CrossTalk Productions, Inc. v. Jacobson

• Decision Date: 16 July 1998
• Docket Number: No. B116366,B116366
• Citation: 65 Cal.App.4th 631,76 Cal.Rptr.2d 615
• Court: California Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 5611, 98 Daily Journal D.A.R. 7813 CROSSTALK PRODUCTIONS, INC., et al., Plaintiffs and Appellants, v. Steven JACOBSON, Defendant and Respondent.

Page 615

76 Cal.Rptr.2d 615

65 Cal.App.4th 631, 98 Cal. Daily Op. Serv. 5611,

98 Daily Journal D.A.R. 7813

CROSSTALK PRODUCTIONS, INC., et al., Plaintiffs and Appellants, v. Steven JACOBSON, Defendant and Respondent.

No. B116366.

Court of Appeal, Second District, Division 2, California.

July 16, 1998.

Fox & Spillane, Gerard P. Fox, Cynthia A. Vroom, and Anne E. Kearns , Los Angeles, for Plaintiffs and Appellants.

Heller & Edwards and Lawrence E. Heller, Beverly Hills, for Defendant and Respondent.

ZEBROWSKI, Associate Justice.

This case concerns the sustaining of a demurrer without leave to amend on grounds of unclean hands. Plaintiffs are CrossTalk Productions, Inc., ("CrossTalk"), and Jeffrey Keith and Steven Cross (the "individual plaintiffs"). ¹ Defendant is Steven Jacobson ("defendant"). CBS Incorporated ("CBS") was also a defendant, but is not a party to this appeal. The trial court sustained the demurrers of both defendant Jacobson and former defendant CBS without leave to amend, and entered a judgment of dismissal. Plaintiffs appeal only the dismissal as to defendant Jacobson.

I. STANDARD OF REVIEW AND SUMMARY OF DISPOSITION.

A demurrer is treated as admitting all material facts properly pleaded, but not "contentions, deductions or conclusions of fact or law." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) "... we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.]" (Ibid.) The complaint must be liberally construed with a view to substantial justice between the parties. (Code of Civ. Proc. § 452.)

Here, the demurrer was based upon an affirmative defense (unclean hands). In such a case, the affirmative defense must clearly appear on the face of the complaint in order to support a demurrer. A demurrer based on an affirmative defense cannot properly be sustained where the action might be barred by the defense, but is not necessarily barred. (See, e.g. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403, 44 Cal.Rptr.2d 339 [statute of limitations defense].) Nor is a demurrer the appropriate procedure for determining the truth of disputed facts or what inferences should be drawn where competing inferences are possible. (Ramsden v. Western Union (1977) 71 Cal.App.3d 873, 879, 138 Cal.Rptr. 426.)

The complaint here did contain a factual ambiguity. If this ambiguity is construed one way, the ruling and dismissal by the trial court would be correct. Construed the other way, however, the ruling and dismissal by the trial court were clearly incorrect. The complaint otherwise contained no fatal defects. Since the complaint could easily have been amended to cure the ambiguity and to state a claim on which relief could be granted, the dismissal as to defendant Jacobson must be reversed.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Allegations of the complaint.

The following facts, alleged in the complaint, must be accepted as true. The individual plaintiffs are the founders of plaintiff CrossTalk. Prior to, and for a period after, the incorporation of CrossTalk, the individual plaintiffs were employed by CBS Television Network. ² Defendant Jacobson was at that time CBS' "Vice President, Advertising and Promotion (West Coast)." While employed at CBS, the individual plaintiffs reported directly to defendant Jacobson, who was their "boss" and had the ability to terminate their employment.

In late March of 1996, the individual plaintiffs approached defendant with the idea of forming an "outside" company to contract with CBS to supply video promotional spots. Defendant's responsibilities at CBS included selecting outside vendors, "overseeing" vendor contracts, and approving contract payments to vendors. Defendant would select the vendor, negotiate the terms of the contract, and approve the final contract. Even if a vendor contract exceeded defendant's "final authority" dollar level (and the signature of defendant's superior was hence required), defendant decided which vendors to select and defendant's superior "routinely approved" his decision. The individual plaintiffs asked defendant if they might be able to negotiate such a contract with CBS. Defendant's response was affirmative.

