UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
February 4, 2005
DAVID CHURCHILL, PLAINTIFF(S),
WINTER CHEVROLET, ET AL., DEFENDANT(S).
The opinion of the court was delivered by: Joseph C. Spero United States Magistrate Judge
AMENDED ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT [Docket No. 68]
Plaintiff's Motion For Partial Summary Judgment (the "Motion") came on for hearing on Friday,
January 21, 2005, at 9:30 a.m. For the reasons stated below, the Motion is GRANTED in part and DENIED in part.
1. Employment Relationship Between Churchill and Winter Chevrolet
David Churchill was employed as General Manager for Winter Chevrolet from March 2000 to July 7, 2003. Joint Statement, No. 13. Prior to commencing his employment, on February 28, 2000, Churchill entered into an employment agreement with Rose Winter, who is the President and Owner of Winter Chevrolet, entitled "General Manager Pay Plan." Counterclaimants Winter Chevrolet Company, Inc. and Rose Winter's Separate Statement of Undisputed Facts and Genuine Issues of Fact in Opposition to Counterdefendant David Churchill's Motion for Partial Summary Judgment ("Defendants' Separate Statement"), No. 1 (citing Winter Dep. 21:15-25; 27: 22-24; Payne Dep., Ex. 8); Plaintiff's Response to Defendants' Separate Statement of Undisputed Facts and Genuine Issues of Fact in Support of Their Opposition to Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's Response to Defendants' Separate Statement") at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement).
In December 2001, Churchill began negotiations with Winter Chevrolet's accountant, Don Payne, for a new employment agreement ("the Employment Agreement"). Defendants' Separate Statement, No. 2 (citing Churchill Dep. 144: 3-5); Plaintiff's Response to Defendants' Separate Statement at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). This new agreement was executed by Churchill, Winter and Winter Chevrolet Business Manager Lenore Nelson on March 12, 2003. Defendants' Separate Statement, No. 6 (citing Churchill Dep. 242: 12-15, Ex. 1); Plaintiff's Response to Defendants' Separate Statement at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). By its terms, the agreement was to have retroactive effect as of January 1, 2002. Declaration of Richard M. Rogers in Support of Motion for Partial Summary Judgment ("Rogers Decl."), Ex. 3, Payne Dep., Ex. 1.
The Employment Agreement contains the following provision enumerating Churchill's duties and obligations:
Employee's Position and Duties
Employee shall be employed as Corporation's General Manager, at 2101 Railroad Avenue, Pittsburg, CA, or at such other place or places as from time to time designated by the Board of Directors of Corporation. Employee shall devote his full time, energy and abilities to the proper and efficient performance of the duties of his employment, Without prior express authority of Corporation's Board of Directors, Employee shall not, directly or indirectly during the term of his agreement: a) render services of a business or commercial nature to any other person or firm, whether for compensation or otherwise; or b) engage in any activity competitive with or adverse to Corporation's business or welfare, whether alone, as a partner, or as an officer, director, employee or shareholder of more than ten percent of the stock of any other corporation; provided, however, that should employee perform services, to any other person or firm for compensation, all such compensation shall be paid over to Corporation by Employee. From and after January 1, 2003, if Employee is terminated for any reason thereafter, for five (5) years following his termination as an Employee, Employee agrees that he will not, directly or indirectly, own an interest in, operate, join, control or participate in, or be connected as an officer, employee, agent, independent contractor, partner, shareholder or principal of any corporation, partnership, proprietorship, firm, association, person or other entity competing with Corporation's products or Corporation's business within fifty (50) miles from the Corporation's principal place of business. During such five (5) year period following termination as an Employee of Corporation, Employee agrees not to undertake any employment or activity competitive with Corporation's business in which the loyal and complete fulfillment of the duties of the competitive employment or activity would call on Employee to reveal, to make judgments on, or otherwise to use any confidential business information or trade secrets of Corporation's business to which Employee had access by reason of Corporation's business.
Id., ¶ 3.
