Opinion
NOT TO BE PUBLISHED
APPEALS from a judgment and order of the Superior Court of San Diego County Nos. GIC726145; GIC758184 Ronald L. Styn, Judge.
McDONALD, J.
Defendant Paloma Weingarten appeals an amended judgment awarding nominal defendant Astra Management Corp. (Astra) punitive damages of $4,657,945 against her on the shareholder derivative breach of fiduciary duty cause of action alleged on its behalf by plaintiff Pointe San Diego Residential Community, L.P. (Pointe). On appeal, Weingarten contends the trial court erred in awarding Astra that amount of punitive damages because: (1) the amount is unconstitutionally excessive and must be reduced to $2,036,420.20, equal to the amount of the compensatory damages awarded to Astra on that cause of action; (2) it violates the law of the case doctrine by, in effect, awarding Pointe punitive damages; (3) the court did not have jurisdiction on remand after appeal to, in effect, award Pointe punitive damages; and (4) the award was based on incorrect factual assumptions by the court.
In its cross-appeal, Pointe contends the trial court erred by denying its motion for a new trial on its derivative breach of fiduciary duty cause of action alleged on behalf of Astra against Weingarten, arguing the court had jurisdiction to consider its motion and abused its discretion by denying it.
FACTUAL AND PROCEDURAL BACKGROUND
We limit our discussion of the factual and procedural background to those matters directly relevant to this appeal and cross-appeal. For a more complete discussion of the factual and procedural background in this action, refer to our opinion in Pointe San Diego Residential Community, L.P. v. W.W.I. Properties, L.L.C. (July 11, 2007, D044695) [nonpub. opn.] (Pointe I).
In 1995 and 1996, Gosnell Builders Corporation of California (Gosnell) and Pointe, a limited partnership affiliated with Gosnell, negotiated a series of transactions and agreements with Weingarten for the development of residential property owned by Pointe. Atlas Holding Group, Inc. (AHG), a corporation controlled by Weingarten, purchased the note secured by the residential property and contributed the note to Astra in exchange for 100, 000 shares of Astra's common stock. Pointe contributed the residential property to Astra in exchange for 1, 000 shares of Astra's Class A common stock. Astra sold a 31 percent tenancy-in-common interest in the residential property for $1.8 million to B.R. Family Partners (BRFP), a limited partnership with William Rogers as its general partner.
Astra and BRFP formed W.W.I. Properties, L.L.C. (WWI) and transferred their interests in the residential property to WWI, which was managed by Weingarten and formed for the purpose of developing and selling the residential property. Astra owned 75 percent of WWI and BRFP owned 25 percent. They intended that profits from the residential property would flow through WWI to Astra as cash distributions under WWI's operating agreement and then be distributed by Astra as dividends to its shareholders, including Pointe.
In March 1997, WWI sold 345 lots to Whitehall Realty Corporation (Whitehall) for $3.5 million. Gerry Ginsberg, Weingarten's friend, was Whitehall's president and sole shareholder. Weingarten's husband was the chairman of Whitehall's board of directors. Ginsberg paid WWI $300,000 down, but did not make any principal or interest payments on the note for the $3.2 million remaining on the purchase price. In November 2001, Whitehall reconveyed the lots to WWI, and WWI forgave Whitehall's $3.2 million debt, plus accrued interest, and assumed Whitehall's financial obligations of $1.2 million.
Because Ginsberg was her friend, Weingarten made no efforts to collect on the note or foreclose on the property.
In August 1997, Atlas Homes, L.L.C. (Atlas), an entity essentially owned indirectly by Weingarten and her family, was formed to acquire, develop, and sell the residential property. On October 20, WWI transferred its remaining 519 residential lots to Atlas in exchange for shares of Atlas's Class A common stock, which would entitle WWI to receive a capital contribution credit of $2.8 million and a portion of Atlas's profits pursuant to Atlas's operating agreement. On that same day, Weingarten unilaterally amended Atlas's operating agreement to change its profit distribution scheme. That amendment greatly diluted WWI's share of Atlas's profits, which in turn diluted Astra's and Pointe's share of profits, and effectively diverted over $26 million in anticipated profits from Pointe. Also on that day, BRFP sold its 25 percent interest in WWI to AHG for $2,110,000. BRFP also paid WWI $1,000 for the right to receive a transferable 15 percent interest in the development and sale of the residential property.
AHG owned 85 percent of Atlas and Weingarten owned 97 percent of AHG. Weingarten's two children and grandchild owned the remaining 15 percent of Atlas and 3 percent of AHG. Weingarten managed both AHG and Atlas.
From 1997 through 2000, Atlas sold about 130 homes at an average sales price of $220,000. Although Weingarten did not have a real estate sales or broker's license, she received a 2.5 percent commission on many of those sales.
Gosnell, Pointe, and other plaintiffs filed two separate actions against Weingarten, WWI, and other defendants alleging various causes of action, including a breach of fiduciary duty claim pleaded alternatively as a direct action by Pointe (sixth cause of action) and a shareholder derivative action by Pointe (seventh cause of action) on behalf of nominal defendant Astra, of which Pointe was a minority shareholder and expected to receive profits from the development and sale of the residential property. On September 22, 2004, following a two-phase trial, the trial court entered a judgment awarding Astra $2,036,420.20 in compensatory damages and prejudgment interest and Pointe $3,330,821.91 million in punitive damages and prejudgment interest on the breach of fiduciary duty claim. The court found Weingarten and AHG breached their fiduciary duties related to: (1) the March 1997 sale of residential property to Whitehall; (2) the sale of property to Atlas on October 20, 1997; (3) the October 20, 1997, transaction with BRFP; (4) Weingarten's receipt of real estate commissions; and (5) payment of attorney fees incurred by Weingarten, Ginsberg, and Rogers. The court found Astra suffered economic damages only regarding the last two categories and awarded it compensatory damages of $1,591,051 for improper commission payments and improperly charged legal and accounting expenses. The court subsequently granted in part Pointe's motion for a new trial on the issue of its damages on the breach of fiduciary duty claim.
