1

Filed 5/5/11 Vespremi v. Tesla Motors CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

DAVID VESPREMI et al.,

Plaintiffs and Appellants,

v.

TESLA MOTORS, INC., et al.,

Defendants and Respondents.

A127008 (San Mateo County Super. Ct. No. CIV-474656)

I. INTRODUCTION

Appellants, two former employees of respondent Tesla Motors, Inc. (Tesla), sued

it and three of its officers and employees for defamation and for breach of a stock option

provision in the appellants’ employment agreements. After considerable pre-trial

litigation, including the sustaining of demurrers to one of appellants’ earlier complaints,

the trial court ultimately sustained respondents’ demurrer to appellants’ third amended

complaint (TAC) without leave to amend and filed a judgment dismissing that complaint.

Appellants appeal that judgment regarding three of their original nine causes of action,

i.e., those for libel, slander, and breach of contract. We reject their appeal regarding the

two defamation causes of action and hence affirm that portion of the judgment.

However, we find that the trial court erred in sustaining, without leave to amend,

respondents’ demurrer to appellants’ cause of action for breach of contract, and hence

remand the matter to the trial court for further proceedings regarding that cause of action.

2

II. FACTUAL AND PROCEDURAL BACKGROUND

Appellants David Vespremi and Gene Glaudell were both hired by respondent

Tesla, a San Mateo-based automobile manufacturer, in 2007. Vespremi was originally

hired as Director of Public Relations and Glaudell as Chief Information Officer. Both

had written employment agreements which specified that they were at-will employees

and also included stock option clauses. According to the TAC, during their employment

with Tesla, both men were “highly acclaimed for [their] work” and neither were ever

“counseled for any poor performance.”

In May 2007, Vespremi was allegedly promoted to “Director of

Communications.” However, a few months later, in November of that year, his job title

was changed to “Technical Writer for the Engineering Department” and his employment

status was changed to “a non-employee service provider.” Vespremi was formally

terminated in December 2007; the company then returned his check for $12,000 paid for

stock options on the basis that his right for same, under the employment agreement, had

not yet vested. According to the allegations of the TAC, Vespremi was not told, at the

time he was terminated, that his termination was due to performance issues; rather, Tesla

spokesperson Darryl Siry allegedly made statements to other Tesla employees “inferring

that Vespremi’s termination was the result of structural organizational changes in the

company.”

In December 2007, Glaudell was allegedly informed that Tesla was making budget

cuts and that he must reduce the labor expenses of his department. On January 10, 2008,1

he was also terminated. Both terminations occurred at about the same time that Tesla

terminated approximately 24 other employees. Those terminations were, according to

appellants’ TAC, because Tesla needed to restructure “its workforce in order to decrease

its operating expenses due to financial difficulties.” Unlike Vespremi, Glaudell

apparently had not attempted to purchase any Tesla stock pursuant to the stock option

1 All further dates noted are in 2008, unless otherwise specified.

3

clause in his employment agreement, but “intended to . . . purchase shares of Common

Stock in blocks as they vest.”

According to the TAC, two days before Glaudell’s termination, i.e., on January 8,

Tesla Chairman Elon Musk told an “executive staff meeting” that company management

should avoid making any public statements that suggested the terminations were due to

financial considerations and, instead, should say that they were “performance-based.”

Thereafter, again per the TAC, “this policy was disseminated to Tesla Motors’

managerial and supervisory staff who [were] required to follow that policy.”

On that same day, January 8, the former CEO and co-founder of Tesla, Martin

Eberhard, posted an article he wrote entitled “Stealth Bloodbath” on his personal blog;

the article sharply criticized the terminations. It said, among other things, that Tesla’s

actions in “axing nearly the entire executive staff. . . [and] ripping through the firmware

team . . . are all hard to explain.” He also wrote: “Some of these folks were let go with

no severance packages at all. Others got pathetic severance packages. This is not the

way I treat people, that is for sure. Maybe this explains why I got the boot first.”

Eberhard’s blog originally listed the names of some of the terminated employees,

including appellants, but two days later the blog was republished, this time with the

names omitted.2

Following its posting on the internet, Eberhard’s blog attracted considerable

attention, both from other internet blogs focused (at least in part) on Tesla’s business

posture, and also from local press, including particularly the San Jose Mercury News.

Several of these articles and blogs quoted Tesla spokesman Siry regarding the reasons for

the layoffs.

Many of these articles and blogs were attached as exhibits to appellants’ TAC.

We will not recite all their content, but only the quotations from Tesla spokesperson Siry

regarding the company’s reasons for the layoffs.

2 This list, including appellants’ names, was apparently subsequently republished

on some of the other blogs and websites which commented on Tesla’s situation and the layoffs.

4

In a January 11 blog commenting on Eberhard’s blog, Siry was quoted as saying:

“We’re letting go of people who are either not the best on the team, or are working on

something that is not a priority. [¶] [New CEO Drori] is holding people accountable at all

levels, and that starts at the top.”

The same day, another blog quoted Siry as saying that there were “several

reasons” for the “firings,” among them being the “insistence” of Tesla’s new CEO, Ze’ev

Drori, “that the company employ only the top performers.” Siry continued, per the blog:

“It’s about managing performance and rewarding top performers and getting rid of the

bottom performers. . . . It’s about developing a team that has accountability.”

The same day, January 11, another blog commenting on both the layoffs and

former CEO Eberhard’s criticism of them, quoted Siry as telling the San Jose Mercury

News that “the employee departures are more about accountability than lay-offs. . . .

[¶] We are not downsizing at all. We are still growing and have dozens of openings we

are recruiting for. This was a very specifically targeted action based on performance and

also in some cases redundancy.”

