Filed 12/31/14 Ehrlichman v. Heart Tronics CA2/8 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 EIGHT

LEE B. EHRLICHMAN,
Plaintiff and Respondent.

v.
HEART TRONICS, INC.,
Defendant and Appellant. B251805
(Los Angeles County Super. Ct. No. BC408322)

APPEAL from a judgment of the Supe rior Court of Los Angeles County. Mary H. Strobel, Judge. Affirmed.

Spire Law Group, LLP, and James N. Fiedler, for Defenda nt and Appellant.

Law Offices of Lisa L. Maki and Lisa L. Maki for Plaintiff and Respondent.

_____________ _____________2 Heart Tronics, Inc., app eals from the judgment awardi ng former chief operating
officer Lee B. Ehrlichman more than $1.2 million for br each of contract, wrongful termination, and related statut ory wage violations after the trial court found that Heart
Tronics fired Ehrlichman withou t cause. We reject Heart Tronics’ contention that there
was insufficient evidence to support the judgment and therefore affirm.

FACTS AND PROCED URAL HISTORY

In June 2008 Lee B. Eh rlichman was hired as chief operating officer of Heart Tronics, Inc., a start-up business that had developed improved electrocardiogram technology. 1 The parties’ written employment agre ement provided Ehr lichman an annual salary of $500,000, along with relocation expenses and other benefits. Ehrlichman took the job after working for several weeks as a c onsultant for the company, in part so he could determine whether the company was viable. Under the agreement Ehrlichman was en titled to two-year’ se verance pay if he were fired without good cause. The agreemen t defined good cause as follows: conduct that led to Heart Tronics being convicted of a crime or incurring criminal penalties; directives by appropriate government en tities that Ehrlichman be terminated; Ehrlichman’s conviction of a felony offens e or a misdemeanor involving a crime of dishonesty or moral turpitude; and the falsity of any of Ehrlichman’s representations and warranties contained in the agreement. Th e agreement contained three representations and warranties applicable to Ehrlichman – co ncerning advice of counsel and the absence of duress and coercion in the negotiation and ex ecution of the agreement, and that he was
not disabled at the time of execution. The employment agreement provided that Ehrlichman would be paid at least semimonthly. Although Ehrlichman was paid duri ng July and August 2 008, he was not paid during September or October. On October 28, 2008, Ehrlichm an sent a letter to Heart Tronics’ board of directors stating that he wo uld be forced to resign unless he was paid.

1 Heart Tronics was a dba of Signalife, In c. When we refer to Heart Tronics we include Signalife where applicable.3 In response Heart Tronics’ in-house counsel Mitchell J. Stein sent Ehrlichman a letter on October 29, 2008, that declared the employm ent agreement void from the start based on numerous alleged acts of fraud and other misc onduct by Ehrlichman. These included: taking a two-week vacation two days afte r signing the employment agreement; making false sales forecasts and then not making a ny sales; and failing to draw against the company’s line of credit in order to pay his own salary. 2 Ehrlichman sued Heart Tronics and Stein, alleging the following causes of action: fraudulently inducing him to relocate from Pennsylvania in viola tion of Labor Code section 970, along with comm on law claims for fraud and ne gligent misrepresentation based on the same conduct; breach of written a nd oral agreements to provide two years’ severance pay and other damage s for firing him without cause; Labor Code violations for unpaid wages and waiting time penalties; wrongful terminati on in violation of public policy based on firing him in retaliation for his demand that he be paid; and defamation. 3
A bench trial was held where Ehrlichm an and Heart Tronics’ President James Fiedler testified and the deposition testim ony of former company chairman Rowland
Perkins was admitted. Heart Tr onics did not dispute that it failed to pay Ehrlichman. Instead, Heart Tronics argued that it was ex cused from doing so fo r several reasons: (1) Ehrlichman could have simply drawn ag ainst the company’s line of credit to pay himself, but failed to do so; (2) he should ha ve requested payment in stock in lieu of cash, as authorized by the ag reement; (3) as set forth in Stein’s October 29, 2008, letter, Ehrlichman was fired for cause; and (4) Ehrlichman’s claims were barred under the equitable doctrine of unclean hands beca use he violated federal securities law by borrowing money from a board member.

2 Stein’s letter is a nine-page rant with accusations posed Jeopar dy style in the form of questions that Ehrlichman was dared to deny. Its petty tone reads more like schoolyard threats and ta unting and was, at a mini mum, unprofessional.

