Facts

In July 2002, plaintiff/counter-defendant Villeroy & Boch (USA) Inc. (V&B) entered into an exclusive distributorship agreement with defendants/counter-claimants Roy Roberts, Michael Faas and Michael Orfant for the sale of Villeroy & Boch tile in Southern California. In September 2002, they entered into a similar exclusive agreement for Northern California. To operate the distributorship, Roberts, Orfant, and Faas formed MRM Distribution Inc. They discovered that the actual sales volume for V&B tile was far less than the amount allegedly represented by V&B. MRM fell behind in payments to V&B for tile it had purchased. V&B filed a collection action. Roberts, Orfant, Faas and MRM counter-claimed for fraud and breach of contract. Faas withdrew his counterclaim before trial.

DEFENDANTS/COUNTER-CLAIMAINTS CONTENTIONS:
In their fraud counterclaim, Roberts, Orfant, and MRM alleged that a principal of V&B orally represented that its wholesale sales averaged between $150,000 and $250,000 per month for each region. MRM achieved only about one-fourth of this alleged average. They also contended that they relied on V&B's representations regarding average monthly sales in deciding to enter into the agreements. On their breach of contract counterclaim, they alleged that V&B did not provide them with accurate customer lists and support materials as required by their agreements. They also alleged that V&B competed directly with MRM in violation of the exclusivity provision. The counter-claimants further alleged that V&B offered its customers substantial discounts, which it did not disclose to them, making it impossible for MRM to compete. The counter-claimants contended this was confirmed by the counter-claimants' expert witness, a certified public accountant and expert in forensic accounting. PLAINTIFF/COUNTER-DEFENDANTS

In their fraud counterclaim, Roberts, Orfant, and MRM alleged that a principal of V&B orally represented that its wholesale sales averaged between $150,000 and $250,000 per month for each region. MRM achieved only about one-fourth of this alleged average. They also contended that they relied on V&B's representations regarding average monthly sales in deciding to enter into the agreements. On their breach of contract counterclaim, they alleged that V&B did not provide them with accurate customer lists and support materials as required by their agreements. They also alleged that V&B competed directly with MRM in violation of the exclusivity provision. The counter-claimants further alleged that V&B offered its customers substantial discounts, which it did not disclose to them, making it impossible for MRM to compete. The counter-claimants contended this was confirmed by the counter-claimants' expert witness, a certified public accountant and expert in forensic accounting. PLAINTIFF/COUNTER-DEFENDANTS CONTENTIONS:
V&B denied making any intentional misrepresentations or breaching the agreement. It argued that the defendants/counter-claimants should not have relied solely on the oral representations before deciding to enter into the contract. V&B's expert witness, a certified financial analyst, testified that the defendants/counter-claimants did not perform sufficient due diligence.

Settlement Discussions

MRM claimed that V&B made a final offer before verdict of $100,000 and that it demanded $1 million. V&B disputes these figures and claimed that MRM demanded $3 million.

Damages

V&B claimed, and MRM admitted, that MRM owed V&B for tile purchased by MRM; the parties stipulated that the value of the goods, for which MRM had not paid V&B, was about $89,000. The defendants/counter-claimants sought damages for fraud and breach of contract in excess of $3 million, including lost earnings, profits, and investments.

Result

The jury found that V&B had breached the contract and had defrauded the defendants/counter-claimants. MRM was awarded $110,000 on its counterclaim for breach of contract; $1,038,000 for lost business value; and $1,152,000 for lost profits on its fraud counterclaim. Roberts was awarded $1,076,000 for lost investment on his fraud counterclaim. Orfant was awarded $192,000 for lost earnings on his fraud counterclaim. The jury also awarded MRM punitive damages in the amount of $90,000, after finding that V&B had acted with fraud, malice, and oppression. V&B moved for judgment as a matter of law, which was granted as to the $1,038,000 and $1,152,000 awards for lost business value and lost profits. However, it denied V&B's request to strike the remaining awards. Total award to counter-claimants: $1,468,000.

Deliberation

three days

Poll

8-0

Length

seven days