Filed 5/5/14 Opinion following rehearing

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

AMERICAN MASTER LEASE LLC,

Plaintiff and Respondent,

v.

IDANTA PARTNERS, LTD. et al.,

Defendants and Appellants.

 B244689

 (Los Angeles County

 Super. Ct. No. BC367987)

APPEAL from a judgment and an order of the Superior Court of Los Angeles 

County, Ramona G. See, Judge. Affirmed in part and reversed in part with directions.

Lathrop & Gage, John Shaeffer, Jeffrey Grant and Emily Birdwhistell for 

Defendants and Appellants.

Mayer Brown, Donald Falk; Mayer Brown, Neil M. Soltman and Germain D. 

Labat for Plaintiff and Respondent.

____________________
2

INTRODUCTION

In this appeal we consider the questions (1) whether a defendant can be liable for 

aiding and abetting breach of fiduciary duty without owing the plaintiff a fiduciary duty, 

(2) what is the statute of limitations for aiding and abetting breach of fiduciary duty, 

(3) whether the restitutionary remedy of disgorgement is available for aiding and abetting 

breach of fiduciary duty, and (4) what is the measure of restitution for aiding and abetting 

breach of fiduciary duty. We answer these questions (1) yes, (2) three or four years 

(depending whether the breach is fraudulent or non-fraudulent), (3) yes, and (4) the net 

profit attributable to the wrong.

Defendants Idanta Partners, Ltd., David J. Dunn, Steven B. Dunn, and the Dunn 

Family Trust appeal from a judgment on a jury verdict in favor of plaintiff American 

Master Lease LLC (AML) and from an order denying their motion for judgment 

notwithstanding the verdict. The jury found defendants liable for aiding and abetting 

breach of fiduciary duty and awarded restitution in the amount of approximately $5.8 

million. Defendants argue that the judgment must be reversed because they cannot be 

liable for aiding and abetting breach of fiduciary duty in the absence of a duty owed 

directly to the plaintiff, and because the aiding and abetting claim is barred by the 

applicable statute limitations. We find no merit in these contentions, but we do conclude 

that defendants are entitled to a new trial on the amount of defendants’ unjust enrichment. 

After having granted a petition for rehearing by AML in order to give the parties an 

opportunity to file supplemental briefs on the valuation timing issue for restitution, we

affirm in part and reverse in part for a new trial on the amount of restitution.
3

FACTUAL AND PROCEDURAL BACKGROUND1

A. AML

Neal Roberts formed AML in 1998 for the purpose of investing in real estate. He 

observed that there were people his age who owned real property but were reaching a 

point in their lives where they wanted to retire and did not want to continue actively 

managing their real estate investments. Roberts’ idea was to allow these investors to sell 

their real estate to a larger entity and then buy interests in the larger entity as tenants in 

common, which would allow them to avoid adverse tax consequences associated with the 

sale of the real estate. This investment vehicle became known as a 1031 FORT, where

1031 referred to the section of the Internal Revenue Code applicable to real estate 

exchanges and FORT stood for Fractionalized Ownership in Real estate Tax deferred.

AML initially had seven members. Roberts and three trusts that he set up for his 

wife, his son, and his daughter owned 75 percent of AML. Jim Andrews, the Roberts 

family lawyer, Charles “Duke” Runnels (Runnels), and Michael Franklin owned the 

remaining 25 percent. Andrews, Runnels, and Franklin had participated in a company 

Roberts formed prior to AML, and Roberts wanted them involved in AML. Roberts was 

the managing member of AML.

The AML Operating Agreement included an agreement not to compete. 

Paragraph 3.9 provided: “The Members agree that the business of the LLC, either to sell 

AML Products[2]. . . directly to purchasers or to sell AML Products indirectly through an 

accommodator as part of a tax-exempt transaction, is unique. . . . No Member, Principal 

of a Member or holder of an Economic Interest of a Member, may have any interest, 

 

1 “We state the facts in the light most favorable to the jury’s verdict, resolving all 

conflicts and indulging all reasonable inferences to support the judgment.” (Green Wood 

Industrial Co. v. Forceman Internat. Development Group, Inc. (2007) 156 Cal.App.4th 

766, 770, fn. 2.)

2 Paragraph 1.4 of the Operating Agreement defines “AML Products” as “direct or 

indirect tenancy-in-common interests in real property.”
4

directly or indirectly, in any business that offers to sell or exchange AML Products or is 

otherwise competitive with [AML], nor may any such Member, Principal or Economic 

Interest holder be employed by, or act as a consultant to, any such competitive business 

without the approval of a Majority In Interest of the Class A and Class B Members, 

voting as a Class. . . .”

B. The Dunns and Idanta Partners, Ltd. (Idanta)

David J. Dunn was the founder and managing general partner of Idanta, a venture 

capital firm that for over 40 years had specialized in helping entrepreneurs create and 

finance new companies. David Dunn was also the sole trustee of the Dunn Family Trust, 

which held the bulk of his assets. David Dunn’s son, Steven, worked for Idanta for about 

two-and-a-half years and was a partner in Idanta for some of that time. Steven left Idanta 

in 1987 or 1988.

David Dunn and the other active partners owned about 20 percent of Idanta. 

Members of the Bass family, a wealthy Texas family engaged in the oil business, owned 

the other 80 percent as limited partners. The Bass family invested $7 or $8 million in 

Idanta.

C. AML Seeks Investment Partners

AML needed an investment partner to provide funding to purchase commercial 

properties. The first partner, in the late 1990’s, was Ethan Penner and an entity he 

created for that purpose, T-Rex. Roberts knew about and approved the joint venture with 

T-Rex. The joint venture was supposed to pay the salaries of Runnels and Franklin, and

Roberts contributed money to the joint venture to help pay for their compensation. 

Before the joint venture could complete any transactions, however, Penner withdrew for 

financial reasons, and the joint venture was dissolved in 1999.

In January 2000 Roberts, Andrews, Runnels, and Franklin entered into a 

management agreement with AML. While Roberts remained the managing member and 

Chairman of the Board, Andrews, Runnels, and Franklin agreed to function as the 
5

operational management of AML (collectively the Operating Group). In addition, their 

interests in AML increased to 13-1/3 percent each, while Roberts’ interests decreased to 

60 percent. The management agreement also required Runnels and Franklin to use their 

best efforts to find a new investment partner.

In July 2000 the Operating Group identified CB Richard Ellis as a potential 

investment partner. Again with Roberts’ knowledge and approval, AML entered into a 

relationship with the newly formed CB Richard Ellis Investors 1031 (CBREI). In 

December 2001 AML entered into an exclusive license agreement with CBREI for FORT 

transactions. During the course of the relationship CBREI grossed $86 million and paid 

AML $500,000.

In the summer of 2003 CBREI lost its financing after its funding source refused to 

fund the transactions. That fall, Roberts told the Operating Group that they should 

consider terminating AML’s relationship with CBREI and searching for a new 

investment partner.3

At a November 7, 2003 AML board meeting, the Operating Group suggested two 

possibilities for a new investment partner: Idanta and Warburg-Pincus. A dispute arose 

at the meeting, however, between the Operating Group and Roberts. Roberts was 

concerned about protecting AML’s business method, while the Operating Group wanted 

to proceed with finding a new investment partner. Roberts vetoed the Operating Group’s 

proposal to pursue a new investment partner. Roberts then presented the Operating 

Group with an amendment to AML’s Operating Agreement, signed by him and the 

trustee of the three trusts. The purpose of the amendment was to make it “absolutely 

clear that no deal could get done without the approval of the majority interest in the 

company.”

 

3

In December 2003 AML converted CBREI’s exclusive license to a nonexclusive 

license and gave CBREI time to find new financing or face termination of the agreement 

with AML.
6

D. Idanta and AML Explore the Possibility of a Relationship

Steven Dunn played tennis with Tyler Runnels, Charles Runnels’ brother. In the 

fall of 2003 Tyler Runnels had Steven Dunn introduce him to David Dunn to discuss a 

loan to AML. Charles Runnels and Franklin were looking for a loan for a FORT 

transaction in conjunction with the CBREI joint venture. David Dunn initially refused to 

provide a loan commitment. At some point, however, he provided a loan commitment of 

$5.1 million in exchange for $177,000, but he never had to make the loan. David Dunn 

later tried to put together a joint venture between Idanta and CBREI but was 

unsuccessful.

In January 2004 David Dunn proposed a transaction that would not include 

CBREI. Idanta would form and finance a new company in which Idanta would own 80 

percent, Runnels and Franklin would own 15 percent and manage the company, and 

AML would own 5 percent. This proposal was unacceptable to Roberts because Runnels

and Franklin would be “getting far too much of the deal when, in fact, it’s an AML 

deal . . . .” Roberts also objected to the interest rate Idanta wanted to charge for loans to 

the new company, and he did not want to grant the new company an exclusive license to

engage in FORT transactions.

4

On January 13, 2004 David Dunn met with Runnels to discuss the situation. He 

told Runnels that he was “still interested” in the transaction. He gave Runnels “a lot of 

good reasons why he [was] better off with an independent entity like Idanta as opposed to 

being tied to a major realty firm” like CBREI.

By the end of January 2004 the relationship between Roberts and the Operating 

Group was strained. Roberts and the Operating Group retained separate legal counsel. 

 

4 At the time AML had granted exclusive licenses to T-Rex and CBREI, no one else 

was engaging in FORT transactions. According to Roberts, “by the time we get to 2004, 

there’s a whole bunch of companies that seemed to be stealing our ideas that you could 

have gone after who were doing billions of dollars of business, and so I wasn’t about to 

give that to some venture capital entity to take care of because I didn’t think they knew 

anything about it.”
7

Roberts was allowed to speak with representatives of Idanta only if Franklin introduced 

him and was present at the meeting.

On February 5, 2004 Franklin wrote to Roberts to set up a meeting with Steven 

Dunn. He urged Roberts to review the paperwork, “which shows that the IDANTA offer 

has an approximate value of $26.5 Million to AML with the majority of that coming from 

FORT sales activity. . . . You seem willing to ‘bet the farm’ on potential licensing 

revenue when we certainly have an excellent opportunity to be in business immediately, 

producing FORT’s, generating income and creating value.”

On February 10, 2004 Andrews, Runnels, and Franklin sent Roberts a compromise 

proposal regarding the proposed new company. Under this proposal, “AML [would] 

accept the Idanta proposal and issue it an exclusive license of the AML business 

method . . . .” The agreement not to compete would be eliminated from AML’s 

Operating Agreement. The November 2003 amendment to the Operating Agreement 

would be rescinded, and any future amendments would require the approval of the 

Operating Group.

On February 19, 2004 Roberts presented the Operating Group with his 

counterproposal. His “central policy issue” was the protection of AML’s intellectual 

property. He proposed entering into a joint venture with Idanta, with AML having at 

least a 20 percent interest in the new company. AML would grant the new company a 

nonexclusive license to use the AML business method. The Operating Group sent 

Roberts’ proposal to Steven Dunn, who forwarded it to David Dunn.

In late February 2004 Roberts met with Steven Dunn. Roberts told Steven Dunn 

that he did not approve of David Dunn’s proposal and that they “had to work out a way to 

go forward that was acceptable to the controlling members, . . . majority in interest in”

AML. Roberts told Steven Dunn about disputes with the Operating Group and “that I 

controlled the company. And I also specifically told him—I think I used the phrase ‘dirty 

linen,’ that we would attempt to clean up the ‘dirty linen’ if we were going to proceed.”
8

E. The Operating Group Forms a New Company and Grants It a License;

Idanta and the Dunns Buy Into It

In approximately mid-March 2004 Runnels incorporated FORT Properties, Inc. 

(FPI), with himself and Franklin as FPI’s owners. David Dunn had already negotiated 

with Runnels and Franklin an ownership interest in FPI for himself, the Dunn Family 

Trust, and Idanta. Initially, Runnels and Franklin owned 100 percent of the shares of 

FPI. In April 2004 defendants purchased preferred shares in FPI for $2.3 million, which 

gave defendants an 85 percent ownership interest in FPI. The Operating Group, on 

behalf of AML, then granted FPI a nonexclusive license to use AML’s business method. 

