Opinion
NOT TO BE PUBLISHED
APPEALS from a judgment of the Superior Court of San Diego County, Jeffrey B. Barton, Judge. Super. Ct. No. GIC824250
McDONALD, J.
Defendants Soco, LLC (Soco), Rieker Shoe Corporation (Rieker), and America West Properties, Inc., (AWP) appeal a judgment after the jury found them liable in the action of plaintiff Freestyle Martial Arts Corporation (Freestyle) for breach of contract (against Soco) and intentional inducement of breach of contract (against Rieker and AWP). On appeal, Rieker and AWP contend: (1) there is insufficient evidence to support the jury's finding that they are liable for intentional inducement of breach of contract; and (2) they are entitled to judgment because the manager's privilege applies to their conduct as a matter of law. Soco and Rieker contend the trial court erred by rejecting their request for an instruction on the propriety of their counsel's meeting with witnesses in the absence of Freestyle's counsel. All three defendants contend there is insufficient evidence to support the jury's finding on Freestyle's damages.
Although the complaint and judgment identify AWP as "America West Properties, LP," AWP represents in its answer and appellate briefs that its true legal name is America West Properties, Inc. For purposes of this appeal, we will presume AWP's representation is correct. However, because AWP apparently did not file a motion in the trial court to correct its name in the judgment, we presume the judgment remains binding on America West Properties, LP.
FACTUAL AND PROCEDURAL BACKGROUND
In 1994 Darren Kikuchi, doing business as USA Freestyle Karate, entered into an agreement (Lease) with DRR Properties, Inc., to lease about 2,190 square feet of space in the Loma Plaza shopping center in San Diego. The lease term was three years five months, with an option for Kikuchi to extend the term for an additional three years. The Lease provided that Kikuchi use the premises for a martial arts school, and included an exclusive use clause, which provided:
"Landlord grants to Tenant that Landlord will not lease within the subject shopping center to any tenant whose authorized use clause (or portion of same) is described as the operation of a martial arts studio." (Italics added.)
In 1997 Kikuchi entered into a first amendment of the Lease with Loma Plaza, L.P., (successor-in-interest to DRR Properties, Inc.) extending the lease term for five years six months (i.e., through February 2003), with an option for Kikuchi to extend the term for an additional five years.
In two phases between 1996 and 1998, Loma Plaza, L.P., transferred to Soco its ownership of the Loma Plaza shopping center. In 1997 Soco entered into an agreement with AWP pursuant to which AWP agreed to manage and maintain the Loma Plaza shopping center for Soco.
Soco has no employees. Rieker is Soco's managing member and supervises Soco's property investments, including the Loma Plaza shopping center.
Rieker supervises AWP's management of the Loma Plaza shopping center.
In or about November 2000, Kikuchi and Soco (successor-in-interest to Loma Plaza, L.P.) executed an assignment of the Lease pursuant to which Kikuchi assigned his interest in the Lease to Freestyle, a corporation he formed earlier that year. The assignment provided that:
"13. LEASE REMAINS IN FULL FORCE: Except as expressly modified hereby, all other terms and provisions of the Lease (a) shall remain in full force and effect and are hereby ratified; (b) are incorporated herein by this reference; and (c) shall govern the conduct of the parties hereto . . . ."
In or about May 2003, Freestyle and Soco entered into a second amendment of the Lease extending the lease term for three years (i.e., through May 2006), with two options for Freestyle to extend the term for an additional three years each (i.e., through May 2009 and through May 2012). The second amendment provided that: "Except as expressly modified or amended herein, each and all terms, conditions, covenants and provisions of the Lease shall remain in full force and effect."
In or about December 2002, Soco retained CB Richard Ellis, Inc., (CB) as its leasing broker to obtain tenants for vacant space in the Loma Plaza shopping center, including the former Blockbuster space.
On October 22, 2003, Bradley Jones, a CB leasing agent, received an e-mail from Kyle Clark, the leasing agent representing The Boxing Club (TBC), in which Clark stated TBC was looking for spaces for its franchisees to lease. Clark's e-mail stated: "The Boxing Club is a fitness facility offering authentic boxing and kickboxing training regimens for people of all fitness levels." Jones immediately forwarded Clark's e-mail to Eric Strauss at AWP with a comment that "[t]he former Blockbuster suite would be ideal for these guys . . . ." Strauss apparently told Gorrod at Rieker of TBC's interest and soon thereafter negotiations with J & B Boxing (JB), a TBC franchisee, began for JB's lease of the vacant Blockbuster space. In or about late November, a proposed lease for JB's occupancy of that space was prepared, describing JB's use of the space to be "for the operation of a boxing and fitness facility." On December 3, Clark sent Jones an e-mail with JB's comments on that proposed lease, including modification of the use provision to read: " 'boxing and kickboxing personal defense/fitness facility.' " (Italics added.) Jones forwarded that e-mail to Gorrod and Strauss. Gorrod and Strauss discussed the expanded use requested by JB. Strauss told Gorrod he saw no conflict and Gorrod stated he had no problem with it.
On December 8, a lease was executed between Soco and JB pursuant to which JB leased the former Blockbuster space (consisting of about 5,435 square feet) for a term of five years four months, with two options for JB to extend the lease for five years each (i.e., through April 2019 were both options exercised). That lease provides that JB use the premises solely "for the operation of a boxing and kickboxing personal defense/fitness facility." (Italics added.)
During the first week of January 2004, Kikuchi learned JB had leased the former Blockbuster space when he saw JB's TBC banner announcing it was "coming soon" and would be offering extreme fitness, boxing, and kickboxing. Also at about this time, one of Freestyle's instructors told Kikuchi he had been offered a job there. Kikuchi immediately called Strauss at AWP to express his concern that JB would put Freestyle out of business and that JB's use would conflict with Freestyle's exclusive use under the Lease. Strauss told Kikuchi not to worry about it, explaining JB was merely a health and fitness club. On January 7, Kikuchi sent Strauss a letter noting their conversation and quoting the exclusive use clause in the Lease. His letter further stated Freestyle's position that JB "will interfere with our business due to the fact [it] will be having martial arts classes such as boxing, kickboxing, and similar classes," which use would violate the Lease's exclusive use clause. JB opened for business in February.
Apparently in January 2004, Freestyle filed the instant action against Soco, Rieker, and AWP. In May, Freestyle filed its second amended complaint against those defendants. Prior to trial, the trial court ruled that because the Lease's exclusive use clause was ambiguous, the parties could present extrinsic evidence on its meaning and scope. The trial court ruled on the defendants' in limine motions and nonsuit motions after the presentation of evidence at trial and Freestyle amended its allegations to state causes of action for breach of contract against Soco and intentional inducement of breach of contract against Rieker and AWP. After deliberating for less than two hours, the jury returned a special verdict unanimously finding Soco liable for breach of contract and Rieker and AWP liable for intentional inducement of Soco's breach of contract and determining Freestyle's damages to be $522,645.
The record on appeal does not contain a copy of the original complaint.
On June 16, 2005, the trial court entered judgment on the jury's special verdict awarding Freestyle $522,645 in damages against Soco, Rieker, and AWP. On July 21, the court entered an amended judgment additionally awarding Freestyle costs and fees of $223,707.54.
All three defendants timely filed a joint notice of appeal.
DISCUSSION
I
Intentional Inducement of Breach of Contract
Rieker and AWP contend the evidence is insufficient to support the jury's finding that they are liable for intentional inducement of Soco's breach of contract.
Soco, as a party to the Lease, does not challenge the jury's finding that it is liable for breach of the Lease.
A
The elements of a cause of action for intentional inducement of breach of contract, more commonly known as intentional interference with contractual relations, are: "(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage [proximately caused by the defendant's acts]. [Citation.]" (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148.) "Wrongfulness independent of the inducement to breach the contract is not an element of the tort . . . ." (Quelimane Co. v. Stewart Title Guraranty Co. (1998) 19 Cal.4th 26, 55.) Furthermore, the tort "does not require that the actor's primary purpose be disruption of the contract." (Id. at p. 56.) However, the plaintiff "must show the defendant's knowledge that the interference was certain or substantially certain to occur as a result of his or her action. [Citation.]" (Reeves, at p. 1148.) Therefore, "[i]f the [defendant] had no knowledge of the existence of the contract or his actions were not intended to induce a breach, he cannot be held liable though an actual breach results from his lawful and proper acts. [Citations.]" (Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 37.) Nevertheless, "[i]ntent, of course, may be established by inference as well as by direct proof." (Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 767, overruled on another ground in Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 88.)
On the elements of Freestyle's causes of action against Rieker and AWP for intentional interference with contractual relations, the trial court instructed with CACI 2200 as to Rieker and AWP: "[Freestyle] must prove all of the following: [¶] 1. That there was a contract between [Soco] and [Freestyle]; [¶] 2. That [Rieker/AWP] knew of the contract; [¶] 3. That [Rieker/AWP] intended to cause [Soco] to breach the contract; [¶] 4. That [Rieker/AWP] caused [Soco] to breach the contract; [¶] 5. That [Freestyle] was harmed; and [¶] 6. That [Rieker/AWP]'s conduct was a substantial factor in causing [Freestyle]'s harm." Neither Rieker nor AWP contends that the trial court erred in so instructing the jury.
B
When an appellant challenges the jury's findings based on insufficient evidence to support those findings, we apply the substantial evidence standard of review. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053, superseded by statute on another ground as noted in DeBerard Properties, Ltd. v. Lim (1999) 20 Cal.4th 659, 668; Thompson v. Tracor Flight Systems, Inc. (2001) 86 Cal.App.4th 1156, 1166.) In applying the substantial evidence standard of review, we "view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor . . . ." (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.) "It is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment. Even in cases where the evidence is undisputed or uncontradicted, if two or more different inferences can reasonably be drawn from the evidence[,] this court is without power to substitute its own inferences or deductions for those of the trier of fact, which must resolve such conflicting inferences in the absence of a rule of law specifying the inference to be drawn. . . . [Citations.]" (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631.) "[E]ven if the judgment of the trial court is against the weight of the evidence, we are bound to uphold it so long as the record is free from prejudicial error and the judgment is supported by evidence which is 'substantial,' that is, of ' "ponderable legal significance," ' ' "reasonable in nature, credible, and of solid value . . . ." ' [Citations.]" (Ibid.) The testimony of a single witness may constitute substantial evidence. (In re Marriage of Mix (1975) 14 Cal.3d 604, 614.) Nevertheless, substantial evidence " 'is not synonymous with "any" evidence.' " (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.)
