Filed 12/5/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

ITV GURNEY HOLDING INC. et al.,

Plaintiffs and Appellants,

v.

SCOTT GURNEY et al.,

Defendants and Respondents.

 B281694

 (consolidated w/B283476)

 (Los Angeles County

 Super. Ct. No. BC 643237)

APPEAL from an order of the Superior Court of 

Los Angeles County, Susan Bryant-Deason, Judge. Affirmed in 

part and reversed in part.

____________________________

Munger, Tolles & Olson, Fred A. Rowley, Jr., Mark R. 

Yohalem, John L. Schwab, Nicholas S. Dufau; Hogan Lovells US, 

Paul B. Salvaty, Megan Dixon, Poopak Nourafchan and Laura M. 

Groen for Plaintiffs and Appellants. 

Kendall Brill & Kelly, Philip M. Kelly, Nicholas F. Daum;

White & Case, Bryan A. Merryman; Lavely & Singer, and 

Michael E. Weinstein for Defendants and Respondents.

____________________________
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Plaintiffs and appellants ITV Gurney Holding Inc. (ITV)

and Gurney Productions, LLC (the Company) challenge the 

trial court’s grant of a preliminary injunction in favor of 

defendants and respondents Scott Gurney and Deirdre Gurney

(the Gurneys), and Little Win, LLC. The Gurneys are the 

minority owners of the Company and formerly served as its 

chief executive officers (CEO’s), pursuant to an employment 

agreement. The Company fired the Gurneys as CEO’s and 

removed them from managing the day-to-day operations of 

the Company. The Gurneys do not challenge the Company’s 

right to fire them as CEO’s. Rather, they contend that under 

the operating agreement that governs the Company, they could 

not be removed from managing its day-to-day operations. 

Plaintiffs contend the operating agreement gave the Company, 

through its board of managers, the ultimate authority to manage

the Company, and thus permitted the board to remove the 

Gurneys as managers of the day-to-day operations. We agree 

with plaintiffs and reverse the trial court’s order to the extent 

that it reinstated the Gurneys to their positions managing the

day-to-day operations of the Company. The Gurneys continue as 

members of the Company’s board of managers, and we affirm the 

portion of the preliminary injunction barring the Company from 

impinging on their rights as board members. 

FACTS AND PROCEEDINGS BELOW

The Gurneys have been producing reality-television 

programming since 2005. Their greatest success was the 

program Duck Dynasty.

In 2012, the Gurneys agreed to sell 61.5 percent of their 

production business to ITV, an affiliate of the British media 

company ITV plc. As part of the transaction, the parties signed 

two contracts relevant to this appeal: an operating agreement, 

which defined the structure of the Company and the terms

under which the owners could buy and sell their stakes, and 
3

employment agreements, which established the terms of the 

Gurneys’ employment as joint CEO’s.

The operating agreement provided for a board of managers 

composed of five members, three of whom were to be appointed 

by ITV, and two by the Gurneys’ shell company, Little Win, LLC. 

The Gurneys themselves were designated as Little Win, LLC’s 

representatives on the board. In most instances, the operating 

agreement allowed the board to decide matters by majority vote, 

but several situations required unanimity. In particular, 

unanimous approval was required for “[o]perating the Company 

and its [s]ubsidiaries other than as a television production 

company in the ordinary course of business consistent with past 

practice of the Gurneys, the Company’s five year forecasts and 

the [b]udget; except that, without the approval of all [m]anagers, 

the Gurneys may [among other powers]: [¶] . . . manage the 

day-to-day business and affairs of the Company.”

The operating agreement also provided for specific time 

frames within which ITV was entitled to buy out the Gurneys’ 

ownership interest, and the Gurneys were entitled to sell their 

interest to ITV. ITV’s right to “call,” or purchase, the Gurneys’ 

interest, was to run for 90 days after the Company’s auditor 

delivered the audited financial statements for the year 2015. 

