WindAirWest v. Castle & Cooke etc. CA2/3 ( 2021 )

Filed 1/8/21 WindAirWest v. Castle & Cooke etc. CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
WINDAIRWEST, LLC, B295513, consolidated
with B299043
Plaintiff and Respondent,
Los Angeles County
v. Super. Ct. No. LC104747
CASTLE & COOKE AVIATION
SERVICES, INC.,
Defendant and Appellant.
APPEAL from a judgment and order of the Superior
Court of Los Angeles County, Elaine W. Mandel and Shirley
K. Watkins, Judges. Affirmed in part, reversed in part.
Wilson Elser Moskowitz Edelman & Dicker, John P.
Loringer, Kevin F. Geary, and William J. Katt for Defendant
and Appellant.
Miller Barondess and Amnon Z. Siegel; Myers Andras
Ashman Kumamoto, Phillip Ashman, and Brian A. Kumamoto
for Plaintiff and Respondent.
_________________________
Defendant Castle & Cooke Aviation Services, Inc. (C&C)
appeals from a judgment awarding plaintiff WindAirWest, LLC
(WAW) lost profits from the disruption of WAW’s private jet
charter operation after C&C negligently caused a collision that
damaged one of WAW’s aircraft. C&C contends WAW’s damages
expert based his lost profits calculation on speculation and
the trial court erred when it denied C&C’s motion for directed
verdict. We conclude there was a substantial evidentiary basis
for the expert’s opinion and the trial court properly allowed
the case to go to the jury.
C&C also challenges the trial court’s ruling rejecting
C&C’s objection to the judgment based on a purported pre-trial
settlement agreement. And C&C appeals the court’s order
awarding WAW attorney fees under a fee provision of the parties’
sublease. We conclude the trial court properly rejected C&C’s
objection to the judgment, but the court erred when it awarded
attorney fees for a tort claim that the fee provision does not cover.
Accordingly, we will affirm the judgment and reverse the order
awarding attorney fees.
FACTS AND PROCEDURAL BACKGROUND
Consistent with the standard of review for an appeal from
the denial of a directed verdict, we state the evidence in the light
most favorable to the respondent, WAW, accepting the evidence
favorable to WAW as true, disregarding conflicts, and resolving
all presumptions, inferences, and doubts in favor of WAW.
(Colbaugh v. Hartline (1994) 29 Cal.App.4th 1516, 1521
(Colbaugh).) We discuss the facts and procedural history
relevant to C&C’s objection to the judgment and WAW’s
motion for attorney fees in separate sections below.
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1. The Parties
WAW is a private air charter company. It has a license
from the Federal Aviation Administration (FAA), referred to as
a Part 135 Certificate (135 Certificate), that allows it to hold out
aircraft for hire.
C&C is a fixed-base operator. The company leases space
at the Van Nuys Airport from the local municipality and provides
aircraft services to aviation companies that sublease parts of
the space from C&C.
2. WAW Begins Charter Operations with the Astra
Aircraft
In 2012, Clifton Simonson became the managing member
of WAW. The same year, WAW acquired a Gulfstream G100,
commonly referred to as the Astra, and hired two pilots. About
a year later, WAW added the Astra to its 135 Certificate, which
allowed WAW to offer the Astra for charter flights. From 2013 to
2015, approximately 50 percent of WAW’s flights with the Astra
were for private charter.
In 2015, WAW hired Lewis Bell as its Director of Sales and
Marketing to focus on its charter business. Before joining WAW,
Bell had about 20 years of experience in the charter industry.
His positions ranged from manager of a charter department,
to air charter broker, to owner of a private jet company. As
an air charter broker, Bell sourced aircrafts for hire on behalf
of an extensive book of clients.
In his first year with WAW, Bell doubled the company’s
charter revenue from approximately $300,000 in 2014 to about
$600,000 in 2015. He doubled charter revenue again in 2016
to approximately $1.2 million. In that year WAW was profitable
with the Astra.
3
Bell was able to increase WAW’s charter business by
drawing on contacts he generated as a charter broker and
by offering one-way pricing. As Bell explained, most charter
companies offer only roundtrip pricing. Under that model, a
customer pays for the charter aircraft to make a roundtrip flight,
even if the customer only rides on one leg of the trip. The one-
way model offers customers the option to pay for only a one-way
trip, while the charter company takes it upon itself to bring
the aircraft home. Although the charter company charges more
per hour for one-way pricing, the option is still cheaper for the
customer than roundtrip pricing, and thus translates into a
competitive advantage for those companies that can successfully
execute the one-way model.
Before he joined WAW, Bell had operated a one-way
pricing model at his own charter company and at another charter
company he managed. At the other company, Bell operated
the one-way model profitably for three years until the company
was sold.
3. WAW Adds a Citation X Aircraft to Its Charter
Operation
In April 2016, WAW entered into a dry lease agreement
with Jayhawk to rent a Citation X aircraft from the company for
$35,000 per month.1 The Citation X is the world’s fastest private
jet and is popular in the charter industry. After considering
approximately 30 different aircraft, Bell recommended WAW
acquire Jayhawk’s Citation X because it was in “immaculate”
condition, the interior was completely refurbished, and the
1 A dry lease is an aircraft leasing arrangement under which
the lessor provides an aircraft without a crew or ground staff.
4
aircraft had winglets—a modification that allows an aircraft
to burn less fuel to reach its cruising altitude.
