Judge Holly J. Fujie, Case BC691790 2022-10-13 Tentative Ruling

RESPONDING PARTY: Defendants Gaumont Television USA, LLC (“Gaumont”) and Gaumont SA (“Gaumont SA”) (collectively, “Defendants”)

This action arises out of the termination of an employment relationship. Plaintiff’s currently operative second amended complaint (the “SAC”) alleges: (1) declaratory relief; (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) fraudulent inducement; (5) fraudulent concealment; (6) unfair competition; (7) intentional interference with contract; (8) inducing breach of contract; and (9) accounting.[1]

Plaintiff filed two motions in limine (collectively, the “Motions”): (1) to exclude parol evidence relating to Defendants’ definition of the contractual term “deficits” as meaning “costs of production” (“MIL 1”); and (2) to exclude evidence relating to Plaintiff’s laptop computer and alleged retention of confidential information (“MIL 2”).

A motion in limine is a motion used to preclude prejudicial or objectionable evidence before it is presented to the jury. (Blanks v. Shaw (2009) 171 Cal.App.4th 336, 375.) The advantage of such motions is to avoid the often-futile attempt to “unring the bell” in the event a motion to strike is granted before the jury. (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1593.) The granting of a motion in limine is improper if it eliminates the opportunity for a party to present evidence to prove its cause of action. (R & B Auto Ctr., Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 359.) In limine rulings are tentative and the court retains discretion to make different rulings as the evidence unfolds. (Scott v. C.R. Bard, Inc. (2014) 231 Cal.App.4th 763, 784.))

The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must be given effect to the mutual intention of the parties. (ASP Properties Group v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1269.) When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. (Civ. Code § 1639.) Parol evidence, however, is properly admitted to construe a written instrument when its language is ambiguous. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.)

Where the meaning of the words used in a contract is disputed, the trial court must provisionally receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably susceptible of a particular meaning. (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1350.) Even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible. (Id. at 1351.) The decision whether to admit parol evidence involves a two-step process. (Salehi v. Surfside III Condominium Owners’ Assn. (2011) 200 Cal.App.4th 1146, 1159.) First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties’ intentions to determine ambiguity, i.e., whether the language is “reasonably susceptible” to the interpretation urged by a party. (Id.) If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract. (Id.) The determination as to whether an ambiguity exists is a question of law. (Wolf v. Superior Court, supra, 114 Cal.App.4th at 1351.) If no competent parol evidence is admitted or the competent parol evidence is not in conflict, resolving the ambiguity is also a question of law. (Id.) Where the parol evidence is in conflict, however, the trial court’s resolution of that conflict is a question of fact. (Id.)

When ascertaining the intent of the parties at the time the contract was executed depends on the credibility of extrinsic evidence, that credibility determination and the interpretation of the contract are questions of fact. (Oakland-Alameda County Coliseum Authority v. Golden State Warriors, LLC (20020) 53 Cal.App.5th 807, 819.) In other words, if interpreting the contract involves deciding between conflicting extrinsic evidence concerning the meaning of contractual provision or divergent testimony about what the parties understood certain contractual provisions to mean, then it is a factual question, not a legal one. (Id.)

Under the “trade usage” rule, extrinsic evidence is admissible to show that words in a contract have by trade usage acquired a different meaning than their plain, ordinary, popular or legal meaning, and when both parties are engaged in that trade, the parties to the contract are deemed to have used them according to their different and peculiar sense as shown by such trade usage. (General Motors Corp. v. Superior Court (1993) 12 Cal.App.4th 435, 442 n. 3.) Parol evidence is admissible to establish the trade usage, and that is true even though the words are in their ordinary or legal meaning entirely unambiguous, inasmuch as by reason of the usage the words are used by the parties in a different sense. (Id.) The trial court may also consider extrinsic evidence of the course of dealings as a practical construction of the terms. (Dillingham-Ray Wilson v. City of Los Angeles (2010) 182 Cal.App.4th 1396, 1404.)

Evidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language. (Salehi v. Surfside III Condominium Owners’ Assn. (2011) 200 Cal.App.4th 1146, 1159.) It is the outward expression of the agreement, rather than a party’s unexpressed intention, which the court will enforce. (Id.)

Plaintiff has taken the position that Defendants have been disregarding the definition of her bonus by overstating the deductions. One of the ways Plaintiff believes that Moving Defendants have manipulated the amounts she is entitled to under the Termination Agreement is by redefining the meaning of the term “deficits” to mean “the cost of production of a series.”