In addition, if “the Company terminates the employment of 

either Gurney with [g]ood [c]ause (as such term is defined in 

such Gurney’s [e]mployment [a]greement with the Company) . . . 

before the end of fiscal year 2015,” ITV would be entitled to 

purchase the Gurneys’ interest on similar terms. If ITV did 

not exercise its call rights, the Gurneys were entitled to “put,”

or sell, their stake to ITV at any time after the auditor delivered 

the financial statements for 2017. The operating agreement 

established the price for the Gurneys’ ownership interest in a put

or call as a multiple of the Company’s average EBITDA (earnings 

before interest, taxes, depreciation, and amortization) for the 

preceding three years.
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The Gurneys also signed employment agreements to 

serve as co-CEO’s of the Company. These agreements required 

the Gurneys to devote their “full business time and efforts to

the performance of [their] duties for [the] Company” for the 

five-year period ending December 31, 2017, with annual renewals 

thereafter at the option of both the Gurneys and ITV. For their 

work, the Gurneys were each to receive $500,000 per year. 

A majority of the Company’s board could vote to remove the 

Gurneys for good cause if, among other reasons, the Gurneys 

“willfully engage[d] in any activity that is in direct conflict with 

[their] duties and responsibilities” under the agreements, or 

“breach[ed their] fiduciary duty to the Company or any affiliated 

entity, including acts of self-dealing (whether or not for personal 

profit).” The Company was also entitled to terminate the 

Gurneys’ employment without cause at any time after the 

contract had been in force for three years, that is, after 2015.

In the employment agreements, the Gurneys agreed not to 

“engage directly or indirectly in any activity that competes with 

the business activities of the Company. The business activities 

of the Company are defined as the development, production, 

promotion, and marketing of reality-based programs whether for 

television, internet or other broadcast, cable, electronic or digital 

media.” The Gurneys also agreed that, while they were employed

and for one year afterward, they would “not interfere with, 

impair, disrupt or damage [the] Company’s business by soliciting, 

encouraging or recruiting any of [the] Company’s employees or 

causing others to solicit or encourage any of [the] Company’s 

employees to discontinue their employment with [the] Company.”

In the summer of 2016, the Gurneys learned that ITV’s

parent company was pressuring its United States-based 

subsidiaries and affiliates, including the Company, to reduce 

expenses. Around July 2016, the Gurneys formed a new 

television production company called Snake River Productions. 

According to the Gurneys, their intention was to produce 
5

programming other than reality shows, and to have an 

alternative source of employment in case ITV elected not to 

renew their contracts at the Company. At around the same time, 

the Gurneys were attempting, without success, to sell a second 

season of a reality program called Sons of Winter to a network for 

broadcast. The Discovery Channel had aired the first season of 

the program but elected not to renew it. At a September 2016 

board meeting, the Gurneys informed the other board members 

that they had sold the rights to Sons of Winter for $3.6 million. 

When asked who the buyer was, Deirdre Gurney claimed she 

could not remember the company’s name, but when Scott 

reminded her, she acknowledged that it was Snake River

Productions. Neither of the Gurneys told the board that they 

owned Snake River Productions.

Plaintiffs allege that the purpose of Snake River 

Productions’ purchase of Sons of Winter was financial 

manipulation. They claim that the sale of Sons of Winter was an 

attempt by the Gurneys to increase the Company’s EBITDA, and 

thus to increase the price at which the Gurneys would be entitled 

to sell their stake in the Company to ITV under the terms of the 

operating agreement. A witness for the plaintiffs calculated that 

the sale of Sons of Winter, if considered in calculating EBITDA, 

would increase the potential sale price of the Gurneys’ ownership 

interest by approximately $3.71 million. In addition, because 

the Gurneys and their holding company owned 38.5 percent

of the Company, they would be entitled to a distribution of 

approximately $1.39 million of the price Snake River Productions 

had paid for the rights to Sons of Winter. Thus, by buying Sons of 

Winter for $3.6 million, the Gurneys could potentially obtain as 

much as $5.1 million for themselves, even if Sons of Winter had 

no value.