Before WAW leased the Citation X, Bell created projections
for Simonson’s review. Bell projected WAW would initially
charter the Citation X for approximately 20 revenue hours
per month and, over an 18-month period, would “ramp up”
to approximately 60 revenue hours per month.2
Bell’s projections were based on a business plan that
contemplated chartering multiple Citation X aircraft out of
the Van Nuys airport. Van Nuys is the second largest airport
for private charter flights and, at the time, there was not a
Citation X based there. WAW also committed to charter the
Citation X without owner restrictions and to market it as such.
This was significant because private charter aircraft owners
typically must pre-approve charter flights, which can lead
to delays and lost business for the charter operator. WAW
would also offer one-way pricing where appropriate, but it
would continue to offer roundtrip pricing too.
WAW had its two existing Astra pilots trained so they
could be qualified to fly, or “type-rated” for, the Citation X.
Additionally, WAW hired two new pilots and paid for their
Citation X training.
The dry lease with Jayhawk was a lease to purchase,
which allowed WAW to offer the Citation X for charter for 13
months and then purchase the aircraft at the end of the lease
2 A “revenue hour” is an hour that the customer pays for
the aircraft to fly. A “flight hour” includes revenue hours and
non-revenue or “dead leg” hours—i.e., all hours flown.
5
for $3.8 million. If WAW decided not to purchase the Citation X,
the lease obligated it to pay a “breakup fee” of $250,000.
4. C&C Causes a Collision that Prevents WAW from
Chartering the Citation X for Six Months
On June 1, 2016, WAW entered into a sublease with C&C.
The sublease gave WAW access to C&C’s facilities at Van Nuys
airport, including ramp and hangar space as well as an office.
On June 10, 2016, WAW flew the Citation X to Van Nuys
airport for the final FAA conformity inspection in anticipation
of receiving approval to add the aircraft to its 135 Certificate.
With FAA approval imminent, WAW was prepared to offer
charter flights beginning in July 2016. Bell sent marketing
materials to approximately 200 of the largest charter brokers
and received many inquiries in return.
On June 21, 2016, a C&C employee moved the Citation X
to access a different aircraft. The C&C employee parked the
Citation X on a downhill slope, and failed to properly place
wheel chocks to prevent accidental movement. As a result,
the Citation X was seriously damaged when it rolled down
the slope into another aircraft.
Due to the damage to the Citation X, WAW was forced
to send the aircraft to the Cessna Aircraft Company’s
headquarters in Wichita, Kansas to be repaired. The repairs
took approximately six months.
5. WAW Charters the Citation X in 2017
WAW received the Citation X back from the Cessna repair
facility in late December 2016. Earlier that month, the FAA
determined the aircraft would be airworthy and added it to
the 135 Certificate.
6
WAW began offering the Citation X for charter flights
in January 2017. However, during the repair period, one of its
Citation X pilots quit, leaving WAW with only one captain and
two co-captains to fly the aircraft. This impaired WAW’s ability
to charter flights because its only captain had to be on every
flight, and the FAA requires a pilot to take two weeks off after
flying for two weeks.
The Citation X also experienced two significant mechanical
issues in early 2017 involving the nose of the aircraft, which
had been damaged in the accident. In January 2017, when
WAW was flying a high-profile client, the nose wheel did not
retract after taking off, forcing WAW to arrange alternative
transportation for the client’s return trip. WAW had to return
the Citation X to the Cessna facility for further repairs. A second
mechanical failure occurred two weeks later. The nose wheel
steering failed on the tarmac with passengers on board, forcing
WAW to refund the customers’ money and arrange for alternate
transportation.
WAW operated the Citation X for the first five months
of 2017, but did not generate a profit. Ultimately it decided not
to purchase the aircraft in May 2017.
6. The Lawsuit and Trial
On October 11, 2016, WAW filed a complaint against C&C,
asserting two causes of action for negligence and breach of the
sublease. On May 1, 2018, WAW filed a first amended complaint,
which dropped the breach of contract claim and asserted only
a single claim of negligence.
Shortly before trial, C&C conceded liability, admitting its
conduct constituted gross negligence. Thus, the only issue to be
7
determined at trial was whether C&C’s conduct caused WAW
to lose profits and, if so, how much.
At trial, WAW presented testimony from Simonson, Bell,
other fact witnesses, its industry expert, Christopher Battaglia,
and its damages expert, Owen Dahl. As we discuss later, Dahl,
a business valuation expert, based his lost profits calculations
on evidence offered through Simonson’s, Bell’s, and Battaglia’s
testimony, as well as WAW’s company records and market data
from aviation industry consultants. In total, Dahl projected
$4,235,935 in lost profits for WAW as a result of C&C’s
negligence.
At the close of testimony, C&C moved for a directed verdict
on the ground that Dahl’s testimony was based entirely on
“speculation.” C&C argued WAW’s expansion of its charter
operation into a one-way model with the Citation X constituted
an “ ‘unestablished business’ ” for which lost profits were “ ‘not
recoverable for the reason that their occurrence is uncertain,
contingent and speculative.’ ”
The trial court denied C&C’s motion for directed verdict,
concluding WAW presented sufficient evidence of actual charter
operations to support Dahl’s damages opinion.
The case went to the jury, which returned a verdict in favor
of WAW, awarding it $2,464,560 in lost profits.
DISCUSSION
1. Reasonably Reliable Evidence Supported WAW’s
Recovery of Lost Profits
C&C contends WAW’s one-way charter operation was an
unestablished business, rendering any theory for the recovery
of lost profits “inherently speculative” and legally insufficient
to support a damages award. Thus, C&C argues the trial court
8
erred when it denied C&C’s motion for a directed verdict.
We conclude the trial court’s ruling was correct.
