Opinion
G058756
02-22-2021
CARLTON ENTERPRISES, INC., Plaintiff and Appellant, v. WALT DISNEY PARKS & RESORTS U.S., INC., Defendant and Respondent.
Macias Counsel, Sean E. Macias; Shaw Koepke & Satter and Jens B. Koepke for Plaintiff and Appellant. Larson O'Brien, Stephen G. Larson, Jonathan E. Phillips and Emilie J. Zuccolotto for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2017-00959155) OPINION Appeal from a judgment of the Superior Court of Orange County, Layne H. Melzer, Judge. Affirmed in part and reversed in part. Macias Counsel, Sean E. Macias; Shaw Koepke & Satter and Jens B. Koepke for Plaintiff and Appellant. Larson O'Brien, Stephen G. Larson, Jonathan E. Phillips and Emilie J. Zuccolotto for Defendant and Respondent.
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Defendant Walt Disney Parks and Resorts U.S., Inc. (Disney), operates an exclusive, expensive, and highly sought-after social club in its Southern California theme parks named Club 33. According to the terms of the membership agreement, membership may be terminated as a "last step in resolving issues inconsistent with the spirit of the Club 33 Membership program or as provided by the rules herein." The agreement lists several bases for terminating a membership, followed by a catchall: "For any other reason in Club 33 Membership Administration's sole discretion."
Plaintiff Carlton Enterprises Inc., which is owned by Diana and Scott Anderson, was a member of Club 33. Disney terminated its membership after Mr. Anderson was found in one of the parks with objective signs of intoxication. However, Mr. Anderson claims he was suffering a medical condition, and, crucially, for purposes of the summary judgment from which this appeal lies, Disney admitted his condition that day was a result of his medical condition. The question is, does that matter? Can Disney terminate a membership based on a medical condition?
We conclude it does matter. The agreement explicitly says that termination may be a consequence of one of two things: a rule violation or conduct inconsistent with the spirit of the Club 33 membership program. Given this language and the list of specific violations preceding the catchall phrase, we conclude "any other reason in [Disney's] sole discretion" refers to its discretion to determine what is within the spirit of the Club 33 membership program. Having a medical condition is within the spirit of the Club 33 membership program. Accordingly, we reverse the judgment.
FACTS
Plaintiff is a consulting company started in 1999 and run by the Andersons. Plaintiff applied for membership in Club 33 in 2003 and was put on a wait list. It was finally afforded the opportunity to become a member in 2012.
Club 33 is owned and operated by Disney. "The Club began as a lounge for Walt Disney to entertain investors, foreign dignitaries, family and friends, and other VIPs. Club 33 now has three locations at the Disneyland Resort in Anaheim: The Club 33 Le Grand Salon dining room, Le Salon Nouveau bar and lounge, and the 1901 bar and lounge." "Club 33 does not advertise or recruit new members, and its membership is the result of a highly selective process that involves an extensive application and vetting procedure." According to Disney, "Club 33 offers an exclusive, distinguished experience to its members who are expected to respect the spirit of the Club."
The written terms of the parties' membership agreement are contained in the Club 33 guidelines (Guidelines). The Guidelines contain a specific section on termination that reads as follows: "Termination is the last step in resolving issues inconsistent with the spirit of the Club 33 Membership program or as provided by the rules herein. Club 33 Membership is a privilege and not a right; therefore, immediate termination may be deemed as an appropriate step to resolve an issue after review of the matter by Club 33 Administration. [¶] There will be no refund of either the initiation fee or annual dues in the event of the termination of Club 33 Membership account. [¶] A Club 33 Membership account may be terminated due to the following: [¶] Misconduct by a Member or their Guest(s) anywhere within the Disneyland Resort; [¶] Failure by a Member and/or their Guest(s) to comply with Club 33 Membership rules; [¶] The sale, barter, auction, lease or loan of a Member's Membership Photo ID, ticket allotment, annual passport or other Club 33 benefits as noted within these guidelines; [¶] Unpaid annual dues; [¶] Unpaid dining charges; [¶] For any other reason in Club 33 Membership Administration's sole discretion." Under a section entitled "Club 33 Members and Guest Proper Conduct," the Guidelines state, "Lewd conduct, public intoxication, inappropriate attire, solicitation of any kind, and use of profanity will not be tolerated by Members or their Guests while on the premises of the Disneyland Resort and may result in termination of the Member's Club 33 Membership account." Disney had a policy of not terminating a membership until the second violation.
Plaintiff's first rule violation occurred in August 2016. According to a letter written by the general manager of Club 33, plaintiff's account was put on hold because Mrs. Anderson allegedly "caused a disruption in the Club 33 Le Salon Nouveau by using a raised voice and profanity which disturbed other Members and Guests around [her]." The hold was to last for 30 days. The following day, Mrs. Anderson wrote a letter apologizing for her behavior. About a week later, the general manager responded in writing confirming the rule infraction but lifting the hold early. He further stated, "You are advised that if another infraction of the Club 33 Rules/Guidelines occurs, the Club 33 Membership will be subject to termination."