The actual article in the San Jose Mercury News appeared the following day,

January 12. That article commented on the “messy divorce” between Eberhard and his

successors at Tesla, and then quoted Siry as saying the “moves were related to

‘performance management.’ Ze’ev Drori, Tesla’s new chief executive appointed in

December [2007], intends to make employees accountable, Siry said. [¶] ‘If you don’t

get the job done, there are consequences,’ Siry said. ‘We haven’t had that before.’ [¶]

The news of the firings—they are not layoffs, Siry said, as the San Carlos company lists

39 job openings on its Website—was announced on a new Web site by Martin

Eberhard . . . .”3

The same day, January 12, respondents Drori and Musk sent an e-mail to,

allegedly, Tesla’s “customers, investors and other third parties” purportedly intended to

3 Portions of this article, including some of the quotations from Siry, were quoted

in a short article in the Business section of the New York Times on January 15.

5

“share some quick perspectives . . . about some recent changes at Tesla Motors that you

may have seen in the media.” Concerning the terminations and the press and internet

commentary thereon, the principal observations contained in that one-page, six-paragraph

message was that the company must “create a culture of accountability to the

commitments we make. A lack of such accountability leads to missed deadlines and

continuous delay. This accountability starts at the top and permeates throughout the

entire organization. As such we have made some changes at every level. . . . [¶] . . . We

have also substantially improved leadership and focus in supply chain management, an

area critical to our success. . . . [¶] . . . Since resources are very precious, this also means

that we must make hard decisions where need be and part ways with those whose

performance has not matched expectations. These actions were taken after careful

analysis by the leadership team, and not by a shotgun approach.”

According to the trial court’s “Register of Actions,” the first action by appellants

against respondents was filed on July 11. That complaint was later amended to add

respondent Musk as a defendant. A second amended complaint was filed on September

18; respondents demurred to it and, on December 22, that demurrer was sustained albeit

with leave to amend. The TAC was filed on January 12, 2009.

On May 18, 2009, the trial court sustained respondents’ demurrer to six of the nine

causes of action in that complaint without leave to amend. Thereafter, appellants

dismissed the remaining three causes of action, resulting in the court entering a judgment

of dismissal of the TAC on October 26, 2009.

Appellants filed a timely notice of appeal on December 4, 2009. Per their opening

brief to us, the only issues on appeal relate to two defamation causes of action (the fourth,

alleging libel and the fifth, alleging slander) and the third cause of action for alleged

breach of the stock option clause in the two appellants’ employment agreements.

6

III. DISCUSSION

A. The Applicable Law.4

The parties agree that our standard of review of a judgment of dismissal after the

sustaining of a demurrer without leave to amend is de novo. They are, of course, correct.

(See, e.g., Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; Total Call

Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166 (Total Call).)

Respondents present two separate and distinct arguments as to why, as a matter of

law, we should find the statements made by the three individual respondents, in their

capacities as officers of respondent Tesla, not to be defamatory, i.e., that the statements

(1) were not “of and concerning” appellants and (2) expressed matters of opinion, not

statements of alleged fact.

Before discussing the law governing both of these contentions, it is important to

note that an underlying consideration regarding defamation actions, especially those

appearing to test the boundaries of that tort, is the principle of freedom of speech

protected by the First Amendment to the United States Constitution. The United States

Supreme Court has spoken of the relevance of this principle to defamation actions several

times. For example, in one of its leading cases restricting the application of liability for

defamation, New York Times Co. v. Sullivan (1964) 376 U.S. 254, 269, the court said that

“libel can claim no talismanic immunity from constitutional limitations. It must be

measured by standards that satisfy the First Amendment.” The court went on to hold that

this “constitutional protection does not turn upon ‘the truth, popularity, or social utility of

the ideas and beliefs which are offered.’” (Id. at p. 271; see also Milkovich v. Lorain

Journal Co. (1990) 497 U.S. 1, 12-21 (Milkovich); Bose Corp. v. Consumers Union of

U.S. (1984) 466 U.S. 485, 513; Herbert v. Lando (1979) 441 U.S. 153, 169-172; Gertz v.

Robert Welch, Inc. (1974) 418 U.S. 323, 339-348 (Gertz).)

4 We will discuss here the applicable law relating to just the two dismissed

defamation causes of action, and reserve until section III, D, ante, a discussion of the pertinent law pertaining to the breach of contract/stock option cause of action.

7

Our own Supreme Court summarized the relevant law in what is probably its

leading case regarding the application of constitutional law to defamation actions, Blatty

v. New York Times Co. (1986) 42 Cal.3d 1033 (Blatty). There, in an opinion authored by

Justice Mosk, the court affirmed a trial court’s ruling sustaining, without leave to amend,

the defendant Times’ demurrers to trade libel and related causes of action brought by an

author of a book he claimed the defendant Times had wrongfully and maliciously omitted

from its best-sellers list. (Id. at pp. 1036-1037.) In so doing, it summarized the

applicable constitutional principles thusly: “In order to advance society’s interest in free

and open discussion on matters of public concern and to avoid undue self-censorship by

the press, the First Amendment establishes a broad zone of protection within which the

press may publish without fear of incurring liability on the basis of injurious falsehood.

[Citations.] Article I, section 2, of the California Constitution, our state constitutional

guarantee of freedom of expression and of the press, independently establishes a zone of

protection that is broader still. [Citations.] [¶] The necessity for this protection is clear.

‘The First Amendment presupposes that the freedom to speak one’s mind is not only an

aspect of individual liberty—and thus a good unto itself—but also is essential to the

common quest for truth and the vitality of society as a whole. [Citation.]’” (Blatty,

supra, 42 Cal.3d at p. 1041.)

