Peter J. Arnold and Breton Construction Inc. v. Haskell & White, a partnership, et al.
Published: Apr. 2, 1998 | Result Date: Jan. 18, 1998 |Case number: 758384 Verdict – $0
Judge
Court
Orange Superior
Attorneys
Plaintiff
Thomas G. Foley Jr.
(Foley Bezek Behle & Curtis LLP)
Defendant
Stephen J. Tully
(Garrett & Tully)
Facts
Plaintiff Breton Construction was a company specializing in commercial construction, operating in Orange County for approximately 20 years. Breton grew and was successful up until the early 1990s, when it began experiencing a deterioration in its financial condition. Defendant Haskell & White was the accountant firm for Breton. In February 1993, it issued an audit report on Breton's Sept. 30, 1992, financial statement. The financial statement did not disclose various transactions which had the effect of increasing Breton's working capital by $600,000 to $1 million. In April 1993, plaintiff Peter Arnold began considering a purchase of Breton. During the course of a due diligence investigation that followed, Arnold was provided with the Sept. 30, 1992, financial statement of Breton, along with Haskell & White's audit report. He was also provided with various information concerning the change in Breton's financial condition in the months following September 1992, including subsequent financial statements which showed losses and reductions in working capital. Arnold's purchase of Breton closed on July 3, 1993. Defendant alleged that as part of his purchase, Arnold agreed to inject capital into Breton and that Arnold put money into Breton after the purchase, but he also withdrew from the company hundreds of thousands of dollars. Per defendant, in 1994, as Haskell & White was preparing the audit of Breton's Sept. 30, 1993, financial statement, Arnold allegedly represented to Haskell & White that he had contributed $2 million cash capital into Breton as evidence of his commitment to support Breton through the coming year. Haskell & White's audit report and the financial statement containing this information were issued the next day. In May 1994, Breton allegedly advised Haskell & White that Arnold had not contributed the $2 million. Per defendant, Arnold placed Breton in bankruptcy in June 1994. The plaintiffs brought this action against the defendants based on professional negligence, fraudulent non-disclosure, negligent misrepresentation, conspiracy and indemnity theories of recovery. Haskell & White filed cross-complaints against Breton and Arnold seeking indemnity.
Settlement Discussions
The plaintiffs made an initial settlement demand for $5 million, reduced to $3 million. The defendant made no settlement offers.
Damages
Per the plaintiffs, they claimed $5.2 million in damages. Per defendant, plaintiff Arnold claimed $1.9 million in losses resulting from the purchase of Breton, and Breton claimed $5.2 million for amounts unpaid to its creditors at the time of trial.
Result
The jury awarded plaintiff Breton $300,000 on its cause of action for conspiracy to commit breach of fiduciary duty, and $35,000 for negligence against Haskell & White. The jury awarded $300,000 to Haskell & White on its cross-complaint for indemnity against Breton. Haskell & White argued that the $35,000 was subsumed by the $300,000 as representing the same damages and, therefore, the total award to Breton of $300,000 was offset by the $300,000 award to Haskell & White. The Feb. 23, 1998, Judgment states, "That plaintiffs shall take nothing on their claims, and that defendant Haskell & White shall take nothing on its cross-claims."
Other Information
The verdict was reached approximately two years after the case was filed. MEDIATION: A mediation was held on March 11, 1997, before the Hon. Leon Savitch of JAMS which did not resolve the matter. SETTLEMENT CONFERENCE: A court-ordered settlement conference was held on March 28, 1997, which did not resolve the matter.
Deliberation
two days
Poll
8-2
Length
four weeks
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