2. Pittsburg Ford Negotiations
During the fall of 2002, Winter entered into negotiations to purchase another car dealership, Pittsburg Ford. Joint Statement, No. 14. As General Manager, Churchill worked closely with Winter during these negotiations and attended meetings between Winter and representatives of Pittsburg Ford. Joint Statement, Nos. 14-16. Churchill viewed a number of confidential documents relating to the potential purchase, including the Pittsburg Ford Lease, the Purchase Agreement to buy Pittsburg Ford, an environmental report on Pittsburg Ford, and Operating Reports for Pittsburg Ford. Joint Statement, Nos. 18-21. On the advice of both Churchill and Winter's accountant, Don Payne, Winter signed an agreement to purchase Pittsburg Ford containing a number of contingencies. Joint Statement, No. 23 (initially, Churchill advised Winter to purchase Pittsburg Ford); Defendants' Separate Statement, No. 8 (Payne advised Winter that he thought Pittsburg Ford could be "quite profitable"); Plaintiff's Response to Separate Statement (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement).
On November 15, 2002, Winter invoked a contingency that revoked the purchase of Pittsburg Ford. Joint Statement, No, 25. The letter sent on behalf of Winter to the seller of Pittsburg Ford listed as material deficiencies the financial condition of Pittsburg Ford, the general condition of the facility -- including potential environmental problems with the site -- and concerns about pending litigation against Pittsburg Ford. Declaration of Joshua J. Cliffe in Opposition to Counterdefendant David Churchill's Motion for Partial Summary Judgment ("Cliffe Decl."), Ex. A, Winter Dep., Ex. 34. According to Defendants, though, the "key" factor in Winter's decision to revoke the agreement to purchase Pittsburg Ford was advice from Churchill that she should back out of the deal.
In support of their position, Defendants cite a declaration by Winter and to Winter's deposition testimony. In the Declaration, Winter states as follows:
7. After I agreed to purchase Pittsburg Ford, it became obvious to me that David's enthusiasm for the deal was diminishing, We both had a number of concerns about Pittsburg Ford, including problems outlined in an environmental report, the condition of the facility and pending litigation, but I believed these problems could be overcome and we could make it a profitable dealership. I thought David thought so too, but I perceived a growing amount of hesitation on his part, so I asked him bluntly whether we should proceed with the transaction. David said, "We have a lot on our table right now. You know, we're building those two buildings. Why don't you just tell that I don't want to go ahead with the deal."
8. I relied upon David a great deal as General Manager and it was important to me that he was on board if we were going to go forward with the purchase. When David advised me to revoke the purchase agreement, I felt that I had no choice but to cancel the purchase agreement. I certainly had concerns about Pittsburg Ford, but David's advice to revoke the purchase agreement was the key factor that led to my decision to cancel the agreement.
Declaration of Rose Winter ("Winter Decl.").
In her deposition, Winter testified as follows:
Q: . . . At some point, November 15, 2002, you decided you didn't want to go ahead with the deal, right?
A: That's correct.
Q: Why was that?
A: There were various reasons. One had to do with the report that we received from the -- the environmental report. There was also some litigation that was pending. There were -- the facility was in disrepair. David visited a couple of times. I visited once. I believe he visited once with me and then with the service manager. So there were a lot of concerns. . . .
Q: . . . The concerns that you raised that you just testified to, were they the real reasons you didn't go ahead with the deal?
A: That plus the fact that David said, "Why don't you just tell them that I don't want to manage all those stores," he said.
Q: How did that come up?
A: Well, because we were saying, "Well, do we go ahead with this or do we not?" And at some point he said, "We have a lot on our table right now. You know, we're building those two buildings," which we defintely were. But at some point he in fact said, "Why don't you just tell them that I don't want to go ahead with the deal."
So I said, I'm not going to say that." I said, I will say, you know, there are some conditions that are not the best conditions, and based on those facts we definitely do not have to proceed with the deal.
Rogers Decl., Ex. 2, Winter Dep. 255: 12 - 257: 1.