On appeal, Weingarten argued: (1) the award of compensatory damages to Astra on Pointe's derivative breach of fiduciary duty claim must be reversed because it did not suffer any legally compensable injury; (2) the award of punitive damages to Pointe on its derivative breach of fiduciary duty claim must be reversed because it (Pointe) did not suffer any actual (i.e., compensatory) damages; and (3) the trial court erred by granting Pointe's motion for new trial on the ground of newly discovered evidence. In Pointe I, we concluded the trial court properly awarded Astra $2,036,420.20 in compensatory damages and prejudgment interest for Weingarten's breaches of fiduciary duties. We concluded Weingarten "breached a fiduciary duty to Astra by deliberately conducting WWI's business in a way that ensured Pointe would not receive dividends from Astra." (Pointe I, supra, D044695, at p. 21.) We rejected Weingarten's assertion that only WWI was harmed, stating:
"Considering that Weingarten controlled all of these related entities, we conclude it would be inequitable to allow Weingarten and AHG to escape liability to Astra for the acts giving rise to Pointe's derivative claims on the ground only WWI was injured by those acts. WWI's pursuit of the same claims against Weingarten or AHG in effect would amount to Weingarten suing herself for breach of fiduciary duty." (Pointe I, at p. 21.)
We further concluded Pointe could not recover punitive damages directly on its derivative breach of fiduciary duty claim because it was merely a representative, nominal plaintiff enforcing Astra's rights and had not suffered any actual damages itself. We stated: "Because Pointe recovered no compensatory damages under the seventh cause of action, we reverse the portion of the judgment awarding punitive damages to Pointe and remand the matter for a determination of whether Astra is entitled to an award of punitive damages under the seventh cause of action and, if so, the amount of the award." (Pointe I, supra, D044695, at p. 25, fn. omitted.) We also concluded the trial court erred by granting Pointe's motion for new trial on the ground of newly discovered evidence. (Pointe I, at pp. 36-42.)
On remand, the trial court conducted a trial on the issue of whether Astra should be awarded punitive damages on the derivative breach of fiduciary duty claim and, if so, in what amount. Pointe argued that because Weingarten would recover over one-half of the amount of any punitive damages awarded to Astra, the amount of the award should be increased beyond the 1:1 ratio of punitive to compensatory damages that otherwise might be appropriate to effect punishment for her wrongful conduct. During her trial testimony, Weingarten admitted receiving one-half of the commissions earned by the project's appointed sales agent on residential property sales and buyer upgrade expenses. Peter Wenner, who created a business plan for Weingarten and was the former development manager of the project, testified she frequently told him that she did not want Pointe to receive any of the profits from the project. Furthermore, although the court had ordered her to provide accountings to Pointe, Weingarten told Wenner to not give Gosnell anything, that she wanted to destroy Robert Gosnell, and make sure he did not "have a penny" when the project was completed.
During closing arguments, the trial court asked Weingarten's counsel to respond to Pointe's argument for an award of punitive damages in an amount greater than that which otherwise might be allowed under a 1:1 ratio, explaining: "I'm not looking at how much Pointe is going to get. I'm looking at how much the other shareholder [i.e., Weingarten] is being punished. I mean if it happens that the money ends up going to Pointe, but the question was the purpose of punitive damages is to punish, and if you determine that an appropriate and a constitutional punishment is one dollar but 50 cents of that is going to come right back to the person or entity being punished, then shouldn't you increase it[?]" Weingarten's counsel replied that the court could not consider what Astra may or may not do.
After first issuing a tentative decision and an initial statement of decision to which Weingarten objected, the trial court issued an amended statement of decision awarding Astra $4,657,945 in punitive damages against Weingarten. The court found:
"[T]here is clear and convincing evidence that Weingarten acted with malice and fraud sufficient to justify an award of punitive damages to Astra. Her actions in taking secret commissions and in improperly charging legal and accounting fees to the project were intended to harm Astra for the purpose of harming Pointe and its owner, Gosnell. Her actual fraud in concealing these payments demonstrates, by clear and convincing evidence, that she acted with actual fraud against Astra and Pointe, as its shareholder. Thus, awarding punitive damages to Astra does not violate the Constitutional prohibition against punishing a defendant for injuries caused to non-parties because Weingarten's fraudulent and malicious conduct caused damage to Astra, the entity in whose favor a judgment was rendered for compensatory damages."
The court then considered various factors in determining the appropriate amount of punitive damages to be awarded Astra. Regarding the relationship of punitive damages to the actual harm suffered by Astra (i.e., its compensatory damages) resulting from Weingarten's breach of fiduciary duty, the court concluded "the 1-to-1 ratio of [Jet Source Charter, Inc. v. Doherty (2007) 148 Cal.App.4th 1] seems appropriate under the facts of this case and the reprehensibility factors set forth above." Finally, the court considered whether the amount of the punitive damages award needed to be adjusted to accomplish its purpose of punishing Weingarten. It considered Astra's articles of incorporation, which provided for "various percentages of the net cash proceeds to be distributed between the class A shareholders and the Weingarten-controlled entities. For example, if Weingarten were to pay $2 million in punitive damages, it would only cost her $400,000 according to the formula (assuming she paid the compensatory damages and the punitive damages are net cash flow). Accordingly, Weingarten would only be punished 20 [percent] of the punitive damages." The court rejected Weingarten's assertion that punitive damages would not be included in Astra's distribution formula because they are not "cash distributions" under Astra's articles of incorporation. The court further stated it was "persuaded by the logic of" two cases cited by Pointe (i.e., Perlman v. Feldmann (2d Cir. 1955) 219 F.2d 173 and Rankin v. Frebank Co. (1975) 47 Cal.App.3d 75). It noted that Pointe I did not reject those cases, but only concluded Pointe could not directly obtain an award of punitive damages without suffering any compensatory damages. The court stated:
The court considered the reprehensibility of Weingarten's misconduct, the disparity between the actual or potential harm suffered by Astra and the punitive damages award, and the difference between the punitive damages awarded and any civil penalties authorized or imposed in comparable cases. The court also considered Weingarten's net worth and whether the award needed to be adjusted to accomplish its purpose of punishing Weingarten.
