Yujin Robot Co., Ltd. v. Synet Electronics, Inc. ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 26 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
YUJIN ROBOT CO., LTD., a South Korean No. 16-55773
corporation,
D.C. No.
Plaintiff-Appellant, 2:14-cv-06237-SJO-AS
v.
MEMORANDUM*
SYNET ELECTRONICS, INC., a California
corporation; et al.,
Defendants-Appellees.
YUJIN ROBOT CO., LTD., a South Korean No. 16-55781
corporation,
D.C. No.
Plaintiff-Appellee, 2:14-cv-06237-SJO-AS
v.
DOES, 1 through 20, inclusive,
Defendant,
and
SYNET ELECTRONICS, INC., a California
corporation,
Defendant-Appellant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Central District of California
S. James Otero, District Judge, Presiding
Argued and Submitted February 12, 2018
Pasadena, California
Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK,** District
Judge.
Yujin, a South Korean electronics manufacturer, appeals the denial of a
motion for a new trial and a judgment in favor of Synet, its former U.S. distributor,
in the amount of roughly $2.01 million for breach of an oral exclusive
distributorship agreement.
1. Our review is substantially constrained because Yujin did not raise a
challenge to the sufficiency of the evidence in a Rule 50(a) motion before the jury
verdict and so has forfeited any such challenge. Nitco Holding Corp. v. Boujikian,
491 F.3d 1086, 1089-90 (9th Cir. 2007); Desrosiers v. Fight Int’l of Fla. Inc., 156
F.3d 952, 956-57 (9th Cir. 1998). We therefore address only the district court’s
Rule 59 ruling, denying the motion for a new trial, and “accord great deference to
Rule 59 rulings from the district court.” Desrosiers, 156 F.3d at 957. We may
reverse the denial of a motion for new trial “only if the record contains no evidence
**
The Honorable John A. Woodcock, Jr., United States District Judge
for the District of Maine, sitting by designation.
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in support of the verdict” or “where the District Court has ‘made a mistake of
law.’” Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007).
Despite these high standards of review, we reverse and remand for a new
trial on damages, because we conclude that the district court committed two
mistakes of law in denying the motion for a new trial: (1) the damage award does
not meet California standards of proof for lost profits in a fledgling business and
(2) the district judge’s post-verdict alteration of the damages was not done in
accordance with applicable precedent.
2. Yujin and Synet entered into an oral contract in which Synet became
Yujin’s exclusive distributor of vacuum robots that Yujin was introducing to the
American market. Synet’s contract with Yujin lasted only six to ten months before
Yujin cancelled it. California law on lost profits for a fledgling business therefore
applies to Synet’s lost profit claims.
3. Under California law, “[t]he damages recoverable in any case must be
susceptible of ascertainment with a reasonable degree of certainty, or, as the rule is
sometimes stated, must be certain both in their nature and in respect of the cause
from which they proceed.” Automatic Poultry Feeder Co. v. Wedel, 213 Cal. App.
2d 509, 516 (1963). It is a “fundamental rule that damages which are speculative,
remote, imaginary, contingent, or merely possible cannot serve as a legal basis for
recovery.” Frustuck v. City of Fairfax, 212 Cal. App. 2d 345, 367–68 (1963); see
3
also Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209 Cal. App. 4th 1118,
1132 (2012).
“Lost profits may be recoverable . . . where the evidence makes reasonably
certain their occurrence and extent.” Sargon Enter., Inc. v. Univ. of S. Cal., 55 Cal.
4th 747, 773–74 (2012).
Where the operation of an established business is prevented or
interrupted, as by a breach of contract, damages . . . are generally
recoverable for the reason that their occurrence and extent may be
ascertained with reasonable certainty from the past volume of business
and other provable data relevant to the probable future sales . . . . In
some instances, lost profits may be recovered where plaintiff introduces
evidence of the profits lost by similar businesses operating under
similar conditions . . . . On the other hand, where the operation of an
unestablished business is prevented or interrupted, damages for
prospective profits that might otherwise have been made from its
operation are not recoverable for the reason that their occurrence is
uncertain, contingent and speculative.
Id. “The plaintiff has the burden to produce the best evidence available in the
circumstances to attempt to establish a claim for loss of profits.” S. C.
Anderson, Inc. v. Bank of Am., 24 Cal. App. 4th 529, 535 (1994); Warner
Constr. Corp. v. City of Los Angeles, 2 Cal. 3d 285, 302 (1970).
The district court did not mention or apply the correct California standard
for proving future lost profits by an unestablished business. Instead, the district
court ruled that on the evidence presented, viewed most favorably to the plaintiff
— not the proper inquiry under Rule 59 — there was a “possibility” — not the
correct substantive standard under California law — that it would have resold the
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number of units that would support the damages award. Applying the correct
substantive standard instead of the incorrect one applied by the district court, the
damages award could not possibly be sustained.
