James E. Welsh vs. Arlon Graphics, LLC

Motion in Limine

Cal. Super. - 4th Dist.June 10, 2016

A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O William C. Bollard, Bar No. 105489 william@ jbblaw.com Catherine A. Close, Bar No. 198549 cac@jbblaw.com M. Adam Tate, Bar No. 280017 adam@jbblaw.com JULANDER,BROWN & BOLLARD 9110 Irvine Center Drive Irvine, California 92618 Telephone: (949) 477-2100 Facsimile: (949) 477-6355 Attorneys for ARLON LLC and HANDY & HARMAN LTD SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER JAMES E. WELSH and NANCY S. WELSH, CaseNo. 30-2016-00857322-CU-BC-CJC individually and as trustees of The Welsh Family Trust dated A pril 29, 1979, ASSIGNED FOR ALL PURPOSES TO: GREGORY H.LEWIS, DEPARTMENT C26 Plaintiffs, MOTION IN LIMINE NO.3TO VS. EXCLUDE EVIDENCE, TESTIMONY OR ARGUMENT RELATED TO ARLON GRAPHICS, LLC, aCalifornia SPECULATIVE DAMAGES limited liability company; FLEXCON COMPANY, INC., aM assachusetts [Supporting Declaration of William C. corporation; and DOES | through 50, Bollard Filed Concurrently Herewith] inclusive, TRIAL Defendants. Judge: Hon. Gregory H. Lewis Date: March 12, 2018 Time: 8:30 a.m. Dept: C26 AND RELATED CROSS-ACTIONS Action Filed: June 10, 2016 Trial Date: March 12, 2018 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on March 12, 2018, at 8:30 a.m., or as soon thereafter as the matter may be heard in Department C26 of the above-captioned court, located at 700 Civic Center Drive West, Santa Ana, California, Cross-D efendants and Cross-Complainants ARLON LLC and HANDY & HARMAN LTD (hereinafter collectively referred to as “Arlon”) will and hereby do move, in limine, for an order in limine precluding Defendants and Cross-Complainants ARLON GRAPHICS, LLC and FLEXCON COMPANY, INC. (collectively “Graphics™) from presenting any evidence of, or testimony or argumentrelated to its speculative damage theory. This Motion in Limine is made on the grounds that Graphics cannotsatisfy its burden of proving its damages with reasonable certainty. With no way to quantify the extent of damages that could possibly be attributable to Arlon (should any liability be found), Graphics will attempt to extrapolate its damages by apportioning the amount it paid to Plaintiffs in settlement of this action and the amountit spent to defend this action. Graphics seeks to hold Arlon responsible for a percentage of its damages equal to the percentage of time Arlon was in possession of the subject Premises. Butthis damage theory is arbitrary and speculative and would undoubtedly mislead and confuse the trier of fact and consume an inordinate amount oftrial time. This Motion in Limine is based on Code of Civil Procedure, Section 3301, Evidence Code Sections 350 and 352, the Court’s inherent power to curb abuses and promote fair process, and its broad authority over the admission and exclusion of evidence. This Motion is based on the attached M emorandum of Points and A uthorities, the supporting Declaration of William C. Bollard filed concurrently herewith the records and files in this action, and such other and further evidence and argument as the Court may consider at the hearing on this Motion. DATED: March 2, 2018 JULANDER, BROWN & BOLLARD wh WilliamC. Bollard : Attorneys for ARLON LLC and HANDY & HARMAN LTD 2 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O MEMORANDUM OF POINTS AND AUTHORITIES l. STATEMENT OF RELEVANT FACTS A. Background Arlon formerly operated a vinyl manufacturing division out of an industrial facility located at 2811 S. Harbor Boulevard in Santa Ana, California (the “Premises™). The Premises were leased for many years from Plaintiffs JAMES E. WELSH and NANCY S. WELSH (collectively “Plaintiffs”). (Bollard Decl., §2(a).) Arlon sold its business and transferred its lease rights to Defendants and Cross- Complainants ARLON GRAPHICS, LLC and FLEXCON COMPANY, INC. (collectively “Graphics”) on February 4, 2011 (the “Closing Date”) pursuant to an A sset Purchase A greement (hereinafter “APA™). Inthe APA, Arlon was only contractually obligated to indemnify Graphics for any losses/damages to the Premises that occurred prior to the Closing