"[T]he purpose of punitive damages is to punish and discourage further similar activity. This purpose will not be accomplished if 80 [percent] of the $2 million punitive damage award goes back to [Weingarten] (and completely frustrated if 100 [percent] goes back to [her]). This Court has attempted to calculate the amounts pursuant to Article 2(b) of [Astra's articles of incorporation]. Assuming [Weingarten] pays the compensatory [damages] judgment and that the compensatory damages are distributed pursuant to Article 2(b), extrapolating from [Pointe's] chart..., the Court has calculated that $4,657,945 of punitive damages would yield a punishment of $2,000,000. Since an appropriate amount of punitive damages is $2 million, the Court awards the amount of $4,657,945 in punitive damages to Astra to accomplish this purpose."
Pointe filed a motion for new trial on its sixth and seventh causes of action against Weingarten for breaches of fiduciary duty, arguing that newly discovered evidence supported its request for a new trial on its damages for Weingarten's breaches of her fiduciary duties. The trial court denied that motion. On December 19, 2008, the trial court entered an amended judgment that awarded Astra $4,657,945 in punitive damages against Weingarten. Weingarten timely filed a notice of appeal challenging the amended judgment and Pointe timely filed a notice of appeal challenging the order denying its motion for new trial.
DISCUSSION
WEINGARTEN'S APPEAL
I
Punitive Damages Generally
In a tort or other civil action not arising from a breach of contract, a plaintiff may be entitled to an award of punitive damages, in addition to actual or compensatory damages, if the plaintiff proves by clear and convincing evidence that the defendant committed the tortious act with oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a); Roby v. McKesson Corp. (2009) 47 Cal.4th 686, 712.) The purpose of punitive damages is not to compensate the plaintiff, but rather to punish the defendant and deter the defendant and others from committing similar acts. (Civ. Code, § 3294, subd. (a); Ferguson v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037, 1046.) Punitive damages "are aimed at deterrence and retribution." (State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 416 (State Farm).) Accordingly, the essential question in every case is "whether the amount of [punitive] damages awarded substantially serves the societal interest." (Adams v. Murakami (1991) 54 Cal.3d 105, 110.)
"The due process clause of the Fourteenth Amendment to the United States Constitution places constraints on state court awards of punitive damages." (Roby v. McKesson Corp., supra, 47 Cal.4th at p. 712.) In State Farm, the United States Supreme Court stated: "The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor." (State Farm, supra, 538 U.S. at p. 416.) An award of grossly excessive or arbitrary punitive damages is constitutionally prohibited because due process entitles a defendant to fair notice of both the conduct that will subject him or her to punishment and the severity of the penalty that may be imposed for the conduct. (Id. at pp. 416-417; Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1171.) "Eschewing both rigid numerical limits and a subjective inquiry into the [trier of fact's] motives, " the United States Supreme Court set forth "a three-factor weighing analysis looking to the nature and effects of the defendant's tortious conduct and the state's treatment of comparable conduct in other contexts." (Simon, at pp. 1171-1172.)
In determining whether the amount of a punitive damages award is grossly excessive and violates the Fourteenth Amendment's due process clause, a court must "consider three guideposts: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." (State Farm, supra, 538 U.S. at p. 418.) "[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." (BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, 575.) Regarding the second guidepost, the United States Supreme Court has "been reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff [i.e., compensatory damages] and the punitive damages award." (State Farm, at p. 424.)
Although State Farm declined "to impose a bright-line ratio which a punitive damages award cannot exceed, " it concluded that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." (State Farm, supra, 538 U.S. at p. 425.) Furthermore, in cases in which substantial compensatory damages are awarded and the tortious act was not particularly egregious, a lesser ratio may apply to limit the amount of punitive damages. (Ibid.) State Farm stated: "When compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages [i.e., a 1:1 ratio], can reach the outermost limit of the due process guarantee. The precise award in any case, of course, must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." (Ibid.) In the facts and circumstances in State Farm, the United States Supreme Court applied the three guideposts, "especially in light of the substantial compensatory damages awarded [i.e., $1 million] (a portion of which contained a punitive element), likely would justify a punitive damages award at or near the amount of compensatory damages." (Id. at p. 429.) Accordingly, the court concluded the award of $145 million in punitive damages was unreasonable and disproportionate to the wrongful act and therefore violated the defendant's due process right against irrational and arbitrary deprivation of property. (Id. at p. 429.)
The California Supreme Court has since interpreted State Farm as "suggest[ing] that a ratio of one to one might be the federal constitutional maximum in a case involving... relatively low reprehensibility and a substantial award of noneconomic damages...." (Roby v. McKesson Corp., supra, 47 Cal.4th at p. 718.)