Around the same time, the Gurneys decided to fire two 

of the employees on the Company’s development team with the 

expectation of rehiring them to work at Snake River Productions.
6

Approximately one week after the September board 

meeting, the Company’s chief financial officer (CFO), who under 

the terms of the operating agreement was appointed by ITV, 

informed ITV that the Gurneys owned Snake River Productions. 

The CFO also told ITV about other financial irregularities he 

perceived in the Gurneys’ management of the Company, 

including the payment of a $350,000 advance to the Gurneys that 

the CFO believed was improper.

At a board meeting in December 2016, the ITV-appointed

board members—who constituted a majority of the board—voted 

to place the Gurneys on a paid leave of absence while the charges 

against them were being investigated. A few days later, the same 

board members voted to terminate the Gurneys’ employment for 

cause, alleging that the Gurneys had violated their duty of 

loyalty to the Company by concealing the facts surrounding the 

sale of Sons of Winter, along with engaging in other misconduct. 

The next day, ITV and the Company filed suit against defendants 

and thereafter defendants filed a cross-complaint against 

the Company. ITV also attempted to exercise its call rights and 

purchase the Gurneys’ share of the Company, and the Gurneys 

attempted to exercise their put rights and sell their share of the 

Company to ITV. The parties, however, did not consummate a 

sale because they could not agree on a price.

On February 1, 2017, the Gurneys filed a motion for a 

preliminary injunction, requesting that the court restrain 

plaintiffs from breaching the operating agreement. In particular, 

the Gurneys asked the court to bar ITV from exercising its call 

rights, and to order the Company to restore the Gurneys to the 

day-to-day management of the Company.

After a hearing, the trial court issued a preliminary 

injunction granting both requests. The trial court found that 

ITV was unlikely to succeed in its claim regarding its call rights 

because, by the time ITV elected to exercise those rights, those 

rights had expired. Under the terms of the operating agreement, 
7

the period in which ITV was entitled to buy out the Gurneys’ 

shares ran 90 days from the end of the 2015 fiscal year, but ITV 

did not notify the Gurneys of its intent to purchase the shares

until February 2017. The injunction also required that the 

Company restore the Gurneys to their positions as day-to-day 

managers of the Company.

DISCUSSION

Plaintiffs contend that the trial court abused its discretion 

by granting the preliminary injunction. They argue that because 

the employment agreement allowed the board to terminate the 

Gurneys’ employment with or without cause at any time, it is 

irrelevant for purposes of a preliminary injunction whether or not 

good cause supported the Gurneys’ termination. Plaintiffs also 

argue that the operating agreement does not provide the Gurneys 

an independent basis for exercising day-to-day authority over the 

Company.

We agree with plaintiffs’ position regarding the 

interpretation of the operating agreement and employment 

agreements. On this basis, we conclude that the trial court 

abused its discretion by granting a preliminary injunction 

reinstating the Gurneys to management positions. Because the 

interpretation of the contracts is decisive in this case, we need 

not and do not reach a determination of the other issues the 

parties have raised in their briefs, including the questions of 

whether the Gurneys violated their fiduciary duties or otherwise 

breached their contracts with the Company, and whether 

the trial court erred by sustaining a number of the Gurneys’ 

objections to plaintiffs’ evidence.1

Although we reverse the trial court’s order restoring the 

Gurneys to day-to-day management of the Company, we leave in 

 

1 Defendants filed a motion to strike portions of plaintiffs’ 

reply brief, and plaintiffs filed a motion to strike portions of the 

defendants’ motion. We deny both motions.
8

place the other portions of the preliminary injunction. 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. It also includes the portion of the injunction barring the 

Company from violating the Gurneys’ rights as members of 

the board of managers, including their right to vote on matters 

requiring unanimous board approval. Those rights belong to the 

Gurneys so long as they and their shell company own at least

10 percent of the Company, regardless of whether they continue 

to be employed as CEO’s.

