The California Sixth District Court of Appeal recently issued its published decision in the case of Orozco v. WPV San Jose, LLC (Vornado Realty Trust) (2019) 36 Cal.App.5th 375, upholding a jury verdict of $872,141 in favor of Terra Law’s client and reversing the trial court’s order denying rescission of the client’s lease guarantee and denying his entitlement to certain attorney’s fees.
The underlying real estate matter involved a complex lease dispute and fraud action between Terra Law’s clients (a small restaurant business and its owner) as tenant and guarantor of the lease and Vornado Realty Trust (“Vornado”), the owner of the retail shopping center in San Jose, as the lessor. After a 15 day jury trial, the jury found that Vornado was liable to the tenant for substantial lost profits and other damages based on the fraudulent representations and concealment by Vornado’s leasing agent. Terra Law established that while our client was asking questions about the possibility of competing restaurants being leased space within the shopping center, Vornado’s leasing agent was making verbal representations that Vornado would not lease space to competing restaurants while, in fact, it had intended all along to locate a competing restaurant only two doors away from our client’s business. On arrival of the competitor, the restaurant business of Terra Law’s client was destroyed.
Vornado is one of the largest real estate entities in the country and it was represented by one of the largest law firms in the country. In attempting to avoid liability, the lessor asserted numerous defenses including alleged exculpatory lease clauses, such as those stating that no representations had been made by the lessor other than those made in the lease and that the lessor had sole discretion to locate other tenants within the shopping center. Terra Law also had to overcome asserted defenses that the tenant, as a new business, could not recover lost profit damages because they were speculative. The jury found, and the Sixth District Court of Appeal agreed, that because of the lessor’s fraudulent verbal statements, on which Terra Law’s client had reasonably relied, the exculpatory provisions in the lengthy lease document did not exonerate the lessor, irrespective if the tenant had read them or not. The Court of Appeal also found the tenant’s experts were qualified and had established that the tenant suffered lost profit damages.
In addition to upholding the jury verdict, the Appellate Court held that the individual restaurant owner as guarantor of the lease was entitled to rescission of the guarantee. This guarantee subjected the guarantor to very significant potential liability over the life of the lengthy lease term. The Sixth District Court of Appeal reversed the Trial Court which had denied such relief. The Court of Appeal also held that the guarantor was entitled to an award of his attorneys fees.
The case was tied to the jury by D.D. (Terry) Hughmanick and James McDaniel. They also handled the appeal. David Draper assisted with jury selection and both he and Martin Dioli gave guidance during the appellate process.