Court Opinion

ID: 4582447
Source: CourtListenerOpinion
Date Created: 2020-10-30 17:02:30.40161+00
Date Added: 2024-06-11T09:28:20.905716
License: Public Domain

Filed 10/30/20 WiFi Rail, Inc. v. S.F. Bay Area Rapid Transit Dist. CA1/4
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                  DIVISION FOUR

 WIFI RAIL, INC.,
           Plaintiff and Appellant,
                                                                        A157568
 v.
 SAN FRANCISCO BAY AREA                                                 (Alameda County
 RAPID TRANSIT DISTRICT,                                                Super. Ct. No. RG16809176)
           Defendant and Respondent.

         Plaintiff WiFi Rail, Inc. (WiFi Rail) entered into a license agreement
with defendant San Francisco Bay Area Rapid Transit District (BART)
whereby WiFi Rail agreed to install, operate, use, replace, modify and
maintain a commercial wireless internet network for the BART system. WiFi
Rail contends that BART breached this license agreement by terminating
WiFi Rail without proper notice and an opportunity to cure.
         A jury found that WiFi Rail did not do all, or substantially all, of the
significant things that the license agreement required it to do, and, as it was
instructed, it answered no further questions on the special verdict form. The
trial court entered judgment for BART on the jury’s verdict, and this appeal
involves only the denial by operation of law of WiFi Rail’s motion for
judgment notwithstanding the verdict (JNOV) on its breach of contract claim.
As it did below, WiFi Rail seeks to overturn the judgment for a new judgment

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entirely in its favor with a new trial for damages only. Because there is a
contested issue of fact as to whether BART’s alleged breach caused WiFi Rail
harm, WiFi Rail is not entitled to the JNOV that it seeks. We shall affirm
the order denying JNOV by operation of law.
            FACTUAL AND PROCEDURAL BACKGROUND
      WiFi Rail incorporated in 2006 with the goal of enabling cellular and
internet service on public rail transportation. In 2006, the CEO of WiFi Rail,
Cooper Lee, contacted BART to see if BART was willing to allow WiFi Rail to
test its concept. BART was a particularly attractive target for Lee because
BART maintained a live-train test track in Hayward. Chuck Rae, BART’s
then Telecommunications Revenue Manager, responded to Lee, and BART
allowed WiFi Rail to utilize its test facility to conduct research and
development. WiFi Rail conducted its research at BART’s Hayward test
track and in BART’s downtown San Francisco stations and track.
The License Agreement
      WiFi Rail and BART entered into a WIFI License Agreement (the
Agreement) on December 15, 2008 for WiFi Rail to provide wireless internet
(wifi) service in contractually-designated coverage areas, including all BART
passenger rail cars operating on the BART right-of-way, all publicly
accessible areas inside the fare gates of all above-ground BART stations, and
all publicly accessible areas of BART underground stations, whether inside or
outside the fare gates, and including platforms, mezzanines and public
corridors, but excluding low-traffic areas identified during the BART design
review process. BART granted WiFi Rail a license to install, operate, and use
equipment and facilities on the BART System. With limited exceptions for
use of existing BART structures and equipment set forth in the Agreement,
the Agreement required WiFi Rail to supply and install the all components of

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the “Wifi Infrastructure” at its sole expense, “including but not limited to (i)
all fiber optic cable; (ii) all towers, antennas, insertion couplers, electronics,
power supplies and other equipment; (iii) all in-car components; (iv) all
internet bandwidth and connectivity; and (iv) all utility connections” (the wifi
infrastructure).
      The Agreement contains a schedule for installation of the wifi
infrastructure in five phases: Phase 1 (four stations); Phase 2 (nine stations);
Phase 3 (thirteen stations); Phase 4 (thirteen stations); and Phase 5 (six
stations). WiFi Rail was to provide wifi in BART stations and cars that
would commence, with respect to the required coverage areas located in each
phase, upon the completion of each phase and that would continue thereafter
during the remaining term of the Agreement. WiFi Rail was required to
provide wifi service that would “always equal or exceed the performance
provided by leading industry service providers.”
      The Agreement provides that the details of the wifi infrastructure and
its installation schedule shall be determined during the BART Design
Approval Process. The Agreement does not contain a fixed time for
performance, but states that an installation schedule would be established
during BART’s design review process. The Agreement provides that the
installation schedule would target completion of the entire wifi infrastructure
within 24 months after BART’s design review process approval for Phases 1
and 2. The Agreement also states that time was of the essence.
      WiFi Rail was entitled to recoup its payment for construction costs by
selling advertising and charging passengers for wifi service after completion
of Phase 2. Upon BART’s certification of substantial completion for Phase 2,
WiFi Rail would owe BART a license fee, and the Agreement sets forth a

