Court Opinion

ID: 9945031
Source: CourtListenerOpinion
Date Created: 2024-02-26 21:03:06.655806+00
Date Added: 2024-06-11T14:25:20.106303
License: Public Domain

Filed 2/26/24 Suh v. Pak CA2/3
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                      DIVISION THREE

 GLEN SUH,                                                          B320737

           Plaintiff and Appellant,                                 Los Angeles County
                                                                    Super. Ct. No.
           v.                                                       BC685235

 UN MI PAK et al.,

           Defendants and Respondents.

     APPEAL from a judgment of the Superior Court of
Los Angeles County, Rupert A. Byrdsong, Judge. Affirmed.

     David S. Kim & Associates, David S. Kim and Todd A.
Fuson for Plaintiff and Appellant.

     Mortenson Taggart Adams, Kevin A. Adams, Robert A.
Schultz and Cassie L. Doutt for Defendants and Respondents.
                               _________________________
       Plaintiff Glen Suh1 appeals from the trial court’s judgment
after a bench trial awarding him $1,320,288 in damages for
lost profits but denying him $4,714,622 in damages for “reverse
royalties” stemming from his purchase of an It’s Boba Time
franchise with an exclusive 10-mile territory. The court found
defendants Un Mi Pak, Boba Time, Inc., Richard Jun aka
Tae Hoon Jun, IBT Brothers, Inc., J&U Corp., and Wellbeing
Time, Inc.2 breached their contract with plaintiff by opening
competing It’s Boba Time franchises within the exclusive
territory and denying plaintiff’s right to the exclusive territory.
       In denying plaintiff the reverse royalties he claimed he
could have collected from defendants for allowing other stores
to open within his exclusive territory, the court found: plaintiff
had not established “the ability to operate additional franchises,”
or the “profitability of any additional franchises”; and plaintiff’s
expert witness’s testimony about the viability of other stores
within the territory was “too speculative and unsupported.”
Plaintiff argues (1) the agreement did not require that he be
able to open other franchises, and (2) the court erred in failing
to award any damages for the lost value of the exclusive territory,

1     Glen Suh formed plaintiff Best Boba Time, Inc. to purchase
the business at issue. Best Boba Time assigned all its rights in
the case to Glen Suh. The judgment thus was entered in favor of
Glen Suh alone.
2      The trial court found each defendant was the alter ego
of the other. We thus refer to defendants collectively regardless
of who specifically signed the agreements at issue or which
defendant owned the franchise versus the business plaintiff
bought.

                                 2
as the evidence supported the expert’s reverse royalty valuation
and defendants presented no alternate valuation. We affirm.
                             BACKGROUND
       Our statement of the facts focuses on the only issue on
appeal: the court’s exclusion of the $4,714,622 plaintiff claimed
his lost exclusive territory rights were worth from the awarded
damages. By way of background, we briefly discuss the facts
relating to defendants’ liability, which we primarily adopt from
the court’s statement of decision. We reserve discussion of some
of the evidence on damages for our analysis below.
1.     Plaintiff’s purchase of an It’s Boba Time store
       Defendant Boba Time, Inc., founded by defendants Eunice
Unmi Pak3 and her husband Tae Yoon “Richard” Jun, is the
franchisor of “It’s Boba Time” (IBT) retail specialty beverage
and snack stores. The shops typically sell boba teas, smoothies,
shaved ice, coffee, and other snack and food items. Defendants
J&U Corp., Wellbeing Time, Inc., and IBT Brothers, Inc. are
affiliates of Boba Time. Pak is the owner and President of
Boba Time and its affiliate companies. Jun is the Vice President
of Boba Time and J&U Corp.
       Pak and Jun purchased a business located on property
owned by plaintiff’s father John Suh—in the name of now defunct
IBT Brothers—and reopened the business as an IBT store.
The store was located in Koreatown at 6th and Kenmore and
thus was known as the Kenmore store. John Suh told Jun
he was interested in having plaintiff buy the Kenmore store
if Jun ever wanted to sell.

3     Plaintiff sued Pak as “Un Mi Pak,” but at trial she stated
her name was “Eunice Unmi Pak.”

                                3
       In 2014, after having operated the Kenmore store for about
two years, Pak and Jun agreed to sell it. Plaintiff and his father
negotiated the sale with Jun. Ultimately, plaintiff purchased
the Kenmore store for $700,000—later reduced to $675,000—
and paid a $25,000 franchise fee. The franchise term was for
two 10-year periods.
       The typed purchase agreement—prepared by plaintiff’s
father, who was a real estate broker—included a provision that
read: “Seller can establish or build or open on 1 more business
wihtin [sic] a 10 miles radius for which Buyer has the first right
refusal [sic] to purchase that pertaining business.” Jun altered
the provision by interlineation. He wrote “2” over “1,” circled
“10 miles,” and handwrote above the sentence, “Koreatown
S[outh] Venice N[orth] Santa Monica W[est] Alvarado E[ast]
Crenshaw.” (Full capitals omitted.) The parties also apparently
signed a franchise agreement.
       The joint escrow instructions include the following
instruction, “Covenant Not to Compete: As part of the
consideration herein paid, the Seller and Buyer agree that Seller
is allowed by Buyer to open only 2 new business after close of
escrow within the boundary set as follows: East Crenshaw –
West Alvarado & South Venice – North Santa Monica. The
Buyer has the first right refusal to purchase that pertaining new
2 Business [sic].” (Full capitals omitted.) The parties understood
that, if there were a conflict between the purchase agreement and
the escrow instructions, the purchase agreement would control.
The sale closed around November 2014.
       For the first two years, plaintiff’s sales at the Kenmore
IBT store grew steadily, reaching a peak net profit of $111,000
in 2016, based on $977,980 in gross sales. In 2016 and 2017,