Date. (Bollard Decl., 912(b).) As part of the diligence phase, Arlon required Plaintiffs to identify any problems they may have with the condition of the Premises so that the problems could either be addressed by the parties prior to the Closing D ate or factored into the purchase price. Satisfied with the condition of the Premises in January 2011, days before the Closing Date, Plaintiffs expressly represented that there was no default in any provision of the lease. Plaintiffs further warranted that Graphics, as the new lessee, “shall have no liability for obligations arising prior to the Closing Date.” Accordingly, Plaintiffs expressly released Arlon from any liability pertaining to the Premises and expressly waived any claims against Graphics for damages to the Premises that accrued prior to the Closing Date. (Bollard Decl., 12(c), Ex. 1.) Four years after the asset purchase transaction closed, in February 2015 Graphics vacated and surrendered the Premises at the end of the then-current L ease term. (See, Complaint, 930.) Plaintiffs thereafter initiated this action in June 2016 alleging that the Premises were in a state of disrepair at the time Graphics surrendered possession and seeking damages for the diminution in value of the Premises resulting from that disrepair. (See, generally, Complaint.) Plaintiffs admitted (both expressly in the discovery and impliedly by not suing A rlon) that they were only 3 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O suing Graphics in this action for damages which arose after the Closing Date — damages for which Arlon would have no liability and for which Graphics expressly assumed all liability under the APA. (Bollard Decl., 92(d)-(e), Exs. 2 and 3.) Notwithstanding the temporal limitation on Plaintiffs’ claims, Graphics sued Arlon for contractual indemnity, falsely surmising that it was being sued for damages to the Premises that arose prior to the Closing Date. Graphics denied Plaintiffs’ assertions regarding the condition of the Premises but alleged that “any damages, if such there be, which might have occurred to the Premises during the period from 1989 until close of escrow of the APA in early 2011, were the responsibility of [Arlon].” (SAXC, 99; Bollard Decl., 92(f).) After the Court granted summary adjudication in favor of Arlon on all of Graphics’ tort and equitable claims, the sole issue remaining to be determined at trial is whether Plaintiffs’ claims “pertain to the period prior to the Closing Date” as that phrase is used in the APA. (Bollard Decl., 12(q).) B. Specific Facts Related to The Instant M otion Throughoutits period of occupancy, Graphics fulfilled its L ease obligations to repair and maintain the Premises. Over the course of its tenancy, Graphics performed and paid for repairs and restorations, including replacing skylights, repairing the roof as needed, and repaving the asphalt parking lot. (Bollard Decl., 94, Ex. 4 [Trombino Depo.], pp. 48:25-49:9 [Graphics resurfacing the parking lot during its tenure]; 84:3-8 [Graphics paid for the resurfacing]; 59:22- 60:19 [Graphics replaced the office skylights during its tenure]; 60:18-61:6 [Graphics maintained the warehouse skylights]; 85:5-16 [Graphics repaired the air conditioning at its own expense].) Not once during that time did Graphics ever turn to Arlon seeking contribution for such repair, restoration, and maintenance costs in an amount proportional to its period of occupancy because it knew that Graphics was now solely responsible for the repair, restoration and maintenance of the Premises. (Bollard Decl., 14, Ex. 4 [Trombino Depo.], p. 98:17-24.) 