Supreme Court of California Justia
Docket No. S100136
Korea Supply Co. v. Lockheed Martin Corp.

Filed 3/3/03



IN THE SUPREME COURT OF CALIFORNIA



KOREA SUPPLY COMPANY,

Plaintiff and Appellant,

S100136

v.

Ct.App. 2/4 B136410

LOCKHEED MARTIN CORPORATION )
et. al,

Los Angeles County

Defendants and Respondents. )

Super. Ct. No. BC 209893



This case addresses what claims and remedies may be pursued by a plaintiff

who alleges a lost business opportunity due to the unfair practices of a competitor.

The Republic of Korea wished to purchase military equipment known as synthetic

aperture radar (SAR) systems and solicited competing bids from manufacturers,

including Loral Corporation (Loral) and MacDonald, Dettwiler, and Associates

Ltd. (MacDonald Dettwiler). Plaintiff Korea Supply Company (KSC) represented

MacDonald Dettwiler in the negotiations for the contract and stood to receive a

commission of over $30 million if MacDonald Dettwiler’s bid was accepted.

Ultimately, the contract was awarded to Loral (now Lockheed Martin Tactical

Systems, Inc.). KSC contends that even though MacDonald Dettwiler’s bid was

lower and its equipment superior, it was not awarded the contract because Loral

Corporation and its agent had offered bribes and sexual favors to key Korean

officials. KSC instituted the present action asserting claims under both

1


California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.) and the

tort of interference with prospective economic advantage.

We granted review to decide two issues. First, we address whether

disgorgement of profits allegedly obtained by means of an unfair business practice

is an authorized remedy under the UCL where these profits are neither money

taken from a plaintiff nor funds in which the plaintiff has an ownership interest.

We conclude that disgorgement of such profits is not an authorized remedy in an

individual action under the UCL. Accordingly, we reverse the judgment of the

Court of Appeal on this issue.

Second, we address whether, to state a claim for interference with

prospective economic advantage, a plaintiff must allege that the defendant

specifically intended to interfere with the plaintiff’s prospective economic

advantage. We conclude that a plaintiff need not plead that the defendant acted

with the specific intent to interfere with the plaintiff’s business expectancy in

order to state a claim for this tort. We affirm the judgment of the Court of Appeal

on this issue.

I.

“Because ‘[t]his case comes to us after the sustaining of a general demurrer

. . . , we accept as true all the material allegations of the complaint.’ ” (Charles J.

Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, 807, quoting

Shoemaker v. Myers (1990) 52 Cal.3d 1, 7.)

Plaintiff KSC is a corporation engaged in the business of representing

manufacturers of military equipment in transactions with the Republic of Korea.

In the mid-1990’s, the Republic of Korea solicited bids for a SAR system for use

by its military. KSC represented MacDonald Dettwiler, a Canadian company, in

its bid to obtain the contract award. KSC expected a commission of 15 percent of

2

the contract price, or over $30 million, if MacDonald Dettwiler were awarded the

contract.

In June 1996, the Korean Ministry of Defense announced that Loral,1 an

American competitor of the Canadian company MacDonald Dettwiler, was

awarded the contract, despite the fact that MacDonald Dettwiler’s bid was about

$50 million lower and that the project management office of the Korean Defense

Intelligence Command had determined that MacDonald Dettwiler’s equipment

was far superior to Loral’s system. The Ministry of Defense explained that the

decision to award Loral the contract was based on a suggestion that the United

States government would not be favorably disposed to share intelligence

information with the Republic of Korea if the latter selected a Canadian supplier.

Beginning in October 1998, major news publications in the Republic of

Korea revealed that an internal investigation had established that the SAR contract

was awarded to Loral as a result of bribes and sexual favors, rather than pressure

from the United States government. Loral’s agent for the procurement of the SAR

contract, defendant Linda Kim, had bribed two Korean military officers. In

addition, Ms. Kim had extended bribes and sexual favors to the Minister of

National Defense, the ultimate decision maker with respect to the award of the

SAR contract. Ms. Kim reportedly received approximately $10 million in

commission from Loral, an amount that exceeded the maximum established by the

Foreign Corrupt Practices Act (15 U.S.C. § 78dd-2) and foreign military sales

policies and regulations. As a result of the internal investigation by the Republic


1

In 1996, Loral changed its name to Lockheed Martin Tactical Systems,

Inc., and became a subsidiary of Lockheed Martin Corporation, both of which are
defendants in the present case. These defendants will collectively be referred to as
Lockheed Martin, unless otherwise indicated.