                                4
defendants began opening other IBT stores in Koreatown and
elsewhere within the 10-mile radius of plaintiff’s store. When
plaintiff contacted Jun about the other stores, Jun denied that
plaintiff had an exclusive territory. Plaintiff’s profits began
dropping in 2017 to the point where he had a loss in 2019.
In January 2020, plaintiff was forced to sell the Kenmore store
at a $300,000 loss and to give up his exclusive territory franchise
rights.
2.     Plaintiff’s lawsuit and trial
       Plaintiff and Best Boba Time, Inc. sued defendants in
November 2017 and filed a first amended complaint in December
2019. Plaintiff pursued causes of action against defendants
for breach of contract and fraud.4 Plaintiff alleged defendants’
refusal to acknowledge and to honor his exclusive territory
caused him harm: their opening of IBT stores within the
exclusive area caused him to lose profits and, ultimately,
his store; and their refusal to honor the exclusive territory
prevented plaintiff “from capitalizing on development of that
area.” At trial, defendants contended plaintiff’s lost profits
resulted from his own mismanagement and increasing
third-party competition; they also denied plaintiff had a
10-mile exclusive territory.
       The court tried the case over four days beginning on
August 16, 2021. Plaintiff, Pak, and Jun, all testified, as did
plaintiff’s father, defendant’s real estate expert, and plaintiff’s
damages expert. The parties also introduced exhibits that the

4     Plaintiff alleged several causes of action against
defendants. He pursued only those for breach of contract and
fraud after the court sustained defendants’ demurrer with leave
to amend as to other causes of action.

                                 5
court received into evidence. At the close of testimony, the
court ordered the parties to submit proposed findings of fact
and conclusions of law. The court adopted plaintiff’s proposed
findings of fact for the most part, adding its credibility findings.
The court revised by interlineation some of plaintiff’s proposed
conclusions of law as to his damages with which it disagreed.
The court also struck plaintiff’s proposed findings as to his
fraud cause of action, finding the fraud allegations did “not
differ from the conduct establishing the breach of contract.”
The court submitted the revised statement as its proposed
statement of decision.
3.     The court’s proposed findings and conclusions
       as to defendants’ breach of the parties’ agreement
       The court found defendants agreed—as part of plaintiff’s
purchase of the Kenmore store—to give plaintiff “the right to
operate an exclusive territory and promise not to compete for
ten years, with the option to renew for an additional ten[-]year
period. Defendants were allowed to open two more franchises
in the territory, with [p]laintiff having the right of first refusal
as to the ownership/operation of those two stores.” The parties
disagreed about the scope of plaintiff’s exclusive territory under
the purchase agreement—whether it encompassed a 10-mile
radius around the Kenmore store, or the defined Koreatown
area.5 After finding Jun’s and Pak’s testimony not credible,
the court found the 10-mile radius was plaintiff’s exclusive

5     Jun testified defendants did not agree to a 10-mile
exclusive territory—plaintiff had only the right of first refusal
to the two stores to be opened in the defined Koreatown area.

                                  6
territory, and the Koreatown exception was inserted to allow
defendants to open two more locations within that defined area.
       The court found the undisputed evidence showed
defendants breached the parties’ contracts. The evidence
established that, after plaintiff purchased the Kenmore store
and 10-mile exclusive territory rights, defendants themselves
had opened at least two more IBT franchises in Koreatown
without first offering the stores to plaintiff. In addition to
breaching their obligation to give plaintiff the right of first
refusal, defendants breached the purchase agreement by
allowing—by the time of trial—19 franchised stores6 to open
within plaintiff’s 10-mile exclusive territory area. Finally,
defendants committed an anticipatory breach of contract when
Jun denied plaintiff had exclusive rights to the 10-mile area.
4.     Plaintiff’s expert’s opinion on damages
       Only plaintiff’s expert Thomas Neches—a forensic
accountant—testified about damages. He prepared a summary
of his calculations, which the court admitted as exhibit 20. In
forming his opinion, Neches reviewed plaintiff’s and Boba Time’s
financial records, the relevant agreements, Boba Time’s franchise
disclosure documents, the complaint, and discovery responses.7
Assuming liability, he concluded defendants’ direct competition
with plaintiff’s Kenmore store caused plaintiff to lose profits
of $1,320,288 over the 20-year term of the agreement.

6     Exhibit 19 showed there were 18, rather than 19, IBT
stores open in the 10-mile exclusive territory at the time of trial.
7     Neches included some of the information on which he relied
in exhibit 20.