Defendants also cite an April 8, 2003 letter from an attorney for Pittsburg Ford, written in the context of the dispute that followed the revocation of the purchase agreement, concerning whether the $50,000.00 deposit paid by Winter Chevrolet would be returned. The letter states:
Ms. Winter did not notify PFI of material deficiencies in the Purchased Assets (as defined in the Agreement). Rather, we understand that throughout the course of her due diligence, Ms. Winter was pleased with the terms of the transaction and with the Purchased Assets, and we are lead to believe that she had full intentions to consummate the sale. Her intent to proceed with the transaction, however, ceased upon her receipt of an opinion from her general manager, who was himself a potential purchaser of the assets and made an offer after Ms. Winter's alleged termination, that the consideration to be paid by Ms. Winter was in excess of the value of the Purchased Assets. It was only after she received this advice that she made any mention to PFI of her alleged concerns with respect to the suitability of the Dealership or the Purchased Assets.
Cliffe Decl., Ex. A, Winter Dep., Ex. 38.
Churchill, on the other hand, testified in his deposition that he never advised Winter to back out of the deal. In particular, Churchill testified as follows:
Q: . . . And your testimony is you never expressed any other concerns, reservations, or negative thoughts to Mrs. Winter about the proposed purchase of Pittsburg Ford?
A: I was excited about the deal. I thought it was a good deal.
Q: Not my question. My question is, is it your testimony that you never offered any other reservations or negative comments to Mrs. Winter about the prospective purchase of Pittsburg Ford?
A: The only negative comments that I offered is things that we already knew; that the business was being managed poorly. So if that's a negative comment -- to me, I look at it as a positive because of the up-side for us, so no.
Q: So there were no negative comments, is that what you're telling me?
A: Other than the fact discussing the current condition the dealership was in, no.
Q: Okay. And you're testifying that at all times you told Mrs. Winter that you thought she should proceed with the deal? A: I was all for the deal. . . .
Cliffe Decl., Ex. B, Churchill Dep. 278: 2 - 21.
Subsequently, on January 15, 2003, Churchill and two other individuals made a joint offer to purchase Pittsburg Ford at a reduced price. Joint Statement, No. 26; Defendants' Separate Statement, No. 18, Plaintiff's Response (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). Churchill did not inform Defendants of his attempt to purchase Pittsburg Ford. Joint Statement, No. 28. Pittsburg Ford was sold to another buyer on March 19, 2003. Defendants' Separate Statement, No. 21; Plaintiff's Response (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement).
3. Churchill's Alleged Statements to Strikers
During the summer of 2003, the Machinist and Teamsters Unions were negotiating with the New Car Dealers of Contra Costa for a new collective bargaining agreement. Joint Statement, No. 33. The Union members -- including employees of Winter Chevrolet -- went on strike on July 3, 2003. Joint Statement, No. 34; see also Cliffe Decl., Ex. E, Declaration of Marc Robinson ("Robinson Decl.") (stating he and approximately 20 employees of Winter Chevrolet were on the picket line outside Winter Chevrolet on the night of July 7, 2003). Two days later, on July 5, 2003, Churchill presented Winter with a new proposed employment agreement. Defendants' Separate Statement, No 39; Plaintiff's Response to Defendants' Separate Statement (stipulating that Plaintiff does not object to No. 39 for purposes of this Motion). Winter refused to sign the agreement, and Churchill resigned following an encounter with Winter on the evening of July 7, 2003. Defendants' Separate Statement, Nos. 43-44; Plaintiffs' Response to Defendants' Separate Statement (Stipulating that Plaintiff does not object to Nos. 43-44 for purposes of this Motion).
According to Marc Robinson, an employee of Winter Chevrolet who was picketing outside of Winter Chevrolet on the evening of July 7, 2003, as Churchill left the premises after his encounter with Winter, he came up to the picketers and said to them: "I quit[.] I couldn't take it anymore to see you guys out here like this." Cliffe Decl., Ex. E, Robinson Decl., ¶ 4. Robinson states further in his declaration that he thought "the resignation of Churchill in support of the strikers put more pressure on Rose Winter and the dealership because now she had no one to help her out during the strike." Id. at ¶ 5.
4. Churchill's Application for Unemployment Benefits and Employment With Hayward Chevrolet
After Churchill's resignation, he filed for unemployment benefits. Defendants' Separate Statement, No. 32. Plaintiff's Response to Defendants' Separate Statement (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). In pursuing these benefits, Churchill testified on November 18, 2003, before administrative law judge, Jeevan Ahuja of the Sacramento Office of Appeals, that the non-compete provision in the Employment Agreement was enforceable. Joint Statement, No. 32 (citing to Defendant Rose Winter' Supplemental Response to First Set of Special Interrogatories at 17); see also Declaration of Richard M. Rogers in Support of Reply to Opposition to Plaintiff's Motion for Partial Summary Judgment ("Rogers Reply Decl."), Ex. 1, Transcript of November 18, 2003 Proceeding.
