Lacagnina v. Comprehend Sys., Inc.

236 Cal. Rptr. 3d 641, 25 Cal. App. 5th 955
California Court of Appeal, 5th District·Decided August 3, 2018·No. A147559·Published·Cited by 24 cases

Opinion

Schulman, J.**

*958After a 10-day trial, a jury ruled in favor of appellant David Lacagnina on his claims *643for fraud, breach of contract, and breach of the covenant of good faith and fair dealing against respondents Comprehend Systems, Inc. (Comprehend) and its two cofounders, Richard Morrison and Jud Gardner. From June 1, 2012 to November 20, 2013, when he was terminated, Lacagnina worked for Comprehend as vice president of business development. The gist of Lacagnina's claims was that he was fraudulently induced to enter into an employment agreement with Comprehend by false representations made to him by Morrison and Gardner. The jury rendered a special verdict and awarded Lacagnina a total of $556,446 in damages, including $226,446 in damages for fraud and $75,000 for emotional distress. However, the trial court granted respondents' motion for judgment notwithstanding the verdict on the fraud claim on the ground that Lacagnina was not damaged by the alleged fraud, and entered an amended judgment against respondents in the amount of $255,000. Lacagnina now appeals from that judgment, and from the trial court's order granting respondents' motion for nonsuit. We will reverse the judgment in part and affirm in part.

In the published portion of this opinion, we reject Lacagnina's contention that an employee who recovers a judgment against an employee for lost compensation has suffered a "theft" of "labor" for which he or she is entitled to recover treble damages and attorneys' fees under Penal Code Section 496, subdivision (c).

I. STATEMENT OF FACTS

"Because this is an appeal from a judgment notwithstanding the verdict, we state the facts in the light most favorable to the verdict." ( Flanagan v. Flanagan (2002) 27 Cal.4th 766, 769, 117 Cal.Rptr.2d 574, 41 P.3d 575.) Likewise, "[i]n reviewing a grant of nonsuit, we are 'guided by the same rule requiring evaluation of the evidence in the light most favorable to the plaintiff.' [Citation]." ( Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291, 253 Cal.Rptr. 97, 763 P.2d 948.)

A. Background

In 2010, Richard Morrison and Jud Gardner founded a new company called Comprehend Systems (Comprehend). They were in the process of developing a software product, Comprehend Clinical, that would assist pharmaceutical companies *959and others in managing and tracking data from clinical drug trials. Morrison and Gardner, both software engineers, had limited capital and no background in sales.

Around the same time, in 2010, Lacagnina also started a new company, e-Clinical Agency (e-Clinical). E-Clinical was designed to sell multiple software products from multiple vendors for use by small and medium-sized pharmaceutical companies in clinical drug trials. Lacagnina had over 30 years of business experience, including starting several companies, and considerable sales experience. His plan was to build e-Clinical as his last start-up venture, and retire after four or five years on the "reoccurring revenue stream" that would pay a commission each time a product he sold was used.

As part of his work with e-Clinical, Lacagnina became familiar with Comprehend and its product, which he believed could be a "game changer" in the industry. Initially, Lacagnina and Morrison reached an oral agreement that e-Clinical would receive a 60 percent commission on any sale of Comprehend's product that Lacagnina could secure before the end of the year. In February 2012, that oral agreement was replaced with a written sales referral agreement for a one-year term in which e-Clinical agreed to sell Comprehend's product *644in exchange for a 30 percent commission.

At the time the agreement was entered into, Comprehend had not closed any sales of its product and did not have a single "referenceable" customer (that is, a company that could credibly vouch for it in marketing to other prospective customers or discussions with potential venture capital investors). Further, at the time, Comprehend had only limited seed money, and it was hoping to secure an "angel" investor to secure the financing it needed. Morrison asked Lacagnina to speak with one such investor, Life Science Angel Network, which invested in Comprehend shortly after meeting with Lacagnina.

B. Lacagnina Is Employed by Comprehend

In May 2012, just as Lacagnina's 18 months of work at e-Clinical building sales relationships in the pharmaceutical industry was "starting to get some traction," Morrison asked Lacagnina to leave e-Clinical and come to work full time for Comprehend. Lacagnina believed in Comprehend's product, but he had a number of concerns that he wanted addressed, and that he discussed with Morrison. In particular, Lacagnina made clear to Morrison that at "at my age I only wanted to work four or five years," which had been his plan at e-Clinical. Morrison told Lacagnina that because of Comprehend's limited funds, he could only afford to pay him $50,000, plus stock options and benefits. Lacagnina was told that once the company got its initial customers *960and funding, he would be brought up to a compensation package with a base salary of $150,000 and would receive additional stock options. Lacagnina asserted that he "was led to believe this was a partnership going forward" and that he believed he would be "treated as a partner."

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Lacagnina v. Comprehend Sys., Inc., 236 Cal. Rptr. 3d 641, 25 Cal. App. 5th 955 (Cal. Ct. App. 2018).

236 Cal. Rptr. 3d 641 (Lacagnina v. Comprehend Sys., Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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