                                  7
       Neches further testified—again, assuming plaintiff
proved liability, which the court found he did—plaintiff also
lost the value of his exclusive territory rights. Neches explained
a franchisee like plaintiff, who had an exclusive area, could
charge “what’s called a reverse royalty to the franchisor”
for each franchise allowed to open within the exclusive area
during the term of the franchise agreement. The court clarified
a reverse royalty generally was a smaller percentage of the
royalty the franchisor collected from the other franchisees.8
       Neches calculated this second area of damages first
by determining a reasonable reverse royalty rate plaintiff
could have charged the franchisor. He chose 1.75 percent—
the midpoint of the 1.5 to 2.0 percent that was customary in
the retail food and beverage industry, according to his research.
He then estimated the number of IBT stores that would open
within the 10-mile territory during the maximum term. He
determined that, as of the date of trial (August 2021), about
18 IBT stores were operating within the 10-mile area—up from
two competing stores open in 2017.9 Based on that growth,
and projections in Boba Time’s franchise disclosure documents,
he assumed “an additional two stores would have opened each

8      The evidence showed Boba Time charged franchisees
a five percent royalty fee and a two percent marketing fee on
weekly gross sales.
9      The court admitted as exhibit 19 a map of the 18 IBT stores
open within the 10-mile area at that time. The exhibit included
a list of the stores’ addresses as well as the addresses of six
franchises “coming soon.” According to exhibit 20, in 2018 there
were four stores open within the exclusive territory, eight stores
open in 2019, and 12 stores open in 2020.

                                 8
year beginning in 2022 . . . through 2034,” the end of the
agreement’s maximum 20-year term. He thus assumed there
would be 44 IBT stores operating within the 10-mile territory
by 2034. Finally, Neches estimated each IBT store open
in the territory would have annual revenues (gross sales) of
$750,000. He determined that assumption was “conservative
and reasonable” based on plaintiff’s Kenmore store’s gross sales
of almost $978,000 in 2016 and over $792,000 in 2017.10
      Based on the foregoing assumptions, Neches calculated
plaintiff’s anticipated lost reverse royalties by multiplying the
combined gross revenues of the IBT stores open in the territory
from 2017 through 2034 by 1.75 percent. For example, he
assumed the two stores open in 2017 would have a combined
annual revenue of $1,500,000, generating a reverse royalty
of $26,250. The number of stores and their combined annual
sales—and resulting total royalty—increased each year through
2034.11 For 2034, when Neches assumed 44 stores were open
in the area, the projected royalty—from $33,000,000 in assumed
combined revenues—was $577,500. Beginning in 2021, Neches
applied a 3.24 percent discount rate based on “the Moody
BAA corporate bond yield, which [took] into account both the
time value of money and the risk that these various operations

10    According to exhibit 20, plaintiff’s store’s gross sales in
2015 were $812,410. In 2019, the store had $774,421 in gross
sales but $48,868 in “[r]eturns and [a]llowances” for total
gross revenues of $725,553.
11    Neches assumed each IBT store open in 2020 and 2021
made $375,000, rather than $750,000, during those years
to account for the COVID-19 pandemic.

                                  9
would have continued.” Neches calculated the present value
of the cumulative lost reverse royalties to be $4,658,000. He
added $56,602 in prejudgment interest on the royalties from
2017 through 2021 for a total of $4,714,602 due for lost reverse
royalties.
5.     The court’s conclusions as to plaintiff’s damages
       Adopting the language of plaintiff’s proposed statement
of decision, the court accepted Neches’s calculations reflected
in exhibit 20—to which defendants did not object—“as correct.”
The court accepted plaintiff’s description of Neches’s opinion
that plaintiff’s Kenmore store lost profits of $1,320,288 over
the 20-year franchise term due to defendants’ direct competition
in breach of the parties’ contract.
       The proposed statement of decision then discussed Neches’s
opinion of “the value of [p]laintiff’s lost exclusive territory rights.”
After stating, “Neches testified his review of Boba Time’s
historical opening of franchises within the exclusive territory
conservatively showed that two stores per year could be opened,”
the court added by interlineation: “The Court was not persuaded
that plaintiff established the ability to operate additional
franchises nor the purported profitability of any additional
franchises.” The proposed statement of decision went on to
describe Neches’s testimony that Suh’s exclusive territory rights
enabled him to charge a reverse royalty “on gross sales from
newly opened franchises in the exclusive territory.” The court
added the following finding: “Mr. Neches, while competent
to provide testimony on forensic accounting, the Court felt his
opinion about the viability of other stores was too speculative
and unsupported.” The court then struck plaintiff’s proposed
findings concerning his loss of $4,714,622 in reverse royalties.

                                  10
The court found plaintiff was entitled to judgment in his favor
on his breach of contract cause of action in the sum of $1,320,288
—Neche’s calculation of plaintiff’s lost profits—plus
postjudgment interest, costs, and fees.12
6.     Plaintiff’s objections to the proposed statement
       of decision
       Plaintiff objected to the court’s proposed statement of
decision, as did defendants, under rule 3.590, subdivision (g)
of the California Rules of Court. Relevant here, plaintiff argued
the court “employed an incorrect standard” in determining
plaintiff had not “ ‘established the ability to operate additional
franchises nor the purported profitability of any additional
franchises.’ ” Plaintiff argued his ability to operate additional
franchises within the 10-mile exclusive territory was “irrelevant
to the value of that territory,” as nothing in the parties’
agreements required plaintiff to own or operate additional
IBT franchises within the exclusive area personally. Plaintiff
asserted that, because his “own ability to operate additional
stores within the exclusive territory [was] not a prerequisite
or requirement to [p]laintiff’s use of the exclusive territory,
the proper standard for [determining damages] is what was
the value of [p]laintiff’s right to exclusive possession and use.”

