W2007 La Costa Resort v. Sephora USA
Defendant Sephora USA, Inc. (Sephora) entered into a contract with plaintiff W2007 La Costa Resort Co., LLC (La Costa) that provided Sephora would hold its 2009 store director conference (SDC) at La Costa's hotel, the La Costa Resort & Spa (the hotel). The contract also provided that, subject to Sephora's right to cancel under a contractual clause (the performance clause), which is the focus of this action, Sephora would also hold its 2010 SDC at the hotel. However, after the 2009 SDC, Sephora canceled the contract for the 2010 SDC at the hotel, citing its right to do so under the performance clause, and La Costa filed this action alleging Sephora breached its contract with La Costa.
The trial court, after hearing conflicting evidence of the etiology of the performance clause, ruled the intent of the clause was to give Sephora the right to cancel the 2010 SDC if it, in the exercise of its sole judgment, was not satisfied with La Costa's performance in connection with the 2009 SDC and believed the deficient performance materially impacted the SDC. However, the court recognized there was evidence from which a trier of fact could conclude Sephora canceled the contract for the 2010 SDC for reasons unrelated to Sephora's judgment as to La Costa's performance in connection with the 2009 SDC. Because the implied covenant of good faith and fair dealing required that Sephora base its decision to cancel on its dissatisfaction with La Costa's performance at the 2009 SDC, and barred Sephora from using the performance clause as a pretext for canceling the 2010 SDC for reasons unrelated to its judgment as to La Costa's performance at the 2009 SDC, the court adopted a special verdict form that tendered to the jury whether Sephora's cancellation breached the contract with La Costa. The jury found in Sephora's favor, and La Costa appeals.
La Costa contends we must reverse the judgment because the special verdict form deprived the jury of the opportunity to adjudicate La Costa's claim alleging Sephora breached the implied covenant of good faith and fair dealing when it canceled the 2010 contract. La Costa also appears to contend the trial court's foundational determination--that the intent of the clause was to give Sephora the right to cancel if in the exercise of its sole judgment it was not satisfied with La Costa's performance in connection with the 2009 SDC and believed the deficient performance materially impacted the SDC--is without substantial evidentiary support.
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