3

of Korea, several persons were imprisoned, including high-ranking Korean

military officers. Ms. Kim herself was indicted in absentia; she avoided

imprisonment because she resides in the United States and refuses to travel to the

Republic of Korea.

Upon learning of these alleged reasons for the award of the SAR contract to

Loral, KSC commenced the present action on May 5, 1999. In its first amended

complaint, KSC alleged that defendants2 “conspired, knowingly and intentionally

to induce and did knowingly and intentionally induce the Republic of Korea,

through its authorized agencies, to award the SAR contract to Loral instead of

MacDonald Dettwiler by employing wrongful means including bribes and sexual

favors.” As a direct and proximate result of defendants’ actions, the Republic of

Korea awarded the contract to Loral; but for the bribes and sexual favors, this

contract would have been awarded to MacDonald Dettwiler. “In securing the

contract by wrongful means, Loral acted with full knowledge of the commission

relationship between plaintiff and MacDonald Dettwiler and knowing that its

interference with the award of the contract . . . would cause plaintiff severe loss.”

“Defendant Lockheed Martin has been the beneficiary of the illegal Loral-Kim

conduct and to that extent has been unjustly enriched.”

The first amended complaint asserts three causes of action: (1) conspiracy

to interfere with prospective economic advantage, (2) intentional interference with

prospective economic advantage, and (3) unfair competition pursuant to Business

and Professions Code section 17200.3 For its unfair competition claim, KSC

2

Lockheed Martin Corporation, Lockheed Martin Tactical Systems, Inc.,

and Linda Kim were named as defendants in the present action.
3

As in Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116,

121 (Kraus), we refer to Business and Professions Code section 17200 et seq., the
unfair competition law, as the UCL, and the claim as one for unfair competition.

4

sought disgorgement to it of the profits realized by Lockheed Martin on the sale of

the SAR to Korea. For the tort claims, KSC sought damages for the loss of its

expected compensation from MacDonald Dettwiler.

Lockheed Martin, joined by Ms. Kim, generally demurred to all counts.

The trial court sustained the demurrer without leave to amend, finding that

plaintiff’s complaint did not state facts sufficient to constitute a cause of action

under California law. Judgment was entered dismissing the action on September

7, 1999. After the trial court subsequently denied KSC’s motion for

reconsideration, KSC filed its notice of appeal. The Court of Appeal reversed the

trial court’s judgment in full, finding that plaintiff had sufficiently stated causes of

action for unfair competition and for intentional interference with prospective

economic advantage.

Lockheed Martin sought review in this court of two bases of the Court of

Appeal’s decision: first, its holding that disgorgement of profits is an available

remedy under the UCL even where the disgorgement sought does not represent

restitution of money or property in which plaintiff has an ownership interest; and

second, its holding that the tort of intentional interference with prospective

economic advantage does not require plaintiff to plead that defendant acted with

the specific intent to interfere with plaintiff’s business expectancy. We granted

review on both issues.

II.

We first address plaintiff’s unfair competition claim. Business and

Professions Code section 17200 et seq.4 prohibits unfair competition, including


4

Section 17200 states: “As used in this chapter, unfair competition shall

mean and include any unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising and any act prohibited by

(Footnote continued on next page.)

5

unlawful, unfair, and fraudulent business acts. The UCL covers a wide range of

conduct. It embraces “anything that can properly be called a business practice and

that at the same time is forbidden by law. [Citations.]” (Cel-Tech

Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th

163, 180 (Cel-Tech), internal quotations omitted.) Standing to sue under the UCL

is expansive as well. Unfair competition actions can be brought by a public

prosecutor or “by any person acting for the interests of itself, its members or the

general public.” (§ 17204.)

Section 17200 “borrows” violations from other laws by making them

independently actionable as unfair competitive practices. (Cel-Tech, supra, 20

Cal.4th at p. 180.) In addition, under section 17200, “a practice may be deemed

unfair even if not specifically proscribed by some other law.” (Cel-Tech, at p.

