United States District Court, C.D. California
Mighty Enterprises, Inc.
She Hong Industrial Co. Ltd.
Present: The Honorable Jay C. Gandhi, United States
CIVIL MINUTES - GENERAL
(IN CHAMBERS) ORDER DENYING DEFENDANT'S RENEWED MOTION
FOR JUDGMENT AS A MATTER OF LAW AND MOTION FOR A NEW TRIAL
Court is in receipt of: (1) Defendant's renewed motion
for judgment as a matter of law (“JMOL Motion”),
Plaintiff's opposition (“Opp. to JMOL
Motion”), and Defendant's reply (“Reply Re
JMOL Motion”), [see Dkt. Nos. 182, 186, 198,
201]; and (2) Defendant's motion for a new trial or,
alternatively, remittitur (“New Trial Motion”),
Plaintiff's Opposition (“Opp. to New Trial
Motion”), and Defendant's reply (“Reply Re
New Trial Motion”), [Dkt. Nos. 182, 187, 199, 202,
203]. The Court also held a hearing on Defendant's
motions on February 17, 2017. [Dkt. Nos. 204, 205.]
reasons discussed below, Defendant's JMOL Motion and New
Trial Motion are both DENIED.
August 19, 2014, Plaintiff sued Defendant for, inter
alia, breach of oral contract, breach of implied
contract, interference with contractual business relations,
and fraud. [See Dkt. No. 1.]
November 2016, this Court presided over a jury trial in this
matter in which Plaintiff argued each of those claims.
[See Dkt. Nos. 149-150, 153, 156, 158.] On each
claim, Plaintiff bore the burden of proof by a preponderance
of the evidence. Wong Kwai Sing v. Dulles, 265 F.2d
131, 133 n.2 (9th Cir. 1959) (finding that the
“ordinary civil” burden of proof is preponderance
of the evidence).
trial, Defendant requested that its proposed jury
instructions based on California Commercial Code section 2309
be given. [Dkt. No. 155.] The Court denied the request, in
part because it was duplicative of the jointly proposed, and
eventually issued, instruction regarding benefit of the
bargain damages. [Dkt. No. 161 at 28; Dkt. No. 194 at 690.]
four days of evidence and argument, and several hours of
deliberation, the jury returned a verdict for Plaintiff on
all claims, issued a damages award of $6, 203, 000, and also
found that Defendant engaged in malice, oppression or fraud
by clear and convincing evidence. [Dkt. No. 168.] Following
the verdict, the parties proceeded with the punitive damages
phase of the trial. [Dkt. No. 195 at 932:11-16.] Following
arguments by both parties, the jury deliberated and issued a
punitive damages award of $6, 000, 000. [See Dkt.
Nos. 169.] Judgment was entered thereafter. [Dkt. No. 177.]
argues that judgment as a matter of law is warranted because:
(1) Plaintiff did not present sufficient evidence to
establish Defendant's liability for breach of contract
and fraud; and (2) Plaintiff did not present sufficient
evidence to establish the amount of compensatory damages
awarded by the jury. (See generally JMOL Mot.; Reply
Re JMOL Mot.) Relatedly, Defendant also argues that a new
trial is warranted because: (1) the Court allegedly failed to
instruct the jury on California Commercial Code Section 2309;
(2) Plaintiff's expert's testimony was inadmissible,
unreliable, and prejudicial; (3) the jury's verdict was
against the clear weight of the evidence; and (4) the total
damages awarded were excessive and against the clear weight
of the evidence. (See generally New Trial Mot.;
Reply Re New Trial Mot.) Defendant alternatively requests a
remitter on both the compensatory and punitive damages
Court addresses each of these contentions below, and finds
that each lacks merit.
Judgment as a Matter of Law
motion for judgment as a matter of law after the verdict
renews the moving party's prior Rule 50(a) motion for
judgment as a matter of law at the close of all the evidence.
Fed.R.Civ.P. 50(b). Judgment as a matter of law after the
verdict may be granted only when the “evidence and its
inferences, construed as a whole and viewed in the light most
favorable to the nonmoving party, can support only one
reasonable conclusion” as to the verdict. Kern v.
Levolor Lorentzen, Inc., 899 F.2d 772, 775 (9th
Cir.1990). Where there is sufficient conflicting evidence, or
if “reasonable minds could differ over the verdict,
” judgment as a matter of law after the verdict is
improper. See Air-Sea Forwarders, Inc. v. Air Asia
Co., 880 F.2d 176, 181 (9th Cir.1989) (internal citation
and quotation marks omitted).
when the sufficiency of the evidence is questioned and is the
basis of a Rule 50(b) motion, the inquiry is whether there
was “substantial evidence” in favor of the
jury's verdict. Janes v. Wal-Mart Stores, Inc.,
279 F.3d 883, 888 (9th Cir.2002). Substantial evidence is
“evidence adequate to support the jury's
conclusion, even if it is also possible to draw a contrary
conclusion from the same evidence.” Johnson v.
Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1227
(9th Cir. 2001).
