Muscatello v. California Tan, Inc.

Filed 2/9/09 Muscatello v. California Tan, Inc. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Randell L. Wilkinson, Judge. Affirmed.

Law Offices of William B. Hanley and William B. Hanley; Gerald N. Shelley, for Plaintiff and Appellant.

Ford & Harrison, Lyne A. Richardson and Sally S. Frontman, for Defendant and Respondent.

Frank Muscatello appeals from a summary judgment entered against him on his complaint alleging breach of contract and wrongful termination in violation of public policy. Muscatello asserts the trial court erred by granting the summary judgment because there was a triable issue of fact concerning whether defendant, California Tan, Inc., had the right to elect, without cause, not to renew his employment contract for a successive period. We conclude the trial courts ruling was correct.

While the contract clearly provides that, during its period, Muscatello can only be terminated for cause, and further provides that the contract automatically renews for successive one-year periods if neither party gives notice of termination, it does not require cause for a partys decision to give notice of non-renewal. And if Muscatellos interpretation of the contract were accepted, it would actually nullify the renewal-for-successive-periods structure of the agreement. If, as Muscatello claims, non-renewal required the same cause requirement as would a termination during a contractual period, the contract would simply be indistinguishable from one with an indefinite period. We cannot interpret it that way. The judgment is consequently affirmed.

FACTS

Muscatello and California Tan entered into an employment agreement in November of 2000. As relevant here, the contract specified that Muscatello would be employed as President The Americas. The employment period was defined in Section 3 as commenc[ing] on November 20, 2000 and [continuing] through December 31, 2003 unless earlier terminated in accordance with the provisions of Sections 7, 8 or 9 hereof, and shall thereafter be automatically renewed on a year-to-year basis on the same terms and conditions as the immediately preceding year, unless either party hereto, not less than one hundred eighty (180) days prior to the end of the initial or a renewal term thereof, serves notice on the other party of his or its intention not to renew this Agreement for an additional one-year term.

Section 7 of the contract specifies certain payments to be made to Muscatello (or his designated beneficiaries) if, during the Employment Period, he dies, becomes disabled, or terminates the agreement other than for Good Reason. Good Reason is defined, in turn, as a material breach of the agreement by the company, a reduction in Muscatellos then-current salary or benefits, a material alteration in his duties; or his relocation outside of California without his consent.

Section 8 of the contract specifies that California Tan has the right to terminate Muscatellos employment for cause at any time, and defines cause as including (1) Muscatellos material breach of the employment agreement, and failure to cure that breach after written notice; or (2) Muscatellos conduct involving material dishonesty or breach of fiduciary duty to the Company. Section 8 also specifies the required notice to be given for such a termination; the process to be followed in implementing it; and the fact that Muscatello would be entitled to only base compensation, accrued but unpaid bonus payments through the end of the prior year, and benefits accrued but unpaid through the effective date of termination.

Section 9 of the contract specifies that [n]otwithstanding anything in this Agreement to the contrary, the Company may terminate [Muscatellos] employment hereunder at any time without Cause. It goes on to explain that [i]f during the Employment Period, the Company terminates [Muscatellos] employment hereunder without Cause . . . then in any such event [Muscatello] shall be entitled to receive: (a) any accrued and unpaid Base Compensation and Benefits through the date of termination, and (b) the Bonus Payment, if any, with respect to the fiscal year in which the termination occurs multiplied by a fraction the numerator of which is the number of days from the first day of such fiscal year until the date of termination and the denominator of which is 365. In addition, [Muscatello] shall be entitled to receive from the date of termination until the first anniversary of the date of termination, the Base Compensation at the rate in effect immediately prior to the date of termination. . . . [Muscatello] shall be under no obligation to mitigate his damages or to seek other employment and if [Muscatello] obtains other employment, any compensation earned by [Muscatello] therefrom shall not reduce the Companys severance obligations . . . .