11] 11] 111 4 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O In June 2013, Graphics first notified Plaintiffs that it intended to vacate the Premises. Following receipt of this 2013 notification, Plaintiffs conducted an inspection of the Premises. That inspection allegedly revealed that certain building systems and components were damaged and had not kept in good condition and repair. (See, Complaint, 1922-24.) Based on the inspection, on February 21, 2014, Plaintiffs sent a Notice of Default to Graphics demanding that the conditions be remedied prior to surrender. (/d. at 125, Complaint, Ex. A.) Graphics refused to remedy the conditions but assured Plaintiffs that, upon surrender, it would deliver the Premises “...in the condition required under the Lease.” (Id. at 926.) In addition, on March 27, 2014, Plaintiffs sent a letter to Graphics requesting copies of all permits and service contracts related to alterations of the Premises within 10 days. (/d. at 926.) On December 4, 2014, Plaintiffs sent a formal Notice of Breach to Graphics due to its failure to cure the defaults identified in the Notice of Default and its failure to provide the service contracts and permits within 10 days of Plaintiffs’ request. (/d. at 929.) Although not alleged in the Complaint, discovery revealed that Plaintiffs entered into a contract to sell the Premises in May 2014, which was twice amended. (Bollard Decl., 95, Ex. 5 [Purchase and Sale A greement Escrow Instructions CTR 0927-0929].) The purchase price for the Premises was $13,000,000, of which $1,381,761 was held back for work that the tenant (Graphics) was expected to perform prior to surrendering the Premises (as determined by a contractor’s estimate of the probable cost of repairs). (Bollard Decl., 15, Ex. 5 [Purchase and Sale A greement Escrow Instructions CTR 0927-0929], 92; Bollard Decl., 16, Ex. 6 [Third Amendment to Purchase and Sale Agreement and Escrow Instructions, 92(b) WFT 0814-0835].) To the extent that Graphics did not complete the repairs prior to surrendering the Premises, the buyer was entitled to retain that portion of the hold-back. After Graphics surrendered the Premises on February 16, 2015, Plaintiffs and the buyer jointly determined that many of the repairs had not been performed and that only $281,817 of the holdback should be released to Plaintiffs. (Bollard Decl., §7, Ex. 7 [Holdback A greement Disbursement Instructions WFT 1429-1432]; Ex. 8 [Ewing Depo.], pp. 25:12-26:14.) Plaintiffs’ damages thus could not exceed $1,099,944 (the amount of money Plaintiffs lost out of the 5 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O $1,381,761 holdback) and only to the extent that the damages: (1) could be tied to one of Graphics’ Lease obligations to repair or replace such items under the Lease; and (2) were not released by the January 2011 consent/release. (Bollard Decl., 18.) Rather than fighting this defensible claim, in November 2017, Graphics elected to settle Plaintiffs’ claims for $580,000 (the “Settlement Amount”). The Settlement A greement did not apportion any specific portions of the Settlement A mountto any specific claims of Plaintiffs — indeed it generally contained a mutual release of all claims, including unknown claims. (Bollard Decl., 19, Ex. 9 [Settlement A greement], pp. 2-3.) In an effort to articulate its damage claim against Arlon in connection with its Opposition to the Motion for Summary Judgment, Graphics espoused two alternate damage theories: (1) That Arlon is responsible for 9/13(69%) ofthe Settlement A mount(in addition to a proportionate share of Graphics’ fees and costs) since Arlon occupied the Premises from 2002-2011 (9 years) and Graphics only occupied the Premises from 2011-2015 (4 years) of the L ease term; or (2) that Arlonis liable for 22 years (84%) of the Settlement A mountif the “useful life” of any of the “dilapidated” components extended into the 1989-2002 period. (Bollard Decl., 10; See, Opposition to Motion for Summary Judgment [ROA No. 195], pp. 11:25-12:13.) As set forth herein, because each of these damage theories is arbitrary and uncertain and would only serve to mislead and confuse the jury, they should be excluded from trial. l. LEGAL ARGUMENT A. The Court Has the Power to Issue an Order in L imine to Promote Fair Process and E xclude the | ntroduction of Evidence The Court enjoys the inherent powerto control litigation before it, to prevent the abuse of its process, and to create a remedy for a wrong even in the absence of specific statutory remedies. (Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 288.) The court’s inherent power to curb abuses and promote fair process extends to the preclusion of