Judge Cuts Internet Ad Firm’s Award

An Orange County Superior Court judge slashed a $6.55-million award to three Yorba Linda brothers who had convinced a jury that a Seattle-based electronics firm plundered their home-grown Internet advertising company.

In Wednesday’s ruling, Judge Gerald G. Johnston reduced the judgment against X10 Wireless Inc. to $1.4 million and said he would order a new trial if Tim, Chris and Russell Vanderhook, who are in their 20s, contested his decision.

The evidence presented at trial of X10’s conduct did not warrant the large award, Johnston wrote in his ruling.

“The damages awarded are excessive,” he wrote. “The jury should have reached a different verdict or decision.”

In handing down their verdict last fall, jurors said they agreed the now-bankrupt electronics firm stole technology, clients and money from Advertisement Banners.com, which the brothers launched in their childhood home and now run from rented offices in Anaheim.

The penalty phase of the litigation was postponed a month after X10 declared bankruptcy. But the brothers persuaded a Washington state Bankruptcy Court to let the Orange County proceedings continue against X10, which sells home-surveillance equipment through Internet ads featuring scantily clad women.

The judge reduced the compensatory damages against X10 to $900,000 and the punitive damages to $500,000. The jury had awarded the Vanderhooks $4.3 million in compensatory damages and $2.25 million in punitive damages.

The ruling disappointed the brothers, said Eric P. Francisconi, one of Advertisement Banners.com’s attorneys. “We disagree with it, and we are considering our options,” he said.

The brothers have 10 days from Wednesday to to challenge the ruling. If they do, they must appear in Johnston’s Santa Ana courtroom March 3 to schedule the new trial.

X10’s lawyer, Sean P. O’Connor, said he was pleased with the ruling. “We’re obviously thrilled the judge overruled the jury’s unjust verdict,” he said. “This goes a long way in righting the wrong that has been done to X10.”

The Vanderhook brothers contended that X10 failed to pay $564,000 in advertising commissions they were owed under a July 2001 business contract. X10 used that money along with Advertisement Banners.com’s proprietary technology and business model to steal clients and start its own Internet advertising business, the brothers alleged.

After the November punitive damage verdict, Tim Vanderhook said that the jury’s verdict showed they thought X10’s conduct was wrong. “The jury was able to grasp and recognize that what X10 was doing was wrong,” he said. “They realized that punishment was needed to deter them from doing this again.”