"Moreover, we defer to the trier of fact on issues of credibility. [Citation.] '[N]either conflicts in the evidence nor " 'testimony which is subject to justifiable suspicion . . . justif[ies] the reversal of a judgment, for it is the exclusive province of the [trier of fact] to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends.' " [Citations.] Testimony may be rejected only when it is inherently improbable or incredible, i.e., " 'unbelievable per se,' " physically impossible or " 'wholly unacceptable to reasonable minds.' " [Citations.]' [Citation.]" (Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 968.)
"Inferences may constitute substantial evidence, but they must be the product of logic and reason. Speculation or conjecture alone is not substantial evidence. [Citations.]" (Roddenberry v. Roddenberry, supra, 44 Cal.App.4th at p. 651.) Furthermore, " '[w]here different inferences may reasonably be drawn from undisputed evidence, the conclusion of the jury or trial judge must be accepted by the appellate court.' " (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 301.) "The ultimate test is whether it is reasonable for a trier of fact to make the ruling in question in light of the whole record. [Citation.]" (Roddenberry, at p. 652.)
C
Rieker. Rieker asserts the evidence is insufficient to support the jury's findings on the second and third elements of Freestyle's cause of action for intentional inducement of Soco's breach of the Lease: (1) knowledge of the Lease's exclusive use clause; and (2) intentionally acting to induce Soco's breach of that clause (i.e., knowledge its (Rieker's) acts were certain or substantially certain to cause Soco to breach that clause).
Based on our review of the record, we conclude there is substantial evidence to support the jury's finding Rieker knew of the Lease and its exclusive use clause. Gorrod, Rieker's vice president, testified that Rieker was Soco's managing member and supervised Soco's property investments, including the Loma Plaza shopping center. He further testified that the original copies of the Lease and other Loma Plaza shopping center leases were kept in his office in Florida. Gorrod, on behalf of Rieker, was involved in Soco's lease negotiations with JB. Although Gorrod testified at trial that during those negotiations he did not have any discussions with anyone regarding the exclusive use clause in the Lease, he was not asked, and did not testify, whether he knew of the Lease's exclusive use clause at the time JB's lease was negotiated.
We conclude that in the circumstances of this case the jury could reasonably infer that Rieker had the requisite knowledge of the Lease's exclusive use clause because Gorrod had the original Lease (which included the exclusive use clause) in his files, supervised (on behalf of Rieker) Soco's investment in and AWP's management of the Loma Plaza shopping center, and was directly involved in the negotiation of JB's lease. Based on the record in this case, it can be reasonably inferred Gorrod/Rieker was aware of the exclusive use clause in the Lease at the time JB's lease was negotiated. Although Strauss (not Gorrod) testified he did not review the Lease's exclusive use clause at the time JB's lease was negotiated, the jury could have either disbelieved that testimony or concluded Strauss's testimony did not disprove its reasonable inference that Gorrod was aware of that clause at the time of the lease negotiations with JB. Furthermore, assuming Gorrod and Strauss did not discuss the Lease's exclusive use clause at the time JB's lease was negotiated, that lack of discussion does not disprove a reasonable inference that Gorrod/Rieker nevertheless knew of that clause. Accordingly, we conclude there is substantial evidence to support the jury's finding that Rieker knew of the Lease's exclusive use clause at the time JB's lease was negotiated.
Likewise, the testimonies of Strauss and Kikuchi regarding their January 2004 (i.e., after the JB lease negotiations) discussion of the Lease's exclusive use clause do not, as discussed in more detail below, necessarily disprove that Strauss, or Gorrod/Rieker, had knowledge of that clause at the time JB's lease was negotiated.
In reaching our conclusion we do not rely on Wells Fund I v. Shoe Show of Rocky Mount, Inc. (Tenn.App. 1993) 863 S.W.2d 731, cited by Freestyle as support for the jury's finding. In that case, the court concluded that when a defendant knows of a lease, "he is on notice as to the terms of the [lease] and has a duty to learn whether his actions will cause [a party to the lease] to breach his agreement." (Id. at p. 733.) Rather than concluding a party (or other defendant) is, as a matter of law, charged with knowledge of the terms of a contract of which it has possession or knowledge, we simply conclude the jury in the circumstances of this case could reasonably infer Rieker, in fact, had actual knowledge of the Lease's exclusive use clause.
Based on our review of the record, we also conclude there is substantial evidence to support the jury's finding Rieker intentionally acted to induce Soco's breach of the Lease's exclusive use clause (i.e., knew its acts were certain or substantially certain to cause Soco to breach that clause). At trial, Freestyle had the burden to show by a preponderance of the evidence that Rieker knew "that the interference [with the Lease] was certain or substantially certain to occur as a result of [its] action. [Citation.]" (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1148.) The record shows that the initial draft of JB's lease limited its use of the former Blockbuster space to "the operation of a boxing and fitness facility." JB then requested that its authorized use be expanded to include kickboxing and personal defense. During Gorrod's discussion with Strauss regarding that requested expansion, Gorrod told Strauss he saw no problem with that expanded use for JB. Accordingly, the final draft of JB's lease, as signed by JB and Soco, provided that JB's authorized use was "for the operation of a boxing and kickboxing personal defense/fitness facility." (Italics added.)
We are not persuaded by Freestyle's argument that Rieker waived this contention by citing evidence only in its favor.
However, as we concluded above, the jury reasonably inferred Gorrod (on behalf of Rieker) was aware at the time JB's lease was negotiated that the Lease granted Freestyle the exclusive right to be the only "martial arts studio" in the Loma Plaza shopping center. An original copy of the Lease was kept in Gorrod's office in Florida. Furthermore, Gorrod, on behalf of Rieker (Soco's managing member), supervised Soco's investment in and AWP's management of the Loma Plaza shopping center. At trial, Gorrod admitted that when he was asked at his deposition whether kickboxing is a martial art, he answered: "Possibly, yes." Accordingly, on the record in this case the jury could reasonably infer Gorrod, and therefore Rieker, were aware kickboxing is a martial art and thus included in the Lease's exclusive use clause. Despite that knowledge, Gorrod, on Rieker's behalf, during negotiation of JB's lease approved JB's request to expand its authorized use to include both kickboxing and personal defense. The jury could have reasonably inferred that had Gorrod informed Soco (or JB) of this conflict between the Lease's exclusive use clause and JB's request to expand its authorized use, Soco would not have entered into the lease allowing JB to use its space for kickboxing and personal defense, and therefore would not have breached the Lease's exclusive use clause. Accordingly, the jury reasonably inferred that Rieker knew its acts were certain or substantially certain to cause Soco to breach the Lease's exclusive use clause. Therefore, there is substantial evidence to support the jury's finding Rieker intentionally acted to induce Soco's breach of the Lease's exclusive use clause. (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1148.)
On redirect examination by Freestyle's counsel, Gorrod was asked if he knew "whether kickboxing is a martial [art]." Gorrod replied: "It may be, but . . . I couldn't define martial arts."
Although Rieker cites Gorrod's testimony that at the time he negotiated JB's lease he believed Freestyle's "business was karate for kids" as proof it had no knowledge of the Lease's exclusive use clause, we concluded above that the jury reasonably inferred Rieker knew of that exclusive use clause at that time. Furthermore, although Gorrod testified he believed JB was a fitness facility, that testimony does not disprove or refute the jury's reasonable inference that Gorrod's approval of JB's expanded authorized use to include kickboxing, a martial art, was certain or substantially certain to result in Soco's breach of the Lease's exclusive use clause. Assuming arguendo JB (and its broker) told Gorrod (or Soco's broker) that JB was a fitness facility, the jury could have reasonably concluded the description "fitness facility" was sufficiently broad to not preclude the offering of kickboxing or other martial arts classes. Furthermore, the jury could have reasonably concluded the express language in JB's lease authorizing its use of the space for kickboxing and personal defense essentially superseded any previous limitation of its use as only a fitness facility.
Similarly, although JB apparently represented to Rieker and others during lease negotiations that it was a fitness facility that uses boxing and kickboxing training regimens, that representation did not preclude the jury's reasonable inference that the expansion of JB's authorized use to include kickboxing and personal defense conflicted with and resulted in Soco's breach of the Lease's exclusive use clause.
D
AWP. AWP asserts the evidence is insufficient to support the jury's findings on the second, third and fifth elements of Freestyle's cause of action for intentional inducement of Soco's breach of the Lease (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1148): (1) knowledge of the Lease's exclusive use clause; (2) intentionally acting to induce Soco's breach of that clause (knowledge its (AWP's) acts were certain or substantially certain to cause Soco to breach that clause); and (3) proximately causing Soco's breach of that clause and damage to Freestyle.
Based on our review of the record, we conclude there is substantial evidence to support the jury's finding AWP knew of the Lease and its exclusive use clause. At trial, Strauss testified he was a co-owner of AWP and managed AWP on a daily basis. In 1997 Soco entered into an agreement with AWP pursuant to which AWP agreed to manage and maintain the Loma Plaza shopping center for Soco. Strauss testified that he had copies of all Loma Plaza shopping center leases (e.g., the Lease) in his files. Furthermore, when AWP began managing the Loma Plaza shopping center, Strauss created an abstract of the Lease. That abstract set forth the "main terms" of the Lease. However, Strauss's abstract of the Lease left blank (i.e., unanswered) the question of whether the Lease had an exclusive use clause. At trial, Strauss could not explain why he left it blank. Strauss, on behalf of AWP, was involved in Soco's lease negotiations with JB. Although Strauss testified at trial that during those negotiations he did not have any discussions with Gorrod or anyone else regarding the exclusive use clause in the Lease, he was not asked, and did not testify, whether he knew of the Lease's exclusive use clause at the time JB's lease was negotiated.
At trial, Strauss admitted Freestyle had an exclusive use clause in the Lease. However, that testimony appeared to be based on Strauss's knowledge at the time of trial rather than at the time of the lease negotiations with JB.
