ITV Gurney Holding Inc. v. Gurney, 18 Cal. App. 5th 22

Background

In 2012 ITV purchased 61.5% of a production business and the parties executed an operating agreement (LLC) and employment agreements making Scott and Deirdre Gurney co-CEOs and minority owners (via Little Win, LLC).
Operating agreement created a five‑member board (ITV appoints 3, Little Win 2) and generally authorized board action by majority vote, but listed certain actions requiring unanimous consent and carved out that the Gurneys could "manage the day‑to‑day business" consistent with past practice without other managers' approval.
Employment agreements required full time service through 2017, set compensation, defined good‑cause termination, and allowed the board to terminate without cause after 2015 with notice.
In 2016 the Gurneys formed Snake River Productions, sold rights to a show (Sons of Winter) to that entity without disclosing ownership, and engaged in other conduct ITV and the board considered potentially self‑dealing; the ITV‑appointed majority placed them on leave and then terminated their employment for cause.
The Gurneys sought a preliminary injunction to (1) bar ITV from exercising call rights and (2) reinstate them to day‑to‑day management under the operating agreement; the trial court granted both requests.
On appeal the court affirmed the portion preserving the Gurneys’ board rights and blocking ITV’s call, but reversed the reinstatement as an abuse of discretion, holding the operating agreement did not grant the Gurneys perpetual management authority after employment termination.

Issues

Issue	Plaintiffs' Argument	Defendants' Argument	Held
Whether the operating agreement grants the Gurneys an absolute, enduring right to manage day‑to‑day operations despite termination as CEOs	Operating agreement vests management authority in the board; the Gurneys’ exception was to facilitate CEO duties, not a perpetual grant	The clause "Gurneys may manage day‑to‑day" is a standalone, irrevocable grant that protects their managerial control regardless of employment status	Held for plaintiffs: clause is an accommodation to CEO role, not an everlasting grant; majority board may remove them from day‑to‑day management upon termination as CEOs
Whether the employment agreements independently preclude reinstatement after termination	Employment agreements allow termination without cause after 2015, so reinstatement is not warranted based on employment contract	Gurneys contend lack of good cause means reinstatement or protections apply	Held for plaintiffs: employment agreements permit termination without cause after the third anniversary; termination did not give a contractual basis for reinstatement
Proper standard and review for preliminary injunction based on contract interpretation	Plaintiffs: contract interpretation is a pure question of law reviewed de novo; injunction reinstating managers was mandatory and subject to strict scrutiny	Gurneys: injunction was permissible; focused on equities and likelihood of success	Held: appellate review de novo on contract interpretation; trial court abused discretion by misinterpreting operating agreement
Scope of preliminary injunction — whether board rights and call/put rights should be preserved	Plaintiffs sought to lift injunction entirely	Gurneys sought to preserve board and anti‑call protections	Held partially for Gurneys: injunction remains insofar as it protects their board rights (vetoes requiring unanimity, inspection rights) and blocks ITV’s attempted call; reversed only as to reinstatement to day‑to‑day managerial functions

Key Cases Cited

IT Corp. v. County of Imperial, 35 Cal.3d 63 (1983) (sets two‑factor test for injunctions: likelihood of success and balance of interim harms)
Oiye v. Fox, 211 Cal.App.4th 1036 (2012) (abuse of discretion standard for injunctions; mandatory injunctions receive stricter review)
Smith v. Adventist Health System/West, 182 Cal.App.4th 729 (2010) (appellate courts accept trial court's factual findings if supported by substantial evidence; legal conclusions reviewed independently)
Taylor v. Nu Digital Marketing, Inc., 245 Cal.App.4th 283 (2016) (contract interpretation is a question of law reviewed de novo)
American Alternative Ins. Corp. v. Superior Court, 135 Cal.App.4th 1239 (2006) (contracts are interpreted as a whole and in context)