The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW FOLLOWING BENCH TRIAL; ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL RECONSIDERATION; AND ORDER FOR ENTRY OF JUDGMENT
After most of the issues in this case had been disposed of, the Court held a bench trial on the sole claim remaining, the first amended complaint's first claim for relief. That claim was for money Plaintiff Thomas Hubbard believed he was owed under an amended consulting agreement. The Court allowed some amendments of claims and defenses at trial, on terms it considered just. Hubbard also sought reconsideration, in part, of an earlier decision. He asks that the Court adjust its ruling by awarding damages the Court had found were subsumed within payments Hubbard already received. The Court ordered briefing on Hubbard's ex parte application, and is now prepared to rule.
Phil Pace and Jeff Loya were dismissed as Defendants at the summary judgment stage, but their actions still form part of the fact pattern of the claim at trial and they now own Phil's. Both appeared at trial, and Pace testified.
Findings of Fact and Conclusions of Law
Hubbard's claim is that his original consulting agreement was modified based on new duties he was going to have to undertake (in connection with opening of a restaurant). His pay was to increase from $3333.33/month to $8333.33 per month, and Defendants in fact began paying him this higher amount. Phil's*fn1 stopped paying him, although he says he stood ready to continue with his consulting work. There is no dispute Phil's started paying him at the higher rate beginning in June, 2007, and that the last check Phil's wrote to him was in November of 2008 (for his work in October). Hubbard kept working anyway, without pay, into the early part of 2009. He took a new job out of the region beginning April 1, 2009, and filed this action two weeks later.
What is in dispute is (1) whether the consulting agreement was validly amended; (2) whether Hubbard adequately performed his consulting work-or whether, as Phil's argues, his work was inadequate so he had to be replaced; and (3) if Hubbard is owed money, how much he is owed.
The Court announced its findings, conclusions, and reasoning from the bench, and those are incorporated here by reference.
The Court finds that Hubbard's consulting agreement was validly modified. The amended shareholder agreement and the board of directors' minutes ratifying the directors' earlier actions serve as written evidence of that, and other evidence presented at trial showed this agreement was in force. These writings don't set forth all the specifics of the amendment, but they do show an amendment was contemplated in consideration for additional efforts by Hubbard, and that such an amendment was made. Although the higher amount Hubbard was to be paid for his additional efforts wasn't specified in these writings, it is capable of objective determination, based on the increased amount Hubbard was actually paid. See Forde v. Vernbro Corp., 218 Cal.App.2d 405, 407--08 (Cal. App. 2 Dist., 1963) (contractual terms such as price can be objectively determined).
In the alternative, the Court finds that the parties orally amended the consulting agreement, and actually began carrying it out. The consulting agreement included a clause forbidding oral modifications. But under California law, a party to a contract can waive contractual terms, including a "no oral modification" clause. See Davidson v. ConocoPhillips Co., 2009 WL 2136535 at *4 (N.D.Cal., July 10, 2009) (citing Biren v. Equality Emergency Medical Group, Inc., 102 Cal. App. 4th 125, 141 (Cal. App. 2 Dist. 2002)). There was adequate evidence to support a waiver of this clause. For example, Phil's paid Hubbard at the higher rate from June, 2007 to November, 2008. Phil's would not have increased his pay so dramatically unless Defendants intended to waive the clause.
Hubbard's last payment for work he did for Phil's was in November of 2008, for work he did in October. Phil's then breached the amended consulting agreement by failing to pay him at all in December, for work done during November, and it paid him nothing thereafter.
The amended consulting agreement limited Hubbard's outside employment somewhat, but it didn't forbid outside restaurant consulting work altogether. Sizzler, because it was outside Phil's territory and a different type of restaurant, was not a competitor of Phil's for purpose of the agreement. While Hubbard was not contractually barred from working for Sizzler as well as Phil's, the Court finds that as a practical matter he could not work for both. The evidence also showed that Hubbard had met his contractual obligations to Phil's until he began working for Sizzler on April 1. The Court does not agree with Defendants' position that his work was of such low quality or performed in bad faith so as to damage Phil's. It is clear there was increasing suspicion and acrimony among the various parties, and particularly between Hubbard and Pace. But the Court does not find Phil's is entitled to any kind of offset for any poor work or malfeasance by Hubbard, or that any of this amounted to a breach of the consulting agreement by him. If his work had been insufficient, he could and should have been given notice and an opportunity to cure; but instead, Phil's merely stopped paying him. The Court therefore finds Hubbard's consulting work for Phil's ceased on March 31, 2009.
Hubbard argued that as soon as Defendants breached, he was entitled to the full value of the contract; in other words, he should be paid his full salary for the full term of the consulting agreement even after he took a consulting job with Sizzler. He also argued that, because the consulting agreement didn't prevent him from working for Sizzler, the money he earned for consulting work there should not offset damages caused by Defendants' breach. Defendants, on the other hand, ask the Court to give them credit for the higher salary he earned at Sizzler by using the increased salary to offset earlier amounts Phil's owed him but never paid. Neither of these approaches is correct.
Hubbard was obligated to attempt to mitigate damages, and when he obtained a similar position with Sizzler that paid him more than he earned for Phil's, he successfully mitigated. The approach Hubbard suggests would effectively eliminate the mitigation requirement, and is not adequately supported by the evidence. Although Hubbard's contract did not preclude him from taking other employment, it did restrict his outside employment somewhat. As a practical matter, the time demands of both jobs would have prevented him from working for Phil's and Sizzler at the same time. Hubbard might have been able to take on some consulting work elsewhere while working for Phil's, but the demands of his work for Sizzler wouldn't have permitted him to work for Phil's too. Because he began working for Sizzler April 1, 2009 and earned more than he would have at Phil's, the Court finds Phil's does not owe him for consulting on or after that date. He worked at Sizzler through the remainder of the term set forth in the amended consulting agreement.
Defendants' approach represents an improper attempt to offset past losses with money Hubbard earned later for other work. One problem with this approach is that Hubbard could potentially have been working for Sizzler beginning in November, 2008 if he had known Phil's was going to stop paying him for work he did during that month and afterwards. Instead of going unpaid from November, 2008 through April, 2009, he could have been earning a higher salary the entire time. A second and related problem is that Defendants' approach inequitably confers a benefit on them at Hubbard's expense. Phil's got, and benefitted from, Hubbard's labor from November, 2008 through April, 2009 without paying him anything. Now they ask the Court to apply Hubbard's own wages to ...