“A directed verdict is . . . subjected to de novo appellate
review. . . . ‘A motion for a directed verdict “is in the nature
of a demurrer to the evidence, and is governed by practically
the same rules, and concedes as true the evidence on behalf of
the adverse party, with all fair and reasonable inferences to
be deduced therefrom.” ’ ” (Brassinga v. City of Mountain View
(1998) 66 Cal.App.4th 195, 210, fn. omitted.) “ ‘A defendant
is entitled to a [directed verdict] if the trial court determines
that, as a matter of law, the evidence presented by plaintiff
is insufficient to permit a jury to find in his favor. [Citation.]
“In determining whether plaintiff’s evidence is sufficient, the
court may not weigh the evidence or consider the credibility
of witnesses. Instead, the evidence most favorable to plaintiff
must be accepted as true and conflicting evidence must be
disregarded. . . .” ’ ” (Colbaugh, supra, 29 Cal.App.4th at
p. 1521.) We will not find the trial court erred in denying
a directed verdict “ ‘ “ ‘unless interpreting the evidence most
favorably to plaintiff’s case and most strongly against the
defendant and resolving all presumptions, inferences and doubts
in favor of the plaintiff a judgment for the defendant is required
as a matter of law.’ ” ’ ” (Ibid.; Baker v. American Horticulture
Supply, Inc. (2010) 186 Cal.App.4th 1059, 1072.)
“[D]amages for the loss of prospective profits are
recoverable where the evidence makes reasonably certain their
occurrence and extent.” (Grupe v. Glick (1945) 26 Cal.2d 680,
693 (Grupe); Sargon Enterprises, Inc. v. University of Southern
California (2012) 55 Cal.4th 747, 773–774 (Sargon).) Such
damages must be proven to be certain, “albeit not with
9
‘mathematical precision.’ ” (Lewis Jorge Construction
Management, Inc. v. Pomona Unified School Dist. (2004)
34 Cal.4th 960, 975; Sargon, at p. 774.)
“Regarding lost business profits, the cases have
generally distinguished between established and unestablished
businesses.” (Sargon, supra, 55 Cal.4th at p. 774.) Where an
established business’s operation is prevented or interrupted,
“ ‘damages for the loss of prospective profits that otherwise might
have been made from its operation 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.’ ”
(Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870, 883 (Kids’
Universe), citing Grupe, supra, 26 Cal.2d at pp. 692–693; see also
Sargon, at p. 774; Parlour Enterprises, Inc. v. Kirin Group, Inc.
(2007) 152 Cal.App.4th 281, 287–288 (Parlour).) “On the other
hand, lost anticipated profits for an unestablished business
whose operation is prevented or interrupted are generally not
recoverable because their occurrence is uncertain, contingent
and speculative.” (Parlour, at p. 288; Sargon, at p. 774.)
Nevertheless, lost profits for an unestablished business
“are allowed where their nature and occurrence can be shown
by evidence of reasonable reliability.” (Grupe, at pp. 692–693;
Kids’ Universe, at p. 883 [lost profits for an unestablished
business may be recovered “ ‘where the evidence makes
reasonably certain their occurrence and extent’ ”]; Sargon,
at p. 774 [same].)
“The award of damages for loss of profits depends upon
whether there is a satisfactory basis for estimating what the
probable earnings would have been had there been no tort.
10
If no such basis exists, as in cases where the establishment of
a business is prevented, it may be necessary to deny such
recovery. [Citations.] If, however, there has been operating
experience sufficient to permit a reasonable estimate of probable
income and expense, damages for loss of prospective profits are
awarded.” (Natural Soda Products Co. v. Los Angeles (1943)
23 Cal.2d 193, 199 (Natural Soda); Kids’ Universe, supra, 95
Cal.App.4th at p. 883.) “It is enough to demonstrate a reasonable
probability that profits would have been earned except for the
defendant’s conduct.” (S.C. Anderson, Inc. v. Bank of America
(1994) 24 Cal.App.4th 529, 536 (S.C. Anderson).)
“ ‘Where the fact of damages is certain, the amount
of damages need not be calculated with absolute certainty.
[Citations.] The law requires only that some reasonable basis
of computation of damages be used, and the damages may
be computed even if the result reached is an approximation.
[Citation.] This is especially true where . . . it is the wrongful
acts of the defendant that have created the difficulty in proving
the amount of loss of profits [citation] or where it is the wrongful
acts of the defendant that have caused the other party to not
realize a profit to which that party is entitled.’ ” (Sargon, supra,
55 Cal.4th at pp. 774–775; Natural Soda, supra, 23 Cal.2d at
p. 200 [“Since defendant made it impossible for plaintiff to realize
any profits, it cannot complain if the probable profits are of
necessity estimated.”].)
The parties disagree about whether the evidence proved
WAW was an established or unestablished business. The
distinction makes no difference in this case. Even if we assume
WAW’s one-way charter model constituted an unestablished
business (as C&C contends), we still find there was sufficient
11
evidence “to demonstrate a reasonable probability that profits
would have been earned” but for C&C’s conduct. (S.C. Anderson,
supra, 24 Cal.App.4th at p. 536; Kids’ Universe, supra, 95
Cal.App.4th at pp. 883–884.)
As the reviewing court explained in Kids’ Universe, “[w]hen
the operation of an unestablished business is prevented, as here,
prospective profits may be shown in various ways.” (Kids’
Universe, supra, 95 Cal.App.4th at p. 884, italics added.)
