Woods v. Fox Broadcasting Sub., Inc.

• Decision Date: 05 May 2005
• Docket Number: No. B173273.,B173273.
• Citation: 28 Cal.Rptr.3d 463,129 Cal.App.4th 344
• Court: California Court of Appeals Court of Appeals
• Parties: Mel WOODS et al., Plaintiffs and Appellants, v. FOX BROADCASTING SUB., INC., et al., Defendants and Respondents.

28 Cal.Rptr.3d 463

129 Cal.App.4th 344

Mel WOODS et al., Plaintiffs and Appellants, v. FOX BROADCASTING SUB., INC., et al., Defendants and Respondents.

No. B173273.

Court of Appeal, Second District, Division 8.

May 5, 2005.

Review Denied August 24, 2005.^*

O'Donnell & Shaeffer, Pierce O'Donnell, John Shaeffer, and Jodi Swick, Los Angeles, for Plaintiffs and Appellants.

Quinn Emanuel Urquhart Oliver & Hedges, John B. Quinn, Johanna Y. Ong, and Ryan G. Baker, Los Angeles, for Defendants and Respondents.

RUBIN, Acting P.J. Plaintiffs Mel Woods and Stan Golden appeal from the judgment entered in favor of Fox Entertainment Group and other Fox related entities following the entry of orders sustaining without leave to amend demurrers to several of plaintiffs' causes of action. For the reasons set forth below, we reverse the judgment and the order sustaining the demurrers to plaintiffs' four causes of action for interference with contract and prospective economic advantage.

FACTUAL ALLEGATIONS¹

In 1995, the News Corporation, Ltd. (News Corporation), and several of its affiliated companies formed Fox Family Worldwide, Inc. (Fox Family) as a joint venture with Haim Saban (Saban). Fox and Saban each owned 49.5 percent of the shares of Fox Family, with the remaining 1 percent held by another entity.² Fox Family was an entertainment company whose assets included the Fox Kids Network and other family-oriented television programming. Before Fox Family was formed, plaintiffs Mel Woods and Stan Golden were high-ranking officers or employees of Saban Entertainment, which was owned by Saban. After the formation of Fox Family, Woods became its president, chief operating officer and chief financial officer. Golden remained as president of Saban Entertainment, but was contractually required to work with and report to Fox Family's leadership.³

While working for Saban before the creation of Fox Family, appellants "earned" vested "compensatory" stock options in Saban Entertainment. After Fox Family was created, those stock options were made contractual obligations of Fox Family. Most relevant here, if Saban ever sold his shares of Fox Family, appellants were required to sell their options in a manner which guaranteed them each 1 percent of the sales price of Saban's Fox Family shares.

In 2001, Saban decided to sell his entire 49.5 percent interest in Fox Family. This eventually resulted in the sale of Saban's and Fox's entire interests in Fox Family to the Walt Disney Co. (Disney) in October 2001. Disney paid $5.3 billion to buy Fox Family. As part of the deal, however, Fox insisted that Disney take on certain of Fox's obligations to carry cable broadcasts of Major League Baseball (MLB) games. Fox did so because the MLB contract had become a losing proposition, with the prospect of future long-term losses of $600 million. Disney initially balked at taking on the MLB obligations, but agreed to do so by paying $400 million less than it would have to buy Fox Family without MLB. The end result was to reduce the amount of appellants' stock option buyout rights by $4 million each. According to appellants, Fox engineered the deal in that manner not just to cut its losses by dumping part of the MLB obligations, but also did so with knowledge of appellants' stock option rights and with the intent to interfere with those rights.

After the deal with Disney was completed, appellants received more than $20 million each, a figure which represented their 1 percent share of the sales price. As part of that transaction, appellants signed a document which stated that the amount received was in accordance with and in full satisfaction of their stock option agreements, and that those agreements were of no further force or effect. According to appellants, they were required to sign the agreement in order to get the money, did so in order to receive the money, and protested the amount of the payment.