We conclude that in the circumstances of this case the jury could reasonably infer AWP had the requisite knowledge of the Lease's exclusive use clause because Strauss had a copy of the Lease (which included the exclusive use clause as quoted above) in his files, created an abstract of the Lease's main terms, managed (on behalf of AWP) for Soco the Loma Plaza shopping center, and was directly involved in the negotiation of JB's lease. Based on the record in this case, it can be reasonably inferred Strauss/AWP was aware of the exclusive use clause in the Lease at the time JB's lease was negotiated. Although Strauss testified he did not review the Lease's exclusive use clause at the time JB's lease was negotiated, the jury could have either disbelieved that testimony or concluded Strauss's testimony did not disprove its reasonable inference that he was, in fact, aware of that clause at the time of the lease negotiations with JB (i.e., Strauss was aware of the exclusive use clause prior to negotiations with JB and therefore knew of that clause without concurrently reviewing the Lease during negotiations with JB). Furthermore, assuming Strauss and Gorrod did not discuss the Lease's exclusive use clause at the time JB's lease was negotiated, that lack of discussion does not disprove a reasonable inference that Strauss/AWP nevertheless knew of that clause.
Likewise, the testimonies of Strauss and Kikuchi regarding their January 2004 discussion of the Lease's exclusive use clause after the JB lease negotiations do not necessarily disprove that Strauss/AWP had knowledge of that clause at the time JB's lease was negotiated. At trial, Strauss testified regarding his conversation with Kikuchi after Kikuchi learned JB had leased the former Blockbuster space and would be offering kickboxing classes. Strauss testified that, in response to Kikuchi's complaint that JB's use would violate Freestyle's exclusive use right, he told Kikuchi that Freestyle did not have "an exclusive use, exclusive use for a fitness club." At trial, Kikuchi testified that during the January 2004 conversation when he (Kikuchi) told Strauss Freestyle had an exclusive use clause, Strauss replied that Freestyle did not have an exclusive use clause. Kikuchi then told Strauss Freestyle did have an exclusive use clause and he (Strauss) should read the Lease. Kikuchi then heard Strauss "fumbling" and cabinets opening. Strauss then got back on the telephone and stated: " 'Well, you have an exclusive use for a martial arts school.' " Strauss explained that JB was a health and fitness facility and told Kikuchi to not worry. Based on the record, the jury could have reasonably inferred from Strauss's and Kikuchi's testimonies (together with other trial evidence) that Strauss did, in fact, know of the Lease's exclusive use clause. It could have interpreted Strauss's testimony as essentially an admission that he was aware of Freestyle's right to be the exclusive martial arts studio because Strauss told Kikuchi it did not have an exclusive use for a fitness club. Furthermore, assuming the jury believed Kikuchi's version of that January 2004 conversation with Strauss, we conclude that version is not necessarily inconsistent with a conclusion Strauss did, in fact, know of the Lease's exclusive use clause at the time of the JB lease negotiations. For example, it is possible the jury could have interpreted Strauss's ostensible or expressed ignorance of that clause as intentionally "feigned" so as to mislead Kikuchi into believing he (Strauss) and AWP did not know of that clause at the time the JB lease was negotiated. We conclude there is substantial evidence to support the jury's finding that AWP knew of the Lease's exclusive use clause at the time JB's lease was negotiated.
The testimonies of Strauss and Kikuchi regarding their January 2004 conversation do not necessarily show Strauss had no knowledge of the Lease's exclusive use clause during negotiations of JB's lease prior to January 2004. Rather, the jury could have found credible both of their testimonies regarding that conversation, but nevertheless rationally concluded Strauss's ostensible or expressed ignorance of that clause during that conversation did not disprove his knowledge of it during negotiations of JB's lease. In other words, the jury was not required to find credible Strauss's extrajudicial, unsworn statements (or actions) during the January 2004 conversation that purportedly showed his ignorance of the exclusive use clause.
Based on our review of the record, we also conclude there is substantial evidence to support the jury's finding AWP intentionally acted to induce Soco's breach of the Lease's exclusive use clause (i.e., knew its acts were certain or substantially certain to cause Soco to breach that clause). At trial, Freestyle had the burden to show by a preponderance of the evidence that AWP knew "the interference [with the Lease] was certain or substantially certain to occur as a result of [its] action. [Citation.]" (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1148.) The record shows that on October 22, 2003, Strauss received from Soco's leasing agent an e-mail from TBC/JB's leasing agent, stating TBC was looking for retail spaces for its franchisees to lease and further stating: "The Boxing Club is a fitness facility offering authentic boxing and kickboxing training regimens for people of all fitness levels." (Italics added.) Following negotiations with JB, an initial draft of JB's lease limited its use of the former Blockbuster space to "the operation of a boxing and fitness facility." JB then requested that its authorized use be expanded to include kickboxing and personal defense. Strauss received a copy of an e-mail setting forth JB's requested expansion of its authorized use. During Strauss's discussion with Gorrod regarding that requested expansion, Strauss told Gorrod he did not see "any conflict" that would arise from the expanded use for JB. Accordingly, the final draft of JB's lease, as signed by JB and Soco, provided that JB's authorized use was "for the operation of a boxing and kickboxing personal defense/fitness facility." (Italics added.) However, as we concluded above, the jury reasonably inferred Strauss (on behalf of AWP) was aware at the time JB's lease was negotiated that the Lease granted Freestyle the exclusive right to be the only "martial arts studio" in the Loma Plaza shopping center. A copy of the Lease was kept in Strauss's office. Strauss even had created an abstract of the Lease, summarizing its main terms (albeit leaving blank an indication whether it had an exclusive use clause). In managing the Loma Plaza shopping center on AWP's (and Soco's) behalf, Strauss had visited the shopping center about twice a month since 1997.
We are not persuaded by Freestyle's argument that AWP waived this contention by citing evidence only in its favor.
As discussed above, Gorrod, in turn, told Strauss he had no problem with that expanded use.
On the record in this case, the jury could reasonably infer Strauss, and therefore AWP, were aware kickboxing is a martial art and thus included in the Lease's exclusive use clause. Despite that knowledge, Strauss, on AWP's behalf, during negotiation of JB's lease informed Gorrod (on behalf of Rieker) that he saw "no conflict" arising from JB's request to expand its authorized use to include both kickboxing and personal defense. The jury could have reasonably inferred that had Strauss informed Gorrod (or Soco or JB) of the conflict between the Lease's exclusive use clause and JB's request to expand its authorized use, Soco would not have entered into the lease allowing JB to use its space for kickboxing and personal defense and therefore would not have breached the Lease's exclusive use clause. Accordingly, the jury reasonably inferred that AWP knew its acts were certain or substantially certain to cause Soco to breach the Lease's exclusive use clause. There is substantial evidence to support the jury's finding AWP intentionally acted to induce Soco's breach of the Lease's exclusive use clause. (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1148.)
The jury could have reasonably concluded Strauss knew kickboxing is a martial art despite his denial at trial that he was "proficient in martial arts." Based on Strauss's twice monthly visits to the Loma Plaza shopping center, the jury could have reasonably inferred he had regularly visited Freestyle's space and observed its classes, including kickboxing classes. Furthermore, at Strauss's deposition he testified he had seen TBC's website and noticed TBC (and presumably JB, its franchisee) taught kickboxing.
Finally, based on our review of the record, we also conclude there is substantial evidence to support the jury's finding AWP's conduct was a substantial cause of Soco's breach of the Lease's exclusive use clause. As the trial court correctly instructed, Freestyle was required to prove by a preponderance of the evidence that "[AWP's] conduct was a substantial factor in causing [Freestyle]'s harm." (Italics added.) In the jury's special verdict, it expressly found that AWP's conduct was a substantial factor in causing harm to Freestyle. A cause of action for intentional interference with contractual relations "require[s] the plaintiff to prove causation. [Citations.]" (Franklin v. Dynamic Details, Inc. (2004) 116 Cal.App.4th 375, 391.) To prove causation, the plaintiff must show the defendant's conduct is " 'a substantial factor in bringing about an injury, damage, loss or harm.' [Citations.]" (Ibid.) "The substantial factor standard is a relatively broad one, requiring only that the contribution of the individual cause be more than negligible or theoretical." (Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 978.) Therefore, "a force which plays only an 'infinitesimal' or 'theoretical' part in bringing about injury, damage, or loss is not a substantial factor. [Citation.]" (Id. at p. 969.) However, "a very minor force that does cause harm is a substantial factor [citation]." (Bockrath v. Aldrich Chemical Co. (1999) 21 Cal.4th 71, 79, italics added.)
"The substantial factor standard generally produces the same results as does the 'but for' rule of causation which states that a defendant's conduct is a cause of the injury if the injury would not have occurred 'but for' that conduct. [Citations.] The substantial factor standard, however, has been embraced as a clearer rule of causation--one which subsumes the 'but for' test while reaching beyond it to satisfactorily address other situations, such as those involving independent or concurrent causes in fact. [Citations.]" (Rutherford v. Owens-Illinois, Inc., supra, 16 Cal.4th at p. 969.)
Freestyle was not required to show AWP was the only cause of Freestyle's harm. Therefore, although the jury also found Gorrod, on Rieker's behalf, also knew of the Lease's exclusive use clause at the time JB's lease was negotiated but did not inform Soco (or Strauss/AWP) of that clause or its conflict with JB's expanded authorized use (and therefore Rieker's conduct was a substantial factor in causing Soco's breach), the jury nevertheless reasonably concluded Strauss/AWP's conduct was also a substantial factor in causing Soco's breach of the Lease. The jury could have reasonably inferred that had Strauss/AWP informed Soco (or Gorrod, Rieker, or JB) of the Lease's exclusive use clause and Soco's potential breach thereof by entering into a lease with JB with the expanded use provision, Soco would not have entered into the lease with JB. In fact, the record shows Strauss, on behalf of AWP, expressly informed Gorrod/Rieker that he did not see any conflict arising out of the expanded authorized use clause requested by JB. Although AWP argues Gorrod/Rieker made the final decision that JB's expanded use provision did not conflict with the Lease's exclusive use clause, that does not prove Strauss/AWP's conduct in not informing other involved parties of that potential conflict, and instead affirmatively informing Gorrod/Rieker there was no conflict, could not have been a substantial factor in causing Soco's breach of that clause. The fact there may have been other factors (e.g., Rieker's conduct) that may have also been substantial factors in causing Freestyle's harm does not show AWP's conduct could not also have been a substantial factor. The substantial factor standard allows for independent or concurrent causes in fact. (Rutherford v. Owens-Illinois, Inc., supra, 16 Cal.4th at p. 969.) AWP's conduct was not necessarily negligible or insignificant in Soco's decision to enter into the lease with JB. We conclude there is substantial evidence to support the jury's finding that AWP's conduct was a substantial factor in causing Soco's breach of the Lease and resultant damage to Freestyle.