The incident that ultimately led to the termination of plaintiff's membership occurred on September 3, 2017. Security personnel for California Adventure Park were called out in response to reports of Mr. Anderson showing signs of intoxication. A security guard filled out a report, stating, "Upon talking to [Mr. Anderson], it was obvious that he was heavily under the influence, he was hunched over and slurred his responses. He tried getting up and fell down." In response, the general manager suspended plaintiff's membership and invited Mr. Anderson to respond to the allegation that he was intoxicated at the park.
Mr. Anderson responded with a letter claiming that he "was incapacitated from a severe allergy attack, a medical condition that disabled me to the point where I was in great physical pain and distress, and I was unforeseeably unable to speak or ambulate back to my hotel to take medication that immediately afforded me relief." Mr. Anderson admitted he was drinking that day, but claimed he "did not drink anything close to an unreasonable amount." The letter attached medical records from his allergist. But the general manager concluded that nothing in those records suggested the sort of episode that occurred at the park. The general manager then consulted with the chief medical officer for Disney, who likewise did not find anything in the medical records that would explain the episode at the park.
The general manager concluded that Mr. Anderson had purposefully misrepresented his condition and thus decided to terminate plaintiff's membership. The general manager wrote a letter to the Andersons noting the existing warning on plaintiff's account and terminating the membership for public intoxication, effective October 9, 2017.
In December 2017, plaintiff filed the underlying complaint, asserting causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. Plaintiff alleged Disney "breached the Agreement with Plaintiff by taking unilateral, unfounded, retaliatory action against Plaintiff
Disney moved for summary judgment/adjudication. As undisputed material facts, Disney set forth, essentially, the Guidelines and the letters Disney wrote first placing plaintiff's account on hold in 2016 for profanity, and then terminating the account in 2017 for public intoxication. Plaintiff responded with additional facts, asserting "Mr. Anderson has a 30-year history of episodic vertigo and dizziness which has occurred with sensitivity to barometric pressure changes which can result in a vestibular migraine episode," and that the episode on September 3, 2017, was a result of that condition. Importantly, for purposes of the summary judgment motion, Disney did not dispute plaintiff's factual claims.
The court granted the motion. In its tentative decision, the court concluded the Guidelines permitted Disney to terminate plaintiff's account for any reason—good, bad, or indifferent—and that Disney had given a reason, thereby entitling it to judgment.
After taking the matter under submission, however, the court concluded that "the language 'any other reason,' is ambiguous." "If the Court were to construe 'any other reason' as meaning 'with or without cause,' as [Disney] seems to urge, the five 'reasons' preceding this clause, which are arguably 'good reason' for termination, would be rendered surplusage . . . . The preceding language strongly suggests that the parties intended for [Disney], in exercising its 'sole discretion' to terminate for 'any other reason,' to do so in a reasonable manner or with good faith." Nevertheless, the court concluded Disney had met that standard because each of the two rule violations were supported by evidence, even if Disney was ultimately mistaken. The court entered judgment, and plaintiff timely appealed.
As a procedural matter, while the motion for summary judgment was pending, plaintiff filed a second amended complaint that added a defamation claim. After the court granted summary adjudication on the original causes of action, plaintiff voluntarily dismissed the defamation claim so that judgment could be entered.
DISCUSSION
The gist of plaintiff's argument on appeal is that the contract required Disney to have good cause to terminate plaintiff's membership, and there are disputed issues of material fact over whether Disney had such cause. An appellate court reviews a grant of summary judgment de novo. (Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 334.) We essentially agree with plaintiff and reverse the judgment.
The interpretation of a contract is a judicial function. (Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 39-40.) "[W]here there is no conflicting extrinsic evidence, the appellate court is not bound by the trial court's interpretation and will decide the issue de novo." (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 847.)
We interpret the contract to mean that Disney may terminate a membership under two circumstances: a violation of a specific provision of the Guidelines that allows for termination, or any conduct inconsistent with the spirit of Club 33 membership, which Disney has broad discretion to determine. The principal basis for our interpretation is the very first sentence of the termination section of the Guidelines: "Termination is the last step in resolving issues inconsistent with the spirit of the Club 33 Membership program or as provided by the rules herein." (Italics added.) The next sentence states: "Club 33 Membership is a privilege and not a right; therefore, immediate termination may be deemed as an appropriate step to resolve an issue after review of the matter by Club 33 Administration." (Italics added.) The word "issue" in that sentence refers back to the previous sentence ("issues inconsistent with the spirit of the Club 33 Membership program"). The termination section then goes on to include a punitive provision: a member cannot get a refund upon termination. It then lists five different termination scenarios that all involve misconduct of some sort.
