Filed 3/25/16 Sleep Concepts Therapy v. E vans CA2/4 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

SLEEP CONCEPTS THERAPY, LLC ,

Plaintiff an d Respondent
,

v.

DAN EVANS et al.
,

Defendant s and Appella nt s

. B 2 5 9548
(Los Angeles County Super. Ct. No. BC492086 )

APPEAL from a judgment of the Superior Court of Los Angeles Co unty, Joseph
R. Kalin , Judge. Revers ed in part, affirmed in part

. Law Office s of Brett W. Wolff
, Brett W. Wolff, for Defendants and Appellants

. No appearance for Plaintiff and Respondent

.

______________________________2

Dan and Jackie Evans 1 appeal from a judgment after a bench trial, which award ed $500,000 in general damages for breach of contract and $50,000 in punitive damages in favor of Sleep Concepts Therapy, LLC ( hereafter, Sleep Concepts)

. 2 We decline to find a novation of the parties’ merchandise licensing agreement , but agree with appellants that
the damage award is not supported by substantial evidence and reverse that po rt ion of the judgment

.

FACTUAL AND PROCEDURAL SUMMARY Appellants competed in the NBC fitness reality series “ The Biggest Los er ” in
2008. In May 2010, they met Bernard Hicks
, a businessman with experience in product development, at an event organized by the Aerobics and Fitness Association of America, for which Hicks had obtained a “Biggest Loser” license. Afterwards, appellan ts, Hicks
and Shannon Nilsen (Hicks’ s wife)
, began meeting socially. Appellants mention ed that they ran half

- marathons to raise money for their children’s foundation and were

1 Appell ants , mother and son, share the same last name; for clarity, we refer to them by their first names when necessary.

2 The pleadings are not in the record, but the case caption and trial court docket identify Sleep Concepts as the sole plaintiff, as does the trial court’s minute order, which awarded damages to plaintiff. Appellants, who were defendants in the case brought against them by Sleep Concepts, cross

- complained against Sleep Concepts and two individuals, Bernard Hicks and Shannon Nils e n

. The court’s minute order identifies Hicks and Nilsen solely as cross

- defendants. However, t he judgment identifie s all cross

de fend ants as plaintiffs. In their opening brief, appellants do not raise any issues regarding the cross

- complaint, but they refer to Sleep Concepts, Hicks, and Nilsen collectively as plaintiffs and respondents, even though in the case information Sleep Con cepts is listed as the sole respondent on appeal. This Court has been informed of Hicks’s death, but there has been no motion to substitute another respondent in his place and no appearance for him or for any other respondent. Because the identification of all cross

- defendants as plaintiffs appears to be in error, for purposes of this opinion we assume that Sleep Concepts was the only plaintiff, that damages were awarded solely in favor of Sleep Concepts, and that the appeal is prosecuted solely against Sleep Concepts. Although Sleep Concepts, Hicks, and Nilsen were jointly represented at trial, to avoid confusion we identify the attorney, trial brief, and exhibits only by reference to Sleep Concepts.3

interested in creating a race series called “The Biggest Loser RunWalk” ( hereaft er, RunWalk). Dan s ai d he enjoyed cooking at home and that he cooked low

- calorie meals to keep the weight off. H e sai d he made dressings and sandwich

- type spreads that had only 10 to 15 calories per serving. Hicks and Nilsen re call ed specifically that D an mentioned a Chipotle Ranch Dressing and that he complained it was difficult to retain the taste while reducing the calories. 3 Appellants asked Hicks to help them obtain a lic ense for RunWalk from NBC , and Hicks suggested that they also could pitch a p roduct line based on Dan’s low

- calorie dressing recipes. On July 29, 2011, appellants, Hicks, and Nilsen entered into a memorandum of understanding to form a company that would be held in equal shares by appellants on the one hand and Hicks and Nilsen on the other. 4 The purpose of the new company was to secure licensing agreements with NBC to market RunWalk and a line of dressings, sauces, spices, and marinades , both under the “Biggest Loser” brand. A company called FitWorld Group, LLC ( hereafter, FitWor ld) was formed, which was owned in equal shares by appellants on the one hand and Boots Holdings, LLC, an entity owned by Hicks, on the other. Around the same time, Jackie obtained a domain name for the pr oduct line under the name “Slim Sauce,” and Hicks a pplied to trademark the name. In August 2011, Hicks pitched both licensing ideas to Consumer Strategies Group, an agency affiliated with NBC. His presentation included a slide listing calories and nutritional information, which he admitted was “just a l abel from a jar.” Another slide
describ ed the product as “low

- calorie, low

- fat, low

- sugar, high

- taste ” and “ formulated by [appellants] and a team of nutritionists, people who know that every drop counts.” Hicks

3 At trial, Dan clarified that the base for his dress ings, sauces, and spreads is Hellmann’s low

- fat mayonnaise, which contains 10 to 15 calories per serving. He mixed it with seasonings , such as garlic or Chipotle

. Dan testified that he tried but could not make low

- fat or no

- fat mayonnaise on his own, and that Hicks assured him there were professionals who could help him.