PROCEDURAL HISTORY

Based on the allegations set out above, appellants sued Fox for intentional and negligent interference with contract and with intentional and negligent interference with prospective economic advantage (the interference claims).⁴ Their first amended complaint also included causes of action for fraud, negligent misrepresentation, breach of fiduciary duty, an accounting, and for unlawful business practices. (Bus. & Prof.Code, § 17200.)⁵ Fox demurred to the interference claims on two grounds: (1) because appellants' contracts did not obligate Fox Family to obtain the highest possible price, and because appellants in fact received their proper share of the purchase price, no interference with their contractual rights occurred; and (2) because Fox owned just under half of Fox Family, it was not a stranger to appellants' contracts with Fox Family and therefore could not, as a matter of law, be liable for interfering with those contracts. Based on the decision in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514, 28 Cal.Rptr.2d 475, 869 P.2d 454 (Applied Equipment), the trial court found that Fox was not a stranger to the contracts and therefore sustained the demurrers to the interference claims without leave to amend.⁶

In response, appellants reasoned that if Fox were not a stranger to the contracts, then it must in some manner be a party to the contracts. Appellants therefore filed a second amended complaint which replaced the four interference claims with causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. That pleading included the five causes of action for fraud, negligent misrepresentation, breach of fiduciary duty, an accounting, and unlawful business practices that had not been demurred to by Fox. Fox demurred to the two contract claims on the ground that it was not a party to the contracts. Those demurrers were sustained without leave to amend. Appellants then filed a request for dismissal with prejudice of their remaining causes of action, which was followed by the entry of judgment in favor of Fox. On appeal, appellants challenge only the order granting Fox's demurrers to the interference claims.

STANDARD OF REVIEW

In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiff-appellant. Regardless of the label attached to the cause of action, we must examine the complaint's factual allegations to determine whether they state a cause of action on any available legal theory. (Black v. Department of Mental Health (2000) 83 Cal.App.4th 739, 745, 100 Cal.Rptr.2d 39.) The judgment will be affirmed if it is proper on any of the grounds raised in the demurrer, even if the court did not rely on those grounds. (Pang v. Beverly Hospital, Inc. (2000) 79 Cal.App.4th 986, 989, 94 Cal.Rptr.2d 643.)

We will not, however, assume the truth of contentions, deductions or conclusions of fact or law and may disregard allegations that are contrary to the law or to a fact which may be judicially noticed. When a ground for objection to a complaint, such as the statute of limitations, appears on its face or from matters of which the court may or must take judicial notice, a demurrer on that ground is proper. (Code Civ. Proc., § 430.30, subd. (a); Black v. Department of Mental Health, supra, 83 Cal.App.4th at p. 745, 100 Cal. Rptr.2d 39.) We may take judicial notice of the records of a California court. (Evid. Code, § 452, subd. (d).) We must take judicial notice of the decisional and statutory law of California and the United States. (Evid.Code, § 451, subd. (a).)

DISCUSSION

1. Fox Can Be Liable for Interference With Appellants' Contract Rights

Our courts recognize four types of claims for interference with contractual rights or expectancies: Intentional or negligent interference with an existing contract and intentional or negligent interference with prospective economic advantage. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153-1154, 131 Cal.Rptr.2d 29, 63 P.3d 937 [intentional interference with contract and economic advantage]; North American Chemical Co. v. Superior Court (1997) 59 Cal. App.4th 764, 786, 69 Cal.Rptr.2d 466 [negligent interference with economic advantage]; SCEcorp. v. Superior Court (1992) 3 Cal.App.4th 673, 677, 4 Cal.Rptr.2d 372 [negligent interference with contract].) The elements of those causes of action have been discussed and detailed by many decisions, but only one element common to all four is relevant here: that a party to the plaintiff's contract cannot be liable under any of the four theories. If the defendant is a party to the contract, the plaintiff is relegated to a cause of action for breach of that contract. (Applied Equipment, supra, 7 Cal.4th at pp. 513, 517-518, 28 Cal. Rptr.2d 475, 869 P.2d 454.) At one time, even though a contracting party could not be liable on an interference claim, many courts had held that the contracting party could be liable in tort for conspiring with a non-contracting party to breach the plaintiff's contract. (See, e.g., Shapoff v. Scull (1990) 222 Cal.App.3d 1457, 1465, 272 Cal. Rptr. 480 (Shapoff); Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 71-72, 35 Cal.Rptr. 652; see also Applied Equipment, supra, at p. 510, 28 Cal. Rptr.2d 475, 869 P.2d 454, and cases cited therein.) For many years, our courts also held that an interference claim based on the contractual obligation of a business entity could be maintained against the officers, directors, or owners of that entity.

Such defendants could escape liability by resorting to certain privileges, however, which turned on whether they had acted to benefit the business entity in question. (Collins v. Vickter Manor (1957) 47 Cal.2d 875, 883, 306 P.2d 783 (Collins) [valid cause of action for interference stated against defendants who were officers, directors, and beneficial owners of the contracting company; existence...