A. Standards of Review of a Preliminary 

Injunction

Pursuant to longstanding Supreme Court case law, “trial 

courts should evaluate two interrelated factors when deciding 

whether or not to issue a preliminary injunction. The first is the 

likelihood that the plaintiff will prevail on the merits at trial.

The second is the interim harm that the plaintiff is likely to

sustain if the injunction were denied as compared to the harm 

that the defendant is likely to suffer if the preliminary injunction

were issued.” (IT Corp. v. County of Imperial (1983) 35 Cal.3d 

63, 69–70.) We review a trial court’s application of these factors 

for abuse of discretion. (Oiye v. Fox (2012) 211 Cal.App.4th 

1036, 1047.) 

“Notwithstanding the applicability of the abuse of 

discretion standard of review, the specific determinations 

underlying the superior court’s decision are subject to appellate 

scrutiny under the standard of review appropriate to that type 

of determination. [Citation.] For instance, the superior court’s 

express and implied findings of fact are accepted by appellate 

courts if supported by substantial evidence, and the superior 

court’s conclusions on issues of pure law are subject to 

independent review.” (Smith v. Adventist Health System/West

(2010) 182 Cal.App.4th 729, 739.) Because this case involves only
9

the interpretation of contracts, which is a question of pure law, 

our review is de novo. (See Taylor v. Nu Digital Marketing, Inc.

(2016) 245 Cal.App.4th 283, 288.)

Injunctions may be either mandatory, in that they compel 

a party to take an action, or prohibitory, in that they attempt 

to maintain the status quo by restraining a party from taking 

action. (Oiye v. Fox, supra, 211 Cal.App.4th at p. 1048.) 

“ ‘ “ ‘A preliminary mandatory injunction is rarely granted, 

and is subject to stricter review on appeal.’ ” ’ ” (Ibid.) In this 

case, plaintiffs contend that the preliminary injunction was 

mandatory; the Gurneys contend that it was prohibitory. 

Because our decision in this case would be the same regardless 

of which standard of review applied, we need not resolve this 

dispute.

B. The Operating and Employment Agreements

The key question in this case is whether the Gurneys 

retained the right, despite their termination from employment 

as CEO’s, to continue managing the Company’s day-to-day 

operations. Our answer to that question is no. The operating 

agreement reserves to the board—by majority, and in some 

cases unanimous, vote—the authority to manage the Company’s 

affairs. In context, the language in the operating agreement 

authorizing the Gurneys to manage the Company without 

the approval of the other board members serves as an 

accommodation to the Gurneys to exercise authority as CEO’s, 

not as an irrevocable grant to continue managing the Company 

indefinitely.
10

1. Termination Under the Employment 

Agreements

Under the terms of the employment agreements, the 

Company was entitled to terminate the Gurneys’ employment 

at any time for good cause. In addition, the employment 

agreements provided that “[t]he Company may terminate 

[the Gurneys’] employment without [g]ood [c]ause at any time 

after the third anniversary of the date of this [a]greement on

[30] . . . days’ advance written notice.” The board’s decision to 

fire the Gurneys occurred in December 2016, almost four years 

after the employment agreements were signed. Consequently, 

we agree with plaintiffs’ contention that the employment 

agreements provide no basis for a preliminary injunction. (In 

any case, the Gurneys do not so contend.) Even if the Gurneys 

are correct that there was no good cause for their firing, the 

only difference between a termination with or without cause is 

whether the Gurneys would be entitled to 30 days’ notice before 

their termination.