4 Neither this, nor most of the subsequent agreements between appellants, Hicks, Nilsen, and entities incorporated by Hicks are in the record on appeal . W e glean their terms from refe rences made to them at trial and in other documents

.4

explained this language was based on appell ants’ participation in “The Biggest Loser
, ” where they had worked with personal trainers to get in shape and with nutrition experts to develop a proper diet

. NBC agreed to license R unWalk, but not Slim Sauce because it preferred to work with a large food company with an established distribution system rather than build another company’s brand using the “Biggest Loser” license. The October 31, 2011
RunWalk mercha ndising deal memo with NBC included a $1.5 million guarantee, which required FitWorld to make t wo initial payments of $225,000 , due in December 2011 and
March 2012 respectively

. According to Hicks, shortly after closing the deal with NBC, appellants demanded a 75 percent share of FitWorld ; to resolve the ensuing stalemate, on November 12, 2011,
he propos ed that the members ’ respective shares in the company could be adjusted based

on their respective contribut ions on the fees due to NBC. Hick s ’ s proposal followed after a potential investor already had demanded a share in FitWorld that would have
si gnificantly diluted the membe r s’ shares had they accepted the investment

. Jackie
countered with a propos al of her own: that appellants could focus on RunWalk, raise the funds for it, and retain 75 percent of that business , while Hicks could focus on
Slim Sauce , in which he would have a 75 percent interest

. She acknowledged that she did not have faith in the viability of SlimSauce after NBC declin ed to license it . In a subsequent e mail, Hicks memorialized the parties’ negotiations : if appellants were

suc cessful in finding an investor for RunWalk
, they would have an increase in ownership in FitWorld, from which they would finance the investment; the increase in ownership would not apply if all members collectively solicited the investor. Appellants were able to find investors to cover the first $225,000 payment due to NBC on the RunWalk license
, in return for 15 percent of FitWorld, which was to come
out of their ownership share. But NBC concluded FitWorld was not a credit

- worthy

company , and it demanded a $750,000 advance instead of the initial $450,000 by March
2012.5

Meanwhile, Hicks negotiated a promotional contract with Consumer Strategies Group, the NBC agent to whic h he had originally pitched the Slim Sauce idea. The
contract was to be on behalf o f Sleep Concepts, a company already incorporated by
Hicks. Because he needed to secure appellants’ commitment to provide r ecipes and
endorse the Slim Sauce product line, on December 9, 2011, he sent appellants a draft merchandise licensing agreement ( herea fter, ML A), limi ted exclusively to Slim Sauce. In the accompanying e mail, he asked if Dan had any written recipes th at could be included
in the MLA but received no response. 5 Appellants sign ed the MLA on January 20, 2012

. 6 They received a 25 percent
sha re i n Sleep Concepts and were required to provide “proprietary recipes for sauces and dressings f

ormulated” by them , as well as other agreed

- upon licensing marks, which according to Hicks included the Slim Sauce domain name. A schedule to t he agreement
lis ted a wide range of products , including marinades, barbeque sauce, seafood sauce, salsa, horseradish sauce, mayonnaise , and many others , for which Hicks admittedly did not know if appellants had recipes

. The MLA also required appellants to commit to a 20

- year exclusive endorsement of Slim Sauce. Because they wanted to focus on RunWalk, appellants negotiated down their promotional appearances from six to two a year. Hicks testified that appellants failed to appear as promised at two promotional

events for SlimSauce immediately after the signing of the MLA , even though he had no
document ary evidence showing appellants had agreed to appear at those events; appellants insis ted they could not have promoted an unlicensed product at events held
under the “Bigges t Loser” license

. Jackie endorsed a different brand of low

- calorie dressing in an interview held before she signed the MLA
, but posted at a later date

.

5 Nor had Hicks received a response to a n earlier email he had sent with regard to pitching the SlimSauce idea to the Schwan Foods Company in October 2011 . In that email, Hicks had asked, “What would it take from Dan’s recipe ideas to get three or four sauces ready for that deal? Obviously
, Schwan would be the manufacturing commercialization of the recipes, but how would we get started?”

6 T he MLA also was signed by Sleep Concepts, Hicks, and Nilse n.6

By the end of February 2012, appellants had arranged to use the $600,000 compensation they expected t o receive under a three

- year contract to endorse a nutrition
bar to cov er the fees due NBC for the Run Walk license. The owner of the nutrition bar
business , David Nolan, offered to invest an additional $900,000 in RunWalk in exchange
for 51 percent of Fit World . A ppellants asked Hicks to accept a dilut ion of his share down to 5 percent , along with a dilution of theirs to below 40 percent, in order t o satisfy
the claims of Nolan and several other investor s

. T hey also offered to “relinquish all ownership in anything to do with slim sauce but would also remove our name and likeness from any slim sauce products. You are free to use any other contestants to promote Slim Sauce

. ” A heated exchange followed. I n an e mail he sent on February 25, 2012, Hicks
blam ed appellants for asking to be released from the MLA, diluting his share in FitWorld,
and entering into an earlier investor agreement that encumbered FitWorld and pledged
the RunWalk license as collateral without consulting him. 7 Jackie responded with
ind ignation, threatening to quit rather than be “bullied” by Hicks. After tempers settl ed, an unsuccessful attempt was made to sell both Hicks’ s share in FitWorld and the
Slim Sauce idea to Nolan , and Hicks eventually agreed to be bought out of FitWorld for $ 75,000.
I n a March 2, 2012 e mail , Hicks inform ed Jackie that if the FitWorld buyout deal was completed by wire transfer that day, “we will take th e SlimSauce deal offered by

you

. . . . ” He demand ed a wire transfer of the first of 12 installments of $2, 000 , which

was “in respect to a complete release from the SlimSauce agreement in terms of the use