The vast majority of the $2.01 million verdict was comprised of future lost
profits damages unsupported by any of the kind of evidence required under
California law. Standing alone, the testimony of Synet’s president, Mr. Rhim,
while competent evidence for certain categories in Synet’s damages request, was
not the best evidence of lost profits, and so could not support Synet’s burden to
establish future profit losses to a reasonable certainty. See id. (“In sum, although
plaintiff undoubtedly sustained damage . . . the amount of damage is entirely
uncertain, and we cannot believe that plaintiff has brought forth the best evidence
of which the case is capable.”). Two examples illustrate the evidentiary
deficiencies.
Roughly $813,000 of Synet’s damages request was for unfulfilled or
cancelled purchase orders from retailers and wholesalers after Yujin’s new
American distributor, Yujin USA, began reaching out to them directly. Despite
displaying a stack of papers to the jury that purportedly represented purchase
orders from Amazon.com, Synet actually introduced into evidence a single invoice
and purchase order for roughly $18,000 from one of four retailers. Synet produced
no other documentary evidence of any purchase order cancellations. In these
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circumstances, Mr. Rhim’s uncorroborated testimony of lost purchase orders was
not the “best evidence” of the future loss. S. C. Anderson, 24 Cal. App. 4th at 535.
The largest portion of Synet’s damages request was about $1.05 million
based on expected profit losses from sales it asserted would have occurred in 2015,
the second year of the two-year oral contract. Mr. Rhim testified that the company
would have met its sales goal of 35,000 units, so Synet multiplied that number by a
profit margin and subtracted a percentage for overhead. But Synet introduced no
evidence to support its assumptions about overhead rates. Particularly in light of
the fact that Synet actually sold less than 2,000 units and Yujin USA later sold
fewer than 6,000 units after it took over direct distribution, Mr. Rhim’s
unsupported testimony that Synet would meet its sales targets and sell 35,000 units
falls short of what California law requires for new business ventures claiming lost
profit. In addition, Mr. Rhim admitted that Synet’s claim for unfulfilled purchase
orders, discussed in the previous paragraph, included orders it received from
Amazon from June 2014 through January 2016. Those purported Amazon
purchase orders from 2015 were thus double-counted damages.
There may be additional defects with some of the remaining subcategories of
Synet’s roughly $2.94 million damages request.1 But this Court need not address
1
In addition, roughly $765,000 of Synet’s damages request was for five
years of lost profits from Synet’s consulting business with the South Korean
6
those details, because subtracting roughly $2.63 million in unsupported lost profits
leaves at most about $310,000 in remaining requested damages. Even assuming all
of the remaining amounts were proper, the $2.01 million award was without doubt
excessive under the correct legal standards for determining future lost profits
damages for an unestablished business under California law.
4. After the jury issued its verdict, the district judge, stating that the jury’s
$0 damage award to Yujin was not supported by the evidence, increased Yujin’s
damages award to about $323,000. The discretion of the trial judge “includes
overturning verdicts for excessiveness and ordering a new trial without
qualification, or conditioned on the verdict winner’s refusal to agree to a reduction
(remittitur).” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 433 (1996).
However, it violates the Seventh Amendment for the district court to grant an
additur. Id. (citing Dimick v. Schiedt, 293 U.S. 474, 486–487 (1935)).
Viewed differently, the district court’s modification of Yujin’s damages
award could be viewed as having reduced Synet’s $2.01 million award, a
remittitur, not an additur. If so, it was not a proper remittitur, because the district
government. Synet’s claim was unsupported by any corroborating evidence, and
the causal connection between Yujin’s contract breach and the government of
South Korea is not evident in the record. Although the jury may well have rejected
this part of Synet’s claim, we cannot be certain, because the math does not subtract
out precisely.
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court did not offer Synet the choice between the modified verdict and a new trial
on damages.
Synet’s damages request included an offset for the money it owed Yujin. As
evidenced by the jury’s answer to a special interrogatory, the jury squarely
addressed Yujin’s damages based on the same evidence the district court
considered, and awarded $0, precisely what Synet repeatedly asked it to do at trial.
Increasing Yujin’s damages in this situation violates Dimick. See also Fenner v.
Dependable Trucking Co., 716 F.2d 598, 603 (9th Cir. 1983) (“Once the trial court
finds a verdict excessive, the court cannot allow it to stand. The trial court abused
its discretion in entering a judgment reflecting damages it had determined were
excessive.”).
The district court necessarily concluded that the $0 award to Yujin was
against the weight of the evidence. The appropriate remedy in that circumstance
would have been to order a new trial on the cross-claim, not an additur. The
failure to order a new trial constituted an abuse of discretion for that additional
reason.
Accordingly, the district court is REVERSED AND REMANDED FOR A
NEW TRIAL ON DAMAGES.
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FILED
Yujin Robot Co., Ltd. v. Synet Electronics, Inc., Nos. 16-55773, 16-55781
JUL 26 2018
BYBEE, Circuit Judge, concurring in part and dissenting in part: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
As I agree that the district court erred in increasing the jury’s award of $0 in
damages for Yujin, I join that portion of the memorandum disposition and concur
in the judgment. I see no error, however, in the district court’s denial of Yujin’s
Rule 50(b) and 59 motions.
