Facts

Two Silicon Valley computer training schools claimed that the other had breached a prior mutual settlement agreement.

The MSA contained numerous express conditions and the plaintiffs claimed that the defendants had breached nearly all of them. The case had two sides. The plaintiffs were Abdi Shemarini, Reza Sheikhai and Computer Training Institute (CTI). The defendants were Allen Mirzaei, American Business College International (ABCI), and the officers and shareholders of ABCI. The MSA contained a mutual release of all claims, a geographic covenant not to compete, non-disparagement clauses and intricate default and security agreements. The two sides were in direct competition with each other, competing for students being vocationally trained in networking and software applications.

The plaintiffs contended that the defendants unreasonably interfered with their rights to enjoy the benefits of the MSA. The case was tried under Robinson Helicopter v. Dana Corporation (2004) 34 Cal.4th 979. They argued that Mirzaei and the other defendants had engaged in a pattern of unfair business practices to extinguish the market competition and to obtain CTI’s accreditation rights with the U.S. Dept. of Education. The plaintiffs introduced evidence of the seven prior lawsuits filed by the defendants against them, dozens of threatening letters sent to them, numerous threats to, and actual contact with, state and federal regulators who issue vocational school licenses and accreditation. They also introduced evidence of threats of jail, deportation and financial ruin unless the plaintiffs gave the defendants CTI and millions of dollars. CTI was accredited and ABCI was not. By taking over CTI, ABCI hoped to utilize CTI’s existing accreditation.

The plaintiffs argued that the ongoing interference was the legal cause of the ruination of their school. The plaintiffs were on the verge of bankruptcy when the case went to trial.

In Phase II, the plaintiffs argued that the defendants should be punished based on Mirzaei’s $32 million net worth. The plaintiffs based their net worth evidence on three of Mirzaei’s recent personal financial statements. These had been obtained shortly prior to the commencement of Phase II and neither Mirzaei nor his expert knew that the plaintiffs had these records. Under cross-examination in Phase II, under Evidence Code 776, Mirzaei testified that his net worth was between $1 million and $2 million, and that his $32 million net worth had fallen nearly $30 million since January 2006 and the start of the punitive damages trial in August 2006.

The defendants contended that the plaintiffs breached the MSA by failing to pay the monthly consideration due under the agreement. They denied that they had breached the MSA, and argued that the plaintiffs were “trying to bite the hand that fed them.”

After discharging trial counsel from Phase I, Mirzaei and ABCI returned to Phase II with a new lawyer, Robert David Baker of San Jose. The defendants argued in Phase II that they had done nothing wrong, and that Phase I was incorrectly decided, and that this was just a breach of contract dispute where both sides interpreted the contract differently. They also argued that the evidence was just “junk” and the case was just “a business dispute.”

They argued in Phase II that Mirzaei’s actual net worth was about $3 million even though Mirzaei had testified in his deposition shortly before Phase II that he was worth a “minus $500,000.”

Settlement Discussions

The defendants demanded between $2 million and $500,000, plus a surrender of CTI to Allen Mirzaei. The plaintiffs demanded $1.5 million.

Result

The jury found that defendants Allen Mirzaei and ABCI had fraudulently breached a mutual settlement agreement. They also found that Ramin Mirzaei, Jalil Saffarian and Sephedia Soltani had breached the implied covenant of good faith and fair dealing. The parties executed the MSA in December 2000. The jury found that Mirzaei and ABCI had entered into that agreement without the intent to perform. A unanimous jury reached verdicts under both the implied covenant and common law fraud. They awarded $3,635,200 in compensatory damages. They were also unanimous in finding that the conduct of Mirzaei and ABCI was malicious, oppressive or fraudulent by clear and convincing evidence. This led to Phase II, punitive damages. In Phase II, the jury awarded $1.5 million in punitive damages against Allen Mirzaei, and $150,000 against ABCI. Mirzaei’s cross-complaint for $650,000 in contract damages resulted in a defense verdict.