Judge: Daniel S. Murphy, Case: 19STCV37687, Date: 2023-09-01 Tentative Ruling

Case Number: 19STCV37687    Hearing Date: January 22, 2024    Dept: 32

BACKGROUND

            On October 21, 2019, Lenny & Larry’s, LLC filed this action against Defendant A&B Ingredients, Inc. The operative Second Amended Complaint, filed June 6, 2022, alleges (1) breach of the implied warranty of merchantability, (2) breach of the implied warranty of fitness, (3) negligent misrepresentation, (4) fraudulent misrepresentation, and (5) unfair competition. The complaint arises from the following facts.

            Plaintiff is a manufacturer of health and fitness oriented food products, such as cookies. Defendant sells a variety of ingredients to food manufacturers, including Plaintiff. The particular ingredient at issue in this case is the antioxidant CytoGuard. CytoGuard is a cultured dextrose powder (“CDP”). Plaintiff alleges that the inclusion of CDP in its cookies caused the products to have an “off flavor” and “soapy” taste, leading to customer complaints and forcing Plaintiff to discontinue sales. Plaintiff contends that the cause of the flavor issue was the presence of lipase in the CDP.  

            The matter came on for trial from October 16, 2023 to November 3, 2023, after which the jury returned a verdict in favor of Plaintiff on the claim for breach of implied warranty of merchantability and in favor of Defendant on the claims for breach of implied warranty of fitness, intentional representation, and negligent representation. The jury further found that Plaintiff’s damages were $0 for lost profits and $958,305 for other damages. On November 27, 2023, the Court entered judgment for Plaintiff against Defendant in the amount of $958,305.

            On December 22, 2023, Plaintiff filed the instant motion for new trial. Defendant filed its opposition on January 2, 2024. Plaintiff filed its reply on January 9, 2024.  

LEGAL STANDARD

            A verdict may be vacated, and a new trial granted, on the following grounds to the extent they materially affect the substantial rights of a party: (1) irregularity in the proceedings; (2) misconduct of the jury; (3) accident or surprise; (4) newly discovered evidence; (5) excessive or inadequate damages; (6) insufficiency of the evidence; or (7) error in law. (Code Civ. Proc., § 657.) “A new trial shall not be granted upon the ground of insufficiency of the evidence to justify the verdict or other decision, nor upon the ground of excessive or inadequate damages, unless after weighing the evidence the court is convinced from the entire record, including reasonable inferences therefrom, that the court or jury clearly should have reached a different verdict or decision.” (Ibid.)

            A trial court has “no power to act as a super juror and substitute its personal opinion for that of the jurors.” (Huy Fong Foods, Inc. v. Underwood Ranches, LP (2021) 66 Cal.App.5th 1112, 1126.) “The purpose of Code of Civil Procedure section 657 . . . is to allow the trial court to grant a new trial on those rare occasions when the jury's verdict is so at odds with any reasonable view of the evidence that judicial intervention is required to avoid a manifest miscarriage of justice.” (Ibid.)

DISCUSSION

I. Weight of the Evidence

            Plaintiff argues that the jury’s decision to award $0 in lost profits is contrary to evidence. “Lost profits to an established business may be recovered if their extent and occurrence can be ascertained with reasonable certainty; once their existence has been so established, recovery will not be denied because the amount cannot be shown with mathematical precision.” (Berge v. Int'l Harvester Co. (1983) 142 Cal.App.3d 152, 161.) “Damages are, of course, limited to those proximately caused by the wrong complained of.” (Ibid.)

            Plaintiff argues that the extent of the soapy flavor incident was uncontroverted. Seven witnesses testified that affected lots may contain between 25% to 80% soapy cookies. Plaintiff argues that the impact of the incident was uncontroverted. Two customers testified that they stopped purchasing Plaintiff’s cookies after eating an affected cookie. Plaintiff’s expert, Professor Stanton, testified that the ingredient problem hurts the brand as a whole and expected sales to go down if more people were exposed to the flavor issue. Plaintiff argues that sales would not have declined but for the flavor issue. Defendant’s expert, Mr. Dos Santos, acknowledged an upward trend going into 2017 and testified that he would not project a decrease in sales based on his analysis. But Plaintiff’s sales did in fact decrease in 2017. Professor Stanton testified it was “more likely than not” that the flavor incident caused the decline in sales because he could not identify any “alternative hypothesis” to explain the downward trend. Mr. Dos Santos testified that he could not explain the downward trend because he “did not investigate specifically the reasons why it went down.” Lastly, Plaintiff testified that it lost $450,000 from cookies that were produced but not sold.  

