Source: https://www.fearnotlaw.com/wsnkb/articles/wijay-v-ten-x-llc-ca-72235.html
Timestamp: 2019-04-21 08:22:26+00:00

Document:
Appeal from a judgment of the Superior Court of Orange County, Randall J. Sherman, Judge. Affirmed.
Dorsey & Whitney, John S. Baker, Pillsbury, Winthrop Shaw Pittman, and Kevin M. Fong, for Defendant and Appellant.
Plaintiff Arvin Wijay performed consulting services for defendant Ten-X, LLC (Ten-X, formerly known as Auction.com), while he was the chief executive officer (CEO) of Retreat Capital Management, Inc. (Retreat). Ten-X refused to pay Wijay for his consulting services, so he sued Ten-X. The jury awarded Wijay $5,702,364 in damages on his contract and quantum meruit causes of action, and the court awarded him $1,460,465 in prejudgment interest.
On appeal, Ten-X claims the court abused its discretion and erred when it granted Wijay’s motions in limine and excluded evidence of certain “no-moonlighting” and “non-competition” provisions contained in Wijay’s employment and stock option agreements with Retreat, and the court further erred when it instructed the jury to disregard any obligations or duties Wijay may have owed to Retreat. Ten-X also claims both of these errors were prejudicial. We reject these claims and affirm the judgment.
The operative complaint alleged Ten-X was an online real estate marketplace serving financial institutions, institutional investors, individual consumers and real estate professionals. Jeffrey Frieden was the co-founder and CEO of Ten-X. In October 2012, Frieden, acting on behalf of Ten-X, solicited Wijay to help Ten-X promote its business relationship with Bank of America.
The parties reached an oral consulting services agreement in late 2012. Wijay agreed to assist Ten-X with Bank of America serviced Department of Housing and Urban Development (HUD) third-party trustee/foreclosure sale (TPS) loan assets, real estate owned (REO) assets, and short sale loan assets (SS). Ten-X agreed to pay Wijay a fee equal to the greater of $2 million per year, or five percent of Ten-X’s gross auction fee revenue for each SS asset and each REO asset sale after the first 2,000 REO asset sales each year. Payments were to begin in January 2013, and were to include work performed before that date.
Ten-X failed to pay Wijay as agreed in the first quarter of 2013, but he continued to work for Ten-X, and Frieden repeatedly promised payment and a written contract would be forthcoming. Wijay’s work for Ten-X produced enormous results, and Frieden continued to promise payment and a written contract. Despite these promises, Ten-X never paid Wijay, so he sued.
The operative complaint alleged causes of action for breach of contract and quantum meruit against Ten-X, and promissory fraud against Ten-X and Frieden. Wijay alleged Ten-X and Frieden deliberately defrauded him by promising to pay for his services but not paying him after those services were rendered. Wijay alleged Ten-X owed him at least $3.5 million. In answer, Ten-X asserted a general denial and raised 20 affirmative defenses, including unclean hands.
Ten-X sought summary judgment and argued the fact Wijay was Retreat’s CEO at the time proved he was acting on Retreat’s behalf. Thus, assuming there was an agreement, Ten-X had contracted with Retreat—not Wijay. The court denied Ten-X’s motion for summary judgment and the case proceeded to trial.
Ten-X’s trial brief asserted Wijay had attempted to negotiate an agreement with Ten-X in his capacity as Retreat’s CEO. When that failed, Wijay attempted “to parlay his relationship with [Ten-X] into a secret (and illegal) agreement between himself, in his individual capacity, and [Ten-X]. These efforts similarly failed.” Ten-X claimed “the evidence will show Wijay knew there could be no binding agreement between himself (or Retreat) unless [Ten-X’s] board of directors approved the agreement,” and Wijay knew that would never happen. Ten-X denied Frieden ever promised to pay Wijay, and argued Wijay could not prove detrimental reliance “because he knew that there could be no binding agreement absent board approval . . . .” Ten-X also claimed Wijay had acted in bad faith and breached his fiduciary and contractual obligations to his employer, Retreat.
