Ascent Media Group v. Those Interested Underwriters at Lloyds
Filed 7/2/08 Ascent Media Group v. Those Interested Underwriters at Lloyds CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
SECOND APPELLATE DISTRICT
DIVISION TWO
ASCENT MEDIA GROUP, LLC, Plaintiff and Appellant, v. THOSE INTERESTED UNDERWRITERS AT LLOYDS, Defendant and Respondent. | B199042 (Los Angeles County Super. Ct. No. SC086972) |
APPEAL from a judgment of the Superior Court of Los Angeles County. Patricia L. Collins, Judge. Affirmed.
Boren, Osher & Luftman and Jeremy J. Osher for Plaintiff and Appellant.
Wilson, Elser, Moskowitz, Edelman & Dicker, Steven R. Parminter and Darren Le Montree for Defendant and Respondent.
____________________
Ascent Media Group, LLC, (Ascent) appeals from a trial court order awarding summary judgment to Those Interested Underwriters at Lloyds (Underwriters). Ascent contends that the trial court committed error in connection with its interpretation and application of three exclusions set forth in the subject insurance policy (exclusion III.F (the assured vs. assured exclusion); exclusion III.I, and exclusion III.M). It also assigns error to the trial courts determination that there was no insurable loss as a matter of law. Finally, it argues that because the trial court erred in finding that Ascent could not establish its breach of contract claim, the trial courts order adjudicating the bad faith claim against Ascent must be reversed as well.
We affirm. (1) Regarding the assured vs. assured exclusion, we conclude that it precludes coverage; the wrongful termination exception to that exclusion does not apply. (2) As an independent basis for affirming the trial courts order and judgment, exclusions III.I and III.M preclude coverage; the allegedly wrongful act occurred after the inception date of the policy and after the time the subsidiaries ceased being subsidiaries and covered insureds. (3) Because Underwriters was entitled to judgment on Ascents breach of contract claim, it follows that Ascent cannot pursue its bad faith claim as a matter of law.
FACTUAL AND PROCEDURAL BACKGROUND
History of Ascent
Ascent is a California limited liability company with its principal place of business in Santa Monica, California. It provides creative and technical services to the media and entertainment industries, such as film and video postproduction and sound services, and satellite and terrestrial distribution. From 2002 through July 2005, Ascent was a corporation known as Ascent Media Group, Inc., and, from 2000 to 2002, it was called Liberty Livewire Corporation (Livewire). As of June 9, 2000, Livewire was a subsidiary of Liberty Media Corporation (Liberty Media), which in turn was a wholly owned subsidiary of AT&T Corporation (AT&T). AT&T acquired Liberty Media on March 9, 1999, when AT&T completed the acquisition of Liberty Medias former parent, Telecommunications, Inc. (TCI), in a merger.
Liberty Media subsequently split off from AT&T on August 10, 2001, while the insurance policy at issue in these proceedings was in full force and effect. The name Livewire was changed to Ascent Media Group, Inc., on November 20, 2002. That entity converted to a limited liability company in July 2005 and is now known as Ascent.
Issuance of the London policy
On July 9, 2001, Underwriters issued and delivered to Livewire, as a named insured and/or as an AT&T subsidiary and/or as a Liberty Media subsidiary, a Directors and Officers and Company Reimbursement Policy (the London policy), for the period July 9, 2001, through July 9, 2007, with aggregate limits of $20 million.
Underwriters also had issued to AT&T a policy for the previous period, July 1, 1997, through July 1, 2001, which included an endorsement that specifically identified Liberty Media and TCI as AT&T subsidiaries as of March 9, 1999.
Terms of the London policy
The London policy contains the following terms, conditions, and exclusions that are relevant to this appeal:
INSURING CLAUSES[:]
C. Underwriters shall pay on behalf of the Company Loss resulting from any Securities Action Claim first made against the Company during the Policy Period for a Wrongful Act.