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license fee schedule of $40,000 per station starting in 2009, with a 3.5 percent
increase per year thereafter starting January 1, 2010.
      The term of the Agreement was from December 18, 2008 to December
31, 2019. Upon the occurrence of “an event of default,” the Agreement
provides that “each party shall have all rights and remedies specified herein
or available at law or in equity,” and “[e]ither party shall have the right to
terminate this Agreement if an event of default by the other party exists.” As
relevant here, the Agreement defined the following as an “Event of Default”:
“[I]f WiFi Rail materially fails to perform any other covenant [besides
payment of fees set forth in subsections (i) and (ii)] in this Agreement within
thirty (30) days after written notice from BART specifying the failure;
provided, that if such failure cannot, with due diligence be cured within a
period of thirty (30) days, WiFi Rail shall not be deemed to be in default if
WiFi Rail begins to cure the failure within such thirty (30) day period and
thereafter diligently prosecutes such cure to completion.”
      Section 20.2, entitled “Notices,” states: “All notices under this
Agreement shall be in writing and shall be deemed validly given if sent by
courier, overnight mail, facsimile transmission or regular certified mail,
return receipt requested, and shall be effective upon receipt.” This section
also provides that notices “should be” addressed to the recipients for each
party noted therein.
The Project
      BART issued a construction permit to WiFi Rail in January 2009,
which, pursuant to the Agreement, evidenced its approval of WiFi Rail’s
plans and engineering drawings. Sometime thereafter, the parties entered
into an agreement for a separate test project wherein WiFi Rail would install

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and test a “proof-of-concept” video surveillance network in train cars for the
BART police.1
      In the second half of 2010, Lee wrote to WiFi Rail shareholders to
explain why he had secured proxy votes to replace the Board of Directors. In
this letter, he stated that the company had ceased focusing on the project
with BART in 2010, and it had all but stopped work on Phase 2. He wrote
that senior management had “diluted [WiFi Rail’s] limited resources in
pursuit of potential opportunities in other sectors of the transportation
industry,” and nearly all of the company’s money had been spent on executive
compensation and travel expenses for fundraising and pursuit of other
opportunities. Lee informed shareholders that, while future opportunities
may be important, WiFi Rail’s business was in its very early stages and
capital remained “very difficult to raise.” Thus, the company needed to “re-
commit itself to completing what is at hand in lieu of assuming additional
commitments.” Lee informed shareholders that WiFi Rail had an available
bank balance of under $10,000 and needed to raise additional funds to
complete Phase 2.
      James Kearns, WiFi Rail’s project manager for development of the
commercial wifi infrastructure, testified that, by the end of 2011, WiFi Rail
had finished much of Phase 2 but had work to do on the installation of certain
equipment on a freeway wall between the Glen Park and Balboa Park
stations. He further testified that, in late October 2011, Rae instructed WiFi

      1 The public commercial wifi network that was the subject of the
Agreement is often referred to in the record as “2.4” or “2.4 GHz,” and the
safety and security network for use by BART police as “4.9” or “4.9 GHz.”
These numbers represent the channel assigned by the Federal
Communications Commission for each network. The purpose of the “proof-of-
concept” security system trial was for WiFi Rail to prove that it could provide
live video from the train cars with 4.9GHz equipment.