            On the other hand, Mr. Dos Santos testified “that both models and assumptions that [Stanton] used were flawed and the calculations associated with that are unreliable.” Mr. Dos Santos also conducted an independent analysis and concluded that “there was no support for the theory of economic harm that’s been put forward by the plaintiffs.” Mr. Dos Santos testified that Professor Stanton’s calculations were “highly speculative and unreliable.” Mr. Dos Santos identified potential alternative causes—such as other complaints about the cookies, competition, a product recall, a class action lawsuit alleging fraud, and COVID—that Professor Stanton did not account for in his analysis. And while a broader timeframe suggests an upward sales trend going into 2017, a narrower timeframe shows that some sales began decreasing prior to the flavor incident. Mr. Stanton testified that “[t]here is a theoretical basis to say we expected the product to be increasing [at an] increasing rate” but acknowledged that “[t]here is no theoretical explanation for the exact numbers that we used.”  

            Based on this conflicting evidence, the cause of the flavor issue was not “uncontroverted” as Plaintiff contends. Rather, the jury was entitled to credit Defendant’s evidence over Plaintiff’s and reject the notion that CytoGuard CDP caused Plaintiff’s lost profits. The jury was entitled to find that Plaintiff’s analysis was speculative and unreliable. While Defendant did not affirmatively prove an alternative cause of the sales decline, the jury could have reasonably concluded that Plaintiff failed to account for other potential causes and that therefore Plaintiff’s analysis was not credible and did not support lost profits. The Court does not find that the “jury clearly should have reached a different verdict.” (See Code Civ. Proc., § 657.) This is not one of “those rare occasions when the jury's verdict is so at odds with any reasonable view of the evidence that judicial intervention is required.” (See Huy Fong Foods, Inc., supra, 66 Cal.App.5th at p. 1126.) Instead, the evidence supports a conclusion that Plaintiff failed to substantiate the existence of lost profits “with reasonable certainty.” (See Berge, supra, 142 Cal.App.3d at p. 161.) Therefore, the jury was entitled to award no lost profits. The Court is satisfied that the evidence, as a whole, supports the verdict. (See Barrese v. Murray (2011) 198 Cal.App.4th 494, 503.)  

II. Irregularity in the Proceedings

            Plaintiff argues that it was error for the Court to exclude Trial Exhibit 2010 as a demonstrative, and then for Defendant to argue to the jury that Plaintiff’s lost profits claim was speculative when Defendant is the one that sought to exclude TE 2010.

            However, TE 2010 was properly excluded because it was not the same document used by Mr. Dos Santos in his testimony, TE 2007. Plaintiff was still allowed to perform the desired mathematical calculations in front of the jury and use demonstratives, including TE 2007. Plaintiff just could not use TE 2010. Plaintiff’s speculation that the jury would have awarded lost profits had it seen TE 2010 is unfounded.

III. Destruction Costs

            Plaintiff argues that the jury should have awarded $32,187.25 in destruction costs which were uncontested, for a total “other damages” award of $990,492.25. Plaintiff introduced an invoice for $32,187.25 in destruction costs (TE 1572), and Mr. Honnette testified that TE 1572 represented “payment for an invoice” for destruction costs (Def.’s Ex. 40 at 185:5-20). Defendant argues that TE 1572 is an invoice, not evidence of actual payment. The jury was not required to accept or believe Plaintiff’s evidence regarding the destruction costs. The Court does not find that the jury “clearly” should have reached a different verdict.

CONCLUSION

            Plaintiff’s motion for new trial is DENIED.