12    The two statements the court added in this section of the
proposed statement of decision overlapped with the original text,
rendering parts of the court’s text illegible. Defendants’ counsel
used a software program to remove the overlap, making the text
legible, and reproduced the court’s text in respondents’ brief.
Plaintiff does not dispute the accuracy of the text defendants
reproduced.

                                11
       Plaintiff asserted the ability to open new stores in
the exclusive territory was undisputed as exhibit 19 showed
19 (really, 18) IBT stores were operating within the exclusive
territory by the time of trial. Plaintiff argued Neches’s
calculation of the reverse royalties plaintiff would have been
able to collect from stores opened in the territory—set forth
in exhibit 20—also was supported by the evidence and
uncontradicted. Plaintiff noted Neches “obtained the baseline
figures (e.g., the historical gross sales) from the documents he
reviewed, including Defendants’ Franchise Disclosure Documents
(Exh. 9–15).”13 Plaintiff further argued the exclusive territory
had “inherent value for its ability to be franchised (almost like
a subletting) to others.” Plaintiff asked the court to include
damages for the value of the exclusive territory in the amount
of $4,714,622.
7.     Entry of judgment
       The court overruled plaintiff’s (and defendants’) objections,
ordering its statement of decision was final. The court filed
its judgment on March 8, 2022, and plaintiff filed and served
notice of entry of judgment on March 10, 2022. Defendants
filed a notice of appeal from the judgment on May 9, 2022, and
plaintiff filed a timely cross-appeal on May 26, 2022. (Cal. Rules
of Court, rule 8.406(b).) On June 6, 2022, the court added
$31,238.90 in costs, $504,745 in attorney fees, and interest to
the final judgment in favor of plaintiff.
       On December 2, 2022, defendants asked this court
to dismiss their appeal. We dismissed defendants’ appeal on

13   Of these exhibits, only exhibit 15—the franchise disclosure
document dated April 2020—was received into evidence.

                                12
December 15, 2022. Plaintiff’s cross-appeal thus became the only
appeal before the court.
                            DISCUSSION
1.     Standards of review
       The parties dispute the applicable standard of review.
Plaintiff contends our review is de novo because his appeal
(1) presents a legal question—whether the court improperly read
a requirement into the contract that plaintiff be able to operate
additional franchises within his exclusive territory to benefit
from it—and (2) requires us to review the application of law to
the “undisputed” evidence of “the value of additional franchises.”
Defendants, on the other hand, contend plaintiff’s appeal
challenges the amount of damages awarded, and thus is subject
to the substantial evidence standard of review.
       In general, on appeal from a judgment based on a
statement of decision following a court trial, we “review questions
of law de novo and we review the trial court’s findings of fact
under the substantial evidence standard.” (Gajanan Inc. v. City
and County of San Francisco (2022) 77 Cal.App.5th 780, 791–792;
see also In re Marriage of Ciprari (2019) 32 Cal.App.5th 83, 94
(Marriage of Ciprari) [“ ‘The substantial evidence standard
applies to both express and implied findings of fact made by
the superior court in its statement of decision rendered after a
nonjury trial.’ ”].) In doing so, we resolve “ ‘ “any conflict in the
evidence or reasonable inferences to be drawn from the facts . . .
in support of the determination of the trial court’s decision.” ’ ”
(Marriage of Ciprari, at p. 94.) We “ ‘ “consider all of the evidence
in the light most favorable to the prevailing party, giving it the
benefit of every reasonable inference and resolving conflicts in
support of the [findings]. [Citations.]” [Citation.] We may not

                                 13
reweigh the evidence and are bound by the trial court’s credibility
determinations. [Citations.] Moreover, findings of fact are
liberally construed to support the judgment.’ ” (Ibid.)
Nevertheless, “[a] party may avoid implied findings in favor
of a judgment, and preserve perceived error in a statement
of decision, by making specific objections to the statement of
decision.” (Ibid.)14
       We thus consider de novo whether the court applied
the appropriate legal standard in determining plaintiff’s
damages. (See, e.g., Bret Harte Inn, Inc. v. City and County
of San Francisco (1976) 16 Cal.3d 14, 23 [considering de novo
a taxpayer’s challenge to the validity of the assessor’s valuation
method].) The trial court’s finding that plaintiff’s evidence was
insufficient to establish the reverse royalties he claimed he would
have received had defendants honored his exclusive territory
rights, however, is subject to the substantial evidence standard
of review.
       Plaintiff contends our review of the court’s findings he
challenges is de novo because the evidence was undisputed.
We disagree. Although defendants did not present their own
conflicting damages calculation, the court heard and evaluated
the factual bases for Neches’s opinion. Defendants’ counsel also
raised issues with it through cross-examination. “[I]t is settled
that when conflicting inferences may be drawn from undisputed

14     Here, plaintiff objected to the court’s finding that he failed
to establish he could operate additional franchises in the territory
as irrelevant to—and applying an “incorrect standard” in—
determining the value of his exclusive territory. He argued “the
inherent value was testified to and monetized by expert Neches,”
directing the court to exhibits 19 and 20.