As the majority acknowledges, Yujin’s failure to challenge the sufficiency of
the evidence in a Rule 50(a) motion prior to the jury’s verdict precludes our review
of whether there was a legally sufficient evidentiary basis for the jury’s verdict.
Mem. Disp. at 2–3; see Nitco Holding Corp. v. Boujikian, 491 F.3d 1086, 1089–90
(9th Cir. 2007) (citing Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S.
394 (2006)); Desrosiers v. Flight Int’l of Fla. Inc., 156 F.3d 952, 956–57 (9th Cir.
1998). For the same reason, the district court properly denied Yujin’s Rule 50(b)
motion. Yet the majority goes on to address exactly that question we cannot
review, analyzing de novo whether Synet presented sufficient evidence of lost
profits under California law. Mem. Disp. at 3–7.
Rule 59 does not enumerate the grounds on which the district court may
order a new trial, but “[w]e have held that ‘[t]he trial court may grant a new trial
only if the verdict is contrary to the clear weight of the evidence, is based upon
false or perjurious evidence, or to prevent a miscarriage of justice.’” Molski v. M.J.
Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (quoting Passantino v. Johnson &
Johnson Consumer Prods., 212 F.3d 493, 510 n.15 (9th Cir. 2000)). “Ultimately,
the district court can grant a new trial under Rule 59 on any ground necessary to
prevent a miscarriage of justice.” Experience Hendrix L.L.C. v.
Hendrixlicensing.com Ltd., 762 F.3d 829, 842 (9th Cir. 2014). We have never held
that the district court’s discretionary determination of whether a jury’s verdict was
against the clear weight of the evidence or a miscarriage of justice requires an
analysis of whether the evidence presented was sufficient under the substantive
law. Imposing such a requirement here enables Yujin—which plainly waived its
challenge to the sufficiency of the evidence—to nevertheless overturn on appeal
the jury’s verdict because “[t]he vast majority of the $2.01 million verdict was
[presumably] comprised of future lost profits damages unsupported by any of the
kind of evidence required under California law.” Mem. Disp. at 5.
Moreover, while a district court is allowed broad discretion to order a new
trial, our review is far more constrained. “Because determining ‘the clear weight
of the evidence’ is a fact-specific endeavor,” Molski, 481 F.3d at 729, one that
requires the district court to weigh for itself the evidence it has heard during trial,
“the court’s denial of a Rule 59 motion is virtually unassailable,” Desrosiers, 156
F.3d at 957. Synet presented evidence in support of its damages claim, including
2
the amount requested for lost profits, and the district court reviewed that evidence
in determining that the jury’s award of an amount of approximately two-thirds
Synet’s request was not against the clear weight of the evidence. Based on its own
analysis of the trial evidence, the majority concludes that Synet failed to meet its
“burden to produce the best evidence available in the circumstances to attempt to
establish a claim for loss of profits,” Mem. Disp. at 4 (quoting S. C. Anderson, Inc.
v. Bank of Am., 30 Cal. Rptr. 2d 286, 290 (Cal. Ct. App. 1994)), and therefore
holds that the district court abused its discretion in denying a motion for a new trial
because there was no evidence supporting the portion of the jury’s verdict
presumably based upon Synet’s lost profits evidence. Under our “absolute absence
of evidence” standard, Molski, 481 F.3d at 729–30, I cannot agree that the district
court abused its discretion.
Finally, the majority suggests that the district court applied the wrong
standard to the Rule 59 motion by viewing the evidence in the light most favorable
to Synet. Mem. Disp. at 4. Although an error of law would support reversing the
denial of a new trial as an abuse of discretion, there is no indication the district
court erred here. The district court correctly noted that it was not required to view
the trial evidence in the light most favorable to the verdict in deciding the Rule 59
motion, but instead could weigh the trial evidence and assess the credibility of the
3
witnesses. And it did so, reviewing the evidence, discussing the credibility of the
witnesses, and concluding that “although the Court itself may have arrived at a
different verdict, the Court cannot say that the jury’s award, in light of the evidence
and testimony presented and the argument of the attorneys, amounted to a
‘miscarriage of justice.’” The majority’s confusion appears to arise from the
court’s denial of Yujin’s alternative request for remittitur; in determining that the
damages award was not excessive (and therefore that remittitur was not warranted),
the district court properly viewed the damages evidence in the light most favorable
to the jury’s award. Fenner v. Dependable Trucking Co., 716 F.2d 598, 603 (9th
Cir. 1983).
In my view, the district court applied the correct legal standard in analyzing
Yujin’s motion for a new trial. It properly weighed the evidence and assessed the
credibility of the witnesses, and concluded that the jury’s verdict was not against
the clear weight of the evidence or a miscarriage of justice. I do not agree that it
was required to analyze the legal sufficiency of the evidence under California law
in conducting that inquiry, and therefore I cannot agree that the district court
abused its discretion in denying the motion for a new trial on this basis.
I respectfully dissent as to this issue.
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