180.) In the present case, KSC’s third cause of action, for unfair competition,

“borrowed” from the federal Foreign Corrupt Practices Act, which prohibits,

among other things, bribing a foreign government official for the purpose of

influencing any act or decision in his or her official capacity and in violation of a

lawful duty, or for the purpose of inducing the use of official influence to obtain or

retain business. (See 15 U.S.C. § 78dd-2(a)(1)(A), (B).) The Court of Appeal

determined that a claim under the UCL may be predicated on a violation of this

act.5


(Footnote continued from previous page.)

Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the
Business and Professions Code.” All subsequent statutory citations are to the
Business and Professions Code, unless otherwise noted.
5

The parties did not challenge this ruling and so we accept, without

deciding, that a claim under the UCL may be predicted on a violation of the
Foreign Corrupt Practices Act.

6

While the scope of conduct covered by the UCL is broad, its remedies are

limited. (Cel-Tech, supra, 20 Cal.4th at p. 180.) A UCL action is equitable in

nature; damages cannot be recovered. (Bank of the West v. Superior Court (1992)

2 Cal.4th 1254, 1266 (Bank of the West).) Civil penalties may be assessed in

public unfair competition actions, but the law contains no criminal provisions. (§

17206.) We have stated that under the UCL, “[p]revailing plaintiffs are generally

limited to injunctive relief and restitution.” (Cel-Tech, supra, 20 Cal.4th at p.

179.) The question raised by this case is whether disgorgement of profits that is

not restitutionary in nature is an available remedy for an individual private

plaintiff under the UCL.

A.

The Court of Appeal in this case held that plaintiff can recover

disgorgement of profits earned by defendants as a result of their allegedly unfair

practices, even where the money sought to be disgorged was not taken from

plaintiff and plaintiff did not have an ownership interest in the money. This

holding was based on language taken from our recent decision in Kraus, supra, 23

Cal.4th 116. As we explain, the Court of Appeal’s reliance on this language was

mistaken.

In Kraus, we held that disgorgement of unfairly obtained profits into a fluid

recovery fund is not an available remedy in a representative action brought under

the UCL. (Kraus, supra, 23 Cal.4th at p. 137.) We began by describing the

remedies that are clearly available to a plaintiff under the UCL: “Through the

UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or

unlawful practices.” (Kraus, at p. 126.) We then differentiated between the terms

“restitution” and “disgorgement” in order to show why a plaintiff in a

representative action under the UCL could recover restitution but could not obtain

disgorgement of profits into a fluid recovery fund.

7

We defined an order for “restitution” as one “compelling a UCL defendant

to return money obtained through an unfair business practice to those persons in

interest from whom the property was taken, that is, to persons who had an

ownership interest in the property or those claiming through that person.” (Kraus,

supra, 23 Cal.4th at pp. 126-127.) We then clarified that “disgorgement” is a

broader remedy than restitution. We stated that an order for disgorgement “may

include a restitutionary element, but is not so limited.” (Id. at p. 127.) We further

explained that an order for disgorgement “may compel a defendant to surrender all

money obtained through an unfair business practice even though not all is to be

restored to the persons from whom it was obtained or those claiming under those

persons. It has also been used to refer to surrender of all profits earned as a result

of an unfair business practice regardless of whether those profits represent money

taken directly from persons who were victims of the unfair practice.” (Ibid.)

Relying on this distinction between restitution and disgorgement, we held in

Kraus that although restitution was an available remedy in UCL actions, a plaintiff

in a representative action under the UCL could not recover disgorgement in the

broader, nonrestitutionary sense, into a fluid recovery fund. (Kraus, at p. 137.)

The Court of Appeal in the present case misread our opinion in Kraus.

Noting that plaintiff in this case seeks disgorgement of profits unjustly earned by

defendants, the Court of Appeal quoted our statement in Kraus that “ ‘[a]n order

that a defendant disgorge money obtained through an unfair business practice may

include a restitutionary element, but is not so limited. . . . [S]uch orders may

compel a defendant to surrender all money obtained through an unfair business

practice even though not all is to be restored to the persons from whom it was

obtained or those claiming under those persons. It has also been used to refer to

surrender of all profits earned as a result of an unfair business practice regardless

of whether those profits represent money taken directly from persons who were

8

victims of the unfair practice.’ ” (Quoting Kraus, supra, 23 Cal.4th at p. 127,

italics added.) Relying on this language, the Court of Appeal concluded that

plaintiff adequately stated a claim under the UCL.

