Facts

In 2001, the city of Compton entered into a 15-year, $100 million exclusive waste hauling contract with Hub City Solid Waste Services. Hub City was owned by Michael Aloyan. At the time, Aloyan also managed Compton's in-house waste management division through another company he owned. Shortly after the franchise agreement was awarded to it, Hub City began making large campaign contributions to certain city politicians. The recipients, former mayor Omar Bradley, and two city council members, Amen Rahh and Delores Zurita, had all voted in favor of the franchise agreement. Hub City also employed and/or gave money to several members of Bradley's family. It also donated to an organization for which Zurita was a board member.

In 2004, Aloyan was convicted of attempted bribery in the neighboring city of Carson, while trying to obtain a similar waste hauling franchise there. After news of his conviction became public, Hub City's books were audited and the illicit campaign contributions and payments were revealed. Compton then terminated the franchise agreement with Hub City. Hub City filed suit against Compton, and Compton counter-claimed.

PLAINTIFF'S CONTENTIONS:
Plaintiff alleged breach of contract, bad faith, and unjust enrichment. Plaintiff argued that the termination of the contract was unlawful because there was no proof that a bribe had been made. It further contended that Compton was in breach because it terminated the contract without following the contract's dispute resolution process, and thus denied plaintiff due process.

DEFENDANT'S CONTENTIONS:
Defendant counter-claimed that the contract was illegal and void, pursuant to Government Code Section 1090, which invalidates contracts formed despite financial conflicts of interest. It also claimed that Aloyan's bribery conviction gave it the right to terminate the contract immediately. Finally, it claimed Aloyan was the alter ego of plaintiff.

Settlement Discussions

Plaintiff demanded $3 million after the court granted partial summary judgment in favor of defendant. Defendant offered $500,000.

Specials in Evidence

Plaintiff also requested anticipated lost future profits for the duration of the contract. It claimed that the future lost profits exceeded $20 million.

Damages

Plaintiff sought consequential damages, incidental damages, and lost-opportunity damages. Defendant sought the return of all monies paid to plaintiff, as required by Section 1092.

Injuries

Plaintiff had performed hauling services pursuant to the contract from Feb. 10, 2001 until Sept. 7, 2004. It sought payment for services rendered between July 1, 2004 and Sept. 7, 2004.

Result

At the bench phase of the trial, Aloyan was found to be plaintiff's alter ego. The judge ruled that defendant had a right to terminate the contract because it violated state and federal laws. This ruling eliminated plaintiff's claim for future lost profits and reduced its damages to about $2 million. At the jury phase of the trial, the jury found the contract was void as against public policy due to the financial conflicts of interest in existence at the time of formation. The jury found for defendant on its counter-claim and awarded it all monies it had paid to plaintiff. Pursuant to Section 1092, defendant was awarded $22,402,759.

Other Information

Defendant will file for costs. Plaintiffs may appeal.

Deliberation

three hours

Poll

12-0 (on contract); 12-0 (on award)

Length

12 days