Wijay’s employment and stock option agreements with Retreat contained certain “no-moonlighting” and “non-competition” provisions (Retreat Contract Restrictions) which required him to “perform, faithfully and loyally . . . the duties assigned . . . [and] devote his full, attention, knowledge and experience” to Retreat, and “not directly or indirectly engage in any business that is competitive” with Retreat.
Wijay filed two motions in limine seeking to exclude all evidence of the Retreat Contract Restrictions on the grounds they were irrelevant, and the probative value of this evidence was substantially outweighed by the probability that its admission would necessitate an undue consumption of time.
In its written opposition, Ten-X argued the Retreat Contract Restrictions were relevant to Wijay’s credibility. Ten-X asserted they tended to prove Wijay could not, and would not, have performed consulting services for Ten-X individually. And, since Wijay’s employment with Retreat did not end until February 2013, the Retreat Contract Restrictions barred him from competing with Retreat until February 2016.
The court conducted an Evidence Code section 402 (section 402) hearing on Wijay’s motions in limine. Wijay’s attorney argued the Retreat Contract Restrictions did not prohibit Wijay from contracting individually with Ten-X. He also argued Retreat had breached its agreements with Wijay before Wijay contracted with Ten-X, so the Retreat Contract Restrictions were not enforceable.
The court called Wijay to testify at the section 402 hearing on its own motion. The court asked Wijay why he “felt free to go forward and enter into a contract with [Ten-X], even though you had this [non-compete] provision in your contract with Retreat?” Wijay responded, “There were two reasons. One of them is in March 2013, I was owed my earn-out in excess of $3 million from - - for buying my other tranches of shares, that [Retreat] didn’t have the money to pay me and they were in breach. That’s one of them.
“The second one is the services I provided personally for [Ten-X] was [sic] not the business of Retreat. [Retreat] never work[s] for commission. They work on hourly consulting work or on a per-file basis providing services for the banks.” Wijay testified Retreat did not perform the type of work requested by Ten-X, and Ten-X was contracting with him due to his personal relationship with Bank of America. Wijay said he felt comfortable working for Ten-X because he did not think he was competing with Retreat.
The court ultimately granted Wijay’s motions in limine and excluded all evidence of the Retreat Contract Restrictions on two alternative grounds. First, the court ruled the evidence was irrelevant. Second, the court ruled the probative value of the evidence was outweighed by the probability that its admission would necessitate undue consumption of time.
The court explained: “So the whole premise of this motion in limine . . . is that it’s irrelevant that Mr. Wijay had this conflict paragraph with Retreat, because the court has already indicated it agrees with plaintiff’s position that this provision is not a legal prohibition from the plaintiff contracting with [Ten-X] I should say.
“And it doesn’t go to any kind of unclean hands defense and all these other arguments . . . the defendants have been making. The only concern that I had was that since defendant denies there was an agreement with the plaintiff, it was possible that, because of this clause, he might be reluctant to enter into an agreement with [Ten-X] because he doesn’t want to breach his agreement with Retreat.
“So the fact that he . . . alleges he entered into an agreement with [Ten-X], you know, that the defendants in this case would be entitled to use this conflict paragraph as something to suggest that it militates against there being an agreement [with Ten-X] because you wouldn’t want to breach an agreement [with Retreat].
“But the court has now heard from [Wijay], . . . that all [he] knew . . . was that he couldn’t compete with Retreat, and he didn’t consider this competitive.
“And, therefore, he wouldn’t consider the contract he alleges in this case with [Ten-X] to be a breach of his contract with Retreat. And that’s completely independent of Retreat owing him money or not, pursuant to this contract.
“All right. . . . [I]t does not appear that the fact that [Wijay] will be testifying that he entered into agreements or an agreement with [Ten-X] would be rebutted by the fact that he thought that by doing so, he would violate some contract or two with Retreat, because he didn’t think that would be the case.
