Facts

Jeffrey Scott Liolios recruited Ron Both to come to California from out of state with the promise of a certain income. Both came to California and started working for Liolios Group, Inc., now known as Gateway Group, Inc. ("LGI"). After a few years of Both not making the expected income that Liolios had promised, Liolios, on Dec. 15, 2002, provided Both with an LGI stock certificate representing 2,000 of a total of 10,000 LGI shares. However, from the date that he was given that share certificate until the date that he voluntarily resigned from LGI, on Dec. 2, 2016, he was never paid a distribution.

Moreover, Both maintained that certain employment compensation that he was due from LGI was reduced because Liolios told him that those reductions were Both's proportionate capital contributions to LGI.

On Dec. 2, 2016, Both quit LGI and immediately went to work for Capital Market Access, LLC ("CMA"), a company started by another former LGI employee, Geoffrey Plank, who had resigned from LGI many months earlier. A few LGI clients followed Both from LGI to CMA. After he left LGI, Both asked for corporate documents and financials from LGI. LGI refused to provide any. So Both sued LGI and Liolios.

In response, LGI filed a cross-complaint against Both, Plank, CMA, and Grant Stude, a young analyst who had been Both's analyst at LGI, and who left LGI when Both did. LGI's cross-complaint was for breach of contract, misappropriation of trade secrets, and interference with contract and prospective economic advantage.

Both and Plank filed a cross-complaint against LGI and Liolios. Both's claims and cross-claims against LGI and Liolios were for breach of fiduciary duty, fraud, and unpaid wages and waiting-time penalties. Plank's cross-claims against LGI and Liolios were for unpaid wages and waiting-time penalties.

PLAINTIFF'S CONTENTIONS: Both owns 20% of LGI. Liolios/LGI used Both's 20% ownership stake to rob Both of $1,707,024 in wage compensation by falsely telling Both that Both needed to contribute that $1,707,024 in wages as a capital contribution because LGI was losing money. But LGI never lost money, and there was never a need for any capital contributions. Liolios and LGI also failed to pay Both his proportionate 20% of distributions, which was $1,009,279. Liolios/LGI repeatedly lied to Both and told him that Liolios never took any distributions. But Liolios took millions in distributions, including by siphoning off money and giving himself phantom distributions by "paying" his wife, who never worked at LGI, via direct deposits into a joint bank account on which Liolios was an account holder. Liolios knew of Both's financial vulnerability -- as he had to give Both a loan just so Both could make ends meet. Then, in the case, Liolios claimed that Both's LGI stock certificate did not really represent ownership in LGI, but was just an agreement that if Both still worked at LGI when it was sold, he would get 20% of the sale's net profit. That was repeatedly shown to be false at trial. In fact, Liolios lied repeatedly about nearly every important topic in the case, especially the financial topics. As to Plank, Liolios repeatedly lied to and concealed from Plank the amount of his agreed-upon compensation, which was based upon a percentage of client revenue. Liolios cheated Plank out of wages that Plank had earned without letting Plank know that he was being cheated. When Plank found out, he quit. In addition to cheating Both and Plank out of money they were owed, at Liolios's direction, LGI asserted a meritless cross-complaint that was factually bankrupt. Despite asserting cross-claims for breach of contract, interference with contract and prospective economic relations, and misappropriation of trade secrets, Liolios admitted that none of LGI's contracts were breached or interfered with, none of its prospective economic relations were interfered with, and none of its trade secrets were misappropriated. Liolios/LGI also destroyed evidence, including LGI's own website, LGI's stock book, and all the LGI stock certificates in Liolios's possession. Both had possession of and kept his stock certificate secure, but Liolios destroyed all the other ones. Liolios also had his own wife and one of his employees lie at trial. Liolios also refused to produce financial documents in response to legitimate discovery, and he lied repeatedly about his finances and income, both in deposition and at trial -- even when faced with contradictory documentary evidence. Liolios's conduct toward Both was reprehensible. That reprehensibility compelled the jury to impose a $2 million punitive damages award against Liolios and LGI and in favor of Both.

Settlement Discussions

At a pre-trial mediation, LGI/Liolios demanded that Both/Plank pay LGI/Liolios $750,000. Right before opening statement, LGI/Liolios offered to pay Both $480,000. After the Phase I verdict, but before the punitive-damages Phase II, LGI/Liolios offered to pay Both $2 million over four years.

Damages

Both: past unpaid distributions $1,009,279; unpaid wages $1,707,024; punitive damages $2,000,000; waiting-time penalties $33,567. Plank: unpaid wages $143,793; waiting-time penalties $25,249.

Result

The jury returned a verdict in favor of Both and against LGI and Liolios in the amount of $4,749,870, which included $2 million in punitive damages. The jury returned a verdict in favor of Plank and against LGI and Liolios in the amount of $169,042. LGI's and Liolios's post-trial JNOV motion and motion for new trial were denied. Both, Plank, Stude, and CMA moved for attorney's fees, and the Court awarded them $1,198,512 in attorney's fees against LGI. They also obtained an award of $26,349 in costs. Verdict in favor of plaintiff/cross-complainant Ron Both and cross-complainant Geoffrey Plank. Motions for Directed Verdict were granted against all of defendant/cross-complainant LGI's cross-claims.

Other Information

LGI and Liolios have appealed. Liolios has filed Chapter 11 Bankruptcy.

Deliberation

less than one day (adding both phases of deliberations together)

Poll

12-0 (actual damages); 10-2 (punitive damages)

Length

15 days