DEFINITIONS[:]
B. Assureds means the Company and the Directors and Officers.
C. Claim means: [] . . . 1. any written or oral demand for damages or other relief against any of the Assureds; [] 2. any civil, criminal, administrative or regulatory proceeding initiated against any of the Assureds, including: [] (a) any appeal therefrom; [] (b) any Securities Action Claim.
D. Company shall mean: [] 1. the Parent Company and any successor corporation, and; [] 2. any Subsidiary.
F. Costs, Charges and Expenses means reasonable and necessary legal fees and expenses . . . incurred . . . by the Company in defense of any Securities Action Claim, and any appeals therefrom.
H. Interrelated Wrongful Acts means Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or transactions.
I. Loss means damages, judgments, settlements and Costs, Charges and Expenses incurred by any of the Assureds, but shall not include: [] . . . [] 4. matters deemed uninsurable under the law pursuant to which this Policy shall be construed.
N. Wrongful Act means: [] . . . [] 2. any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty by the Company in the purchase or sale or offer to purchase or sell any securities of the Company or in preparing materials of the Company filed with the Securities and Exchange Commission or any similar state agency or in rendering any other public statements regarding the Company, which is alleged in any Securities Action Claim.
EXCLUSIONS[:]
Underwriters shall not be liable to make any payments in connection with any Claim:
F. by, on behalf of, or at the direction of any of the Assureds, except and to the extent such Claim: [] . . . [] 3. is brought by any of the Assureds for actual or alleged wrongful dismissal, discharge or termination of employment whether actual or constructive.
I. against . . . any Subsidiary, based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving: [] 1. any Wrongful Act occurring prior to the date such entity became a Subsidiary or subsequent to the date such entity ceased to be a Subsidiary, or [] 2. any Wrongful Act occurring while such entity was a Subsidiary which together with a Wrongful Act occurring prior to the date such entity became a Subsidiary, would constitute Interrelated Wrongful Acts.
M. based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving any Wrongful Act actually or allegedly committed on or after 9:00 a.m., Eastern Standard Time on 9th July, 2001.
The underlying claim
Paul J. Dujardin seeks financing for Triumph
In 1993, Paul J. Dujardin (Dujardin) founded Triumph Communications, Inc. (Triumph), a cable transmission and broadcasting company. As Triumphs founder, Dujardin owned 100 percent of its stock. Between 1994 and 1999, Triumph grew dramatically, and by February 1999, Dujardin was looking for outside financing to continue Triumphs expansion.
On August 26, 1999, Dujardin met David Beddow (Beddow), then the vice president of Liberty Media. After their initial meeting, Beddow told Dujardin that Liberty Media was interested in creating a subsidiary of which he (Beddow) would be the chief executive officer and which would provide production and audio/video transmission services in the feature film, television, and advertising industries. Over the next few months, Dujardin and Beddow spoke many times about Beddows vision for the new subsidiary and Dujardins desire for financing from Liberty Media.
Liberty Media seeks to purchase Triumph
On November 8, 1999, Beddow told Dujardin that Liberty Media wanted to purchase Triumph outright instead of simply lending it money. Beddow proposed a purchase price of two times Triumphs gross revenues, to be paid 50 percent in cash and 50 percent in stock in the proposed subsidiary. Beddow further stated that Liberty Media wanted to integrate Triumph into the new subsidiarys network division and make Dujardin head of that division.
On November 18, 1999, Beddow, on behalf of Liberty Media, offered Dujardin approximately $33 million for Triumph, to be paid on the 50/50 terms. In his offer, Beddow again represented that Dujardin was to be made the head of the new subsidiarys network division. Dujardin accepted Liberty Medias offer on November 23, 1999.
The payment terms are restructured
On February 3, 2000, Beddow informed Dujardin that Liberty Media wanted to restructure the payment terms. Instead of the original 50/50 deal, Liberty Media proposed an 80/20 split: Dujardin would receive the Triumph purchase price as 80 percent stock in the new subsidiary and 20 percent cash. At that time, Beddow reiterated Liberty Medias commitment that Dujardin would head the subsidiarys network division. Dujardin accepted the new terms.
The merger is finalized
On June 9, 2000, Liberty Media acquired a privately held entity and changed its name to Livewire. Livewire became the new Liberty Media subsidiary into which Triumph was integrated.