7 In relevant part, Hicks wrote: “As of today, my entity, Boots Holdings LLC holds 50% of the entity of FitWorld Group LLC. We have had verbal discussions to amend that ownership, based upon a proposal that you gave me in Fall, 2011 that included yo ur offer to increase my ownership in SlimSauce in return for accepting a dilution in my ownership in FitWorld Group (as evidenced by our signatures on the SlimSauce agreement, signed in December 2011). Your recent proposal asks that you now be released fr om that SlimSauce agreement and that I reduce my 50% ownership of FitWorld Group to 5%.”7

of your likeness, image, etc. and include [d] the surrender of your ownership in SlimSauce.” The money was to be wired to Nilsen’s bank account by the end of the day “for this ag reement to be accepted by us.”
T he buy out of Hicks’ s shares in FitWorld was memorialized in a redemption agreement, which was negotiated over several days. In a March 11 e mail , Hicks acknowledged, “I did receive the payment this week regarding [FitWorld] and your first $2,000 payment ,” but now he want ed to sign a “similar agreement ” to the one signed on
the FitWorld deal. H e attached a proposed formal release, which Jackie rejected. On April 10, Hicks rejected Jackie’s proposed rele ase, stating that “we just don’t seem to be able to meet on this revision to our original agreement.” He offered to refund “the $2,000 that arrived by wire transfer from you” and to return to the MLA. H e demanded that appellants transfer the domain name and forward him Dan’s recipes immediately in order to complete his trademark application. Appellants did not receive a refund and did not respond to Hicks’ s demands. At trial, Hicks denied receiving a wire transfer from appellants on March 2, 2012,

or a t any time after that date , and explained that what he mistakenly refer r ed to as a wire
transfer in his e mails was a $2
, 000 check he received from appellants ; the check was undated and the bank refused to accept it because Nilsen’s name was misspe lled as

“ Shannon M.” 8 Sleep Concepts sued appellants in September 2012. 9 I t asserted claims for breach of contract, breach of fiduciary duty, fraud, specific performance, and claim and delivery

. Sleep Concepts’ trial brief argu ed that appellants completely fai led to perform under the MLA; that they financed the first investment in FitWorld without Hicks and Nilsen’s

8 Jackie testifi ed that the check was sent o n April 9, 2012, to cover the second of 12 installment s , after the first payment had gone directly into Nilsen’s account

. Although it was marked as one of Sleep Concepts’ exhibits, the check is not included in the record on appeal. Appellants did not present documentary evidence of the wire transfer.

9 Since t he complaint and cross

- complaint are not in the record on ap peal, we borrow the description of their respective claims from the trial briefs.8

consent; that they misrepresented to Hicks between May and July 2007 that they were interested in creating a business based on RunWalk events and S limSauce products, signed a memorandum of understanding and MLA on July 29, 2011
, and immediately after obtaining the RunWalk license demanded a change of the ownership interests in SlimSauce and RunWalk; that the recipes and appellants’ endorsement were u nique and subject to specific performance, and that Sleep Concepts, Hicks
, and Nilsen were entitled

to the recipes, domain name, use of appellants’ images
, and their promotional support

. Appellants cross

- complained against Sleep Concepts, Hicks, and Nils en for breach of contract and invasion of privacy for the allegedly unauthorized use of their photographs to promote SlimSauce; they sought declaratory relief on their interest in and obligation to Sleep Concepts, as well as the involun tary dissolution of the company and
the cancellation of their interest in it. 10 At trial, Sleep Concepts presented expert testimony of the present value of its lost profit s for the SlimSauce product line over 20 years, which was estimated to be over $ 5 2
million

. In closing, i ts counsel requested damages in that amount

. Counsel made no specific request for punitive damages , even though a general request was included in the
trial brief

. After a f our

- day bench trial, the court t ook the matter under submission; three
months l ater , it issued a ruling in the form of a minute order. With few exceptions, the language of the ruling was borro wed verbatim from Sleep Concepts’ trial brief, including typographic errors, factual inaccuracies , and irrelevant arguments

. 11 The court appar ently

10 Appellants ’ cross

- claims were based on Hicks’s posting of a photograph where they wore clothes bearing the “Biggest Loser” logo on a mock

- up website he set up from April to July 2012 in order to obtain a trademark for the name “SlimSauce” Appellants also were concerned that i n filings with the State of Nevada, Hicks had designated them as “managing members” of Sleep Concepts, without their knowledge and consent.

11 A f ew examples : T he minute order copied the trial brief’s incorrect factual statement s that app ellants had to pay NBC $600,000 and that the MLA was signed in Ju ly 2011. In the language of the trial brief, it concluded that appellants’ “total refusal . . . t o do none of the promises” between them and Sleep Concepts constituted breach of contract. It copied the facts supporting the claim for breach of fiduciary duty, which had9

accepted the theories of fraud and breach of contract laid out in the trial brief, repeating
the statements in the trial brief that appellants refused to perform under the MLA, that they made misrepresentations “[p]rior to July 29, 2011,” and Sleep C oncepts, Hicks, and Nilsen “were defrauded by [appellants] to gain control over RunWalk.” The only independent factual finding the court made was that Dan “never developed, created and possessed any recipes for SlimSauce and had not so informed HICKS

. ” U ltimately, t he

court ruled: “Plain t i ff has no interest in Fit World Group, LLC
, and defendants have no
interest in SlimSauce. Cross

- complainants shall take n othing on their cross

- complaint

. Plaintiff is enti tled to damages from [ d ] efendants . . . for bre ach of their agreement with Sleep Concepts Therapy, LLC in the sum of $50 0,000 and punitive damages in the amount of $50,000.”
T he judgment drafted by Sleep Concepts ’ attorney , while incorporating the court’s ruling, misidentif

ied all cross

- defendants as pl aintiffs. Appellants’ motion for a new trial
was denied. This appeal followed.