The Blatty court also noted one of the two bases respondents rely on here, i.e., that

in order to overcome the First Amendment limitations on defamation actions, the plaintiff

must establish that the statements at issue concerned him or her. The court said: “In

defamation actions the First Amendment also requires that the statement on which the

claim is based must specifically refer to, or be ‘of and concerning,’ the plaintiff in some

way. The New York Times case suggested as much, although it could possibly have been

read to imply that the requirement derives from the due process clause of the Fourteenth

Amendment and ultimately from the state’s definition of the tort of defamation, and

hence that it is merely an element which the state is presumably free to require or not as it

sees fit. [Citation.] Rosenblatt v. Baer (1966) 383 U.S. 75, however, made it plain that

the requirement derives directly and ultimately from the First Amendment. In that case,

8

the United States Supreme Court held that a defamation plaintiff could not

constitutionally establish liability without satisfying the requirement even though the

governing state law imposed no such prerequisite: ‘under New York Times . . . [the

plaintiff is] required to show specific reference.’” [Citation.] (Blatty, supra, 42 Cal.3d at

p. 1042.)

Several other California cases have followed the law as set forth in Blatty

regarding the necessity that the allegedly defamatory statements be “of and concerning”

the plaintiffs. These include: Total Call, supra, 181 Cal.App.4th at pp. 170-171; Mullins

v. Brando (1970) 13 Cal.App.3d 409, 422-423 and footnote 13, certiorari denied (1971)

403 U.S. 923 (Mullins); Noral v. Hearst Publications, Inc. (1940) 40 Cal.App.2d 348,

350-353 (Noral). (See also Barger v. Playboy Enterprises, Inc. (N.D.Cal. 1983) 564

F.Supp. 1151, 1153, affd. (9th Cir. 1984) 732 F.2d 163, cert. den. (1984) 469 U.S. 853 [a

case citing both Noral and Mullins regarding the applicable California law] (Barger).)

There is also a second, separate issue: whether the views expressed in the

publications cited in appellants’ pleadings constituted allegations of fact or merely

expressions of opinion. Many California cases have dealt with this issue; one of them

(curiously not cited by either party in their briefs to us) is a decision of this court,

Hofmann Co. v. E. I. Du Pont de Nemours & Co. (1988) 202 Cal.App.3d 390 (Hofmann).

In that case, we affirmed the action of the Contra Costa County Superior Court sustaining

a demurrer without leave to amend and then dismissing an action for trade libel and

intentional interference with prospective economic advantage. The action was brought

by the developer of a proposed housing subdivision against the owner and operator of a

nearby chemical plant (Du Pont) regarding comments two of its executives (Gilbert and

McNamara) had made to the San Francisco Chronicle concerning the potential negative

impact of the chemicals emitted from Du Pont’s plant on prospective homeowners in the

proposed development.

Presiding Justice Kline, writing for a unanimous court, relied on both Blatty and

some of the United States Supreme Court precedent cited above in affirming the trial

court’s dismissal of the defamation (trade libel) cause of action. He wrote:

9

“Because the gravamen of the complaint is the allegation that respondents made

false statements of fact that injured appellant’s business, the ‘limitations that define the

First Amendment’s zone of protection’ are applicable. [Citations.] ‘[It] is immaterial for

First Amendment purposes whether the statement in question relates to the plaintiff

himself or merely to his property . . . .’ [Citation.]

“If respondents’ statements about appellant are opinions, the cause of action for

trade libel must of course fail. ‘Under the First Amendment there is no such thing as a

false idea. However pernicious an opinion may seem, we depend for its correction not on

the conscience of judges and juries but on the competition of other ideas. But there is no

constitutional value in false statements of fact.’ [Citation.] Statements of fact can be true

or false, but an opinion—‘a view, judgment, or appraisal formed in the mind . . . [, a]

belief stronger than impression and less strong than positive knowledge’—is the result of

a mental process and not capable of proof in terms of truth or falsity. [Citation.]

“In most cases ‘[the] critical determination of whether the allegedly defamatory

statement constitutes fact or opinion is a question of law.’ [Citations.] However, where a

statement is ambiguous and capable of being understood by the average reader as being

either fact or opinion, categorization of the statement is not a question of law and must be

left to the jury’s determination. [Citation.]

“ ‘The distinction [between fact and opinion] frequently is a difficult one . . . .’

[Citations.] To make the differentiation ‘California courts have developed a “totality of

the circumstances” test . . . .’ [Citation.] The court must put itself in the place of an

‘ “ ‘average reader’ ” ’ and decide the ‘ “ ‘natural and probable effect’ ” ’ of the

statement. [Citations.] The words themselves must be examined to see if they have a

defamatory meaning, or if the ‘ “ ‘sense and meaning . . . fairly presumed to have been

conveyed to those who read it’ ” ’ have a defamatory meaning. [Citations.] Statements

‘ “cautiously phrased in terms of apparency” ’ are more likely to be opinions. [Citations.]

“In addition to the language, the context of a statement must be examined.

[Citation.] The court must ‘look at the nature and full content of the communication and

10

to the knowledge and understanding of the audience to whom the publication was

directed.’ [Citation.]” (Hofmann, supra, 202 Cal.App.3d at pp. 397-398, fns. omitted.)

Holding essentially to the same effect as we did in Hofmann is another case (also

not cited in the parties’ briefs to us), Copp v. Paxton (1996) 45 Cal.App.4th 829 (Copp).

That appeal involved a defamation action brought by an alleged expert on earthquake

safety and rescue (Copp) against a San Mateo County official (Paxton) who had written

several communications questioning Copp’s credentials and expertise in that area. In

affirming the trial court’s grant of summary judgment to the defendants (which also

included the county and one of its agencies), Division One of this court wrote:

“Some of Paxton’s statements which Copp finds injurious fall into the category of

opinions. Despite the broad statutory language, such opinions are not actionable as a

matter of constitutional law. ‘An essential element of libel . . . is that the publication in

question must contain a false statement of fact. . . . This requirement . . . is

constitutionally based.’ [Citation.] ‘However pernicious an opinion may seem, we

depend for its correction not on the conscience of judges and juries but on the

competition of other ideas. But there is no constitutional value in false statements of

fact.’ [Citation.] A statement of opinion, however, may still be actionable ‘if it implies

the allegation of undisclosed defamatory facts as the basis for the opinion.’ [Citations.]

‘The dispositive question for the court is whether a reasonable fact finder could conclude

that the published statements imply a provably false factual assertion. . . .’ [Citations.]

