Make your own free website on

Posted by on April 22, 2021

Plaintiff employees sought relief from the order of the California Court of Appeals, which reversed the trial court’s judgment in their favor on their claim that defendant employer had breached an implied-in-fact contract term not to demote their employees except for good cause. The parties were represented by their own California small business attorney.


Plaintiffs were employed by defendant employer in a senior managerial capacity when they were demoted. The demotion resulted in a reduction in salary and benefits, as well as a loss of all supervisory authority. Plaintiffs sued defendant, claiming among other things that defendant had breached an implied-in-fact contract term not to demote their employees except for good cause. The jury found that such a contract existed and had been breached, and awarded each plaintiff a substantial amount in compensatory damages for past and anticipated future lost earnings. The appellate court reversed, holding that courts should not recognize or enforce such agreements for various reasons of law and public policy. The supreme court reversed, holding that there was ample evidence from defendant’s personnel policy manual, and the testimony of one of defendant’s own human resources managers, to support the finding of an agreement to discipline its employees only for good cause. The court also held that the evidence supported the conclusion that defendant breached this agreement. The court found that the agreement was not unenforceably vague and was not contrary to public policy.


The supreme court reversed the appellate court’s reversal of the trial court’s decision to award plaintiff employees damages after defendant employer demoted them. The supreme court held that there was sufficient evidence to conclude that defendant entered into an enforceable implied contractual agreement not to demote its employees without cause, and that defendant had breached this agreement by wrongfully demoting plaintiffs.

Procedural Posture

Defendant manufacturers appealed the judgment of the Superior Court of Alameda County (California) entered upon a jury award in plaintiff patent holders’ action of for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and interference with advantageous business relations. Plaintiffs cross-appealed a judgment against them on claims for violation of the Cartright Act and wrongful termination.


Following defendant manufacturers’ acquisition of plaintiff patent holders’ company, defendants terminated funding of plaintiffs’ company for failure to reach profitability in accordance with the parties’ agreement. Plaintiffs secured judgment for damages in an action that charged failure to honor defendants’ funding commitment. Defendants appealed, arguing as error the admission into evidence of plaintiffs’ business plan as the basis of the parties’ buyout agreement. The court reversed, ruling that the business plan was not admissible under the parol evidence rule, Cal. Civ. Proc. Code ยง 1856. The court ruled that the parties’ agreement was an integrated contract, which could not be contradicted by evidence of purportedly collateral agreements. The court also ruled that a prior or contemporaneous collateral oral agreement relating to the same subject matter could have been admitted, but only where it was not inconsistent with the terms of the integration. The court found that the agreement specifically reserved to defendants the right to determine funding based upon profit performance standards. The court affirmed in part and reversed in part.


The court reversed the judgment for plaintiff patent holders because the business plan was proffered to vary the terms of the parties’ integrated agreement and was not admissible under the parol evidence rule. The judgments in favor of defendant manufacturers on the actions for violation of the Cartright Act and for wrongful termination of employment were affirmed.


Be the first to comment.

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>