Facts

Plaintiff Wellington Property Co. filed suit against its former President Randal Lee and Lee's new company Discovery Investments.

Lee filed a cross-complaint against Wellington, and minority shareholders Paul Loh, John Loh and Ricardo da Silva.

PLAINTIFF'S CONTENTIONS:
Plaintiff alleged Lee stole its employees, clients and trade secrets, primarily consisting of two property spreadsheets listing all properties managed by Wellington. Wellington also offered an unfair competition claim based on the undisputed fact that Discovery Investments was operating without a real estate license during its first two months of operation due to bureaucratic delays by the Bureau of Real Estate in issuing the license.

Plaintiff claimed that immediately upon Lee's departure, the Lohs and da Silva began taking money out of Wellington and transferring it to Loh Realty, which they owned 100 percent, claiming the money constituted "professional services" or "wages" for their increased workload after Lee's departure. The Lohs and da Silva also retained real estate distributions in Wellington from the three properties Wellington owned, instead of its historical practice of distributing those out to the owners.

When Lee left Wellington, 23 percent of Wellington's clients followed him to Discovery Investments. After Lee left, Wellington offered Lee $4,000 for his 25 percent ownership of Wellington. Lee valued his shares at $300,000.

Wellington's expert, Dr. Debo Sarkar testified that Wellington suffered a diminution in value of $2,167,000 as a result of Lee's conduct. Wellington also requested punitive damages.

DEFENDANT'S CONTENTIONS:
Lee denied stealing any clients, trade secrets or employees. Lee called former Wellington clients and employees, all of whom uniformly testified that they were not solicited to leave Wellington or join Discovery Investments. Lee asserted that John Loh, Paul Loh and Ricardo da Silva started stealing money from Wellington and funneling it to their own company, Loh Realty, which were disguised shareholder distributions. Lee requested the court to dissolve Wellington based on abuse of a minority shareholder.

Lee's expert, Colin Johns testified that Wellington's damages were limited to lost profits which amounted to a mere $22,000 per year even if Wellington could prove all 23 percent of the clients had been stolen. Johns testified that Lee's damages were $277,000 based on money stolen from Wellington, and Wellington's failure to distribute real estate profits that historically had been made to shareholders of Wellington.

CROSS-COMPLAINANT'S

Settlement Discussions

Wellington's settlement demands ranged from a low of $998,000 via a CCP 998 offer, and $1.5 million. Lee offered $100,000 plus his 25 percent ownership interest in Wellington.

Damages

Lee requested 25 percent of what the Lohs and da Silva obtained in fees for alleged professional services, plus 25 percent of real estate profits that he claimed had not been distributed to him consistent with past practices.

Result

The jury rejected all of Wellington's causes of action against Lee and Discovery except an interference with prospective business advantage based on Discovery not having a license for two months, and awarded Wellington $3,000. Lee was awarded compensatory damages on his breach of fiduciary duty claims of $153,249. The jury also awarded punitive damages of $300,000 against Paul Loh and John Loh each, and $100,000 against daSilva, for a total of $700,000. The court issued a tentative ruling to dissolve Wellington on Lee's equitable statutory claim based on abuse of a minority shareholder.

Other Information

Following the jury's verdict and prior to entry of judgment, the case settled at mediation to the mutual satisfaction of the parties. The case was mediated before trial by Michael Carbone and Hon. Ronald Sabraw, ret. Judge Sabraw also mediated the case after the jury's verdict. FILING DATE: Sept. 7, 2012.

Deliberation

one day

Poll

On Lee's breach of fiduciary duty claims (12-0) and (11-1) on damages

Length

27 days