On June 21, 2000, Dujardin, Triumph, and Liberty Media executed an agreement and plan of merger (the merger agreement) providing for Livewire to acquire all shares of Triumph from Dujardin for approximately $29.5 million ($5.9 million in cash and $23.6 million in Class A shares of Livewire).
The merger agreements earn out provision
As part of the merger agreement, 117,595 of Dujardins 705,554 shares were held back pursuant to certain earn out provisions designed to provide incentives to Dujardin for high performance. Specifically, section 2.5 of the merger agreement provides:
Business Plan and Earnout. (a) Schedule 2.5 hereto sets forth the Companys business plan for the two year period following the Effective time (the Business Plan). . . . [] (c) On each anniversary of the Closing Date, one half of the Earnout Amount (with any dividends, interest or other earnings thereon) will be paid to [Dujardin] if gross revenues as indicated on the financial statements of the Triumph Entities (or successors thereto) on a combined basis (the Gross Revenues) equal or exceed $19,426,442 for the fiscal year 2000 and $26,773,932 for the fiscal year 2001 (each a Target Amount). If such Gross Revenues do not equal or exceed the relevant Target Amount for the applicable time period, then [Livewire] shall pay to [Dujardin] a percentage of such Earnout Amount which is otherwise payable on such date equal to one half of the quotient (expressed in a percentage) obtained by dividing actual Gross Revenues by the Target Amount for such date, and the remaining portion of the Earnout Amount otherwise payable shall be retained by [Livewire] and not be paid to [Dujardin]. Notwithstanding the foregoing, on the second anniversary of the Closing Date, if Gross Revenues equal or exceed the Target Amount for such time period, then [Livewire] shall pay to [Dujardin] any unpaid portion of the Earnout Amount (with any dividends, interest or other earnings).
Section 2.5 of the merger agreement also contained the following provision regarding disposition of the earn out shares in the event of Dujardins termination:
(f) Notwithstanding anything to the contrary in this Section, the Earnout Amount (to the extent not theretofore paid), together with any dividends, interest or other earnings thereon, shall be paid to [Dujardin] at such time as [Dujardins] employment with [Livewire] (including employment with any subsidiary or affiliate thereof) terminates, unless such termination of employment results from (1) [Dujardin] terminating such employment or (2) [Dujardins] (or any subsidiary or affiliate thereof) terminating [Dujardins] employment because of [Dujardins] (a) willful failure to perform his job duties, (b) conviction of, or pleading guilty or nolo contendere to, a felony, or (c) willfully engaging in misconduct, the nature of which is not prohibited from being the basis of termination under applicable federal or state law, if such misconduct is injurious to [Livewire] (or any subsidiary or affiliate thereof).
The pledge and security agreement
On July 3, 2000, in connection with the sale and merger, Dujardin and Livewire executed a pledge and security agreement (the pledge agreement), pursuant to which 440,981 of Dujardins 705,554 shares were pledged back to Livewire as security against any future claims Livewire might have against Dujardin for breach of certain representations and warranties set forth in the merger agreement. The pledge agreement contains the following provision regarding disposition of the pledged securities in the event of Dujardins termination:
12. Termination. This Agreement and the security interest created hereunder shall terminate upon the later of (i) April 30, 2002 or (ii) such date on which all the Obligations arising prior to April 30, 2002 have been paid in full. Notwithstanding the immediately preceding sentence, this Agreement and the security interest created hereunder shall terminate at such time as [Dujardin]s employment with [Livewire] (or any subsidiary or affiliate thereof) terminates, unless such termination of employment results from (1) [Dujardin] terminating such employment or (2) [Livewire] (or any subsidiary or affiliate thereof) terminating [Dujardin]s employment because of [Dujardin]s (a) failure to perform his job duties, (b) conviction of, or pleading guilty or nolo contendere to, a felony, or (c) willfully engaging in misconduct, the nature of which is not prohibited from being the basis of termination under applicable federal or state law, if such misconduct is injurious to [Livewire] (or any subsidiary or affiliate thereof). Upon termination hereof, [Livewire] shall execute and deliver to [Dujardin] all documents which [Dujardin] shall reasonably request to evidence termination of such security interest and shall return physical possession of any Collateral then held by [Livewire] to [Dujardin]. . . .