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Rail not to finish the last item of work under Phase 2—installing equipment
on the freeway wall between Glen Park and Balboa Park—and to instead
focus on installing devices that carried video for the security system in BART
cars. WiFi Rail never presented BART with certificates that installation of
the wifi infrastructure was substantially completed and ready for commercial
operation for Phase 1 or Phase 2.
      In September 2012, Rae wrote to WiFi Rail regarding its “failure to
meet its contractual obligations” by “fail[ing] to build-out the 2.4 system” due
to “[WiFi Rail’s] lack of financial resources.” Rae wrote that he had
“repeatedly warned [Lee] about [WiFi Rail’s] failure to build-out the 2.4
system,” it was past time for WiFi Rail to “step up to the plate,” and BART
was very concerned with the status of the project.2 He noted that “[t]ime is
very short,” and that, absent progress, BART would be forced to consider
alternatives.
      Lee responded days later telling BART that he “believe[d] [Phase 3 roll
out and design] will take between 14 and 16 months to complete the wayside
and on-car installations with a cost of roughly $9M.” At trial, Lee conceded
that, at the time, he did not deny Rae’s statements regarding the delay or
that the delay was the result of WiFi Rail’s chronic financial problems; he
instead ignored the statements. As of December 31, 2012, WiFi Rail had
$18,475.16 available in its bank accounts. On October 11, 2012, Rae wrote
Lee again, advising him that “[e]nsuring the timely completion of the 2.4
system is BART’s primary objective,” and, “[t]he delays in the 2.4 project
have become a major concern to BART management.”
      In January 2013, Lee wrote to inform BART that WiFi Rail had secured
funding to proceed with Phase 3, but WiFi Rail required modification of the

      2   Rae passed away in 2013, so he did not testify at trial.

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Agreement “to lower the station rental fees to a level that will work
commercially or agree to a gross profit sharing arrangement.” Lee suggested
$5,000 per annum per station, but stressed that this figure depended on the
commercial value derived from the users of the wifi services. He also
proposed reexamination of the Agreement’s provision that wifi access to users
in the first four downtown San Francisco stations remain free and certain
details about costs associated with the construction. Lee admitted at trial
that WiFi Rail sought a contract modification reducing the license fee owed to
BART from $40,000 to $5,000 per station because that was what it could
make work commercially. No such modification occurred, and Lee admitted
that he told BART he was not sure that the project would be feasible even
with a reduction to $5,000.
      Thereafter, and for an extended period of time, the parties attempted to
negotiate an Amendment No. 1 to the Agreement. Communications
regarding this amendment show the amendment contemplated that WiFi
Rail would first design and install the infrastructure facilities at the BART
stations in Phase 3 and then would install the infrastructure to provide wifi
coverage along the trackways between the stations.
      In February 2014, counsel for BART, Jay Powell, emailed a letter to
counsel for WiFi Rail, noting that, notwithstanding the lack of execution of
Amendment No. 1, BART had cooperated with WiFi Rail’s engineering team
to permit them to design an installation plan for Phase 3. Powell outlined a
process whereby BART’s design review for Phase 3 would proceed in two
stages: The first stage would deal with design and installation of
infrastructure facilities at BART stations, and the second stage would
address design and installation of infrastructure to provide coverage along
the trackways. Powell attached a proposed Amendment No. 1 that he stated

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the parties must sign before WiFi Rail commenced work on Phase 3. The
Agreement required modifications to be in writing, but the parties did not
execute Amendment No. 1.
      WiFi Rail applied for a Phase 3 permit in the spring of 2014.
      On July 31, 2014, BART’s new in-house counsel, Phyllis Whitten,
emailed a letter to counsel for WiFi Rail. Whitten stated that WiFi Rail must
provide: 1) an installation schedule including milestones for the design and
submission of plans for the installation of the wifi infrastructure along the
trackways between stations for Phase 3; 2) a schedule and plan for WiFi
Rail’s commencement and completion of an assessment of its economic model
for the project; and 3) written information that would give BART reasonable
assurance that WiFi Rail had the necessary financial resources to complete
both stages of Phase 3.
      By mid-2014, Lee informed BART’s Assistant Chief Technology Officer,
Travis Engstrom, that WiFi Rail was out of money to build the network. In a
meeting in September 2014, Engstrom testified that Lee “confessed to us that
he did not have the ability to move forward. He did not have an investor. He
did not have his own money to continue.” Engstrom testified that, Lee, with
tears welling in his eyes, offered to install anything BART wanted if BART
would pay WiFi Rail $110,000 a month.
      On September 9, 2014, Whitten again sent a letter to WiFi Rail’s
counsel by email. She stated that BART’s objective was to obtain a working
commercial wifi network in a timely manner, and she reiterated that BART
had not received the information that it requested in its July 2014 letter. She
further noted WiFi Rail’s failure to provide the requested design milestones
for the wifi infrastructure and requested that this information be provided
within ten business days. Whitten wrote that WiFi Rail “has not been