                                 14
facts, the reviewing court must accept the inference drawn
by the trier of fact so long as it is reasonable.” (Boling v. Public
Employment Relations Bd. (2018) 5 Cal.5th 898, 913; see also
Husain v. California Pacific Bank (2021) 61 Cal.App.5th 717, 732
[whether a question of fact is decided on conflicting or undisputed
facts, that fact question decided against appellant “must be
affirmed under the rule of conflicting inferences by which
we must indulge all reasonable inferences” in favor of the
respondent].) And, as here, “ ‘ “[w]here [a] statement of decision
sets forth the factual and legal basis for the decision, any
conflict in the evidence or reasonable inferences to be drawn
from the facts will be resolved in support of the determination
of the trial court decision.” ’ ” (Marriage of Ciprari, supra,
32 Cal.App.5th at p. 94, italics added.)
       Moreover, where an appeal turns on the appellant’s failure
of proof, as it does here, “ ‘the question for a reviewing court
becomes whether the evidence compels a finding in favor
of the appellant as a matter of law. [Citations.] Specifically,
the question becomes whether the appellant’s evidence was
(1) “uncontradicted and unimpeached” and (2) “of such
a character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding.” ’ ”
(Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc.
(2011) 196 Cal.App.4th 456, 466.)
2.     Plaintiff did not forfeit his appeal
       Defendants initially contend plaintiff forfeited his right
to appeal because he did not move for a new trial on the issue of
inadequate damages. Plaintiff contends no new trial motion was
required because (1) he objected to the court’s proposed statement

                                15
of decision, and (2) the court made a legal error in failing to
award any damages for the lost value of his exclusive territory.
       Defendants rely on County of Los Angeles v. Southern Cal.
Edison Co. (2003) 112 Cal.App.4th 1108, 1121 (County), where
the court stated: “Failure to move for a new trial on the ground
of excessive or inadequate damages precludes a challenge
on appeal to the amount of damages if the challenge turns
on the credibility of witnesses, conflicting evidence, or other
factual questions. . . . [¶] ‘When defendants first challenge the
damage award on appeal, without a motion for new trial, they
unnecessarily burden the appellate courts with issues which
can and should be resolved at the trial level. . . .’ [Citation.]
The same is true when a plaintiff challenges a damage award
on appeal on the ground of inadequacy.” (Ibid., italics added.)
The court explained, “A trial court ruling on a new trial motion
on the ground of excessive or inadequate damages must weigh
the evidence and acts as an independent trier of fact. [Citations.]
Thus, the trial court is in a far better position than the Court
of Appeal to evaluate the amount of damages awarded in light
of the evidence presented at trial.” (Ibid.)
       Here, as plaintiff argues, he does not simply challenge the
court’s findings as to the sufficiency of the evidence of his claimed
damages for the loss of his exclusive territory rights. He also
contends the court applied the wrong standard in assessing those
damages. In any event, plaintiff timely filed specific objections to
the court’s proposed statement of decision, requested a hearing,
and asked the court to review its statement of decision and
amend it to include damages for the value of his exclusive
territory. Plaintiff argued (1) the value of the exclusive territory
was not dependent on Suh’s ability or inability to operate stores

                                 16
within the area, as the court had found, (2) the territory had
inherent value for its ability to be franchised to others, and
(3) Neches had given that value a figure that “was not effectively
challenged or disputed by [d]efendants.”
       Plaintiff makes the same arguments on appeal—they
are not new. (Cf. County, supra, 112 Cal.App.4th at p. 1122
[questions county presented on appeal about the value of real
property “should have been presented to the trial court in a
new trial motion”; plaintiff thus was precluded from arguing
the issue for the first time on appeal].) We agree with plaintiff
that his objections to the court’s proposed statement of decision
essentially served the same purpose as a motion for new trial:
they made the trial court aware of the purported issues with its
damages findings and directed it to the evidence plaintiff argued
supported his contentions. A new trial motion would not have
further elucidated the issue for the trial court. As the court
evaluated the evidence of damages and acted as an independent
trier of fact both at the trial and presumably in considering—
and overruling—plaintiff’s objections, plaintiff did not forfeit
his appeal.
3.     The court did not err in awarding plaintiff damages
       for his lost profits but not his lost, anticipated
       reverse royalties
       At trial, plaintiff argued defendants’ wrongful conduct
not only harmed his own IBT store by competing with it—
for which the court awarded plaintiff his estimated lost profits—
but also prevented him from capitalizing on reverse royalties or
“upfront fees” he could have charged for each new IBT franchise
that opened within the 10-mile area. He contends the court erred
in failing to award any damages to account for the lost value of