Dujardin is never made head of Livewires network division
As set forth above, in exchange for Dujardins agreement to sell Triumph, Livewire repeatedly promised to employ Dujardin as head of said division. However, that never occurred. Instead, on August 28, 2001, Livewire notified Dujardin that he was being terminated. And, on September 28, 2000, Livewire appointed Scott Davis (Davis) to head the network division.
Livewire refuses Dujardins demand to return the pledged and earn out shares
On August 29, 2001, Dujardins counsel notified Livewire that Dujardin sought the return of the pledged and earn out shares pursuant to the termination provisions of the merger agreement and pledge agreement. Livewire did not return the shares, alleging that Dujardin had been terminated for his failure to perform his job duties and/or willful misconduct, two of the three enumerated causes in the merger agreement and pledge agreement that allow Livewire to terminate Dujardin and still retain the shares.
Dujardins original complaint and arbitration demand
On November 30, 2001, Dujardin filed suit against Liberty Mutual and Livewire in the federal district court for the Southern District of New York. He asserted claims for fraud, breach of contract, and violation of section 10(b) of the Securities Exchange Act of 1934 based upon the following pertinent factual allegations: (1) Liberty Mutual and Livewire induced him to accept the 80/20 deal knowing that he would never be made the head of Livewires network division; (2) Davis and others at Livewire poorly managed the network division, which caused Livewires share price to drop; (3) Dujardin received a lower purchase price for Triumph than he was entitled to because he received 80 percent of the $29.5 million Triumph purchase price in Livewire stock, stock that was valued at $33.394 per share at the time of the merger but had dropped significantly; and (4) Livewire breached the merger agreements earn out provision when it failed to immediately return the earn out shares to him upon termination of his employment. In other words, Dujardin alleged that Livewires termination of his employment and its failure to employ him as the head of its network division (framed as fraud and breach of contract causes of action) resulted in an immediate fall in Livewires stock prices, causing Dujardin to suffer significant damage.
Because the pledge agreement contained a clause requiring that all disputes related to it be arbitrated, on December 14, 2001, Dujardin initiated an arbitration proceeding against Livewire, alleging that Livewire breached the pledge agreement when it failed to immediately return the shares upon his termination.
Livewire notifies Underwriters of Dujardins claims; Underwriters denies coverage
On February 15, 2002, Livewires insurance broker sent notice of the arbitration and of the securities action to Hanson & Peters (the law firm designated in the London policy to receive notice of claims), and enclosed copies of the complaint and Dujardins demand for arbitration. On April 29, 2002, Underwriters acknowledged receipt of the notices referencing the arbitration and the securities action. After obtaining additional information from Livewire, on January 24, 2003, Underwriters denied coverage of the arbitration. On November 28, 2005, Underwriters denied coverage of the securities action.
Resolution of the arbitration and securities action
Meanwhile, the arbitration proceeding was conducted from December 2001 through June 2002. The arbitrator issued his opinion on June 13, 2002.
The arbitrator concluded that Dujardin was entitled to a return of the pledged shares as a matter of law, reasoning that: (1) [T]he pledged stock was an important part of the consideration which [Dujardin] received on the sale of his business and that . . . business is now an integral part of [Livewire]; (2) In the instant proceeding, no reason was required to end [Dujardin]s employment, since he had no employment agreement and therefore was an employee at will; (3) [Dujardin] was entitled under the Pledge Agreement to the return of his stock upon his termination, with several particularized exceptions[:] . . . (i) . . . his failure to perform his job duties, (ii) conviction of, or pleading guilty or nolo contendere to a felony, (iii) or willfully engaging in misconduct injurious to [Livewire]; (4) [T]he record in this proceeding does not support a determination depriving [Dujardin] of the stock he received from the sale of his business. More specifically, I find that [Dujardin] was not terminated for cause within the meaning of the Pledge Agreement.