DISCUSSION
I
When a respondent does not file a brief, we “may decide the appeal on the record, the opening brief, and any oral argument by the appellant.” (Cal. Rules o f Court, rule 8.220(a)(2).) We examine the record guided by the appellant ’ s brief and reverse only if prejudicial error is shown

. (See In re Bryce C. (1995) 12 Cal.4th 226, 232

– 233.) The

a ppellant has the burden of providing an adequate record and must show error

to do with appellants’ obtaining an investment for FitWorld, without acknowledging that Sleep Concepts never had an interest in FitWorld. It also copied language suggesting that Sleep Concepts, Hicks, and Nilsen were all entitled to specific performance and claim and delivery, without acknowledging that Hicks and Nilsen were not plainti ffs; to that language, the court added it s finding that there were no recipes but did not clearly deny the requested relief

.10

affirmatively. If the record on an issue is inadequate, it must be resolved against the appellant. ( Foust v. San Jose Const ruction Co., Inc. (2011) 198 Cal.App.4th 181, 187.) Appellants have provided a complete reporter’s transcript of the b ench trial; a partial clerk’s transcript, which does not contain the pleadings; and an incomplete set of exhibits, which does not contain any of Sleep Concepts’ exhibits . They acknowledge that the record on appeal is incomplete, but argue that this is bec ause the trial court returned
the exhibits to the respective party that had offered them, and that “Plaintiffs /
R espondent s” did not comply with the court’s request that they provide the exhibits.
A ppellants are not absolved of their duty to provide an ad equate record on appeal. We

note in particular that their briefs in support of the motion for a new trial contain citations

to Sleep Concepts’ exhibits, suggesting that appellants had cop ies of at least some of
th e se exhibits in their possession. Appell ants , who represented themselves at trial, complain that the creation of a record in the trial court was problematic. The repo rter ’ s transcript indicates that Sleep Concepts’ attorney had prepared an exhibit book, which he used to examine witnesses ; howev er, v ery few exhibits out of the book were actually marked for identification during
trial

. A t the end of trial, counsel specifically stated that he wished all exhibits in the book
to be admitted into evidence. The court responded that exhibits marked fo r identification
would be admitted and allowed counsel to check with the court clerk. Counsel asked the clerk about a few exhibits between numbers 23 and 31, but did not check whether the
lower numbered exhibits had been marked for identification

. Neithe r did appellants. Nevertheless, it appears that the exhibit book was left with the trial court for its
consideration. Generally, w here a document is produced by a party and given to the trial court for its consideration, and it is clear that the court c onsider ed the document after both parties had an opportunity to examine witnesses about it , the lack of a formal tender of evidence “does not deprive the document of its true character as evidence.” ( Walsh v. Walsh (1952) 108 Cal.App.2d 575, 579.) The pr oblem in this case is that it is not clear from the trial court’s ruling whether th e court considered any exhibits , or much of any evidence11

presented at trial
, since it copied almost all factual findings word for word from Sleep Concepts’ trial brief

. “In nonjury trials, where the judge is the trier of fact , a trial brief is an instrument of advocacy”; it argues “the facts as well as the law.” (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 201 5 ) ¶ 1 :331 , p. 1

- 92 .) It
is axiomatic that a rgument of counsel is not evidence . ( Fuller v. Tucker (2000) 84 Cal.App.4th 1163, 1173 .)
Because of the apparent problem s in the judgment and the court ruling on which it
was based , we choose to entertain this appeal on an incomplete rec ord, relying heavily on the reporter’s transcript of the trial. Nevertheless, our review is constrained by the doctrine of implied findings and the substantial evidence standard of review . We must presume that the judgment is correct, and that the trial court made all factual findings necessary to support it; we review the court’s express and implied findings of fact for substantial evidence. ( Brewer v. Carter (2013) 218 Cal.App.4th 1312, 1320; In re Marriage of Fong (2011) 193 Cal.App.4th 278, 293.) 12 I n applying the substantial evidence standard of review, “ ‘[w]e have no power to judge

. . . the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, or to resolve
conflicts in the evidence or in the reasonab le inferences that may be d rawn therefrom.’ [Citations.]” ( Leff v. Gunter (1983) 33 Cal.3d 508, 518.) Nevertheless, ‘“ [s]ubstantial
evidence

. . . is not synonymous with “any” evidence.’ . . . Inferences may constitute substantial evidence, but they must be the product of logic and reason.” ( Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.) Witness testimony that supports the judgment may be rejected on appeal only if ‘ “ it is physically impossible or inherently improbable and such inherent imp robability plainly appears. [Citation.]’ ” ( Fuentes v. AutoZone, Inc. (2011) 200 Cal.App.4th 1221, 1233.)