2. The Gurneys’ Rights Under the Operating 

Agreement

Our conclusion regarding the employment agreements 

is insufficient to decide this case, however. The operating 

agreement includes a provision stating that, “without the 

approval of all [m]anagers, the Gurneys may [among other 

powers]: [¶] . . . manage the day-to-day business and affairs 

of the Company consistent with past practice of the Gurneys 

(except as otherwise restricted in this [a]greement).” The 

Gurneys contend that this provision is a blanket grant of 

authority to control the operations of the Company, regardless 

of the wishes of the majority owners, regardless of whether or 

not the Gurneys continued to be employed under the employment 

agreements, and thus, apparently, regardless of whether there 

is cause for firing them. We disagree. The Gurneys misinterpret
11

the language of the operating agreement itself and its connection 

with the Gurneys’ employment agreements. 

The provision regarding the management of day-to-day 

operations must be understood in the context of the operating 

agreement as a whole. (American Alternative Ins. Corp. v. 

Superior Court (2006) 135 Cal.App.4th 1239, 1245 [“We consider 

the contract as a whole and interpret the language in context, 

rather than interpret a provision in isolation.”]; Civ. Code, 

§ 1641.) In this case, the relevant language is found in the 

section describing the circumstances in which the board may 

make decisions by majority or unanimous vote. The operating 

agreement provides that “[a]ll actions by the [b]oard . . . shall 

require the affirmative vote of a majority of the [m]anagers, 

except for such actions as to which a greater than majority vote 

may be required pursuant to the provisions of the [a]ct or this

[a]greement.”

The operating agreement then goes on to list a number 

of exceptions for which unanimous approval is required. The 

first of these exceptions is for any action involving “[o]perating 

the Company and its [s]ubsidiaries other than as a television 

production company in the ordinary course of business consistent 

with past practice of the Gurneys, the Company’s five[-]year 

forecasts and the [b]udget.” In other words, the Company 

may not deviate from its prior way of doing business without

unanimous board approval. The same section of the operating 

agreement then continues: “except that, without the approval of 

all [m]anagers, the Gurneys may: 

(i) manage the day-to-day business and affairs of the 

Company consistent with past practice of the Gurneys (except as 

otherwise restricted in this [a]greement);

(ii) hire and fire employees other than the chief financial 

officer;

(iii) decide which productions are sold, to whom, and 

upon what terms . . . ;
12

(iv) spend up to $500,000 on development in [f]iscal 

[p]eriod 2014 and each [f]iscal [p]eriod forward;

(v) introduce new business streams to the Company, 

including merchandising and music rights;

(vi) utilize the Company’s resources to maximize profits;

(vii) deploy employees of the Company in their sole 

discretion”; along with a few other similar functions.

Thus, in general, the board may make decisions by majority 

vote, with the exception that some decisions require unanimity. 

The Gurneys’ authority over the day-to-day operations of the 

Company is an exception to the exception. It describes instances 

in which the Gurneys may operate autonomously. Within the 

operating agreement these exceptions serve a clear role: They 

relieve the Gurneys, when acting in their role as joint CEO’s of 

the Company, from needing to seek the approval of the other 

board members for every decision that might represent a 

departure in some small way from their prior course of business. 

Presumably, neither the Gurneys nor the other members of 

the board wished to become bogged down in constant votes over 

minor matters. 

The exceptions to the exception did not grant the Gurneys 

lifetime jobs as managers of the Company. If the Gurneys were 

removed as CEO’s, these exceptions would no longer have any 

practical effect. At that point, the Gurneys would no longer 

be operating the Company, and so they would no longer need 

an exemption from the unanimity requirement to perform the 

specified job functions. 
13

3. The Operating Agreement Interpreted 

in Broader Context

As we have seen, the operating agreement, even when 

interpreted on its own, does not grant the Gurneys authority 

to manage the Company’s day-to-day operations indefinitely. 

If there could be any doubt about the Gurneys’ rights under 

the operating agreement, it is dispelled when the operating 

agreement is considered in light of the employment agreements. 