II
Manager's Privilege
Rieker and AWP contend they are entitled to judgment because, as a matter of law, the manager's privilege applies to their conduct.
A
In Olivet v. Frischling (1980) 104 Cal.App.3d 831 (disapproved on another ground in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521, fn. 10), the court described the manager's privilege:
"The privilege to induce an otherwise apparently tortious breach of contract is extended by law to further certain social interests deemed of sufficient importance to merit protection from liability. Thus, a manager or agent may, with impersonal or disinterested motive, properly endeavor to protect the interests of his principal by counseling the breach of a contract with a third party which he reasonably believes to be harmful to his employer's best interests. [Citation.]" (Olivet, supra, at pp. 840-841, fn. omitted.)
"The scope of the manager's privilege, as developed under California's common law since Olivet v. Frischling was decided, is neither clear nor consistent. [Citation.]" (Huynh v. Vu (2003) 111 Cal.App.4th 1183, 1195.) "There are three formulations of the manager's privilege: (1) absolute, (2) mixed motive, and (3) predominant motive." (Halvorsen v. Aramark Uniform Services, Inc. (1998) 65 Cal.App.4th 1383, 1391.) The "predominant motive" formulation, applied in the circumstances of Huynh, "is the most restrictive, granting a manager the privilege of interfering with a principal's contract only when the manager's predominant motive is to serve the interest of the principal. [Citation.]" (Huynh, at pp. 1195, 1198.)
B
Freestyle asserts that because neither Rieker nor AWP raised the defense of the manager's privilege at trial, they have waived that defense and cannot now raise it on appeal. Generally, an affirmative defense of privilege to a cause of action for intentional interference with contractual relations must be specifically pleaded in the defendant's answer and, if not so pleaded, will be deemed waived. (Mayes v. Sturdy Northern Sales, Inc. (1979) 91 Cal.App.3d 69, 80 ["The affirmative defense of privilege [to cause of action for intentional interference with contractual relations] was not asserted and therefore is deemed waived."], disapproved on another ground in Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 521, fn. 10; Code Civ. Proc., § 431.30, subd. (g); cf. A. F. Arnold & Co. v. Pacific Professional Ins., Inc. (1972) 27 Cal.App.3d 710, 714-715 [affirmative defense of justification to cause of action for intentional interference with prospective economic advantage must be pleaded by defendant in answer and proved at trial]; Tschirky v. Superior Court, supra, 124 Cal.App.3d at p. 538 ["The general rule is that a privilege must be pleaded as an affirmative defense."]; Philbrick v. Huff (1976) 60 Cal.App.3d 633, 644 ["[D]efendants waived the bar of the [affirmative defense of the] statute of limitations by failing to plead it in an appropriate pleading . . . ."]; Minton v. Cavaney (1961) 56 Cal.2d 576, 581 [same].) Because neither Rieker nor AWP raised the affirmative defense of the manager's privilege in its answer, they are deemed to have waived that privilege and cannot now raise it on appeal.
However, if the existence of a privilege is shown on the face of the complaint, it need not be pleaded in the answer and may be raised on demurrer or in a motion for summary judgment. (Cruey v. Gannett Co. (1998) 64 Cal.App.4th 356, 367; Tschirky v. Superior Court (1981) 124 Cal.App.3d 534, 538.)
Although the answers of Rieker and AWP to Freestyle's second amended complaint raised the affirmative defense that their conduct "was justified or privileged under the circumstances alleged" in that complaint, their answers did not specifically raise the manager's privilege as an affirmative defense. In any event, neither Rieker nor AWP raised that privilege on demurrer, in a motion for summary judgment, or at trial. Therefore, they have waived that privilege for purposes of appeal.
In a similar vein, we further conclude Rieker and AWP cannot raise the manager's privilege on appeal because that defense is raised for the first time on appeal. "New theories of defense . . . may not be asserted for the first time on appeal. [Citation.]" (Bardis v. Oates (2004) 119 Cal.App.4th 1, 14, fn. 6.) In Pool v. City of Oakland (1986) 42 Cal.3d 1051, the Supreme Court addressed a similar situation in which the defendant did not raise at trial the defense of a merchant's statutory privilege to detain a customer. (Id. at p. 1065.) Because the defendant neither raised that argument nor requested jury instructions on that defense at trial, the court concluded that defense "may not be raised for the first time on appeal. [Citations.]" (Pool v. City of Oakland, supra, 42 Cal.3d at pp. 1065-1066.) In the circumstances of this case, because Rieker and AWP did not argue or assert the manager's privilege at trial and did not request jury instructions on that defense, they waived that defense and it may not be raised on appeal. Furthermore, based on the record in this case, Rieker and AWP cannot reasonably argue there could have been no controverted facts for the jury to decide regarding their qualification for the manager's privilege. Because the defense of the manager's privilege was not raised at trial, Freestyle had no reason to discover or introduce evidence that arguably would have shown Rieker's and AWP's predominant motive was not to serve Soco's interests. (Huynh v. Vu, supra, 111 Cal.App.4th at pp. 1195, 1198.) Furthermore, as the manager's privilege is an affirmative defense, it would have been Rieker's and AWP's burden to prove by a preponderance of the evidence that they were entitled to that defense (had they raised it at trial). Therefore, we cannot conclude on this record that Rieker and AWP showed the facts were undisputed that they were entitled to the manager's privilege as a matter of law.
AWP argues the trial court had a sua sponte duty to instruct on the defense of the manager's privilege. However, the trial court did not have that duty. "Whereas in criminal cases a court has strong sua sponte duties to instruct the jury on a wide variety of subjects, a court in a civil case has no parallel responsibilities. A civil litigant must propose complete instructions in accordance with his or her theory of the litigation and a trial court is not 'obligated to seek out theories [a party] might have advanced, or to articulate for him that which he has left unspoken.' [Citations.]" (Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1686.) The trial court here did not err by not sua sponte instructing on the defense of the manager's privilege.
Assuming arguendo the facts are undisputed and show Rieker and AWP qualified for the manager's privilege as a matter of law, we nevertheless decline to exercise our discretion to consider that question of law because it is raised for the first time on appeal. We have discretion whether to consider an issue of law or theory not raised at trial. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 24 ["[T]he Court of Appeal had discretion to address the issue [of law] even though it had not been raised in the trial court."]; Canaan v. Abdelnour (1985) 40 Cal.3d 703, 722, fn. 17, overruled on another ground in Edelstein v. City and County of San Francisco (2002) 29 Cal.4th 164, 183; Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1297; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (Rutter Group 2006) ¶ 8:272, p. 8-151 (rev. #1 2006).) Appellate courts are more inclined to exercise their discretion to consider newly raised issues of law on undisputed facts if they involve matters affecting the public interest or the administration of justice. (Bialo v. Western Mutual Ins. Co. (2002) 95 Cal.App.4th 68, 73; Fox v. State Personnel Bd. (1996) 49 Cal.App.4th 1034, 1039; Catchpole v. Brannon (1995) 36 Cal.App.4th 237, 244.) In the circumstances of this case, we decline to exercise our discretion to consider the question whether the defense of the manager's privilege applied. Neither Rieker nor AWP raised that defense theory at trial, depriving Freestyle, the trial court, and the jury of the opportunity to fully address or respond to it. Furthermore, that newly raised issue does not appear to involve compelling matters affecting the public interest or the administration of justice. Rather, it appears to involve merely a matter of tort law (i.e., whether Rieker and AWP are exempt from liability under the manager's privilege for their intentional interference with contractual relations).
III
Jury Instruction on Counsel's Meeting with Witnesses
Soco and Rieker contend the trial court erred by rejecting their request for an instruction on the propriety of their counsel's meeting with witnesses in the absence of Freestyle's counsel.
A
During CB leasing agent Jones's testimony at trial, Freestyle's counsel questioned him on a meeting he had with defense counsel about one week before his testimony. Jones explained the purpose of that meeting was "[j]ust to discuss the status of what is going on, keep me up to speed." Freestyle's counsel then asked Jones: "Did counsel discuss with you that it was improper to meet with you outside the presence of [Freestyle's] counsel?" Counsel for Soco and Rieker did not immediately object to that question or request a curative admonition. Jones answered: "I don't believe that was discussed."
After a lunch break, counsel for Soco and Rieker voiced concerns to the trial court about the question posed to Jones by Freestyle's counsel, arguing that question implied they had acted unethically in meeting with Jones in the absence of Freestyle's counsel. Defense counsel complained:
"At the close of the testimony of Brad Jones this morning, [Freestyle's] counsel inferred [sic] it was improper for a counsel to speak with any witness outside the presence of the other counsel which when [Freestyle's counsel] asked a question of Brad Jones, did counsel inform you that it was inappropriate for them to meet with you outside the presence of [Freestyle's] counsel.
"First of all, this -- the allegation that [Freestyle's counsel] was inferring [sic] is contrary to the law, it's incorrect. There is absolutely no reason that an unrepresented party can't meet with either counsel. [¶] . . . [¶]
"And there is no duty on our [part] to speak with or consult with [Freestyle's counsel] prior to meeting with a witness, and we would like an admonishment to the jury that that's not an improper action for either counsel to take.
"I'm concerned that the question that [Freestyle's counsel] directed to Mr. Jones left the jury with the impression that defense counsel had done something improper when it did not."
The trial court stated:
"I think defense counsel are correct that there is nothing in the law that I'm aware of that would restrict their ability to meet with a third-party witness. The plaintiff is free to [examine] them about that, and the defense is free to [reexamine] on cross about the same subject."
The court then ruled:
"Well, at this time, I would be willing to entertain a special jury instruction from the defendant[s]. I'm not inclined to ad lib one to the jury at this point in time. That can be done. If it's a recurring theme, I'll instruct the jury in the middle of the trial. If it's not a recurring theme, we can include it in the instructions at the end of trial." (Italics added.)
