Laurel Valley EstatesIn 1978, Two California businessmen, Claude Trout and Harry Moore, formed a real estate development company, which they named Laurel Valley Estates.1 The partnership agreement signed by Trout and Moore stated that the two partners would make equal capital contributions to the new firm and would share equally in its profits. Trout’s initial capital contribution was a 400-acre parcel of undivided land appraised at $640,000; Moore contributed an equal amount of cash. From 1978 through the end of 1981, Trout supervised the subdivision of the 400-acre property into residential lots and the addition of improvements. During that same period, Moore negotiated with several construction companies to build expensive tract homes on the property.
Near the end of 1981, Moore became restless with the slow progress being made in developing the Laurel Valley property. Moore questioned whether Trout was properly managing the partnership’s dwindling cash funds and whether those funds would be depleted before the completion of the project. To allay his concerns, Moore decided to retain Newby & Company, an accounting firm that he had employed in previous business ventures, to review the partnership’s books. After learning of Moore’s decision, Trout told Moore that he had no objection to Newby & Company’s reviewing the partnership’s accounting records. In fact, Trout offered to engage Newby & Company as the partnership’s permanent accounting firm. Moore accepted Trout’s offer. A few days later, Trout notified Douglas & Michaels, the partnership’s accounting firm since its inception in 1978, of the decision to switch to Newby & Company.
In early December 1981, Jay Kent Newby, a staff accountant with Newby & Company and the son of the firm’s founder, arrived at the Laurel Valley offices to review the partnership’s books. Newby asked Trout for a listing of all tangible assets held in the partnership’s name, as well as the partnership’s general ledger, cash receipts and cash disbursements journals, and check register.
Late in the afternoon of his second day on the Laurel Valley engagement, a visibly upset Newby stormed into Trout’s office, interrupting a conversation between Trout and his secretary. Newby told Trout that he had uncovered major problems in the partnership’s financial records. The most serious problem involved the property that Trout had allegedly contributed to the partnership. That property was listed as an asset in the firm’s general ledger; however, Trout had never transferred the legal title of the property to Laurel Valley Estates. Newby implied that Trout intended to claim, at some point in the future, that the property was his alone. Newby also charged that over the past three years, Trout had squandered most of the cash invested in the partnership by Moore. According to Newby, Trout had paid exorbitant amounts to contractors he had retained to develop the Laurel Valley
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​[5] He was charged in court a fee of $5,500 to settle the outstanding costs of operating the partnership. [2]
However, in March 2012, according to emails from a Laurel Valley operative to a partner at Arrowhead Property Management, the operative requested that the operative have the plaintiff’s information available for the legal review of the company’s investment in Laurel Valley. Arrowhead refused to supply the information.
The operative continued to work for Trout after Trout and Laurel Valley became engaged. This legal review involved reviewing the corporate governance structure of Laurel Valley Estates and related entities.
[6] Newby filed a counterclaim against Los Angeles County over the property’s ownership of $3 million in 1999.
[5] The Los Angeles County court ordered on March 2, 2013 as a condition of the settlement, that, if the settlement fails to result in equitable distribution of property, the lily and its related plants should remain in Laurel Valley as in-house growers for a period of up to ten years. Newby was the first plaintiff to file a counterclaim against Los Angeles County over its ownership of Laurel Valley Estates.
​[3] The L.A. County District Court refused to issue a judgment upholding Newby’s settlement of the dispute, citing a failure by the plaintiff to consult with the legal officers and consultants on a final determination of the value of all of Laurel Valley’s property.
[6] Newby continued suing for punitive damages, and filed for an administrative review period between August 29, 2014, and January 3, 2015, in Los Angeles County Circuit Court, to review the property’s property valuation. [10]
[4] In January 2016, Los Angeles County Court Judge Daniel C. Hickey ordered the plaintiff’s claims for compensatory and punitive damages be paid $13.20 million. [11] Newby filed a motion seeking compensatory and punitive damages based on the amount of money he owed the defendant over the last year; and in February 2016, Newby filed a motion seeking compensatory damages in excess of $100 million under Section 1236 (a) of the California Income Tax Act. In June 2016, Newby received a preliminary grant of a preliminary injunction, claiming that the district court erred in failing to grant the injunction under the California Income Tax Act. The judge vacated the preliminary injunction on August 15, 2016 and ordered the defendants to pay the amount which Newby wanted, at a minimum and on a monthly basis. Newby claimed the injunction violated Section 1236 under which the defendants are prohibited from providing employment, or receiving any employment, compensation, or benefit to employees from other companies that were not affiliated with the defendants (the “cooperation” provision); in other words: the defendant is barred from participating in participation in the cooperative activities of the cooperatives.
​[3] The Los Angeles County Court awarded $13.20 million to Newby in December 2016. [10] In January 2017, the court granted a preliminary injunction against Newby based on the $13.20 million judgment due Newby.
​[3] According ‘Lawsuit Un-Ruled by the Court’ the Los Angeles County court on March 12 ruled, “According to their judgment in the Newby decision, the defendants [Los Angeles County] and Laurel Valley Estates Defendants did not use Plaintiff for the purpose of co-operation, and only sought for information as to their own financial success and the