Filet Menu, Inc. v. C.C.L. & G., Inc., et al.
Published: Oct. 17, 1998 | Result Date: Jan. 12, 1998 | Filing Date: Jan. 1, 1900 |Case number: SC034175 Verdict – $334,749
Judge
Court
L.A. Superior Central West
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
Bill Kelley
(technical)
Richard Leroy
(technical)
Defendant
Eric Gardner
(technical)
Facts
In 1992, a salesman from plaintiff Filet Menu Inc., a supplier of custom-made menus and other paper goods for restaurants, approached defendant C.C.L. & G., Inc., which owns and operates a small chain of Mexican-style restaurants known as Don Cuco's. Defendants alleged that in the initial meetings, Gus Salazar from C.C.L. & G. told the salesman that Don Cuco's was currently paying $2 for menus, but could go as high as $4. Defendants alleged that Salazar also stated that Don Cuco's used about 1,000 menus per year and wanted to buy a two to three year supply. Defendants also alleged that Salazar later met with Michael Levine, the president of Filet Menu, who assured C.C.L. & G. that Filet Menu could design and produce a menu to fit its budget. The defendants further alleged that Levine represented that Filet Menu's product would increase Don Cuco's sales by 10 percent. C.C.L. & G. agreed to have Filet Menu produce a menu. Salazar thereafter signed various form documents presented to him that Salazar alleged were represented as merely authorizing certain aspects of the "design process" and nothing more. These documents included a Credit Application and Agreement, which Salazar alleged was represented as "just a credit application" which Filet Menu needed to check Don Cuco's credit. The Credit Application and Agreement was printed in 6-point type, on monarch size stationary (6+ x 8) and covered 20 subjects without any headings. The Credit Application was also a personal guarantee, and contained numerous provisions for liquidated damages, conditions that triggered further obligations for the defendants, and various liquidated damages clauses. The Credit Application also provided that the contract "automatically renewed" if it was not canceled before the last shipment of product. The defendants alleged that they were induced to "authorize" the design of other products (napkins, cocktail napkins, and place mats) on the representation "if you don't want them your deposit ($500) will automatically be applied to your menu program." The defendants also alleged they were told this project should be done in 2-3 months. The defendants claimed that when the per unit price list for the new menus was revealed by Filet, they ranged from a high of $29.90 per menu for 1,000 menus to a low of $1.90 for 25,000 menus. The defendant claimed that, to get the menus needed and not lose the $12,000 deposits paid, C.C.L. & G. had to buy. Further, that in order to get a $4 per menu price, C.C.L. & G. had to purchase 4,000 menus (1,000 more menus than needed) and commit to buy a "package" of the other paper products - a combined total of 15 million dinner and cocktail napkins, placemats, etc. for a total of over $450,000. A dispute later arose between the parties when defendant alleged that Filet Menu tried to double the price of the menus on the second year run, and also sought to "pass through" shipping charges which defendant claimed were non-existent. C.C.L. & G. then sought to cancel the agreement. Filet Menu ultimately filed this lawsuit against C.C.L. & G. based on breach of contract, breach of personal guarantee, quantum meruit, account stated, and open book account. Defendants then filed a counter-lawsuit against Filet Menu and cross-defendant Michael Levine for intentional and negligent misrepresentation, concealment, fraud, breach of contract, bad faith and unfair competition.
Settlement Discussions
At a settlement conference held in early September 1997, the defendants/cross-complainants advised the judge that they would pay $100,000 in seven annual installments. Plaintiff demanded that defendants complete the contracts. Just prior to trial, Judge Altman recommended that defendants pay $23,000 (which was offered), and which plaintiff refused. At the beginning of trial, defendants were asked by the trial judge to offer $30,000 which they did. Plaintiff rejected the offer, demanding that the contract purchases be completed.
Damages
Plaintiff/cross-defendants alleged damages in excess of $350,000 for breach of contract; in excess of $700,000 for breach of personal guarantee and for quantum meruit; $20,004, $700 and $7,997.07 for account stated; and approximately $350,000 in lost profits. Defendants/cross-complainants sought disgorgement of profits obtained from alleged unfair business practices, as well as compensatory and punitive damages in an amount to be proved at trial.
Other Information
The court ruled that the liquidated damages clauses in the contract with Filet Menu Inc. were unconscionable and, thus, unenforceable. The court also ruled that Michael Levine was the alter ego of Filet Menu Inc. and fully liable for the debts incurred by the corporation. Interesting Note: Plaintiff's expert, Bill Kelley, testified that "nobody but an idiot would sign a personal guarantee" such as the one drafted by Filet Menu Inc. without first having read it. He further denied that he had ever signed such a guarantee. When confronted on cross-examination with an identical personal guarantee drafted by Filet Menu Inc. and signed by Bill Kelley on behalf of a company for which he worked, Kelly explained the discrepancy to the jury as follows: "There's a simple explanation: I'm an idiot. The verdict was reached approximately three years and one month after the case was filed. The case is on appeal.
Deliberation
2½ days
Poll
12-0 (existence of a written contract), 11-1 (for plaintiff/cross-defendant on fraud), 11-1 and 10-2 (unfair business practices), 12-0 (damages)
Length
18 days
For reprint rights or to order a copy of your photo:
Email
jeremy@reprintpros.com
for prices.
Direct dial: 949-702-5390