Runnels signed the licensing agreement on behalf of FPI; Andrews, Runnels, and 

Franklin signed on behalf of AML.

On March 15, 2004 David Dunn wrote to Sid Bass, one of Idanta’s partners, about 

the deal. David Dunn expressed his belief that “we are involved with first-rate 

professionals who have an opportunity to build a very large strongly financed business.” 

David Dunn further stated that “once we have done a couple of successful transactions 

and, again, this management has done successful transactions, we will be able to increase 

the number of deals we do through obtaining additional layers of capital. We also believe 

that if we become the major player in the industry, we will have a very attractive vehicle 

for a public offering.” David Dunn explained that Runnels and Franklin “finally lost 

patience with CBRE” due to the failure to provide the promised financing. While “the 

majority holder” of AML’s business method (i.e., Roberts) wanted to go after infringers, 

Runnels and Franklin were not interested in pursuing this course of action. They 

intended to draft a non-exclusive license for FPI to use the business method. Andrews, 

Runnels, and Franklin, “as the operating people (non-employees) of AML will inform the 

majority . . . holder of their action sending him copies of the FORT Property license and a 

copy of the deposited check” for the license.

Runnels and Franklin wrote to Roberts on March 17, 2004 that his February 19 

proposal “misse[d] the mark.” They explained: “Your opposition to any exclusive 

license arrangement is noted, and as a result we have been actively seeking parties in 
9

addition to CBREI who are willing to enter into nonexclusive licenses. In this regard, the 

Operating Group has granted a nonexclusive license to [FPI], a newly formed entity.” 

The royalty rate was the same as the royalty rate paid by CBREI, and FPI paid an 

advance against royalties of $50,000. Runnels and Franklin stated that they “believe[d] 

the license agreement with FPI is fair and reasonable and can provide a launching pad for 

the AML licensing operation.”

Runnels and Franklin also stated that Roberts’ proposal that they work for the 

proposed venture between AML and a new company was unacceptable. They pointed 

out that they “have never been employees of AML and do not plan to be in the future.” 

They also stated that they had been informed by counsel that paragraph 3.9 of the AML 

Operating Agreement was “an unenforceable attempt to restrict employment under 

California law.” They notified Roberts that “[Runnels] has decided to join FPI as its 

President with a view to bringing it into the 1031 TIC[5] business. [Runnels] and other 

management personnel will purchase an equity interest in FPI. [Franklin] will likely also 

accept an offer for employment and affiliate himself with FPI.”

Roberts received the letter on March 22, 2004. He researched FPI and discovered 

that Runnels was its the sole incorporator. He sent an email to Runnels and Franklin 

stating that he was “obviously disheartened” to learn of their conclusion that his proposal 

“‘misse[d] the mark’ but [was] hopeful that your comments about moving forward to 

protect the Company’s intellectual property and generate revenue can lead to an 

agreement in that sphere.” He also stated his belief that Runnels and Franklin were 

“bound by the non-compete provisions of the operating agreement and that you have 

never had the authority to make exclusive or non-exclusive licenses on behalf of the 

company . . . .”

Runnels forwarded the email to David Dunn. David Dunn was aware that the 

authority of Runnels and Franklin to enter into the license agreement was questionable, 

 

5 Tenant in common.
10

but he let his son Steven, who knew about licenses, deal with the issue. Having read the 

email, however, David Dunn did not believe that Roberts had vetoed the license 

agreement. Franklin later reported to David Dunn that he had met with Roberts and 

given him the $50,000 check for the advance against royalties. After discussing the 

matter, Roberts said, “‘I don’t know whether this is the best thing that ever happened to 

us or whether I’ve been f’d.’ And [Franklin] said he told him it was the best thing that 

ever happened to him.”

F. Roberts Objects

On September 28, 2004 Roberts’ attorney, Neil M. Soltman, wrote to Steven 

Dunn. He stressed that Roberts and his family owned a majority interest in AML, and 

that AML owned a business method for performing tax-deferred real estate exchanges. 

“The 1998 Operating Agreement . . . specifically provides that without the approval of a 

majority in interest of AML’s owners, no member of AML may have any interest, 

directly or indirectly, in any business that offers to sell or exchange AML products or is 

otherwise competitive with AML, nor may any member be employed by or act as a 

consultant to any such competitive business. Neither the 2003 Amendment to the 

Operating Agreement nor any side agreement signed by some of the members of the 

company in any way changed these provisions.” Soltman noted that Roberts had learned 

that Runnels had formed FPI “and that three members of AML ([Andrews, Runnels, and 

Franklin]) who do not collectively own a majority in interest in AML have executed a 

document which purports to grant a non-exclusive license of the AML [business method] 

to FPI. At no time has the majority in interest of AML’s owners approved of that 

license.” Having learned of the investment in FPI by Idanta and the Dunns, Soltman 

informed them that the license was not authorized. Soltman advised: “If the actions of 

the three individuals are, as we are now of the opinion, in breach of their duties under the 

AML Operating Agreement and their fiduciary duties to AML . . . , it then follows that all 

compensation that they receive of any type . . . does and will continue to belong to AML. 

Since at least one of the three individuals formed FPI and executed the license on behalf 
11

of FPI and AML, FPI is on notice that all such compensation is to be held in trust for the 

benefit of AML. [¶] In addition, if FPI knowingly infringes the AML [business method], 

FPI will be liable to AML for all proceeds from the enterprise and for all available 

damages and remedies under the patent laws of the United States and similar state and 

federal laws or decisions.” Steven Dunn sent Soltman’s letter to David Dunn, who now 

understood that Roberts was objecting to the transaction.

On October 25, 2004 counsel for Idanta responded to the letter and stated that 

“Steve Dunn is not affiliated with Idanta Partners. Furthermore, the investment that you 

mentioned by Idanta Partners in Fort Properties, Inc. has been concluded. [¶] Since it 

appears that the matters you raise in your letter concern disputes between Neal Roberts 

and the other members of AML . . . , Idanta partners believes it is appropriate for those 

parties to resolve those matters among themselves without the involvement of Idanta 

Partners.”

G. FPI’s FORT Transactions

Within a month after Soltman sent his letter, FPI cancelled the license agreement 

with AML. FPI engaged in several FORT transactions without AML, with its first FORT 

transaction closing in November 2004. Idanta and the Dunn Family Trust provided 

financing for these transactions in the amount of $2.5 million “[p]lus a commitment to 

put in up to 25 million for subordinated loans on [each] individual [FORT] transaction.” 

FPI paid Idanta and the Dunn Family Trust $2,450,000 in interest on total loans of 

approximately $74 million, at prime plus 8 percent.

H. Roberts Institutes Arbitration Proceedings Against Andrews, Runnels,

and Franklin

At some point Roberts commenced arbitration proceedings against Andrews, 

Runnels, and Franklin. On December 4, 2008 the arbitrator issued a final arbitration 

award, finding that some of the conduct by Runnels and Franklin constituted a breach of 

their fiduciary duties to AML, and some of it did not. “[T]he Arbitrator found [that] the 
12

appropriate remedy was an equitable remedy of requiring Runnels and Franklin to 

transfer a certain percentage of the [FPI] shares to Roberts based on his 60% ownership 

in AML.” Roberts filed a petition to confirm the arbitration award, but the parties to the 

arbitration settled their disputes and Roberts dismissed the petition. (Roberts v. Andrews

(Super. Ct. L.A. County, 2009, No. BS120091).)

I. Idanta and the Dunn Family Trust End Their Relationship With FPI

On March 15, 2007 AML filed this action against Idanta, the Dunn Family Trust, 

David Dunn and Steven Dunn, and Jonathan Huberman,6 one of Idanta’s partners. AML 

alleged causes of action for aiding and abetting breach of fiduciary duty, inducing breach 

of contract, conspiracy to induce breach of contract, interference with contractual 

relations, conspiracy to interfere with contractual relations, unfair competition, and unjust 

enrichment.

A few months later, in June 2007, FPI agreed to pay Idanta and the Dunn Family 

Trust $5.8 million for the preferred stock they had purchased in April 2004 for $2.3 

million. The initial payment for the repurchase of the stock was $2.9 million, with the 

payment of another $2.9 million after closing.7 FPI made the first $2.9 million payment, 

and then, during the pendency of this litigation in 2009, paid $300,000 towards the

 

6 Huberman is not a party to this appeal.

7

It is unclear from the record whether the second payment from FPI to defendants 

was a fixed $2.9 million or some percentage of FPI’s profits that may have been valued at 

$2.9 million. AML’s expert, Kelly Melle, testified that there was a “closing payment” of 

$2.9 million and a “post closing payment” of another $2.9 million. During discussions 

with the court over the jury instructions, however, counsel for AML stated that the terms 

of defendants’ sale of their stock back to FPI had “a cash component” (presumably the 

first $2.9 million payment) and a “retained . . . future profit interest” in FPI of “25 

percent of [FPI’s] profits,” and that Melle was going to value this “25 percent profit 

interest” at over $2 million. Neither side points to any direct evidence of the terms of this 

transaction, and the copy of Melle’s demonstrative exhibit that might shed light on this 

issue is illegible. For purposes of this appeal, we assume that the June 2007 transaction 

between defendants and FPI contemplated two $2.9 million payments.
13

second $2.9 million payment. Idanta and the Dunn Family Trust agreed to accept an 

additional $100,000 in lieu of the remaining $2.6 million owed on the second payment. 

From March 2004 through December 2009 FPI experienced a net loss of about $600,000 

to $700,000.

J. The Litigation

1. Rulings on the Pleadings

On July 5, 2007 defendants filed a demurrer to AML’s first amended complaint. 

They argued in part that AML could not state a claim for aiding and abetting a breach of 

fiduciary duty because they did not owe a fiduciary duty to AML. The trial court, Hon. 

Edward Ferns, sustained the demurrer with leave to amend. The court ruled that while a 

defendant must owe an independent duty to the plaintiff in order to be liable for 

conspiracy to breach that duty (Applied Equipment Corp. v. Litton Saudi Arabia Ltd.

(1994) 7 Cal.4th 503, 510-511), a defendant need not owe an independent duty to the 

plaintiff in order to be liable for aiding and abetting a breach of that duty (Casey v. U.S.

Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144). In other words, the court ruled that 

aiding and abetting is an independent tort even though conspiracy is not. The court 

nevertheless sustained the demurrer to AML’s aiding and abetting cause of action on the 

ground AML had failed to plead sufficient facts to state a cause of action for aiding and 

abetting a breach of fiduciary duty by Andrews, Runnels, and Franklin. Specifically, the 

court ruled that AML had not sufficiently alleged that defendants knew the conduct of 

Andrews, Runnels, and Franklin constituted a breach of fiduciary duty, or that defendants 

gave the three of them substantial assistance or encouragement.

On June 27, 2008 AML filed its fourth amended complaint alleging causes of 

action for aiding and abetting a breach of fiduciary duty, interference with contract, 

unfair competition, and unjust enrichment. The trial court sustained defendants’

demurrer to the causes of action for unfair competition and unjust enrichment without 

leave to amend. The court ruled that although the conduct of Andrews, Runnels, and 

Franklin “in unfairly competing with [AML] may be considered” unfair competition, 
14

AML was not entitled to injunctive relief or disgorgement under “California’s unfair 

competition law.”

2. Defendants’ Motion for Summary Judgment

On June 26, 2009 defendants filed a motion for summary judgment or in the 

alternative summary adjudication. They argued that the arbitrator’s ruling on AML’s 

breach of fiduciary duty claim was collateral estoppel on AML’s claim in this action, and 

that the arbitrator’s equitable remedy gave Roberts “complete satisfaction.” Defendants

also argued that they could not be liable for interference with contract because 

paragraph 3.9 of the AML Operating Agreement, the agreement not to compete, was void 

and unenforceable. The trial court denied the motion on the grounds the parties in this 

case were not the same as the parties in the arbitration and that the unconfirmed 

arbitration award was not binding. The court did not address the validity of the noncompetition agreement.

3. Evidence of the Unjust Enrichment

After multiple continuances, the trial finally began on June 13, 2012 before Judge 

Ramona See.