“ ‘[I]f the business is a new one or if it is a speculative one . . . ,
damages may be established with reasonable certainty with
the aid of expert testimony, economic and financial data, market
surveys and analyses, business records of similar enterprises,
and the like.’ ” (Ibid.) “ ‘When the tortfeasor has prevented
the beginning of a new business . . . all factors relevant to the
likelihood of the success or lack of success of the business or
transaction that are reasonably provable are to be considered,
including general business conditions and the degree of success
of similar enterprises.’ ” (Ibid.) Consistent with these principles,
our Courts of Appeal have held “the experience of similar
businesses is one way to prove prospective profits.” (Id. at
p. 885, citing Resort Video, Ltd. v. Laser Video, Inc. (1995) 35
Cal.App.4th 1679, 1699; Berge v. International Harvester Co.
(1983) 142 Cal.App.3d 152, 163 (Berge) [a plaintiff can rely
on “data from other enterprises” operating under “similar
conditions”].)
Another relevant consideration is “whether the market
is an established one,” even if the particular business operation
is new. (Kids’ Universe, supra, 95 Cal.App.4th at p. 885.) S. Jon
Kreedman & Co. v. Meyers Bros. Parking-Western Corp. (1976) 58
Cal.App.3d 173 (Kreedman) is instructive. There, the reviewing
12
court affirmed an award of lost profits for a parking garage
operator (Meyers) against a real estate developer, even though
the contemplated parking structure was never built. (Id. at
pp. 178, 184–185.) The parties agreed the structure would
consist of nine levels above ground and two levels below, with
subterranean levels adjoining another garage in the One Wilshire
Building, and commercial establishments on the first floor and
part of the second floor. (Id. at p. 182.) The evidence showed
that although the particular parking structure would have been
new, the parking business was not, and Meyers “ ‘was a highly
experienced garage operator.’ ” (Id. at pp. 182, 185.) A land
economist also opined “based on feasibility studies and the
evidence developed at the trial that the parking garage, had it
been constructed, would have been a very profitable operation.”
(Id. at p. 185.) And, a longtime employee of Meyers testified
concerning the profitability of a subterranean garage in the
One Wilshire Building that Meyers already operated. (Ibid.)
The Kreedman court held this evidence was sufficient to support
Meyers’s lost profits claim, notwithstanding the lack of past
business volume for the contemplated garage and competing
evidence, offered by the developer’s expert, showing garages
he operated in the area had recently gone bankrupt. (Ibid.)
Here, the evidence demonstrated WAW had a reasonable
probability of earning profits from its one-way charter business
with the Citation X, and there was a nonspeculative basis to
calculate those profits with reasonable certainty. (See Kreedman,
supra, 58 Cal.App.3d at pp. 184–185; S.C. Anderson, supra,
24 Cal.App.4th at p. 536; Kids’ Universe, supra, 95 Cal.App.4th
at pp. 883–884.)
13
The testimony of WAW’s Director of Sales and Marketing,
Lewis Bell, and WAW’s industry expert, Christopher Battaglia,
demonstrated the market for chartered private jets, like the
parking business in Kreedman, was an established one. Together
with WAW’s owner, Clifton Simonson, they showed WAW had
a significant four-year track record operating in the charter
market, including profitable operations with the company’s Astra
aircraft, and the company had made substantial preparations
to expand its operations with the Citation X, including training
two pilots and hiring and training two more to fly the new
aircraft. Bell’s and Battaglia’s testimony also established charter
companies had been offering one-way pricing for at least 10
years, and both experts testified to their own successful execution
of the model at prior companies. And, critically, Bell’s testimony
showed WAW had successfully offered one-way pricing with
the Astra, which allowed Bell to double charter revenue each
year for his first two years with WAW.
Regarding the projected monthly flight hours for
the Citation X, Bell and Battaglia each testified, based on
their experience in the charter market, the appeal of WAW’s
Citation X, the company’s team of four pilots, and WAW’s
exclusive commitment of the aircraft to charter operations, that
it was reasonably probable the Citation X’s total flight hours
would ramp up from 20 hours in the first month to 80 hours
a month over an 18-month period.3 Battaglia opined WAW
3 Like Bell and Battaglia, C&C’s experts acknowledged
the Citation X is a highly desirable aircraft for charter, it is
well known in the industry, and “easy to sell.” They also
acknowledged WAW could reasonably expect to achieve more
14
“could have easily done 80 hours a month,” citing his experience
running a one-way model at a similar charter operator where,
with three aircraft, the operator was able to bill “upwards of
90 to a hundred hours . . . a month per aircraft.”4 He also cited
WAW’s actual performance history, which showed it had
chartered the Astra—an “inferior aircraft”—between 50 and 70
hours per month with just two pilots. All experts, including
C&C’s, agreed WAW could reasonably expect to achieve more
hours with additional pilots. The 80-hour figure was grounded
in “ ‘reasonably provable’ ” factors relevant to WAW’s likelihood
of achieving success with the one-way model for its new
Citation X. (Kids’ Universe, supra, 95 Cal.App.4th at pp. 884–885
[“the experience of similar businesses is one way to prove
prospective profits” for an unestablished business]; Berge, supra,
142 Cal.App.3d at p. 163 [same].)
To calculate revenues, WAW’s damages expert, Owen Dahl,
used actual data from the 2017 period when WAW chartered
the Citation X to determine the “dead leg” percentage—i.e., the
flight hours with additional pilots and by exclusively committing
the aircraft to charter operations.
4 C&C complains that Battaglia based his opinion on a
conversation with an unidentified individual at XoJet—a charter
company that utilized a one-way model with 25 aircraft available
for charter. The contention ignores that in delivering his opinion,
Battaglia drew directly upon his own experience with a more
modest charter operation similar to WAW. C&C’s failure to
address this testimony disregards our standard of review, which
requires that we accept the evidence most favorable to WAW
and resolve all presumptions, inferences, and doubts in its favor.