As for damages, the arbitrator determined that the most appropriate measure of damages [was] the average of the high and low price of the 440,981 [pledged] shares on August 29, 2001, the date of breach, adjusted by marketability and blockage discounts, which calculated to $11.81 per share.
After the arbitration award was reduced to judgment, Livewire paid Dujardin $3,661,611.60 ($11.81 per share for each of the 440,981 pledged shares, less a 35 percent discount for marketability, including preaward interest at 9 percent per year from August 29, 2001).
Litigation continues regarding the earn out shares
When the arbitration was completed, litigation regarding the earn out shares resumed in the Southern District of New York, with Liberty Media and Livewire moving to dismiss Dujardins original complaint and Dujardin filing a cross-motion for summary judgment on liability for the earn out shares.
The trial court partially granted Dujardins motion for summary judgment, finding Livewire liable for breach of the earn out provision as a matter of law, a point upon which all parties agreed. Specifically, the trial court noted: The arbitration proceeding claim resulted in a determination that Dujardin was entitled to the pledged shares because he had not, in fact, been terminated for cause. The parties agree that the arbitrators determination as to the basis of Dujardins termination is binding as to the Earnout claim at issue here and [Liberty Media and Livewire] therefore concede their liability on the claim. The trial court found, however, that the arbitrators valuation of the pledged shares was not controlling and allowed litigation to proceed on the value of the earn out shares.
The trial court also partially granted Liberty Media and Livewires motion to dismiss Dujardins fraud claims, and allowed him leave to replead to include further allegations regarding the timing of the hiring of Davis as evidence that Livewire induced Dujardin to accept the 80/20 deal by fraudulently promising him that he would be made head of its network division.
Dujardins first amended complaint
Dujardin filed his first amended complaint on April 4, 2005. Again, he did not seek damages as a result of his firing; instead, he alleged that he suffered a loss in the Triumph purchase price as a result of Liberty Media and Livewires fraud and breach of the earn out provision.
The securities action settles
Eight months later, the parties reached a confidential settlement of Dujardins remaining claims, and his case was dismissed on December 29, 2005.
The instant coverage action
After Underwriters declined coverage, Ascent, as successor to Liberty Media and Livewire, commenced the instant coverage action.[1] Ascent asserted causes of action for breach of written insurance contract and breach of the covenant of good faith and fair dealing, and requested a declaration of coverage. Ascent sought all amounts paid to Dujardin with respect to the arbitration and settlement of the securities action; attorney fees and costs incurred with respect to both the arbitration and the securities action; punitive damages; and attorney fees related to the coverage action.
Summary judgment is awarded to Underwriters
Ascent and Underwriters filed cross motions for summary judgment.
Prior to oral argument, the trial court set forth a lengthy tentative ruling, indicating its intent to grant Underwriterss motion for summary judgment. First, the trial court found undisputed that Dujardin was an assured under the terms of the policy; thus, the claim was an excluded assured vs. assured claim, unless an exception applied. According to Ascent, the wrongful termination exception applied.
The trial court disagreed, finding that there is no triable issue of material fact to dispute that the underlying Dujardin claim was not for wrongful termination. Neither Dujardins Arbitration Claim nor his Lawsuit expressly alleges a claim for wrongful termination. . . . Nor do they contain factual allegations that would support a claim for wrongful termination. . . . Rather the Arbitration Claim and Lawsuit allege fraud in the sale of Triumph to [Ascent] and breach of contract terms relating to the sale.
The trial court also found that Dujardin did not have [an employment contract], nor did he ever claim the breach of any such term [for termination only with cause] of an employment agreement. Nor did he claim that his termination was in violation of public policy, either based on the constitution or statute. In fact, Dujardin never allege[d] the formation of any written or oral employment contract. In other words, the trial court found that Dujardins claim was not for breach of any employment agreement; rather, [t]he wrong alleged was not in the fact of his termination, but in the failure to return the shares upon his termination without cause. No facts are alleged in the Arbitration Claim or Lawsuit to support a charge of wrongful termination. Thus, the trial court determined that the assured vs. assured exclusion applied.