On or about April 25, 1996 the individual plaintiffs met with defendant and his superior to make a formal request "to be considered for an exclusive contract with CBS for the production of video promotional spots." Defendant's superior approved the request and "directed [defendant] to prepare the contract." Defendant and his superior asked the individual plaintiffs to remain at CBS until replacements could be hired. "At or about this point" the individual plaintiffs "let it be known to management" they would be leaving CBS to form CrossTalk.

The next day, defendant told plaintiff Keith that he wanted CrossTalk to "help him out" by paying him $500 a month, because he had done the individual plaintiffs a "favor." By this time, defendant knew that the individual plaintiffs had notified management that they were leaving and "had staked their entire future on CrossTalk's deal with CBS." In considering defendant's demand, the individual plaintiffs knew that defendant had the ability to "kill" the contract CrossTalk was negotiating with CBS, and the power to terminate the contract once the individual plaintiffs were "out on their own." Defendant was also still the individual plaintiffs' "boss," and had the power to terminate their employment before they could start up CrossTalk.

Defendant's demand "shocked and dismayed" plaintiff Keith. Although he did not believe he and plaintiff Cross owed defendant (or CBS) anything other than their continued hard work, he told defendant that he would speak with plaintiff Cross. The individual plaintiffs then attempted to "rationalize" defendant's demands as a form of "help" to defendant and his department. The individual plaintiffs believed defendant "stood in a position of power and control" over them, and had their economic future "in his hands." They were intimidated by defendant's status at CBS and his power over the contract and all potential CrossTalk projects. CBS had not yet provided the "promised contract," and the individual plaintiffs feared they would lose both the contract and their jobs if they refused, or told anyone of, defendant's demand.

Plaintiff Keith was "greatly distressed, and felt as though a gun were being put to his head." Plaintiff Cross was also "very distressed." Both individual plaintiffs "believed, to their great distress, that they had no reasonable alternative under these circumstances but to accede to [defendant's] demand in order to secure CrossTalk's contract with CBS." (Italics added). Accordingly, plaintiff Keith returned to defendant's office and "reluctantly" agreed to pay. (The use of the term "secure" in the complaint apparently figured prominently in the ruling of the trial court below.)

The individual plaintiffs then incorporated CrossTalk. The CrossTalk/CBS contract, although dated "[a]s of May 15, 1996," was not actually executed (by defendant's superior and the individual plaintiffs) until July, with performance to begin on August 1. Under the agreement, CrossTalk would work exclusively for CBS for two years, in exchange for a guaranteed minimum number of projects.

The individual plaintiffs were unable to leave CBS prior to the August 1 start date. Plaintiff Keith therefore asked defendant if the $500 payments could begin the following month. Defendant agreed, but plaintiff Keith's "perception" was that defendant was expecting a payment soon "or the contract would be in jeopardy." The individual plaintiffs believed this was defendant's means of doing business, and the "price of admission being charged by the person CBS empowered to preside over outside vendors." The individual plaintiffs still feared that the contract "on which they had staked their entire livelihood after leaving their jobs at CBS," would be imperiled if they did not make the payments demanded by defendant. Plaintiff Keith therefore delivered the first $500 to defendant on September 4, 1996, "under duress and believing that they had no other choice." He "tried to summon the strength to confront [defendant] ... but the reality of defendant's position of power and authority, and the oppressive nature of his office, caused [plaintiff Keith] to fold under defendant's control and to accede to his demands."

Although plaintiff Keith delivered additional $500 payments to defendant in October and November 1996, the individual plaintiffs heard through a separate source that defendant wanted to cancel the contract. They consequently became even more fearful of the consequences of failing to pay. In December, when plaintiff Keith called to discuss billing on a project for which CrossTalk sought additional compensation, defendant said he wanted his payments increased to $1000. Plaintiff Keith explained that CrossTalk could not afford that sum. Defendant appeared to become angry and stated that nonpayment would be "unacceptable."

After being advised that CrossTalk could not pay his increased demands, defendant began to fail to respond to plaintiff Keith's work-related communications, which made CrossTalk's performance under the contract difficult. On December 20, plaintiff Keith delivered to defendant $300 in cash and $200 in gift certificates he hoped would "pass" as the fourth payment. Defendant then claimed there were a number of "problems" with CrossTalk's...