Several months after Churchill left Winter Chevrolet, he worked for Hayward Chevrolet, which is a competing dealership within fifty miles of Winter Chevrolet. Joint Statement, No. 3 (citing Winter Dep. at 239-240).
B. Procedural Background
Churchill filed this action on February 5, 2004, alleging fraud and breach of contract. In response, Defendants asserted the following counterclaims:
Claim One: Intentional Infliction of Emotional Distress;
Claim Two: Breach of Contract;
Claim Three: Intentional Interference with Contractual Relations; and
Claim Four: Intentional Interference with Prospective Economic Advantage.
In the Motion, Plaintiff seeks summary judgment in his favor on Defendants' second, third and fourth counterclaims. With respect to Claim Two, based on Churchill's alleged breach of the Employment Agreement, Plaintiff make three arguments. First, he argues that Churchill's resignation cannot be a breach of contract because the Employment Agreement contains an at-will provision. Second, he asserts that Defendants have stipulated that no damage resulted from Churchill's employment by Hayward Chevrolet and therefore, Defendants cannot establish liability on the claim. Third, he argues that in any event, the non-compete provision contained in the Employment Agreement is unenforceable. As to Claim Three, based on Churchill's alleged comments to strikers on July 7, 2003, Plaintiff asserts that Defendants again can point to no evidence of damages. For the same reason, Plaintiff asserts, Claim Four fails to the extent it is based on the alleged comments made by Churchill to strikers. Finally, as to the allegation that Churchill's actions with respect to the purchase of Pittsburg Ford interfered with Defendants' prospective economic advantage (the second theory of liability under Claim Four), Plaintiff asserts there are no damages because Winter admitted that she abandoned the purchase of Pittsburg Ford for reasons unrelated to Churchill.
In their Opposition, Defendants concede that they were not damaged by Churchill's employment by Hayward Chevrolet, but assert that there is still a controversy as to Claim Two, based on both Churchill's employment by Hayward Chevrolet and his conduct with respect to the purchase of Pittsburg Ford. As to Churchill's alleged breach of the non-compete provision based on his employment by Hayward Chevrolet, Defendants assert that even if there are no damages, the claim survives because they seek declaratory relief and because Churchill is seeking benefits past the point when he began to work for Hayward Chevrolet. Defendants argue further that Churchill is estopped from arguing the non-compete provision is unenforceable because he testified that it was enforceable before an administrative law judge when he was seeking unemployment benefits. Finally, Defendants argue that, in any event, there is a material issue of fact as to whether Churchill breached the Employment Agreement based on his conduct with respect to the purchase of Pittsburg Ford. Defendants do not dispute that Churchill's resignation, by itself, cannot be a breach of contract.
With respect to the claims based on Churchill's alleged comments to strikers (Claims Three and Four), Defendants assert that there is evidence that the comments harmed Defendants. Defendants point to a statement by a striker, Marc Robinson, that he thought Churchill's resignation "put more pressure on the dealership because now she had no one to help her during the strike." Cliffe Decl., Ex. E, Robinson Decl. at ¶ 5. Defendants also point to evidence that the strike resulted in lost profits. Finally, as to Claim Four based on Churchill's alleged actions regarding the purchase of Pittsburg Ford, Defendants point to both Winter's deposition testimony and her declaration as evidence that there is a genuine issue of fact as to whether Churchill advised Winter to back out of the deal before attempting to purchase Pittsburg Ford himself.
A. Legal Standard
Rule 56 provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there are no genuine issues as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the nonmoving party's claim, or to a defense on which the nonmoving party will bear the burden of persuasion at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also Nissan Fire & Marine Ins. Co. v. Fritz Cos. Inc., 210 F.3d 1099 (9th Cir. 2000). Once the movant has made this showing, the burden shifts to the party opposing summary judgment to "designate specific facts showing there is a genuine issue for trial." Celotex, 477 U.S. at 323.
