LAWYERS WEEKLY USA
JANUARY 13, 1997

And when Sterling Starr, the retired vice president of General Dynamics, finished his testimony, the week the defense had spent preparing him for trial was shot to hell, the plaintiffs' lawyer says.

But that's what happens when a witness contradicts his own deposition -- he gets called on it, says plaintiffs' lawyer Don Howarth, who bombarded Starr with questions. The witness finally admitted that he altered his trial testimony from his deposition to protect GD.

The result was a $107.5 million verdict on behalf of two plaintiffs who started a company for GD and were not compensated when it was sold as they had been promised. They were awarded $7.5 million in compensatory damages and $100 million in punitives. The plaintiffs split the verdict, which was rendered against GD for fraud and breach of oral contract.

Cross-examination won the trial, Howarth says. Witness after witness tried to explain that statements or promises had been misconstrued by the plaintiffs, but Howarth attacked the credibility of each. He contradicted one witness' testimony with his own deposition and uncovered another witness' offer to buy the start-up company before it was sold to a rival aerospace giant.

Howarth says GD didn't take the case seriously, and made its biggest mistake in underestimating a breach of oral contract claim.

"They had this attitude that, 'We're a corporation and you can't challenge us,"' Howarth tells Lawyers Weekly USA.

The trial judge reduced the punitive damages on remittitur to $30 million for each plaintiff. The case is on appeal.

The defense did not return numerous calls for comment to LWUSA.

Creating a New Company
Between them, William Forti and Dolores Blanton had worked for GD in Pomona, Calif., for nearly 25 years. GD offered Forti, a business manager, and Blanton, an administrative assistant, the chance to leave the company to be "founders" of a new company called E-Metrics.

E-Metrics was formed to develop and market a computer Chip that recognizes an object by "seeing" it through a camera lens and "hearing" it over a microphone. For example, it could be used to recognize a disguised face in a crowd of thousands, 20 years after initially "seeing" it, so that it is valuable in crime detection and prevention.

With its recognition capabilities, the computer chip could be used to detect abnormalities in cells, and GD intended to market it to medical labs for that purpose.

GD's plan, Forti and Blanton were told, was to use them to head up a team of four engineers who were in charge of the technology.

The engineers had already developed the technology, and GD had 17 patents on it when the company offered the plaintiffs the opportunity to work for E-Metrics, Howarth says. The company told the plaintiffs and the four engineers that they would be "founders" of the company and share a 20-percent stock interest in E-Metrics.

Howarth says the plaintiffs did not obtain a written contract of these promises for two reasons: first, GD told the plaintiffs that the technology had to be developed, marketed successfully and shares of stock had to be sold to investors before a formal contract could be written and signed; and second, Forti and Blanton had no reason to doubt their longtime employer's word.

But Howarth says GD had plans that were very different from the company's promises.

Two years after Forti and Blanton left GD for E-Metrics - and two weeks before E-metrics was sold as part of a $500 million sale - the company fired them, Howarth says. Howarth says E-Metrics and the technology totaled $125 million of that sale.

When Forti and Blanton tried to obtain a portion of the proceeds of the sale, the company refused to compensate them. Howarth says GD contended that the agreements were never formalized nor were the agreements approved by the GD board of directors.

Forti and Blanton sued GD, alleging:
breach of oral contract for refusing to compensate them for the sale of E-Metrics, and

fraud because GD never intended to keep its promise to compensate them.

High-Stakes Litigation
The plaintiffs hired Howarth in 1994 after his high-stakes litigation boutique won a $9 million verdict in a breach of oral contract case, his largest verdict before this case, he says.

Howarth says 40 percent of his firm's work is defending large companies, but the rest of his practice focuses on cases that will reap large damage awards. For example, Howarth is currently litigating suits by people who developed leukemia in the area surrounding the San Onofre nuclear power plant in Southern California. He has also sued Phillip Morris on behalf of the widow of the first "Marlboro Man," a model who developed cancer after smoking Marlboros.

Howarth says this case fit perfectly into his firm's specialty.

I liked this case because it was a very valuable technology and the case had high potential" for damages, Howarth says.

He also liked this case because "an oral contract gives the defense an arrogance" because they are so hard to prove, Howarth says.

"If the plaintiffs had had a written contract with GD, it never would have gone to trial, it would have settled," Howarth says.

Never-Ending Discovery
As can be expected when litigating against a large company, discovery was a never-ending battle with GD.

"Throughout the trial General Dynamics was still producing documents," Howarth says. "If it hadn't been for people we knew at General Dynamics and former employees, we would have had a more difficult time.

"I'm still not sure whether we have all the documents we subpoenaed," Howarth says.

During discovery Howarth also prepared one simple piece of demonstrative evidence: a timeline that outlined the complex order of events in the case.

The timeline was printed on a piece of mounted poster board, which showed key events such as the date the plaintiffs left GD for E-Metrics, when secret negotiations to sell E-Metrics began and when E-Metrics was finally sold to Hughes. Then, as other pertinent evidence surfaced during the trial, Howarth wrote it on the board with a magic marker.

