Plaintiffs, former corporate officers, sued defendant broadcaster and related entities for, among other things, intentional and negligent interference with contract and intentional and negligent interference with prospective economic advantage. The Los Angeles County Superior Court, California, sustained without leave to amend demurrers to plaintiffs’ causes of action and entered judgment in favor of the broadcaster. Plaintiffs appealed.
Overview
The broadcaster formed an entertainment company as a joint venture with an investor. While working for the investor’s company, plaintiffs “earned” vested “compensatory” stock options in the investor’s company. These stock options were made contractual obligations of the entertainment company. If the investor were to sell his shares of the entertainment company, plaintiffs were required to sell their options in a manner which guaranteed them each one percent of the sales price of the investor’s shares. The broadcaster and the investor sold their entire interests in the entertainment company. Plaintiffs received more than $ 20 million each, a figure which represented one percent of the sales price. The instant court held that the trial court erred in sustaining the demurrer on the ground that the broadcaster was not a stranger to plaintiffs’ contracts. Plaintiffs bargained for and received certain contractual rights to recoup a percentage of the sales proceeds of the entertainment company. The broadcaster did not have unlimited discretion to intentionally act to defeat or diminish plaintiffs’ contractual rights by rigging the sale terms in a way that would hold down the sales price.
Outcome
The judgment was reversed, along with the order sustaining the demurrers to the interference causes of action. Plaintiffs were awarded their costs on appeal.
Procedural Posture
The parties were counseled by their respective small business lawyer in California. Cross-appeals were taken from a judgment of the Superior Court of Orange County (California), which, in a dispute regarding an asset purchase agreement, ruled that plaintiff sellers’ complaint for breach of contract was time-barred and that defendant buyer could not obtain damages or rescission on its cross-complaint for securities fraud under Corp. Code, § 25401.
Overview
The buyer paid in part with unregistered shares of the buyer’s stock. A contractual 24-month limitations period applied to claims for indemnification. The sellers alleged in their complaint, filed four years after the transaction, that the buyer had failed to obtain timely registration of its stock. The buyer’s cross-complaint alleged that the sellers had misrepresented the assets. The court held that the sellers’ contract claim was a claim for indemnification to which the 24-month limitations period applied. Reading the contract as a whole pursuant to Civ. Code, § 1641, and applying the definition of indemnity in Civ. Code, § 2772, the court concluded that the parties intended the indemnity provisions to include direct claims. Although Civ. Code, § 2778, contemplated third party claims, it did not apply because a contrary intention appeared. The trial court correctly interpreted Corp. Code, § 25501, to require valuation of the stock as of the date when the cross-complaint was filed, which resulted in no damages. Rescission was not available under § 25501 and Civ. Code, § 1691, subd. (b), because the buyer no longer had the assets and the sellers no longer had the buyer’s stock.
Outcome
The court affirmed the judgment.