The contract also contains an integration clause, stating that it supersedes any other agreements or understandings, oral or written, between the parties hereto with respect to the subject matter hereof and, together with the Award Agreement^[1] represents their entire understanding and agreement with respect to the subject matter hereof. The contract also specifies it can only be amended, or have any of its provisions waived, by a written document making specific reference to the contract, and signed by both parties.

After its initial three-year period, Muscatellos employment agreement was renewed for two successive one-year periods. However, in June of 2005, California Tan gave written notice to Muscatello that the contract would not be renewed again. The notice of non-renewal stated that California Tans intent was not to terminate Muscatellos employment, but instead to convert his employment to at-will status as of January 1, 2006, the day after termination of the then-current contract period. Muscatello refused to accept the non-renewal of his contract, and after further discussions, California Tan terminated his employment on May 8, 2006.

On September 28, 2006, Muscatello filed his complaint for breach of employment contract and wrongful termination in violation of public policy. With respect to the latter cause of action, Muscatello alleged he was fired for refusing to sign a new agreement which contained a non-compete agreement in violation of Business and Professions Code section 16600.^[2]

After filing its answer, California Tan moved for summary adjudication of Muscatellos first cause of action for breach of contract. California Tan argued that the undisputed evidence established it had properly notified Muscatello of its decision not to renew his employment contract for 2006, in accordance with its terms, and as a consequence, the contract was no longer in effect in May of 2006, when his employment was terminated, and could not have been breached by that termination.

Muscatello opposed the summary adjudication. He asserted that the employment contract permitted termination only for cause, and that the provision allowing either party to give notice of non-renewal on 180 days notice was also subject to the for cause provision. He argued that, as a consequence, there was a triable issue of fact as to whether the agreement remained in effect at the time California Tan terminated his employment.

The trial court granted the motion. In its ruling, the court explained that California Tan had properly given 180 days notice, in writing, of its election not to renew the contract for 2006, and there was no evidence that California Tan had ever withdrawn that election. Consequently, the court agreed with California Tans assertion the contract was no longer in effect at the time Muscatellos employment was terminated. As for Muscatellos contention that the for cause requirement was applicable to the non-renewal provision, the court dismissed the idea as nonsensical. As the court noted, it would make no sense in any employment contract to provide an employee with 6 months notice before termination for cause could be carried out. Otherwise, an employer could catch an employee looting the companys assets and could do nothing to terminate the employee in less than 6 months.

In the wake of the summary adjudication, Muscatello voluntarily dismissed his second cause of action for termination in violation of public policy, and judgment was entered against him.

DISCUSSION

Muscatellos sole argument on appeal is that Section 3 of the parties contract, which provides that the contract automatically renews unless either party gives the other not less than one hundred eighty (180) days notice of its intention not to renew, is ambiguous, and is reasonably susceptible of an interpretation requiring that such an election could be made only for cause.^[3]

We begin our analysis with Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389, in which our Supreme Court addressed the issue of whether a provision in an employment contract providing for termination at any time or upon specified notice is, without more, reasonably susceptible to an interpretation allowing for the existence of an implied-in-fact agreement that termination will occur only for cause. The court concluded it was not, explaining that [a]s a matter of simple logic, rather, such a formulation ordinarily entails the notion of with or without cause. (Id. at p. 391.)

So the only question is whether Muscatello has demonstrated the existence of some additional evidence (the more) that might suggest this clause is reasonably susceptible of the for cause interpretation he advocates.

We conclude he has not. Essentially, Muscatello argues three things: First, he asserts the language of Section 3 itself, including its specific reference to Sections 7, 8 and 9 of the contract all of which he claims address the issue of termination for cause implies that Section 3 itself is intended to require cause for non-renewal. The argument is not persuasive because Muscatello neglects to focus on what Section 3 actually says about the other provisions. Section 3 in no way incorporates those provisions, or the standards which govern them, into its own non-renewal provision. Instead, it simply sets forth the effective dates of the contract and a six-month notice requirement to trigger its expiration including the initial three-year period, plus successive one-year renewable periods while noting that the contract can also be earlier terminated in accordance with those other Sections. In other words, what Section 3 does is merely acknowledge that a termination of the contract, under Sections 7, 8 and 9, may occur during a contractual period, and is thus an exception to the general rule that the contract will be in effect for the specified periods. Carving out an exception to the general rule does not otherwise alter that rule.