8

 During the trial, AML’s expert, Melle, testified that he was “asked to 

compute the dollar amount of the benefit that the defendants received [as of June 13, 

2012] from a revolving loan agreement and a preferred stock sale.”

9

 Melle calculated 

that defendants earned $2,328,892 interest on loans to FPI between 2004 and 2007, and 

 

8 On February 27, 2012 the parties stipulated to a waiver of the five-year period in 

which to commence trial. (See Code Civ. Proc., §§ 583.310, 583.330, subd. (a).)

9 Defendants had filed a motion in limine seeking to exclude evidence of “any 

alleged damage sustained by [AML] based upon the purported ‘benefits’ defendants 

received from” interest on the loan to FPI and the sale of FPI stock. Defendants argued 

that these amounts were not damages proximately caused by the tortious conduct alleged 

in the complaint. The trial court denied the motion as a “failed motion[] for summary 

adjudication.”
15

that with prejudgment interest the total amount of this benefit was $3,399,287. The jury 

did not award this amount.

Melle also “did an analysis of the benefits [defendants] received” from the June 

2007 sale of their FPI stock. The “sale called for a payment of 2.9 million dollars and 

then following the closing, other payments of another 2.9 million, for a total of 5.8 

million dollars or 5,808,826 dollars.” Adding interest through June 13, 2012, Melle 

calculated that the total amount of this benefit was $7,075,891.

Melle acknowledged that shortly after he had performed his calculations, “there 

were payments of about 300,000 dollars,” and that defendants subsequently “took 

100,000 dollars instead of [the remaining] 2.6 million.” Melle’s calculations, however,

did not take into account the fact that defendants did not receive all of the second $2.9 

million payment and therefore did not receive the entire $5.8 million. Nor did Melle take 

into account defendants’ initial investment of $2.3 million to acquire the FPI stock. He 

stated that he did not take these facts into account because his task was to calculate the

(gross) benefits defendants received “at the time they closed the deal,” not “profits.”

4. Jury Instructions

The court and counsel had several discussions, some before trial and some in the 

middle of trial, about the parties’ proposed CACI and special jury instructions. AML 

objected to CACI No. 3900, “Introduction to Damages,” because it instructed the jury on 

traditional tort damage theories, while AML sought restitution based on disgorgement 

and constructive trust. AML had drafted special instructions to cover its restitution 

theories. Defendants objected to AML’s special instruction Nos. 3 and 4 regarding unjust 

enrichment and constructive trust, arguing that the trial court had previously sustained 

their demurrer to AML’s cause of action for unjust enrichment and that there was nothing 

over which a constructive trust could be imposed. Defendants also objected to AML’s 

special instruction Nos. 7 and 8 regarding the calculation of the amount of disgorgement 

and the imposition of a constructive trust with respect to the date as of which the 

restitution amounts should be calculated. Defendants argued that these instructions failed 
16

to include any offset for amounts paid by defendants. The trial court took the matter of 

the jury instructions under submission.

During Melle’s testimony, counsel for defendants attempted to question him on 

cross-examination about whether he had included any offsets in his calculations. Counsel 

for AML objected, pointing out that there was “an approved jury instruction, special 

number 8, which says the jury can’t take that into account.” After considering the matter 

the trial court ruled that it was going to modify this instruction to refer to “profit” rather 

than “economic benefit,” because “[d]isgorgement deals with profit. And profit by its 

very definition is calculated less expenses.” The record reflects, however, that the trial 

court ultimately did not give this instruction.10

5. Motion for Nonsuit

Following the conclusion of AML’s case-in-chief defendants moved for a 

judgment of nonsuit “as to both claims on the basis that they are barred by the statute of 

limitations and as to the second cause of action for interference with contract on the basis 

that there has not been proof offered of a valid and enforceable contract.” The trial court 

denied the motion and ruled that the limitations period for AML’s cause of action for 

aiding and abetting a breach of fiduciary duty was four years pursuant to Code of Civil 

Procedure section 343 and In re Brocade Communications Systems, Inc. Derivative 

Litigation (N.D.Cal. 2009) 615 F.Supp.2d 1018, 1037. The trial court stated that the 

limitations period for interference with contract was two years. The court found,

however, that “[a]lthough it appears that all aspects of the claims that are the subject of 

this lawsuit were known at the time of the September 28, 2004 letter sent by Neil 

Soltman to Steven Dunn . . . , there remain issues of fact for the jury to decide regarding 

 

10 The court reporter did not transcribe the trial court’s reading of the instructions to 

the jury. This particular instruction does not appear in the set of written instructions 

included as given in the record on appeal.
17

the effect of a subsequent response letter from Idanta dated October 4, 2004 and the 

meaning of the word ‘concluded’ within that letter.”

On the issue of the existence of a valid contract, the court noted that the ruling on 

defendants’ summary judgment motion was that they “did not meet their burden of 

proof . . . , not that the defense or claims asserted by Defendants lacked merit.” When 

defendants raised the issue again in a motion in limine, the trial court denied the motion 

“on the grounds that it was a disguised motion for summary judgment not that the 

substance of the motion lacked merit.”

6. Deliberations

The trial court instructed the jury, pursuant to CACI No. 3900, that if it found 

AML had proved its claims against defendants, the jury then had to decide how much 

money would reasonably compensate AML for the “harm.” The court instructed the jury 

pursuant to special instruction No. 3 that “[t]he elements of an unjust enrichment claim 

are (1) the receipt of a benefit from another; and (2) the unjust retention of the benefit at 

the expense of another,” and that if the jury found that defendants were unjustly enriched 

at AML’s expense, then it could “award [AML] the amount by which Defendant has been 

unjustly enriched.”

During deliberations, the jury sent the court a note asking the court to define 

“harm” and “benefit.” Counsel noted that there were no instructions defining “harm.” 

Special instruction No. 4, Calculation of Disgorgement of Defendants’ Benefits, referred 

to “profit,” but the word “benefit” did not appear in the instruction. Over defendants’

objection, the trial court instructed the jury, “These words are to be used in their plain and 

ordinary meaning. You are to read these words in the context of the instructions in which 

they are used.”

7. Jury Verdict

On July 3, 2012 the jury returned a special verdict. On the cause of action for 

interference with contract, the jury found that Idanta, David Dunn, Steven Dunn, and the 
18

Dunn Family Trust knew about the non-competition agreement, paragraph 3.9 of the 

AML Operating Agreement; they acted with the intent to disrupt the performance of 

paragraph 3.9; their conduct prevented the performance of paragraph 3.9 or made its 

performance more expensive or difficult; and their conduct was a substantial factor in 

causing harm to AML. On the cause of action for aiding and abetting a breach of 

fiduciary duty, the jury found that Andrews, Runnels, and Franklin knowingly acted 

against AML’s interests, and without AML’s informed consent, in forming FPI, and, as 

to Runnels and Franklin, working for and owning shares in FPI. The jury also found that 

defendants knew that Andrews, Runnels, and Franklin were going to breach their 

fiduciary duties to AML; that defendants gave substantial assistance to Andrews, 

Runnels, and Franklin; and that defendants’ conduct was a substantial factor in causing 

harm to AML.

The jury rejected defendants’ affirmative defenses of estoppel, laches, waiver, 

consent, and ratification. The jury found for defendants, however, on their claim that 

AML’s cause of action for interference with contract was barred by the two-year statute 

of limitations, finding that defendants proved that AML had suffered harm before March 

15, 2005, and that AML had not proven that it did not discover facts leading a reasonable 

person to suspect defendants’ wrongful conduct until after March 15, 2005.

The jury awarded AML restitution (although it was called “damages” on the 

verdict form) in the amount of $7,075,891. This was the exact figure AML’s expert, 

Melle, had calculated as “the benefits [defendants] received” from the June 2007 sale of 

their FPI stock, plus interest. The jury also found that AML was not entitled to punitive

damages.

8. Motion for Judgment Notwithstanding the Verdict and New Trial

On August 9, 2012 defendants filed motions for judgment notwithstanding the 

verdict and for a new trial, arguing that the award of damages was excessive and not 

supported by substantial evidence. In particular they argued that Melle’s testimony was 

without foundation and that the jury instructions were confusing, as evidenced by the 
19

jury’s question regarding the definitions of “harm” and “benefit.”

11 On September 21, 

2012 the trial court denied both motions. The court rejected defendants’ contentions of 

evidentiary and instructional error and found “that the jury’s verdict is supported by 

substantial evidence in the form of testimony and admitted exhibits.” On October 18, 

2012 defendants timely filed a notice of appeal.12

DISCUSSION

A. Aiding and Abetting a Breach of Fiduciary Duty

Defendants challenge the trial court’s ruling that a defendant can be liable for 

aiding and abetting a breach of fiduciary duty, even if the defendant does not owe the 

plaintiff a fiduciary duty. Defendants argue that there is no sound policy reason to 

distinguish between liability for conspiracy to breach a fiduciary duty and liability for

aiding and abetting a breach of fiduciary duty by requiring that a conspirator but not an 

aider and abettor owe a fiduciary duty to the plaintiff. AML argues that defendants 

cannot make this argument on appeal, and that, even if they can, on the merits it is legally 

incorrect.

1. Standing and Invited Error

AML asserts that defendants lack standing to challenge the trial court’s ruling on 

demurrer because the court sustained their demurrer and therefore they are not aggrieved 

parties. AML also asserts that because the trial court gave defendants’ jury instruction on 

aiding and abetting, which did not include a requirement that they owe a fiduciary duty, 

the doctrine of invited error precludes defendants’ claim of error on appeal.

 

11 Defendants also submitted a declaration from one of the jurors regarding the 

confusion, but the trial court properly ruled it inadmissible. (See Evid. Code, § 1150.)

12 The trial court subsequently denied AML’s motion for attorneys’ fees. AML’s 

appeal from that order is pending.
20

Only an aggrieved party may appeal. (Code Civ. Proc., § 902; United Investors 

Life Ins. Co. v. Waddell & Reed, Inc. (2005) 125 Cal.App.4th 1300, 1304.) “It is true 

that, as a general rule, a party is not aggrieved and may not appeal from a judgment or 

order entered in its favor. [Citation.] However, a party which has not obtained all of the 

relief it requested in the trial court is aggrieved and may appeal. [Citations.]” (Friends of 

Aviara v. City of Carlsbad (2012) 210 Cal.App.4th 1103, 1108; see Roa v. Lodi Medical 

Group, Inc. (1985) 37 Cal.3d 920, 925, fn. 4 [plaintiffs could challenge award of 

attorneys’ fees in their favor on the ground that the statutory limitation on such fees was 

invalid]; Archer v. United Rentals, Inc. (2011) 195 Cal.App.4th 807, 811, fn. 2 [fact that 

plaintiffs received cash payments did not preclude their appeal of denial of class 

certification].)

Here, although the trial court sustained defendants’ demurrer with leave to amend, 

the court ruled against defendants on the legal issue of whether AML could maintain a 

cause of action for aiding and abetting a breach of fiduciary duty in the absence of a 

fiduciary duty on their part. The trial court sustained the demurrer only because the 

complaint lacked sufficient factual allegations of aiding and abetting. After amending its 

complaint AML proceeded and ultimately prevailed on this cause of action. Defendants 

did not obtain all of the relief they requested and thus were aggrieved by the court’s 

ruling and have standing to challenge it on appeal.

AML also argues that defendants “successfully proposed an aiding and abetting 

jury instruction, but only one that omitted the independent duty element it claims on 

appeal should be imposed. Having invited the supposed error, [defendants] forfeited 

[their] right to appeal the issue.” The doctrine of invited error does not apply here.

“Under the doctrine of invited error, when a party by its own conduct induces the 

commission of error, it may not claim on appeal that the judgment should be reversed 

because of that error. [Citations.] But the doctrine does not apply when a party, while 

making the appropriate objections, acquiesces in a judicial determination. [Citation.] As 

this court has explained: ‘“An attorney who submits to the authority of an erroneous, 

adverse ruling after making appropriate objections or motions, does not waive the error in 
21

the ruling by proceeding in accordance therewith and endeavoring to make the best of a 

bad situation for which he was not responsible.”’ [Citations.]” (Mary M. v. City of Los 

Angeles (1991) 54 Cal.3d 202, 212-213; see Norgart v. Upjohn Co. (1999) 21 Cal.4th 

383, 403 [invited error does not apply where “a party may be deemed to have induced the 

commission of error, but did not in fact mislead the trial court in any way—as where a 

party ‘“‘endeavor[s] to make the best of a bad situation for which [it] was not 

responsible’”’”].)