evidence at trial. (/d.) Even without such abuses, the trial court enjoys a broad authority over the admission and exclusion of evidence. (Id.; citing 3 Witkin, Cal. Evidence (3d ed. 1986): Introduction of Evidence at Trial, § 1707, p. 1667.) Trial courts regularly exercise their basic power to ensure that 6 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O all parties receive a fair trial by precluding evidence. (/d. [citations omitted].) The appropriate vehicle is the motion in limine, which is within the trial court’s inherent power to entertain and grant. (/d.) Even absent a specific statute or rule, the motion in limine can be used to prevent an abuse or an unfair advantage by a party to the litigation. (/d. at 289.) B. Graphics’ Apportionment of Damage T heories are Arbitrary and Speculative and Cannot Support a Claim for Damages in this C ase Code of Civil Procedure, Section 3301 provides that, “[n]o damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin.” Damages that are uncertain, speculative or unascertainable cannot be recovered. (Page v. Bakersfield Uniform & Towel Supply Co. (1966) 239 Cal.App.2d 762, 774 [damages cannot be recovered if the evidence leaves them uncertain, speculative or remote; Engle v. City of Oroville (1965) 238 Cal.App.2d 266, 273 [damages must be certain and not speculative or conjectural].) As set forth above, Arlon could only be found liable in this action if, and to the extent that, the trier of fact determines that Plaintiffs’ claims “pertain to the period prior to the Closing Date.” But, there is no way of knowing what portion of the $580,000 Settlement Amount, “settling all claims known and unknown,” was attributable to any claim that could possibly pertain to the period prior to the February 2011 Closing Date. For example, the Settlement would necessarily include Plaintiffs’ claims that Graphics failed to surrender the Premises as required under the Lease in February 2015 and further failed to provide the service contracts and permits within ten (10) days of Plaintiffs’ request — claims that could not possibly be Arlon’s responsibility under any legal theory. The Settlement would also necessarily include claims concerning items that Graphics had already repaired and restored throughoutits tenancy — such as the skylights Graphics had installed and the parking lot Graphics resurfaced. But any claims related to these types of items could not possibly pertain to the period prior to Graphics” occupancy since they were installed or restored during Graphics’ occupancy. (Bollard Decl., 911.) Moreover, to simply take the Settlement A mount and arbitrarily divide it by the amount of time that Arlon was in possession under the L ease would ignore the fact that Plaintiffs expressly released both Arlon and Graphics from liability for any L ease obligations arising prior to the 7 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O Closing Date. (Bollard Decl., 11, Ex. 1.) Therefore, not a penny of the Settlement A mount could be attributed to any pre-Closing issues. Put simply, there is no way of knowing what percentage of Settlement Amount (or even of Graphics’ fees and costs) would be attributable to claims “pertaining to the period prior to the Closing Date.” No party has produced any evidence whatsoever that would establish with certainty the extent (if any) that any of Plaintiffs’ claims could possibly predate the Closing. Indeed, Plaintiffs themselves consistently maintained throughout the litigation that none of their claims arose prior to February 2015 (four years after the Closing Date). (Bollard Decl., 112 and 92(e), Exs. 2 and 3.) Accordingly, Graphics should not be permitted to present evidence, testimony, or argument that would suggest to the trier of fact that Arlon is responsible for damages in proportion to its period of occupancy. C. Graphics’ Arbitrary and Speculative Damage Theories W ould Necessitate an Undue C onsumption of Time, C reate Undue Prejudice to Arlon, and Will Certainly Confuse the J ury Only relevant evidence is admissible at trial. (Evid. Code § 350.) Evidences relevant whenit has a “tendency in reason to prove or