(Colbaugh, supra, 29 Cal.App.4th at p. 1521.)
15
percentage of flight time dedicated to nonrevenue operations—
and to test whether his model was consistent with the actual
revenue hours WAW had achieved. From that data, Dahl derived
a dead leg percentage of 14.9 percent, which reduced the 80-hour
total flight time figure to 68.1 revenue hours per month.5 The
evidence showed that figure was consistent with WAW’s actual
charter performance with the Astra.6 Then, using a combination
of WAW’s actual data from its Citation X operation in 2017
and data from the charter industry generally, Dahl derived
a projected hourly rate for the Citation X. He multiplied
the projected revenue hours by that rate to determine the
Citation X’s projected operating revenues for the relevant period
5 Notably, C&C’s industry experts conceded that, with four
pilots, WAW would have been able to achieve up to 60 revenue
hours per month—just eight fewer hours than Dahl calculated.
Like Bell, Battaglia, and Dahl, C&C’s experts based their
opinions on their experience in the established charter market
and on WAW’s historical performance data. While the conflict
between Dahl’s 68-revenue-hour projection and C&C’s 60-hour
figure presented a factual dispute for the jury to resolve, the
opposing experts’ reliance on essentially the same matters
belies C&C’s assertion that WAW’s lost profit calculation
was speculatively based.
6 The evidence showed WAW flew the Astra for 65.7 revenue
hours in January 2016; 61.3 revenue hours in September 2016;
and 68.4 revenue hours in November 2016. Unlike the Citation
X, the Astra’s charter operations were not interrupted by C&C’s
admitted misconduct. Thus, the Astra data offered a view into
what the Citation X’s operations could have been when fully
ramped up. (Berge, supra, 142 Cal.App.3d at p. 163 [a plaintiff
can rely on “data from other enterprises” operating under
“similar conditions”].)
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of loss. This approach was plainly consistent with accepted
methods for calculating business revenues as a component of lost
net profits. (See Kids’ Universe, supra, 95 Cal.App.4th at p. 884
[“ ‘[I]f the business is a new one . . . , damages may be established
with reasonable certainty with the aid of expert testimony,
economic and financial data, market surveys and analyses,
business records of similar enterprises, and the like.’ ”].)
Finally, to calculate WAW’s recoverable damages, Dahl
needed to determine its projected expenses. (Kids’ Universe,
supra, 95 Cal.App.4th at p. 884 [“A plaintiff must show loss of net
pecuniary gain, not just loss of gross revenue.”].) He started by
identifying individual expense items, then used WAW’s historical
financial statements and expense data specific to the Citation X
from a recognized aviation consultant, Conklin & de Decker,
to create a forecast of operating expenses for the aircraft.7 Dahl
also used WAW’s flight logs from the Citation X’s 2017 operations
to calculate the aircraft’s fuel burn rate. Like the evidence
underlying his revenue calculation, this evidence afforded Dahl
a nonspeculative basis to determine WAW’s probable expenses for
the Citation X during the relevant period of loss. (See Kreedman,
supra, 58 Cal.App.3d at pp. 184–185; S.C. Anderson, supra, 24
Cal.App.4th at p. 536; Kids’ Universe, supra, 95 Cal.App.4th at
pp. 883–884.)
C&C’s reliance on Kids’ Universe is misplaced. The
plaintiff in that case, a toy retailer, operated a brick-and-mortar
toy store and had made preparations to launch an online retail
operation for its products. (Kids’ Universe, supra, 95 Cal.App.4th
7 C&C’s expert agreed Conklin & de Decker was a reliable
source for expense data.
17
at pp. 874–875.) The defendants negligently caused a flood
that severely damaged the store, forcing its two-week closure
and preventing the company from launching its online store.
(Id. at p. 874.) The company sued, claiming lost profits stemming
from its inability to launch its Web site at an “optimal time”
for e-business. (Id. at p. 877.) It offered evidence showing it
had a “state-of-the-art Web site,” “favorable” placement on
“fast-growing” and “ ‘high[ly] trafficked’ ” Web portals, and
it was “prepared to meet customers’ on-line orders.” (Id. at
pp. 886–887.) The company asserted it would attract “significant
venture capital” and, given the planned timing of the venture,
it “would have been in a position to be a financially successful
leader in the e-commerce sale of toys.” (Id. at p. 887.) Its expert
“assum[ed]” it would be a “roughly equal competitor[ ]” with
another online toy retailer, and opined the company’s capital
value would be “in excess of $50 million.” (Ibid.)
The Kids’ Universe court concluded the plaintiff’s “evidence,
while suggesting the Web site would have been viable, [was] not
of a type necessary to demonstrate . . . to a reasonable certainty
that the unestablished business would have made a profit.”
(Kids’ Universe, supra, 95 Cal.App.4th at p. 887.) The company
had “not previously operated [its] Web site as a profit-producing
venture,” and, critically, “the on-line market for toys was not
an established one.” (Ibid.) The plaintiff “presented no specific
economic or financial data, market survey, or analysis based on
the business records or operating histories of similar enterprises,”
and its expert’s conclusion that the on-line business would
be profitable “was based on an unanalyzed assumption the
[plaintiff’s] Web site would have been a roughly equal competitor
with eToys.” (Id. at p. 888.) The lack of evidence to substantiate
18
the assumption rendered the comparison with eToys insufficient
to prove the plaintiff would have “realized net profits from the
operation of its on-line business.” (Ibid.)