“And, therefore, it’s an undue consumption of time to get into the fact that . . . plaintiff entering into a contract with [Ten-X] could be a violation of [the Retreat Contract Restrictions].
“So plaintiff’s motion in limine . . . is granted.
At trial, Wijay testified Ten-X approached him for help with its business with Bank of America in late 2012. Wijay reached an oral agreement with Frieden sometime in December of that year. Pursuant to the oral agreement, Wijay agreed to use his best efforts to facilitate Ten-X’s relationship with Bank of America for the sale of the three specified categories of serviced real estate assets (TPS, REO & SS). Wijay also promised to provide customer support.
In return, Ten-X agreed to pay Wijay the greater of (1) a minimum fee of $2 million per calendar year; or (2) percentages of Ten-X’s gross auction fee revenue for three categories of Bank of America serviced real estate assets (TPS, REO & SS). Ten-X was to pay Wijay for deals that closed after January 1, 2013.
Frieden said Wijay could contract with Ten-X individually or using any entity or person or entity he chose to designate, so long as Wijay himself performed the services. Over the course of several months, Ten-X prepared multiple draft written agreements in the names of Retreat, Wijay, his wife, and other Wijay-related entities, but none of them was ever signed by Ten-X.
Still, after the parties had reached the oral agreement, Wijay facilitated numerous conference calls and meetings with key members of Bank of America’s leadership team. Wijay assisted with presentation materials, and provided market and business intelligence, as well as general consulting services. Wijay introduced hundreds of e-mails reflecting his efforts to promote Ten-X’s business with Bank of America.
Wijay also introduced evidence which showed that in the nine months before he started his consulting efforts on Ten-X’s behalf, Ten-X earned just over $9 million in revenue from Bank of America. But in the 15 months after Wijay started his consulting efforts on Ten-X’s behalf, Ten-X earned just over $121 million in revenue from Bank of America.
In March 2013, after Wijay had dramatically increased Ten-X’s business with Bank of America, Ten-X provided Wijay a draft written agreement which materially altered the terms of the oral agreement. Nevertheless, Frieden assured Wijay the oral agreement was still operative, and the draft written agreement was wrong.
In May 2013, Wijay told Frieden he was leaving Retreat. Frieden suggested Wijay use the name of one of his entities in the written agreement, but he otherwise acknowledged the terms of the oral agreement.
Frieden also promised to reconcile their numbers in December 2013 or early January 2014, and he reaffirmed that Ten-X would pay Wijay the money it owed him for work performed in 2013 under the oral agreement. Frieden and Wijay agreed to sign a written contract in January 2014.
In November 2014, Ten-X presented another draft written agreement with different terms and a start date of November 2014, not January 2013 as previously agreed. This would have taken almost two years of commissions from Wijay after Frieden had repeatedly promised his commissions were accruing. At that point, Wijay filed his complaint for damages.
Frieden testified he negotiated the terms of Wijay’s compensation, and the consulting agreement was going to start January 2013. In March 2014, Wijay told Frieden about some problems at Retreat, and Wijay wanted to hold off further negotiations until he left Retreat. Frieden admitted telling Wijay he could use whatever name he wanted in the written agreement. Nevertheless, Frieden said he never made an oral agreement with Wijay. The e-mails he received from Wijay never mentioned the proposed written agreement should be with Wijay individually, rather than Retreat, and several e-mails were sent by Loren Morris, Retreat’s senior vice-president and general counsel.
Despite the court’s in limine ruling excluding evidence of the Retreat Contract Restrictions, Ten-X’s trial attorney, John. S. Baker, told the jury during his opening statement that Wijay was the CEO of Retreat with a “fiduciary obligation to the corporation,” and Wijay had to act in Retreat’s best interest. Baker also told the jury Frieden was negotiating with Wijay “because he was the CEO of Retreat Capital” with a “fiduciary duty” to negotiate on Retreat’s behalf.