As Lockheed Martin and several amici curiae point out, however, this

passage from Kraus, cited by the Court of Appeal as authorization for

disgorgement under the UCL, merely defined the term “disgorgement” in order to

demonstrate that it was broader in scope than “restitution.” In the above cited

quotation, this court was not approving of disgorgement as a remedy under the

UCL. To the contrary, we held in Kraus that while restitution was an available

remedy under the UCL, disgorgement of money obtained through an unfair

business practice is an available remedy in a representative action only to the

extent that it constitutes restitution. We reaffirm this holding here in the context

of an individual action under the UCL. We therefore reverse the judgment of the

Court of Appeal on this issue.

B.

We begin our analysis with the statutory authorization for relief under the

UCL, found in section 17203: “Any person who engages, has engaged, or

proposes to engage in unfair competition may be enjoined in any court of

competent jurisdiction. The court may make such orders or judgments, including

the appointment of a receiver, as may be necessary to prevent the use or

employment by any person of any practice which constitutes unfair competition,

as defined in this chapter, or as may be necessary to restore to any person in

interest any money or property, real or personal, which may have been acquired by

means of such unfair competition.”

The fundamental objective of statutory construction is to ascertain the

Legislature’s intent and to give effect to the purpose of the statute. (Code Civ.

Proc., § 1859.) If the language of the statute is unambiguous, the plain meaning

9

governs. (Day v. City of Fontana (2001) 25 Cal.4th 268, 272.) Under section

17203, “[t]he statutory authorization . . . to make orders necessary to restore

money to any person in interest is clear.” (Kraus, supra, 23 Cal.4th at p. 129.) An

order for restitution, then, is authorized by the clear language of the statute. In

fact, “restitution is the only monetary remedy expressly authorized by section

17203.” (Ibid.)

While a remedy of nonrestitutionary disgorgement of profits is not

expressly authorized by the statute, KSC argues that the equitable language in

section 17203 is sufficiently broad to allow courts to award this monetary remedy

for an unfair competition claim. KSC contends that under the UCL a court may,

in its discretion, order Lockheed Martin to surrender its profits to KSC because

KSC allegedly has been wronged by Lockheed Martin’s unfair conduct.

Here, since the remedy of nonrestitutionary disgorgement is not expressly

authorized by the statute, we determine whether the Legislature intended to

authorize such a remedy under section 17203. If the statutory language is

ambiguous, we may look to the history and background of the statute. (Kraus,

supra, 23 Cal.4th at p. 129.) In ascertaining the Legislature’s intent, we attempt to

construe the statute to preserve its constitutional validity, as we presume that the

Legislature intends to respect constitutional limits. (See ibid.)

We described the legislative history of the UCL in Kraus. (Kraus, supra,

23 Cal.4th at pp. 129-130.) As amended in 1933, the predecessor to the current

law provided express authority to enjoin unfair competition. (Civ. Code, former §

3369, as amended by Stats. 1933, ch. 953, § 1, p. 2482.) While no specific

provision empowered courts to order monetary remedies, in People v. Superior

Court (Jayhill) (1973) 9 Cal.3d 283, 286, we held that trial courts retained their

inherent equitable power to order restitution under the UCL. Three years after

Jayhill, express authority to order restitution was added to Civil Code section

10

3369, the predecessor to section 17203. (Stats. 1976, ch. 1005, § 1, p. 2378.) As

we have previously said, this revision of the act was intended to codify, not

change, the remedies available to a trial court under the UCL. (Kraus, supra, at p.

132 [with the 1976 amendments, “the Legislature confirmed, but did not increase,

the powers of the court in a UCL action”]; see also Assem. Com. on Judiciary,

Analysis of Assem. Bill No. 1763 (1972 Reg. Sess.) May 1, 1972 [congruent

amendments to false advertising law were intended to affirm equity power already

existing in courts]; Sen. Com. on Judiciary, Analysis of Assem. Bill No. 1763

(1972 Reg. Sess.) [same].)