On appeal, we determine de novo whether an award of punitive damages is unconstitutionally excessive and make an independent assessment of the reprehensibility of the defendant's conduct, the relationship between the punitive and compensatory damages, and any civil penalties for comparable conduct. (Simon v. San Paolo U.S. Holding Co., Inc., supra, 35 Cal.4th at p. 1172.) However, we defer to any findings of historical fact made by the trial court that are supported by substantial evidence. (Ibid.) In reviewing the constitutionality of a punitive damages award, we determine only whether the amount awarded exceeds the constitutionally permissible level and do not decide what particular amount we believe should have been awarded in the facts and circumstances of that case. (Id. at p. 1188.)
II
Constitutionality of Amount of Punitive Damages Award
Weingarten contends the trial court erred by awarding Astra $4,657,945 in punitive damages because that amount is unconstitutionally excessive and must be reduced to $2,036,420.20, which is equal to the amount of the compensatory damages awarded to Astra on the derivative breach of fiduciary duty cause of action. She argues the 2.3:1 ratio of punitive to compensatory damages exceeds the 1:1 maximum ratio established by State Farm for cases such as the instant one.
We assume arguendo that the trial court properly concluded a 1:1 ratio of punitive to compensatory damages was the maximum ratio permitted in the facts and circumstances of this case under the Fourteenth Amendment's due process clause as interpreted by State Farm. Nevertheless, as discussed above, the court increased the amount of punitive damages it awarded so that the effective amount of the punitive damages awarded against Weingarten would approximate the amount of compensatory damages awarded (i.e., $2 million). The court reasoned that because Weingarten and/or entities she controlled owned a majority interest in Astra, which she also controlled, a nominal award to Astra of $2 million in punitive damages would not punish her to that extent. Rather, a substantial portion of the nominal award would, or could, effectively be returned to, or otherwise recouped by, Weingarten through her control of, and majority interest in, Astra (e.g., directly through dividends or indirectly through increased value of Astra's common stock). Accordingly, to adequately punish Weingarten for her wrongful conduct, the trial court reasoned the nominal amount of the punitive damages award should be increased to such extent that Weingarten (and/or entities she controlled) would not necessarily be able to recoup at least $2 million of that award, which amount would not exceed the compensatory damages awarded against her for breaches of fiduciary duty. The court calculated that nominal amount to be $4,657,945, which, after consideration of Weingarten's interest in and control of Astra, would effectively punish her in the amount of $2 million.
Based on our de novo review of the facts and circumstances of this case, we conclude the trial court's award to Astra of the nominal amount of $4,657,945 in punitive damages did not exceed the maximum amount allowed under the due process clause of the Fourteenth Amendment, as interpreted by State Farm. Although, as Weingarten notes, the facial amount of the punitive damages award resulted in an approximate 2.3:1 ratio of punitive to compensatory damages (i.e., $4,657,945 to $2,036,420.20), that ratio reflected only the nominal ratio and not its effective ratio after consideration of Weingarten's ownership and control of Astra. Assuming arguendo the trial court correctly calculated the interest of Weingarten (and entities she controlled) in Astra (which calculation she apparently does not dispute on appeal), we conclude the effective ratio of punitive to compensatory damages is approximately 1:1 for purposes of the due process clause and State Farm. To effectively punish Weingarten for her wrongful conduct, the trial court reasonably concluded it needed to increase the nominal amount of the punitive damages award so that the net financial effect on her was a loss of approximately $2 million after taking into account her control of and interest in Astra. The court could reasonably conclude Weingarten and/or entities she controlled had, or could have, the ability to recoup, or otherwise receive the economic benefit of, at least $2,657,945 of the $4,657,945 in punitive damages awarded to Astra. Accordingly, the court properly concluded its effective punitive damage award against Weingarten was only $2 million and therefore did not exceed the constitutional maximum ratio of 1:1 for punitive to compensatory damages.
Weingarten does not cite any apposite case holding the nominal, and not the effective, amount of a punitive damages award is the only amount to be used in determining whether a punitive damages award exceeds the constitutionally permissible maximum ratio under the due process clause and State Farm. Although Pointe, in turn, does not cite, and we have not found, any apposite case holding a court can consider the effective, and not the nominal, amount of a punitive damages award in determining its constitutionality, we believe that in appropriate cases, such as the instant case, the facts and circumstances may support such an approach. As noted above, the purpose of punitive damages is not to compensate the plaintiff, but rather to punish the defendant and deter the defendant and others from committing similar acts. (Civ. Code, § 3294, subd. (a); Ferguson v. Lieff, Cabraser, Heimann & Bernstein, supra, 30 Cal.4th at p. 1046.) In the facts and circumstances of this case, the trial court reasonably concluded that a nominal punitive damages award of only $2 million would not have the same effect in punishing Weingarten for her misconduct and deterring her and others from committing such acts in the future as a similar award would have in a case in which the defendant had no financial interest in or control of the plaintiff. For example, a defendant is not punished to the full extent of a $2 million punitive damages award if that defendant, through control of the plaintiff, can immediately cause a distribution to the defendant, or otherwise receive the economic benefit, of a substantial portion of that award. Accordingly, based on the facts and circumstances in this case, the trial court's award to Astra of $4,657,945 in punitive damages did not exceed the maximum amount allowed under the due process clause of the Fourteenth Amendment.
III
Law of the Case Doctrine
Weingarten contends the trial court's award to Astra of $4,657,945 in punitive damages violates the law of the case doctrine by, in effect, awarding Pointe punitive damages in violation of our opinion and disposition in Pointe I. As noted above, in Pointe I we concluded Pointe could not recover punitive damages directly on its derivative breach of fiduciary duty claim because it was merely a representative, nominal plaintiff enforcing Astra's rights and had not suffered any actual damages itself. We stated: "Because Pointe recovered no compensatory damages under the seventh cause of action, we reverse the portion of the judgment awarding punitive damages to Pointe and remand the matter for a determination of whether Astra is entitled to an award of punitive damages under the seventh cause of action and, if so, the amount of the award." (Pointe I, supra, D044695, at p. 25, fn. omitted.)