3 Because the complaint is not in the reco rd, our description of Ehrlichman’s causes of action comes from the trial court’s mi nute orders and statement of decision.4 The trial court – in a fairly detailed statemen t of decision – rejected these defenses. Concerning Ehrlichman’s sup posed failure to simply pa y himself by drawing on the company’s line of credit, the trial court note d a conflict in the evidence: While Board
Chairman Perkins testified that Ehrlichm an could have drawn on the credit line,
Ehrlichman testified that he ha d no control over the line of cr edit, and that his attempts to draw on it were rebuffed by Perkins and in-hous e counsel Stein. The trial court resolved
this conflict in favor of Ehrlic hman, finding his testimony credible. Concerning Ehrlichman’s failure to reques t payment in shares of stock, the trial court noted that the employment agreement left that option so lely in the company’s hands
and found no evidence to sh ow that the company ever exercised that option. Concerning Ehrlichman’s alleged breaches of contract, the trial court noted that Ehrlichman testified that the accusatory questi ons in Stein’s October 29 letter were either untrue or half-truths and that nobody had prev iously raised those issues. The trial court found that the alleged breaches were “not su pported by any evidence .” Stein’s October
29 letter was not sworn testim ony and Stein did not testify regarding the bases of his accusations. Although Perkins testified that he was disappointed in Ehrlichman’s sales efforts, the employment agr eement did not link his compensation to any stated sales goals. Perkins did not testify that Ehrlichman had been fire d for cause and instead said that the company had accepted his resignation. Based on th e evidence, the trial court found the company was not excused from paying Ehrlichman’s salary. Concerning the unclean hands defense a nd Ehrlichman’s supp osed violation of federal securities law by accepting a $5,000 lo an from a board member, the trial court found that the company pr esented no evidence it suffered any consequences from
Ehrlichman’s actions. The trial court al so found that Ehrlichman did not act unconscionably or in bad faith, thereby pr ecluding application of the unclean hands
doctrine. Summing up, the trial court found that He art Tronics fired Eh rlichman without good cause. The trial court also found that the company fired Ehrlichman in violation of public policy by drawing the inference that Eh rlichman had been fire d in retaliation for5 having demanded payment of his wages. The company’s willful failure to pay Ehrlichman’s wages violated the Labor Co de, entitling him to both his wages and waiting time penalties. The trial court awarded Ehr lichman damages of nearly $1.3 million as follows: (1) $1 million, representing two years of contractual severance pay; and (2) nearly $282,000 in unpaid wages, liquidated da mages and waiting time penalties. (Lab. Code, §§ 203, 1194.2.) 4
Heart Tronics contends there was insufficien t evidence to support any of the trial court’s findings.

DISCUSSION

1. Heart Tronics Has Waived Its Substantial Evidence Challenge
The purpose of a statement of decision is to provide an explanation of the factual and legal basis for the trial court’s decision. ( Wallis v. PHL Associates, Inc. (2013) 220 Cal.App.4th 814, 825.) It gives the parties and the appellate court a clear understanding of the facts and law relied on by the trial cour t to reach its decision and serves as the touchstone for determining wh ether the facts and the law support the trial court’s decision. ( Ibid.; Slavin v. Borinstein (1994) 25 Cal.App. 4th 713, 718.) We review the trial court’s factual findings under th e substantial evidence standard of review. ( Central Valley Genera l Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.)
Because Heart Tronics raises substantial evidence challenges to the judgment, it was subject to certain rules and principles governing the presentation of facts and arguments in its appellate briefs. These include: presenting the facts fully and completely, and not in a one-sided manner; providing an adequate record to permit meaningful appellate review; and proper c itation to the record and applicable legal authority. ( Gombiner v. Swartz (2008) 167 Cal.Ap p.4th 1365, 1374.)

4 The trial court found for the company on Ehrlichman’s misrepresentation and Labor Code section 970 causes of action, as well as his causes of action for defamation and breach of oral contract.6 Heart Tronics has failed to meet these ob ligations. It has provided only a partial reporter’s transcript, omitting the last day of testimony, where company president Fiedler testified for both parties. The statement of facts in its opening appellate brief makes numerous factual assertions without record citations. Heart Tronics gives at most a passing nod to the trial court’s statement of decision and provides only those facts favorable to itself, without discussing the adve rse evidence described in the statement of decision. As discussed in section 2, it ha s not cited proper authority to support its contentions that it had good cause to fire Ehrlichman and that Eh rlichman had unclean hands for violating federal securities law. Accordingly, Heart Tronics’ substantial evidence challenges are waived. ( Gombiner v. Swartz, supra, 167 Cal.App.4th at p. 1374.) As set forth next, we alternativel y hold on the merits th at the judgment is supported by substantial evidence.