While express authority to order restitution was added to the UCL, courts

were not given similar authorization to order nonrestitutionary disgorgement.

Further, plaintiff has not pointed to anything in the legislative history that suggests

that the Legislature intended to provide such a remedy in an individual action.

Plaintiff contends that this court’s interpretation of the UCL and commentary by

leading academic authorities establish that a court’s equitable power under the

UCL is broad. Notably absent from this argument, however, is any showing from

the language or history of section 17203 that the Legislature intended to authorize

a disgorgement remedy that was not restitutionary in nature. Instead, KSC merely

asserts, without pointing to any particular statutory language or legislative history,

that a court’s equitable powers under section 17203 are broad enough to

encompass its requested remedy.

We have previously found that the Legislature did not intend section 17203

to provide courts with unlimited equitable powers. In Kraus, we rejected the

argument, revived by plaintiff in this case, that the general grant of equitable

authority in section 17203 implicitly permitted a disgorgement remedy—in that

case, into a fluid recovery fund in a representative action. We found that since

there was nothing in the express language of the statute or its legislative history

11

indicating that the Legislature intended to provide such a remedy, the remedy was

not available. (Kraus, supra, 23 Cal.4th at p. 132.) Here, again, we find nothing

to indicate that the Legislature intended to authorize a court to order a defendant to

disgorge all profits to a plaintiff who does not have an ownership interest in those

profits.

In fact, the language of section 17203 is clear that the equitable powers of a

court are to be used to “prevent” practices that constitute unfair competition and to

“restore to any person in interest” any money or property acquired through unfair

practices. (§ 17203.) While the “prevent” prong of section 17203 suggests that

the Legislature considered deterrence of unfair practices to be an important goal,

the fact that attorney fees and damages, including punitive damages, are not

available under the UCL is clear evidence that deterrence by means of monetary

penalties is not the act’s sole objective. A court cannot, under the equitable

powers of section 17203, award whatever form of monetary relief it believes

might deter unfair practices. The fact that the “restore” prong of section 17203 is

the only reference to monetary penalties in this section indicates that the

Legislature intended to limit the available monetary remedies under the act.6

Our previous cases discussing the UCL indicate our understanding that the

Legislature did not intend to authorize courts to order monetary remedies other

than restitution in an individual action. This court has never approved of

nonrestitutionary disgorgement of profits as a remedy under the UCL. While prior


6

Our discussion in this case is limited to individual private actions brought

under the UCL. In public actions, civil penalties may be collected from a
defendant. (§ 17206.) Further, in Kraus we noted that the Legislature “has
authorized disgorgement into a fluid recovery fund in class actions.” (Kraus,
supra
, 23 Cal.4th at p. 137.) These issues are not before us, and therefore we need
not address them further.

12

cases discussing the UCL may have characterized some of the relief available as

“disgorgement,” we were referring to the restitutionary form of disgorgement, and

not to the nonrestitutionary type sought here by plaintiff. (Cortez v. Purolator Air

Filtration Products Co. (2000) 23 Cal.4th 163, 176 (Cortez) [holding that because

section 17203 authorizes an order compelling a defendant to pay back wages as a

restitutionary remedy, we “need not consider whether the order might be proper

under the UCL under a disgorgement of benefit theory”]; ABC International

Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1271 [stating

that “the defendant’s victims may be entitled to restitution” under section 17203];

Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 452 (Fletcher)

[trial court may order restitution under the UCL for bank customers challenging a

bank’s computation of per annum interest on the basis of a 360-day year]; People

v. Superior Court (Jayhill), supra, 9 Cal.3d at p. 286 [court may order a defendant

to pay restitution to victims who have been defrauded as a result of an unfair

business practice].) The present case merely confirms what we have previously

held: Under the UCL, an individual may recover profits unfairly obtained to the

extent that these profits represent monies given to the defendant or benefits in

which the plaintiff has an ownership interest.

C.