Second, regarding whether clause III.I and/or clause III.M excluded coverage, the trial court found that there is no material dispute that Dujardins termination occurred on August 28, 2001, after the above reference Policy runoff date. Dujardins Lawsuit and Arbitration Claim, if either could be characterized as one for a wrongful termination, were therefore necessarily a Claim . . . arising out of . . . or in any way involving a Wrongful Act, actually or allegedly committed on or after . . . July 9, 2001.
Third, the trial court concluded that Ascents claim was for an uninsurable loss. In so finding, the trial court determined that the payment [by Ascent to Dujardin] constituted the delivery of the balance of the Triumph sale consideration due and owing to Dujardin as originally agreed and [could not] be shifted to [Underwriters] under the Policy.
Because Underwriters was entitled to judgment on Ascents contract claim, it followed that Underwriters was entitled to judgment on Ascents bad faith claim; there can be no action for breach of the covenant of good faith and fair dealing if there is no coverage under the policy.
Judgment was entered, and Ascents timely appeal ensued.
CONTENTIONS
Ascent submits that the trial court committed reversible error in connection with its order granting Underwriterss motion for summary judgment. Specifically, it claims:
1. The trial court erroneously concluded that Dujardins claims were barred by exclusion III.F of the London policy (the assured vs. assured exclusion) and that the wrongful termination exception to that exclusion did not apply. Rather, according to Ascent, Dujardin did allege a claim for wrongful termination against Ascents predecessors; thus, the exception to the exclusion does apply and Dujardins claims are not excluded.
2. The trial court erroneously concluded that exclusion III.I of the London policy precludes coverage where, as here, Ascent committed a wrongful act during the time it was a covered subsidiary and that act was interrelated to a wrongful act that it committed after it ceased to be a subsidiary.
3. The trial court erroneously concluded that exclusion III.M precludes coverage where, as here, an entity committed a wrongful act during the time it was a covered subsidiary, and that act was interrelated to a wrongful act that it committed on or after the London policys run-off/inception date (July 9, 2001).
4. The trial court erroneously concluded that the monies paid by Ascent to Dujardin did not constitute an insurable loss because Dujardin only sought to recover the value of the Livewire stock to which he was entitled as a matter of contract.
We agree with Underwriters that exclusion III.F (the assured vs. assured exclusion) precludes coverage. As a separate basis, we also agree that exclusions III.I and III.M preclude coverage. Thus, although raised by the parties at oral argument, we need not address the question of whether the settlement monies paid by Ascents predecessors to Dujardin constitute an insurable loss.
DISCUSSION
I. Standard of review and relevant rules of contract interpretation
A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., 437c, subd. (c).) We review the trial courts decision de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)
Interpretation of an insurance policy also is a question of law. (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115 (Palmer).) In interpreting an insurance contract, we apply ordinary rules of contractual interpretation. The mutual intent of the parties to the contract at the time the contract was formed governs. (Civ. Code, 1636; Palmer, supra, at p. 1115; E.M.M.I., Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470 (E.M.M.I.).) We consider the policy as a whole and construe the language in context, rather than interpret a provision in isolation. (Civ. Code, 1641; Palmer, supra, at p. 1115.) The contract language controls if it is clear and explicit, and words are to be given their ordinary and popular meaning, unless used in a special or technical way by the parties. (Palmer, supra, at p. 1115.)
Insurance contracts have special features and rules. Insurance policies typically have insuring clauses providing coverage; if a claim does not fall within the terms of those insuring clauses, no coverage exists. (Palmer, supra, 21 Cal.4th at pp. 11151116.) An insurance policy may also have specific clauses excluding coverage, which generally follow insuring clauses, and which are conspicuous, plain and clear. (E.M.M.I., supra, 32 Cal.4th at p. 471.) Insurance policy exclusions are construed narrowly, while exceptions to those exclusions are construed broadly in favor of the insured. (Ibid.; see also Delgado v. Heritage Life Ins. Co. (1984) 157 Cal.App.3d 262, 271; National Union Fire Ins. Co. v. Lynette C. (1991) 228 Cal.App.3d 1073, 1082.)