                                       8
relieved by BART of any obligations to design, fund and install the necessary
infrastructure.” She requested that WiFi Rail provide a report on the status
of completion of Phases 1 and 2 of the wifi infrastructure within ten business
days, noting that the Agreement provides “that [WiFi Rail] will seek from
BART a written certificate of substantial completion prior to commencing
commercial operations, and pay certain license fees to BART.” Whitten also
wrote that it appeared that WiFi rail had never sought to confirm completion
of the first two phases, and it had not paid any license fees to BART in
connection with these phases.
      On October 10, 2014, Whitten emailed another letter to WiFi Rail’s
counsel. In this letter, BART informed WiFi Rail that it had failed to provide
information requested about its business model and its financial resources to
complete the project. It further stated that BART had asked for, but had not
received, details from WiFi Rail regarding how the project in Phase 3 would
proceed past the first step to reach timely completion. BART also stated that
Phases 1 and 2 of the project were not complete, testing in cooperation with
WiFi Rail established that WiFi Rail was not providing adequate service to
BART riders, and no license fees had been paid. Because of what it
considered to be WiFi Rail’s inability to secure financing for over six years
and the resulting incompletion of the project, BART proposed that the parties
agree to mutually terminate the Agreement.
      On November 5, 2014, Whitten emailed a letter to WiFi Rail’s counsel
stating that BART was supplementing its October 10, 2014 letter as it had
not received any response. The November letter stated that, as BART
previously indicated, with the cooperation of WiFi Rail and an outside testing
firm, BART tested WiFi Rail’s service as installed in Phases 1 and 2. “The
test results, included as a PDF attachment to the same email that transmits

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this letter, show that Wi-Fi service with unacceptable data connectivity loss
is being provided to BART riders.” BART concluded, “Under the
circumstances, BART concludes that [WiFi Rail] has failed to provide a fully
functional Wi-Fi system and has failed to demonstrate that it is capable of
doing so. Accordingly, we hereby terminate the 2008 Wi-Fi License
Agreement (License Agreement) for provision of commercial wireless services
on BART premises.”
The Lawsuit
      WiFi Rail sued BART for breach of contract, breach of the implied
covenant of good faith and fair dealing, and conversion.
      A 13-day jury trial was held.3 The trial court directed a verdict for
BART on WiFi Rail’s conversion claim, and the court denied WiFi Rail’s
motion for directed verdict on its other two claims. The jury returned a
unanimous special verdict in BART’s favor. The special verdict addressed
only the first element of WiFi Rail’s two causes of action—did WiFi Rail do
all, or substantially all, of the significant things required of it by the parties’
contract? Because the jury answered that question in the negative, it did not
address anything else, including whether BART breached the Agreement or
whether WiFi Rail was harmed by BART’s alleged breach. The trial court
entered judgment in BART’s favor on February 7, 2019, and BART served
WiFi Rail with a Notice of Entry of Judgment on February 14, 2019.
      On February 20, 2019, WiFi Rail filed its motion for JNOV, with a
hearing scheduled for May 9, 2019. In its JNOV motion, WiFi Rail requested
that the trial court “direct a verdict on liability in favor of [WiFi] Rail and

      3 WiFi Rail’s briefing describes a number of the trial court’s pretrial
rulings. We do not discuss these rulings because we have dismissed WiFi
Rail’s appeal from the judgment.

