Facts

West Coast Custom Rooms Inc. (WCCR) was a manufacturer of aluminum patio structures that were marketed to the public through Home Depot and Metal USA. When a customer purchased an aluminum structure from Home Depot, Metal USA would be assigned the contract for construction and performance. Metal USA sub-contracted the work to various parties that constructed the structures, which included WCCR in the Los Angeles area. Unlike other sub-contractors in the rest of the country, WCCR was allowed to receive progress payments from the customers until the completion. Upon completion, WCCR would forward the full amount received to Home Depot, and Home Depot would return the amount after it deducted a certain percentage commission for itself and Metal USA. This procedure deviated from the terms of Home Depot's written contract with WCCR. In the contract, payment was to be made to the manufacturers of these structures only after the project had been completed.

On April 30, 2005, plaintiffs Michael Weinman and Weinman Enterprises LLC (WE) purchased all the shares of WCCR from defendant Ron Albrecht in a written contract executed in Los Angeles, California. The total cost of the purchase was $4,300,000. The contract included clauses that stated that there were no changes since December 2004 that would have a material adverse effect on WCCR and in the event of misrepresentation by any party, the prevailing party would be awarded reasonable attorney fees. Plaintiffs were aware of the contract between WCCR and Home Depot for the provision of the aluminum patio products and all of its clauses.

After the contract was executed, Home Depot informed WE that, as of May 6, 2005, WCCR would no longer be able to accept progress payments. Rather, the customer would pay the amount to Home Depot and WCCR would receive payment after project completion. In December 2007, WE learned that Albrecht had been aware of the change in procedure to be implemented in May 2005 prior to his sale to WE. Weinman and WE filed suit against Albrecht for fraud and misrepresentation.

PLAINTIFFS' CONTENTIONS:
Weinman and WE contended that Albrecht misrepresented the terms of the contract with Home Depot. Weinman and WE argued that the change in payment procedure caused a material and negative impact on WCCR's cash flow as it was required to finance 85% to 90% of the project before receiving payment.

DEFENDANT'S CONTENTIONS:
Albrecht countered that Weinman and WE were fully aware of all the contract terms listed in WCCR's agreement with Home Depot and there was no misrepresentation.

Damages

Weinman and WE claimed damages in the amount of $3,300,000 for the difference between the actual value of WCCR and its purchase price, and $1,188,000 for additional capital injected into WCCR.

Result

The jury found in favor of Albrecht.

Other Information

FILING DATE: Jan. 18, 2008.