Unlike the toy retailer’s proposed online business in Kids’
Universe, WAW had a four-year track record operating within an
established market with reliable market surveys and analyses.
Its Director of Sales and Marketing and industry expert had
experience with charter operations generally and with the
one-way model specifically. And, unlike the plaintiff in Kids’
Universe, WAW had a history of profitably chartering the Astra,
as well as actual data from its four-month operation of the
Citation X. Dahl had a reasonable basis for his opinion and the
evidence was sufficient to demonstrate a reasonable probability
that profits would have been earned but for C&C’s conduct. (S.C.
Anderson, supra, 24 Cal.App.4th at p. 536; Kids’ Universe, supra,
95 Cal.App.4th at pp. 884–885; Kreedman, supra, 58 Cal.App.3d
at pp. 184–185.)
In sum, even if we accept that WAW’s use of a one-way
charter model for its new Citation X was an unestablished
business, as C&C contends, the record shows Dahl relied upon
data and evidence that afforded a nonspeculative basis to
calculate those profits with reasonable certainty. The trial
court did not err when it denied the motion for directed verdict.
2. The $300,000 Offset Was Not Enforceable as Part of a
Settlement Agreement Under Code of Civil Procedure
Section 664.6
C&C filed an objection to WAW’s request for entry of
judgment, arguing it was entitled to a $300,000 credit under a
purported mediation agreement. The trial court rejected C&C’s
objection and entered judgment in the full amount of the jury’s
19
verdict.8 Because the writing prepared at the mediation was
not enforceable under the relevant version of section 664.6,
we conclude the court properly rejected the objection.
On December 9, 2016, the parties participated in
a mediation. They prepared a writing at the mediation’s
conclusion, stating in relevant part: “The Parties have not
resolved the litigation, however, they reached the following
agreement: [¶] 1. [C&C], through its insurance carrier USAIG,
will make a payment of three hundred thousand dollars
($300,000.00) to [WAW] as soon as possible . . . to be used to pay
outstanding amounts due to [the owner of the Citation X]. . . . ;
[¶] . . . 4. [C&C], through its insurance carrier USAIG, shall
receive a credit for the $300,000.00 payment made herein
pursuant to this agreement against all other claims or damages
that may be awarded to [WAW].” The document was executed by
8 Statutory references are to the Code of Civil Procedure,
unless otherwise designated. The trial court concluded the
writing at issue was inadmissible under the mediation privilege.
(See Evid. Code, § 1119.) We do not reach the question of
admissibility because we conclude the writing was not
enforceable under the version of section 664.6 that existed when
the document was signed and enforcement was sought. Because
the issue is one of statutory interpretation, we review the ruling
de novo, exercising our independent judgment, and must affirm
on any ground supported by the record, even if the trial court did
not expressly consider it. (See Los Angeles County Prof. Peace
Officers’ Assn. v. County of Los Angeles (2004) 115 Cal.App.4th
866, 869 [questions of law such as statutory interpretation are
subject to the appellate court’s independent judgment]; Jimenez
v. County of Los Angeles (2005) 130 Cal.App.4th 133, 140 [where
the trial court’s ruling implicates a legal question, an appellate
court must affirm on any ground supported by the record].)
20
Clif Simonson, as Member for WAW. However, with respect to
C&C and USAIG, the document was executed “by and through
their attorney, Peter Brotzen.”
On November 16, 2018, C&C filed its objection to WAW’s
request for entry of judgment. C&C argued the provision for
a $300,000 credit was enforceable as a part of a settlement
agreement under section 664.6.9
At the time relevant here, section 664.6 provided: “If
parties to pending litigation stipulate, in a writing signed by
the parties outside the presence of the court or orally before
the court, for settlement of the case, or part thereof, the court,
upon motion, may enter judgment pursuant to the terms of the
settlement. If requested by the parties, the court may retain
jurisdiction over the parties to enforce the settlement until
performance in full of the terms of the settlement.”10
9 C&C did not present evidence, either at trial or in its
objection to the judgment, proving its insurance carrier paid
WAW $300,000 as stipulated in the mediation writing. WAW
does not dispute that it received a $300,000 payment; however,
it argues the payment was made for repairs to the Citation X—
not to pay amounts due to the aircraft’s owner—and Dahl had
already accounted for those covered repair costs in his damages
calculation.
10 On September 29, 2020, the Governor approved A.B. 2723,
which amends section 664.6 to add the following subparagraphs:
“(b) For purposes of this section, a writing is signed by a party
if it is signed by any of the following: [¶] (1) The party. [¶]
(2) An attorney who represents the party. [¶] (3) If the party
is an insurer, an agent who is authorized in writing by the
insurer to sign on the insurer’s behalf.
“(c) Paragraphs (2) and (3) of subdivision (b) do not apply
in a civil harassment action, an action brought pursuant
21
In Levy v. Superior Court (1995) 10 Cal.4th 578 (Levy),
our Supreme Court addressed “whether the written stipulation
must be signed personally by the litigant, or whether the
signature of the litigant’s attorney is sufficient to create a
settlement enforceable under section 664.6.” (Id. at p. 580.)
Because the settlement of a lawsuit implicates a substantial right
of the litigants themselves, our high court concluded that “in
providing for an enforcement mechanism for settlements by
‘parties,’ the Legislature intended the term to literally mean
the litigants personally.” (Id. at p. 584.) Because the litigants’
attorneys, and not the litigants themselves, had executed
the purported settlement agreement, the Levy court held the
agreement was not enforceable under section 664.6. (Levy,
at p. 586.)
