Court Of Appeal Declines To Create A New Cause Of Action For Tortious Nonrenewal Of An Employment Contract In Violation Of Public Policy

A former employee cannot state a claim for wrongful termination in violation of public policy where an employer decides not to exercise an option to renew an employment contract.  (Touchstone Television Productions v. The Superior Court of Los Angeles County (--- Cal.Rptr.3d ----, Cal.App. 2 Dist., August 16, 2012).

Facts

Touchstone Television Productions (“Touchstone”) hired Nicollette Sheridan (“Sheridan”) to appear in its television series Desperate Housewives to play the character of Edie Britt.  The contract between Touchstone and Sheridan was for the first season of the series but gave Touchstone the option to renew on an annual basis for an additional six seasons.  The contract also provided that, if Touchstone exercised its option to renew, it was not obligated to use Sheridan’s services but was obligated to pay her for that particular year.  Although Touchstone renewed the contract until and through Season 5, during that season it informed Sheridan it would not renew for season 6.  During Season 5, an incident occurred between Sheridan and the creator of the series, Marc Cherry (“Cherry”).  Sheridan states Cherry hit her and then she complained to Touchstone about the incident.  While Season 5 was still in production, Touchstone informed Sheridan that it was not going to exercise its option for Season 5.  Touchstone told Sheridan that her character would be killed in a car accident during Season 5.  Touchstone paid Sheridan the full amount due for Season 5 even though she did not appear in every Season 5 episode.  After Touchstone informed her that it would not renew her contract, Sheridan appeared in three more episodes and engaged in publicity for the series. 

Sheridan brought a lawsuit against Touchstone and Cherry alleging Cherry committed a battery upon her in September 2008 and Touchstone fired her in February 2009 in retaliation for complaining about Cherry’s conduct.  Sheridan sought damages in excess of $20 million.  The matter went to trial on the following three causes of action:  (1) wrongful termination in violation of public policy, (2) breach of the implied covenant of good faith and fair dealing, and (3) battery.  The trial court directed a verdict in favor of Cherry and Touchstone on the battery issue because it concluded the matter was one that should be brought within the workers’ compensation system.  Sheridan voluntarily dismissed her claim for breach of the implied covenant of good faith and fair dealing.  A jury deadlocked on the cause of action for wrongful termination.  Touchstone asked for a directed verdict but the trial court denied the motion and decided the matter should be retried.  Touchstone petitioned the court of appeal for extraordinary relief.

Decision

California case law “does not allow a plaintiff to sue for wrongful termination in violation of public policy based upon an employer’s refusal to renew an employment contract.”  An employment contract for a fixed term is terminated by the expiration of that term.  If employment under a fixed-term contract is not renewed, an employee cannot state a claim for wrongful termination in violation of public policy.  Prior case law provides that in order for a former employee to prevail on a discrimination claim after her former employer failed to renew her contract, she was required to prove that, had she not complained about unsafe work conditions, the employer would have renewed her employment.  Even if she could prove her case, her recovery for damages would be limited to lost wages and work benefits.

Based on this case law, the court of appeal found the trial court erred when it denied Touchstone’s request for a directed verdict.  Sheridan was not discharged, fired, or terminated, but instead Touchstone chose not to renew her contract for Season 6.  She continued to work on Desperate Housewives throughout Season 5 and received full compensation for her work.  “That Touchstone’s decision not to renew her contract for an additional season may have been influenced by her complaints about an unsafe working condition (e.g., Cherry’s purported battery) does not change [the court’s] conclusion in light of the principle that a decision not to renew a contract set to expire is not actionable in tort.”

The facts here do not present a situation where an employer fired an employee.  Instead, Touchstone made a decision not to rehire Sheridan after her contract expired on its own terms.  The only remedy Sheridan has at this time is amend her complaint to allege a cause of action under Labor Code section 6310, subdivision (b), that Touchstone retaliated against her when it decided not to exercise its option to renew her contract because she complained about unsafe working conditions.  Pursuant to section 6310, subdivision (b), if Sheridan prevails, her damages will be limited to lost wages and work benefits caused by Touchstone’s decision not to renew her contract.

The court granted a writ ordering the court to enter a directed verdict in favor of Touchstone as to Sheridan’s wrongful termination cause of action.  The court of appeal, however, directed the trial court to permit Sheridan to file an amended complaint to allege a cause of action under section 6310, subdivision (b).

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Bruce A. Scheidt, Laura Izon Powell or David W. Tyra | 916.321.4500

 

Published In: Art, Entertainment & Sports Updates, General Business Updates, Labor & Employment Updates, Personal Injury Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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