The Gurneys signed their employment agreements on the same 

day that they signed the operating agreement, and the operating 

agreement explicitly refers to the termination provisions of the 

employment agreements. Thus, the section of the operating 

agreement describing actions that require unanimous board 

approval states that unanimity is required for “[f]iring any 

senior executive, other than the Gurneys (whose employment 

may be terminated in accordance with their [e]mployment 

[a]greements).”2

The employment agreements described in detail the 

circumstances under which the Gurneys’ employment could be 

terminated. In addition to setting out time frames during which 

the Gurneys could be terminated with or without cause, the 

employment agreements explained exactly what would constitute 

good cause. They also spelled out the procedure the board must 

follow, including allowing the Gurneys an opportunity to respond 

to the evidence against them. It would be unimaginable for 

ITV and the Gurneys to go to this much trouble to describe 

the procedures surrounding the Gurneys’ termination, if 

they intended that the Gurneys would continue to “manage the 

day-to-day business and affairs of the Company,” “hire and fire 

 

2 This reference in the operating agreement to the 

termination of the Gurneys’ employment shows that it is proper 

to interpret the operating agreement in light of the employment 

agreements in spite of the integration clause in the operating 

agreement.
14

employees,” and exercise other functions ordinarily reserved for 

CEO’s, even after they were removed from those positions.

Furthermore, the operating agreement must be interpreted 

in light of common understandings in corporate law. Although 

the Company was established as a limited liability company 

rather than as a corporation, we interpret the establishment 

of a formal board as a choice by the Company to organize itself 

according to the ordinary rules of a board of directors. (See

Friedman et al., Cal. Practice Guide: Corporations (The Rutter 

Group 2017) ¶ 2:36.18, p. 2-16.) Ordinarily, a majority 

shareholder who has the authority to appoint a majority of 

the board of directors may make decisions despite the objection 

of a minority shareholder. If the Gurneys’ interpretation were 

correct, that rule would be flipped on its head, with essentially 

no recourse for the majority to assert its authority. Under 

their interpretation, the Gurneys could never be removed from 

managing the Company, regardless of any bad behavior on their 

part or the terms of their employment. Even if the Gurneys 

had already breached their duty of loyalty by entering into a 

self-dealing transaction to benefit themselves at the expense of 

the Company and ITV, the remaining board members would have 

no means of preventing the Gurneys from continuing indefinitely

to operate the Company, except by dissolving the Company.

If the parties intended the operating agreement to 

grant the Gurneys, as minority shareholders, this much 

control regardless of the wishes of the majority shareholder, 

we would expect to find such authority granted prominently and 

unequivocally in the text of the document. Instead, the language 

that the Gurneys rely on appears as an exception to a rule 

requiring unanimous approval of board actions.

Our conclusion that the operating agreement does not 

give the Gurneys this unchecked authority does not render 

the Gurneys powerless. Although the Gurneys lost the right

to manage the day-to-day operations of the Company when the 
15

majority of the board voted to remove them as CEO’s, they 

retained their rights as board members. This included the ability 

to veto proposed actions requiring unanimous board approval.

Furthermore, as board members, the Gurneys retained

the right to visit and inspect the Company’s properties, books, 

and records, and to speak with the Company’s officers regarding 

the Company’s affairs, finances, and accounts. We perceive no

error in the trial court’s grant of a preliminary injunction in favor 

of the Gurneys with respect to these matters.

The trial court’s order granting the injunction depended 

on its interpretation of the operating agreement as granting 

the Gurneys authority to manage the day-to-day affairs of the 

Company regardless of whether they continued to be employed 

as CEO’s. Because the trial court erred in its interpretation of a 

question of law, its grant of the injunction constituted an abuse 

of discretion, and we must reverse.
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DISPOSITION

We reverse the order granting the preliminary injunction 

to the extent that the injunction reinstates the Gurneys to 

exercise the functions described in section 5.7(a)(i) - (ix) of the 

operating agreement, including the day-to-day management 

of the Company. In all other respects, the trial court’s order 

granting the preliminary injunction is affirmed. Appellants are 

awarded their costs on appeal.

CERTIFIED FOR PUBLICATION.

ROTHSCHILD, P. J.

We concur:

JOHNSON, J.

LUI, J.