12 To avoid the doctrine of implied findings, “[t]he appellant must secure a statement of decision under Code of Civil Procedure section 632 and, pursuant to Code of Civil Procedure section 634, bring any ambiguities and omissions in the statement of decision to the trial court’s attention.” ( Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58.) The record does no t show, nor do appellants argue, that they sought or secured an actual statement of decision.12 II Appellants argu e that Hick s ’s March 2, 2012 e mail created a unilateral contract, which they accepted by sending the wire transfer he requested
, and, as a result, were released from the MLA through a novation. A novation is a new agreement that supplants the original contract and extinguishes the original obligation. (Civ. Code, § 1531, subd. (1); Wells Fargo Bank v. Bank of America (1995) 32 Ca l.App.4th 424, 431.) The parties must clearly intend to extinguish rather than merely modify the original agreement. ( Vallely Investments, L.P v. Bancamerica Commercial Corp. (2001) 88 Cal.App.4th 816, 832 [“A novation requires an express release by the part y entitled to enforce a promise ”].) T he “interpretation of a contract is subject to de novo review ,” but only “ where the interpretation does not turn on the credibility of extrinsic evidence.” ( Morgan v. City of Los Angeles Bd. of Pension
Comrs. (200 0) 85 Cal.App.4th 836, 843 .) Where the extrinsic evidence is in conflict,

‘“ the trial court’s resolution of that conflict is a question of fact and must be upheld if supported by substantial evidence. [Citation.] ’” ( DVD Copy Control Assn., Inc. v.
Kalei descape, Inc. (2009) 176 Cal.App.4th 697, 713.) Appellants relied on evidence e xtrinsic to the March 2, 2012 email to establish that
the e mail created a novation. The trial court made no express finding on the issue, but we must presume it concluded the re was no novation if that conclusion is supported by
substantial evidence in the record.
In t he March 2, 2012 e mail , Hicks purport ed to accept , on behalf of himself and unspecified others, a “SlimSauce deal” offered by appellants, on two conditio ns: th at “the [FitWorld] deal [would be completed] via wire transfer . . . as offered” and that $2,000 would be tr ansferred to Nilsen’s account; b oth transfers were to occur that day. The $2,000 payment wa s described as the firs t of 12 payments of $2,000; it wa s said to be “in respect to a complete release from the SlimSauce agreement in terms of the use of your likeness, image, etc. and include [d] the surrender of your ownership in SlimSauce.” The main dispute at trial was whether ap pellants sent the wire tra nsfer as required.
Hicks testified that they did not, and that all he received was a defective check that could13

not be deposited. Appellants invite us to reject Hicks’ s testimony as incredible by comparing it to other evidence, specifically his contempor an eous e mails, in which he acknowledged receipt without indicating any flaw in appellants’ performance. Under the substantial evidence standard of review, we can reject witness testimony which support s the judgment only if that testimony is incredible “o n its face ”

— that is, without the need

to compar e it to other evidence. ( Fuentes v. AutoZone, Inc ., supra , 200 Cal.App.4th at

p. 1234.) We cannot redetermine Hick’s credibility as to whether he in fact received a
wire transfer because his testimony on that issue is not inherently incredible

. The legal significance of Hicks’ s contemporaneous acknowledgment of receipt of a payment without notifying appellants of any defect in their performance is a different matter. A party may waive conditions in a contra ct, and an offeror may waive a provision in an offer specifying the means of its acceptance. ( Sabo v. Fasano (1984) 154 Cal.App.3d 502, 505.) A waiver may be implied from the injured party’s conduct, including its continuation of performance
, or acceptan ce of the other party’s continued performance. (1 Witkin , Summary of Cal. Law (10th ed. 2005) Contracts
, § 857, p. 944 .) It was undisputed at trial that Hicks did not object to the untimeliness of, or any other
defect in, appellants’ first payment

. Rath er , on March 11, 2012, he acknowledged its receipt and proceeded to attach a formal release for appellants’ signature. Appellants rejected the proposed release, which is not in the record on appeal. At trial, Sleep Concept ’ s position was that, by its te rms, the MLA could not be modified without a writing signed by all parties, and that the March 2 , 2012 e mail was not binding without a signed formal release. However, a novation is a new contract,
rather than a modification of the e xisting one, and if the parties ’ objectively expressed intent was to be bound by the terms of the March 2, 2012 e mail, the fact that they failed to agree on the language of the subsequently proposed release would be irrelevant. ( See Harris v. Rudin, Richman & Appel (1999) 74 Ca l.App.4th 299, 308.) The March 2, 2012 e mail is ambiguous in two important respects. First, it is unclear whether the statement, “This payment is in respect to a complete release

. . . ,” was intended to mean that, upon payment of $2,000 , appellants wou ld automatically be14

released from the MLA, or that they w ould be released in a subsequent formal release

. It
is clear that by March 11, 2012, after a formal redemption agreement was signed in the FitWorld deal, Hicks insisted on a “similar agreement” in t he SlimSauce deal. Second, and more important, Hicks’ s reference to a “complete release ” in the March 2, 2012 e mail is qualified by the phrase “in terms of the use of your likeness, image, etc.” We interpret the former phrase in context, so as not to re nder the latter phrase “ surplusage.” ( Boghos v . Certain Underwriters at Lloyd’ s of London (2005)
36 Cal.4th 495, 503.) W e give the words their common dictionary meaning. ( Blasiar, Inc. v. Fireman’s Fund Insurance Co. (1999) 76 Cal.App.4th 748, 754 .) Th e common meaning of “et cetera” is “and others . . . of the same kind.” ( Merriam

