Facts

Father and son, Touraj and Reza Jahangiri, and a friend, Farid Larijani, formed Polaris Medical Academy LLC, along with Michael Allen as Chief Financial Officer. The business provided classroom instruction aimed at medical doctors to teach them how to use CT scans primarily for cardiac testing. Polaris launched in July 2007, and classes were conducted in Irvine.

The Jahangiris and Larijani claimed that from late 2007 to early 2008, Allen repeatedly told them that the business was failing and needed to be dissolved. The partners agreed and commenced dissolution proceedings in February 2008. Immediately after this, Allen formed Polaris Medical Academy Inc., a wholly new corporation, but with a similar business model as the prior LLC.

The Jahangiris, Larijani, and Polaris Medical Academy LLC sued Allen and Polaris Medical Academy for, among others, conversion, breach of unsigned operating agreement, and unfair business practices. Allen filed a cross-complaint alleging fraud.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that Allen misrepresented the LLC's state of finances, leading to its dissolution, for the purpose of taking the LLC's assets and starting his own business. They further contended that Allen was not entitled to the LLC's assets, which were reserved for the majority shareholder of the LLC.

DEFENDANTS' CONTENTIONS:
Defendant contended that he was entitled to the business' assets as a majority shareholder because he converted his minority stake in the LLC into a majority stake while acting as CFO for the company. He also contended that the assets he took belonged to him, personally, because he used his own personal credit card to pay for the subject assets. He further contended that plaintiffs fraudulently promised to invest money into the LLC, but did not. He contended he was never reimbursed for his investments of time and money and that he was entitled to compensation and reimbursement. He also contended that Touraj Jahangiri embezzled money from the LLC.

Damages

Plaintiffs sought approximately $2.3 million in total damages for their loss income and opportunity. Allen, in his cross-complaint, sought roughly $2.2 million in total damages for business expense reimbursements and post lost earnings. He also sought declaratory relief to establish himself as a majority stakeholder and to secure the business and its assets as his own.

Injuries

Loss of income and opportunity.

Result

The judge dismissed Allen's embezzlement claim for lack of standing. All other legal claims against Allen were also dismissed, except for conversion and breach of unsigned operating agreement. Allen's claim for fraud was also denied, but the judge determined Allen owned 10 percent of the LLC. The jury ruled in the LLC's favor for its conversion claim. It was awarded $400,000 but no damages were awarded for the breach claim. The jury also awarded $50,000 to Allen for reimbursement expenses. Plaintiff's net recovery was $350,000.

Deliberation

two days

Length

two weeks