Here, the trial court had already rejected defendants’ argument that aiding and 

abetting a breach of fiduciary duty requires that the aider and abettor owe the plaintiff a 

fiduciary duty. Defendants did not forfeit the right to challenge that ruling by proposing 

a jury instruction that was consistent with the trial court’s ruling. The doctrine of invited 

error does not apply where, as here, the party submits a jury instruction pursuant to or 

consistent with a prior adverse court ruling. (See Gillan v. City of San Marino (2007) 

147 Cal.App.4th 1033, 1052 [“[d]efendants did not invite the error by proposing . . .

instructions” on two causes of action “after their unsuccessful attempts to defeat those 

counts by demurrer and summary adjudication”]; Horsemen’s Benevolent & Protective 

Assn. v. Valley Racing Assn. (1992) 4 Cal.App.4th 1538, 1555 [“[w]hen an appellant 

offers instructions on irrelevant matter only after an unsuccessful attempt to remove it 

from the case, he may attack the relevancy on appeal”]; Quigley v. Pet, Inc. (1984) 162 

Cal.App.3d 877, 894, fn. 6 [no invited error in submitting instruction on issue where 

“from the beginning in law and motion, and thereafter through the motion for new trial, 

defendants objected” to the issue].) Defendants did not forfeit their right to challenge the 

trial court’s ruling on this issue.

2. Civil Conspiracy and Aiding and Abetting

Civil conspiracy is “a legal doctrine that imposes liability on persons who, 

although not actually committing a tort themselves, share with the immediate tortfeasors 

a common plan or design in its perpetration. [Citation.] By participation in a civil 

conspiracy, a coconspirator effectively adopts as his or her own the torts of other 
22

coconspirators within the ambit of the conspiracy. [Citation.] In this way, a 

coconspirator incurs tort liability co-equal with the immediate tortfeasors.” (Applied

Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at pp. 510-511.) “By its 

nature, tort liability arising from conspiracy presupposes that the coconspirator is legally 

capable of committing the tort, i.e., that he or she owes a duty to plaintiff recognized by 

law and is potentially subject to liability for breach of that duty.” (Id. at p. 511.)

Following Applied Equipment Corp., this court held in Kidron v. Movie Acquisition Corp.

(1995) 40 Cal.App.4th 1571 that “[a] nonfiduciary cannot conspire to breach a duty owed 

only by a fiduciary.” (Id. at p. 1597; accord, Everest Investors 8 v. Whitehall Real Estate 

Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1109.)

Some courts, noting the close relationship between conspiracy and aiding and 

abetting, have suggested that the law should treat conspiracy to breach a fiduciary duty 

and aiding and abetting a breach of fiduciary duty similarly. For example, in In re 

County of Orange (Bankr. C.D.Cal. 1996) 203 B.R. 983,

13 citing Applied Equipment 

Corp. and Kidron, the court stated that it saw “no reason for treating the vicarious tort of 

aiding and abetting breach of a fiduciary duty differently from that of conspiracy to 

breach a fiduciary duty. ‘Conspiracy is a concept closely allied with aiding and abetting. 

A conspiracy generally requires agreement plus an overt act causing damage. Aiding and 

abetting requires no agreement, but simply assistance. The common basis for liability for 

both conspiracy and aiding and abetting, however, is concerted action.’” (Id. at p. 999, 

quoting Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 78.) In Howard v. 

Superior Court (1992) 2 Cal.App.4th 745 the issue was whether a client attempting to 

plead a cause of action for aiding and abetting against an attorney had to comply with 

former Civil Code section 1714.10, which required the plaintiff to obtain a court order

before pleading such a civil conspiracy claim. The court noted that “[i]n the abstract, 

there may be a distinction between an aiding and abetting cause of action and one for 

 

13 Reversed in part on other grounds in In re County of Orange (Bankr. C.D.Cal. 

1997) 245 B.R. 138.
23

civil conspiracy,” but held that because the alleged conduct fell “within the ambit” of the 

statute, the statute applied to the plaintiff’s aiding and abetting claim. (Id. at p. 749, fn. 

omitted.) And in K & S Partnership v. Continental Bank, N.A. (8th Cir. 1991) 952 F.2d 

971, the court stated, “[k]nowing participation in a breach of fiduciary duty ‘is analogous 

to a cause of action . . . for aiding and abetting a securities fraud,’ where the primary 

violation involves a breach of fiduciary duty. [Citation.] Likewise, liability for civil 

conspiracy is in substance the same thing as aiding and abetting liability. Civil 

conspiracy requires an agreement to participate in an unlawful activity and an overt act 

that causes injury, so it ‘does not set forth an independent cause of action’ but rather is 

‘sustainable only after an underlying tort claim has been established.’ [Citations.]” (Id. 

at p. 980.)

California law, however, does not treat conspiracy to breach a fiduciary duty and 

aiding and abetting a breach of fiduciary duty similarly. In Casey v. U.S. Bank Nat.

Assn., supra, 127 Cal.App.4th 1138, on which the trial court relied, a trustee in 

bankruptcy sued three banks, alleging that they aided and abetted the fiduciaries of the 

bankrupt corporation in a scheme to divert funds from the corporation. One of the causes 

of action was aiding and abetting a breach of fiduciary duty. (Id. at pp. 1141-1142.) 

Citing this court’s opinion in Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 

846, the court in Casey observed that “California has adopted the common law rule for 

subjecting a defendant to liability for aiding and abetting a tort. ‘“Liability may . . . be 

imposed on one who aids and abets the commission of an intentional tort if the person (a) 

knows the other’s conduct constitutes a breach of duty and gives substantial assistance or 

encouragement to the other to so act or (b) gives substantial assistance to the other in 

accomplishing a tortious result and the person’s own conduct, separately considered, 

constitutes a breach of duty to the third person.” [Citations.]’ [Citation.]” (Casey, supra,

at p. 1144.)14 The trustee in Casey attempted to allege liability under the first theory, and 

 

14 California courts have consistently followed and applied the two part alternative 

test for civil aiding and abetting liability in Saunders and Casey. (See, e.g., Das v. Bank 
24

the banks challenged the sufficiency of the allegations of “‘substantial assistance.’” (Id. 

at p. 1145.) The court noted “that liability for aiding and abetting depends on proof the 

defendant had actual knowledge of the specific primary wrong the defendant 

substantially assisted.” (Ibid.) The court concluded that the trustee had failed to allege 

facts showing that the banks knew the fiduciaries were misappropriating corporate funds. 

Thus, the trustee failed to state a cause of action for aiding and abetting a breach of 

fiduciary duty. (Id. at p. 1153.)

Citing Casey, Saunders, and the Restatement Second of Torts, the court in Berg & 

Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802 

explained: “Despite some conceptual similarities, civil liability for aiding and abetting 

the commission of a tort, which has no overlaid requirement of an independent duty, 

differs fundamentally from liability based on conspiracy to commit a tort. [Citations.]

‘“[A]iding-abetting focuses on whether a defendant knowingly gave ‘substantial 

assistance’ to someone who performed wrongful conduct, not on whether the defendant 

agreed to join the wrongful conduct.” [¶] . . . [W]hile aiding and abetting may not 

require a defendant to agree to join the wrongful conduct, it necessarily requires a 

defendant to reach a conscious decision to participate in tortious activity for the purpose 

of assisting another in performing a wrongful act. . . .’ The aider and abetter’s conduct 

need not, as ‘separately considered,’ constitute a breach of duty. [Citations.]” (Id. at 

p. 823, fn. 10.)

 

of America, N.A. (2010) 186 Cal.App.4th 727, 741, 744-745; Berryman v. Merit Property 

Management, Inc. (2007) 152 Cal.App.4th 1544, 1559; Austin B. v. Escondido Union 

School Dist. (2007) 149 Cal.App.4th 860, 879; Richard B. LeVine, Inc. v. Higashi (2005) 

131 Cal.App.4th 566, 574; Fiol v. Doellstedt (1996) 50 Cal.App.4th 1318, 1325-1326; 

River Colony Estates General Partnership v. Bayview Financial Trading Group, Inc.

(S.D.Cal. 2003) 287 F.Supp.2d 1213, 1225; see also Wood v. Greenberry Financial 

Services, Inc. (D.Hawai‘i 2012) 907 F.Supp.2d 1165, 1181-1182 [adopting Casey]; El 

Camino Resources, Ltd. v. Huntington Nat. Bank (W.D.Mich. 2010) 722 F.Supp.2d 875, 

905 [same].)
25

In Neilson v. Union Bank of California, N.A. (C.D.Cal. 2003) 290 F.Supp.2d 1101, 

the court thoroughly reviewed California case law and concluded that under California 

law a defendant can be liable for aiding and abetting a breach of fiduciary duty in the 

absence of an independent duty owed to the plaintiff. (Id. at p. 1135.) After noting that 

conspiracy and aiding and abetting “are closely allied forms of liability,” the court found 

that “[n]o California case, however, holds that a party must owe the plaintiff a duty 

before he or she can be held liable as an aider and abettor. Rather, California cases 

outlining the elements of aiding and abetting liability have consistently cited the elements 

of the tort as they are set forth in the Restatement (Second) of Torts, § 876, and have 

omitted any reference to an independent duty on the part of the aider and abettor. Under 

this formulation, liability may properly be imposed on one who knows that another’s 

conduct constitutes a breach of duty and substantially assists or encourages the breach.” 

(Id. at p. 1133.)

The Neilson court explained why this is so: “Unlike a conspirator, an aider and 

abettor does not ‘adopt as his or her own’ the tort of the primary violator. Rather, the act 

of aiding and abetting is distinct from the primary violation; liability attaches because the 

aider and abettor behaves in a manner that enables the primary violator to commit the 

underlying tort. . . . Because aiders and abettors do not agree to commit, and are not held 

liable as joint tortfeasors for committing, the underlying tort, it is not necessary that they 

owe plaintiff the same duty as the primary violator. Conspirators, by contrast, are held 

liable for the tort committed by their co-conspirator. [Citation.] Because liability is 

premised on the commission of a single tort, it is logical that all conspirators must be 

legally capable of committing the wrong.” (Id. at pp. 1134-1135, fn. omitted.) 

“Additionally, causation is an essential element of an aiding and abetting claim, i.e., 

plaintiff must show that the aider and abettor provided assistance that was a substantial 

factor in causing the harm suffered. [Citations.] . . . This difference too demonstrates 

the distinction between the forms of liability, and argues in favor of a rule that permits 

the imposition of aider and abettor liability in the absence of a duty owed directly to the 

plaintiff.” (Id. at p. 1135; see Simi Management Corp. v. Bank of America, N.A.
26

(N.D.Cal. 2013) 930 F.Supp.2d 1082, 1099, fn. 15 [“‘liability for aiding and abetting may 

exist even where the defendant’s conduct does not independently breach a duty to the 

plaintiff’”]; Villains, Inc. v. American Economy Ins. Co. (N.D.Cal. 2012) 870 F.Supp.2d 

792, 795 [“‘[t]he differences between conspiracy and aiding and abetting are not merely 

semantic’ and . . . ‘[t]hese differences have led several courts . . . to recognize that a nonfiduciary can aid and abet a breach of fiduciary duty’”]; Granewich v. Harding (Or. 

1999) 985 P.2d 788, 793-794 [“[l]egal authorities . . . virtually are unanimous in 

expressing the proposition that one who knowingly aids another in the breach of a 

fiduciary duty is liable to the one harmed thereby,” and “[n]one of those authorities even 

implies that liability for participants in the breach of fiduciary duty is confined to those 

who themselves owe such duty”]; see also Heckmann v. Ahmanson (1985) 168 

Cal.App.3d 119, 127 [third party greenmailer purchasers of corporation’s shares in 

takeover attempt can be liable for aiding and abetting breach of fiduciary duty of 

corporation’s directors who authorized corporation’s purchase of the third parties’ shares 

at a premium]; accord, Feinberg Testamentary Trust v. Carter (S.D.N.Y. 1987) 652 

F.Supp. 1066, 1083.)