“The issue whether a communication was a statement of fact or opinion ‘is a

question of law to be decided by the court.’ [Citation.] In making the distinction, the

courts have regarded as opinion any ‘broad, unfocused and wholly subjective comment,’

[citation] such as that the plaintiff was a ‘shady practitioner’ [citation] ‘crook’ [citation],

or ‘crooked politician.’ [Citation.] Similarly, in Moyer v. Amador Valley J. Union High

School Dist. [(1990)] 225 Cal.App.3d [720,] 725, this court found no cause of action for

statements in a high school newspaper that the plaintiff was ‘the worst teacher at FHS’

and ‘a babbler.’ The former was clearly ‘an expression of subjective judgment.’ (Ibid.)

And the epithet ‘babbler’ could be reasonably understood only ‘as a form of exaggerated

11

expression conveying the student-speaker’s disapproval of plaintiff’s teaching or

speaking style.’ [Citation.]” (Copp, supra, 45 Cal.App.4th at pp. 837-838.)

Many other cases hold to the same effect as Hofmann and Copp regarding the

necessity that the alleged defamatory statements be of “fact” and not merely “opinion.”

These include: Baker v. Los Angeles Herald Examiner (1986) 42 Cal.3d 254, 259-261

(Baker); Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424,

1444; Ferlauto v. Hamsher (1999) 74 Cal.App.4th 1394, 1401-1404; Campanelli v.

Regents of University of California (1996) 44 Cal.App.4th 572, 578-580 (also a decision

of this court); Banks v. Dominican College (1995) 35 Cal.App.4th 1545, 1554; Gould v.

Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1153-1154 (Gould);

Jensen v. Hewlett-Packard Co. (1993) 14 Cal.App.4th 958, 970-971 (Jensen); Kahn v.

Bower (1991) 232 Cal.App.3d 1599, 1606-1609 (Kahn)5; Moyer v. Amador Valley J.

Union High School Dist., supra, 225 Cal.App.3d at pp. 724-725; Fletcher v. San Jose

Mercury News (1989) 216 Cal.App.3d 172, 190-191; Gregory v. McDonnell Douglas

Corp. (1976) 17 Cal.3d 596, 600-604.

For the reasons set forth below, we agree with respondents that the statements

made by them and published in either online blogs or newspapers satisfied neither test—

especially when those tests are considered in combination.

B. The Statements were not “Of and Concerning” Appellants.

None of the verbal statements made by Tesla spokesperson Siry or the written

statement by Tesla Chairman Musk mentioned appellants’ names. Those names, along

with those of 24 other Tesla employees who had been laid off, were published initially by

former Tesla Chairman Eberhard on his blog on January 8 and, as noted above, thereafter

5 Kahn is also a decision of this court, one in which we held similarly to our

opinion in Hofmann, i.e., that some of the statements of the defendants concerning the perceived inadequacy of plaintiff child welfare worker were opinions, albeit some (those suggesting “incompetence”) were not. But we also took account of the fact that, the previous year, the United States Supreme Court had, in Milkovich, clarified the scope of First Amendment protection provided to expressions of opinion by its prior decisions, especially Gertz. (See Kahn, supra, 232 Cal.App.3d at pp.1606-1609.)

12

recited on other blogs and websites, albeit not in either of the newspaper articles relating

to the Tesla layoffs. As also noted, the list of 26 names was deleted from the January 10

edition of Eberhard’s blog. Additionally, none of the comments by Tesla spokesperson

Siry mentioned appellants’ job titles, positions held, or responsibilities undertaken.

Probably most importantly regarding this issue, appellants’ TAC specifically

alleges that appellants “were terminated as part of a ‘lay-off’ of approximately 26

employees that occurred at Tesla Motors in or around December 2007 through January

2008.”

Under the law set forth in Blatty, references such as those in the verbal statements

made by Siry, the writings and blogs referencing them, and the written statement of

Musk, when made concerning a group acknowledged by appellants to be as large as 26,

can seldom be “of and concerning.” In Blatty, our Supreme Court specifically stated as

much: “To begin with, the [New York Times best seller] list does not expressly refer to

Blatty or his novel. Nor does he contend otherwise. Quite the contrary: the failure of

Legion [Blatty’s novel] to appear on the list is the very basis of his action. [¶] Further,

the list cannot be reasonably understood to refer to Blatty or his novel by implication.

When, as in this case, the statement that is alleged to be injuriously false concerns a

group—here, books currently in print and their authors—the plaintiff faces a ‘difficult

and sometimes insurmountable task. If the group is small and its members easily

ascertainable, [the] plaintiff[] may succeed. But where the group is large—in general,

any group numbering over twenty-five members—the courts in California and other states

have consistently held that plaintiffs cannot show that the statements were “of and

concerning them,’ [citations].’ [Citations.])” (Blatty, supra, 42 Cal.3d at p. 1046,

emphasis supplied.)

Much of this portion of Blatty is repeated in the most recent California case on

point, Total Call, supra, 181 Cal.App.4th at page 170, footnote 3. And in Mullins, supra,

13 Cal.App.3d at page 423, footnote 13, the court quoted a 1964 edition of Prosser on

Torts to substantially the same effect. That court emphasized these words from the

13

Prosser text: “The rule has been applied quite uniformly to comparatively large groups

of classes of a definite number, exceeding, say twenty-five persons.”6

Appellants present no persuasive arguments or citation of authority demonstrating

why this principle should not apply here. For example, one of their arguments derives

from a sentence appearing in the next paragraph of Blatty: “The group in question here

obviously numbers substantially more than 25 members: a visit to even the smallest

bookstore establishes this fact.” (Blatty, supra, 42 Cal.3d at p. 1046.) From this,

appellants infer that Blatty means that when the “number of members in the group is

approximately 26,” the “of and concerning” principle is inapplicable because 26 is “a

number that in no way is substantially more than 25.”