B. Claim Two (Breach of Contract)
Plaintiff seeks summary judgment on Claim Two on the basis that Churchill's resignation cannot constitute a breach of contract in light of the at-will provision in the Employment Agreement. Plaintiff argues further that Defendants have presented no evidence of damages and the non-compete clause is unenforceable. Defendants do not dispute that Churchill's resignation cannot be a breach of contract. Further, Defendants have stipulated that no damages resulted from Churchill's employment at Hayward Chevrolet. However, they assert that Claim Two should not be dismissed because they seek declaratory relief on this claim. Defendants argue further that Plaintiff is judicially estopped from asserting that the non-compete clause is unenforceable. Finally, Defendants argue that in any event, the claim should not be dismissed because there is a material issue of fact as to whether Churchill's conduct in connection with the purchase of Pittsburg Ford breached paragraph 3 of the Employment Agreement.
Because Defendants do not dispute that the breach of contract claim fails to the extent it is based on Churchill's resignation, Plaintiff is entitled to summary judgment on that issue. Further, the Court concludes that Plaintiff is entitled to summary judgment on Claim Two to the extent that it is based on Churchill's employment by Hayward Chevrolet because: 1) Defendants have not established that their claim for declaratory relief is based on an actual controversy; and 2) even if there is an actual controversy, the non-compete clause is unenforceable and the doctrine of judicial estoppel does not apply. On the other hand, the Court finds evidence sufficient to show a material issue of fact on the question of whether Churchill's conduct regarding the Pittsburg Ford deal constituted a breach of contract.
1. Declaratory Relief
Because the question of whether a federal court should award declaratory relief is procedural, Defendants' request for declaratory relief is governed by the federal Declaratory Judgment Act, 28 U.S.C. § 2201. See Golden Eagle Ins. Co. v. Travelers Cos., 103 F.3d 750, 753 (9th Cir. 1996), overruled on other grounds, Government Employees Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998). The Declaratory Judgment Act provides that "[i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a). In applying this provision, courts must address two issues: 1) whether there is an actual controversy; and 2) whether it is proper to exercise the discretion afforded under the Declaratory Judgment Act by exercising jurisdiction. American States Ins. Co. v. Kearns, 15 F.3d 142, 143 -144 (9th Cir. 1994).
The "actual controversy" requirement under the Declaratory Judgment Act is the same as the "case or controversy" requirement of Article III of the United States Constitution. Id. The Ninth Circuit has described this inquiry as follows:
Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. . . . A case is ripe where the essential facts establishing the right to declaratory relief have already occurred.
Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th Cir. 1986) (citations omitted).
With respect to the second issue, whether to exercise discretion to entertain a declaratory relief claim, courts "'must balance concerns of judicial administration, comity, and fairness to the litigants.'" Id. (quoting Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir.1991)). Thus, courts commonly decline to exercise discretion under the Declaratory Relief Act where a request for declaratory relief on the same claim is pending in state court. See Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 494 (1942).
Here, Defendants have requested a declaration that "Churchill, not Defendants, committed a breach of the General Manager Pay Plan and the 2003 Employment Plan." Defendants' First Amended Answer and Counterclaims to Plaintiff's Complaint for Damages ("Amended Answer and Counterclaims) at 17. Nothing in the Amended Answer and Counterclaims provides any indication of an actual controversy with respect to the Hayward Chevrolet claim. However, Defendants assert in opposition to the Motion that such a controversy exists because Churchill is seeking benefits under the Employment Agreement past the time when he began working for Hayward Chevrolet. It is unclear what benefits Defendants are referring to. Because Defendants fail to establish an actual controversy, there is no jurisdiction under the Declaratory Relief Act over the breach of contract claim based on Churchill's employment by Hayward Chevrolet.
2. Judicial Estoppel
Even if the Court could properly exercise jurisdiction over the Hayward Chevrolet breach of contract claim under the Declaratory Relief Act, this claim fails because the non-compete provision as it applies to this claim is unenforceable and the doctrine of judicial estoppel does not apply.