Under the law of the case doctrine, " 'the decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case.' " (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 301.) The doctrine also "extend[s] to questions that were implicitly determined because they were essential to the prior decision." (Yu v. Signet Bank/Virginia (2002) 103 Cal.App.4th 298, 309.) However, "[t]he doctrine does not apply to points of law that might have been determined, but were not decided in the prior appeal." (Ibid.) The law of the case doctrine "promotes finality by preventing relitigation of issues previously decided." (Ibid.)
Based on our review of our opinion in Pointe I, we conclude the law of the case doctrine applies only to preclude Pointe from directly receiving an award of punitive damages for harm suffered by Astra. As noted above, in Pointe I we reversed the award of punitive damages to Pointe and remanded the matter for a determination of whether Astra (which suffered actual damages from Weingarten's breach of fiduciary duty) should receive an award of punitive damages on Pointe's derivative breach of fiduciary duty claim filed on Astra's behalf and, if so, in what amount. Pointe, as a holder of Astra's Class A common stock, clearly had the right to file a shareholder derivative cause of action on behalf of Astra. Furthermore, in its capacity as a holder of Astra's Class A common stock, Pointe presumably would receive an indirect benefit from any award to Astra of punitive damages (along with an award of compensatory damages) based on that derivative cause of action. Contrary to Weingarten's assertion, there is nothing in our Pointe I opinion, either expressed or implied, that precludes Pointe from receiving any indirect benefit in its capacity as a shareholder of Astra from an award of punitive damages made directly to Astra. Assuming arguendo the trial court believed Pointe would receive $2 million of the punitive damages award to Astra as a result of its ownership of Astra's Class A common stock, that indirect receipt of part of the proceeds from the punitive damages awarded to Astra would not contradict or alter our decisions on questions of law in Pointe I. At most, the question of Pointe's indirect receipt of proceeds as a shareholder of Astra was a question of law not decided in Pointe I. Accordingly, the law of the case doctrine did not apply to preclude the trial court from awarding punitive damages to Astra even though Pointe may indirectly benefit from those proceeds as a shareholder of Astra. (Yu v. Signet Bank/Virginia, supra, 103 Cal.App.4th at p. 309.)
IV
Jurisdiction of the Trial Court to Award Punitive Damages
Weingarten similarly contends the trial court on remand after Pointe I did not have jurisdiction to, in effect, award Pointe punitive damages. Again, she misconstrues both the language and intent of our opinion and disposition in Pointe I.
"When there has been a decision upon appeal, the trial court is reinvested with jurisdiction of the cause, but only such jurisdiction as is defined by the terms of the remittitur. The trial court is empowered to act only in accordance with the direction of the reviewing court; action which does not conform to those directions is void." (Hampton v. Superior Court (1952) 38 Cal.2d 652, 655.) Alternatively stated, "[w]hen an appellate court's reversal is accompanied by directions requiring specific proceedings on remand, those directions are binding on the trial court and must be followed." (In re Justin S. (2007) 150 Cal.App.4th 1426, 1434-1435.) Furthermore, "[w]here the directions to the trial court are ambiguous, they are interpreted in accordance with the views, reasoning, and holdings expressed in the opinion as a whole." (Id. at p. 1435.)
Based on our review of our opinion and dispositional language in Pointe I, we conclude the trial court clearly had jurisdiction on remand to determine whether Astra should receive an award of punitive damages and, if so, in what amount. Our reversal of the award of punitive damages directly to Pointe, as the shareholder acting on Astra's behalf, was based solely on the principle that a plaintiff cannot obtain an award of punitive damages unless that plaintiff suffered actual harm (i.e., compensatory damages). Because Pointe's seventh cause of action for breach of fiduciary duty was filed derivatively as a shareholder on behalf of Astra, Pointe could not directly receive any award of compensatory or punitive damages. Contrary to Weingarten's assertion, there is nothing in our opinion or dispositional language in Pointe I holding, concluding, or supporting the position that Pointe could not indirectly receive, as a shareholder of Astra, any dividend or other economic benefit resulting from an award of punitive damages to Astra. Accordingly, we conclude the trial court had jurisdiction on remand after Pointe I to award Astra punitive damages even though Pointe might indirectly receive some economic benefit from that award in its capacity as a shareholder of Astra.
V
Trial Court's Factual Assumptions
Weingarten contends the trial court erred by awarding $4,657,945 in punitive damages to Astra because that award was based on incorrect factual assumptions by the court. She argues the court erred in increasing the nominal amount of that award based on the erroneous assumption that Pointe would receive about $2 million of that award as a holder of Astra's Class A common stock.
