Corporate Entity May Be Liable For Interfering With Shareholders’ Contractual Rights

Woods v. Fox Broadcasting, 129 Cal. App. 4th 344 (2005)

Mel Woods and Stan Golden, former shareholders of Fox Family Worldwide, Inc. (a joint venture between Saban Entertainment and Fox Entertainment and affiliates) sued Fox Entertainment, et al., after the sale of Fox Family to the Walt Disney Company. Woods and Golden alleged that as part of the deal with Disney, Fox insisted that Disney carry cable broadcasts of Major League Baseball games, which resulted in a $400 million reduction in the purchase price, which in turn resulted in a diminution in the value of the stock options that Woods and Golden owned. Woods and Golden alleged that Fox interfered with their contractual rights and their prospective economic advantage. The trial court sustained Fox’s demurrers, but the Court of Appeal reversed, holding that Fox could potentially be liable to Woods and Golden for interfering with the contracts at issue even though Fox had been a 49.5% owner in Fox Family and, therefore, not a “stranger” to those contracts.