Vespremi v. Tesla Motors Inc

• Decision Date: 05 May 2011
• Docket Number: A127008
• Court: California Court of Appeals Court of Appeals
• Parties: DAVID VESPREMI et al., Plaintiffs and Appellants, v. TESLA MOTORS, INC., et al., Defendants and Respondents.

DAVID VESPREMI et al., Plaintiffs and Appellants,

v.TESLA MOTORS, INC., et al., Defendants and Respondents.

A127008

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO

Dated: May 5, 2011

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Mateo County Super. Ct. No. CIV-474656)

I. INTRODUCTION

Appellants, two former employees of respondent Tesla Motors, Inc. (Tesla), sued it and three of its officers and employees for defamation and for breach of a stock option provision in the appellants' employment agreements. After considerable pre-trial litigation, including the sustaining of demurrers to one of appellants' earlier complaints, the trial court ultimately sustained respondents' demurrer to appellants' third amended complaint (TAC) without leave to amend and filed a judgment dismissing that complaint. Appellants appeal that judgment regarding three of their original nine causes of action, i.e., those for libel, slander, and breach of contract. We reject their appeal regarding the two defamation causes of action and hence affirm that portion of the judgment. However, we find that the trial court erred in sustaining, without leave to amend, respondents' demurrer to appellants' cause of action for breach of contract, and hence remand the matter to the trial court for further proceedings regarding that cause of action.

II. FACTUAL AND PROCEDURAL BACKGROUND

Appellants David Vespremi and Gene Glaudell were both hired by respondent Tesla, a San Mateo-based automobile manufacturer, in 2007. Vespremi was originally hired as Director of Public Relations and Glaudell as Chief Information Officer. Both had written employment agreements which specified that they were at-will employees and also included stock option clauses. According to the TAC, during their employment with Tesla, both men were "highly acclaimed for [their] work" and neither were ever "counseled for any poor performance."

In May 2007, Vespremi was allegedly promoted to "Director of Communications." However, a few months later, in November of that year, his job title was changed to "Technical Writer for the Engineering Department" and his employment status was changed to "a non-employee service provider." Vespremi was formally terminated in December 2007; the company then returned his check for $12,000 paid for stock options on the basis that his right for same, under the employment agreement, had not yet vested. According to the allegations of the TAC, Vespremi was not told, at the time he was terminated, that his termination was due to performance issues; rather, Tesla spokesperson Darryl Siry allegedly made statements to other Tesla employees "inferring that Vespremi's termination was the result of structural organizational changes in the company."

In December 2007, Glaudell was allegedly informed that Tesla was making budget cuts and that he must reduce the labor expenses of his department. On January 10, 2008, ¹ he was also terminated. Both terminations occurred at about the same time that Tesla terminated approximately 24 other employees. Those terminations were, according to appellants' TAC, because Tesla needed to restructure "its workforce in order to decrease its operating expenses due to financial difficulties." Unlike Vespremi, Glaudell apparently had not attempted to purchase any Tesla stock pursuant to the stock optionclause in his employment agreement, but "intended to... purchase shares of Common Stock in blocks as they vest."

According to the TAC, two days before Glaudell's termination, i.e., on January 8, Tesla Chairman Elon Musk told an "executive staff meeting" that company management should avoid making any public statements that suggested the terminations were due to financial considerations and, instead, should say that they were "performance-based." Thereafter, again per the TAC, "this policy was disseminated to Tesla Motors' managerial and supervisory staff who [were] required to follow that policy."

On that same day, January 8, the former CEO and co-founder of Tesla, Martin Eberhard, posted an article he wrote entitled "Stealth Bloodbath" on his personal blog; the article sharply criticized the terminations. It said, among other things, that Tesla's actions in "axing nearly the entire executive staff... [and] ripping through the firmware team... are all hard to explain." He also wrote: "Some of these folks were let go with no severance packages at all. Others got pathetic severance packages. This is not the way I treat people, that is for sure. Maybe this explains why I got the boot first."

