Pair Awarded $107M Over Business Deal Company Defrauded Ex-Employees Out of Share in Start-Up Sold to Rival Concern
By Rebecca Lisa
Daily Journal Staff Writer
Los Angeles Daily Journal
Monday, July 29, 1996
Offering more of a kick in the ribs than a slap on the wrist, a jury in Norwalk Friday directed General Dynamics Corp. to pay two former employees $107.4 million in damages for not honoring a lucrative business agreement.
After deliberating for 21/2 days, the jury found by "clear and convincing evidence" that General Dynamics had committed fraud and should pay William B. Forti and Dolores Blanton – former employees of the company – $3.7 million each in compensatory damages.
"This was a very deliberate, rational verdict," said plaintiffs' attorney Don Howarth, of the Los Angeles firm Howarth & Smith. "This was a business deal and General Dynamics mad this money ... They did not have a right to defraud my clients of that."
The plaintiffs were also represented by Brian Bubb, a partner with Howarth & Smith.
The Los Angeles Superior Court cases, filed in June and July 1994, arose out of the development of a subsidiary company of General Dynamics called E-Metrics. After working 15 years for General Dynamics, Forti and Blanton agreed to leave their positions and help build the new Pomona-based computer technology company. In exchange, General Dynamics, in an oral contract, agreed to give the two equity ownership in the company, the complaint alleged.
Howarth described E-Metrics as having developed "absolutely astounding technology" that was going to "change the world" had it been give commercial application. The computer they developed at E-Metrics could "think like the human brain," according to Howarth, who said it is now being used in the defense industry. "It was so good, it had to sleep for a while after you fed it information," he said.
Following two weeks of testimony, the jury found that General Dynamics not only breached the oral contract but defrauded the plaintiffs because it had never intended to honor the agreement, according to Howarth.
"It was like the carrot in front of the mule," Howarth said. "They held [the equity agreement] out in front of them when they never intended to give it to them."