                                         10
require a new trial on damages only,” and it submitted a proposed order with
language ordering “that the judgment entered herein on February, 7, 2019 be
vacated, and that judgment be entered in favor of Plaintiff [WiFi] Rail, Inc.”
WiFi Rail also filed a motion for a new trial, with a hearing scheduled for
May 14, 2019. In May 2019, the trial court called the motions and confirmed
that its jurisdiction to hear both had expired and the motions were denied by
operation of law.
      On June 7, 2019, WiFi Rail appealed from the judgment and the denial
of the motions for new trial and JNOV. This court granted BART’s motion to
dismiss WiFi Rail’s appeals of the judgment and the order denying its motion
for a new trial because they were untimely, but found the appeal from the
denial of the motion for JNOV to be timely.
                                DISCUSSION
A. Standard for Review for Judgment Notwithstanding the Verdict
      A trial court shall render judgment notwithstanding the verdict
whenever a motion for a directed verdict for the aggrieved party should have
been granted. (Code Civ. Proc., § 629, subd. (a).) “A motion for judgment
notwithstanding the verdict may be granted only if it appears from the
evidence, viewed in the light most favorable to the party securing the verdict,
that there is no substantial evidence in support.” (Sweatman v. Department
of Veterans Affairs (2001) 25 Cal. 4th 62, 68.)
      On appeal from the denial of a motion for judgment notwithstanding
the verdict, we determine whether there is any substantial evidence,
contradicted or uncontradicted, supporting the jury’s verdict. (Sweatman,
supra, 25 Cal.4th at p. 68.) In reviewing a trial court’s denial of a judgment
notwithstanding the verdict motion, we consider the evidence in the light
most favorable to the prevailing party and indulge in all legitimate and

                                       11
reasonable inferences to uphold the verdict. (Casella v. SouthWest Dealer
Services, Inc. (2007) 157 Cal. App. 4th 1127, 1144.) If there is any substantial
evidence, we must affirm the denial of the motion. (Sweatman, at p. 68.)
“However, to the extent a motion for judgment notwithstanding the verdict
raises legal issues such as the application of law to undisputed facts or the
interpretation of a statute or contract, we review the trial court’s ruling on
the motion de novo.” (Brown v. City of Sacramento (2019) 37 Cal. App. 5th
587, 598.)
B. Analysis
      WiFi Rail’s cause of action for breach of contract is the only cause of
action at issue in this appeal. The elements of this cause of action are: the
contract; plaintiff’s performance or excuse for nonperformance; defendant’s
breach; and the resulting damages to plaintiff. (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal. 4th 811, 821.) To establish a breach of contract claim,
the plaintiff must prove causation—that defendant’s conduct was a
substantial factor in causing the plaintiff’s harm. (Haley v. Casa Del Rey
Homeowners Assn. (2007) 153 Cal. App. 4th 863, 871–872.)
      The parties spend many pages of their briefing disputing whether
BART provided proper notice of default before terminating the Agreement
with letters that WiFi Rail contends were sent by improper means and failed
to adequately specify the defaults at issue. We do not reach this issue
because WiFi Rail’s request that we reverse the denial of JNOV founders on
another point: Even assuming BART failed to provide proper notice before
termination and thereby breached the Agreement, WiFi Rail would only be
entitled to the remedy it seeks—entry of a verdict in its favor on its breach of
contract claim and a new trial on damages only—if the evidence indisputably
established the element of causation. WiFi Rail ignores causation, and we

                                       12
agree with BART that a disputed question of fact exists regarding whether
BART’s termination caused WiFi Rail any harm. WiFi Rail thus is not
entitled to reversal of the denial of its JNOV motion and entry of judgment in
its favor on its breach of contract claim.
      With limited exceptions for use of existing BART structures and
equipment, the Agreement required WiFi Rail to supply and install the
components of the wifi infrastructure at its sole expense, and WiFi Rail
agreed to install, operate, use, replace, modify, and maintain the wifi
infrastructure. In 2008, WiFi Rail estimated that it would take close to $20
million to build the wifi infrastructure. In 2009, WiFi Rail estimated that
completion of phase 2 would cost $4 million, and completion of phases 3
through 5 would cost $15 million. Mr. Lee admitted that no investment
company ever provided WiFi with this $19 million in investment capital.
WiFi Rail’s original business plan was to become profitable and cash-flow
positive by the end of the second year of deployment, but Lee admitted that
did not happen.
      Sometime in the second half of 2010, Lee wrote to WiFi Rail
shareholders stating that the company had ceased focusing on the project
with BART in much of 2010, and it had all but stopped work on Phase 2.
Senior management had “diluted [WiFi Rail’s] limited resources in pursuit of
potential opportunities in other sectors of the transportation industry,” and
nearly all of the company’s money had been spent on executive compensation
and travel expenses for fundraising and pursuit of other opportunities. Lee
informed shareholders that capital remained “very difficult to raise,” WiFi
Rail had an available bank balance of under $10,000, and it needed to raise
additional funds to recommit to and complete Phase 2.