Plaintiff cites California Business and Professions Code § 16600, which makes non-compete provisions unenforceable with only limited exceptions. See also Latona v. Aetna Healthcare, Inc., 82 F. Supp. 2d 1089, 1095 (C.D. Cal. 1999) (holding that non-compete clause that prohibited healthcare worker from working for competing organization within 50 miles of employer for a period of six months after termination was unenforceable under California law). Defendants do not dispute the non-compete provision is unenforceable. Rather, they assert that Plaintiff is barred from raising this issue under the doctrine of judicial estoppel. The Court does not agree.
Federal law on judicial estoppel governs in federal court. Risetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 603 (9th Cir. 1996) (affirming summary judgment in favor of defendant and holding that plaintiff was judicially estopped from asserting legal claims based on ability to work where she had received a favorable Workers' Compensation settlement based on assertions that she was unable to work).*fn3 The doctrine of judicial estoppel is an equitable doctrine that may be invoked by the court at its discretion to protect the integrity of the judicial process. Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). The doctrine was developed to prevent litigants from "playing fast and loose" with the courts by obtaining an advantage from taking one position and then seeking a second advantage by taking an incompatible position. Risetto, 94 F.3d at 600. The doctrine applies to statements made in separate proceedings and also has been applied where the prior proceeding was an administrative proceeding. Id. at 604, 605. It is most commonly applied to factual assertions. See Russell, 893 F.2d at 1037; see also California Amplifier, Inc. v. RLI Ins. Co., 94 Cal. App. 4th 102, 118 (2001) (affirming trial court's determination that doctrine of judicial estoppel did not apply on basis that prior inconsistent position was legal rather than factual). Further, the Ninth Circuit has recently adopted the position taken by the majority of the Circuits that application of the doctrine is limited to cases in which the court or administrative body relied on or accepted the prior inconsistent position. See Interstate Fire & Cas. Co., an Illinois Corp. v. Underwriters at Lloyd's, London, 139 F.3d 1234, 1239 (9th Cir. 1998).
The Court may consider a number of factors in determining whether the doctrine of judicial estoppel applies. The Supreme Court has described this inquiry as follows:
[S]everal factors typically inform the decision whether to apply the doctrine in a particular case: First, a party's later position must be "clearly inconsistent" with its earlier position. . . . Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create "the perception that either the first or the second court was misled." Absent success in a prior proceeding, a party's later inconsistent position introduces no "risk of inconsistent court determinations," . . . and thus poses little threat to judicial integrity. . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.
New Hampshire v. Maine, 532 U.S. 742, 750 (2001).
The Court concludes that under the circumstances here, the doctrine of judicial estoppel does not apply. First, Defendants have neither alleged nor shown any evidence that Churchill's prior invocation of the non-compete provision was accepted or adopted in the administrative proceeding.
Second, the Court, having reviewed Churchill's testimony in the administrative proceeding, does not find that Churchill has engaged in an attempt to play "fast and loose" with the Court. In particular, the prior statements are not "clearly inconsistent" with the position taken in this proceeding. Rather, when questioned in the administrative proceeding about whether he could have found alternative employment before resigning from Winter Chevrolet, Churchill simply testified that he could have found employment if he had not been limited by the non-compete clause. See Rogers Reply Decl., Ex. 1, Transcript of Administrative Proceeding at 8. In the same proceeding, he noted that he doubted whether the provision was even legal. Id. at 14. At most, Churchill's testimony amounted to an assertion that he felt bound by a provision that may or may not have been legally binding. Given that Churchill's prior testimony did not contain any factual inconsistency, and in light of the fact that Churchill's testimony made clear that he was not sure of the legality of the non-compete clause, the Court declines to apply the doctrine of judicial estoppel.
Accordingly, the Court GRANTS summary judgment in favor of Plaintiff on Defendants' breach of contract claim to the extent the claim is based on Churchill's employment by Hayward Chevrolet. The Court also GRANTS summary judgment in favor of Plaintiff on Defendants' breach of contract claim to the extent the claim is based on Churchill's resignation.