In an attempt to fit its claim within the statutory authorization for relief, and

as an implicit acknowledgement that nonrestitutionary disgorgement is not an

available remedy in an individual action under the UCL, plaintiff describes its

requested remedy as “restitution.” This term does not accurately describe the

relief sought by plaintiff. As defined in Kraus, an order for restitution is one

“compelling a UCL defendant to return money obtained through an unfair

business practice to those persons in interest from whom the property was taken,

that is, to persons who had an ownership interest in the property or those claiming

13

through that person.” (Kraus, supra, 23 Cal.4th at pp. 126-127.) The object of

restitution is to restore the status quo by returning to the plaintiff funds in which

he or she has an ownership interest.

The remedy sought by plaintiff in this case is not restitutionary because

plaintiff does not have an ownership interest in the money it seeks to recover from

defendants. First, it is clear that plaintiff is not seeking the return of money or

property that was once in its possession. KSC has not given any money to

Lockheed Martin; instead, it was from the Republic of Korea that Lockheed

Martin received its profits. Any award that plaintiff would recover from

defendants would not be restitutionary as it would not replace any money or

property that defendants took directly from plaintiff.

Further, the relief sought by plaintiff is not restitutionary under an

alternative theory because plaintiff has no vested interest in the money it seeks to

recover. We have stated that “[t]he concept of restoration or restitution, as used in

the UCL, is not limited only to the return of money or property that was once in

the possession of that person.” (Cortez, supra, 23 Cal.4th at p. 178.) Instead,

restitution is broad enough to allow a plaintiff to recover money or property in

which he or she has a vested interest. In Cortez, we determined that “earned

wages that are due and payable pursuant to section 200 et seq. of the Labor Code

are as much the property of the employee who has given his or her labor to the

employer in exchange for that property as is property a person surrenders through

an unfair business practice.” (Ibid.) Therefore, we concluded that such wages

could be recovered as restitution under the UCL. We reached this result because

“equity regards that which ought to have been done as done [citation], and thus

recognizes equitable conversion.” (Cortez, supra, at p. 178.)

While the plaintiffs in Cortez had a vested interest in their earned but

unpaid wages, KSC itself acknowledges that, at most, it had an “expectancy” in

14

the receipt of a commission. KSC’s expected commission is merely a contingent

interest since KSC only expected payment if MacDonald Dettwiler was awarded

the SAR contract. (See United States v. Rodrigues (9th Cir. 2000) 229 F.3d 842,

846 [finding that under the federal Victim and Witness Protection Act of 1982,

restitution was not available for a contingent loss in which the company had only

an expectancy interest; restitution could only be recovered for the loss of a vested

interest].) Such an attenuated expectancy cannot, as KSC contends, be likened to

“property” converted by Lockheed Martin that can now be the subject of a

constructive trust. To create a constructive trust, there must be a res, an

“identifiable kind of property or entitlement in defendant’s hands.” (1 Dobbs,

Law of Remedies (1993) § 4.1(2), pp. 589-590.) As the United States Supreme

Court recently said, a constructive trust requires “money or property identified as

belonging in good conscience to the plaintiff [which can] clearly be traced to

particular funds or property in the defendant’s possession.” (Great-West Life &

Annuity Insurance Co. v. Knudson (2002) 534 U.S. 204, __ [112 S.Ct. 708, 714].)

The recovery requested in this case cannot be traced to any particular funds in

Lockheed Martin’s possession and therefore is not the proper subject of a

constructive trust.

KSC’s expectancy in this case is further attenuated since KSC never

anticipated payment directly from Lockheed Martin. Instead, it expected the

Republic of Korea to pay MacDonald Dettwiler, which would then pay a

commission to KSC. In contrast, in Cortez, the defendant was the employer from

which the plaintiffs expected payment. (Cortez, supra, 23 Cal.4th at p. 169.)

Therefore, the order for restitution served to restore to the plaintiffs funds that

were directly owed to them by the defendant. Unlike Cortez, then, the monetary

relief requested by KSC does not represent a quantifiable sum owed by defendants

to plaintiff. Instead, it is a contingent expectancy of payment from a third party.

15

For these reasons, we find that plaintiff’s claim is properly characterized as a

claim for nonrestitutionary disgorgement of profits.

D.