                               17
his exclusive territory when the court found defendants breached
the exclusive territory provision, and he presented “ample”
uncontested and uncontradicted evidence of “the value of the
exclusive territory.”
       a.    Applicable law
       Damages cannot be recovered for a breach of contract
unless they are “clearly ascertainable in both their nature and
origin.” (Civ. Code, § 3301.) Thus, “[t]he plaintiff in a breach
of contract action has the burden of proving nonspeculative
damages with reasonable certainty.” (Copenbarger v. Morris
Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 11.)
Generally, “ ‘damages for the loss of prospective profits are
recoverable where the evidence makes reasonably certain their
occurrence and extent.’ ” (Sargon Enterprises, Inc. v. University
of Southern California (2012) 55 Cal.4th 747, 773–774 (Sargon).)
Such damages must be proven to be certain, “ ‘albeit not with
“mathematical precision.” ’ ” (Id. at p. 774.)
       “Regarding lost business profits, the cases have
generally distinguished between established and unestablished
businesses.” (Sargon, supra, 55 Cal.4th at p. 774.) Where an
established business’s operation is prevented or interrupted,
“ ‘damages for the loss of prospective profits that otherwise might
have been made from its operation are generally recoverable for
the reason that their occurrence and extent may be ascertained
with reasonable certainty from the past volume of business
and other provable data relevant to the probable future sales.’ ”
(Ibid.) “On the other hand, lost anticipated profits for an
unestablished business whose operation is prevented or
interrupted are generally not recoverable because their
occurrence is uncertain, contingent and speculative.” (Parlour
Enterprises, Inc. v. Kirin Group, Inc. (2007) 152 Cal.App.4th

                                18
281, 288; Sargon, at p. 774.) Nevertheless, “ ‘anticipated profits
dependent upon future events are allowed where their nature
and occurrence can be shown by evidence of reasonable
reliability.’ ” (Sargon, at p. 774; see also Kids’ Universe v.
In2Labs (2002) 95 Cal.App.4th 870, 883–884 (Kids’ Universe)
[“ ‘Lost anticipated profits cannot be recovered if it is uncertain
whether any profit would have been derived at all from the
proposed undertaking. But lost prospective net profits may
be recovered if the evidence shows, with reasonable certainty,
both their occurrence and extent.’ ”].)
       “ ‘The award of damages for loss of profits depends upon
whether there is a satisfactory basis for estimating what the
probable earnings would have been had there been no [wrongful
conduct]. If no such basis exists, as in cases where the
establishment of a business is prevented, it may be necessary
to deny such recovery. [Citations.] If, however, there has been
operating experience sufficient to permit a reasonable estimate
of probable income and expense, damages for loss of prospective
profits are awarded.’ ” (Kids’ Universe, supra, 95 Cal.App.4th
at p. 883.)
       “ ‘Where the fact of damages is certain, the amount
of damages need not be calculated with absolute certainty.
[Citations.] The law requires only that some reasonable basis
of computation of damages be used, and the damages may
be computed even if the result reached is an approximation.
[Citation.] This is especially true where . . . it is the wrongful
acts of the defendant that have created the difficulty in proving
the amount of loss of profits [citation] or where it is the wrongful
acts of the defendant that have caused the other party to not
realize a profit to which that party is entitled.’ [Citation.]”

                                 19
(Sargon, supra, 55 Cal.4th at pp. 774–775.) “ ‘It is enough to
demonstrate a reasonable probability that profits would have
been earned except for the defendant’s conduct. [Citations.]’
. . . [A] plaintiff is ‘not required to establish the amount of
its damages with absolute precision, and [is] only obliged to
demonstrate its loss with reasonable certainty. [Citation.]’ ”
(Kids’ Universe, supra, 95 Cal.App.4th at p. 884.) Thus, expert
testimony alone is sufficient to establish “ ‘ “an award of lost
profits in the new business context when the expert opinion is
supported by tangible evidence with a ‘substantial and sufficient
factual basis’ rather than by mere ‘speculation and hypothetical
situations.’ ” ’ ” (Id. at p. 885, quoting Kaech v. Lewis County
PUD (2001) 106 Wash.App. 260 [23 P.3d 529, 539], italics added.)
        Plaintiff’s claim of lost anticipated reverse royalties has
elements of a claim for lost anticipated profits of both a new
business and an existing business. Plaintiff had to demonstrate
unknown third parties would and could have opened viable
IBT stores in the 10-mile area, and nonparty franchisees were
operating—and would continue to operate—their IBT stores,
at the levels Neches assumed. Plaintiff did not have to account
for expenses under this theory of damages, as in a lost profits
analysis, however. Rather, plaintiff had to demonstrate with
reasonable certainty the gross sales and viability of current and
future IBT stores that he did not own or operate. We thus apply
the above principles from cases involving lost profits, as the
parties do, in determining whether the court erred in finding
the evidence insufficient to establish plaintiff’s claimed lost
anticipated reverse royalties.

