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C.A. Upsets Decisions in Conflict Over Trellis
Terms Case, Presided Over by Then-Judge Michael Linfield, a ‘Procedural Mess’
By a MetNews Staff Writer
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NICOLE CLARK attorney/Trellis CEO |
The Court of Appeal for this district yesterday affirmed in part, reversed in part, and vacated in part the judgment and postjudgment orders in litigation among two founders of Trellis Research, Inc. and the corporation, declaring that the handling of the case in the trial court was thoroughly botched.
Trellis is a fee-based online service that provides access to tentative rulings.
Then-Los Angeles Judge Michael P. Linfield, now director of litigation for a personal injury firm, presided over the case. Presiding Justice Elwood Lui of this district’s Div. Two said in the unpublished opinion:
“This case presents a bitter dispute that was improperly tried by the parties and the trial court. Simply put, the case is a procedural mess, compounded by significant gaps in the record. It appears many critical decisions were made during unreported chambers’ conferences or hearings. Our task is to resolve the issues presented without getting into the weeds of the many procedural deficiencies and inconsistencies that make this case so convoluted. With that in mind, rather than address the opposing parties’ appeals separately, we consider them together, examining the challenged rulings on their posttrial motions.”
Adage Proven
The initial founders of Trellis (later joined by a third co—founder) are attorney Nicole Clark and software engineer Andrew Thaler. They had once dated—prompting Lui to remark, “This litigation proves the adage, ‘Never go into business with friends’ ”—but had a falling out after starting Trellis, with Clark ousting Thaler.
Trellis sued Thaler; Thaler sued Trellis and Clark.
A jury found that Thaler intentionally interfered with contractual relations through post-termination lies to investors, awarding Trellis $305,000 in compensatory damages and $610,000 in punitive damages; it determined that Clark breached her fiduciary duty to Thaler by firing him and was liable to him in the amount of $600,000; and it decided that Trellis owed Thaler $22,265 in unpaid wages.
Thaler waived the damage-award in favor of receiving declaratory equitable relief in the form of an award of stock in the company, with Linfield awarding him 583,333 shares.
Declaratory Relief Improper
Lui said that declaratory relief was inappropriate because “[n]o actual controversy existed between the opposing parties” and the “parties also failed to allege any continuing business relationship between them that would be clarified and stabilized through declaratory relief.”
The jurist agreed with Clark that Linfield erred in denying her motion for judgment notwithstanding the verdict on the cause of action for breach of fiduciary, saying that he should have applied the business-judgment rule, He wrote:
“Clark’s ousting of Thaler either for consistently refusing to do his job or intentionally harming the Company is a classic exercise of business judgment. Far from conflicting with Clark’s personal interests, her decision to terminate Thaler was in the best interests of Trellis. Whatever personal animus Clark had for Thaler, the jury agreed with her contention at trial that it was her need to protect the Company from Thaler’s misconduct that led to his termination. Clark’s motion should have been granted.”
Trellis was deserving of a compensatory-damage award against Thaler based on investors demanding their money back, Lui said, but not punitive damages because the company failed to show that that the software engineer had sufficient funds to pay that amount. Taking the stance that Trellis had its chance, he declared that “[n]o retrial is required.”
Left standing is the unpaid-wages award, plus $48,706.00 in attorney fees and $41,195.82 in costs assessed by Linfield in connection with that cause of action.
The case is Trellis Research v. Thaler, B330990,
Alyssa D. Bell and Martin J. Cristopher Santos of the downtown Los Angeles firm of Cohen Williams represented Trellis and Clark. Robert G. Loewy of Aliso Viejo and South Dakota lawyer Stephen Demik acted for Thaler.
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