Shapes state law on civil theft remedies
Los Angeles, July 21, 2022 — The California Supreme Court issued its long-awaited decision in a high-profile business lawsuit, Siry Investments vs. Saeed Farkhondehpour, adopting a limited partner’s position that the state’s civil theft statute applies to the theft of business funds. In interpreting Penal Code section 496, California’s highest court held for the first time that the statutory treble damages and attorneys’ fees authorized by this potent statute apply to business disputes and other cases where the defendant is alleged to have stolen any form of property.
“We are extremely delighted with the Supreme Court’s rejection of the lower court’s narrow interpretation of such a critical statute. The Supreme Court’s seminal decision confirms our view that a business partner that misappropriates partnership property is subject to triple damages and attorney fees,” said Robert Cooper, appellate counsel at Wilson Elser, representing the appellant. “This landmark decision has significant impact on numerous pending lawsuits throughout California, eliminating the prior conflict created by different appellate courts.”
“We were particularly pleased the Court accepted this case for review, even though 96% of all petitions for review are summarily denied. The various parties have been litigating for nearly 20 years in this case, and we look forward to having final closure in this case shortly,” Cooper said. “Once the appellate attorneys’ fees and interest calculations are resolved on remand, we expect another eight-figure judgment to be entered.”
A second issue the Court resolved involved whether a party in default may challenge the excessiveness of damages in California. The Court and the intermediate courts had adopted conflicting views as to the parameters governing post-judgment motions, an area of the law previously described by the high court as a procedural minefield. While the Court adopted the defendants’ procedural position that a defaulted defendant may seek a new trial, the Court deferred resolution of the merits of that issue which will be decided in another case in a few months.
Plaintiff Siry Investment, L.P., was a limited partner that joined a partnership with the real estate moguls that were sued as defendants. The partnership’s main asset was a Los-Angeles-based swap meet building occupied by small businesses. The partnership generated rental income from tenants of the mixed-use property.
Following the resolution of an initial lawsuit that was filed in 2003 by the other limited partners against Siry, appellant Siry filed this second lawsuit to recover damages based on the other partners’ misdeeds in handling the partnership. Following the first trial, the jury awarded Siry $3.5 million in damages. The judgment was ultimately reversed on appeal on a technicality; the case was remanded for a new trial.
In 2013, following remand, Siry sought treble damages and attorneys’ fees under California’s civil theft statute. Following extensive discovery abuse, Siry obtained terminating sanctions and a default judgment against all the other partners. After examining Siry’s extensive evidentiary submissions, the trial court issued an eight-figure default judgment against the remaining partners.
Despite being in default, defendants argued the judgment erroneously awarded $42 million in damages, though Siry construed the judgment to award less. While denying defendants’ motion for new trial based on excessive damages, the trial court reduced the damages to $7 million. After both sides appealed, the court of appeal affirmed the judgment as to liability issues while reducing the judgment to $3 million. The court of appeal held the civil theft statute does not apply to the theft of partnership funds, thereby eliminating the attorneys’ fees and statutory treble damages.
On behalf of Siry, Cooper challenged the intermediate appellate court’s decision, successfully obtaining discretionary review in the California Supreme Court (appeal no. S262081). After extensive briefing on the merits and oral argument, the Supreme Court held that California’s civil theft statute applies to all forms of commercial and non-commercial litigation where the statute’s elements have been satisfied.
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