Missakian v. Amusement Indus., Inc.
| Decision Date | 29 September 2021 |
| Docket Number | B296749 |
| Parties | Craig MISSAKIAN, Plaintiff and Appellant, v. AMUSEMENT INDUSTRY, INC., et al., Defendants and Appellants. |
| Court | California Court of Appeals Court of Appeals |
69 Cal.App.5th 630
285 Cal.Rptr.3d 23
Craig MISSAKIAN, Plaintiff and Appellant,
v.
AMUSEMENT INDUSTRY, INC., et al., Defendants and Appellants.
B296749
Court of Appeal, Second District, Division 5, California.
Filed September 29, 2021
Salisian Lee and Richard H. Lee, Los Angeles; Law Offices of Craig Missakian and Craig H. Missakian, Los Angeles; Greines, Martin, Stein & Richland and Timothy T. Coates, Los Angeles, for Plaintiff and Appellant.
Bashir E. Eustache, Los Angeles, for Defendant and Appellant Amusement Industry, Inc.
Tucker Ellis, Marc R. Greenberg, Los Angeles, for Defendant and Appellant Allen Alevy.
Professor Laurie Levenson, Los Angeles, as Amicus Curiae on behalf of Defendant and Appellant Amusement Industry, Inc.
MOOR, J.
Former in-house counsel Craig Missakian (Missakian) filed suit against his former employer Amusement Industry, Inc. (Amusement) and its founder Allen Alevy (Alevy),1 based on an oral promise to pay a bonus and share of recovery from litigation. The jury issued a special verdict in favor of Missakian on the claims brought against Amusement for breach of oral contract and promissory fraud, but the jury also made special verdict findings in favor of Alevy on the sole claim of promissory fraud brought against him, finding that Alevy did not make a false promise. The trial court granted judgment notwithstanding the verdict (JNOV) on Missakian's promissory fraud claim against Amusement. Each party filed an appeal.
Amusement appeals from the portion of the judgment awarding damages for breach of oral contract. Amusement contends the contract in question is void under Business and Professions Code section 6147,2 which requires contingency fee agreements to be in writing. We hold that, regardless of his status as in-house counsel, Missakian's oral agreement with Amusement is a contingency fee agreement subject to section 6147 and is therefore unenforceable as a matter of law.
Missakian appeals from the order granting JNOV on the promissory fraud claim. We find the jury's special verdict to be inconsistent because it found Alevy did not make a false promise, but that Amusement (acting only through Alevy) did. Because the court cannot choose between the jury's inconsistent responses, the court should have ordered a new trial as to all parties rather than JNOV.
Alevy appeals from a postjudgment order denying his motion for attorney fees. In light of our reversal of the judgment and remand for a new trial, Alevy's contentions are moot.
The judgment is reversed, and the case is remanded for a new trial as to all parties.
FACTUAL BACKGROUND
During the time frame relevant to this case, Alevy was an owner, officer, and board member of Amusement, with authority to enter into contracts on behalf of Amusement. Amusement was a real estate company, and the company was engaged in ongoing litigation (the Stern Litigation) in New York, stemming from a real estate deal in which Amusement lost $13 million to an alleged fraudster. Sometime in the summer of 2010, Alevy contacted Missakian to discuss the prospect of Missakian working as an in-house attorney at Amusement, where Missakian's duties would include working on the Stern Litigation.
Alevy offered and Missakian accepted the terms of his employment at Amusement (the Oral Contract). As general counsel,3 Missakian would receive a salary of $325,000. Once the Stern Litigation resolved, Missakian would receive a bonus of $6,250 for each month he had worked on that litigation (Monthly Bonus), and an additional bonus of ten percent of the recovery
in the Stern Litigation, excluding ordinary litigation costs (Stern Litigation Bonus). The parties exchanged multiple written drafts negotiating various details of the Oral Contract, but they never signed a written contract. Missakian started working as an employee at Amusement on December 10, 2010, spending most of his time on the Stern Litigation, but doing some other work as well.
In March 2011, Missakian learned of the existence of a draft agreement that significantly altered the terms of the Oral Contract, specifying that the Stern Litigation Bonus would be based not on all amounts recovered, but on the balance after Amusement's initial $13 million loss and other litigation expenses (such as in-house and outside attorney fees) had been deducted. Missakian "blew up" upon discovering this new draft, but Alevy reassured him that the language was a mistake. Missakian continued working, periodically inquiring about a revised agreement. Alevy usually deflected his inquiries.