- Webster’ s Collegiate Dict. (10th ed. 199 5 ) p. 398 .) It suggests that Hicks did not agree to release appellants from all their obligations under the MLA , but only from their obligation to
endorse SlimSauce . Appellants ’ earlier e mail, on February 23, 2012, indicates they had
offered to “ relinquish all ownership in anything to do with slim sauce but would also remove our name and likeness from any slim sauce products.” Appella nts’ own e mail supports the conclusion that they offered to give up their rights in SlimSauce, but failed to clearly demand a complete release from all their obligations under the MLA . That opened the door to Hicks’ s continued demands that appellants turn over the SlimSauce domain name and recipes
, which he claimed were their remaining obligations under the MLA, so he could develop the SlimSauce product line with other contestants

. Hence , even if Hicks waived any defect in appellants’ first $2,000 paymen t , it is
reasonable to infer that the terms of th e SlimSauce deal
, which appellants had proposed and which Hicks purported to accept, were not sufficiently clear to complete ly extinguish appellants’ obligations under the MLA

. Because Hicks , on behalf of h imself and any other parties of the MLA he purported to represent, did not unambiguously promise a complete release of appellants from the MLA, no novation occurred.
II I Assuming that they breached the MLA , appellants argue that the damage award is

not s upp orted by substantial evidence. At trial, Sleep Concepts requested over $5215

million in damages based on its expert’s estimate of the present value of the company’s lost profit s over the 20

- year term of the MLA. 13 The trial court rejected that amount, an d instead awarded $500,000. The court did not explain what evidence supported the reduced award, and the record before us show s Sleep Concepts di d not prove its entitlement to damages for lost profits. Lost profits may be recoverable as breach of contra ct damages if their occurrence and extent are reasonably certain. ( Sargon Enterprises, Inc. v. University of Southern
Cal ifornia (2012) 55 Cal.4th 747, 773

– 774 ( Sargon Enterprises ) .) The claim of lost profits of an unestablished business is “ ‘ generally o bjectionable ’ ” because “ ‘ their estimation is conjectural and speculative ’ ” ; lost profits for such a business are allowed only “ ‘ where their nature and occurrence can be shown by evidence of reasonable reliability. ’ [Citation.] ” ( Id . at p. 774.) Lost pr ofits may be proven with reasonable reliability where the owners have experience in the business they are seeking to establish, and the business is in an
established market. ( S. Jon Kreedman & Co. v. Meyers Bros. Parking

– Western Corp. (1976) 58 Cal.App.3d 173, 184

– 185.) The proof may involve expert analysis of

“ economic or financial data, market survey, or

. . . the business records or operating histories of similar enterprises. ” ( Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870,
888 .) “‘ [ T ] here must be “ ‘ a substantial similarity between the facts forming the basis of the profit projections and the business o pportunity that was destroyed.’”’ [Citation.] ” ( Sargon Enterprises , supra , 55 Cal.4th at p. 778 .) T o be admissible and to constitute
substantia l evidence, the expert’s testimony should not be based on assumptions unsupported by record evidence; nor should the expert rely on speculation and conjecture. ( Id . at p. 770 ; Roddenberry v. Roddenberry
, supra , 44 Cal.App.4th at p. 651.)

13 As an alternative measure of damages, Sleep Concept s’ counsel argued that appellants would derive over $60 million from RunWalk events over 20 years

. As we shall explain, the estimate was based on a gross misrepresentation of appellants’ testimony. In any event, the profitability of RunWalk has no bearing on Sleep Concepts’ entitlement to damages based on appellants’ breach of the MLA, which had nothing to d o with RunWalk.16

At trial, Sleep C oncepts’ expert explained that he relied on a report by a company called Fintel, which provides data about existing industry segments, based on financial statements for companies of various sizes and an average for the entire industry . He also
considered a report about consumer trends in sauces, dressings and condiments in the
United States. From these reports, he concluded that there was an existing market for the products listed in the MLA , none of which was new or unique

. Hicks provided the pricing an d cost structure for the proposed business ; the expert verifi ed Hicks’ s numbers against a report for the distribution of a particular dressing and accepted his projected price per unit as reasonable. F or year one, the expert approved Hicks’ s projection of $4,145,200 in gross revenue
, along with his projections of cost per unit, promotional cost, operating expenses, pre

- tax income, taxes due
, and net income. The projected revenue was to come from sales to “Biggest Loser ” fans, grocery retail sales, interne t sales, and licensing sales. The expert’s written report was admitted in evidence but has not been included in the record on appeal , and we have no means of verifying the soundness of the
calculations

. H owever, the expert admitted he had not been asked to, and did not, consider what the startup costs for the yet nonexistent business would be. When asked about those costs, the expert speculated that “there would be a

— say a month or so the cost associated with things like salaries and some initial market ing expenses, but I did not consider that to be actually material

. . . .”
It is clear that at the time the MLA was signed in January 2012, there existed

no thing more than an idea and a name for a product line. The trial court found there were no recipe s, and substantial evidence in the record supports a finding that there were no

“ proprietary ” recipes

. A s Dan explained, he simply mixed brand

- name products, such as
Hellman’s low

- fat mayonn aise and Chipotle seasoning , to create his low

- calorie version
of a Chipotle Ranch Dressing

. The expert’s off

- hand estimate that, within a month or so , a business based on a nonexistent product may be brought from the conceptual to the marketing and distribution stage is conjecture at best

