Thompson v. Asimos

• Citation: 6 Cal.App.5th 970,212 Cal.Rptr.3d 158
• Decision Date: 15 December 2016
• Docket Number: A140096
• Court: California Court of Appeals Court of Appeals
• Parties: Jason Everett THOMPSON et al., Plaintiffs, Cross-defendants and Respondents, v. Dean ASIMOS, Defendant, Cross-complainant and Appellant.

6 Cal.App.5th 970

212 Cal.Rptr.3d 158

Jason Everett THOMPSON et al., Plaintiffs, Cross-defendants and Respondents,

v.Dean ASIMOS, Defendant, Cross-complainant and Appellant.

A140096

Court of Appeal, First District, Division 4, California.

Filed December 15, 2016

Certified for Partial Publication.^*

Law Offices of Jessica R. Barsotti, Jessica R. Barsotti, Oakland, for Defendant, Cross-complainant and Appellant.

Kyle Law Corporation, Stephan E. Kyle, San Francisco, Andrew H. Winetroub for Plaintiffs, Cross-defendants and Respondents.

Streeter, J.Jason Everett Thompson founded a consulting firm and operated it as a sole proprietorship under the dba Wired Real Estate Group (WREG) with the aim of advising clients in a niche internet infrastructure industry called "colocation," sometimes, but not always, performing services that required WREG to have a real estate broker's license. Because Thompson did not have a broker's license when he founded WREG, he decided to collaborate with someone who did, Dean Asimos. To memorialize the terms of their collaboration, Thompson and Asimos adapted a standard form independent contractor agreement typically used by real estate brokers and agents.

The form agreement Thompson and Asimos used turned out to be a poor fit for the unique business context in which WREG operated. A series of disputes arose between the two of them concerning, among other things, alleged underpayment of commissions and alleged failure to comply with regulatory requirements governing real estate brokerage. These disputes led to litigation, with the parties suing each other on various breach of contract and business tort theories. After a bench trial, Thompson prevailed in all respects, obtaining a substantial damages award, plus an award of attorney fees. Asimos took nothing, and now appeals from the judgment.

In the published portion of this opinion, we affirm the trial court's rejection of all of Asimos's claims against Thompson and its determination of liability against Asimos for breach of contract, but vacate the damages award and remand for recalculation and clarification of the amount awardable. In the unpublished portions of the opinion we deny Thompson's motion to dismiss the appeal under the appellate disentitlement doctrine, and affirm the trial court's liability findings against Asimos on Thompson's claims for unfair competition and trademark infringement.

I. BACKGROUND

In a terse four-page Statement of Decision, the trial court framed the business context giving rise to this lawsuit as follows: While "most real estate agents deal with residential or commercial property[,] [Thompson] deals with the highly specialized kind of real estate needed to house the hardware which makes the internet work. He does business under the name Wired Real Estate Group. Initially Wired Real Estate Group was a consulting business. Thompson sold his advice and was paid an hourly rate, an activity not regulated by the California Department of Real Estate (DRE)." A great deal is packed into these background observations about the business setting. To illuminate how the business circumstances bear on our analysis of the trial court's disposition of the parties' claims, we begin with a summary of the evidence presented at trial.

A. Evidence Presented at Trial

1. Thompson's Consulting Business, WREG

Thompson, a civil engineer with a background in the power plant industry, testified that in the early 2000s, he was working for Equinix, a company operating in what was then a nascent internet-infrastructure industry called "colocation services." Colocation, according to Thompson, means multitenancy; and colocation data services means advice and consulting offered to companies involved in managing or locating themselves in "data centers," buildings which house computer servers and other networking equipment, all of which must be powered, connected to the internet, and cooled in a highly specialized way.

According to Thompson, companies needing large-scale internet storage (i.e., "cloud") capability and high-speed broadband access to the internet tend to cluster together in data center colocation arrangements under the umbrella of "management services agreements." To advise such companies, Thompson left Equinix to start his own independent colocation services consulting business. In 2005, when he left Equinix, Thompson was not set up to take advantage of real estate brokerage opportunities in his colocation services consulting practice. He was a licensed real estate agent, but he was not a licensed real estate broker.

