Metropolitan News-Enterprise


Thursday, January 2, 2020


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Investor Gains, Loses, Gains, Loses $62 Million Judgment

Court of Appeal Says Man’s Own Testimony as to Value of Companies Doesn’t Suffice


By a MetNews Staff Writer


A man who was stripped of a $62 million judgment by the Court of Appeal, had it reinstated by the trial court on remand, has again been divested of the award on appeal—this time permanently—because he relied on his own testimony, not that of an expert, as to the valuation of companies.

Court of Appeal Presiding Justice Lee Edmon of this district’s Div. Three wrote the opinion, filed Monday and not certified for publication. It affirms a judgment by Los Angeles Superior Court Judge David Sotelo—except to the extent of striking one paragraph from it: the paragraph awarding to plaintiff Christopher Adams against his former partners, Hong Mu and David Topolewski.

Adams contended that he was cheated out of his 19.7 percent share in educational technology companies in which he had invested. At the first trial, before Los Angeles Superior Court Judge Mary Strobel, the defendants did not appear.

2012 Reversal

An economist testified as to the value of Adams’s interest. The Court of Appeal reversed the judgment on Nov. 19, 2012 because an improper accounting method was used.

In that opinion, then-Justice Richard Aldrich of Div. Three, now retired, said:

“In concluding that the trial court relied on an improper valuation method, we follow the law even though it seems inequitable that Mu and Topolewski, who failed to abide by the judicial process and did not show up for trial, benefit from this legal error. Our legal conclusion is not a ‘win’ for Mu and Topolewski, and we do not intend to reward them for their litigation conduct, which inexplicably included the failure to inquire about the status of their case after their attorney had been relieved as counsel.”

Aldrich’s Opinion

Aldrich continued:

“If Mu and Topolewski do not comply with discovery requests on remand, or engage in any conduct to further delay a resolution of this action, we are confident that the trial court will issue the necessary orders, and if appropriate, sanctions for noncompliance. Under no circumstance would it be equitable or just to conduct a second trial on the valuation of Adams’s 19.7 percent interest without the financial documents to which Adams is entitled to obtain in discovery.”

Meanwhile, the assets of the companies in which Adams had invested were turned over to new companies. Adams testified as his reckoning as to the value of those companies.

Sotelo barred objections by the defendants on the basis of evidentiary sanctions imposed on them based on their refusals to provide documents in discovery.

Adams was awarded $62,282,000.

Substantial Evidence Absent

Announcing the reversal, Edmon said the award “is not supported by substantial evidence because Adams was not qualified to opine on the value of the New Companies, his valuation opinion was not based on competent evidence, and he did not employ an accepted valuation methodology.”

She elaborated:

“We conclude that the trial court abused its discretion in finding Adams qualified to give expert testimony on the value of closely held corporations because Adams did not establish that he had the requisite knowledge, skill, experience, training, or education to qualify as a valuation expert. It is undisputed that Adams does not have a college degree, worked for much of his career as a salesperson and later as a managing director, and at the time of trial was running a small biotech firm. Other than at the first trial of this action, where the trial court rejected his opinion, Adams had never offered expert testimony with regard to the valuation of a business. And, while Adams testified to having invested in many limited partnerships, nothing in his education or experience qualified him to give expert testimony on the value of closely held foreign companies.”

Evidence Code Section

Adams argued that under Evidence Code §813, the value of property may be established by testimony of an owner of the property or one entitled to possession of it. Edmon responded:

“But this principle does not apply in the present case because plaintiff unquestionably was not an owner of any of the New Companies. Nor was plaintiff a person ‘entitled to possession of the property’…: His claim in this litigation has always been to a share of the value of the companies, not a share of the companies themselves.”

She added that the testimony “was based on factually unfounded assumptions, unauthenticated documents, and an unproven valuation methodology.”

No Remand

Edmon declared:

“We find ourselves, once again, in the position of striking portions of a judgment against Topolewski and Mu notwithstanding their failure to participate appropriately in this litigation.  We recognize, moreover, that Topolewski’s and Mu’s failures to respond to discovery, even after being ordered to do so, seriously complicated Adams’s ability to marshal the evidence he needed to prove his case.  Nonetheless, the evidentiary sanctions against Topolewski and Mu did not relieve Adams of his burden of proof, including his obligation to support his claims with admissible, reliable evidence. 

“Because the evidence was insufficient to support the damages award against Topolewski, Mu, and the Specially Appearing Parties, we strike paragraph 2 of the judgment.  We do so, moreover, without granting a retrial on the issue.”

She cited authority for the proposition that if a party had the opportunity to present evidence of damages and failed, a remand is unnecessary.

The case is Adams v. Topolewski, B293813.

Jeffrey J. Zuber and Agnes M. Sullivan of the law firm of Zuber Lawler & Del Duca represented the defendants and Robert C. Baker and Laurence C. Osborn of Baker, Keener & Nahra acted for the plaintiff.


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