often does, in lengthy, acrimonious legal action. Eventually, plaintiffs Elite Power, Inc., and Walter Zacharias (sometimes collectively Elite) filed a malicious prosecution action against defendant Steven K. Zinnel. In response, Zinnel filed an anti-SLAPP motion, which the trial court denied. On appeal, Zinnel, proceeding in pro. per., challenges the trial court's denial of his motion. We shall affirm the judgment.*fn1


The Split Between the Parties

Zacharias worked for Zinnel in a business called Hi-Voltage Wire Works, Inc. (Hi-Voltage), founded in 1987. In 2001 the pair began discussions about forming a new company and shutting down Hi-Voltage. Zinnel and Zacharias discussed the ownership, structure, and possible customer base of the new company. Once the new company was established, Hi-Voltage would shut down. According to Zacharias, Zinnel, in forming the new company, sought to hide assets from his soon to be ex-wife.

In September 2001 Zinnel and Zacharias entered into an agreement to establish the new business. Subsequently, Zacharias decided not to participate in the new venture because it would defraud Zinnel's ex-wife.

Zacharias formed Elite Power, Inc., after leaving Hi-Voltage. Zinnel accused Zacharias of taking Hi-Voltage's property and employees with him to Elite.

First Action

In November 2002 Zinnel, sole officer, director, and shareholder of Hi-Voltage, filed suit in the company's name against Zacharias and 15 other defendants, including Zinnel's ex-wife and former Hi-Voltage employees. (Hi-Voltage Wire Works, Inc. v. Zacharias (Super. Ct. Sacramento County, 2007, No. 02AS07030).) The complaint, subsequently amended four times, alleged Zacharias formed Elite by stealing millions of dollars worth of equipment, accounts, and other assets from Hi-Voltage.

Hi-Voltage alleged 20 causes of action against defendants: breach of fiduciary duty, usurpation of corporate opportunity, misappropriation of trade secrets, conversion, constructive trust, injunctive relief, unfair business practices, accounting, unfair solicitation, concealment of competitive plans, organization of a competing business, intentional interference with contractual relations, intentional or negligent interference with prospective economic advantage, trade libel, civil conspiracy, defamation, fraud, negligent misrepresentation, negligence, and appointment of a receiver. The first action sought over $3 million in damages, plus punitive damages and injunctive relief.

Second Action

A few years later Zinnel filed a second action in his own name against many of the defendants named in the first action. (Zinnel v. Zacharias (Super. Ct. Sacramento County, dism. 2008, No. 05AS05785).) In the second action, based on the same facts as the first, Zinnel alleged 12 causes of action, including tortious interference with contract, intentional interference with prospective economic advantage, conversion, constructive trust, breach of written contract, breach of implied covenant of good faith and fair dealing, breach of non-compete covenant, breach of fiduciary duty, defamation-slander, fraud, appointment of receiver, and alter ego. The second action requested the same relief as the first. Subsequently, Zinnel dismissed Elite Power from the second action.

Termination of First Action

The first action went to trial. Following a series of dismissals and motions, only five causes of action went before the jury.

In its special verdict, the jury found Zacharias did not usurp corporate opportunities, solicit employees, conceal his plans, or make misrepresentations. In addition, the jury concluded defendants did not convert any property or interfere with any contract. Finally, the jury determined Hi-Voltage was aware of Zacharias's intent to start a new business.

Zacharias pleaded the affirmative defenses of illegality and unclean hands; those defenses were bifurcated and determined by the court. The trial court found Zinnel was the sole shareholder of Hi-Voltage, which was heading toward bankruptcy. Zinnel was also in the midst of an acrimonious divorce proceeding. In 2001 Zinnel entered into partnership with Zacharias to start Elite in order to hide assets from his then wife. Subsequently, Zinnel misled his wife's attorneys regarding the nature of his assets, and Zinnel and Hi-Voltage were alter egos.

The court found Hi-Voltage guilty of unclean hands: "Mr. Zinnel made plans to shut down Hi-Voltage in 2001, stating at the time it was heading toward bankruptcy. Mr. Zinnel agreed with Mr. Zacharias to form Elite Power, Inc. with the intent of not disclosing the new corporation to his then wife. Mr. Zinnel's actions were motivated by a desire to limit assets that would be disclosed and available to his then wife. Mr. Zinnel and Hi-Voltage, Inc., although legally distinct as individual and entity, were for all other purposes one and the same. Significantly, Mr. Zinnel directed Mr. Zacharias to shut down Hi-Voltage, Inc. even though there were no minutes or corporate formalities associated with such a drastic and fatal act. For all intents and purposes, Mr. Zinnel utilized the corporate shield at his convenience and opportunity. He now wishes to continue that design even though it is clear that his efforts with Hi-Voltage, Inc. in the second half of 2001 were improper and designed for secrecy. Finally, the Court would be remiss if it did not recognize that Mr. Zinnel's testimony was lacking in credibility on numerous key points. His responses were often evasive and his memory appeared to suffer from convenience. [¶] The Court will not countenance such actions." The court sustained the affirmative defenses to the breach of fiduciary obligation, interference with contract, and fraud causes of action.

Voluntary Dismissal of Second Action

As discovery continued in the second action, Zinnel moved for a protective order to prevent defense counsel from taking his deposition. Zinnel stated defense counsel had previously intimidated him and he did not feel safe being in the same room with him. Following the court's denial ...

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