“During opening statement, counsel for [Ten-X] made several references to fiduciary obligations or fiduciary duties allegedly owed by the plaintiff, Arvin Wijay, to his former employer Retreat . . . .
The court declined to give the proposed special instruction at that time, and reserved a final ruling on it until the end of the trial. The court found there had been no violation of the in limine ruling per se, but Baker’s comments were improper and any further mention of Wijay’s fiduciary duties would also be improper. Nevertheless, during his direct testimony, Frieden said if Wijay was working with Ten-X in his individual capacity then he could be guilty of fraud. Other Ten-X witnesses accused Wijay of double-dealing behind Retreat’s back.
By special verdict, the jury found in favor of Wijay on his breach of contract and quantum meruit causes of action and awarded him $5,702,364 in damages on both claims. Ten-X moved for a new trial on insufficiency of the evidence grounds, and for a judgment notwithstanding the verdict. The court denied both motions. The court then entered judgment on the jury verdict and awarded Wijay $1,460,465 in prejudgment interest.
Ten-X claims: (1) the court abused its discretion and erred by granting Wijay’s motions in limine and excluding evidence of the Retreat Contract Restrictions; (2) the court erred by instructing the jury to disregard any potential obligations or duties Wijay may have owed Retreat; and (3) the court’s errors were prejudicial. We disagree.
1. The Court Did Not Err in Excluding Evidence of the Retreat Contract Restrictions.
Ten-X argues the court erred in excluding evidence of the Retreat Contract Restrictions because: (a) the excluded evidence was relevant; (b) the court abused its discretion by conclusively assessing Wijay’s credibility in the section 402 hearing; and (c) the court abused its discretion by excluding the evidence under Evidence Code section 352 (section 352). Ten-X also argues the asserted errors were prejudicial. We will address each of these arguments in turn.
a. The Excluded Evidence was Relevant to Wijay’s Credibilty.
The court excluded evidence of the Retreat Contract Restrictions on the grounds it was irrelevant. Ten-X argues the excluded evidence was relevant to disprove Wijay’s trial testimony that he provided his services to Ten-X in his individual capacity. Ten-X reasons it is improbable Wijay would have entered into an agreement with Ten-X in his individual capacity, because doing so would have put him in breach of the Retreat Contract Restrictions. According to Ten-X, one logical and reasonable inference was that Wijay was acting on behalf of Retreat, not in his individual capacity. We agree.
Applying these basic principles leads us to conclude the excluded evidence was relevant to Wijay’s credibility as a witness at trial. The existence of the Retreat Contract Restrictions was an interest or other motive, which had some tendency in reason to disprove the truthfulness of Wijay’s trial testimony that he provided his services to Ten-X in his individual capacity; and this was a disputed material fact which was of consequence to the determination of Wijay’s contract cause of action. Therefore, the court erred to the extent it ruled the excluded evidence was irrelevant.
b. Ten-X’s Section 402 Hearing Abuse of Discretion Argument is Moot.
Ten-X also argues the court abused its discretion in conclusively assessing Wijay’s credibility, based on his section 402 hearing testimony, because the jury must determine the credibility of testimony on ultimate issues. This argument is moot as the result of our conclusion the excluded evidence was relevant to Wijay’s credibility.
c. The Court Did Not Abuse Its Discretion Under Section 352.
The court also excluded evidence of the Retreat Contract Restrictions under section 352 on the grounds its probative value was outweighed by the probability that its admission would necessitate undue consumption of time. Ten-X argues the court abused its discretion to exclude evidence on these grounds. Ten-X maintains the excluded evidence was highly relevant, was highly probative, was not cumulative, and would not have resulted in undue consumption of time. We are not persuaded.
The excluded evidence was minimally probative, not highly probative as Ten-X contends. In terms of materiality, the relationship between the excluded evidence and the inference to be derived from it was weak. The inference that Wijay was acting on behalf of Retreat, and not as an individual, is dependent upon at least four questionable assumptions: (i) the Retreat Contract Restrictions were valid and enforceable; (ii) the Retreat Contract Restrictions in fact barred Wijay from entering into an agreement with Ten-X individually, (iii) Wijay subjectively understood that fact; and (iv) Wijay would not have chosen to intentionally breach the Retreat Contract Restrictions.