We disagree that Blatty and the subsequent authorities relying on it7 articulate a

principle which can only be applied when the number of persons covered by the alleged

defamation is “substantially more than 25.” What Blatty says is that, when the number of

people covered by the alleged defamation reaches that range, plaintiffs face a “difficult

and sometimes insurmountable task” to show that the words are “of and concerning

them.” There is no magic number above and below which the law is different. However,

there clearly is, and should be, a burden imposed on a plaintiff or plaintiffs to satisfy the

6 See also, to the same effect, Restatement Second of Torts, section 564A, comment b, which states in relevant part: “It is not possible to set definite limits as to the size of the group or class, but the cases in which recovery has been allowed usually have involved numbers of 25 or fewer.” (See also the cases collected in the appendices to that Restatement citing and relying on that comment.)

7 As noted above, three of these are California cases, i.e., Noral, Mullins and Total Call. Barger is a federal case decided by Judge Marilyn Patel of the Northern District of California, and citing and relying almost entirely upon California appellate precedent. The only case appellants cite that is at all to the contrary of these cases is Brady v. Ottaway Newspapers, Inc. (N.Y.App.Div. 1981) 445 N.Y.S.2d 786, a case in which an appellate court affirmed the denial of a motion to dismiss a complaint alleging libel against the entire police force of a small New York town. Citing that case, a New York federal district court recently noted that, although the “New York Courts have not set a particular group number above which defamation of a group member is not possible,” some federal courts and the courts of California, Florida and Nevada have. (Diaz v. NBC Universal, Inc. (2008) 536 F.Supp.2d 337, 343.)

14

“of and concerning” test when the group allegedly libeled exceeds a certain number—as

it did here. (Blatty, supra, 42 Cal.3d at p. 1046.)

Appellants contend they have accomplished this task because former Tesla

executive Eberhard listed 26 names, including theirs, in an original attachment to his

original January 8 blog critical of Tesla’s actions in terminating all of those people.

We disagree. First of all, it would be wrong to hold respondents liable for

defamation because a prominent critic of Tesla’s then-current management publicly listed

who he assumed to be the people subject to the layoffs. Second, appellants argue that

Siry’s comments that the laid-off people were “working on something that is not a

priority” or were “in some cases [redundant]” were “clearly inapplicable to Vespremi and

Glaudell” whose positions were “Director of Communications and Public Relations and

Chief Information Officer, respectively.”

This argument overlooks two rather obvious facts. First, per appellants’ TAC,

over a month before his termination appellant Vespremi had been demoted to a “non-

employee service provider” position as a “Technical Writer for the Engineering

Department” and was no longer “Director of Communications.” Second, if, as and when

a company is suffering financially, as appellants specifically allege Tesla was at the time,

the management of the company might well perceive their public relations employees to

be “not a priority.”

We therefore conclude that the trial court was correct in ruling that the various

statements of Siry and the other respondents relied upon by appellants fail the “of and

concerning” test.

C. The Statements were Expressions of Opinion, not Allegations of Fact.

As noted earlier, we also agree that the statements relied upon by appellants as

constituting defamation were, under the law cited earlier, expressions of the opinions of

the respondents, and not allegations or purported statements of fact.

Appellants’ briefs to us identify the following as the terms and phrases used by

respondents (and thereafter repeated in the blogs and newspapers quoted above) that

appellants believe constitute defamatory statements of fact as to them personally: the

15

terminated former employees were “bottom performers” who were being held

“accountable” because they “did not get the job done”; the terminations were related to

“performance management” and “developing a team that has accountability;” this is so

because “[i]f you don’t get the job done, there are consequences,” a standard Tesla

allegedly hadn’t “had before;” and Tesla must “make hard decisions where need be and

part ways with those whose performance has not matched expectations.”

First of all, clearly these phrases are very broad indeed; none of the terminated

employees is termed “incompetent,” a term which could well cross the border into a

statement of fact. Probably the most specific term used was that by Siry to the effect that

the actions were “about managing performance and rewarding top performers and getting

rid of the bottom performers.” This statement could well be interpreted as characterizing

the 26 terminated employees of Tesla as “bottom performers.” But we do not find this

phrase to meet the applicable standard, i.e., “ ‘whether a reasonable fact finder could

conclude that the published statements imply a provably false factual assertion.’ ”

(Moyer, supra, 225 Cal.App.3d at p. 725, quoted by this court in Kahn, supra, 232

Cal.App.3d at p. 1607, emphasis supplied).

The difference between what was said about the 26 laid-off Tesla employees and

what is defamatory was made clear by our colleagues in the Second District in Gould,

supra, 31 Cal.App.4th at page 1154, where that court held: “Here, the statement by

Gould’s supervisor accusing Gould of ‘poor performance’ is clearly a statement of

opinion. It does not suggest any lack of honesty, integrity or competency on Gould’s part

nor does it impute any reprehensible personal characteristic.” (Emphasis supplied; see

also Kahn, supra, 232 Cal.App.3d at p. 1609 & Jensen, supra, 14 Cal.App.4th at p. 965.)

The phraseology used by respondents—even the “bottom performers” phrase—

was not only broad but also unspecific; the words were obviously intended to refer to all

the laid-off Tesla employees, not just to these two appellants.

Which brings us to the second reason why the phraseology cited by appellants—

and quoted above—cannot be considered statements of fact, but only expressions of

opinion: the numerosity of the alleged objects of the statement, i.e., the 26 former

16

employees. As we said in Hofmann: “In addition to the language, the context of a

statement must be examined. [Citation.] The court must ‘look at the nature and full

content of the communication and to the knowledge and understanding of the audience to

whom the publication was directed.’ [Citation.]” (Hofmann, supra, 202 Cal.App.3d at p.

398.)