On the other hand, the Court DENIES summary judgment as to the breach of contract claim to the extent that it is based on Churchill's conduct with respect to the Pittsburg Ford deal. First, as discussed below, there is a material issue of fact as to whether Churchill's actions with respect to the Pittsburg Ford deal were adverse to or competitive with Winter Chevrolet. Second, Plaintiff has not established that he did not have an obligation under the Employment Agreement to refrain from acting in a manner that was adverse to Defendants. In particular, Plaintiff has cited no authority in support of his assertion that a contract that is retroactive on its face cannot be applied to conduct that occurred before the contract was signed.
C. Claim Three (Intentional Interference With Contractual Relations)
Plaintiff asserts that Claim Three must be dismissed because there is no evidence of damage resulting from the alleged comments made by Churchill. The Court agrees.
In order to prevail on a claim for intentional interference with contractual relations, a plaintiff must establish the following elements: "(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage." Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990). Plaintiff asserts that there is no evidence of an actual disruption of any contractual relationship and argues further that Winter admitted in her deposition that Churchill's remarks (assuming he made the alleged remarks) neither caused nor prolonged the strike. Without reaching the question of whether Winter's testimony constitutes an admission that is binding on Defendants, the Court finds that there is no evidence in the record from which a jury could reasonably conclude that the alleged false statements by Churchill caused actual disruption of the contractual relationship between Defendants and the strikers.
Defendants concede that Churchill's alleged remarks did not cause the strike in the summer of 2003. However, they assert that Churchill's alleged false comments prolonged the strike by emboldening strikers. They rely heavily upon a declaration by Marc Robinson, an employee of Winter Chevrolet who was among the striking workers on the night of July 7, 2003. In his declaration, Robinson states as follows:
4. I was on the picket line outside of the dealership on the evening of July 7, 2003, when General Manager David Churchill approached a group of strikers and said, "I quit I couldn't take it any more to see you guys out here like this." There were approximately 20 employees on the picket line when Churchill made this statement. After he left, I believe word spread that he quit because he couldn't take seeing the employees out on strike.
5. After Churchill resigned and told me he was quitting in support of us, I thought the dealership was at its end because Churchill was the General Manager. I thought that the departure of Churchill and other employees was weakening the dealership. I thought the resignation of Churchill in support of the strikers put more pressure on Rose Winter and the dealership because now she had no one to help her out during the strike.
Cliffe Decl., Ex. E, Robinson Decl. at ¶¶ 4-5.
Robinson's declaration fails to provide support for Defendants' claim because there is no indication in the statement that it was Churchill's alleged expression of support that caused Robinson to believe Winter Chevrolet was in a weakened position. Rather, Robinson's statement makes clear that his reaction to Churchill's alleged statements was based on the mere fact that Churchill had resigned, leaving Winter without his support. Yet Churchill could not be liable for simply telling the strikers that he had resigned because true statements cannot give rise to liability for intentional interference with economic relations. See Savage v. Pacific Gas & Electric Co., 21 Cal. App. 4th 434, 449 (1993). There is no evidence in the record from which a jury could reasonably conclude that the strike was prolonged because of Churchill's alleged statements concerning the motivation for his resignation, as distinct from the resignation itself. Nor does the statement by Winter that the workers became more aggressive after July 7, 2003, provide sufficient evidence from which to draw a reasonable inference of such a connection. Winter Decl. ¶ 14, Ex. A. Therefore, the Court GRANTS summary judgment as to Claim Three.
D. Claim Four (Intentional Interference With Prospective Economic Advantage)
To establish liability on claim for Intentional Interference with Prospective Economic Advantage, a plaintiff must establish the following elements: 1) an economic relationship between the plaintiff and some third person containing the probability of a future economic benefit to plaintiff; 2) knowledge by the defendant of the existence of the relationship; 3) a wrongful act by the defendant designed to disrupt the relationship; 4) actual disruption of the relationship; and 5) damages to plaintiff proximately caused by the acts of the defendant. Della Penna v. Toyota Motor Sales, 11 Cal. 4th 376, 389, 392-393 (1995).
1. Alleged Comments to Strikers
As discussed above, there is no evidence from which a jury could reasonable conclude the strike was prolonged because of Churchill's alleged misrepresentations concerning the reasons for his resignation. Therefore, the Court GRANTS summary judgment on this claim.