As the Stern Litigation moved closer to settlement, Missakian renewed his efforts to reduce the Oral Contract to writing. He sent a new draft agreement to Alevy on April 7, 2014. Alevy told Missakian he already had a signed agreement in his personnel file. Upon obtaining the copy (which was dated December 10, 2010 and was signed by Alevy) from his personnel file, Missakian believed Alevy and Amusement were trying to change the Oral Contract, because the version from the file again contained language that Missakian had disputed in March 2011. Later the same day, Missakian sent an e-mail to Alevy and Yanki Greenspan, president of Amusement, that included the following: "When I first saw this agreement I was furious and almost quit on the spot. I was told that it was a mistake. Now I see that I was lied to and that it was not a mistake but an attempt to paper the file without my knowledge. I simply cannot believe that this was done or that anyone could believe it would hold up in court. Please understand that if we cannot resolve the matter this week, I will be submitting my resignation based on the company's tortious denial of and anticipatory breach of our oral agreement that was memorialized in the writing and upon which I relied in leaving my previous job." Missakian and Amusement were unable to resolve their differences. After he was offered a position in federal government, Missakian left Amusement, effective August 1, 2014.
The Stern Litigation settled in February 2015, with Amusement receiving a settlement of $26 million. Missakian never received the Monthly Bonus or the Stern Litigation Bonus.
PROCEDURAL HISTORY
A. Complaint, demurrer, and writ
In April 2016, Missakian filed suit against Alevy and Amusement, alleging five causes of action: breach of contract, fraudulent inducement, failure to pay wages ( Labor Code, § 203 ), declaratory relief, and accounting. The complaint named Amusement as a defendant for all causes of action. The only claim naming Alevy as a defendant was the fraudulent inducement claim.4
Alevy and Amusement filed a demurrer to the complaint and moved to strike from
the complaint all references to the Stern Litigation Bonus. Both defendants argued that Missakian was barred from enforcing the Oral Contract, because a contingency fee agreement is voidable unless in writing, signed by both parties. The trial court overruled the demurrer, but granted the motion to strike, reasoning that section 6147 barred enforcement of an oral contingency fee agreement.
Missakian filed a petition for writ of mandate, seeking relief from this court. Missakian argued the trial court made two errors when it granted the motion to strike. First, the court erroneously construed section 6147 to apply to employee-attorneys, a question of first impression in California. Second, contrary to the standard applicable at the demurrer stage, the court decided a contested factual issue, concluding that Missakian was an independent contractor earning a fee, rather than an employee earning wages.
Ruling on Missakian's petition, this court offered the following tentative conclusion: "In reviewing an order sustaining a demurrer, we take the allegations of the complaint as true. ( Dale v. City of Mountain View (1976) 55 Cal.App.3d 101, 105, 127 Cal.Rptr. 520.) Plaintiff's complaint alleges that the parties agreed he would receive ‘a bonus equal to 10% of any and all sums recovered in the [Stern litigation] or related matters.’ Whether the bonus constitutes wages or attorney's fees is a factual question that cannot be determined on the pleadings. (See, e.g., Millsap v. Federal Express Corp. (1991) 227 Cal.App.3d 425, 431, 277 Cal.Rptr. 807 [‘Whether a person is an employee or an independent contractor is ordinarily a question of fact’].)" (Missakian v. Superior Court , B278773, Nov. 15, 2016.) We issued an alternative writ directing the trial court to either (a) vacate its order granting the motion to strike and enter a new order denying the motion to strike, or (b) show cause why a peremptory writ should not issue. (Ibid .) The trial court subsequently entered a new order, denying the motion to strike.
B. Pretrial motions
Before trial, the parties filed several motions in limine raising the issue of the Oral Contract's enforceability under section 6147 or rule 3-300 of the California Rules of Professional Conduct (rule 3-300). All parties agreed that Missakian was an employee, and that any contract was oral, not written. Referencing this court's alternative writ, the trial court found that the questions of contract terms and breach were factual questions for the jury. It granted Missakian's motions in limine on the oral contract question, and denied Amusement and Alevy's motions on the same issue.
C. Special verdicts after trial
The parties went to jury trial on two causes of action: breach of oral contract and promissory fraud. The jury found that Amusement had breached the Oral Contract. For Amusement's failure to pay the Stern Litigation Bonus, the jury awarded Missakian $2.25 million, and for the failure to pay the Monthly Bonus, the jury awarded $275,000.
On the promissory fraud claim, the jury ultimately entered a special verdict in favor of Alevy, but against Amusement.5 It made special verdict findings that while Alevy made a promise to Missakian, he intended to keep the promise when made. However, the jury found against...
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