.17

Neither Hicks n or appellant s had any experience in the food industry, and Hicks’ s

e mail to appellants in October 2011 suggests he had no idea what it would take to prepare actual sauces from Dan’s recipe “ideas” for a pitch to a food company. T o conclude that a food company would h ave been interested in commercializing recipes based on mixing existing brand

- name products would be speculative . Nor is there evidence reasonably supporting Hicks’ s self

- serving assumption at trial that Sleep Concepts would have been immediately successf

ul in attracting investment capital for SlimSauce and outsourcing its production to a cold packer. That assumption was based on a flawed analogy to the
success of RunWalk and the presumed success of the nutrition bar appellants were paid to promote. Howe ver, Dan testified that the nutrition bar never launched, and Nolan instead
invest ed in RunWalk, which already had been licensed by NBC

. In contrast, SlimSauce was an idea for a nonexistent product line that both NBC and Nolan had rejected. The assumptio n that the SlimSauce product line would have come to fruition , let alone that it
would have been immediately profitable , was no more than wishful thinking. Sleep Concepts’ expert recognize d that , unless uniquely promoted, the SlimSauce products would hav e be en undifferentiated from already existing low

- calorie sauce s and dressing s . A s to how successful a promotion based on celebrity endorsement would have
be en , the expert responded
, “T hat is very difficult to answer.” While certified and experienced in business valuation, the expert admitted he had not done much work on celebrity valuations; nor did he reference any aids he had used to guide his valuation of appellants’ celebrity status. The expert acknowledged that appellants are not A

- li st celebrities like Paul Newman ; nevertheless, for purposes of product recognition
, he
believ ed they would have the sa me short

- term effect, apparently due to the popularity of “The Biggest Loser.” It is undisputed that SlimSauce was declined a “Biggest Loser” license by NBC,
and Hicks testified he assumed the product line would not be licensed by NBC. At trial, appellants and Hicks disagreed whether appellants could endorse an unlicensed product at their licensed RunWalk events, but even Hicks agreed NBC had become st ricter about the use of the “Biggest Loser” logo

. Yet , t o gauge appellants’ popularity , Hicks , who18

was not qualified as a valuation expert, relied on “metrics relating to the show,” such as
the close to 2 million “ likes ” on the NBC “Biggest Loser” Faceboo k fan page, rather than

on appellants’ own Facebook pages. Sleep Concepts’ expert endorsed Hicks’ s approach
without provid ing any reasoned justification for gauging the marketability of a product sponsored by past contestants on “The Biggest Loser
, ” but n ot licensed or promoted by
NBC , by comparing it to the popularity of the show itself. Other than the speculative evidence of its lost profits, Sleep Concepts claimed no other actual damages. The award of $500,000 in compensatory damages is, therefore,

u nsupported by evidence.
IV The award of $50,000 in punitive damages against appellants also must fail

. While punitive damages may not be awarded for mere breach of contract, they may be awarded where “a defendant fraudulently induces the plaintiff to en ter into a contract.” ( Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 135 , citing Civ. Code, § 3294 .) However, “ a ctual damages are an absolute predicate for an award of exemplary or punitive damages. [Citations .] ” ( Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147; see also Fullington v. Equilon Enterprises, LLC (2012) 210 Cal.App.4th 667, 674; see Berkley v. Dowds (2007) 152 Cal.App.4th 518, 530.) Where “the evidence fails to establish a basis to recover any of the damages awarded” by the trier of fact, “the punitive damages award must be reversed because punitive damages cannot be awarded without actual damages. [Citations.] ” ( Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 758.) Since Sleep Concepts did not prove it had suffered actual damages, the punitive damages award cannot stand. The punitive damage award cannot be sustained also because Sleep Concepts presented no meaningful evidence of appella nts’ financial condition. ( Baxter v. Peterson (2007) 150 Cal.App.4th 673, 680.) “ Normally, evidence of liabilities should accompany evidence of assets, and evidence of expenses should accompany evidence of income. ” ( Ibid .) Here, no evidence was introdu ced regarding appellants’ assets, overall income,19

expenses, and liabilities. At most, Sleep Concepts’ counsel elicited some unspecific testimony about the general revenues from RunWalk, but not appellants’ share of those revenues. Jackie testified appell ants were hoping to do 28 races and some “off

- road challenges” with another company. She testified that while their largest race had 3
, 500 participants, the races usually averaged 12 people. The entry fees started at $15 for children and $25 for adults, and went up to $95. Sleep Concepts’ counsel repeatedly misstated Jackie’s testimony as proof that appellants organize 40 races a year with 1
, 500 participants per race and a $50 entrance fee. Although the court did not expressly state that it awarded pun itive damages for fraud, it made disparate findings of misrepresentation, nondisclosure, and fraud, which

a ppellants challenge independently

. F raud (be it fraud in the inducement or promissory
fraud ) generally consists of “ ‘ (a) misrepresentation (false re presentation [or promise], concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage. ’ [Citations.] ” ( Lazar v. Superior Court (1996) 12 Ca l.4th 631, 638.)
T he court uncritically adopted Sleep Concepts’ theory that appellants feigned interest in SlimSauce because they wanted to gain control over RunWalk and convinc e Hicks to give up his ownership in FitWorld. That theory was based on an in complete and misleading statement of the facts. To begin with, a s we have noted
, the claimed damage to one of Hicks’ s entities, Boots Holding, from the loss of its shares in R un Walk is of questionable relevance to the damages his other entity, Sleep Conc epts, claimed to have sustained from appellants’ failure to perform their obligations with regard to the SlimSauce product line