Soco and Rieker's opening brief misstates that ruling, claiming the trial court stated it would rectify the problem with a jury instruction at the end of the trial. As quoted above, the court merely stated it would entertain an instruction offered by the defense.
Thereafter, in questioning at least four other witnesses, Freestyle's counsel elicited testimony that each had met with defense counsel before their testimony. However, the questions posed by Freestyle's counsel to those witnesses did not include any language implying that meetings with defense counsel were improper. Furthermore, counsel for Soco and Rieker did not object to any of those questions.
Soco and Rieker list those other witnesses as Clark (TBC/JB's leasing agent), Ensley Elsbach (JB's manager), Patrick Cox (a representative of the former owner of the Loma Plaza shopping center), and Bradley Weinreb (a co-owner of JB).
Defense counsel and Freestyle's counsel each submitted to the trial court proposed instructions regarding the propriety of counsel's meetings with witnesses. Counsel for Soco and Rieker proposed the following special instruction:
"During the testimony in this case it has been suggested that it was 'inappropriate' for attorneys to have met privately with witnesses before or during trial. This is incorrect. In fact, meeting with witnesses before or even during trial is an essential part of trial preparation, and it is entirely proper for attorneys to meet with witnesses, in private, to discuss the facts of the case and the witness's expected testimony."
As supporting authority for that proposed instruction, counsel for Soco and Rieker cited a civil trials and evidence practice guide. However, the trial court disagreed with that practice guide's commentary regarding counsel's meetings with witnesses. The court agreed with Freestyle's counsel that the instruction proposed by Soco and Rieker contained inappropriate emotive language regarding meetings with witnesses as being an essential ingredient of trial preparation. Accordingly, the court declined to give the special instructions proposed by Soco and Rieker (as well as the special instruction proposed by Freestyle). The court stated: "I don't have an option [i.e., special instruction] before me that works so I think I have to refuse the instruction. . . . I'll put all of them in the refused pile."
B
Soco and Rieker argue the trial court erred by not instructing with one of their proposed instructions on the propriety of their counsel's meeting with witnesses before trial. However, they do not carry their burden on appeal to show that their proposed instructions were correct statements of law and therefore the trial court was required to give them. Although a "party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence" (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572), Soco and Rieker do not show their proposed instructions were correct and nonargumentative. In their opening brief, they present little, if any, substantive legal analysis showing their proposed instructions were correct and nonargumentative. At most, by simply citing language from the practice guide, they appear to presume that guide's commentary presents a correct and nonargumentative statement on applicable law. In so doing, they do not persuade us their proposed instructions were correct and nonargumentative.
Furthermore, a trial court is not required to correct an incomplete or erroneous proposed instruction and may properly refuse to give it. (Truman v. Thomas (1980) 27 Cal.3d 285, 301; Shaw v. Pacific Greyhound Lines (1958) 50 Cal.2d 153, 158; Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1673.) Because the trial court in this case was not required to modify the instructions proposed by Soco and Rieker to constitute correct and nonargumentative instructions, we conclude the court properly refused to give them.
In any event, assuming arguendo the trial court erred by not giving one of the instructions proposed by Soco and Rieker, we nevertheless conclude they have not carried their burden on appeal to show they were prejudiced by that error. "[T]he existence of instructional error alone is insufficient to overturn a jury verdict. A defendant must also show that the error was prejudicial (Code Civ. Proc., § 475) and resulted in a 'miscarriage of justice' (Cal. Const., art. VI, § 13). [Citation.]" (Pool v. City of Oakland, supra, 42 Cal.3d at p. 1069.) Reversal is required only when, after examining the whole record, we are of the opinion it is reasonably probable that a result more favorable to the appellant would have been reached in the absence of the error. (Ibid.; Soule v. General Motors Corp., supra, 8 Cal.4th at p. 570.)
Based on our review of the record, we conclude Soco and Rieker were able to present their full case to the jury and had the opportunity to refute Freestyle's implication in questioning Jones that their counsel improperly met with witnesses before trial. Soco and Rieker's counsel questioned Jones regarding the content of their pretrial meetings with him. Their counsel asked him: "[W]hen we met last week, did I tell you that I wanted you to testify, sir, in a certain way?" Jones answered, "No, you didn't." Their counsel then asked: "Did I ever attempt to try to change your testimony in any way?" Jones answered: "No." Their counsel asked similar questions, and obtained similar answers, from Clark. Therefore, they exercised their opportunity to counter the implication contained in Freestyle's questioning of Jones and Clark. The trial court recognized that, stating: "You cover[ed] that issue on direct and redirect once it arose in the case with every witness." Their counsel agreed with the court. Furthermore, because the jury's finding of Soco's and Rieker's liability appears to have been based primarily on the actions of Gorrod (and the jury's interpretation of the Lease's exclusive use clause and JB's lease) and not the actions of Jones, Clark, Elsbach, Cox, and Weinreb, it is not likely that any negative implication regarding defense counsel's meetings with those five other witnesses had any effect on the jury's verdict.
We disagree with Soco and Rieker's characterization of the testimonies of those five witnesses as "key" testimony on liability and damages.
Also, during closing argument Freestyle's counsel referred to defense counsel's pretrial meeting with Elsbach in arguing the jury should consider the bias and credibility of the defendants' witnesses. He did not argue that Soco and Rieker's counsel acted improperly in meeting with witnesses before trial. In fact, Freestyle's counsel appeared to counter that implication, arguing to the jury:
"I'm not suggesting to you that [defense counsel] told these witnesses what to say on the stand. That's not what I am saying. I'm suggesting to you that they had a lot of discussions and a lot of conversations. They told these witnesses what their view was and many of these witnesses may not have had an opinion before that occurred. So, look at the bias factor when you evaluate the witness, evaluate the credibility of witnesses in this case, please." (Italics added.)
That argument properly asked the jury to question the bias and credibility of defense witnesses. (Evid. Code, § 780, subd. (f); cf. People v. Brown (2003) 31 Cal.4th 518, 544 [a party "is entitled to explore whether a witness has been offered any inducements or expects any benefits for his or her testimony, as such evidence is suggestive of bias."].)
Finally, after less than two hours of deliberations, the jury returned a unanimous (12-0) verdict. That suggests the jury did not consider this case a close one. Also, the record does not show the jury was confused or misled by the absence of the instructions proposed by Soco and Rieker. Based on our review of the whole record, we conclude it is not reasonably probable Soco or Rieker would have obtained a more favorable verdict had the trial court given the instructions proposed by Soco and Rieker's counsel on the propriety of counsel's pretrial meetings with witnesses. (Pool v. City of Oakland, supra, 42 Cal.3d at p. 1069; Soule v. General Motors Corp., supra, 8 Cal.4th at p. 570.)
IV
Sufficiency of the Evidence to Support the Damages Award
All three defendants contend the evidence is insufficient to support the jury's finding on Freestyle's damages. They argue: (1) there is insufficient evidence to support a finding Freestyle's enrollment decrease was because of JB's competition with Freestyle; (2) Freestyle's damages expert relied on unproven assumptions to support his opinion; (3) there is insufficient evidence to support a finding Freestyle and JB will exercise their options to extend their lease terms through May 2012, thereby limiting any award of future lost profits to the period of the Lease's current term (i.e., through May 31, 2006); (4) there is insufficient evidence to support a finding Freestyle lost the same number of children's enrollments as adult enrollments, precluding the jury from doubling the amount of future lost profits from decreased adult enrollments as calculated by Freestyle's expert. We are not persuaded by these arguments and conclude there is substantial evidence to support the jury's damages award.
In reviewing the defendants' challenge to the sufficiency of the evidence to support the jury's damages award, we apply the substantial evidence standard of review, as discussed in part I.B., ante. (Bickel v. City of Piedmont, supra, 16 Cal.4th at p. 1053; Thompson v. Tracor Flight Systems, Inc., supra, 86 Cal.App.4th at p. 1166.)
A
"Lost profits to an established business may be recovered if their extent and occurrence can be ascertained with reasonable certainty; once their existence has been so established, recovery will not be denied because the amount cannot be shown with mathematical precision. [Citations.]" (Berge v. International Harvester Co. (1983) 142 Cal.App.3d 152, 161-162.) The California Supreme Court stated:
"The award of damages for loss of profits depends upon whether there is a satisfactory basis for estimating what the probable earnings would have been had there been no tort. . . . If . . . there has been an operating experience sufficient to permit a reasonable estimate of probable income and expense, damages for loss of prospective profits are awarded. [Citations.] In the present case plaintiff's probable gross receipts could be estimated from its sales in the preceding two years . . . ." (Natural Soda Prod. Co. v. City of L. A. (1943) 23 Cal.2d 193, 199.)
"[E]vidence of lost profits must be unspeculative and in order to support a lost profits award the evidence must show 'with reasonable certainty both their occurrence and the extent thereof.' [Citation.]" (Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 892, 907.) However, a "wrongdoer cannot complain if his own [conduct] creates a situation in which the [jury] must estimate rather than compute. [Citations.]" (Guntert v. City of Stockton (1976) 55 Cal.App.3d 131, 143.)
"[L]ost prospective net profits may be recovered if the evidence shows, with reasonable certainty, both their occurrence and extent. [Citation.] It is enough to demonstrate a reasonable probability that profits would have been earned except for the defendant's conduct. [Citations.] The plaintiff has the burden to produce the best evidence available in the circumstances to attempt to establish a claim for loss of profits. [Citations.]" (S. C. Anderson, Inc. v. Bank of America (1994) 24 Cal.App.4th 529, 536.)
A plaintiff must present "the best evidence . . . [of damages] of which the nature of the case is capable." (Stott v. Johnston (1951) 36 Cal.2d 864, 876.)
B
At trial (in June 2005), Robert Taylor testified as Freestyle's expert on its economic damages. In calculating Freestyle's damages, Taylor reviewed and considered Freestyle's financial statements for 2002 through September 2004, its tax returns for 2001 through 2003, its fee schedules for types of students and programs, the Lease, deposition testimonies of various witnesses (including Freestyle's bookkeeper), discussions with Kikuchi, and statistical information about discount and growth rates. Taylor first calculated Freestyle's damages for past lost profits for the period of January 1, 2004 (when JB began competing with Freestyle) through May 31, 2005 (the day before his testimony). Based on Freestyle's past lost profits, he extrapolated that rate of loss into the future to calculate the present value of lost profits Freestyle would suffer from June 1, 2005, through May 31, 2012 (i.e., the end of the Lease's term, assuming Freestyle would exercise its two options to extend the initial term).