3. Application to This Case

Thus, there are two different theories pursuant to which a person may be liable for 

aiding and abetting a breach of fiduciary duty. One theory, like conspiracy to breach a 

fiduciary duty, requires that the aider and abettor owe a fiduciary duty to the victim and 

requires only that the aider and abettor provide substantial assistance to the person 

breaching his or her fiduciary duty. (Casey v. U.S. Bank Nat. Assn, supra, 127 

Cal.App.4th at p. 1144; Coffman v. Kennedy (1977) 74 Cal.App.3d 28, 32.) On this 

theory, California law treats aiding and abetting a breach of fiduciary duty and conspiracy 

to breach a fiduciary duty similarly. Courts impose liability for concerted action that

violates the aider and abettor’s fiduciary duty. (See Janken v. GM Hughes Electronics, 

supra, 46 Cal.App.4th at p. 78; In re County of Orange, supra, 203 B.R. at p. 999.) The 

second theory for imposing liability for aiding and abetting a breach of fiduciary duty 
27

arises when the aider and abettor commits an independent tort. (See Casey, supra, at p. 

1144; Saunders v. Superior Court, supra, 27 Cal.App.4th at p. 846.) This occurs when 

the aider and abettor makes “‘a conscious decision to participate in tortious activity for 

the purpose of assisting another in performing a wrongful act.’” (Berg & Berg 

Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 823, fn. 10; 

accord, Central Bank v. First Inter. Bank (1994) 511 U.S. 164, 181.)

AML proceeded on the second theory of aiding and abetting liability. AML 

pleaded and proved that defendants had actual knowledge of the fiduciary duties

Andrews, Runnels, and Franklin owed to AML, that defendants provided the three 

fiduciaries with substantial assistance in breaching their duties, and that defendants’

conduct resulted in unjust enrichment. Thus, the trial court did not err in ruling, on 

demurrer and in connection with the jury instructions,

15 that defendants could be liable 

for aiding and abetting a breach of fiduciary duty even though they did not owe a 

fiduciary duty to AML.

B. Statute of Limitations for Aiding and Abetting a Breach of Fiduciary Duty

Defendants also argue that AML’s cause of action for aiding and abetting a breach 

of fiduciary duty was barred by the two-year statute of limitations applicable to a cause of 

action for interference with contract, and that the trial court erred by not instructing the 

jury that this two-year limitations period applied to AML’s breach of fiduciary duty 

 

15 Pursuant to defendants’ special instruction No. 4, the trial court instructed the jury 

that defendants could be held liable for aiding and abetting a breach of fiduciary duty if: 

“(1) Runnels, Franklin, and/or Andrews breached their fiduciary duties to [AML]; 

[¶] (2) Defendants had actual knowledge that Runnels, Franklin, and/or Andrews were 

breaching their fiduciary duties to [AML]; [¶] (3) Defendants gave substantial assistance 

or encouragement to Runnels, Franklin, and/or Andrews in breaching their fiduciary 

duties; [¶] (4) Defendants acted with the intent to participate in the breach of fiduciary 

duty by Runnels, Franklin, and/or Andrews for the purpose of assisting them in 

performing the breach of their fiduciary duties; and [¶] (5) That the conduct of 

Defendants was a substantial factor in causing harm to [AML].”
28

claim.

16

 AML argues that the four-year statute of limitations of Code of Civil Procedure 

section 343, the “catchall provision,” applies to its aiding and abetting breach of fiduciary 

duty claim. We conclude that because the applicable statute of limitations is either three 

or four years, and there is no dispute that AML filed this action less than three years after 

accrual,17 AML’s aiding and abetting claim is not barred by the statute of limitations.

The statute of limitations for a cause of action for aiding and abetting a tort 

generally is the same as the underlying tort. (See Vaca v. Wachovia Mortgage Corp.

(2011) 198 Cal.App.4th 737, 743-744 & fn. 4 [aiding and abetting fraud]; River Colony 

Estates General Partnership v. Bayview Financial Trading Group, Inc., supra, 287 

F.Supp.2d at p. 1220 [aiding and abetting fraud]; see also Marketxt Holdings Corp. v. 

Engel & Reiman, P.C. (S.D.N.Y. 2010) 693 F.Supp.2d 387, 393 [“statute of limitations 

for each aiding and abetting claim is determined by the underlying tort”].) Thus, the 

statute of limitations for aiding and abetting a breach of fiduciary duty is the same as the 

statute of limitations for breach of fiduciary duty. (See In re Brocade Communications 

Systems, Inc. Derivative Litigation, supra, 615 F.Supp.2d at pp. 1036-1037 [because 

aiding and abetting breach of fiduciary duty is “most akin to a breach of fiduciary duty

claim,” the four-year statute of limitations applies].)

 

16 Defendants asked the trial court to instruct the jury that the limitations period for 

both of AML’s claims was “two years from the time [AML] knew or should have known 

of the loss or damage it claims to have suffered.” The trial court instructed the jury 

“[w]ith regard to AML’s claim for interference with contract only, Defendants contend 

that AML’s lawsuit was not filed within the time set by law. To succeed on this defense, 

Defendants must prove that AML’s claimed harm occurred before March 15, 2005 unless 

AML proves that before March 15, 2005 it did not discover, and did not know facts that 

would have caused a reasonable person to suspect, Defendants’ wrongful act or 

omission.”

17 As noted above, Roberts learned that the Operating Group had granted FPI a 

license on March 17, 2004. AML filed this action on March 15, 2007. Defendants do 

not argue that AML’s aiding and abetting claim is barred by a three-year statute of 

limitations.
29

The statute of limitations for breach of fiduciary duty is three years or four years, 

depending on whether the breach is fraudulent or non-fraudulent. (See Fuller v. First 

Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 963 [“limitations period is three 

years . . . for a cause of action for breach of fiduciary duty where the gravamen of the 

claim is deceit, rather than the catchall four-year limitations period that would otherwise 

apply”]; William L. Lyon & Associates, Inc. v. Superior Court (2012) 204 Cal.App.4th 

1294, 1312 [“[b]reach of fiduciary duty not amounting to fraud or constructive fraud is 

subject to the four-year ‘catch-all statute’ of Code of Civil Procedure section 343”]; 

Thomson v. Canyon (2011) 198 Cal.App.4th 594, 606-607 [same]; City of Vista v. Robert 

Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 889 [four-year statute of limitations 

applies to breach of fiduciary duty, unless the gravamen of the claim is actual or 

constructive fraud, in which case the statute of limitations is three years].) Because 

defendants do not dispute that AML filed this action within three years of accrual, it does 

not matter whether the breach of fiduciary duty was fraudulent or non-fraudulent. Either 

way, the claim is timely.

In some circumstances, the statute of limitations for a breach of fiduciary duty 

claim can be less than three years. For example, in Hydro-Mill Co., Inc. v. Hayward, 

Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, the court held that 

because the claim of breach of fiduciary duty “amount[ed] to a claim of professional 

negligence,” the two-year statute of limitations for professional negligence applied, and 

the plaintiff could not “prolong the limitations period by invoking a fiduciary theory of 

liability.” (Id. at p. 1159.) Here, defendants argue that the two-year statute of limitations 

for interference with contract applies because “interference with contract is the gravamen 

of [AML’s] aiding and abetting claim in this case.” Defendants argue that “since a 

contractual agreement [i.e., the AML Operating Agreement] created the underlying 

fiduciary obligation (owed by third parties), AML’s claim is for interfering with [the 

three Operating Group members’] obligations to AML, and is logically akin to other 

interference torts and should be subject to the two-year limitations period of section 339 

of the Code of Civil Procedure.”
30

The fiduciary duties of Andrews, Runnels, and Franklin, however, were not 

created exclusively or even primarily by the Operating Agreement, but were imposed by 

law on them as members and managers of AML. (See Corp. Code, § 17704.09, 

subds. (b)(2), (b)(3) [members owe fiduciary duties of loyalty and care to the limited 

liability company, including the duties to “refrain from dealing with a limited liability 

company in the conduct or winding up of the activities of a limited liability company as 

or on behalf of a party having an interest adverse to a limited liability company” and to 

“refrain from competing with a limited liability company”], subd. (d) [“[a] member shall 

discharge the duties to a limited liability company and the other members under this title 

or under the operating agreement and exercise any rights consistent with the obligation of 

good faith and fair dealing”];

18 Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410

[“[t]he duty of loyalty arises not from a contract but from a relationship”]; Manok v. 

Fishman (1973) 31 Cal.App.3d 208, 213 [although “[a]n express agreement between the 

parties may govern their relationship, . . . to the extent that their respective rights and 

duties are not spelled out in an express agreement, the law imposes obligations arising 

out of the nature of their fiduciary relationship”]; see also Federal Deposit Ins. Corp. v. 

McSweeny (S.D.Cal. 1991) 772 F.Supp. 1154, 1157 [“a cause of action for breach of 

fiduciary duty is its own ‘right sued on’ and cannot be compartmentalized into another 

rubric for time-bar purposes”].)

Moreover, AML did not allege that defendants aided and abetted by interfering 

with a contract. AML’s fourth amended complaint mentioned a contractual provision, 

 

18 Corporations Code sections 17704.07 and 17704.09, effective January 1, 2014, 

distinguish between a manager-managed limited liability company and a membermanaged limited liability company, with the default as member-managed unless the 

operating agreement provides otherwise. The Operating Agreement for AML named 

Roberts as the managing member, but provides that the members “may determine that 

there should be more than one Manager.” The January 2000 management agreement 

gave Andrews, Runnels, and Franklin control over AML’s “operational decisions” and 

responsibility at “both the senior management (operational) level as well as the boardlevel (leadership) level.”
31

paragraph 3.9 of the Operating Agreement, and alleged that it formed the basis for 

AML’s (ultimately unsuccessful) cause of action for interference with contract, but AML 

did not allege that the Operating Agreement was the basis of the aiding and abetting 

claim. Instead, the gravamen of AML’s cause of action for aiding and abetting breach of 

fiduciary duty was that defendants provided substantial assistance for Andrews, Runnels, 

and Franklin in breaching their duties of loyalty as members and managers of AML. 

AML alleged that defendants acted with Andrews, Runnels, and Franklin “to: a).

wrongfully acquire rights to the AML patent for less than full value; b). hire Runnels and 

Franklin to execute the AML Business Method; and c). otherwise cause Runnels and 

Franklin to breach their fiduciary duties to AML without seeking or obtaining the 

requested permission of AML and Roberts, its majority owner and manager.” AML 

alleged that in February 2004 Andrews, Runnels, and Franklin “were secretly aligned 

with the Defendants and had already commenced negotiating with Defendants,”

“surreptitiously forwarded [AML’s] strategic negotiating points” to defendants, received 

financial incentives from defendants “to breach their duties of loyalty to AML and its 

other member,” and “incorporate[d] [FPI] for the unlawful purpose of using [FPI] as an 

operating company to exploit the patented AML Business Method without receiving 

valid authorization from AML and without adequately compensating AML.”

19 AML 

also alleged that Runnels engaged in a classic example of a breach of the duty of loyalty 

by signing an unauthorized and undervalued licensing agreement on behalf of both 

contracting parties, AML and FPI. The fact that one of the breaches of fiduciary duty 

may also have been a breach of a provision of the Operating Agreement does not mean 

the three defalcating fiduciaries only breached a provision of the Operating Agreement.

 

19 The district court in Fort Properties, Inc. v. American Master Lease, LLC

(C.D.Cal. 2009) 609 F.Supp.2d 1052 invalidated AML’s business patent. The Court of 

Appeals affirmed the district court’s decision invalidating AML’s patent in Fort 

Properties, Inc. v. American Master Lease LLC (Fed.Cir. 2012) 671 F.3d 1317.
32

Thus, the gravamen of AML’s aiding and abetting breach of fiduciary duty claim 

was not interference with a provision of the Operating Agreement. The two-year statute 

of limitations for interference with contract did not apply.