                                20
       b.    The court did not apply an incorrect standard
       Plaintiff essentially contends the trial court erred in
finding he had to prove he could “open and operate additional
[IBT] stores in the exclusive area,” when the parties’ contract
imposed no such requirement on plaintiff’s exclusive use of the
area. We do not read the court’s statement as finding plaintiff
was required to show he could open more stores in order to
recover damages for the loss of his exclusive territory. Rather,
that was one way plaintiff could have benefited from his
exclusive territory. Indeed, plaintiff testified he “had plans
to open additional stores within the ten-mile radius,” and to
sell locations if other franchisees wanted to open a store within
the territory for a $125,000 fee. Thus, as defendants put it, the
“exclusive territory could only have value to [plaintiff] if he or
someone else could have opened profitable businesses there—
as demonstrated by [plaintiff’s] testimony regarding expansion
and his expert’s testimony regarding capitalizing on reverse
royalties or ‘upfront fees.’ ” In our view, the court simply found
plaintiff presented no evidence that he could have capitalized
on his exclusive territory rights by opening additional IBT
franchises and thus was not entitled to compensation for
his inability to do so based on defendants’ breach.
       Substantial evidence supported the trial court’s finding
that plaintiff failed to demonstrate he would have been able
to open more IBT stores in the area to warrant damages on that
basis. Plaintiff testified he wanted to open other IBT franchises
but presented no evidence of concrete plans to do so. (See, e.g.,
Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739,
749, 763 [testimony of property’s worth had it been developed
according to intended “plans and specifications” did not, without

                                21
evidence plaintiff was an established business or had a “track
record” of successful developments, “supply substantial evidence
that the development [was] reasonably certain to be built, much
less that it [was] reasonably certain to produce profits”].)
       Plaintiff also testified he “was having a lot of issues
with the IRS” by 2020. From this, the court could infer he was
in no position to buy more franchises. In any event, plaintiff
does not contend he personally would have been able to open
additional IBT stores. Thus, the court did not err in finding
plaintiff could not recover damages for stores he was unable
to open in the territory.
       c.     The court did not err in finding plaintiff failed to
              establish his lost, anticipated reverse royalties with
              sufficient certainty
       As plaintiff notes, the court found defendants breached
the parties’ contract “by opening additional stores throughout
the 10-mile radius area.” Jun admitted Boba Time opened
three new stores within Koreatown in 2016 and 2017, although
one store replaced a franchisor-owned store that had been open
in the area before plaintiff bought the Kenmore store. The court
specifically found exhibit 19 “showed [18] stores opened within
the 10-mile exclusive territory” after plaintiff bought the
Kenmore store. Thus, had defendants honored plaintiff’s
exclusive territory rights—and plaintiff retained his franchise—
plaintiff could have charged defendants a reverse royalty on
the gross sales of the franchised stores defendants had opened
within the 10-mile area.
       As it is undisputed defendants did not compensate plaintiff
for the right to open additional IBT franchises within his
exclusive territory, plaintiff demonstrated the fact of that loss

                                 22
due to defendants’ breach—at least with respect to franchises
opened as of the time of trial. We are mindful that the amount
of damages need not be calculated with “ ‘absolute certainty’ ”
where the fact of damages is certain. (Sargon, supra, 55 Cal.4th
at p. 774.) Nevertheless, plaintiff bore the burden of proving
the extent of his damages with reasonable certainty. (Ibid.;
Kids’ Universe, supra, 95 Cal.App.4th at pp. 883–884.) We
cannot conclude the evidence compelled the court to find plaintiff
demonstrated a reasonable probability that he would have
earned the reverse royalties he claimed. As we discuss, the
court reasonably could find Neches’s calculations were grounded
in speculative and insufficiently supported factual bases.
       Our analysis here is somewhat unique in that plaintiff’s
calculation of lost reverse royalties is dependent not only on
the assumption that additional IBT franchises operated by
unidentified individuals would open within the 10-mile territory
at a rate of two per year from 2022 through 2034 but also that
each IBT franchise—existing and prospective—would gross
$750,000 in annual sales on average. We begin with plaintiff’s
projected, prospective lost reverse royalties from the time of
trial through 2034, which are more akin to lost profits for an
unestablished business.
       First, the court specifically found that, while Neches was
“competent to provide testimony on forensic accounting, . . . his
opinion about the viability of other stores was too speculative
and unsupported.” The evidence supports the court’s assessment;
it certainly did not compel the court to find otherwise.
       Neches was a forensic accountant. He was not an expert in
the retail food and beverage industry. He based his assumption
that the 10-mile territory could support the net addition of two

                               23
IBT franchises per year from 2022 through 2034 on the fact
18 stores existed in the territory in 2021—including two
franchisor-owned stores—up from two stores in 2017.15 He did
not testify that he did any research into the market’s ability to
sustain that number of IBT stores within the territory, however.
Nor did he testify he researched the expected demand for boba
beverage stores like IBT when assuming the territory could
support the net addition of two stores per year over the next
13 years. Rather, he simply “noted that many Boba Time stores
were being opened in that area, which indicate[d] that the area
. . . [could] support many other stores.”
         Plaintiff notes Neches also considered Boba Time’s own
projections from its franchise disclosure documents in concluding
he reasonably could assume the territory would support the
opening of two more stores each year. Boba Time’s franchise
disclosure document dated April 2020 projected 12 new

15     Pak testified she—meaning Boba Time, the franchisor—
owned two of the stores listed in exhibit 19. Based on the record,
the court could infer these were the two stores defendants
could open in Koreatown under the parties’ agreement. Neches
testified he included them in his lost royalty calculation, having
assumed—as the court ultimately found—defendants did not
give plaintiff the right of first refusal to open those shops himself,
as required. As plaintiff failed to demonstrate he would have
been able to open those stores had defendants offered them
to him, defendants’ failure to do so did not damage plaintiff
in this respect. The two franchisor-owned stores thus should
not have been included as ones from which plaintiff could extract
a reverse royalty. Neches testified that, had plaintiff rejected
the stores after defendants gave him the right of first refusal,
his lost reverse royalty calculation “would go down a few
percent[age] [points].”