Everything about the termination section up to that point suggests that termination is a consequence of doing something wrong. Only then does it list "any other reason" within Disney's sole discretion. In our view, that provision has to be read in the broader context of the termination section. The "any other reason" refers to the broad and undefined set of "issues" that may violate the spirit of Club 33 membership, as determined in Disney's sole discretion.
Disney contends the Guidelines give it unfettered discretion to terminate a membership for any reason at all— good, bad, or indifferent. If a member sneezes the wrong way, Disney can terminate the membership. Under Disney's interpretation, it does not matter that it was mistaken about the cause of Mr. Anderson's condition on the day in question. Subjectively, Disney had a reason; end of story. The trial court adopted a similar rationale as we do—that the broader section describes terminations for good cause—but then came to the conclusion that, so long as Disney operated reasonably and in good faith, it could terminate a membership for a perceived rule violation, even if ultimately mistaken. It found undisputed evidence of good faith in the evidence Disney collected prior to making the decision to terminate plaintiff's membership.
Where both the court and the parties went wrong, however, is in failing to incorporate the first sentence of the termination section in their analyses. Neither the court nor the parties even mention that sentence. Yet it is the sentence that broadly defines—and limits—what may constitute the basis of a termination decision. It is also the sentence that gives structure to the discretion Disney has in the "any other reason" provision.
Moreover, there is nothing in the termination section that suggests Disney can be mistaken in its justification. There is no provision that says a perceived violation may result in termination. Both Disney and the court seem to have interpreted the word "reason" in "any other reason" in a subjective sense—as long as Disney subjectively had a reason, termination is proper. In our reading, the word "reason" is objective—there must have actually been a reason; in other words, an actual rule violation or actual conduct inconsistent with the spirit of Club 33 membership. To interpret "reason" subjectively results in an extraordinarily harsh term where members may be tossed out for doing nothing wrong—indeed, Disney would be the one in the wrong. (See Strong v. Theis (1986) 187 Cal.App.3d 913, 920 ["The court must avoid an interpretation which will make a contract extraordinary, harsh, unjust, or inequitable"].) In light of the overall termination section, and absent some clear textual indication, we decline to adopt that interpretation.
Applying our interpretation to the undisputed facts, Disney is not entitled to summary adjudication on the breach of contract cause of action. Disney did not dispute, for purposes of this motion that Mr. Anderson's condition on the day in question was due to a medical condition. Having a medical condition does not violate a specific rule, nor is it contrary to the spirit of Club 33. Accordingly, on the undisputed facts, Disney would be in breach of contract for terminating plaintiff's membership in violation of the termination provisions in the Guidelines. Thus, plaintiff's breach of contract cause of action may proceed.
Plaintiff's second cause of action for breach of the implied covenant of good faith and fair dealing, however, may not proceed. "[W]here breach of an actual term [of a contract] is alleged, a separate implied covenant claim, based on the same breach, is superfluous." (Guz v. Bechtel National Inc., supra, 24 Cal.4th at p. 327.) Plaintiff's implied covenant claim is based on the exact same facts and the exact same alleged breach. It is superfluous. Thus, summary adjudication on the second cause of action was proper and we affirm that ruling.
This does not preclude plaintiff from asserting at trial that Disney's conduct violated the implied covenant. It simply is not a separate cause of action. It is part of the cause of action for breach of contract. --------
As to the third cause of action for declaratory relief, it too is superfluous. Plaintiff alleged in its complaint that "[t]here exists a controversy as between Plaintiff, on the one hand, . . . and Defendants, and each of them, on the other hand, as to whether or not said Defendants have breached the subject Club 33 membership Agreement and whether or not Plaintiff should be reinstated to its membership with Club 33." The court's order granting summary judgment recites simply that "[t]he Court GRANTS Defendant's motion for summary adjudication as to the Third Cause of Action for Declaratory Relief." Defendant's motion did not argue for a contract interpretation in its favor—it simply argued for dismissal of the declaratory relief cause of action essentially because it sought the same relief and on the same basis alleged in the breach of contract cause of action. (See Code Civ. Proc., § 1061 ["The court may refuse to exercise the power to [grant declaratory relief] in any case where its declaration or determination is not necessary or proper at the time under all the circumstances"].) Further, the minute order granting summary adjudication states "the declaratory relief claim warrants dismissal because Plaintiff is not entitled to the declaration it seeks." On appeal, plaintiff did not separately argue the ruling on the declaratory relief cause of action. Accordingly, we affirm the court's grant of summary adjudication on the third cause of action dismissing that claim as not necessary or proper under the circumstances.
DISPOSITION
The judgment as to the breach of contract cause of action is reversed. In all other respects, the judgment is affirmed. Plaintiff shall recover its costs incurred on appeal.
IKOLA, J. WE CONCUR: MOORE, ACTING P. J. GOETHALS, J.