In 2008, Thompson met Asimos, a real estate broker whose expertise was mostly in residential real estate. Asimos had little knowledge of colocation services, but he did have a real estate broker's license. Seeing the potential for mutual advantage, Thompson and Asimos, after brief discussion, "pretty quickly" agreed to enter into what would become a two-year business collaboration.

On June 4, 2008, Thompson and Asimos signed the first of two successive independent contractor agreements governing their relationship (the "ICAs"), the first covering the period from inception through December 31, 2008, and the second, negotiated in March 2010 but covering the period January 1, 2009 through September 30, 2010. The renewal contract included two written amendments, added as attachments, and made a number of revisions to the body of the contract. The most significant among these revisions was language broadening the scope of what the parties considered to be commission-generating transactions covered by the ICAs.

Just before he and Asimos signed their first contract, Thompson established a sole proprietorship known by the dba WREG. At the same time, he issued a press release, displaying in the release the trademarked name, WREG, and announcing that he was bringing a new consultant onto "the Wired Real Estate Group team." He also filed a fictitious business name statement for WREG in the City and County of San Francisco and opened a bank account in WREG's name at Wells Fargo Bank.

2. The Issue of DRE Regulation

On the topic of DRE regulation, the trial testimony of Thompson and Asimos was in accord on three basic points. First, a real estate broker has supervising responsibility over an agent on all real estate transactions for which the agent utilizes the broker's license. Second, if the agent operates through an entity, the broker must register the name of that entity with DRE under the broker's license. And, third, commissions on all real estate transactions requiring a broker's license must be paid directly to the broker, who then distributes the agreed share of commissions to the agent.

Although there was no dispute between Thompson and Asimos as to what the applicable DRE rules were, they disagreed on how these rules applied to WREG. Thompson testified that the consulting aspects of WREG's business do not involve the "[sale], lease or exchange" of real property ("licensed" deals, in his terminology), and thus do not require a real estate broker's license. Because most colocation data services consulting involves brokering of "personal property" or "service[s]," Thompson testified, most of WREG's consulting business is not regulated by DRE.

According to Thompson, Asimos recognized that most of WREG's consulting business was "separate and apart" from its business conducted under the ICAs because he showed no interest in it. To ensure full disclosure of anything Asimos wished to know about WREG's activities, Thompson testified that he regularly sent Asimos detailed "pipeline reports" showing the status of leads, pending deals, and closed transactions for all WREG business. Thompson claimed to have "spent a lot of time explaining these things" to Asimos, but rather than ask follow-up questions, Asimos complained that the pipeline reports had "too much information" and seemed to have "trouble understanding" them.

Asimos, on the other hand, claimed Thompson never disclosed enough about WREG's consulting activities. He said Thompson "never told [him] that he planned to do business [himself] as [WREG] as a consultant." He claimed he expected from the outset that all WREG business would run through him, as indicated by the fact that Thompson assigned him the right to use the WREG name. Asimos testified that, shortly after signing the 2008 ICA, he obtained his own dba for WREG in San Mateo County, and sought to register that dba with DRE by sending in the required DRE registration form. To collect and distribute expected WREG revenues, Asimos testified that he established a bank account at Bank of America. He claimed to have been unaware that Thompson had a separate dba for WREG and a separate bank account, and said he was "shocked" when Thompson began sending him commission checks directly, since the money flow, in his view, was supposed to be the opposite by DRE regulation.

3. Meager Commission Revenue and DRE Compliance Problems

In a harbinger of problems to come, 2008 produced no commission revenue at all for Asimos. Thompson described that year as a challenging one due to the recession. At the time, Thompson testified, WREG was pursuing many deals, some on the consulting side, and some "licensed" deals; a few of the consulting deals were completed, but none of the "licensed" deals closed, which is why Asimos received no commission revenue in 2008. On the unregulated side of his business, Thompson said he began discussions in the fall of 2008 with Astound Broadband LLC (Astound) about a colocation arrangement with Amazon, but that deal did not close until late April 2009.

Thompson testified that, in 2009, one of the reasons he was willing to negotiate renewal terms expanding the defined scope of the commission-generating deals covered by the ICA was because his collaboration with Asimos had generated so little for Asimos to that point. The renewal terms did produce an increase for Asimos in commissions received on WREG transactions from...