2. Actions Related to Purchase of Pittsburg Ford
Plaintiffs assert that the interference claim based on the attempted purchase of Pittsburg Ford must fail because at the time Churchill submitted an offer to purchase Pittsburg Ford, Winter had already decided not to purchase Pittsburg Ford. Therefore, Churchill asserts, there was no prospective economic relationship. Plaintiff argues further that there is no evidence that Churchill intentionally advised Winter to revoke a potentially profitable deal so that he could buy Pittsburg Ford at a reduced price. Plaintiff cites Winter's deposition testimony, which he asserts establishes, as a matter of law, that Winter's decision was based entirely on factors that were independent of Churchill. Therefore, Plaintiff asserts, Defendants have not provided any evidence that Churchill's alleged acts resulted in damages and this claim should be dismissed. The Court rejects Plaintiff's arguments.
First, to the extent Plaintiff attempts to limit the inquiry to whether the offer made by Churchill interfered with a prospective economic relationship at the time the offer was made, Churchill frames the issue too narrowly. Defendants' claim is based not only on Plaintiff's offer to purchase Pittsburg Ford but also on his earlier advice, first to purchase Pittsburg Ford and later to back out of the deal. See Answer and Counterclaims at 13. In particular, Defendants assert that Plaintiff advised Winter to cancel deal so that Churchill, in partnership with competitors of Winter Chevrolet, could purchase Pittsburg Ford at a reduced price. Therefore, the fact that Defendants had already cancelled the deal and had no intention of purchasing Pittsburg Ford at the time Churchill made his offer does not defeat Defendants' claim.
Second, the Court rejects Plaintiff's assertion that he could not be liable on this claim because Winter admits she cancelled the deal for reasons that had nothing to do with Churchill. In advancing this argument, Plaintiff mischaracterizes Winter's deposition testimony. See Rogers Decl., Ex. 2, Winter Dep. 255: 12 - 257: 1 (quoted in full above). In her deposition, Winter was asked about the reasons she cancelled the deal. She listed the factors described in the November 15, 2002 letter and Plaintiff's counsel asked her if these were the only factors that affected her decision. Id. Winter answered, "That plus the fact that David said, 'Why don't you just tell them that I don't want to manage all those stores,' he said." Id. Although one could interpret this testimony as a statement that Churchill merely offered to serve as a pretext for canceling the deal, as Plaintiff asserts, a reasonable jury could, in the alternative, infer from this testimony that Churchill was advising Winter not to purchase Pittsburg Ford -- or at least, that Winter interpreted Churchill's statement that way.
The Court also rejects Plaintiff's assertion that Winter's declaration should be ignored because it is inconsistent with her deposition testimony. In her declaration, Winter repeats the statements by Churchill to which Winter testified in her deposition and elaborates on the context in which the statement was made and her reaction to the statement. In particular, Winter states that the statement by Churchill was made in response to Winter's question as to whether she should proceed with the transaction. Winter Decl., at ¶ 7. Winter states further that "David's advice was the key factor that led to my decision to cancel the agreement." Id. at ¶ 8. These statements are not clearly inconsistent with Winter's deposition testimony and may not be ignored on summary judgment. Rather, the evidence cited by Defendants as to whether Churchill may have caused Winter to cancel the deal creates a material issue of fact. Accordingly, the Court DENIES summary judgment on Plaintiff's claim for interference with prospective economic relations based on Churchill's actions in connection with the Pittsburg Ford negotiations.
For the reasons stated above, the Motion is GRANTED as to the following counterclaims:
1) Claim Two (Breach of Contract) to the extent it is based on the allegation that Churchill violated non-compete provision of Employment Agreement when he worked for Hayward Chevrolet and to the extent it is based on Churchill's resignation;
2) Claim Three (Intentional Interference with Contractual Relations);
3) Claim Four (Intentional Interference with Prospective Economic Advantage) to the extent it is based on allegation that Churchill's alleged comments to strikers on July 7, 2003, prolonged the strike.
These claims are DISMISSED with prejudice. The Motion is DENIED as to Claims Two and Four to the extent these claims are based on Churchill's alleged conduct regarding the Pittsburg Ford negotiations and deal.
The parties shall be permitted to file no more than one further summary judgment motion per side on issues that have not been addressed in this Motion.
IT IS SO ORDERED.