Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC
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The case in question involved a dispute between Epochal Enterprises, Inc., doing business as Divine Orchids, and LF Encinitas Properties, LLC and Leichtag Foundation, over a commercial lease agreement for a property containing dilapidated commercial greenhouses known to contain asbestos and lead paint. Epochal Enterprises claimed that the defendants failed to disclose the presence of these hazardous substances, which resulted in economic damage when the County of San Diego quarantined the leased premises. A jury found the defendants liable for premises liability and negligence, and awarded Epochal Enterprises damages for lost profits and other past economic loss.
However, the trial court granted the defendants' motion for judgment notwithstanding the verdict (JNOV), based on a limitation of liability clause in the lease agreement that purported to prevent Epochal Enterprises from recovering the economic damages awarded by the jury.
The Court of Appeal, Fourth Appellate District Division One State of California, reversed the trial court's judgment. It found that the jury necessarily concluded that the defendants had violated the Health and Safety Code by failing to disclose the existence of asbestos, and that this violation of law rendered the limitation of liability clause invalid under Civil Code section 1668. The court concluded that the limitation of liability clause could not bar Epochal Enterprises from recovering damages for the defendants' statutory violations.
The court also affirmed the trial court's denial of the defendants' motion for partial JNOV on the issue of damages, finding that the jury had a reasonable basis for calculating the amount of lost profits. The court remanded the case for further proceedings.
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