Taylor calculated Freestyle lost about $65,000 in gross revenues during 2004 (the first year JB competed with it). He calculated Freestyle's incremental expenses associated with those lost revenues were about 12 percent of revenues and then added another 5 percent "cushion," for a total expense ratio of 17 percent. Multiplying the remaining incremental profit margin of 83 percent by $65,000 in lost gross revenues, Taylor concluded Freestyle lost $53,950 in net profits during 2004. Based on those 2004 calculations and extrapolating them into 2005, Taylor further concluded Freestyle lost an additional $22,479 in net profits from January 1, 2005 through May 31, 2005. As of the date of his trial testimony, Taylor calculated Freestyle lost a total of $76,429 ($53,950 plus $22,479) in past net profits because of competition from JB from January 1, 2004, through May 31, 2005.
Based on Taylor's calculation of $53,950 in net lost profits for 2004, Freestyle's monthly net lost profits were $4,495.83 (i.e., $53,950 divided by 12 months), or about $4,500. Multiplying $4,500 in monthly net lost profits by the five months of 2005 (January through May), Taylor calculated Freestyle lost $22,479 in net profits from January 1, 2005 through May 31, 2005.
Regarding Freestyle's loss of net profits in the future, Taylor assumed Freestyle would incur lost net profits from June 1, 2005, through May 31, 2012, at the same rate as from January 1, 2004, through May 31, 2005. After factoring in an annual three percent tuition rate increase, he calculated the present value of those future lost net profits to be $223,108. Therefore, Taylor calculated the total of Freestyle's past and future lost net profits to be about $299,500 (i.e., $76,429 plus $223,108). However, Taylor stated that his calculations of Freestyle's lost net profits did not include any loss of child enrollees because JB did not have a children's program in 2004.
Taylor explained that based on his calculation of Freestyle's lost gross revenue for 2004 of $65,000 and its average annual tuition of $1,300 per enrolled student, Freestyle had lost about 50 students because of competition from JB. Therefore, applying the same methodology, assuming Freestyle had lost 100 students (instead of 50), Taylor stated the amount of Freestyle's lost net profits would double.
At trial, Kikuchi testified regarding the number of child enrollees Freestyle had lost since JB began its children's program in January 2005. He stated that before JB began competing with Freestyle in 2004, Freestyle typically had about 300 to 320 students enrolled, of which 25 to 30 percent were adults (and thus the remaining 70 to 75 percent were children). By the end of 2004, Freestyle had lost about 25 percent of its students. He observed that JB's children's program did not begin until January 2005. By June 1, 2005 (the date of Kikuchi's testimony), Freestyle's new children's enrollments had decreased by 40 percent.
Taylor testified that Kikuchi had told him Freestyle's children's enrollments (i.e., presumably existing ones) had dropped by 40 percent from January through May 2005.
The trial court instructed the jury on how to measure damages, including the following instruction:
"To recover damages for lost profits, [Freestyle] must prove it is reasonably certain it would have earned profits but for defendants' conduct.
"To decide the amount of damages for lost profits, you must determine the gross amount [Freestyle] would have received but for defendants' conduct and then subtract from that amount the expenses [Freestyle] would have had if defendants' conduct had not occurred.
"The amount of the lost profits need not be calculated with mathematical precision, but there must be a reasonable basis for computing the loss." (CACI No. 3903N.)
The court further instructed: "[Freestyle] does not have to prove the exact amount of damages that will provide reasonable compensation for the harm. However, you must not speculate or guess in awarding damages." (CACI No. 3900.)
In returning its unanimous special verdict in Freestyle's favor, the jury found Freestyle's damages from the defendants' wrongful conduct were $76,429 for past economic loss and $446,216 for future economic loss, for a total amount of $522,645 of economic loss (i.e., total lost profits).
C
Soco and Rieker argue the damages award in Freestyle's favor must be reversed because the evidence is insufficient to support a finding Freestyle's enrollment decrease was because of JB's competition with Freestyle. Soco and Rieker argue Freestyle presented no evidence to support a conclusion that Freestyle's drop in student enrollment was attributable to competition from JB, noting that at trial Kikuchi could identify only three Freestyle students who left Freestyle for JB. They argue Kikuchi could not identify any other students Freestyle lost or would have enrolled with Freestyle but for JB's competition. They also point to their evidence that every JB student signed a form stating they were not persuaded to join JB instead of Freestyle. They also note they presented testimony that prospective members were informed JB was not a martial arts school.
As noted above, the trial court instructed the jury that Freestyle had the burden to prove "it is reasonably certain [Freestyle] would have earned more profits but for" Soco's breach of the Lease and Rieker's intentional interference with contractual relations. (Italics added.)
That form states in part: "I confirm that I have not been solicited, directly or indirectly, by [JB] . . . in an attempt to persuade me to become a member of . . . [JB] as opposed to [Freestyle] . . . (except through advertisements through any medium directed to the public at large, public demonstrations or being provided information in response to an inquiry or request for information.) I acknowledge that my confirmation set forth in this paragraph is an essential condition to my being permitted to be a member of . . . [JB] and applies whether or not I am a current or former student of [Freestyle]."
However, in so arguing, Soco and Rieker do not show there is insufficient evidence to support the jury's finding that Freestyle would not have sustained damages but for JB's competition. Rather, they either misinterpret or misapply the applicable substantial evidence standard of review. Contrary to their argument, Freestyle was not required to show it lost any specific students, whether existing or potential students, because of JB's competition. Instead, Freestyle had to show it lost profits because of JB's competition (i.e., it would have made more profits but for their conduct). They wholly omit any reference to Kikuchi's trial testimony that Freestyle had consistent revenues from 2001 through 2003 and then revenues (and presumably enrollment) dropped in 2004. When asked whether he could think of any other cause for that 2004 drop, Kikuchi answered, "No." On cross-examination, Kikuchi testified Freestyle had lost students "as a result of" JB's competition. He testified it was his opinion that the "only cause" of Freestyle's enrollment drop was JB's competition. He explained he had not obtained JB's records, but Freestyle's numbers had "been relatively constant from 2001 to . . . 2003, and [in] 2004, as soon as [JB] open[ed] [its] doors [Freestyle's] numbers . . . dropped dramatically." He also testified that no other new martial arts studios or gyms opened in Point Loma during 2004.
Likewise, Taylor testified Freestyle had consistent revenues prior to 2004 and then lost $65,000 in gross revenues in 2004. He knew of nothing other than competition from JB that could have caused Freestyle's lost revenues in 2004.
Stephen Truscott, Freestyle's expert on the demographics and business of martial arts studios, testified JB and Freestyle were located in the same shopping center, offered similar classes, and charged similar fees. However, JB had a bigger and more prominent space with bigger signage and had marketing advantages from TBC, its franchisor. Accordingly, Truscott testified he "expect[ed] the impact [of JB's competition] to be very negative to [Freestyle's] business."
We conclude there is substantial evidence to support the jury's finding that Freestyle would not have sustained its lost profits but for competition from JB (the result of Soco's and Rieker's wrongful conduct). Freestyle was not required to show it lost any specific existing or future students because of JB's competition.
D
AWP argues the damages award in Freestyle's favor must be reversed because Freestyle's damages expert (i.e., Taylor) relied on eight unproven assumptions to support his opinion. However, AWP's argument appears to be one that should have been more appropriately addressed to the jury regarding the weight to be attributed to Taylor's testimony and opinions regarding Freestyle's lost profits. As we discuss below, there is evidence to support reasonable inferences by the jury that Taylor's assumptions were true. Alternatively, if there were insufficient proof for a particular assumption, the lack of such proof did not necessarily preclude the jury from nevertheless relying on Taylor's opinions.
1. AWP argues the evidence is insufficient to support an assumption by Taylor that Freestyle lost at least 45 to 50 students by the end of 2004. However, as discussed above, Taylor's opinion was based on revenues lost in 2004, rather than students lost in 2004. He calculated Freestyle lost about $65,000 in gross revenues in 2004. Dividing that amount by Freestyle's average tuition of $1,300, Taylor also calculated Freestyle lost about 50 students in 2004. Therefore, although his opinion on lost profits was not based on any assumption regarding the number of lost students in 2004, there is substantial evidence to support his calculation that Freestyle lost about 50 students in 2004. Taylor did not assume Freestyle lost 45 to 50 students in 2004. Furthermore, Taylor was not required to audit Freestyle's records to determine if 50 students had actually left Freestyle during 2004 and were not replaced.
2. AWP argues the evidence is insufficient to support Taylor's assumption that Freestyle's attrition rate was consistent from year to year. Taylor testified that although he did not know Freestyle's attrition rate, he assumed it was consistent from year to year. However, Taylor's opinion regarding Freestyle's lost profits was based on a drop in revenues in 2004 from consistent revenue levels in prior years. Based on Freestyle's consistent revenues prior to 2004, we conclude Taylor, and the jury, could reasonably infer Freestyle's attrition rate was fairly constant during those years prior to 2004. In any event, AWP does not show that Taylor's opinion would have been any different (or, much less, necessarily unreliable) had he assumed Freestyle's attrition rate had not been consistent during those years.
3. AWP argues the evidence is insufficient to support Taylor's assumption that Freestyle's 45 to 50 lost members were full time members and each paid about $1,300 in annual tuition. Again, Taylor's opinion on Freestyle's lost profits was not based on an assumption regarding the number of students Freestyle had lost. Rather, it was based on the 2004 decrease in gross revenues over consistent revenues Freestyle had in prior years. Therefore, whether its lost members were full time or part time was irrelevant to Taylor's opinion. Based on his review of Freestyle's records, Taylor determined its average annual tuition was $1,300 and, based thereon and on his determination it had lost $65,000 in gross revenues, calculated Freestyle had lost about 50 students. The validity of Taylor's opinion on Freestyle's lost profits did not depend on his review of Freestyle's records on, much less assumptions regarding, the demographics of its students (e.g., full time, part time, age, sex, etc.).