Plaintiff was terminated in September 2015; in connection with her termination, she and Gaumont negotiated and entered into a termination agreement (the “Termination Agreement”). (See Declaration of Daniel A. Saunders (“Saunders Decl.”), Exhibit A.) Under the Termination Agreement, Plaintiff was to be guaranteed a share of the “modified adjustment gross receipts” (the “MAGR”) of the television series she worked on during her employment. (See id.) The Termination Agreement defines the MAGR as “all gross receipts derived from each such television show less the following items and in the following order of priority: (i) any third party distribution fees actually charged to GIT [Gaumont], provided however, that if GIT self-distributes a program, the distribution fees for such program shall be fifteen percent (15%) for all media; (ii) third party out of pocket distribution expenses; and (iii) deficits (including a ten percent (10%) overhead on all production costs plus all producer fees paid to you as a producer of such television show), plus interest at prime plus one percent (1%), provided there be no interest on overhead (or vice versa).” (Id. at ¶ 1(c).)[2]

The Termination Agreement also contains a clause which states: “This Agreement contains the entire understanding between you and GIT with respect to the subject matter hereof and supersedes all previous written and oral agreements between you and GIT with respect to the subject matter set forth herein.” (Id. at ¶ 12.)

Gaumont’s response to Plaintiff’s Special Interrogatory Number 2 states that it defines the term “deficits” as used in the MAGR provision of the Termination Agreement as the cost of production of a series including a ten percent overhead on all production costs plus all producer fees paid to Plaintiff as a producer of such television show, plus interest at prime plus one percent, provided there be no interest on overhead (or vice versa). (Saunders Decl., Exhibit B at 8:25-28.) In response to Special interrogatory Number 3, Gaumont stated that it defined “production costs” as used in the same provision as the cost of production of a series. (Saunders Decl., Exhibit B at 9:26-27.)

Plaintiff presents evidence of various Gaumont executives, including individuals involved in the negotiation of the Employment Agreement and/or the Termination Agreement, that they have not encountered the word “deficit” being ascribed with the meaning offered by Defendants in contexts aside from Plaintiff’s Termination Agreement. For example, Plaintiff presents evidence that Gaumont’s outside counsel who negotiated the Termination Agreement on its behalf, Robert Gaulin (“Gaulin”), testified that he has never used the term “deficit” to mean production costs. (See Saunders Decl., Exhibit C at 28:13-24:4, 102:7-17.) Plaintiff also presents the deposition testimony of expert witness Robert A. Wyman (“Wyman”) who provided the opinion that the term deficits is generally understood to be the difference between the income and expenses in situations where the expenses exceed the income. (Saunders Decl., Exhibit D at 8.) Plaintiff also presents evidence of a MAGR bonus participation statement issued to Plaintiff in connection with the Termination Agreement that includes line items showing gross receipts of a series subtracting from them various line item costs, including total production costs and reserves, and identifying the result of that equation in red as a deficit. (See Saunders Decl., Exhibit I.) Plaintiff additionally presents evidence of Gaumont documents which rely on a definition of deficit that varies from the interpretation Defendants ascribe to the term in the Termination Agreement. (See, e.g., Supp. Saunders Decl., Exhibit C.)

Defendants contend that evidence of the negotiation of Plaintiff’s Employment Agreement demonstrates that the definition of “deficit” in the Termination Agreement is reasonably susceptible to their proffered interpretation because the Termination Agreement uses the same language as the Employment Agreement entered into on September 15, 2010 (the “Employment Agreement”). (Compare Saunders Decl. Exhibits 1-2.) The Court has provisionally considered this evidence, although it notes that while the Termination Agreement states that Plaintiff was entitled to receive a contingent bonus payment for 2015 in accordance with the definition of “net profits” contained in “paragraph 1 of Amendment No. 2 to the Employment Agreement pertaining to adjusted net profits of GIT,” it does not explicitly state that the terms used in the MAGR provision are to be defined in accordance with the Employment Agreement. (See Saunders Decl., Exhibit A at ¶ 1(b)-(c).)^{^[3]}

Defendants provide evidence of an email sent by Plaintiff September 7, 2010 stating that she had “a pitch to slightly adjust compensation but would not impact overall amount.” (Grosswendt Decl., Exhibit L.) Defendants also provide evidence of a September 21, 2010 draft of the Employment Agreement, which does not include the MAGR provision but provides for Plaintiff’s entitlement to a bonus in the form of receiving “cash compensation equal to 2.5% of the ‘net profits’ from each television show. The term net profits shall be determined by taking all revenues earned by the company in respect of such television show and deducting the Company’s direct costs of producing such television show from inception, including all financing, studio overhead and sales costs, plus distribution fees but excluding any producer fees payable to Employee.” (See Grosswendt Decl., Exhibit J at ¶2.3(b) (emphases omitted).)

On September 23, 2010, Plaintiff’s counsel sent an email to Christophe Riandee (“Riandee”) requesting to incorporate the definition of MAGR that appears in the final iteration of the Employment Agreement. (See Grosswendt Decl., Exhibit K.) Riandee approved the provision on September 24, 2010. (See id.) The provision discussed in Exhibit K of the Grosswendt Declaration appears in the final Employment Agreement in lieu of the provision stated in the September 21, 2010 draft quoted above. (See Grosswendt Decl., Exhibit K; Saunders Decl., Exhibit J.)