A
Astra was incorporated in Maryland. Its articles of incorporation authorized the issuance of 100, 000 shares of common stock and 1, 000 shares of Class A common stock. As noted above, Pointe received 1, 000 shares of Astra's Class A common stock in exchange for the residential property it transferred to Astra. Under paragraph 2(b) of Astra's articles, "[t]he holders of Class A Stock shall be entitled to receive quarterly dividends from, and only from, Cash Distributions received by [Astra]...." (Italics added.) Furthermore, "[h]olders of Class A Stock shall not be entitled to receive any dividends or other distributions from [Astra] except as set forth in this paragraph 2(b) or in paragraph 4 hereof." Paragraph 4 of Astra's articles provide: "In the event that [Astra] shall be dissolved or wound up, whether voluntarily or involuntarily, after there shall have been paid or set aside amounts to pay creditors of [Astra], the LLC Assets [defined in the articles as Astra's interest in WWI and any assets, other than Cash Distributions, distributed to and actually received by Astra on account of its interest in WWI] shall be distributed to the holders of Common Stock and Class A Stock in accordance with paragraph 2(b) hereof as if such LLC Assets were dividends.... Holders of Class A Stock shall not be entitled to receive any portion of the assets of [Astra], other than the LLC Assets as provided in this paragraph 4." Accordingly, the definition of "Cash Distributions" in paragraph 1(a) of Astra's articles is crucial to Pointe's interest as a Class A shareholder:
Those dividends are distributed as follows: "(i) The holders of Class A Stock shall receive 100 [percent] of the first $450,000 of Cash Distributions received by the Corporation from the date of organization of [WWI]; [¶] (ii) Thereafter, the holders of Class A Stock shall receive 20 [percent] of the next $5,250,000 of Cash Distributions received by [Astra]; [¶] (iii) Thereafter, the holders of Class A Stock shall receive 88-8/9 [percent] of the next $1,462,500 of Cash Distributions received by [Astra]; and [¶] (iv) Thereafter, the holders of Class A Stock shall receive 66 2/3 [percent] of all Cash Distributions received by [Astra]." In contrast, the holders of ordinary (i.e., non-Class A) common stock "shall receive such dividends as, when and if declared by the Board of Directors of [Astra]."
" 'Cash Distributions' shall mean distributions of cash actually received by [Astra] from [WWI], whether from the sale or disposition of assets of [WWI] or from profits earned in the operation of [WWI]...."
To understand what distributions of cash Astra potentially could receive from WWI that could constitute Cash Distributions under Astra's articles, we refer (as the parties and the trial court did) to WWI's operating agreement. That agreement provides, in pertinent part, that WWI's management committee "shall cause all Net Cash Flow, if any, to be distributed [quarterly] to the Members [i.e., Astra and BRFP], in the following order: [¶] (i) 80 [percent] to [BRFP] and 20 [percent] to Astra until [BRFP] shall have received $1.8 million and Astra shall have received $450,000...; then [¶] (ii) 100 [percent] to Astra until Astra shall have received $5.25 million...; then [¶] (iii) 10 [percent] to [BRFP] and 90 [percent] to Astra until the aggregate Net Cash Flow distributed to Astra and [BRFP]... shall equal $162,500 to [BRFP] and $1,462,500 to Astra; [and] then [¶] (iv) 25 [percent] to [BRFP] and 75 [percent] to Astra." (Italics added.) WWI's operating agreement defines "Net Cash Flow" generally as "the excess, if any, of (a) all cash revenues and funds received by [WWI] from operations during such period..., minus (b) the sum (without duplication) of all operating or other cash expenditures of [WWI] paid during such period...."
B
Weingarten argues the trial court erred in increasing the amount of the punitive damages awarded to Astra from $2 million to $4,657,945 based on the erroneous assumption that Pointe would receive $2 million of that award as a shareholder of Astra and that she would or could receive the remainder of that award as the controlling shareholder of Astra. Weingarten argues a punitive damages award to Astra could not constitute "Net Cash Flow" from WWI, which could be considered "Cash Distributions" under Astra's articles and therefore distributed as dividends to Pointe as a holder of Astra's Class A common stock.
However, we need not decide the exact meaning of those two terms or the effect of Astra's articles to uphold the trial court's award of $4,657,945 in punitive damages to Astra. Rather, based on our general review of the provisions and definitions discussed above, we conclude the trial court did not abuse its discretion in assuming Weingarten (and/or entities she controlled) would or could receive, or otherwise obtain the financial benefit of, at least $2,657,945 of the $4,657,945 in punitive damages it awarded to Astra and that Pointe (the only non-Weingarten-related holder of Astra stock) would or could receive (at most) $2 million of that award. Accordingly, in order to effectively punish Weingarten to the extent of $2 million for her wrongful conduct, the court reasonably, as discussed above, increased the nominal amount of award to $4,657,945. The trial court considered Astra's articles of incorporation, which it noted provide for "various percentages of the net cash proceeds to be distributed between the class A shareholders and the Weingarten-controlled entities. For example, if Weingarten were to pay $2 million in punitive damages, it would only cost her $400,000 according to the formula (assuming she paid the compensatory damages and the punitive damages are net cash flow). Accordingly, Weingarten would only be punished 20 [percent] of the punitive damages." The court rejected Weingarten's assertion that punitive damages would not be included in Astra's distribution formula because they are not "cash distributions" under Astra's articles of incorporation. In so doing, the trial court did not abuse its discretion. Based on our reading of Astra's articles of incorporation and WWI's operating agreement, it is not inconceivable that a court could (whether in a declaratory relief action, involuntary dissolution action, or shareholder action for other equitable relief) rationally decide that the punitive damages award in effect constitutes net cash flow or profits from WWI's operations such that the award constitutes "Cash Distributions" under Astra's articles from which Pointe, as a Class A shareholder, is entitled to receive dividends. Accordingly, the trial court did not abuse its discretion by assuming it was possible Pointe (as the only non-Weingarten-related holder of Astra stock) could receive $2 million of the $4,657,945 in nominal punitive damages awarded to Astra.