Eberhard's blog originally listed the names of some of the terminated employees, including appellants, but two days later the blog was republished, this time with the names omitted.²

Following its posting on the internet, Eberhard's blog attracted considerable attention, both from other internet blogs focused (at least in part) on Tesla's business posture, and also from local press, including particularly the San Jose Mercury News. Several of these articles and blogs quoted Tesla spokesman Siry regarding the reasons for the layoffs.

Many of these articles and blogs were attached as exhibits to appellants' TAC. We will not recite all their content, but only the quotations from Tesla spokesperson Siry regarding the company's reasons for the layoffs.

In a January 11 blog commenting on Eberhard's blog, Siry was quoted as saying: "We're letting go of people who are either not the best on the team, or are working on something that is not a priority. [¶] [New CEO Drori] is holding people accountable at all levels, and that starts at the top."

The same day, another blog quoted Siry as saying that there were "several reasons" for the "firings," among them being the "insistence" of Tesla's new CEO, Ze'ev Drori, "that the company employ only the top performers." Siry continued, per the blog: "It's about managing performance and rewarding top performers and getting rid of the bottom performers.... It's about developing a team that has accountability."

The same day, January 11, another blog commenting on both the layoffs and former CEO Eberhard's criticism of them, quoted Siry as telling the San Jose Mercury News that "the employee departures are more about accountability than lay-offs.... [1] We are not downsizing at all. We are still growing and have dozens of openings we are recruiting for. This was a very specifically targeted action based on performance and also in some cases redundancy."

The actual article in the San Jose Mercury News appeared the following day, January 12. That article commented on the "messy divorce" between Eberhard and his successors at Tesla, and then quoted Siry as saying the "moves were related to 'performance management.' Ze'ev Drori, Tesla's new chief executive appointed in December [2007], intends to make employees accountable, Siry said. [1] 'If you don't get the job done, there are consequences, ' Siry said. 'We haven't had that before.' [1] The news of the firings—they are not layoffs, Siry said, as the San Carlos company lists 39 job openings on its Website—was announced on a new Web site by Martin Eberhard...."³

The same day, January 12, respondents Drori and Musk sent an e-mail to, allegedly, Tesla's "customers, investors and other third parties" purportedly intended to"share some quick perspectives... about some recent changes at Tesla Motors that you may have seen in the media." Concerning the terminations and the press and internet commentary thereon, the principal observations contained in that one-page, six-paragraph message was that the company must "create a culture of accountability to the commitments we make. A lack of such accountability leads to missed deadlines and continuous delay. This accountability starts at the top and permeates throughout the entire organization. As such we have made some changes at every level.... [¶]... We have also substantially improved leadership and focus in supply chain management, an area critical to our success.... [¶]... Since resources are very precious, this also means that we must make hard decisions where need be and part ways with those whose performance has not matched expectations. These actions were taken after careful analysis by the leadership team, and not by a shotgun approach."

According to the trial court's "Register of Actions," the first action by appellants against respondents was filed on July 11. That complaint was later amended to add respondent Musk as a defendant. A second amended complaint was filed on September 18; respondents demurred to it and, on December 22, that demurrer was sustained albeit with leave to amend. The TAC was filed on January 12, 2009.

On May 18, 2009, the trial court sustained respondents' demurrer to six of the nine causes of action in that complaint without leave to amend. Thereafter, appellants dismissed the remaining three causes of action, resulting in the court entering a judgment of dismissal of the TAC on October 26, 2009.

Appellants filed a timely notice of appeal on December 4, 2009. Per their opening brief to us, the only issues on appeal relate to two defamation causes of action (the fourth, alleging libel and the fifth, alleging slander) and the third cause of action for alleged breach of the stock option clause in the two appellants' employment agreements.

III. DISCUSSION

A. The Applicable Law⁴

The parties agree that our standard of review of a judgment of dismissal after the sustaining of a demurrer without leave to amend is de novo. They are, of course, correct. (See, e.g., Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; Total Call Internal, Inc. v. Peerless Ins. Co. (2010) 181...