II. The trial court properly granted Underwriters motion for summary judgment pursuant to the assured vs. assured exclusion set forth in the London policy
As set forth above, the London policy contains an assured vs. assured exclusion, which prohibits coverage for claims between assureds. The wrongful termination exception to that exclusion provides, in relevant part, that the exclusion is inapplicable except and to the extent such Claim: [] . . . [] is brought by any of the Assureds for actual or alleged wrongful dismissal, discharge or termination of employment whether actual or constructive.
It is undisputed that Dujardin is an assured under the London policy because he was an officer, employee, and senior manager of Triumph from June 1993 through August 28, 2001. It is also undisputed that Liberty Media and Livewire (including Triumph after the merger on July 3, 2000) were subsidiaries of the named insured, AT&T. Dujardins lawsuit and arbitration claim thus fell within the scope of the assured vs. assured exclusion of the London policy, unless the wrongful termination exception to that exclusion applies.
Here, as the trial court found, Dujardin did not allege a claim for wrongful termination against Liberty Media and/or Livewire. Rather, his claim sounded in fraud and breach of contract, all related to the sale of Triumph to Ascents predecessors.
Specifically, in his complaint in the securities federal action, Dujardin pled claims for fraud and breach of contract arising out of Livewire and Liberty Medias alleged misrepresentation regarding the true value of Livewires stock, their concealment of their intent not to make Dujardin head of the new network division, and their failure to pay Dujardin the earn out shares. Likewise, in the arbitration proceeding, Dujardin sought the return of his pledged shares, based upon Livewires unfulfilled promises, including the failure to make him head of Livewires network division and the failure to provide adequate financing to Triumph, which prevented Dujardin from achieving the targets set forth in the business plan that determined the amount of earn out stock he was entitled to receive. Dujardin never claimed that he had an employment contract with Ascents predecessors; in fact, in the arbitration, Dujardin specifically pointed out that he was never given an employment agreement. Nor did he allege that any such contract was breached when his employment was terminated. He also did not aver that his termination violated any public policy embodied in either a statutory or constitutional provision. Absent such allegations, it is evident that Dujardin did not assert a claim for wrongful termination. (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1252.)
Importantly, in the arbitration proceeding, the arbitrator expressly found that no reason was required to end [Dujardin]s employment since he had no employment agreement and therefore was an employee at will. Thereafter, when the parties resumed litigating the securities action, the district court noted that Liberty Media and Livewire agree[d] that the arbitrators determination as to the basis of Dujardins termination is binding. Because Ascents predecessors agreed that Dujardin had no employment contract and was an employee at will, Ascent cannot now claim otherwise. (See, e.g., Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271.)
In urging us to reverse, Ascent argues that the trial court erred in ignoring the well-established principle that a court is not bound by the captions or labels of a cause of action in a pleading. (AnandaChurch of Self-Realization v. Massachusetts Bay Ins. Co. (2002) 95 Cal.App.4th 1273, 1281.) Thus, according to Ascent, the fact that Dujardin did not style his causes of action in either the securities action or the arbitration wrongful termination is irrelevant because the gravamen of [his] claims is that he was wrongfully terminated.
Although Ascent properly summarizes the relevant law, we disagree with Ascents proposed application of that legal precept to this case. As set forth above, Dujardins claim for damages was premised upon Ascents (and its predecessors) failure to pay Dujardin the full consideration he was owed for selling Triumph. It was not based upon any implicit claim for wrongful termination.
In making its argument, Ascent points us to purported express language of the Merger Agreement and the Pledge Agreement, which contain provisions governing Dujardins employment and set forth express limitations on [Livewires] right to terminate said employment. Ascent misconstrues the plain language of the provisions in these two controlling agreements.
Quite simply, neither agreement provides for a minimum two-year term of employment. Rather, both agreements merely set forth that the security arrangements contained therein (the earn out shares held back and the pledged shares, respectively) shall continue until (1) the parties obligations had been met or for two years, whichever was later; or (2) until the termination of Dujardins employment. Neither agreement contains a two-year term of employment.
