The Daily Journal
It was one happy Fourth of July for Kip and Victoria Giro, who learned the day before that a jury had awarded them $1.45 million in damages in lieu of profits they did not realize after Enwald Enterprise Inc. reneged on a deal last year to sell the couple four dry-cleaning stores in Yolo County.
After a week-and-a-half-long trial in Yolo County Superior and Municipal Court, a jury of seven women and five men returned on July 3 a unanimous verdict that Jerry Enwald of Enwald Enterprises Inc. had breached a valid agreement in May, 1995 to sell the Giros two stores in Woodland and two in Davis.
By not consummating the sale, Enwald prevented the Giros from making $1.454 million in potential profits, the jury estimated, based on profit projections offered by Enwald in the sales brochure for the dry cleaning establishments, for which his original asking price was $535,000.
The jury deliberated one whole day before bring back the $1.45 million award, which is thought to be one of the largest damage awards ever granted by a Yolo County jury, according to Jeffrey H. Ochrach, the Roseville attorney who represented the Giros.
"Just before escrow was to close, Enwald backed out," Ochrach said. "What’s unusual about the award is not only the size, but that it is based on lost profits, something you don’t see very often."
Woodland attorney Lawrence Cobb, who represented Enwald, also found the award unusual – but for very different reasons. "I feels the awards was inappropriate," Cobb said. "The jury determined the damages on a speculative and uncertain basis." Cobb said his client was looking at all available avenues to remedy the outcome, including filing an appeal, but he declined further comment "until the dust settles."
On May 16, 1995, Kip Giro, 49, and his wife Victoria, 33, entered into a written agreement with Enwald to but the four operating dry cleaning stores for a little more than $500,000. Kip Giro had owned a dental supply firm but had sold it about five years earlier, staying on as an employee while he looked for a different business venture to pursue. He was barred by agreement from returning to the dental supply trade.
The couple lived in Granite Bay but learned about the Woodland and Davis stores, found them to be an attractive investment, struck the deal, signed the agreement and sold valuable securities to cover the escrow, Victoria Giro said.
"We put a lot of time and expense in preparing to take over the businesses," she said.
But sometime around July or August of last year, Enwald and his corporation allegedly breached the agreement by refusing to complete the sale – the alleged "failure to perform" that gave rise to the suit.
"The jury saw it as "a deal’s a deal,’" said Ochrach, who polled some of the jurors after the verdict came back. The jury based the award on the potential profits it calculated the couple might have gained over the next 10 years, Ochrach said.
"Lost profits" judgments are not unheard of, but they are uncommon, Ochrach said. He mentioned Getty v. Pennzoil as one historical legal example.
Cobb thought the "lost profits" theory left much to be desired and said the jury’s award was unfortunate, and ill considered.
"The so-called agreement was not even completed ... Liability should not have been found," he said. "We were very, very surprised by the verdict."
Cobb said the award appeared to be symptomatic of a recent trend by juries to grant "excessive" awards against small business owners seemingly on the presumption that business owners can easily recoup the costs, which he said is false.
The couple, of course, had a different take on the outcome.
"I was not surprised at the verdict," Victoria Giro said, "but I was surprised at the award."
"Justified," was the one-word summation of how he felt in view of the verdict and award.
The couple will continue looking for a new business venture, Victoria Giro said.