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      In 2013, Lee requested an amendment to the Agreement to lower the
per station license fee from $40,000 to $5,000 as the $5,000 figure was what
WiFi Rail thought it could make work commercially.
      By mid-2014, Lee had informed BART that WiFi Rail was out of money
to build the network. In a meeting in September 2014, Engstrom testified
that Lee, “confessed to us that he did not have the ability to move forward.
He did not have an investor. He did not have his own money to continue.”
Lee offered to install anything BART wanted if BART would pay WiFi Rail
$110,000 monthly for services. Lee tried to explain his request through his
testimony that there was newer 802.11 technology at the time than the
802.11g equipment deployed in Phases 2, BART had requested a technology
refresh of the deployed equipment, and Lee said that WiFi Rail would do the
technology refresh if BART paid for it because WiFi Rail did not plan to do
the refresh until after Phase 3.4 However, the Agreement stated that, “WiFi
Rail shall upgrade the equipment used in the Wi-Fi Infrastructure from time
to time as may be necessary to meet the performance specifications or to
provide support for new Wi-Fi protocols (such a 802.11(n)) as they achieve an
appropriate level of commercial acceptance and use.” (§ 6.1(c).) Lee testified
that the newer 802.11n technology was available, WiFi Rail had deployed
this 802.11n technology in a project it worked on in England, and it planned
to deploy this technology with Phase 3. After the September 2014 meeting,

      4 802.11 is an engineering standard for the manufacturing of
equipment for wireless Ethernet. Over the years, there have been various
iterations of 802.11, starting with 802.11a in the late 1990s and spanning
many iterations since then, such as 802.11g, 802.11h, and 802.11n. These
protocols are backwards and forwards compatible, so as the manufacturers
made better and better devices, the older devices would still work with the
newer devices.

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WiFi Rail never contacted BART to inform BART that WiFi Rail had secured
funding to move forward with the project.
      Based on the foregoing evidence, a jury could reasonably conclude that
any alleged failure by BART to provide proper notice of default before
terminating the Agreement did not cause WiFi Rail harm because WiFi Rail
simply did not have the financial resources to perform. WiFi Rail is thus not
entitled to a directed verdict on liability, which (along with a new trial on
damages only) is the sole remedy it requested.
C. Evidence Exclusion and Instructional Error
      WiFi Rail argues that the trial court erred in failing to give a special
jury instruction modifying CACI 321 relating to the existence and occurrence
of a condition precedent, which the trial court found inverted the burden of
proof, and in excluding certain communications from WiFi Rail’s counsel to
BART’s counsel. Because these arguments were not raised in the JNOV
motion below, BART contends that they cannot be raised on appeal, and WiFi
Rail does not respond to BART’s forfeiture argument. We find these issues
forfeited because WiFi Rail failed to raise them in its JNOV motion below
and also because WiFi Rail did not timely appeal from the judgment or from
the denial of its motion for a new trial. (Lee v. West Kern Water Dist. (2016)
5 Cal. App. 5th 606, 634–635 [it is improper to raise arguments on appeal that
were not raised in the post-trial motion being challenged on appeal]; Sanchez
v. Brooke (2012) 204 Cal. App. 4th 126, 136–137 [appellant forfeited an
instructional error challenge by not appealing the judgment and appealing
only the denial of judgment notwithstanding the verdict].)
                                DISPOSITION
      The order denying JNOV is affirmed.

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                                                     _________________________
                                                     BROWN, J.

WE CONCUR:

_________________________
POLLAK, P. J.

_________________________
TUCHER, J.

Wifi Rail, Inc. v. San Francisco Bay Area Rapid Transit District (A157568)

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