New Trial and Remittitur
Federal Rule of Civil Procedure 59(a), a federal court may
grant a new jury trial for “grounds that have been
historically recognized.” Zhang v. Am. Gem.
Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003). In
other words, “[t]he trial court may grant a new trial
only if the verdict is contrary to the clear weight of the
evidence, is based upon false or perjurious evidence, or to
prevent a miscarriage of justice.” Passantino v.
Johnson & Johnson Consumer Prods., 212 F.3d 493, 510
n.15 (9th Cir. 2000). Notably, “a district court may
not grant a new trial simply because it would have arrived at
a different verdict.” Silver Sage Partners, Ltd. v.
City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir.
deciding a motion for a new trial, “the district court
may, in its discretion, grant the motion and order a new
trial . . . or deny the motion and reinstate the judgment . .
., or grant a remittitur with the alternative of a new trial
if the remittitur is not complied with.” Milhouse
v. Travelers Commercial Ins. Co., 982 F.Supp.2d 1088,
1093 (C.D. Cal. 2013) (internal citation and quotation marks
omitted), aff'd, 641 F. App'x 714 (9th Cir.
2016). A motion for remittitur of a jury verdict is subject
to the same standard as a motion for new trial under FRCP 59.
Morris v. Walgreen Oshkosh, Inc., 2016 WL 1704320,
at *3 (D. Or. Apr. 28, 2016), appeal dismissed
(Sept. 20, 2016). If the Court “decides to offer the
option of a remittitur, the jury's verdict should be
reduced to the maximum amount sustainable by the
proof.” Milhouse, 982 F.Supp.2d at 1093
(internal citation and quotation marks omitted).
Neither Judgment as a Matter of Law Nor a New Trial is
Warranted on the Grounds that Plaintiff Failed to Present
Sufficient Evidence for Breach of Contract
There was Substantial Evidence of a Breach of
claims that: (1) “[Plaintiff] failed to show that the
alleged exclusive distributorship agreement even existed, as
there was no meeting of the minds”; (2) “there
was insufficient evidence to show that [Plaintiff] provided
adequate consideration to [Defendant] for its
exclusivity”; and (3) there is a “lack of
evidence that [Defendant] terminated [Plaintiff].”
(JMOL Mot. at 4, 9.)
rule, the elements of a breach of oral contract claim are the
same as those for a breach of written contract: a contract;
its performance or excuse for nonperformance; breach; and
damages. Stockton Mortg., Inc. v. Tope, 233
Cal.App.4th 437, 453 (2014). Relatedly, “[a] cause of
action for breach of implied contract has the same elements
as does a cause of action for breach of contract, except that
the promise is not expressed in words but is implied from the
promisor's conduct.” Yari v. Producers Guild of
Am., Inc., 161 Cal.App.4th 172, 182 (2008). Notably,
“[u]sage or custom may be looked to, both to explain
the meaning of language and to imply terms, where no contrary
intent appears from the terms of the contract.”
Howard Entm't, Inc. v. Kudrow, 208 Cal.App.4th
1102, 1114 (2012) (internal citation and quotation marks
as Defendant admits, “[Plaintiff] produced evidence
showing that [Defendant] referred to [Plaintiff] as its
exclusive dealer in the United States.” (JMOL Mot. at
5.) Specifically, according to the testimony of Peter Tsai
(“Mr. Tsai”), Plaintiff's founder and CEO:
(1) he and Defendant's founder, Joseph Chen (“Mr.
Chen”), agreed in 1987 that “Defendant will build
machinery and not sell to any other people in the USA market,
” and “Plaintiff will . . . only bring
[Defendant's] machine and not . . . [those] from any
other competitor”; (2) in 2003, Mr. Chen told him that
Plaintiff had an “exclusive relationship” with
Defendant; and (3) in the same year, Mr. Chen told him that
the relationship between the two companies “will be
running for” another 20 years. [Dkt. No. 189 at
141:13-15, 142:10-24; 160:9-14.] There was also documentary
evidence of the exclusivity arrangement, such as: (1) a 2013
email from Mr. Chen to one of Plaintiff's dealers, in
which Mr. Chen states that “[Plaintiff] is our formal
exclusive dealer in USA, ” [id. at 159:1-10;
Dkt. No. 200-2 at 2]; and (2) a 2013 email from Daniel Lu
(“Mr. Lu”), sales manager for Defendant, to Mr.
Tsai, in which Mr. Lu says “[Plaintiff] is our
exclusive dealer in USA (whole territory), ” [Dkt. No.