We reaffirm that an action under the UCL “is not an all-purpose substitute

for a tort or contract action.” (Cortez, supra, 23 Cal.4th at p. 173.) Instead, the act

provides an equitable means through which both public prosecutors and private

individuals can bring suit to prevent unfair business practices and restore money

or property to victims of these practices. As we have said, the “overarching

legislative concern [was] to provide a streamlined procedure for the prevention of

ongoing or threatened acts of unfair competition.” (Id. at pp. 173-174.) Because

of this objective, the remedies provided are limited. While any member of the

public can bring suit under the act to enjoin a business from engaging in unfair

competition, it is well established that individuals may not recover damages.

(Bank of the West, supra, 2 Cal.4th at p. 1266.)

The nonrestitutionary disgorgement remedy sought by plaintiff closely

resembles a claim for damages, something that is not permitted under the UCL.

As one court has noted: “Compensation for a lost business opportunity is a

measure of damages and not restitution to the alleged victims.” (MAI Systems

Corp. v. UIPS (N.D.Cal. 1994) 856 F.Supp. 538, 542.) Plaintiff suggests that its

disgorgement remedy need not include all of the profits unfairly obtained by

Lockheed Martin; instead, its recovery might be limited to the amount it allegedly

would have obtained as a commission had McDonald Dettwiler been awarded the

contract. This proposed recovery would be in exactly the same amount that

plaintiff is seeking to recover as damages for its traditional tort claim of

interference with prospective economic advantage. The only difference between

what plaintiff seeks to recover as “disgorgement” and the damages it seeks under

its traditional tort claim is that plaintiff would not recover its full expected

16

commission under a “disgorgement” remedy if, for some reason, the profits

obtained by Lockheed Martin did not equal the amount of plaintiff’s expected

commission.

Allowing the plaintiff in this case to recover nonrestitutionary

disgorgement under the UCL would enable it to obtain tort damages while

bypassing the burden of proving the elements of liability under its traditional tort

claim for intentional interference with prospective economic advantage. As we

have stated, any member of the public can bring suit under the UCL. In addition,

“to state a claim under the act one need not plead and prove the element of a tort.

Instead, one need only show that ‘members of the public are likely to be

deceived.’ [Citation.]” (Bank of the West, supra, 2 Cal.4th at p. 1267; see also

Fletcher, supra, 23 Cal.3d at p. 453 [individual plaintiff’s knowledge of the unfair

practice not needed in order to recover restitution].) Given the UCL’s liberal

standing requirements and relaxed liability standards, were we to allow

nonrestitutionary disgorgement in an individual action under the UCL, plaintiffs

would have an incentive to recast claims under traditional tort theories as UCL

violations. They could recover from a competitor without having to meet the

more rigorous pleading requirements of a negligence action, or a breach of

contract suit. The result could be that the UCL would be used as an all-purpose

substitute for a tort or contract action, something the Legislature never intended.

In addition, it is possible that due process concerns would arise if an

individual business competitor could recover disgorgement of profits under the

UCL. While restitution is limited to restoring money or property to direct victims

of an unfair practice, a potentially unlimited number of individual plaintiffs could

recover nonrestitutionary disgorgement. Allowing such a remedy would expose

defendants to multiple suits and the risk of duplicative liability without the

traditional limitations on standing. (See Stop Youth Addiction v. Lucky Stores, Inc.

17

(1998) 17 Cal.4th 553, 582 (conc. opn. of Baxter, J.) [disgorgement of profits to a

party that has not paid money to the defendant and was not a party to the litigation

“raises substantial due process issues implicating the rights of both the defendant

and the absent parties”].) The disgorgement remedy requested in this case would

not require that the disgorged money or property have come from the prospective

plaintiff in the first instance. Nor is there any limit on the number of times the

remedy could be sought or any limit on the monetary relief available. There is a

risk of unfairness not only to defendants but also to direct victims of the unfair

practice. If Lockheed Martin were forced to disgorge its profits to KSC, there

might be little left for the Republic of Korea to recover, even though it is the party

ostensibly entitled to restitutionary relief.

Plaintiff suggests ways of alleviating these due process concerns, proposing

several “options to prevent abuse,” including that this remedy be “limited to

instances where the defendant has engaged in egregious practices.” None of

plaintiff’s proposals, however, alleviate the possibility that defendants would be

subjected to duplicate liability. Further, none of plaintiff’s proposed “options to

prevent abuse” are contemplated by the legislative scheme.