disprove any disputed fact that is of consequence to the determination ofthe action.” (Evid. Code § 210.) California Evidence Code Section 352 provides that “[t]he court in its discretion may exclude evidence if its probative value is substantially outweighed by the probability that its admission will (a) necessitate undue consumption of time or (b) create substantial danger of undue prejudice, of confusing the issues, or of misleading the jury.” Itis well-settled that the Court is vested with wide discretion to exclude evidence under section 352. (See, M ozzetti v. City of Brisbane (1970) 67 Cal.A pp.3d 565, 578.) As set forth above, evidence, testimony, and argumentrelated to Graphics’ apportionment theories are irrelevant since itis wholly speculative and, therefore, not an available measure of damages in this action. (See William Dal Porto & Sons, Inc. v. Agricultural Labor Relations Bd., (1987) 191 Cal.App.3d 1195, 1211-12 [wholly speculative evidence is not relevant and is properly 8 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W © O0 0 N N o o U 1 A& A W N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O excluded].) Moreover, there exists a real danger that the trier of fact might be misled and persuaded by Graphics’ apportionment argument and accord the undue argument weight. A nd the presentation of evidence, testimony and argument would undoubtedly necessitate an inordinate amount of trial time given its complete lack of probative value. (Bollard Decl., 113.) For these reasons, evidence, testimony, and argument related to the speculative damage theories should be excluded pursuant to Evidence Code Section 352. D. Graphics’ Arbitrary and Speculative Damage T heories C ontradict its Sworn Discovery R esponses. In an effort to flush out what the nature and extent of the damages that Graphics is claiming to have suffered, Arlon propounded a set of form interrogatories to Graphics. Graphics’ responses plainly admit that Graphics had not suffered any damages as of July 21, 2017. FORM INTERROGATORY NO. 7.1: Do you attribute any loss of or damage to a vehicle or other property to the INCIDENT? If so, for each item of property: (a) describe the property; (b) describe the nature and location of the damage to the property; (c) state the amount of damage you are claiming for each item of property and how the amount was cal culated; and (d) if the property was sold, state the name, ADDRESS, and telephone number of the seller, the date of sale, and the sale price. RESPONSE TO FORM INTERROGATORY NO. 7.1: No. FORM INTERROGATORY NO.9.1: Are there any other damages that you attribute to the INCIDENT? If so, for each item of damage state: a) the nature; b) the date it occurred; c) the amount; and d) the name, ADDRESS, and telephone number of each PERSON to whom an obligation was incurred. ~ ~ ~ — RESPONSE TO FORM INTERROGATORY NO. 9.1: No. (Bollard Decl., 914, Ex.10, p. 5-7.) 9 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES A T T O R N E Y S A T L A W O O O0 0 N N o o U 1 A W N N B = N N N N N N N N N N B N F H RF R R R R E E E = = = 0 0 N o o u n A W M N H H O V O O N O O U O A W M N = O Graphics’ newly found position that Arlon should be financially responsible for some portion of the Graphics’ legal fees would directly contradict these discovery responses. Especially where Graphics responses to the Form Interrogatories were made more than a year after the case had been filed and a mere four months before it settled its case with Plaintiffs. (Bollard Decl. 914, Ex10.) Ata minimum, Graphics should be precluded from arguing that itis entitled to any attorney’s fees which predated such responses. II. CONCLUSION For the reasons set forth herein, Arlon respectfully requests that the Court grant this Motion and issue an Order in Limine precluding Graphics from presenting any evidence of, or testimony or argumentrelated to, its arbitrary and speculative apportionment of damages theory. DATED: March 2, 2018 JULANDER, BROWN & BOLLARD ow) William C~ Bollard Attorneys for ARLON LLC and HANDY & HARMAN LTD 10 ARLON’S MOTION IN LIMINE NO.3 TO PRECLUDE EVIDENCE/TESTIMONY RE: SPECULATIVE DAMAGES