Using the timeline as his only demonstrative evidence, Howarth was able to keep the evidence simple and organized for the jury.

And it was essential to keep the case simple, Howarth says. Between the explanation of the technology and the complicated events, a jury might get frustrated or confused.

The "Starr" Witness
Howarth's strategy was simple: tell the jury that his clients got a raw deal, that they were long-time employees with no reason to doubt their supervisor's promises and that the absence of a written contract was incidental because your word is your bond.

Howarth says his clients were the strongest evidence of this argument. He began the trial with their testimony and characterized them as loyal workers who trusted their supervisors.

Plaintiff's lawyer Don Howarth argued that the jury shouldn't cripple General Dynamics -- but also shouldn't let it keep the fruits of the sale of E-Metrics.

He also called two E-Metrics engineers who testified that the same promises were made to them as were made to the plaintiffs, and that they did not file suit because they believed they would be unable to fight GD on their own. The portion of the case that sealed a win for Howarth was cross-examining the defense witnesses. Howarth beat the defense to taking depositions of the top company executives. This proved to be a huge advantage during trial when those executives altered their testimony after realizing the impact this suit would have on GD. "Everyone had an agenda," Howarth says, so it was easy for him to attack the credibility of each witness' testimony with evidence of those agendas. For example, one defense witness testified that he tried to raise funds for E-Metrics but had no luck finding investors. "He said there wasn't much interest in the company because it wasn't worth much," Howarth says. But Howarth showed there was great interest in E-Metrics, particularly from the witness himself. He produced a memo from the witness to Sterling Starr, the GD vice-president, offering to buy E-Metrics himself and allow GD to maintain an interest in it. Howarth also introduced as evidence the depositions of GD's chief executive officer and its general counsel, who both testified that GD and Hughes Aircraft were involved in secret negotiations to sell E-Metrics before the plaintiffs were offered the jobs at E-Metrics. Both stated in their depositions that the plaintiffs were not told of the negotiations, and that company officials knew no stock would be delivered to the plaintiffs.

But the high point of the trial was Howarth's cross-examination of Starr.

Starr was retired by the time the trial started, so he was not obligated to appear, Howarth says. But the defense brought him to California from his home in Colorado for the trial.

"I flew out to Colorado to take his deposition long before trial. Then I noticed him a few days before trial -we were all staying at the same hotel," Howarth says. "So I knew [the defense was] working with him."

Howarth says that when Starr took the stand he tried to deny that the plaintiffs were founders of E-Metrics or that he had knowledge of secret negotiations to sell it or cheat the plaintiffs. Starr said the plaintiffs had misconstrued the meaning of GD's offers, Howarth says.

But Howarth countered with Starr's deposition, which said that he was aware of the 20-percent stock shares allocated to the founders of E-Metrics and aware that there was no Intention of delivering that stock to the founders.

"It was great. He was twisting in his seat, grabbing for the microphone and gasping for air," Howarth recalls. Starr looked to the judge for a reprieve, but the judge told him he was compelled to answer Howarth's questions.

Sitting on the witness stand, Starr said that when he gave Howarth his deposition, he didn't realize what impact his answers would have on GD, Howarth says.

"So you are modifying your answers now according to the impact on GD?" Howarth asked.

"Yes," Starr answered.

Punitive Damages
In part one of the bifurcated trial, the jury deliberated for two-and-a-half days on compensatory damages.

Howarth says the credibility of his clients and his own fancy foot-work in cross-examining witnesses was all it took for the Norwalk Superior Court jury to award $3.25 million in compensatory damages to each of the plaintiffs.

The punitive damages portion of the trial was brief, Howarth says.

He spoke for just 15 minutes, explaining to the jury his theory of a proper punishment for GD. He said the jury shouldn't cripple the company but also shouldn't let it keep the fruits of the sale of E-Metrics. Howarth suggested punitive damages between $100 and $125, based on the worth of E-Metrics in the sale to Hughes Aircraft.

Then the defense addressed the jury - and sealed punitive damages, the plaintiff's lawyer believes.

Howarth says defense lawyers argued that it was not GD's fault the plaintiffs were not compensated; it was Starr's fault. The defense argued that because the jury had determined liability based on Starr's testimony, it should punish him, not GD.

The jury came back after just two hours, awarding the plaintiffs $100 million in punitive damages. That was reduced by the trial judge to $30 million for each plaintiff.

Howarth says that in interviewing jurors after the trial, it was the defense's shift of the blame that most struck the jury and to them, justified the substantial verdict.

GD has appealed the verdict, but Howarth believes it will stand based on the worth of E-Metrics sale to Hughes, it was sensible just punishment.
Howarth says this case shows that simplicity goes as far as choosing a case with potential. As well, it shows that lawyers faced with oral contract cases shouldn't be put off, Howarth says.

"When it comes down to who believes who, an oral contract is proof."

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