Since Levy, the Courts of Appeal have uniformly held
section 664.6 requires the signature of all parties against whom
the agreement is sought to be enforced and the parties seeking to
enforce the agreement. (See Harris v. Rudin, Richman & Appel
(1999) 74 Cal.App.4th 299, 305; Sully–Miller Contracting Co. v.
Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30,
37; Gauss v. GAF Corp. (2002) 103 Cal.App.4th 1110, 1116–1121;
Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1255–1258.)
to the Family Code, an action brought pursuant to the Probate
Code, or a matter that is being adjudicated in a juvenile court
or a dependency court.
“(d) In addition to any available civil remedies, an attorney who
signs a writing on behalf of a party pursuant to subdivision (b)
without the party's express authorization shall, absent good
cause, be subject to professional discipline.”
22
Because the writing prepared at the mediation was signed
on behalf of C&C and its insurer only “by and through their
attorney,” the $300,000 credit provision was not enforceable
under section 664.6. (See Levy, supra, 10 Cal.4th at p. 586.) This
does not mean the provision cannot be enforced under alternative
procedures, but it does mean the trial court was not authorized to
incorporate the provision into the judgment under the summary
procedure established by section 664.6. (See Levy, at p. 586 &
fn. 5 [holding agreement was not enforceable under section 664.6,
but observing alternative procedures existed for enforcement,
including a separate suit in equity].) The trial court did not err.
3. The Sublease’s Attorney Fee Provision Did Not
Authorize Attorney Fees for WAW’s Negligence Claim
WAW moved for contractual attorney fees under sections
1021, 1032, and 1033.5 based on the following provision in its
sublease with C&C:
“8. Attorneys’ Fees. If there is any legal
action or proceeding between Sublandlord
and Subtenant to enforce any provision of this
Sublease or to protect or establish any right
or remedy of either Sublandlord or Subtenant
hereunder, the non‐prevailing party to such
action or proceeding will pay to the prevailing
party all costs and expenses, including
reasonable attorneys’ fees incurred by such
prevailing party in such action or proceeding
and in any appearance in connection therewith,
and if the prevailing party recovers a judgment
in any such action, proceeding or appeal, such
costs, expenses and attorney’s fees will be
23
determined by the court or arbitration panel
handling the proceeding and will be included
in and as a part of the judgment.”
The parties agree a prevailing party is eligible for attorney
fees under this provision for a legal action brought “to enforce any
provision of this Sublease” (the Enforce Clause) or “to protect or
establish any right or remedy of either Sublandlord or Subtenant
hereunder” (the Protect or Establish Clause).
The trial court granted WAW’s motion for attorney fees,
concluding the Protect or Establish Clause’s “use of the word ‘any’
to describe ‘right or remedy’ ” was “broad enough to encompass
tort claims.” We conclude the trial court erred.
Attorney fees are recoverable costs under sections 1021 and
1032 if authorized by contract. (§ 1033.5, subd. (a)(10).) Case
law interpreting section 1021 has consistently recognized “parties
may validly agree that the prevailing party will be awarded
attorney fees incurred in any litigation between themselves,
whether such litigation sounds in tort or in contract.” (Xuereb
v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341.)
“[T]he test is not whether the cause of action sounds in tort or
contract. Instead, the sole question is the intent of the parties:
did they intend to authorize the prevailing party to recover its
attorney fees for a tort cause of action.” (Allstate Ins. Co. v. Loo
(1996) 46 Cal.App.4th 1794, 1798.)
To answer this question, “we apply the ordinary rules of
contract interpretation.” (Santisas v. Goodin (1998) 17 Cal.4th
599, 608.) “ ‘Under statutory rules of contract interpretation, the
mutual intention of the parties at the time the contract is formed
governs interpretation. [Citation.] Such intent is to be inferred,
if possible, solely from the written provisions of the contract.
24
[Citation.] The “clear and explicit” meaning of these provisions,
interpreted in their “ordinary and popular sense,” unless “used
by the parties in a technical sense or a special meaning is given
to them by usage” [citation], controls judicial interpretation.
[Citation.] Thus, if the meaning a layperson would ascribe to
contract language is not ambiguous, we apply that meaning.’ ”
(Ibid.)
The plain words of the Enforce Clause make the parties’
intent clear: The prevailing party would be entitled to attorney
fees for a claim brought “to enforce any provision of this
Sublease.” (Italics added.) There is no reasonable construction
of this clause under which the identification of a “provision of
this Sublease” is not a prerequisite to an award of attorney fees.
Because WAW does not, and cannot, identify a provision of
the sublease that its action enforced, WAW was not entitled
to attorney fees under the Enforce Clause. (See Loube v. Loube
(1998) 64 Cal.App.4th 421, 430 [attorney fee provision “providing
for the payment of fees for an action brought to enforce the terms
of the parties’ agreement, cannot be read as a contractual
agreement to award fees in an action brought for legal
malpractice”].)
WAW’s reliance on Lockton v. O’Rourke (2010) 184
Cal.App.4th 1051 (Lockton) is misplaced. The plaintiff in
Lockton sued his former attorneys (an individual attorney and
the attorney’s law firm) for contract and tort causes of action
based on their alleged failure to preserve the plaintiff’s claims
in an underlying lawsuit. (Id. at p. 1059.) After the attorneys
successfully demurred, they moved for attorney fees under the
fee clause in their retainer agreement. (Id. at pp. 1070–1071.)
The trial court denied fees for the individual attorney on the
25
ground that he was not a signatory to the retainer agreement,
and thus could not be held liable for breach of contract. (Id. at
p. 1073.) The Lockton court reversed, concluding “the contract
and tort claims were inextricably intertwined,” and the attorney
was entitled to fees on all claims under Civil Code section 1717.