Here, that context was that the statements concerned not just one or a very few

named persons, as in most of the cases in which the “fact vs. opinion” issue has been

discussed, but—as noted previously—concerned a whole group. In such cases, the law is

clear that there must be an allegedly false factual assertion aimed at one or more specific

individuals. Thus, in Noral, supra, 40 Cal.App.2d at page 352, the court first quoted a

federal appellate court opinion to this effect and then continued: “ ‘The courts have

chosen not to limit freedom of public discussion except to prevent harm occasioned by

defamatory statements reasonably susceptible of special application to a given

individual. [Citation.] [¶] Even where there is a small group involved and the language

fails to indicate affirmatively that all members were involved in the charge, it was held

that ‘defamatory words must refer to some ascertained or ascertainable person, and that

that person must be the particular plaintiff.’ [Citation.] [¶] ‘In every action for

defamation, two things are necessary (1) A defamation apparent from the words

themselves, for no innuendo can alter the sense. (2) Certainty as to the person who is

defamed, for no innuendo can render certain that which is uncertain.’ [Citation.]”

Northern California Federal District Judge Patel relied specifically on Noral in her

opinion in Barger, where she stated: “The Noral court, for example, dismissed a

complaint for defamation . . . [holding] that plaintiffs failed to state a claim for libel

because ‘the publication does not defame any ascertainable person. . . . There is nothing

in the published article that makes a personal application to the plaintiff.’ [Citing Noral.]

[¶] This rule embodies two important public policies. First, where the group referred to

is large, the courts presume that no reasonable reader would take the statements as

literally applying to each individual member. [Citation.] Second, and most importantly,

this limitation on liability safeguards freedom of speech by effecting [¶] ‘a sound

17

compromise between the conflicting interests involved in libel cases. On the one hand is

the societal interest in free press discussions of matters of general concern, and on the

other is the individual interest in reputation. The courts have chosen not to limit freedom

of public discussion except to prevent harm occasioned by defamatory statements

reasonably susceptible of special application to a given individual.’ [Citation.]”

(Barger, supra, 564 F.Supp. at p. 1153, emphasis supplied.)

Missing from appellants’ briefs to us is any argument as to why the generalized

statements regarding Tesla’s 2007-2008 terminations, i.e., the various statements made

by spokesperson Siry or in the January 12 e-mail of Tesla executives Drori and Musk,

were “reasonably susceptible of special application to” the two appellants. Throughout

those briefs, appellants simply assume that phrases such as “bottom performers” were

intended by their authors to apply specifically to them; we see nothing in those briefs or

in the record before us to support that assumption. For example, nowhere in appellants’

arguments is there any indication of what positions were held by some of the other

employees who were laid off at the same time. Were some of them officers? We are not

told. Were some of them specifically designated to be responsible for cost control?

Again, we are not told. For these reasons, we have no problem in concluding that,

especially because none of the allegedly defamatory statements contained any

specification as to whom among the 26 persons they related, they were expressions of

opinion, and not fact. Further, and as noted above, this conclusion is supported by the

inherent breadth and generality of the expressions.

Finally on this subject, as noted in the numerous citations provided above, even

when the allegedly defamatory statements are made concerning one or just a very few

individuals, the vast majority of California authority has found the statements to be

opinions, and not statements of fact. Appellants cite us to very few cases going the other

direction. In one of those few cases, Gill v. Hughes (1991) 227 Cal.App.3d 1299, 1309,

our colleagues in the Fifth District held that a statement made by members of a hospital’s

administrative board that a specific doctor, the plaintiff, was “an incompetent surgeon

and needs more training” stated facts and not just an opinion. We ruled somewhat

18

similarly in Kahn, holding that some of the statements made about the plaintiff, a child

welfare worker, by a private agency providing counseling and guidance to children, were

expressions of opinion and thus not defamatory. (Kahn, supra, 232 Cal.App.3d at pp.

1606-1609.) However, we ruled differently regarding the agency’s statement that the

children being overseen by the plaintiff are “being seriously interfered with by the

incompetence of the worker, Mrs. Marilyn Kahn.” We held that that statement could not

be categorized as “opinion” as a matter of law but, rather, was “reasonably susceptible of

a provably false meaning,” an issue that might need to be determined by a jury. (Id. at p.

1609.)8 Other authorities cited by appellants are similarly distinguishable.9

In summary, after considering the applicable law, the phrases used by respondents,

and the fact that those phrases were used regarding a group of persons and not just the

two appellants, we conclude that, under the “ ‘totality of the circumstances’ test” (see

Baker, supra, 42 Cal.3d at p. 260), the relevant phrases constituted expressions of opinion

and not statements of fact.

8 Except not to be so determined in that case: we subsequently held that the

plaintiff was a “public official” and thus was required to plead a knowing or reckless falsehood to state a cause of action for defamation. In light of her failure to do so, or to request leave to do so, any trial court error in sustaining the demurrer to the defamation allegation was harmless. (Kahn, supra,232 Cal.App.3d at pp. 1610-1615; cf. to the same general effect, Copp, supra, 45 Cal.App.4th at pp. 839-848 [one of several statements concerning the individual plaintiff “could constitute actionable speech” but was privileged].) Also holding that, in marginal circumstances, whether a statement concerning a specific person was one of fact or opinion may be a jury question is Good Government Group of Seal Beach v. Superior Court (1978) 22 Cal.3d 672, 682.

9 For example, appellants rely on Oberkotter v. Woolman (1921) 187 Cal. 500, where the court held that Oberkotter, a school principal, stated a cause of action for defamation based on the alleged statement by Woolman that the school superintendent had described the principal as one of the “weak spots in the public school system.” (Id. at pp. 503-504.) But this decision came decades before the issuance of the many opinions from the United States Supreme Court and our Supreme Court making clear that the First Amendment protects such statements of opinion. Similarly, the statements made about (again, by name) the plaintiff in Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 727-729, were statements of fact involving his alleged dishonesty in his dealings with specific customers of his employer.