In any event, Muscatello is wrong in suggesting that Sections 7, 8 and 9 of the contract deal entirely with termination for cause. To the contrary, Section 9.1 of the contract expressly affirms California Tans right to terminate his employment at any time without Cause. (Italics added.) It then expressly places conditions on that right only if exercised during the Employment Period (i.e., during the initial or any renewed term of the contract) and thus implicitly acknowledges that California Tan retains the unconditional right to do so other than during the Employment Period which would only be after the contract had come to an end. Clearly then, the contract treats as separate the concept of Muscatellos employment with the company, which might extend past the contracts expiration, and the concept of its own renewable periods; and it allows for the possibility that Muscatellos employment might continue on an at-will basis or pursuant to a subsequent agreement entered into between the parties even after the expiration of its last renewed period.

Muscatello also argues that Section 3s use of the word shall, in the phrase shall automatically renew suggests that renewal is mandatory, and is thus consistent with the implication that a partys election not to renew must be based upon good cause. However, the phrase shall automatically renew is itself modified by the phrase unless either party hereto . . . serves notice on the other party of his or its intention not to renew. . . . Based upon that latter language, there is simply no basis for inferring that renewal is mandatory. Instead, renewal is made automatic unless a party notifies the other of its intention not to do so in a timely manner. And California Tan did just that.

Muscatellos second argument is that the compensation package outlined in the contract, including a stock option grant to be purchased by March of 2002, suggests that both parties understood he would remain employed for the long term absent cause. As he explains, [t]he timing of this large financial commitment and the amount of time that would most likely be required for the investment to return dividends make [the] contention that the contract automatically renews unless he does something wrong seem particularly plausible. But this amounts to nothing more than an assertion that greater job security perhaps in the form of longer contractual renewal periods might have been a benefit to Muscatello; it has nothing to do with whether the language of the contract actually provides for that benefit.

In reality, the contract between Muscatello and California Tan is very straightforward. It provided him with substantial job security and California Tan with stability in its presidency during the initial three-year term and each one-year renewal period, while allowing either party the right to opt-out of the contract at the end of a period by giving the required 180 days notice.

And Muscatellos attempt to engraft a cause requirement onto the provision allowing either party the annual right to opt out makes little sense. By equating the expiration of the contract (which can only be effected on 180 days notice and is only effective at the end of a contract period) with a termination of the contract (which can occur at any time during the a contract period) Muscatello is actually seeking to transform a contract structured with optional renewal periods into one which operates as thought it has a single, open-ended term and is terminable only for cause. Since the contract already gives California Tan the right to terminate Muscatellos employment for cause, even during a contractual period, it makes little sense to give it the additional opportunity to do the same thing, once per year, on 180 days notice.

Further, as the trial court pointed out, it would make little sense to conclude the parties had intended that the 180-day nonrewal provision be exercised only for cause. Requiring six months of advance notice before a company could opt out of an employment agreement for cause which in this particular agreement is defined as including fraud, embezzlement, theft or proven material dishonesty in the course of [Muscatellos] employment would border on the bizarre. No reasonable employer would agree to retain even a low-level employee, let alone the president of the company, for even a week after concluding he had engaged in such behavior. It would simply be impossible to conclude, in the absence of the most explicit provision, that the parties intended to prohibit California Tan from immediately opting out of the contract under those circumstances.

What does make sense is that the parties intended that the generous 180-day notice provision would give both of them ample opportunity to either renegotiate their agreement, or prepare for the conclusion of their relationship, if either one decided that the current agreement was no longer suitable and chose not to continue under its provisions.