4. AWP argues the evidence is insufficient to support Taylor's assumption that Freestyle's tuition would increase by about three percent through 2012. AWP asserts that because Kikuchi did not testify regarding Freestyle's past tuition increases, Taylor had no basis on which to assume its tuition would increase three percent annually in the future. However, Taylor testified that he assumed Freestyle's tuition would increase annually at the same rate as inflation, or the consumer price index (CPI). Absent proof to the contrary, it was not unreasonable for Taylor to assume, and the jury to infer, Freestyle's annual tuition increases would be about the same as the rate of general consumer price inflation. Although he or Kikuchi could have studied, and then testified regarding, the history of Freestyle's past tuition increases, AWP does not show that such testimony was required for an expert to testify regarding the expected rate of tuition increases in the future. Rather, AWP's argument was more appropriate for cross-examination of Taylor and closing argument.
5. AWP argues the evidence is insufficient to support Taylor's assumption that Freestyle lost 45 to 50 students because of competition from JB either from existing students joining JB or prospective students joining JB rather than Freestyle. However, as discussed above, Taylor's opinion regarding lost profits was not based on an assumption that Freestyle lost a certain number of existing or future students. Rather, it was based on financial data showing Freestyle had lost $65,000 in gross revenues in 2004 compared to its relatively consistent gross revenues in years prior to 2004. Therefore, his opinion regarding Freestyle's lost profits was not based on an assumption Freestyle lost 45 to 50 students (even though, based on Freestyle's average annual tuition, he calculated it had lost about 50 students). To the extent AWP alternatively argues Taylor's opinion regarding lost profits was based on an assumption that Freestyle's decreased gross revenues (which represented lost students) were caused by competition from JB, there is substantial evidence to support that assumption. As discussed above, Kikuchi testified at trial that Freestyle had consistent revenues from 2001 through 2003 and then revenues (and presumably enrollment) dropped in 2004. When asked whether he could think of any other cause for that 2004 drop, Kikuchi answered, "No." On cross-examination, Kikuchi testified Freestyle had lost students "as a result of" JB's competition. He testified it was his opinion that the "only cause" of Freestyle's enrollment drop was JB's competition. Similarly, Truscott testified Freestyle's business was negatively impacted by competition from JB. There is substantial evidence to support Taylor's assumption, and the jury's finding, that Freestyle would not have sustained its lost profits but for competition from JB (which was the result of AWP's wrongful conduct). Taylor was not required to base his opinion on evidence showing Freestyle lost any specific existing or future students because of JB's competition.
6. AWP argues the evidence is insufficient to support Taylor's assumption that Freestyle's lost gross revenues of $65,000 in 2004 (representing a loss of about 45 to 50 students) was a permanent decrease that would continue through May 31, 2012. However, because Kikuchi and Taylor testified regarding Freestyle's established business and consistent revenues before 2004, Taylor reasonably assumed, and the jury could reasonably infer, that Freestyle's lost profits in 2004 would continue annually as long as JB competed with Freestyle and Freestyle remained at the Loma Plaza shopping center (e.g., through May 31, 2012). Taylor's opinion was not based on an assumption regarding Freestyle's future enrollments or attrition rate, and AWP does not show his opinion was invalid absent such assumptions and proof thereon. Alternatively, AWP argues Taylor did not allocate Freestyle's losses among the defendants based on the losses caused by their respective conduct. However, that issue was not necessarily for Taylor, but rather for the jury to determine based on all of the evidence in the record. As shown in the special verdict, the jury expressly found AWP's intentional interference with contractual relations caused Freestyle to sustain past and future economic losses totaling $522,645. AWP has not carried its burden on appeal to show there is insufficient evidence to support that finding (or, in particular, that AWP's conduct was not a substantial factor in causing that amount of Freestyle's losses). The fact that the conduct of other defendants (e.g., Soco or Rieker) may also have been a substantial factor in causing those losses does not show AWP's conduct was not a substantial factor in causing the same amount of Freestyle's losses. Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, cited by AWP, is factually inapposite and does not persuade us to conclude otherwise.
Guntert v. City of Stockton, supra, 55 Cal.App.3d 131, cited by AWP, is factually inapposite and does not persuade us to conclude otherwise.
AWP unpersuasively argues: "[Taylor's] damage calculations necessarily include contract losses for which AWP has no liability, and losses on conduct which is legally insufficient to support Freestyle's intentional inducement of [breach of] contract claim." The question of the amount of damages for which AWP was liable based on its wrongful conduct was, in the circumstances of this case, a question of fact for the jury. AWP does not show there is insufficient evidence to support the jury's finding on that question.
In any event, AWP misstates the court's holding in Biren. Biren did not conclude the expert was incompetent to testify because he did not apportion the cross-complainant's damages among the cross-respondents. Rather, Biren concluded the trial court, in a bench trial, properly weighed the credibility of the cross-complainant's damages expert and made a factual finding the cross-complainant had not carried its burden of proof regarding the amount of damages caused by a particular cross-respondent's conduct. (Biren v. Equality Emergency Medical Group, Inc., supra, 102 Cal.App.4th at pp. 138-139.)
7. AWP argues the evidence is insufficient to support Taylor's assumption that JB would remain at the Loma Plaza shopping center and compete with Freestyle through May 31, 2012, by offering kickboxing and other martial arts classes. In support of that argument, AWP notes that Freestyle did not ask any questions of witnesses associated with JB regarding whether JB will exercise its option to extend its lease after its initial five-year term. However, the fact that a JB witness did not so testify did not preclude Taylor from reasonably assuming, and the jury reasonably finding, that JB will exercise its option to extend its lease. As discussed in more detail below, there is substantial evidence to support a reasonable inference JB will exercise its option to extend its lease at least through May 31, 2012. At trial, Elsbach, JB's manager, described JB's facility and equipment while the jury viewed a videotape and numerous photographs of that facility. The jury also heard testimony that JB had 650 members and had recently expanded its classes to include a teen's program and a children's program, for which it had enrolled about 60 participants for those new programs. It also heard Weinreb, a JB co-owner, testify that JB had become profitable three months before his June 2005 testimony. Based on the obviously large amount of capital invested in JB's facility, its substantial number of members (which continued to grow), and its admitted profitability, Taylor could reasonably assume, and the jury could reasonably infer, that JB will exercise its option to extend its lease at least through May 31, 2012. Furthermore, there was no reason for Taylor to assume, or the jury to infer, that JB would discontinue its offering of kickboxing or other martial arts classes that compete with Freestyle.
8. AWP argues the evidence is insufficient to support Taylor's assumptions that Freestyle will not mitigate its damages (e.g., change its marketing or class offerings to increase its gross revenues through May 31, 2012). However, AWP does not cite any case holding that a plaintiff in an action for intentional inference with contractual relations must show, as part of its case, that it has or will mitigate its future damages. In any event, the record supports an inference that Freestyle will mitigate its future damages by continuing to operate its martial arts studio at the Loma Plaza shopping center through May 31, 2012, rather than ceasing operations and presumably increasing its future losses. Taylor testified that Freestyle's best means of mitigating its damages is to continue operating its business at the Loma Plaza shopping center, rather than moving to another location or ceasing to do business. To the extent AWP believes Freestyle could take other actions that would mitigate or otherwise decrease the amount of its future losses, AWP could have presented the testimonies of defense witnesses to that effect and argued in closing that a lesser amount therefore should be awarded. It apparently did not do so.
Guntert v. City of Stockton, supra, 55 Cal.App.3d 131, cited by AWP, is inapposite and does not support its argument. In Guntert, the court reversed an award of future damages because the defendant only partially breached a lease and then the court authorized the plaintiffs to file a new action or request the trial court to reserve jurisdiction to award future damages in the event of a future breach by the defendant. (Id. at p. 153.) In so doing, the court advised the plaintiffs to minimize their losses prior to filing future applications for additional damages. (Ibid.) Guntert did not hold that a plaintiff must prove it had mitigated or will mitigate its damages to receive an award of future damages.
AWP also asserts that because Taylor did not verify Freestyle's enrollment on certain dates and other student information (e.g., attrition rates and ages of and tuition paid by students who left Freestyle), his opinion on Freestyle's future lost profits was necessarily based on speculation. Because, as discussed above, Taylor's opinion on Freestyle's lost profits was based on a decrease in its gross revenues in 2004 from consistent levels in prior years and not on assumptions regarding the loss of particular students or attrition rates, AWP does not persuade us that Taylor's opinion was based on speculation rather than on substantial evidence.
E
All three defendants argued the evidence is insufficient to support a finding Freestyle and JB will exercise their options to extend their lease terms through May 2012, thereby limiting any award of future lost profits only to the period of the Lease's current term (i.e., through May 31, 2006). As we discussed in part IV.D., ante, we concluded there is substantial evidence to support a reasonable assumption by Taylor, and a reasonable inference by the jury, that JB will remain at the Loma Plaza shopping center and compete with Freestyle through May 31, 2012, by offering kickboxing and other martial arts classes. Although Freestyle did not ask any questions of witnesses associated with JB regarding whether JB will exercise its option to extend its lease after its initial five-year term, the absence of that testimony did not preclude Taylor from reasonably assuming, and the jury reasonably finding, that JB will exercise its option to extend its lease at least through May 31, 2012. At trial, Elsbach described JB's facility and equipment while the jury viewed a videotape and numerous photographs of that facility. Therefore, the jury observed JB's boxing ring, weight machines, boxing and other exercise equipment, locker rooms, retail area, and other equipment and improvements. The jury also heard testimony that JB had about 650 members and had recently expanded its classes to include a teen's program and a children's program, for which it had signed up about 60 participants for those new programs within six months. It also heard Weinreb testify that JB had become profitable three months before his June 2005 testimony.
Therefore, based on the large amount of capital invested in JB's facility, its substantial and increasing number of members, and its admitted profitability, Taylor could reasonably assume, and the jury could reasonably infer, that JB will exercise its option to extend its lease at least through May 31, 2012. Furthermore, there was no reason for Taylor to assume, or the jury to infer, that JB would discontinue its offering of kickboxing or other martial arts classes that compete with Freestyle. Testimony that JB had discontinued teaching Muay Thai kickboxing did not disprove a reasonable inference by the jury that JB continued to offer, and even expanded, the number of other martial arts classes it offered. The evidence showed JB continued to offer classes in other types of kickboxing and other martial arts, including "kickboxing" and "power kickboxing." As noted above, in 2005 during the five-month period before trial, JB began children's and teen's programs that offered classes teaching kickboxing.