VI
Other Contentions
Weingarten contends the trial court erred by increasing the nominal amount of the punitive damages award under the derivative breach of fiduciary duty cause of action because that award violates the principle of shareholder derivative actions that a shareholder cannot directly benefit from a derivative action. (See, e.g., Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1107-1108, 1114.) However, as discussed above, the award of punitive damages to Astra did not directly benefit Pointe. Rather, Pointe's benefit from that award may be, at most, indirect as a shareholder of Astra. Furthermore, the underlying reason for the trial court's increase in the nominal amount of punitive damages was to effectively punish Weingarten to the extent of $2 million. The trial court could reasonably conclude Weingarten, who controlled Astra, could receive dividends or other economic benefit from Astra in the amount $2,657,945 of the nominal $4,657,945 amount of the punitive damages awarded to Astra. The court presumably believed that Weingarten could be adequately punished only if the only non-Weingarten-related shareholder of Astra (i.e., Pointe) received, or at least had a reasonable claim to, $2 million of the award. Weingarten wrongly argues a shareholder (e.g., Pointe) that files a shareholder derivation action on behalf of a corporation (e.g., Astra) may not indirectly benefit from an award to the corporation. On the contrary, that shareholder may properly benefit indirectly from an award to the corporation in its capacity as a shareholder (e.g., through dividends or increased value of its equity interest).
Contrary to Weingarten's assertion, the trial court's reliance on the "logic" of Perlman v. Feldmann, supra, 219 F.2d 173 and Rankin v. Frebank Co., supra, 47 Cal.App.3d 75, even if those cases are factually inapposite, does not detract from the trial court's reasoning in increasing the nominal amount of punitive damages from $2 million to $4,657,945 to effectively punish Weingarten for her wrongful conduct.
Weingarten also contends the trial court's increase in the nominal amount of punitive damages awarded to Astra from $2 million to $4,657,945 is neither logical nor equitable. However, as we discussed above, the court did not abuse its discretion by believing Weingarten would not be adequately punished for her wrongful conduct unless she effectively could not recoup $2 million of the punitive damages awarded to Astra, a corporation she controlled. Unlike Weingarten, we understand the logic underlying the trial court's increase in the nominal amount of punitive damages to $4,657,945. Regarding Weingarten's assertion that the punitive damages award is inequitable, she does not present any substantive argument in support of that assertion. Accordingly, we deem it to have been waived. (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830.)
POINTE'S CROSS-APPEAL
VII
Order Denying Motion for New Trial
In its cross-appeal, Pointe contends the trial court erred by denying its motion for a new trial on its derivative breach of fiduciary duty cause of action alleged on behalf of Astra against Weingarten, arguing the court had jurisdiction to consider its motion for a new trial on Astra's compensatory damages and abused its discretion by denying that motion.
A
As noted above, in Pointe I we concluded the trial court properly awarded Astra $2,036,420.20 in compensatory damages and prejudgment interest for Weingarten's breaches of fiduciary duties. However, we concluded the trial court abused its discretion in granting Pointe's (original) motion for new trial on the issue of damages on the ground of newly discovered evidence. (Pointe I, supra, D044695, at pp. 36-42.) We reasoned that the purported new evidence regarding tax benefits received by AHG was cumulative to testimony presented at trial and therefore not "material" within the meaning of Code of Civil Procedure section 657(4). Regarding the purported new evidence of real estate profits, we reasoned Pointe had not shown that evidence was admissible and therefore material (i.e., it would likely have changed the result of the trial). In our disposition in Pointe I, we reversed that portion of the judgment awarding punitive damages to Pointe and remanded the matter for retrial to determine whether Astra was entitled to punitive damages and, if so, in what amount (as discussed above), and reversed the order granting Pointe's motion for new trial on its seventh cause of action for breach of fiduciary duty. (Pointe I, at p. 60.)
On remand, the trial court conducted a trial on the issue of whether Astra should be awarded punitive damages on the derivative breach of fiduciary duty claim and, if so, in what amount. On January 8, 2008, the trial court issued an initial statement of decision that awarded Astra $4,657,945 in punitive damages against Weingarten.
On February 4, 2008, the trial court issued an amended statement of decision that maintained its award to Astra of $4,657,945 in punitive damages against Weingarten.
On January 16, 2008, Pointe filed a motion for new trial on its sixth and seventh causes of action against Weingarten for breach of fiduciary duty, arguing newly discovered evidence supported its request for a new trial on Astra's damages for Weingarten's breaches of her fiduciary duties. In its supporting papers, Pointe focused on purported newly discovered evidence that would show Astra was entitled to a greater award of compensatory damages. The trial court denied that motion, reasoning that it did not have jurisdiction to consider the issue of compensatory damages because Pointe I expressly remanded the matter for retrial on the issue of punitive (and not compensatory) damages. It alternatively reasoned the law of the case doctrine precluded it from addressing the merits of a new trial motion decided in Pointe I.
B
Pointe asserts the trial court erred by denying its motion for new trial on the ground the court did not have jurisdiction to consider Pointe's motion for a new trial on Astra's compensatory damages. However, we conclude the trial court correctly determined that it did not have jurisdiction on remand after Pointe I to address the issue of Pointe's compensatory damages, whether during the retrial on remand of the punitive damages issue or in deciding a motion for new trial filed after it issued its decision on punitive damages.
To the extent Pointe's motion for new trial may have argued there was newly discovered evidence on the issue of punitive damages, Pointe does not substantively argue that issue on appeal and therefore has waived or forfeited it. (In re Marriage of Falcone & Fyke, supra, 164 Cal.App.4th at p. 830.) We note that Pointe's brief states: "In sum, the superior court had jurisdiction to grant Pointe's motion for a new trial on the issue of Astra's compensatory damages on the derivative seventh cause of action." (Italics added.)
