'Improperly tried' case over online court-access business gets appellate cleanup

(CN) — A California appellate panel blasted the closed-door nature of trial proceedings in a dispute over an online court-access business.

The legal battle between Nicole Clark and Andrew Thaler stemmed from their creation of Trellis Research, Inc. — a website offering access to court rulings for lawyers and law firms. The pair, who’d dated previously, had a falling out in 2018. That led to a suit by Clark, who’d gained control of Trellis, and a countersuit against Clark and Trellis by the ousted Thaler.

“This litigation proves the adage ‘Never go into business with friends,’” Second Appellate District Justice Elwood Lui. He added later: “Soon, they began to disagree over developing the company. Their relationship turned contentious.”

A handful of claims reached a jury which issued what Lui called a purportedly advisory verdict. The trial court later adopted the findings, which offered a mixed bag for both parties.

The jury awarded Trellis $305,000 in compensatory damages and $610,000 in punitive damages against Thaler on claims of interference with contractual relations. Thaler received an award of $600,000 in compensatory damages against Clark on fiduciary duty claims, and $22,265 in compensatory damages against Trellis over unpaid wages.

Both parties appealed.

“This case presents a bitter dispute that was improperly tried by the parties and the trial court,” the Jerry Brown appointee wrote Tuesday for the three-judge panel. “Simply put, the case is a procedural mess, compounded by significant gaps in the record.”

Lui wrote that the panel’s job was to resolve the legal issues without digging deep into the procedural problems and inconsistencies that made the case convoluted.

First, the panel voided Thaler’s challenge to the denied motion for a new trial on his fiduciary duty claim.

Thaler had argued the trial court erred because a jury heard that claim, not the judge, which was improper under Delaware law, where Trellis was incorporated.

The panel found Thaler had forfeited that argument, as the record appeared incomplete.

“In any event, our role is not to engage in speculation or piece together what happened in the trial court,” Lui wrote. “We are unable to evaluate the court’s decision to have a jury trial under California law on Thaler’s breach of fiduciary claim.”

The panel also vacated a declaratory relief award to Thaler, as the trial court improperly awarded Thaler almost 600,000 shares of Trellis stock. That court, Lui wrote, failed to take the necessary legal steps to reach that decision.

And the panel affirmed the denial of Thaler’s request for more attorney fees and the denial of his motion for judgment. The justices determined their decision to vacate the award of stock shares defeated Thaler’s request for attorney fees.

Pivoting to the motion for judgment, the panel found Thaler lied to investors after his firing. That led them to withdraw their investments, and to Clark having to find over $150,000 to repay them.

Thaler argued that loan, and 1 million shares used as collateral, couldn’t be a basis for damages. The appeals panel disagreed, but sided with Thaler over punitive damages after finding the evidence did not support the $610,000 awarded.

“Clark produced no evidence or analysis of Thaler’s existing or ongoing costs or liabilities,” Lui wrote. “There is no evidence to suggest his current income would enable him to satisfy his punitive damages award while covering necessary living expenses and paying the compensatory damages.”

Lastly, the panel reversed the denial of Clark’s motion for judgment notwithstanding the verdict on Thaler’s claim of breach of fiduciary duty.

Lui wrote the issue hinged on whether Clark faced liability for firing Thaler for cause.

The lower court ruled that a legal, business rule didn’t apply because Clark had a conflict of interest, like when a board of directors, fearing a merger, act in their own best interests instead of the corporation’s.

The appeals panel saw no conflict of interest, ruling the lower court should have granted her motion. As the panel had vacated Thaler’s award of Trellis shares, the breach of fiduciary duty verdict against Clark was moot.

“Far from conflicting with Clark’s personal interests, her decision to terminate Thaler was in the best interests of Trellis,” Lui wrote. “Whatever personal animus Clark had for Thaler, the jury agreed with her contention at trial that it was her need to protect the company from Thaler’s misconduct that led to his termination.”

Justice Judith Ashmann-Gerst, a Gray Davis appointee, and Justice Anne Richardson, appointed by Gavin Newsom, joined in the opinion.

“We are thrilled to have successfully defended the trial team’s impressive victory in this hard fought case,” said attorney Alyssa Bell, who represented Clark and Trellis. “Nicole Clark is a visionary entrepreneur who has always acted in her company’s best interests, as the Court of Appeal affirmed. Trellis is now free to continue its upward trajectory with Clark at the helm.”

Thaler couldn’t be reached for comment.