The Nethercutt Collection v. Regalia
Filed March 19, 2009,
Second District,
Division Five
Cite as 2009 SOS 1754-Torts-

Employee’s Wrongful Termination Claim Denied, Slander Award Reversed

Michael Regalia worked as a senior executive for Jack Nethercutt’s private automobile collection known as the Merle Norman Classic Beauty Collection and as president of its automobile museum in Sylmar. Nethercutt is the founder of the Merle Norman Cosmetics Company.

In 1995, Nethercutt established the Nethercutt Collection as a non-profit foundation funded by his estate. The foundation operates the automobile museum, a research library and archival materials and has restoration facilities. The museum features over 250 American and European automobiles, with a collection dating from 1898 to 1997.

When Nethercutt was hospitalized in August 2004, his son, Jack Nethercutt II assumed control of the foundation, with approval from the elder Nethercutt.

Nethercutt II claimed that when his father died in December 2004, Regalia demanded a 10 percent “finder’s fee” or “commission”, for his effort in locating and acquiring a rare 1937 Talbot-Lago Type 150-C-SS/ Sport Coupe for the museum. The car is worth $ 2.3 million, and one of the only 14 remaining car type in the world.

In addition, Regalia also believed that a reward for him is justified as he claimed he had kept the museum under budget every year.

Subsequently, Regalia was terminated from work.

Nethercutt II told employees that Regalia had been fired because of the following reasons:

• he demanded a “finder’s fee”
  
• some employees threatened to leave if Regalia remained employed

Moreover, Betty Locke, the Talbot-Lago donor, reiterated that Nethercutt told her the same reasons.

As a result, Regalia sued the museum for wrongful termination in violation of public policy and against both the museum and Nethercutt for slander or defamation.

After trial, the jury denied Regalia’s wrongful termination claim but upheld the slander charges against both the museum and Nethercutt. Although no actual proof of economic damages were found, the jury awarded Regalia $ 750,000 for harm to his reputation.

However, during appeal, the Second District court of appeal reversed the damage award. According to the court, it is the job of the court to decide if the if a statement is slanderous “per se” or if proof of damages is required (called slander per quod).

California Civil Code defines slander “per se” as “an orally uttered false and unprivileged statement about a person who accuses him of a crime, carrying infectious disease, imputes to him impotence or lack of chastity, or directly injures him in respect to his profession or business”.

The court held that although the alleged statements did not “directly disparage” Regalia, they could have actually damaged his professional reputation and therefore should have been presented under a slander per quod theory.

On the other hand, the court stated that the “unwillingness of employees to work with a person would not necessarily reflect poorly on that person” as there could be other reasons such as differences in work ethic or legitimate business policies that may be opposed to a person’s attributes.

The Second District court of Appeal therefore, concluded that a retrial was unnecessary and directed the trial court to enter judgment in favor of Nethercutt and the museum.