. Furthermore , there is no substantial evidence that appellants actually gained control of
FitWorld. Under the substantial evi dence standard of review, we must credit Hicks’ s testimony that appellants demanded a 75 percent share of FitWorld immediately after NBC approved the RunWalk license in October 2011. But that is not the share with
which appellants apparently ended. Rathe r, in February 2012, wh en appellants asked
Hicks to dilute his interest to 5 percent, Hicks claimed Boots Holding still owned 5020

percent of FitWorld. At the same time, a ppellants’ combined interest in FitWorld was to drop below 40 percent to accommodate N olan’s demand for a 51 percent share in exchange for his sizeable investment in RunWalk. No evidence was offered in support of Hicks’ s stated belief that appellants ended up own ing 90 percent of RunWalk. 14 I t would
be speculative to conclude that appellan ts colluded with Nolan to gain a combined majority interest in FitWorld
, just because they already had an endorsement deal with his company and convinced him to invest a combined $1.5 million in R un Walk

. Jackie’s testimony supports the conclusion that ap pellants had lost faith in
SlimSauce after NBC refused to license the product line , which is why they offered Hicks 75 percent in th at business

. Even assuming appellants did not co mmunicate their waning
enthusiasm to Hicks at the time, i t is undisputed th a t at the end of February 2012 , appellants simultaneously asked to be released from the ir endorsement obligations under
the MLA and proposed to dilute Hicks’ s interest in FitWorld to 5 percent. Thus, when he
made the decision to sell his entity’s shares i n RunWalk
, Hicks already knew appellants
did not want to promot e SlimSauce

. Under the circumstances, i t is unreasonable to
conclude that his decision to sell the FitWorld shares was induced by appellants ’ feigned
interest in the product line

. The trial court also found that before July 29, 2011 , the date on which they signed the original memorandum of understanding, appellants had falsely represented they were interested in creating a business based on SlimSauce products, and that Dan had “never develope d, created or possessed any recipes for SlimSauce and had not so informed ”
Hicks. Hicks’ s testimony does not make clear what exactly Dan said during the original conversations that led Hicks to believe any “ proprietary ” recipes existed , beyond the
mix ing of products already available on the market. But even assuming Dan exaggerated the extent of his success in developing original recipes for low

- calorie dressings
, sauces, and spreads, the question is whether Hicks (on behalf of his entity Sleep Concepts)

14 At the bench trial, Hicks expressed this belief during a brief exchange about a separate lawsuit in Texas and with regard to a separate FitWorld entity incorporated in Illinois.21

reasonably relied on Dan’s original misrepresentations
, or on appellant s ’ subsequent
failure to set the record straight

. Hicks did not testify Dan represented that nutritionists were involved in developing any actual recipes ; rather, Hicks himself made t hat representation to NBC
, based on the presence of nutritionists on “The Biggest Loser.” Similarly, Hicks did not
claim Dan told him that he had recipes for all products listed in the MLA ; rather, Hicks claimed to have been misled by appellants’ failure to deny affirmatively that any proprietary recipes existed. B efore the MLA was signed, Hicks asked whether any of Dan’s recipes were written down
, so that they could be included in the MLA, and how his recipe ideas could be turned into three or four sauce s ; he received no response. Even assuming appellants had a fiduciary duty to affirmatively disclose there were no proprietary recipes ( see Scafidi v. Western Loan & Bldg. Co. (1 946) 72 Cal.App.2d 550,
562

– 563 ) , it is questionable whether Hicks could reaso nably rely on their silence to exaggerate what Dan originally told him and to expand the number of recipes for the
formulation of which appellants would be solely responsible under the MLA.
V Because Sleep Concepts failed to prove its entitlemen t to dama ges, the damage
award must be reversed
, together with any findings of fraud supporting the award of punitive damages

. ( Kelly v. Haag (2006) 145 Cal.App.4th 910, 919 [“‘where the plaintiff’ s evidence is insufficient as a matter of law to support a judgment for plaintiff, a reversal with directions to enter judgmen t for the defendant is proper’ ” ].) Appellants do not challenge the rest of the court’s ruling, which was incorporated into the judgment. For the sake of clarity, we affirm the rest of the judgme nt with the following caveats: (1) We assume the court did not award any additional affirmative
relief on the complaint

. Both the court’s ruling and the judgment include sundry

passages copied from Sleep Concepts ’ trial brief, purporting to entitle not o nly Sleep Concepts, but also Hicks and Nilsen, to specific performance
, or claim and delivery
, even though Hicks and Nilsen
, we re not parties to the complaint. Although the court did not expressly deny the requested relief
, it implicitly d id so because it did not order appellants22

to specifically perform the MLA

. (2) The court denied appellants ’ cross

- complaint but
nevertheless cance l led their interest in “SlimSauce, ” which we understand to include their interest in Sleep Concepts.

DISPOSITION
The award of compensatory and punitive damages is reversed, and Sleep Concepts takes nothing under the complaint. The cancellation of appellants’ interest in SlimSauce
and the denial of the rest of their cross

- complaint are affirmed. Appellants are to bear their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

EPSTEIN, P. J. We concur:

MANELLA, J.

COLLINS, J.