                                 24
franchised outlets and three new “company-owned” outlets would
open within California in the 2020 fiscal year. Those projections
were not specific to plaintiff’s 10-mile territory, however.
Nothing in the record demonstrates Neches determined which
of those stores were projected to open within the 10-mile area.
We can infer the court found those projections thus did not
provide a reasonable basis for Neches’s assumption.
       The court also found plaintiff failed to demonstrate “the
purported profitability of any additional franchises.” Plaintiff
contends Neches’s assumption that the added IBT stores would
average $750,000 in annual gross sales through 2034 was
reasonable because the figure was based on historic data from
the Kenmore store’s sales. “ ‘In some instances, lost profits may
be recovered where plaintiff introduces evidence of the profits
lost by similar businesses operating under similar conditions.’ ”
(Sargon, supra, 55 Cal.4th at p. 774.) We cannot conclude this
is such a case.
       Considering plaintiff’s Kenmore store suffered a loss
in 2019—when only eight IBT franchises were open within
the 10-mile territory16—the court reasonably could infer other
IBT franchises also would have a drop in sales if a greater
number of IBT franchises were to open in the area. Indeed,
plaintiff proposed the court’s findings in its statement of decision
that “[p]laintiff’s profits lowered beginning in 2017, which
Mr. Neches noted was at the same time as [d]efendants’ direct
competition began,” and “[d]efendants’ direct competition led

16    According to Neches’s alternative damages calculation
based on an exclusive territory limited to Koreatown, in 2019
three IBT stores were open in Koreatown, where the Kenmore
store was located.

                                 25
to further lowering of profits such that [p]laintiff actually had
a loss in 2019.” Yet, Neches never considered the effect the
opening of additional IBT franchises in the area would have on
each store’s viability and profitability when assuming each new
—and existing—franchise would gross $750,000 in annual sales
continuously through 2034.
       Indeed, defendants’ counsel specifically asked Neches,
albeit in the context of lost profits, “If another Boba Time store
opened within a block of Kenmore Boba Time in 2018, wouldn’t
that affect the income of the Kenmore Boba Time?” Neches
responded, “It might or might not. It would depend on the
particular facts and circumstances of the two stores, which
I haven’t analyzed.”
       Nor did Neches consider whether or how similar food
and beverage stores opened in the area would affect the sales
of the assumed, increasing number of IBT outlets. On cross-
examination, Neches testified he knew only the number of
IBT stores operating in the exclusive 10-mile area, not the
number of other, competing beverage stores.17 When asked
if other competing beverage stores would “have an effect on the
Kenmore Boba Time store’s revenue,” Neches did not know.
       Based on the foregoing, the court reasonably found
Neches’s assumptions as to the number of IBT stores that
could open within the exclusive territory, and their projected
revenues, did not have a sufficient factual basis to support
his calculation of prospective lost reverse royalties.
       We also conclude the court did not err in finding plaintiff
did not present sufficient evidence to support the reverse

17   Defendants’ real estate expert prepared a map of other
competing boba and beverage stores in the Koreatown area.

                                26
royalties he lost from the IBT stores that were open in plaintiff’s
exclusive territory at the time of trial. We cannot say the fact the
Kenmore store had gross sales in excess of $750,000 compelled
the court to find reasonable Neches’s assumption that the other
existing IBT franchises had gross annual sales of $750,000.
       To be sure, calculating the Kenmore store’s prospective
lost profits based on its historical net profits was reasonable.
(Sargon, supra, 55 Cal.4th at p. 774 [extent of lost profits for
established business “ ‘may be ascertained with reasonable
certainty from the past volume of business and other provable
data relevant to the probable future sales’ ”].) We cannot
conclude, however, the record established Neches’s extrapolation
of the Kenmore store’s gross sales—albeit at the low-end of the
store’s sales—onto other IBT franchises operated by third parties
was a reasonable basis of computation to determine plaintiff’s
lost royalties from established stores.
       As those stores were in business—and defendants were
collecting royalties from them based on each store’s weekly
gross sales—actual sales data for the exhibit 19 stores existed.
Yet, plaintiff relied on assumed sales rather than introducing
evidence of those stores’ actual gross sales. Nothing in the record
shows plaintiff asked defendants for that data in discovery or
served a third-party subpoena on any of the stores listed in
exhibit 19. As actual data were available, the court was not
required to accept Neches’s assumption that the existing stores
grossed annual sales of $750,000, or that they would continue
to do so through 2034.
       Given the issues with the factual bases behind the
assumptions on which Neches relied, the court did not err in
finding plaintiff failed to demonstrate with reasonable certainty

                                27
that he lost $4,714,622 in reverse royalties. We thus affirm the
judgment awarding plaintiff his lost profits, but not his claimed
lost reverse royalties.
                          DISPOSITION
       The judgment is affirmed. Respondents are to recover
their costs on appeal.

      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                     EGERTON, J.

We concur:

             EDMON, P. J.

             ADAMS, J.

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