19

D. The Stock Option Provisions were Ambiguous.

Appellants’ third cause of action was, as noted, for breach of contract, specifically

the stock option provision in their original employment agreements. Vespremi’s

employment agreement, dated February 1, 2007, provided in relevant part: “Subject to

the approval of Tesla’s Board of Directors, you will be granted a stock option to purchase

an aggregate of 40,000 shares of Tesla’s Common Stock pursuant to Tesla’s Equity

Incentive Plan then in effect. Your stock options will vest commencing upon your first

day of employment (1/4 of the shares vest one year after the Vesting Commencement

Date, and 1/48th of the shares vest monthly thereafter over the next three years.)”

Appellant Glaudell’s May 8, 2007, agreement contained an identical clause,

except his share number was 100,000 shares.

Neither appellant was offered or received any Tesla common stock before their

terminations in December 2007 and January 2008 respectively. Their third cause of

action included, principally, this allegation: “Tesla Motors breached Named Plaintiffs

employment agreements by denying them the option to vest stocks of Tesla Motors they

had purchased during their employment with the company.” The complaint also included

five paragraphs alleging that, after appellants had been hired, Tesla “created an implied-

in-fact contract that modified and/or supplemented the employment agreements of its

employees . . . with regard to the vesting of option to purchase Tesla Motors’ stocks

under the Incentive Plan” and a corresponding “custom and/or practice,” one or both of

which contract (a) “allowed the vesting of stock option of Tesla Motors for an employee

who was terminated after less than a year of service with the company, (b) “was in effect

at the time that the named Plaintiffs were terminated by Tesla Motors,” and (c) was

“based on the language in the employment agreements. . . which provides that stock

options begin to vest at the first day of employment.”10

10 The trial court’s order granting respondents’ demurrer to the TAC did not

address its “implied in fact” or “custom and/or practice” allegations noted above.

20

Respondents’ memorandum of points and authorities in support of their demurrer

to this cause of action (the demurrer itself is not included in the record before us)

summarizes their legal position as follows: “Plaintiffs were at will employees whose

employment could be terminated at any time, for any reason. Plaintiffs acknowledge that

they were terminated by Tesla prior to completing one year of employment at Tesla.

Because the Offer Letters expressly granted Tesla that authority and because the offer

letters unambiguously provided for a one-year vesting cliff, Plaintiffs’ allegation that

Tesla breached the Offer Letters by denying them ‘the option to vest stocks of Tesla

Motors’ is baseless. [¶] As the Offer Letters are not susceptible to any interpretation

under which Plaintiffs could prevail on their claims, Tesla’s demurrer should be sustained

without leave to amend as to Plaintiffs’ third cause of action for breach of their written

employment agreements.”

The trial court apparently agreed with respondents’ position regarding the

“unambiguous” language quoted above as, in sustaining respondents’ demurrer to the

third cause of action of the TAC, it stated that appellants’ “interpretation of the

Employment Agreement language was unreasonable.” In support of this ruling, the trial

court cited, among several other cases, this court’s decision in Hillman v. Leland E.

Burns, Inc. (1989) 209 Cal.App.3d 860, 866, and quoted from it the following: “ ‘When a

contract is reduced to writing, the intention of the parties is to be ascertained from the

writing alone, if possible . . . .’ [Citation.] ‘The language of a contract is to govern its

interpretation, if the language is clear and explicit, and does not involve an absurdity.’ ”11

As our colleagues in Division Three of this court wrote in Badie v. Bank of

America (1998) 67 Cal.App.4th 779, 798-799 (Badie): “When a dispute arises over the

meaning of contract language, the court must decide whether the language is ‘reasonably

11 Although not noted by the trial court in its written orders, those statements in

Hillman were quotations from Civil Code sections 1638 and 1639. And, as we also held in Hillman, “ ‘[t]he determination of whether a written instrument is ambiguous is a question of law. [Citation.] As such, an appellate court independently reviews the instrument to determine whether there is an ambiguity.’ [Citations.]” (Hillman, supra, 209 Cal.App.3d at p. 866.)

21

susceptible’ to the interpretations urged by the parties. [Citation.] ‘ “. . . Whether the

contract is reasonably susceptible to a party’s interpretation can be determined from the

language of the contract itself [citation] or from extrinsic evidence of the parties’ intent

[citation].” ’ [Citations.] [¶] If the contract is capable of more than one reasonable

interpretation, it is ambiguous [citations], and it is the court’s task to determine the

ultimate construction to be placed on the ambiguous language by applying the standard

rules of interpretation in order to give effect to the mutual intention of the parties.

[Citation.] When ambiguities in a standardized contract, like the account agreement

involved here, cannot be dispelled by application of the other rules of contract

interpretation, they are resolved against the drafter. [Citations.] [¶] Interpretation of a

contract is solely a question of law unless the interpretation turns upon the credibility of

extrinsic evidence. [Citations.] Even where extrinsic evidence is admitted to interpret a

contract, unless it is conflicting and requires a determination of credibility, the reviewing

court is not bound by the trial court’s interpretation. [Citation.]” (See also Southern Cal.

Edison Co. v. Superior Court (1995) 37 Cal.App.4th 839, 847-848.)

We disagree with the implicit premise of the trial court that the language quoted

above from the two employment agreements was, as regards the vesting of appellants’

stock options, “clear and explicit.” To the contrary, we agree with appellants’ contention

that there was a latent ambiguity—which, of course, cannot be addressed on demurrer—

in those agreements as to whether the right to purchase and hold the Tesla stock vested

before or after the passage of one year from the effective dates of those agreements. The

ambiguity arises from an apparent inconsistency between the first clause of the relevant

sentence in the employment agreements and the parenthetical clause following it: “Your

stock options will vest commencing upon your first day of employment (1/4 of the shares

vest one year after the Vesting Commencement Date, and 1/48th of the shares vest

monthly thereafter over the next three years).”

To “vest” means “[t]o confer ownership (of property) upon a person” or “[t]o

invest (a person) with the full title to property.” (Black’s Law Dict. (9th ed., 2009).)

