1:00pm PT by Ashley Cullins
'Duck Dynasty' Co-Creators Lose Autonomy Over Their Company
The co-creators of Duck Dynasty don't have autonomous control of their production company, but they still have power as voting board members — and ITV can't buy out their shares until dueling lawsuits are resolved, an appellate court ruled Tuesday.
The legal battle began in December 2016 when ITV fired Scott and Deirdre Gurney from Gurney Productions and sued them for fraud. The couple promptly countersued, claiming ITV was asserting bogus allegations in an attempt to usurp their company.
In March, Los Angeles Superior Court judge Susan Bryant-Dyson granted the couple's preliminary injunction, which sought to reinstate their control of Gurney Productions. ITV appealed the decision. A California appellate panel on Tuesday affirmed it in part, but reversed the portion of order that restored the duo as day-to-day managers of the company.
ITV argued the Gurneys' employment agreement allowed the board to terminate them as CEOs with or without cause, and the panel agreed. In short, it held that the clause in the operating agreement that gave the Gurneys as CEOs a certain degree of autonomy over operations was meant to keep the board from being bogged down by votes over minor matters.
"Our conclusion that the operating agreement does not give the Gurneys this unchecked authority does not render the Gurneys powerless," writes presiding justice Frances Rothschild. "Although the Gurneys lost the right to manage the day-to-day operations of the Company when the majority of the board voted to remove them as CEO’s, they retained their rights as board members."
The appellate court held that the rest of the injunction stands. (Read the decision in full here.) "This includes the portion of the injunction denying ITV’s request to exercise its call rights to purchase the remainder of the Company, a ruling which plaintiffs have not challenged on appeal," writes Rothschild.
Michael Weinstein, the Gurneys' attorney, says the couple is happy with the ruling, although they intend to appeal the portion of the decision that reversed the trial court's order.
"In upholding major portions of the injunction against ITV, the Appellate Court has not only solidified the Gurneys’ position as managing board members, but has also affirmed a lower court finding that the Gurneys are likely to prevail on their substantial claims against ITV," says Weinstein. "Despite ITV’s public posturing and misleading statements to the press, the facts in this case and court rulings have ITV running into a legal dead end."
Weinstein also says the couple considers the appellate decision and an earlier anti-SLAPP decision back-to-back wins.
ITV had argued that the Gurneys were suing in response to the Dec. 5, 2016, board meeting during which they were fired. It claimed that meeting was, in effect, a settlement discussion and therefore couldn't prompt litigation under California's anti-SLAPP lawsuit, which bars lawsuits arising from protected activity.
Bryant-Deason wasn't buying it. She held that the evidence reflects the meeting "was not a settlement negotiation, but an ambush," and therefore it isn't protected by the litigation privilege. Given that finding, she didn't need to address whether the Gurneys demonstrate a probability of prevailing on their claims — but she did it anyway.
The court addressed a document that allegedly shows the takeover attempt was planned for months in advance — and even had a code name.
"Dierdre Gurney submits a checklist entitled 'Operation Peking' that she discovered in Gurney Productions' business records, which she contends is a reference to the Gurneys based on their work with Duck Dynasty," finds Bryant-Deason. "The checklist purportedly shows the steps the Cross-Defendants planned to take to forcibly divest the Gurneys of their interest in Gurney Productions, LLC even without good cause, including 'purchas[ing] champagne for positive outcome.'"
That checklist, Bryant-Deason found, is enough to create a triable issue regarding whether ITV acted in bad faith in such a way that the litigation privilege wouldn't apply even if she had not already reached that conclusion earlier in her analysis.
ITV has not yet responded to a request for comment on the rulings.