MIchael Tu of Orrick, Herrington & Sutcliffe (courtesy photo)

Christopher Adams has had two chances to prove that former investment partners owe him $62 million. Thanks to Orrick, Herrington & Sutcliffe, he isn't going to get a third.

California's Second District Court of Appeal threw out the $62 million award Tuesday, despite Adams' two opponents having been precluded at trial from contesting his valuation of a company the three created nearly 20 years ago. It's the second time the appellate court has thrown out a one-sided trial win for Adams against co-investors Hong Mu and David Topolewski.

"We find ourselves, once again, in the position of striking portions of a judgment against Topolewski and Mu notwithstanding their failure to participate appropriately in this litigation," Justice Lee Smalley Edmon wrote in a 27-page unpublished opinion. "Nonetheless, the evidentiary sanctions against Topolewski and Mu did not relieve Adams of his burden of proof, including his obligation to support his claims with admissible, reliable evidence."

An Orrick team led by partner Michael Tu joined the litigation after the second trial and argued the appeal along with Jeffrey Zuber of Zuber Lawler & Del Duca. Tu represented companies that Adams had characterized as successor entities, but the companies had never been added as defendants in the litigation. The appellate court said it had "significant concerns" about due process afforded those companies, but ultimately rested its decision on Adams' valuation model, which it called "wholly without foundation."

Adams was a co-investor with Mu and Topolewski in a business venture involving English language education technology in China. Adams received a 19.7% stake in companies called EXI and EXPL. Mu and Topolewski chose not to participate in a first trial, at which Adams valued his interest in EXPL at $62.7 million. The Second District threw out that result on the ground that Adams' expert witness had used a price-earnings model that's inappropriate for valuing closely held private companies.

"It is virtually impossible to determine the value of Adams's 19.7% interest in EXPL and related entities without financial data" allegedly held by Mu and Topolewski, the court stated then. Though it "seems inequitable" that Mu and Topolewski should benefit by failing to cooperate, the court ordered a second trial.

This time Mu and Topolewski participated, but "engaged in gross misuse of the discovery process," according to Los Angeles Superior Court Judge Michelle Rosenblatt. As a sanction, Rosenblatt forbade the defendants from presenting any valuation evidence.

Meanwhile, EXPL had been placed in receivership in 2010, and Adams alleged that Mu and Topolewski transferred its assets to Cirrus Education, a company that sells educational software to schools and hotels. Adams testified that another EXPL investor told him that Mu and Topolewski intended "just to change the name of the company" so that Adams could never collect his share.

Mu and Topolewski tried to testify that EXPL was properly foreclosed and that there was no continued relationship, but Superior Court Judge David Sotelo, who took over the case from the now-retired Rosenblatt, ruled that testimony precluded by Rosenblatt's sanctions order.

Instead of calling an expert witness this time, Adams testified himself that Cirrus and its related entities were worth about $306 million, making his 19.7% interest worth about $60 million. Sotelo found that Adams was qualified to give that opinion "as an owner entitled to possess the property he has been denied so many years and as a long-time business person and investor."

In reversing, the Second District ruled that Adams did not have "the requisite knowledge, skill, experience, training, or education to qualify as a valuation expert" on closely held companies, Edmon wrote. While an owner of a company may testify about valuation, "this principle does not apply in the present case because plaintiff unquestionably was not an owner of any of the New Companies."

Plus, "Adams's valuation method appears to closely resemble that used by his expert in the first trial of this matter, which we have already rejected as unsound," Edmon wrote.

The appellate court left intact other portions of the judgment against Mu and Topolewski, which may be worth about $500,000. But the court threw out the $62 million award and ordered no retrial, saying Adams had a full and fair opportunity to present the case.

Adams was represented by Baker, Keener & Nahra.