We further conclude there is substantial evidence to support a reasonable assumption by Taylor, and a reasonable inference by the jury, that Freestyle will remain at the Loma Plaza shopping center and compete with JB through May 31, 2012. Although Freestyle did not ask any questions of Kikuchi or its other witnesses whether Freestyle will exercise its two three-year options to extend the Lease, the absence of that testimony did not preclude Taylor from reasonably assuming, and the jury reasonably finding, that Freestyle will exercise those options and extend the Lease through May 31, 2012. At trial, Kikuchi testified he had regularly taught martial arts classes since 1986. As noted above, in 1994 he entered into the Lease and began teaching martial arts classes at the Loma Plaza shopping center. In 1994, he spent over $70,000 for tenant improvements and signage. He testified that a specific location for his classes (i.e., the Loma Plaza shopping center location) was necessary to develop goodwill for his business. From 1994 through 1997, his business grew from 100 students to about 300 students. From 1997 through 2003 (i.e., before JB opened its competing business), his business remained fairly stable with about 300 to 330 students. From 1994 through 2003, he spent about $2,000 to $4,000 per month for fixtures, tenant improvements, and marketing to develop and maintain his business's goodwill at its Loma Plaza shopping center location. He also testified that Freestyle had never been in breach of the terms of the Lease. Accordingly, based on the large amount of capital invested in Freestyle's facility, its substantial number of members, its established goodwill at its current location, and Kikuchi's long history of teaching martial arts classes, Taylor could reasonably assume, and the jury could reasonably infer, that Freestyle will exercise its options to extend the Lease through May 31, 2012, and continue to offer kickboxing and other martial arts classes.
Unlike the facts in the two cases cited by the defendants, in this case there is substantial evidence to support a reasonable assumption by Taylor, and a reasonable inference by the jury, that Freestyle will be ready, willing and able to exercise its two 3-year options to extend the term of the Lease. (Cf. Caspary v. Moore (1937) 21 Cal.App.2d 694, 700 [record did not contain "any allegation or evidence that [exercising option to renew or extend the contract] was [plaintiff's] intention, or that [plaintiff] would have been able, ready or willing to do so"]; Crawford v. Hub Ranch of Paradise Valley (1955) 134 Cal.App.2d 256, 265 ["[T]here is no evidence that plaintiff was or would have been able to exercise the option to purchase and an award of damages on the assumption that the option would have been exercised cannot be sustained."].) Accordingly, we conclude Caspary and Crawford are inapposite and do not persuade us to reach a different conclusion in this case.
F
All three defendants contend the evidence is insufficient to support a finding Freestyle lost the same number of children's enrollments as adult enrollments, thereby precluding the jury from doubling the amount of future lost profits from decreased adult enrollments as calculated by Taylor, Freestyle's damages expert. They argue there is insufficient evidence to support the jury's award of $446,216 for Freestyle's future economic losses, which award apparently was based on the jury's doubling of the $223,108 amount for future lost profits calculated by Taylor based on Freestyle's decreased revenues in 2004.
As discussed in part IV.B., ante, Taylor testified (in June 2005) he calculated that Freestyle lost $65,000 in gross revenues and $53,950 in net profits during 2004 (i.e., the first year of JB's competition with Freestyle). Based on those 2004 calculations and extrapolating them into 2005, Taylor further concluded Freestyle lost an additional $22,479 in net profits from January 1, 2005, through May 31, 2005. Accordingly, as of the date of his June 2005 trial testimony, Taylor calculated Freestyle lost a total of $76,429 ($53,950 plus $22,479) in past net profits because of competition from JB from January 1, 2004 through May 31, 2005.
Regarding Freestyle's loss of net profits in the future, Taylor assumed Freestyle would incur lost net profits from June 1, 2005, through May 31, 2012, at the same rate as before (i.e., from January 2004 through May 2005). After factoring in an annual three percent tuition rate increase, he calculated the present value of those future lost net profits to be $223,108. Therefore, Taylor calculated the total of Freestyle's past and future lost net profits to be about $299,500 (i.e., $76,429 plus $223,108). However, Taylor stated that his calculation of Freestyle's lost net profits did not include any loss by Freestyle of child enrollees because JB did not have a children's program in 2004.
Taylor also explained that based on his calculation of Freestyle's lost gross revenue for 2004 of $65,000 and its average annual tuition of $1,300 per enrolled student, Freestyle had lost about 50 students because of competition from JB. Therefore, applying the same methodology, assuming Freestyle had lost 100 students (instead of 50), Taylor stated the amount of Freestyle's lost net profits would double.
At trial, Kikuchi testified regarding the number of child enrollees Freestyle had lost since JB began its children's program in January 2005. He stated that before JB began competing with Freestyle in 2004, Freestyle typically had about 300 to 320 students enrolled, of which 25 to 30 percent were adults (meaning the remaining 70 to 75 percent were children). By the end of 2004, Freestyle had lost about 25 percent of its students. He observed that JB's children's program did not begin until January 2005. By June 1, 2005 (the date of Kikuchi's testimony), Freestyle's new children's enrollments had decreased by 40 percent.
In a possible contradiction, Taylor testified that Kikuchi had told him Freestyle's children's enrollments (i.e., presumably existing ones) had dropped by 40 percent from January through May 2005. Therefore, the record may be ambiguous whether Freestyle's existing children's enrollments or new children's enrollments had decreased by 40 percent. However, because we construe the record favorably to support the jury's verdict, we resolve that possible contradiction by assuming the jury found Freestyle's existing and new children's enrollments had decreased by 40 percent since JB began its children's program in January 2005.
Although, as the defendants note, Taylor did not calculate the amount of future lost net profits that resulted from Freestyle's loss of children's enrollments after JB began its children's program in 2005, we conclude there is substantial evidence to support a finding by the jury that Freestyle lost at least 50 children's enrollments in 2005 and therefore lost $223,108 in future net profits for those children's enrollments, thereby supporting the jury's doubling of Taylor's calculation of lost future net profits (based solely on the decrease in Freestyle's gross revenues in 2004). The jury was able to, and presumably did, perform simple mathematical calculations based on certain evidence admitted at trial in finding Freestyle lost $223,108 in future net profits for lost children's enrollments caused by JB's competition.
In particular, based on Kikuchi's testimony that before JB opened in 2004, Freestyle had 300 to 320 students, 25 to 30 percent of whom were adults, the jury could calculate that the remaining 70 to 75 percent of Freestyle's students were children. Seventy percent of 300 students is 210 students. Therefore, the jury could find that Freestyle had at least 210 children enrolled before JB began its children's program in January 2005. Based on Kikuchi's testimony, the jury could find Freestyle lost 40 percent of its children's enrollments after JB began its children's program. Forty percent of 210 child enrollees is 84 child enrollees. Therefore, the jury could have concluded Freestyle lost 84 child enrollees because of competition from JB that began in January 2005. However, apparently following the suggestion of Freestyle's counsel in closing argument, the jury reduced that number from 84 to the more conservative number of 50 lost child enrollees. In so doing, the jury could have reasonably concluded either that Kikuchi's testimony that Freestyle lost 40 percent of its child enrollments was somewhat exaggerated or that Freestyle in the future would mitigate its loss of child enrollees and therefore would lose only 50 child enrollees because of competition from JB during the period of June 1, 2005, through May 31, 2012.
Kikuchi's testimony was, by itself, sufficient evidence to support that finding. Freestyle was not required to support Kikuchi's testimony with documentation (e.g., written membership lists) that demonstrated the level of decrease in its child enrollments. S.C. Anderson, Inc. v. Bank of America, supra, 24 Cal.App.4th 529, cited by Soco and Rieker, does not persuade us to conclude otherwise. Rather, the lack of such documentary support for Kikuchi's testimony was a matter for defendants' cross-examination of Kikuchi and closing arguments in challenging the weight and credibility of that testimony.
Next, the jury could have used the $223,108 amount that Taylor calculated for Freestyle's future lost net profits (which reflected the loss of only adult students in 2004) and divided that amount by 50 (the number of lost adult students that Taylor calculated based on $65,000 in gross revenues lost in 2004 divided by Freestyle's average annual tuition of $1,300). The result of $4,462.16 represents the amount of future lost net profits per lost student. Finally, multiplying the more conservative number of 50 lost child enrollees by $4,462.16 future lost net profits per student, the jury could reasonably conclude Freestyle lost $223,108 in future net profits from the loss of child enrollees because of JB's competing children's program that began in January 2005. Adding that amount for lost child enrollees ($223,108) to the amount Taylor calculated for Freestyle's future lost net profits that reflected only lost adult enrollees ($223,108), the jury could have reasonably found Freestyle lost a total of $446,216 in future net profits because of the defendants' wrongful conduct.
A "short-cut" method for the jury to have reached that result would have been, as Freestyle's counsel suggested in closing (and as Taylor implied in his trial testimony), for the jury to simply double the amount Taylor calculated for Freestyle's future lost net profits of $223,108 based on a finding that Freestyle lost an equal number of child enrollees (i.e., 50) as it had lost adult enrollees based on Taylor's calculations (i.e., 50) and therefore it would simply double the amount calculated by Taylor for future lost net profits that reflected only the loss of 50 adult enrollees. Contrary to AWP's argument, in arguing the jury should double the $223,108 amount for future lost net profits because Taylor's calculation of future lost net profits did not account for 50 lost child enrollees, Freestyle's counsel did not commit misconduct or "def[y]" the trial court's ruling precluding Taylor from opining on the amount of future lost net profits from lost child enrollees as beyond the scope of his deposition opinions. Rather, Freestyle's counsel merely asked the jury to perform simple mathematical calculations based on evidence in the record. Accordingly, AWP has not carried its burden on appeal to show that Freestyle's counsel committed misconduct and/or that the jury's damages award must be reversed as excessive and a new trial on damages be conducted.
DISPOSITION
The judgment is affirmed. Freestyle is entitled to costs on appeal.
WE CONCUR: BENKE, Acting P. J., NARES, J.