C. Remedies for Aiding and Abetting a Breach of Fiduciary Duty

Defendants argue that the trial court erred in allowing the jury to make an award 

based on unjust enrichment, disgorgement, and constructive trust, because equitable 

remedies available for breach of fiduciary duty are not available for aiding and abetting a 

breach of fiduciary duty. We agree with AML that the restitutionary remedies of unjust 

enrichment and disgorgement are available for aiding and abetting breach of fiduciary 

duty.

“We begin with the law of restitution. An individual is required to make 

restitution if he or she is unjustly enriched at the expense of another. [Citations.] A 

person is enriched if the person receives a benefit at another’s expense. [Citation.] 

Benefit means any type of advantage. [Citations.] [¶] The fact that one person benefits 

another is not, by itself, sufficient to require restitution. The person receiving the benefit 

is required to make restitution only if the circumstances are such that, as between the two 

individuals, it is unjust for the person to retain it. [Citation.]” (First Nationwide Savings 

v. Perry (1992) 11 Cal.App.4th 1657, 1662-1663; see City of Chula Vista v. Gutierrez

(2012) 207 Cal.App.4th 681, 686; Unilogic, Inc. v. Burroughs Corp. (1992) 10 

Cal.App.4th 612, 627.)

Disgorgement as a remedy is broader than restitution or restoration of what the 

plaintiff lost. (County of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533, 542; 

Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1013.) There 

are two types of disgorgement: restitutionary disgorgement, which focuses on the 

plaintiff’s loss, and nonrestitutionary disgorgement, which focuses on the defendant’s 
33

unjust enrichment. (Feitelberg, supra, at p. 1013.)20 “Typically, the defendant’s benefit 

and the plaintiff’s loss are the same, and restitution requires the defendant to restore the 

plaintiff to his or her original position.” (County of San Bernardino, supra, at p 542.) 

However, “[m]any instances of ‘liability based on unjust enrichment . . . do not involve 

the restoration of anything the claimant previously possessed . . . includ[ing] cases 

involving the disgorgement of profits . . . wrongfully obtained . . . .’ [Citation.] ‘[T]he 

public policy of this state does not permit one to “take advantage of his own wrong”’

regardless of whether the other party suffers actual damage. [Citation.] Where ‘a benefit 

has been received by the defendant but the plaintiff has not suffered a corresponding loss 

or, in some cases, any loss, but nevertheless the enrichment of the defendant would be 

unjust . . . the defendant may be under a duty to give to the plaintiff the amount by which 

[the defendant] has been enriched.’ [Citation.]” (Ibid; see Feitelberg v. Credit Suisse 

First Boston, LLC, supra, 134 Cal.App.4th at p. 1013.)

Moreover, “‘“[i]t is not essential that money be paid directly to the recipient by the 

party seeking restitution. . . .”’ [Citations.] The emphasis is on the wrongdoer’s 

enrichment, not the victim’s loss. In particular, a person acting in conscious disregard of 

the rights of another should be required to disgorge all profit because disgorgement both 

benefits the injured parties and deters the perpetrator from committing the same unlawful 

actions again. [Citations.] Disgorgement may include a restitutionary element, but it

‘“may compel a defendant to surrender all money obtained through an unfair business 

practice . . . regardless of whether those profits represent money taken directly from 

persons who were victims of the unfair practice.”’ [Citation.] Without this result, there 

 

20 The cases cited by defendants that involve restitution under the unfair competition 

law are inapplicable “[b]ecause restitution in a private action brought under the unfair 

competition law is measured by what was taken from the plaintiff” (Clark v. Superior 

Court (2010) 50 Cal.4th 605, 614-615), rather than by the defendant’s unjust enrichment. 

(Ibid.; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149; Cortez 

v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177-178; Peterson v. 

Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593-1594.)
34

would be an insufficient deterrent to improper conduct that is more profitable than lawful 

conduct.” (County of San Bernardino v. Walsh, supra, 158 Cal.App.4th at pp. 542-543.)

Disgorgement based on unjust enrichment is an appropriate remedy for aiding and 

abetting a breach of fiduciary duty. For example, in County of San Bernardino v. Walsh, 

supra, 158 Cal.App.4th 533, the defendant, the vice president of a waste management 

company, was negotiating a new contract with the county. He and the former county 

administrative officer (CAO) agreed to bribe the current CAO to award the contract to the 

waste management company, along with an additional consulting agreement that would 

benefit the former CAO and the defendant. (Id. at pp. 538-539.) When the county 

discovered the bribery scheme, the county sued the current CAO, the former CAO, and 

the defendant. Affirming the trial court’s decision finding them liable for breaching or 

inducing a breach of the current CAO’s fiduciary duty, fraud, unfair competition, and 

unjust enrichment, the Court of Appeal held: “Disgorgement of profits is particularly 

applicable in cases dealing with breach of a fiduciary duty, and is a logical extension of 

the principle that public officials and other fiduciaries cannot profit by a breach of their 

duty. Where a person profits from transactions conducted by him as a fiduciary, the 

proper measure of damages is full disgorgement of any secret profit made by the 

fiduciary regardless of whether the principal suffers any damage. [Citations.]” (Id. at 

p. 543.) Even though the defendant was not in a fiduciary relationship with the county, 

the court held that his “[a]ctive participa[tion] in the breach of fiduciary duty by another 

[rendered him] accountable for all advantages [he] gained thereby . . . .” (Ibid; see

Chicago Park Dist. v. Kenroy, Inc. (Ill. 1980) 402 N.E.2d 181, 186 [“[i]t is a fundamental 

rule in the law of restitution that ‘[a] third person who has colluded with a fiduciary in 

committing a breach of duty, and who obtained a benefit therefrom, is under a duty of 

restitution to the beneficiary’”]; Rest.3d Restitution, § 43, com. g [“[b]enefits derived 

from a fiduciary’s breach of duty may . . . be recovered from third parties, not themselves 

under any special duty to the claimant, who acquire such benefits with notice of the 

breach,” and “[a] fortiori, one who actively participates in another’s breach of fiduciary 

duty will be liable to disgorge the profits realized thereby”].)
35

Defendants assert that “nonrestitutionary disgorgement is purely equitable and 

only for the court to decide.” Defendants do not argue, however, that the trial court erred 

by submitting the issue of unjust enrichment to the jury. Indeed, as the court in Jogani v. 

Superior Court (2008) 165 Cal.App.4th 901 explained, “‘[t]he fact that equitable 

principles are applied in the action does not necessarily identify the resultant relief as 

equitable. [Citations.] Equitable principles are a guide to courts of law as well as of 

equity. [Citations.]’ [Citations.]” (Id. at p. 909.) Where liability is definite and damages 

may be calculated without an accounting, the action is legal. (Id. at pp. 909-910; see 

Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 728 [plaintiff entitled to jury trial 

on claim for unjust enrichment seeking restitution of money unjustly retained by bank, 

“even when equitable principles are applied”]; Martin v. County of Los Angeles (1996) 51 

Cal.App.4th 688, 694 [“‘law courts now recognize and apply many equitable principles 

and grant relief based thereon where . . . legal relief is sought in the form of a judgment 

for a specific amount’”]; see also Holson Inv. Co. v. Villelli (N.D.Ill. 1998) 1998 WL 

312107 at p. 5 [“the amount of the restitution is a question of fact for the jury”].)

As part of their argument that restitution is not available for aiding and abetting a 

breach of fiduciary duty, defendants contend that the trial court erred by instructing the 

jury on constructive trust. The court gave a special instruction, requested by AML and

entitled “disgorgement/constructive trust,” that defined a constructive trust, set forth the 

requirements for imposing a constructive trust, and told the jurors that if they found the 

existence of the elements of a constructive trust then they could award AML the profit 

defendants derived from their investment in FPI.21 This hybrid instruction essentially 

 

21 The trial court instructed the jury pursuant to Special Instruction No. 2: “A 

constructive trust is an involuntary equitable trust created by operation of law as a 

remedy to compel the transfer of property from the person wrongfully holding it to the 

rightful owner. A constructive trust may only be imposed where the following three 

conditions are satisfied: (1) the existence of property or a property interest; (2) the right 

of the Plaintiff to that property or property interest; and (3) some wrongful acquisition or 

detention of that property or property interest by Defendants.
36

asked the jury to determine whether AML had proven entitlement to a constructive trust, 

but did not ask the jury to actually impose one; it only asked the jury to award 

disgorgement. Nevertheless, to the extent that the instruction asked the jury to decide 

whether to impose a constructive trust, the instruction was erroneous.

“A constructive trust is an involuntary equitable trust created by operation of law 

as a remedy to compel the transfer of property from the person wrongfully holding it to 

the rightful owner. [Citations.] The essence of the theory of constructive trust is to 

prevent unjust enrichment and to prevent a person from taking advantage of his or her 

own wrongdoing. [Citation.]” (Communist Party v. 522 Valencia, Inc. (1995) 35 

Cal.App.4th 980, 990.) Imposition of “[a] constructive trust is an equitable remedy to 

compel the transfer of property by one who is not justly entitled to it to one who is. 

[Citation.]” (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 

Cal.App.4th 1306, 1332; accord, Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 

445, 457.) It is not “a substantive claim for relief.” (PCO, Inc. v. Christensen, Miller, 

Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 398; see 

Embarcadero Mun. Improvement Dist. v. County of Santa Barbara (2001) 88 

Cal.App.4th 781, 793 [“[a] constructive trust is not a substantive device but merely a 

remedy”].) The issue of whether to impose a constructive trust is an equitable issue for 

the court. (See Fowler v. Fowler (1964) 227 Cal.App.2d 741, 747 [“it is for the trial 

 

“If you find that (1) a property interest existed in the proceeds of any sale by 

Defendants of their interests in FORT and/or the interest on any loans made by Idanta 

Partners, Ltd. To FORT; (2) Plaintiff had a right to the proceeds of any sale by 

Defendants of their interests in FORT and/or the interest on any loans made by Idanta 

Partners, Ltd. To FORT; and (3) Defendants wrongfully acquired the proceeds of any 

sale by Defendants of their interest in FORT and/or the interest on any loans made by 

Idanta Partners, Ltd. to FORT, then you may award Plaintiff the profit that Defendants 

have derived from their acquisition of the proceeds of any sale by Defendants of their 

interests in FORT and/or the interest on any loans made by Idanta Partners, Ltd. to 

FORT. However, if you find that Plaintiff never had a right to the proceeds of any sale 

by Defendants of their interest in FORT and/or the interest on any loans made by Idanta 

Partners, Ltd. to FORT, then you should not award Plaintiff any damages under the 

theory of constructive trust or disgorgement.”
37

court to decide whether” the plaintiff has proven entitlement to a constructive trust].) 

The trial court erred by submitting the issue of whether to impose a constructive trust to 

the jury.

The error, however, was not prejudicial. “‘A judgment may not be reversed for 

instructional error in a civil case “unless, after an examination of the entire cause, 

including the evidence, the court shall be of the opinion that the error complained of has 

resulted in a miscarriage of justice.” [Citation.]’ [Citation.] Instructional error in a civil 

case is prejudicial ‘“where it seems probable”’ that the error ‘“prejudicially affected the 

verdict.”’ [Citation.] ‘[W]hen deciding whether an [instructional] error . . . was 

prejudicial, the court must also evaluate (1) the state of the evidence, (2) the effect of 

other instructions, (3) the effect of counsel’s arguments, and (4) any indications by the 

jury itself that it was misled.’ [Citation.]” (Turman v. Turning Point of Central

California, Inc. (2010) 191 Cal.App.4th 53, 61; Daum v. SpineCare Medical Group, Inc.

(1997) 52 Cal.App.4th 1285, 1313-1314.) The appellant has the burden on appeal of 

showing that an instructional error was prejudicial and resulted in a miscarriage of 

justice. (Boeken v. Philips Morris, Inc. (2005) 127 Cal.App.4th 1640, 1678; Logacz v. 

Limansky (1999) 71 Cal.App.4th 1149, 1161.)