189 at 160:15-161:21; Dkt. No. 200-3 at 17]. As such, there
was substantial evidence of an exclusive distributorship
agreement (“Distribution Agreement”) between the
was also evidence of a contract term governing the manner in
which a party could terminate. Specifically: (1) Mr. Tsai
testified that pursuant to the “machine tool industry
in the United States” and the Distribution Agreement
between Plaintiff and Defendant, Defendant would have to buy
back the equipment it previously sold to Plaintiff if it
wished to terminate, [Dkt. No. 189 at 143:7-144:14]; (2)
Plaintiff's Vice President of Marketing, Bo Jean
(“Mr. Jean”), testified that it was customary for
the seller of machinery/equipment to buy back its equipment
from the buyer/dealer if the seller intended to terminate the
business relationship, [Dkt. No. 192 at 496:11-497:13]; (3)
Mr. Tsai testified that, in 2010, he told Mr. Lu that
Defendant would have to buy back “all the
inventory” and “outstanding machines” if it
wanted to terminate the Distribution Agreement, [Dkt. No 190
at 279:8-280:3]; (4) Mr. Tsai further testified that Mr. Lu
did not object to such a condition, [id. at
280:4-7]; and (5) Mr. Lu confirmed that Mr. Tsai had told him
in a 2010 email that Defendant could terminate only after it
bought back the machinery and parts in Plaintiff's
possession, [Dkt. No. 191 at 355:3-7].
was also evidence that, in consideration of these terms,
Plaintiff was prohibited from selling the same kind of
machines that it was getting from Defendant. [Dkt. No. 189 at
142:16-24 (testimony of Mr. Tsai).] Furthermore, Plaintiff
was required to install the machines at their customers'
premises, honor warranty and service obligations, and
maintain a trained service staff and parts department.
[Id.; Dkt. No. 190 at 299:10-300:12 (testimony of
Andrew Chen, son of Mr. Chen and Defendant's current
chairman), 319:2-14 (testimony of Mr. Lu); Dkt. No. 192 at
443:8-18 (testimony of Alex Tseng (“Mr. Tseng”),
Defendant's sales specialist).]
Plaintiff presented evidence in support of its claim that
Defendant terminated the Distribution Agreement.
Specifically, Defendant's representative emailed Mr. Jean
and Mr. Tsai on June 23, 2014, and imposed onerous conditions
on Plaintiff (i.e., limitation of sales to 10 U.S.
states and a prohibition on selling “other
Taiwan[-]brand[-]assembled center machines”). [Dkt. No.
192 at 526:1-10; Dkt. No. 200-4 at 9.] The jury could have
inferred that such terms constructively terminated the
Distribution Agreement because adherence to them would have
effectively put Plaintiff out of business. [Dkt. No. 189
at184:21-185:13 (Mr. Tsai's testimony that Plaintiff
would have had to give up half of its revenue as a result,
and that Defendant was “trying to kill us and take
everything away”); Dkt. No. 192 at 526:1-527:1 (Mr.
Jean's testimony that Plaintiff would have had to
sacrifice “way more” than “half of [its]
revenue” if it complied with such conditions).]
Plaintiff presented evidence indicating that Defendant
breached the agreement. Importantly, and preliminarily,
although “[Defendant] had the right to terminate
[Plaintiff] as its exclusive domestic distributor, ”
there was evidence that “[Defendant] breach[ed] the
agreement by the way it terminated the agreement.”
(Opp. to JMOL Mot. at 15.) For example, Plaintiff presented
evidence that from 2013 to 2014, Defendant attempted to
solicit not just other distributors in the United States, but
more specifically, Plaintiff's dealers. [Dkt. No. 189 at
177:15-181:9; Dkt. No. 191 at 345:4-23, Dkt. No. 192 at
444:5-14, 484:17-485:14, 522:15-523:7; Dkt. No. 200-3 at
23-24]; (see also Section III.A.2., infra).
Based on this evidence, the jury could have inferred that
such actions violated the aforementioned exclusivity term and
the implied covenant of good faith and fair dealing. See
Boland, Inc. v. Rolf C. Hagen (USA) Corp., 685 F.Supp.2d
1094, 1103 (E.D. Cal. 2010) (“[I]n the context of an
oral contract . . . the scope of the implied duty must be
determined by the trier of fact.”). Also, the fact that
Defendant did not buy back the inventory it sold to Plaintiff
could have been construed as a breach of the aforementioned
termination terms. [Dkt. Nos. 191 at 355:9-12; 193 at
there is evidence that, as a result of Defendant's breach
of the Distribution Agreement's terms, Plaintiff suffered
the following damages described by Plaintiff's damages
expert, Jason Engel (“Mr. Engel”), and confirmed
by Mr. Jean: (1) costs of repairing and repurchasing
defective machines; and (2) costs of purchasing and keeping
machines/parts inventory with marginal value. [See
Dkt. No. 193 at 542:14-543:17, 545:11-546:2, 546:11-547:6];
(see also Section III.B., infra).
the jury's verdict that Defendant breached the terms of
the Distribution Agreement is supported by substantial
evidence and not contrary to the clear weight of the
There was Substantial Evidence of Fraud
also claims that there was insufficient evidence of fraud
because: (1) Plaintiff was aware of Defendant's intention
to find another distributor; (2) Defendant had no duty to
disclose its intention to commit tortious interference to
Plaintiff; and (3) Plaintiff did not present any evidence of
a fiduciary relationship with ...