In general, "[t]he effect of an unqualified reversal ('the judgment is reversed') is to vacate the judgment, and to leave the case 'at large' for further proceedings as if it had never been tried, and as if no judgment had ever been rendered." (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 869, p. 928, italics added.) "An unqualified reversal ordinarily has the effect of remanding the cause for a new trial on all of the issues presented by the pleadings. It is unnecessary to add specific directions for this purpose in the judgment [on appeal]." (9 Witkin, supra, at § 870, p. 929.) The same general rule applies to an unqualified partial reversal of a judgment. (Hall v. Superior Court (1955) 45 Cal.2d 377, 381.)
However, "[o]ne limitation [on that general rule] is that a case is to be set at large for retrial only when that is the intent of the appellate court. 'Judgment reversed' at the end of an opinion is, of course, strong indication of such intent. But when the opinion as a whole establishes a contrary intention, the rule is inoperative." (Stromer v. Browning (1968) 268 Cal.App.2d 513, 518-519.) Alternatively stated, "[t]he general rule that an unqualified reversal results in a retrial does not necessarily apply when the opinion as a whole establishes a contrary intent. It is the substance of the opinion that controls, not the form of the order." (In re Anna S. (2010) 180 Cal.App.4th 1489, 1500; see also In re Justin S., supra, 150 Cal.App.4th at p. 1435 [if language of disposition is unclear, the opinion as a whole should be considered for proper interpretation].)
More importantly, "[w]hen there has been a decision upon appeal, the trial court is reinvested with jurisdiction of the cause, but only such jurisdiction as is defined by the terms of the remittitur. The trial court is empowered to act only in accordance with the direction of the reviewing court; action which does not conform to those directions is void." (Hampton v. Superior Court, supra, 38 Cal.2d at p. 655, italics added.) For example, "[w]here a reviewing court reverses a judgment with directions to determine damages in accordance with the rules set forth in its opinion and to enter judgment for the plaintiff, the trial court is bound by the directions given and has no authority to retry any other issue or to make any other findings. Its authority is limited wholly and solely to following the directions of the reviewing court." (Rice v. Schmid (1944) 25 Cal.2d 259, 263, italics added.) It is appropriate for an appellate court to order a retrial on the issue of only one type of damages (e.g., punitive damages) when that issue is separate and distinct from other types (e.g., actual or compensatory damages). (Torres v. Automobile Club of So. California (1997) 15 Cal.4th 771, 776.)
In the circumstances of this case, in Pointe I we reversed that portion of the judgment awarding punitive damages to Pointe and remanded the matter for retrial to determine whether Astra is entitled to punitive damages and, if so, in what amount. (Pointe I, supra, D044695, at p. 60.) In so doing, we did not, either explicitly or implicitly, permit a retrial on any other issues on remand of the matter to the trial court. Therefore, our opinion precluded any retrial on the issue of Astra's compensatory damages under the seventh cause of action for breach of fiduciary duty. Contrary to Pointe's assertion, the trial court's entry of an amended judgment (or issuance of a statement of decision) awarding Astra punitive damages after retrial on that specific issue did not give Pointe an opportunity to file a (second) motion for new trial on the issue of Astra's compensatory (and not punitive) damages. At most, Pointe could have filed a motion for new trial solely on the issue of punitive damages, which issue was retried on remand after Pointe I. Similarly, our "unqualified" reversal in Pointe I of the trial court's order granting Pointe's original motion for new trial did not allow it to file a second motion for new trial on the issue of compensatory damages. To so construe the law and our opinion would be to, in effect, give Pointe a "second bite at the apple" when it missed on its first attempt. Rather, our reversal of the order granting Pointe's first motion for new trial ended the matter as to Astra's compensatory damages. Whether based on the retrial on remand of the punitive damages issue or on our reversal of Pointe's first motion for new trial, Pointe did not obtain a "renewed" right to file a motion for new trial on the issue of Astra's compensatory damages under the seventh cause of action for breach of fiduciary duty.
The cases cited by Pointe do not persuade us to conclude otherwise. (See, e.g., Bond v. United Railroads (1915) 169 Cal. 273, 275; Woodcock v. Fontana Scaffolding & Equip. Co. (1968) 69 Cal.2d 452, 459-460; Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 752-753.)
However, as we noted above, to the extent Pointe's motion for new trial may have argued there was newly discovered evidence on the issue of punitive damages, Pointe does not substantively argue that issue on appeal and therefore has waived or forfeited it. (In re Marriage of Falcone & Fyke, supra, 164 Cal.App.4th at p. 830.)
Any consideration by the trial court of the merits of a motion for new trial on the issue of compensatory damages, like a retrial on remand on the issue of compensatory damages, is beyond both the explicit and implicit directions of our opinion and disposition in Pointe I. Furthermore, to the extent our directions in Pointe I were ambiguous regarding the issue of compensatory damages, we construe our language in that opinion as a whole to mean the trial court had jurisdiction on remand to consider only the issue of punitive, and not compensatory, damages. (Cf. Stromer v. Browning, supra, 268 Cal.App.2d at pp. 518-519; In re Anna S., supra, 180 Cal.App.4th at p. 1500; In re Justin S., supra, 150 Cal.App.4th at p. 1435.) Accordingly, we conclude the trial court did not have jurisdiction or authority to consider the merits of Pointe's motion for new trial on the issue of Astra's compensatory damages under the seventh cause of action. (Hampton v. Superior Court, supra, 38 Cal.2d at p. 655; Rice v. Schmid, supra, 25 Cal.2d at p. 263.)
Because we conclude the trial court did not have jurisdiction to consider the merits of Pointe's motion for new trial, we need not, and do not, address whether the law of the case doctrine applied to preclude that motion or support the trial court's denial thereof.
DISPOSITION
The amended judgment and order denying the motion for new trial are affirmed. The parties shall bear their own costs on appeal.
WE CONCUR: HUFFMAN, Acting P. J. HALLER, J.