Using this—and other similar lay definitions of “vest”—we agree with appellants that

22

there is an apparent inconsistency in the key sentence from the employment agreements

quoted above. The first clause of that sentence states that the stock options “will vest

commencing upon your first day of employment,” but the parenthetical clause following

it seems contradictory in saying that “1/4 of the shares will vest one year after the Vesting

Commencement Date” (the latter phrase presumably referring to the “first day of your

employment”).

Respondents contend that the first 12 words of the critical sentence of the

agreements can be interpreted to “allow pro-rated vesting during the first year of

employment” only if those “words [are] read in isolation,” which they should not be

because “the provision must be read as a whole” and that, when so read, “the provision is

not reasonably susceptible to meaning that shares vest on a pro-rated basis before

completion of the first year of employment.” We disagree; we think there is a latent

ambiguity in this sentence in that the first clause of the key sentence of the employment

agreements is inconsistent with the ensuing parenthetical clause.12

Additionally, this ambiguity is clearly attributable to the drafting of the

employment agreement, a task obviously performed by Tesla. As the Badie court noted,

12 Respondents cite no law to the contrary; the only case they cite involving the

interpretation of a stock option clause, Sedaghatpour v. DoubleClick, Inc. (S.D.N.Y. 2002) 213 F.Supp.2d 367, 373, involved a clause significantly different in wording than that involved here. Nor do respondents argue, as they might, that there is a legal difference between the vesting of a stock option and the vesting of the right of ownership of the shares of stock themselves. They make a vague reference to “cliff” vesting as opposed to pro-rated or “straight” vesting in their brief to us, but neither explain those concepts or cite any explanatory law or treatise on the subject.

On remand, the parties and the trial court might well consider two appellate court cases which may be helpful regarding the critical term “vest” as used in the employment agreements. Both In re Marriage of Harrison (1986) 179 Cal.App.3d 1216, 1224-1225, and In re Marriage of Walker (1989) 216 Cal.App.3d 644, 647-652 (Walker), appear to suggest there may well be a legal distinction between the date a stock option may be exercised and the date the legal right to ownership of the stock vests. For example, the latter case states: “The vesting date is the date the stock purchased pursuant to the option can be received. An option may be exercised, but the stock still subject to forfeiture if the employee is terminated prior to its vesting.” (Walker, supra, at p. 647, fn. 1.)

23

pursuant to Civil Code section 1654 this means that the stock option provision of the

employment agreements “should be interpreted most strongly against the party who

caused the uncertainty to exist,” i.e., respondent Tesla. (See also Cohen v. Five Brooks

Stable (2008) 159 Cal.App.4th 1476, 1486-1487; Victoria v. Superior Court (1985) 40

Cal.3d 734, 739.)

In summary, for the reasons stated above, we believe the trial court erred in

sustaining respondents’ demurrer to the third cause of action because there was a latent

ambiguity in the pertinent clause of the stock option provision in appellants’ employment

agreements.

E. The Trial Court Properly Denied Appellants’ Motion to Amend Their Complaint.

Finally, we address appellants’ argument that the trial court erred in not allowing

them to file another amended complaint.

The law is clear regarding our standard of review of this issue. Pursuant to Code

of Civil Procedure section 473, subdivision (a)(1), a trial court “has wide discretion in

allowing amendment of pleadings and, as a matter of policy, the trial court’s ruling will

be upheld unless a manifest or gross abuse of discretion is shown.” (5 Witkin, Cal.

Procedure (5th ed., 2008) § 1194, p. 625; see also Schifando v. City of Los Angeles,

supra, 31 Cal.4th at p. 1081; Record v. Reason (1999) 73 Cal.App.4th 472, 486-487.)

For two reasons, we find no abuse of discretion in the trial court’s denial of a

further amendment to appellants’ complaint regarding the two defamation causes of

action. In the first place, the TAC was, apparently, appellants’ second attempt to plead

valid defamation claims. The abbreviated record provided by appellants does not contain

the first two editions of their complaint, but from the copy of the Register of Actions

provided in their appendix, we know that the initial complaint was filed in July 2008, and

thereafter amended to add Musk as a defendant.

Before respondents offered a responsive pleading to that complaint pursuant to a

stipulation, a First Amended Complaint (later ordered to be re-titled as a Second

Amended Complaint) was filed in September 2008; respondents demurred to it. A

24

hearing on that demurrer was held on December 22, 2008, and the demurrer sustained

with leave to amend.

One of the bases the trial court relied on in originally sustaining the demurrer to

the two defamation causes of action was that the “allegedly defamatory statements do not

sufficiently identify Plaintiffs so as to be actionable as being ‘of and concerning’ them.”

All of which resulted in the filing of the TAC the following month. In short, appellants

had at least one opportunity to specifically address the legal validity of their defamation

claims before the trial court sustained respondents’ demurrer to their TAC without leave

to amend. And, as discussed above, they failed to do so. We find no abuse of discretion

by the trial court in sustaining respondents’ demurrer to the fourth and fifth causes of

action of the TAC without leave to amend.

Second, appellants are clear that the amendments they would make to the TAC

would involve simply deleting or excluding certain portions of their claims, not making

any substantive changes to them much less adding any new or different factual

allegations. For example, in both of their briefs to us, they say that one of the changes

they propose making would be to “limit the defamatory statements to only those

statements which this Court deems are viewed as statements of fact.” (Emphasis

supplied.) We reject appellants’ suggestion that they are entitled to rely on a yet-to-be-

issued opinion of this court as the basis for a further amendment of the defamation causes

of action.

With regard to the third cause of action for breach of contract, as to which we are

reversing the trial court, we believe appellants should be given another opportunity to

amend that cause of action.

25

IV. DISPOSITION

The judgment appealed from is affirmed regarding the fourth and fifth causes of

action, but vacated and reversed regarding the third cause of action for breach of contract.

The matter is remanded to the trial court for further proceedings concerning that cause of

action. The parties are to bear their own costs on appeal.

_________________________ Haerle, J. We concur: _________________________ Kline, P.J. _________________________ Lambden, J.