Defendants’ statement, without more, that the instruction on constructive trust was

“plainly prejudicial to [them], given the Jury’s monetary verdict,” is insufficient to meet 

their burden of showing prejudice. (See Scheenstra v. California Dairies, Inc. (2013) 

213 Cal.App.4th 370, 403.) “Prejudice from an erroneous instruction is never presumed; 

it must be affirmatively demonstrated by the appellant. [Citations.]” (Wilkinson v. Bay 

Shore Lumber Co. (1986) 182 Cal.App.3d 594, 599; see Brokopp v. Ford Motor Co.

(1977) 71 Cal.App.3d 841, 853-854.) Defendants have not demonstrated that the 

measure or award of restitution would have been any different had the instruction focused 

on disgorgement only, without any mention of constructive trust. Defendants have not 

shown how a more favorable verdict would have been reasonably probable had the 

instruction excluded the theory of constructive trust. Therefore, any error was not 

prejudicial.
38

D. Award of Restitution

Defendants first contend that one who aids and abets a breach of fiduciary duty 

may be liable for the fiduciary’s unjust enrichment, but cannot be liable for more than the 

fiduciary’s unjust enrichment. Thus, defendants contend that even if they can be liable 

for aiding and abetting the breach of fiduciary duty by Andrews, Runnels, and Franklin, 

they cannot be liable for more than any profit Andrews, Runnels, and Franklin obtained. 

Defendants, however, cite no authority for this contention. Moreover, the Restatement 

distinguishes between those who are subject to disgorgement because they have breached 

a fiduciary duty and those who are subject to disgorgement because they are other 

“conscious wrongdoer[s],” such as aiders and abettors: “The object of restitution . . . is to 

eliminate profit” of the “conscious wrongdoer, or . . . defaulting fiduciary without regard 

to notice or fault . . . .” (Rest.3d Restitution & Unjust Enrichment, § 51(4).) Indeed, 

“[t]he object of the disgorgement remedy—to eliminate the possibility of profit from 

conscious wrongdoing—is one of the cornerstones of the law of restitution and unjust 

enrichment,” and “[t]he profit for which the wrongdoer is liable by the rule of §51(4) is 

the net increase in the assets of the wrongdoer, to the extent that this increase is 

attributable to the underlying wrong.” (Id., com. e.)22 As independent wrongdoers under 

the second theory of aiding and abetting liability based on the commission of an 

independent tort (see Casey v. U.S. Bank Nat. Assn., supra, 127 Cal.App.4th at p. 1144; 

Saunders v. Superior Court, supra, 27 Cal.App.4th at p. 846.), defendants were subject to 

disgorgement of the profit or “net increase in the assets” they obtained, not merely those 

that Andrews, Runnels, and Franklin obtained.

 

22 In Uzyel v. Kadisha (2010) 188 Cal.App.4th 866, the court relied on section 51(4) 

of the Restatement Third of Restitution and Unjust Enrichment, although then still in 

draft form, and “deem[ed it] applicable under California law to a trustee who has 

committed a breach of trust . . . .” (Id. at p. 894; see Ghirardo v. Antonioli (1996) 14 

Cal.4th 39, 51 [relying on the Restatement of Restitution definition of unjust 

enrichment].)
39

Defendants next contend that even if AML is entitled to an award based on unjust 

enrichment or disgorgement, the jury instructions were erroneous and the amount of 

restitution in the verdict is inconsistent with controlling law and not supported by 

substantial evidence. We agree that the trial court committed prejudicial instructional 

error. Therefore, the award must be reversed.

As noted above, subsection (4) of section 51 of the Restatement Third of 

Restitution and Unjust Enrichment provides that “the unjust enrichment of a conscious 

wrongdoer, or of a defaulting fiduciary without regard to notice or fault, is the net profit 

attributable to the underlying wrong . . . . Restitution remedies that pursue this object are 

often called ‘disgorgement’ or ‘accounting.’” The amount of restitution to be made is 

sometimes described as the “benefit” received by the defendant. (Rest., Restitution, § 1, 

com. a.) This was the term the trial court used in Special Instruction No. 3.

Subsection (5) of section 51 of the Restatement Third of Restitution and Unjust 

Enrichment explains that “[i]n determining net profit the court may apply such tests of 

causation and remoteness, may make such apportionments, may recognize such credits or 

deductions, and may assign such evidentiary burdens, as reason and fairness dictate, 

consistent with the object of restitution as specified in subsection (4). . . .” The 

Restatement further explains that “[p]rofit includes any form of use value, proceeds, or 

consequential gains [citation] that is identifiable and measurable and not unduly remote.” 

(Id., subsec. (5)(a).) In addition, a “conscious wrongdoer or a defaulting fiduciary may 

be allowed a credit for money expended in acquiring or preserving the property or in 

carrying on the business that is the source of the profit subject to disgorgement. . . .” (Id., 

subsec. (5)(c).) Comment a explains that “[t]he principal focus of § 51 is on cases in 

which unjust enrichment is measured by the defendant’s profits, where the object of 

restitution is to strip the defendant of wrongful gain [citations]. . . .” (Id., com. a.)

In measuring the amount of the defendant’s unjust enrichment, the plaintiff may 

present evidence of the total or gross amount of the benefit, or a reasonable 

approximation thereof, and then the defendant may present evidence of costs, expenses, 

and other deductions to show the actual or net benefit the defendant received. As the 
40

court in Uzyel v. Kadisha, supra, 188 Cal.App.4th 866 stated, “[t]he party seeking 

disgorgement ‘has the burden of producing evidence permitting at least a reasonable 

approximation of the amount of the wrongful gain,’” and the “‘[r]esidual risk of 

uncertainty in calculating net profit is assigned to the wrongdoer.’ [Citation.]” (Id. at 

p. 894.) The court in Uzyel adopted this formulation from the Restatement, which 

explains that the “traditional formula, inherited from trust accounting and enshrined in 

the Copyright Act (17 U.S.C. § 504(b)), states that the claimant has the burden of proving 

revenues and the defendant has the burden of proving deductions.” (Rest.3d Restitution 

& Unjust Enrichment, § 51, com. i.) The new Restatement, however, “adopts a more 

modern and generally useful rule that the claimant has the burden of producing evidence 

from which the court may make at least a reasonable approximation of the defendant’s 

unjust enrichment,” and “the defendant is then free (there is no need to speak of ‘burden 

shifting’) to introduce evidence tending to show that the true extent of unjust enrichment 

is something less.” (Ibid.) Thus, “[a]s a general rule, the defendant is entitled to a 

deduction for all marginal costs incurred in producing the revenues that are subject to 

disgorgement. Denial of an otherwise appropriate deduction, by making the defendant 

liable in excess of net gains, results in a punitive sanction that the law of restitution 

normally attempts to avoid.” (Id., com. h.) Of particular relevance here, comment h of 

the Restatement Third of Restitution and Unjust Enrichment, section 51, states: 

“Disloyal fiduciaries are uniformly reimbursed for the purchase price of property 

acquired in conscious breach of their duty of loyalty.”

The trial court instructed the jury pursuant to Special Instruction No. 7, entitled 

“Calculation of Disgorgement of Defendants’ Benefits—Effective Date”: “If you decide 

to award [AML] any profit made or to be made by Defendants as a result of [FPI’s]

existence, you must consider the value of those benefits at the time they were acquired by 

Defendants. You may not reduce the value of those benefits by any events occurring 

after they were first acquired, including any later decision by Defendants to accept less 

for the benefits they received than their value on the date they received them.” The trial 

court further instructed the jury pursuant to Special Instruction No. 4, entitled 
41

“Calculation of Disgorgement of Defendants’ Benefits—No Offset”: “In awarding 

[AML] any profit made or to be made by Defendants as a result of [FPI’s] existence, you 

must disregard what Defendants might have earned had they not created [FPI]. Instead, 

you must only focus on the profit received or to be received by Defendants as a result of 

their actual conduct in this case.”

These special jury instructions, requested by AML, were erroneous. Special 

Instruction No. 7 incorrectly told the jury that it had to consider the value of the benefits 

defendants received at the time of acquisition of the benefits. Defendants acquired shares 

of FPI stock for $2.3 million in April 2004, which “at the time” probably, although not 

necessarily, had a value of $2.3 million (because that is what defendants paid for the 

stock). Assuming that defendants had not negotiated a discount, or that defendants had 

not otherwise underpaid or overpaid, there was no benefit yet to defendants because they 

had only exchanged $2.3 million in cash for $2.3 million in stock. Defendants held the 

stock, which in June 2007 may have had a value of $5.8 million, giving defendants a 

potential benefit of $3.5 million. Sometime later, defendants’ FPI stock had a value of at 

least $3.3 million ($2.9 million plus $300,000 plus $100,000), and perhaps more, 

depending on the value of defendants’ contractual right to the second $2.9 million, 

discounted by the prospects of FPI’s finances, risk of insolvency, and ability to pay the 

balance due. Both sides were entitled to present evidence, including expert testimony, on 

these issues. The trial court’s instruction to consider only the value of the benefits “at the 

time they were acquired” improperly instructed the jury on valuing the defendants’

enrichment.23

 

23 AML argues in its supplemental brief that Special Instruction No. 7 stood “simply 

[for] the proposition that any purchase price of the property to be disgorged should be 

‘considered’ in the profit equation, i.e., if proven, it can be deducted as an expense from 

the highest future value to determine [defendants’] profit.” This is not a fair reading of 

the instruction. In the instruction’s mandate to the jurors that they “must consider the 

value of those benefits at the time they were acquired by Defendants,” “those benefits” 

referred to the jury’s “award” of defendants’ profits, not an element of a “profit 

equation.” There is nothing in the instruction suggesting that the jury should deduct the 
42

Special Instruction No. 7 also incorrectly told the jury that it could not reduce the 

value of the benefits defendant received “by any events occurring after they were first 

acquired, including any later decision by Defendants to accept less for the benefits they 

received than their value on the date they received them.” As noted above, an unjust 

enrichment defendant may introduce evidence that its enrichment was reduced by costs, 

expenses, and other factors. Defendants may have received only a total of $400,000 out 

of the second $2.9 million payment because (as AML argued) defendants engaged in a 

sham transaction to minimize the value of AML’s claims in this litigation,24 or because 

(as defendants argued) of “the failure of the real estate market . . . in September of 2009.”

Either way, defendants were entitled to present evidence of this transaction, AML was 

entitled to challenge the transaction’s legitimacy, and the jury was entitled to hear this

evidence and determine the value of defendants’ remaining interest in FPI. As counsel 

for defendants acknowledged to the trial court, if counsel for AML “want to argue that 

they should get $5.8 million even though the defendants never got $5.8 million, I suppose 

they can argue that.” Counsel for defendants just wanted the corresponding ability to 

argue that defendants did not get $5.8 million. Special Instruction No. 7 deprived them 

of this ability by erroneously precluding the jury from considering defendants’

acceptance of $400,000 for its right to receive the remaining $2.9 million when 

determining the unjust enrichment defendants obtained as a result of the sale of their FPI 

stock.25

 

purchase price or anything else. Moreover, AML’s argument is inconsistent with its 

argument, also in its supplemental brief, that defendants’ $2.3 million purchase price “is 

irrelevant to the restitutionary calculation” and should not be deducted as an expense or 

offset when calculating defendants’ profit.

24 Defendants’ agreement to accept $100,000 for the remaining $2.6 million occurred 

within 30 days of Melle’s deposition, where defendants first saw Melle’s damages 

analysis.

25 AML argues that defendants forfeited their challenge to Special Instruction No. 7 

by withdrawing their objection to the instruction. AML directs us to a portion of the 

record where counsel for defendants withdrew an objection to the use of the word 
43

Special Instruction No. 4 compounded the problem by instructing the jury that it 

“must only focus on the profit received or to be received by Defendants . . . .” There is 

no difference between the benefit or “profit” defendants received and the benefit or 

“profit” defendants were to receive in the future. Defendants received one benefit, an 

equity interest in FPI. There may have been a dispute about how to value this benefit, but 

both sides were entitled to present evidence of its value, and the jury was entitled to 

determine how much it was really worth. The 2004 value of $2.3 million and the 2007 

values of $3.5 million and $400,000 were evidence of the value of the unjust enrichment 

defendants obtained as a result of their wrongful conduct, but none of these values was 

conclusive, and the jury was entitled to “focus” on any or all of them.26

In support of Special Instruction No. 7, AML cited section 51 of the Restatement 

Third of Restitution and Unjust Enrichment, section 202 of the Restatement Second of 

Restitution, and Elliott v. Elliott (1964) 231 Cal.App.2d 205. None of these authorities 

 

“benefits” in the instruction. We do not construe this stipulation to one word in the 

instruction as a waiver of all objections to the instruction.