In terms of necessity, the excluded evidence was largely cumulative, not vital to the proof of Ten-X’s defense. It is true the question of whether Wijay provided his services to Ten-X individually or on behalf of Retreat was a main issue. But Wijay and Frieden both testified and were cross-examined on this issue. In addition, draft written agreements between Ten-X and either Retreat or parties other than Wijay as an individual were admitted into evidence, including one which would have had Wijay sign in his capacity as the CEO of Retreat. Finally, e-mails touching on this issue were also admitted into evidence, including some sent by Retreat’s general counsel.
On the other hand, admitting the excluded evidence would have necessitated undue consumption of time. It would have led to a separate trial within a trial to examine whether Wijay had breached the Retreat Contract Restrictions.
The universe of potential issues to be litigated would have included at least the four questionable assumptions set out above, each of which presented factual and legal subissues. For example, whether the Retreat Contract Restrictions were valid and enforceable would have depended on proof that Wijay’s employment and stock option agreements with Retreat were properly formed; the noncompetition provisions did not violate Business and Professions Code section 16600, et seq.; and Retreat had not breached its contractual obligations to Wijay as he testified in the section 402 hearing.
Similarly, whether the Retreat Contract Restrictions in fact barred Wijay from entering into an agreement with Ten-X individually would have turned on questions of contract interpretation involving the intent of the parties (Wijay & Retreat). It would have also required proof that Wijay had not faithfully and loyally performed his assigned duties to Retreat; Wijay had not devoted his full, attention, knowledge and experience to Retreat; and Wijay had directly or indirectly engaged in business which was competitive with Retreat, despite his contrary testimony in the section 402 hearing.
All told, the record supports the court’s conclusion the probative value of the excluded evidence was outweighed by the probability its admission would necessitate undue consumption of time. The record also supports a conclusion the probative value of the excluded evidence was substantially outweighed by the probability its admission would create a substantial danger of confusing the issues or misleading the jury. Thus, Ten-X has not shown the court exercised its discretion to exclude evidence under section 352 in an arbitrary, capricious or patently absurd manner.
d. The Exclusion of Evidence Under Section 352 Was Not Prejudicial.
Turning to prejudice, even if the court had acted in an arbitrary, capricious or patently absurd manner, the judgment would not be reversed unless Ten-X could show the error resulted in a miscarriage of justice. (People v. Rodrigues, supra, 8 Cal.4th at p. 1124; Zhou v. Unisource Worldwide (2007) 157 Cal.App.4th 1471, 1480; Cal. Const., art. VI, § 13; Evid. Code, § 354.) Ten-X has not shown any miscarriage of justice.
Applying this test to the record before us, we conclude it is not reasonably probable a result more favorable to Ten-X would have been reached had the court not excluded evidence of the Retreat Contract Restrictions. Regarding the contract claim, Wijay testified he negotiated an agreement with Frieden to provide his services to Ten-X in his individual capacity. Frieden admitted he negotiated with Wijay but said they never reached an agreement. Frieden also testified he negotiated with Wijay in his capacity as the CEO of Retreat, so any agreement was with Retreat, not with Wijay individually.
It is important to note the court’s in limine ruling was narrowly drawn, only excluded evidence of the Retreat Contract Restrictions, and it did not preclude Ten-X from offering other evidence to challenge the credibility of Wijay’s testimony that he provided services to Ten-X individually. (See e.g. McAllister v. George (1977) 73 Cal.App.3d 258, 263-264.) In fact, Ten-X did challenge Wijay’s credibility on this point by cross-examining him, by offering Frieden’s contrary testimony, and by introducing the draft written agreements and related e-mails noted above.