Defendants contend that the September 7, 2010 email demonstrates the parties’ intention that Plaintiff would not be drastically changing the terms of her compensation. While the Opposition presents the September 7, 2010 email as an indication that Plaintiff did not intend to significantly alter the terms of her entitlement to a bonus, the Opposition does not acknowledge the timeline of this communication and the subsequent communications it presents as evidence. Defendants have provided evidence of a drafted version of the Employment Agreement sent to Plaintiff on August 30, 2010. (See Declaration of William Grosswendt (“Grosswendt Decl.”), Exhibit I.) The Court notes that the portions of the draft presented in Exhibit I that address compensation and bonus payments are illegible and the Court has not considered them. (See id.) Nonetheless, it appears that the September 21, 2010 iteration of the Employment Agreement, which is presented in a format that appears to track the changes from its previous iteration, includes minor adjustments to Plaintiff’s base compensation rate. (See Grosswendt Decl., Exhibit J.) The timing of the September 7, 2010 email suggests that Plaintiff’s then-proposed changes may not have been not made in connection to the MAGR provision submitted on September 23, 2010.

Defendants have further provided evidence of the testimony of various executives and attorneys providing their understanding of the term deficit as used in the Employment Agreement, and by incorporation, the Termination Agreement. (See, e.g., Grosswendt Decl., Exhibits C-G.) Defendants additionally indicate their intention to present the testimony of two expert witnesses who have been designated to provide an opinion concerning, among other things, industry standards regarding definitions used in MAGR agreements. (See Grosswendt Decl., Exhibit O at ¶¶ 5, 10.)

As a preliminary matter, the Court finds that, based on the extrinsic evidence, the use of “deficit” in the Termination Agreement is ambiguous because it is undefined and does not identify its calculation. The Court further finds that the evidence presented raises a factual issue concerning the credibility of the parties’ evidence. While Defendants have not presented evidence that Gaumont’s intended meaning of deficit was ever communicated to Plaintiff, Defendants have provided evidence placing their understanding within the context of Gaumont’s course of contractual dealings with Plaintiff and the negotiation of the Employment Agreement. Furthermore, while the Court acknowledges Plaintiff’s arguments regarding the inconsistency of Defendants’ witnesses’ testimonies, these inconsistencies require a credibility determination that is reserved for a jury’s consideration. (See Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1127.) Moreover, the Court notes that extrinsic evidence is admissible when offered to establish trade usage and usage in the parties’ course of dealings.

The SAXC alleged that Plaintiff wrongfully retained Defendants’ confidential documents on her laptop computer after her termination. On February 24, 2020, the Court sustained Plaintiff’s demurrer to four of the six causes of action in the SAXC concerning allegations of Plaintiff wrongfully absconding with confidential materials without leave to amend. On August 14, 2020, the Court granted Plaintiff’s motion for summary adjudication (the “MSA”) to the thirteenth and fifteenth affirmative defenses (breach of contract and excuse, respectively) alleged in Defendants’ answer (the “Answer”) to the SAC. In its ruling on the MSA, the Court found that the obligations of Plaintiff and Gaumont were independent based on the language of the Termination Agreement and that Plaintiff’s entitlement to compensation was not contingent upon her returning Gaumont’s property.

As previously stated, Defendants dismissed the SAXC on October 10, 2022; accordingly, MIL 2 is moot to the extent that the evidence concerns the allegations in the SAXC. Defendants’ opposition to MIL 2 argues that the evidence of Plaintiff’s improper conduct is relevant their unclean hands and fraud affirmative defenses. Defendants do not discuss why such evidence is relevant to these affirmative defenses or otherwise present an argument that distinguishes the Court’s reasoning in granting Plaintiff’s MSA to the breach of contract and excuse affirmative defenses. The Court finds that Defendants have waived this point. Where a point is merely asserted without argument of or authority for the proposition, it is deemed to be without foundation and requires no discussion. (Central Valley Gas Storage, LLC v. Southam (2017) 11 Cal.App.5th 686, 695.) The Court therefore GRANTS MIL 2 in its entirety.

In consideration of the current COVID-19 pandemic situation, the Court¿strongly¿encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative.¿¿If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to¿SMC_DEPT56@lacourt.org¿stating your intention to appear in person.¿ The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date.¿ This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court

[1] Defendants filed a cross-complaint against Plaintiff; on October 10, 2022, Defendants dismissed their second amended cross-complaint (the “SAXC”).

[2] Gaumont was formerly known as Gaumont International Television, LLC (“GIT”).

[3] It is also unclear which iteration of the Employment Agreement constitutes “Amendment No. 2.”