26 AML argues in its supplemental brief that “[n]othing in the text of any instruction 

prevented the jury from determining [defendants’] wrongful profits net of any legitimate 

costs” because there was no evidence in the record that defendants actually paid $2.3 

million for the FPI stock. It is true that none of the parties to the 2004 transaction 

testified that defendants paid $2.3 million. But there was testimony by Melle about the 

$2.3 million investment. There was a long discussion at sidebar, while Melle was on the 

witness stand, about whether the trial court would allow counsel for defendants to ask 

Melle about the $2.3 million. Melle had included the $2.3 million in his expert report, 

but, in response to a tentative ruling by the court on a jury instruction regarding “offsets,” 

Melle removed the $2.3 million from his calculations. Counsel for defendants argued to 

the court that it was unfair to allow the jury to make an award “without having discounted 

for the [$]2.3 [million] that [defendants] put in,” and that “the [$]2.3 [million] offset 

definitely comes in now. That’s an expenditure.” The trial court ultimately allowed 

counsel for defendants to ask Melle about the $2.3 million investment. Counsel for 

defendants then asked Melle if he had “take[n] into account the fact that defendants had 

put in 2,300,000 dollars as their initial investment,” and Melle acknowledged he had not. 

Melle said that his calculations did “not include a deduction for the amount that the 

defendants initially invested . . . .” Both sides agree that Melle’s testimony was the only 

testimony on this issue.
44

supports an instruction that AML was entitled to recover the full contract price of 

defendants’ stock rather than the amount defendants actually received for the stock, or

that in determining the value of defendants’ profits from the sale of its FPI stock the jury 

should not consider defendants’ subsequent decision to accept less than the contract 

amount. As noted above, section 51 focuses on the defendant’s net benefit. Section 202

concerns imposition of a constructive trust, not restitution based on unjust enrichment. 

And the court in Elliott held that in valuing an asset subject to a constructive trust, the 

trier of fact should consider the actual value of the asset, including issues such as 

collectability and solvency. (See Elliott, supra, at p. 213 [failure to make findings on 

whether the note was collectable and whether the maker of the note was insolvent was 

reversible error].)

Finally, these instructional errors were prejudicial. As noted, the “uniform test for 

civil instructional error” (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 581, 

fn. 11) is whether “it is reasonably probable the error affected the verdict.” (Ted Jacob 

Engineering Group, Inc. v. The Ratcliff Architects (2010) 187 Cal.App.4th 945, 962). In 

assessing the likelihood that instructional error prejudicially affected the verdict, “‘[t]the 

reviewing court should consider not only the nature of the error . . . but [also] the 

likelihood of actual prejudice as reflected in the individual trial record, taking into 

account “(1) the state of the evidence, (2) the effect of other instructions, (3) the effect of 

counsel’s arguments, and (4) any indications by the jury itself that it was misled.”

[Citation.]’” (Viner v. Sweet (2004) 117 Cal.App.4th 1218, 1226, fn. 8, quoting 

Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 983, and Soule v. General 

Motors Corp., supra, at pp. 580-581.) Here, the evidence was that defendants obtained a 

net benefit from the sale of their FPI stock of approximately $1 million ($600,000 from 

the first $2.9 million payment, plus $400,000), not the $5.8 million the jury awarded. 

Moreover, as noted above, the other jury instructions on restitution simply made matters 

worse. And although counsel for AML asked the jury to award Franklin’s estimated 

value of AML’s interest in a potential joint venture with defendants, $26,462,188, the 

joint venture never materialized and the jury’s award was not close to this amount. 
45

Finally, the jury gave a very clear and unequivocal indication it was misled or at least 

confused by asking a question during deliberations about the meaning of “harm” and 

“benefit” and how to calculate defendants’ unjust enrichment. The instructional error 

was prejudicial because in all probability it “misled the jury and affected [the] verdict.” 

(Krouse v. Graham (1977) 19 Cal.3d 59, 72; see Code Civ. Proc., § 475; Veronese v. 

Lucasfilm Ltd. (2012) 212 Cal.App.4th 1, 32 [“instructional error will be prejudicial if it 

is ‘reasonably probable that instructions . . . actually misled the jury’”], quoting 

Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 682.) Therefore, we conclude that 

defendants are entitled to a new trial on the amount of unjust enrichment they should pay 

in restitution to AML.

On remand, the trial court should instruct the jury that the amount by which 

defendants were unjustly enriched “is the net profit attributable to the underlying wrong.”

(Rest.3d Restitution & Unjust Enrichment, § 51(4).) In calculating the net profit 

attributable to the underlying wrong, the jury will need guidance on how to evaluate three 

important numbers in this case: (1) the $2.3 million defendants paid for the FPI stock in 

April 2004, (2) the value of the FPI stock defendants received when they purchased the 

stock in April 2004, and (3) the value of defendants’ right to receive the second $2.9 

million payment when they sold the stock in June 2007. On the first issue, the trial court 

should instruct the jury that it should give defendants “credit for money expended in 

acquiring or preserving the property or in carrying on the business that is the source of 

the profit subject to disgorgement.” (Rest.3d Restitution & Unjust Enrichment, 

§ 51(5)(c); accord, Uzyel v. Kadisha, supra, 188 Cal.App.4th at p. 894; see Carrey v. 

Boyes Hot Springs Resort, Inc. (1966) 245 Cal.App.2d 618, 622 [“in calculating the net 

profit of a business all of the costs of producing the gross income should be 

deducted”].)27

 

27 Citing Ward v. Taggart (1959) 51 Cal.2d 736, 744, AML argues in its 

supplemental brief that defendants are not entitled to a credit for their $2.3 million 

investment because “expenses that aided the wrongdoer in accomplishing the wrongdoing 

cannot be deducted” and “[a]mounts expended to further breaches of fiduciary duty are 
46

On the second issue, the trial court should instruct the jury it should consider the 

face value of the benefits at the time defendants received them (i.e., the $2.3 million 

defendants paid for the FPI stock), as well as evidence that the benefits were worth more 

or less than what defendants paid for them. (See Knudsen v. Hill (1964) 227 Cal.App.2d 

639, 640, 642 [in a damages case involving conversion of a “pledged promissory note,” 

measure of damage is “value at time of conversion and, although the rule is variously 

expressed, face value of the bill or note is, prima facie, its true value,” although

“[e]vidence is admissible to establish that actual value is a lesser sum than face value”]; 

St. Paul Fire & Marine Ins. Co. v. Compaq Computer Corp. (8th Cir. 2008) 539 F.3d 

809, 818 [“[w]hile the contract price is evidence of the value of an item, it is not 

conclusive”].)

On the third issue, the trial court should instruct the jury that in determining 

whether defendants have met their burden of proving any deductions or discount from the 

right to receive the second $2.9 million, the jury may consider defendants’ ability to 

collect the full contract price for the sale of their stock and FPI’s solvency (Elliott v. 

Elliott, supra, 231 Cal.App.2d at p. 213; cf. Medi-Cen Corp. v. Birschbach (1998) 123 

Md.App. 765, 778-779 [720 A.2d 966, 972-973] [discussing the effect of doubtful 

collectability on the value of a converted asset], or even evidence that defendants 

intentionally chose not to collect the full amount due for the sale of their FPI stock in 

order to minimize their liability in this litigation. (See Elliott, supra, at p. 212; 

 

not valid deductions from [defendants’] profits.” This argument confuses the price of a 

wrongfully acquired asset with the costs associated with its acquisition. “One who 

misappropriates the property of another is not entitled to deduct any of the costs of the 

transactions by which he accomplished his wrongful conduct.” (A & M Records, Inc. v. 

Heilman (1977) 75 Cal.App.3d 554, 570.) The purchase price of the misappropriated 

property, however, is not a transactional cost. (See Rest.3d Restitution & Unjust 

Enrichment, § 51.) Indeed, in Ward the Supreme Court held that the defendant was not 

entitled to a deduction for commissions and other transaction costs, but the defendant did 

receive a credit for the $4,000 per acre purchase price of the property he misappropriated 

and resold for $5,000 per acre, so that the plaintiff recovered a judgment “representing 

the $1,000 per acre secret profit.” (Ward, supra, at pp. 739-740, 742, 744.)
47

Janiszewski v. Behrmann (1956) 345 Mich. 8, 29 [75 N.W.2d 77, 93] [court will not 

“permit the tortious taker to escape by paying only the give-away price at which he sold, 

regardless of fair value”].)

Finally, the trial court should instruct the jury, consistent with the Restatement,

that “‘[w]here a person is entitled to a money judgment against another because by fraud, 

duress or other consciously tortious conduct the other has acquired, retained or disposed 

of his property, the measure of recovery for the benefit received by the other is the value 

of the property at the time of its improper acquisition, retention or disposition, or a higher 

value if this is required to avoid injustice where the property has fluctuated in value . . . .’ 

(Rest., Restitution, § 151, p. 598.)” (Colgan v. Leatherman Tool Group, Inc. (2006) 135 

Cal.App.4th 663, 698-699;

28 see Gerstle v. Gamble-Skogmo, Inc. (E.D.N.Y. 1969) 298 

F.Supp. 66, 100-101 [“the restitutional basis of recovery is the value of the property at the 

time the sale was consummated or a higher value at a subsequent time if the value of the 

property has thereafter fluctuated”].) Such an instruction will assist the jury in deciding 

how to value the second $2.9 million payment, which defendants essentially claim 

decreased to $400,000. “Where the subject matter is of fluctuating value, and where the 

person deprived of it might have secured a higher amount for it had he not been so 

deprived, justice to him may require that the measure of recovery be more than the value 

at the time of deprivation. This is true where the recipient knowingly deprived the owner 

of his property or where a fiduciary in violation of his duty used the property of the 

beneficiary for his own benefit. In such cases the person deprived is entitled to be put in 

 

28 Colgan v. Leatherman Tool Group, Inc. involved claims under the false 

advertising law, Business and Professions Code section 17500, and the unfair 

competition law, Business and Professions Code section 17200. (Colgan v. Leatherman 

Tool Group, Inc., supra, 135 Cal.App.4th at p. 672.) As noted, nonrestitutionary

disgorgement is not available for these claims. (Id. at pp. 696-697; see footnote 20 ante.) 

The issue of how to value an asset that fluctuates in value or that trades in a limited 

market, however, arises whether the plaintiff is seeking restitutionary disgorgement based 

on what the plaintiff lost or nonrestitutionary disgorgement based on what the defendant 

gained.
48

substantially the position in which he would have been had there not been the 

deprivation, and this may result in granting to him an amount equal to the highest value 

reached by the subject matter within a reasonable time after the tortious conduct.” (Hutt 

v. Dean Witter Reynolds, Inc. (D.Mass. 1990) 737 F.Supp. 128, 134; see Roxas v. Marcos

(1998) 89 Hawai‘i 91, 152 [969 P.2d 1209, 1270] [amount of damages for conversion of 

gold “is the highest value of the gold between—and including—the date of conversion 

and a reasonable time thereafter”]; American General Ins. Co. v. Equitable General 

Corp. (E.D.Va. 1980) 493 F.Supp. 721, 765 [for purposes of rescission, court valued 

stock “at the highest value attained within a reasonable time” after announcement of 

merger].)

DISPOSITION

The judgment is reversed as to the amount of defendants’ unjust enrichment. In 

all other respects, it is affirmed. The order denying defendants’ motions for judgment 

notwithstanding the verdict and new trial is reversed to the extent it denies a new trial on 

the issue of the amount of defendants’ unjust enrichment, and in all other respects it is 

affirmed. The trial court is directed to grant a new trial on the issue of the amount of 

defendants’ unjust enrichment only. The parties are to bear their own costs on appeal.

SEGAL, J.*

We concur:

PERLUSS, P. J. ZELON, J.

 

*

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to 

article VI, section 6 of the California Constitution.