(Lockton, at p. 1073 [observing, “it is settled,” under Civil Code
section 1717’s mutuality principle, “that a defendant who is not
a signatory to the contract with the fee clause is entitled to fees
when sued on the contract ‘as if he were a party to it, when
a plaintiff would clearly be entitled to attorney’s fees should
he prevail in enforcing the contractual obligation’ ”].)
The Lockton court concluded the contract and tort claims
against the law firm were likewise inextricably intertwined;
however, because the law firm effectively represented itself in
the litigation, it could not recover fees under Civil Code section
1717 and our Supreme Court’s holding in Trope v. Katz (1995)
11 Cal.4th 274, 277 (Trope).11 (Lockton, supra, 184 Cal.App.4th
at pp. 1074–1075.) Nevertheless, the Lockton court held the
attorney fee provision was sufficiently broad to allow recovery
of fees under section 1021. The fee provision in the retainer
agreement provided: “ ‘The prevailing party in any action or
11 Civil Code section 1717, subdivision (a) authorizes the
recovery of attorney fees “[i]n any action on a contract, where
the contract specifically provides that attorney’s fees and costs,
which are incurred to enforce that contract, shall be awarded
either to one of the parties or to the prevailing party.” (Italics
added.) In Trope, our Supreme Court held “an attorney litigating
in propria persona cannot be said to ‘incur’ compensation for
his time and his lost business opportunities” and, thus, cannot
recover attorney fees under Civil Code section 1717. (Trope,
supra, 11 Cal.4th at p. 280.)
26
proceeding to enforce any provision of this agreement will be
awarded attorneys’ fees and costs incurred in that action or
proceeding, including, without limitation, the value of the time
spent by QEUO&H attorneys to prosecute or defend such an
action (calculated at the hourly rate(s) then normally charged
by QEUO & H to clients which it represents on an hourly
basis) . . . .’ ” (Lockton, at p. 1075.) The Lockton court held this
italicized language established the plaintiff’s intent to pay the
firm “for the value of the time spent by attorneys in that firm
to prosecute or defend an action based on the attorney-client
relationship created by the retainer agreement,” even though
the firm effectively represented itself in propria persona,
and this was sufficient to allow the recovery of fees for the
intertwined contract and tort claims under section 1021.
(Lockton, at p. 1078.)
Here, WAW dismissed its contract claim and C&C admitted
liability on WAW’s tort claim only. WAW does not contend its
tort claim was inextricably intertwined with its dismissed
contract claim. Lockton is inapposite.
WAW also was not entitled to attorney fees under the
Protect or Establish Clause. Focusing on the word “ ‘any’
to describe the ‘right or remedy’ ” the trial court concluded the
clause was “broad enough to encompass tort claims.” But this
construction ignores critical language in the clause specifically
limiting the recovery of attorney fees to claims brought “to
protect or establish any right or remedy of either Sublandlord or
Subtenant hereunder.” (Italics added.) Like the Enforce Clause’s
reference to “any provision of this Sublease” (italics added), the
Protect or Establish Clause’s use of the term “hereunder” plainly
limits recovery to an action that protects or establishes a right
27
under the sublease—not any right that possibly can be
established in a legal action.12 The trial court’s construction
is inconsistent with the plain language of the Protect or Establish
Clause.
WAW contends its action did protect or establish a right
or remedy under the sublease because the “lost profits” it won
“can be a form of ‘special’ or ‘consequential’ damages.” However,
the provision of the sublease WAW relies upon does not provide
a right to special or consequential damages—it expressly
precludes those damages as an available remedy.
Section 16.5 of the sublease provides in relevant part:
“Subtenant hereby agrees that Sublandlord shall not be liable
for injury or damage to Subtenant’s business or any loss of
income arising therefrom or for damage to the aircraft . . . .
Notwithstanding any provision in the Lease to the contrary,
in no event shall Sublandlord be liable to Subtenant for special,
incidental, consequential or punitive damages no matter how
occurring.” (Italics added.) Notwithstanding this provision,
WAW’s tort claim allowed it to recover damages it manifestly
12 WAW suggests “hereunder” refers to the terms
“Sublandlord or Subtenant,” and argues the fee clause “thus
authorizes the award of fees to WAW because it is one of the
parties ‘hereunder.’ ” This is not a reasonable construction of
the clause. “Sublandlord” and “Subtenant” are defined terms
that specifically refer to the parties to the sublease—C&C and
WAW, respectively. Because the definitions of these terms
already establish that C&C and WAW are parties under the
sublease, WAW’s proposed construction would render the term
“hereunder” surplusage, in violation of basic rules of contract
construction. (Farmers Ins. Exchange v. Knopp (1996) 50
Cal.App.4th 1415, 1421 [contracts are to be construed to avoid
rendering terms surplusage].)
28
could not have recovered under the terms of the sublease.
The trial court erred in awarding WAW attorney fees under
the sublease. (See Exxess Electronixx v. Heger Realty Corp.
(1998) 64 Cal.App.4th 698, 710 [award of attorneys fees cannot
be sustained on the theory that the tort claims were brought to
“ ‘enforce the terms’ ” of the lease]; DeMirjian v. Ideal Heating
Corp. (1949) 91 Cal.App.2d 905, 909–910 [lease authorizing
award of attorney fees in an action “ ‘to enforce Lessors’ rights
hereunder’ ” did not support fee award for tort claim].)
DISPOSITION
The judgment is affirmed. The order awarding attorney
fees is reversed. The parties shall bear their own costs.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EGERTON, J.
We concur:
EDMON, P. J.
LAVIN, J.
29