Muscatellos final argument is that the parol evidence he submitted to the trial court supported his interpretation of the contract, and was sufficient to create a triable issue of fact. We disagree. First, the May 8, 2006 termination notice, given to him by California Tan does not imply that he could only be terminated for cause, merely because it included a list reasons which California Tan asserted would justify termination for cause. As Muscatello acknowledges, the notice begins by expressly stating he is an at-will employee following the expiration of your employment agreement which was not renewed. It thus cannot be fairly construed as admitting the opposite. The fact that it also contends there was good cause for Muscatellos termination does not suggest his employment was other than at will.

Whats more, the terms of the proposed 2006 Employment Agreement are likewise insufficient to create any triable issue of fact regarding the operation of the nonrenewal provision in the parties earlier contract. First, it is clear the new proposed contract was actually drafted in 2005, while the original contract remained in effect.^[4] Thus, the fact that it recites that the 2000 Employment Agreement shall terminate immediately upon the execution of this 2006 Employment Agreement in no way suggests that California Tan believed the old agreement had survived beyond the December 31, 2005 expiration date, which was triggered when it gave its 180 days notice of intent not to renew.

Moreover, the fact that the new proposed agreement acknowledged that Muscatellos employment under the first contract was not at will has nothing to do with whether the non-renewal provision in that contract could be properly exercised without cause. Again, Muscatello is confusing the provisions governing how his employment might be terminated during the contractual period, with the provision governing how the contract itself could be made to expire.

And finally, the fact that California Tan continued to employ Muscatello even after he made it clear he would not work on an At Will basis does not suggest that it had somehow accepted his demand to be retained on the terms set forth in the contract. Muscatello first made that statement in June of 2005, right after he received California Tans notice of nonrenewal, and a full six-months prior to the expiration of his contract. It is undisputed that he was not at will during that period. The fact that he apparently reiterated that statement even after the contract had expired, and he had actually become an at-will employee, suggests only that he was unwilling to accede to California Tans assertion that anything had changed. In the absence of some evidence that California Tan had actually backed off its position that he had become an at will employee as of January 1, 2006, Muscatellos repeated assertions that he would not agree to be at will demonstrates the parties were simply engaged in a stand-off. Stated another way, Muscatellos evidence establishes nothing other than the absence of any new agreement. And that is not enough to demonstrate a triable issue of any fact relevant to this dispute.

Because a provision allowing a party to terminate an employment agreement upon specified notice is not, without more, reasonably susceptible to an interpretation allowing for the existence of an implied-in-fact agreement that termination will occur only for cause (Dore v. Arnold Worldwide, Inc., supra, 39 Cal.4th at p. 389), and Muscatello has failed to provide us with anything more which is sufficient to create a triable issue of fact regarding whether the parties in this case intended that the nonrenewal provision in their employment contract be subject to a requirement of cause, we conclude the trial court properly ordered that Muscatellos cause of action for breach of contract be summarily adjudicated against him. We consequently affirm the ensuing judgment.

The judgment is affirmed; California Tan is entitled to recover its costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

MOORE, J.

FYBEL, J.

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[1] The contract does not identify the Award Agreement or specify its terms. Likewise, the parties do not address that agreement in their arguments. We consequently assume it is not relevant to our analysis.

[2] Business and Professions Code section 16600 provides Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

[3] Muscatellos opening brief does identify four issues presented. However, as California Tan points out, his brief presents an argument pertaining to only the first issue: i.e., whether there is a triable issue of fact relating to [] the mutual intent of the parties concerning the right to nonrenew the employment agreement without cause. By failing to support the other three issues with any points and authorities, Muscatello has abandoned them for purposes of appeal. When an issue is unsupported by pertinent or cognizable legal argument it may be deemed abandoned and discussion by the reviewing court is unnecessary. (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700.)

[4] The proposed agreement states in its first paragraph that it is dated _________, 2005.