Ascent further argues that Dujardin alleged a claim for wrongful termination based [upon Ascents alleged] violation of an implied-in-fact contract not to terminate Dujardin without cause. Ascent has forfeited this argument on appeal because it did not raise this argument below. (In re Marriage of Hinman (1997) 55 Cal.App.4th 988, 1002.)
Citing Smith v. Commonwealth Land Title Ins. Co. (1986) 177 Cal.App.3d 625, 629630, Ascent claims that this argument has not been forfeited on appeal because the rule barring new theories on appeal is limited to appeals after trial. Not so. By failing to raise a theory in opposition to a motion for summary judgment, a party may forfeit that issue on appeal from a trial court order granting summary judgment. (See, e.g., Saville v. Sierra College (2005) 133 Cal.App.4th 857, 872873; Beroiz v. Wahl (2000) 84 Cal.App.4th 485, 498, fn. 9; Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488; North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 29; Munro v. Regents of University of California (1989) 215 Cal.App.3d 977, 988989.) The rule upon which Ascent relies applies to appeals arising from the pleading stage of litigation (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, 406, p. 458), but not to orders granting summary judgment.
III. The trial court properly granted summary judgment to Underwriters pursuant to Exclusions III.I and III.M
As an alternative and independent basis, the trial court properly granted Underwriters motion for summary judgment pursuant to exclusions III.I and III.M of the London policy.
Exclusion III.I(1) precludes coverage for any wrongful act actually or allegedly committed by a former subsidiary of the named insured (AT&T) after the date on which the entity ceased being a subsidiary. Similarly, pursuant to exclusion III.M, the London policy covers only those wrongful acts that actually or allegedly occurred prior to the policys inception date of July 9, 2001.
Here, it is undisputed that Liberty Media and Livewire ceased being AT&T subsidiaries on August 10, 2001. It is also undisputed that Dujardin was terminated on August 28, 2001. Accordingly, even if we were to agree with Ascent that Dujardin did assert a claim for wrongful termination, that wrongful act occurred on August 28, 2001, after Liberty Media and Livewire ceased being AT&T subsidiaries and after the London policys inception date. Thus, pursuant to these exclusions, coverage is precluded.
In an effort to avoid this result, Ascent reads the London policy differently. It argues that Dujardin complained of an interrelated series of Wrongful Acts related to [Ascents] purchase of Triumph that commenced during the time that [Ascent] was a covered Subsidiary under the London Policy. Thus, according to Ascent, the fact that one wrongful act may have occurred outside the London policy period is irrelevant. Exclusion III.I simply does not embrace the scenario where a series of Interrelated Wrongful Acts commences at a time when the entity qualifies as a Subsidiary.
We cannot agree. Exclusion III.I plainly provides that there is no coverage for any Claim: [] . . . [] against any . . . Subsidiary . . . in any way involving: [] . . . any Wrongful Act occurring . . . subsequent to the date such entity ceased to be a Subsidiary. Likewise, exclusion III.M plainly provides that there is no coverage for any Claim: [] . . . [] in any way involving any Wrongful Act actually or allegedly committed on or after 9:00 a.m. Eastern Standard Time on 9th July 2001.
Any means one, a, an, or some; one or more without specification or identification. (
IV. The trial court properly dismissed Ascents bad faith claim
Pursuant to Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36, there can be no action for bad faith if there is no coverage under the policy. As set forth above, we conclude that there is no coverage. It follows that Ascent cannot pursue a claim for bad faith.
DISPOSITION
The judgment of the trial court is affirmed. Underwriters is entitled to costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
_____________________, J.
ASHMANN-GERST
We concur:
_____________________, P. J.
BOREN
_____________________, J.
CHAVEZ
Publication courtesy of San Diego free legal advice.
Analysis and review provided by Santee Property line attorney.
San Diego Case Information provided by www.fearnotlaw.com
[1] Ascent later filed a first amended complaint on March 15, 2006.