Nevertheless, the jury found Wijay credible and Frieden not credible. Under these circumstances, Ten-X’s claim the jury would have found Wijay’s testimony not credible if the court had not excluded evidence of the Retreat Contract Restrictions is nothing more than an abstract possibility. There is no reasonable chance of a more favorable result because, as we have already explained, the excluded evidence was marginally relevant, minimally probative, and largely cumulative.
The jury was properly instructed on the elements of this claim, and the evidence supporting it was largely uncontradicted. Plus, the excluded evidence had no direct bearing on any element of this claim or any affirmative defense asserted by Ten-X, including unclean hands. Finally, Ten-X was not even aware the Retreat Contract Restrictions existed until after Wijay filed this case.
“In short, from an ‘examination of the entire cause, including the evidence,’ it is our ‘opinion’ that ‘the error complained of has’ not ‘resulted in a miscarriage of justice.’” (People v. Watson, supra, 46 Cal.2d at p. 837.) Ten-X has not shown a reasonable probability the jury was influenced by the court’s exclusion of evidence, or that admission of the excluded evidence would have affected the jury’s verdicts.
2. The Court Did Not Err in Giving the Special Jury Instruction.
Ten-X claims the court erred in giving the special instruction concerning any potential obligations or duties Wijay may have owed to Retreat, and the claimed instruction error was prejudicial. We will consider and reject both of these arguments.
The special instruction was given for two reasons. First, during his opening statement Ten-X’s attorney, Baker, improperly commented on potential violations of fiduciary obligations or duties Wijay may have owed to Retreat. Second, during the trial Frieden and other Ten-X witnesses testified about possible fraud or double-dealing based on obligations or duties Wijay may have owed to Retreat, even after the court ruled any further mention of any such obligations or duties would be improper.
If Ten-X’s attorney and witnesses had not improperly commented and testified, the special instruction would not have been necessary. The court only intervened because they did. The court could have stricken the improper comments and testimony and instructed the jury to disregard them (see CACI No. 5002 (ed. 2018)). But giving the special curative instruction instead was well within the court’s discretion. In a nutshell, Ten-X created the problem and it cannot complain about the cure.
At any rate, the special instruction was a correct statement of the law as applied to the facts of this case. Any potential obligations or duties—including any fiduciary duties—that Wijay may have owed to Retreat were not relevant to any of Wijay’s claims or Ten-X’s affirmative defenses. Any relevance to Wijay’s credibility was eliminated once the court excluded evidence of the Retreat Contract Restrictions and other potential obligations or duties Wijay may have owed to Retreat.
We presume the jury followed this correct instruction (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 803-804) and understood Baker’s improper comments during his opening statement about potential obligations or duties including fiduciary duties Wijay may have owed to Retreat were not evidence. Consequently, the special instruction that told the jury these potential obligations or duties are irrelevant to this lawsuit and should be entirely disregarded had no prejudicial effect on their deliberations.
The jury did ask questions about Wijay’s relationship with Retreat. But this occurred during Wijay’s testimony, not during deliberations, so it cannot indicate the jury was misled by the special instruction which was given later.
What is more, the jury’s verdicts were not close: 11-1 on the breach of contract claim; and 12-0 on the quantum meruit claim.
We therefore find no reasonable probability the claimed error in giving the special instruction affected the jury’s verdicts. Accordingly, we conclude the instruction error, if any, was harmless.
The judgment is affirmed. Wijay is entitled to costs on appeal.
Description Plaintiff Arvin Wijay performed consulting services for defendant Ten-X, LLC (Ten-X, formerly known as Auction.com), while he was the chief executive officer (CEO) of Retreat Capital Management, Inc. (Retreat). Ten-X refused to pay Wijay for his consulting services, so he sued Ten-X. The jury awarded Wijay $5,702,364 in damages on his contract and quantum meruit causes of action, and the court awarded him $1,460,465 in prejudgment interest.
Views 5 views. Averaging 0 views per day.

References: v. 
 v. 
 § 13
 § 354
 v. 
 v. 
 v.