2. Substantial Evidence Supports the Judgment

Heart Tronics contends there was insuffici ent evidence to suppor t the judgment for the following reasons: (1) Stein’s October 29 letter of accusations cannot be secondguessed, pursuant to Cotran v. Rollins Hudi g Hall Internat., Inc. (1998) 17 Cal.4th 93, 100-101 ( Cotran ); (2) Ehrlichman did not deny and fa iled to disprove the accusations in Stein’s letter; (3) Ehrlichman had a corpor ate duty to draw on the company’s line of credit and failed to disprove his ability to ha ve done so; (4) Ehrlichman was not entitled to Labor Code waiting time penalties because there was no evidence that Heart Tronics intentionally failed to pay his wages; and (5) the unclean hands doct rine was established by the evidence. We begin with the first two c ontentions, and then take the others in turn. Cotran, supra, 17 Cal.4th 93 concerned the scope of the fact-finder’s inquiry in a wrongful discharge case based on an implied-in-fact contract to terminate only for cause. In such cases, the Cotran court held, the test is not wh ether the employee’s misconduct actually occurred. Instead, the proper inquiry focuses on whether the employer concluded in good faith, albeit mistakenly, that the misconduct occurred, as opposed to firing the employee arbitrarily or on a pretext. ( Id. at p. 107.)7 Heart Tronics fails to mention the distin ction between express and implied-in-fact contracts drawn by the Cotran court. When an express c ontract to terminate only for cause is involved, a different standard may ap ply, “depending on the precise terms of the contract provision.” ( Cotran, supra, 17 Cal.4th at p. 96, fn. 1.) As noted earlier, the employment agreem ent defined what constituted a good cause termination: the falsity of any of Ehrlichman’s representations and warranties contained in the agreement; conduct that led to Heart Tronics being convicted of a crime or incurring criminal penalties; directiv es by appropriate government entities that Ehrlichman be terminated; and Ehrlichman’s conviction of a felony offense or a misdemeanor involving a crime of dishonesty or moral turpitude. The trial court relied on these provisions and found that none of the designated instances of good cause had occurred. Signalife does not address this issu e at all, leading us to deem it waived. Alternatively, nothing in the re cord indicates that any of th e specified instances of good
cause ever occurred. Furthermore, even if Cotran applies and the actions described in Stein’s letter could constitute good cause, Heart Tronics ha s never addressed the other component of
the Cotran test: whether it acted arbitrarily or on a pretext. Ehrlichman denied that the
conduct described in Stein’s letter ever occu rred. As a result, there was substantial evidence to support a finding that Stein was fired on a pretext. As for the unclean hands defense, it is based on Heart Tronics’ contention that
Ehrlichman violated section 402 of th e Public Company Accounting Reform and Corporate Responsibility Act of 2002 (15 U.S.C. § 7201, et seq. (the Sarbanes-Oxley Act)) by accepting a $5,000 loan from a board member. That section applies only when a person who issues or proposes to issue any se curity makes a loan to a company director or executive officer. (15 U. S.C. §§ 78c(a)(8), 78m(k)(1) & 7201(7).) Ehrlichman
testified that Board Member Jennifer Black lo aned him $5,000 becaus e she felt bad that he had not been paid. There is no evidence that Black wa s an “issuer” as defined by Sarbanes-Oxley, an issue that Heart Tronics has failed to acknowledge or address. Accordingly, we see no evid ence that the requisite vi olation of law occurred.8 As for Ehrlichman’s supposed failure to dr aw on the company’s line of credit and the supposed absence of evidence that Heart Tronics inten tionally failed to pay his wages, we simply note the following: (1) Ehrlic hman testified that he was prevented from drawing on the line of credit; and (2) th e circumstances surrounding his termination
without cause at least create an inference that the compan y intentionally withheld his wages. To suggest that when an employer fails to pay its COO his salary contract, the
COO has a contractual duty to draw down on the employe r’s credit line strikes us as
ludicrous. Finally, Heart Tronics contends that the damage award was excessive because it
did not account for the fact th at Ehrlichman took another job soon after he was fired, meaning that the amount of his damages shou ld have been offset by the amount of the salary from his new job. We reject this c ontention for two reasons. First, apart from a citation to Ehrlichman’s opening statement concerning the fact that he took a new job,
Heart Tronics does not cite to any portion of the record to su bstantiate that assertion or show the amount of salary Ehrlichman earned from his new job. ( Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115 [re viewing court has no obligation to search the record and points not supported by appropriate reco rd citations are waived].) Second, Heart Tronics does not contend, and th e record does not show, that it ever moved for a new trial on the ground that the dama ge award was excessive. The contention is therefore waived for that reason as well. ( Zaxis Wireless Communic ations, Inc. v. Motor Sound Corp. (2001) 89 Cal.App.4th 577, 581, fn. 3.)

DISPOSITION
The judgment is affirmed. Responde nt shall recover his costs on appeal.

RUBIN, J. WE CONCUR:

BIGELOW, P. J. FLIER, J .