E.

We conclude, therefore, that allowing plaintiff to recover monetary relief

under the UCL in this case would be at odds with the language and history of the

statute, our previous decisions construing the UCL, and public policy. We hold

that nonrestitutionary disgorgement of profits is not an available remedy in an

individual action under the UCL. We note that the UCL remains a meaningful

consumer protection tool. The breadth of standing under this act allows any

consumer to combat unfair competition by seeking an injunction against unfair

business practices. Actual direct victims of unfair competition may obtain

18

restitution as well. The present decision merely reaffirms the balance struck in

this state’s unfair competition law between broad liability and limited relief.

In addition, we note that our decision does not foreclose all relief to

plaintiff. While plaintiff may not recover monetary relief under the limited

remedies provided by the UCL, plaintiff may pursue a cause of action under

traditional tort law. In fact, as we conclude below, plaintiff in this case can state a

claim for the tort of intentional interference with prospective economic advantage.

While the pleading and proof requirements under this tort are more rigorous than

under the UCL, if plaintiff succeeds in meeting its burden of proof, it may recover

damages for the injuries it claims to have suffered as a result of unfair

competition.

III.

Lockheed Martin argues that KSC fails to state a claim for intentional

interference with prospective economic advantage because it has not shown that

Lockheed Martin acted with the specific intent to disrupt KSC’s business

relationship. KSC counters that a plaintiff need only show that the defendant

acted with the knowledge that its wrongful acts were substantially certain to

disrupt plaintiff’s business expectancy. We conclude that the tort of intentional

interference with prospective economic advantage does not require a plaintiff to

plead that the defendant acted with the specific intent, or purpose, of disrupting the

plaintiff’s prospective economic advantage. Instead, to satisfy the intent

requirement for this tort, it is sufficient to plead that the defendant knew that the

interference was certain or substantially certain to occur as a result of its action.

A.

We first articulated the elements of the tort of intentional interference with

prospective economic advantage in Buckaloo v. Johnson (1975) 14 Cal.3d 815,

827 (Buckaloo). These elements are usually stated as follows: “ ‘(1) an economic

19

relationship between the plaintiff and some third party, with the probability of

future economic benefit to the plaintiff; (2) the defendant’s knowledge of the

relationship; (3) intentional acts on the part of the defendant designed to disrupt

the relationship; (4) actual disruption of the relationship; and (5) economic harm

to the plaintiff proximately caused by the acts of the defendant.’ [Citations.]”

(Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th

507, 521-522.)

We most recently considered this tort in Della Penna v. Toyota Motor

Sales, U.S.A., Inc. (1995) 11 Cal.4th 376 (Della Penna), where we held that a

plaintiff seeking to recover damages for interference with prospective economic

advantage must plead and prove as part of its case-in-chief that the defendant’s

conduct was “wrongful by some legal measure other than the fact of interference

itself.” (Id. at p. 393.) In Della Penna, we did not address the elements of the tort

as we had formulated them in Buckaloo, other than noting that “[t]o the extent that

language in Buckaloo . . . addressing the pleading and proof requirements in the

economic relations tort is inconsistent with the formulation we adopt in this case,

it is disapproved.” (Della Penna, supra, 11 Cal.4th at p. 393, fn. 5.)

Since our opinion in Della Penna, lower courts considering this tort have

continued to apply the elements we articulated in Buckaloo, with the added

understanding that a plaintiff must plead that the defendant engaged in an act that

is wrongful apart from the interference itself. (See, e.g., Limandri v. Judkins

(1997) 52 Cal.App.4th 326, 339; Arntz Contracting Co. v. St. Paul Fire and

Marine Insurance Company (1996) 47 Cal.App.4th 464, 475; Westside Center

Associates v. Safeway Stores 23, Inc., supra, 42 Cal.App.4th at pp. 521-522.) The

Court of Appeal in the present case, however, in considering whether a plaintiff

must plead specific intent, determined that after Della Penna, “it is no longer

20

appropriate to apply the elements formulated in Buckaloo in all actions for

interference with prospective advantage.”

We disagree with the Court of Appeal’s conclusion that the elements we

first articulated in Buckaloo, supra, 14 Cal.3d 815, do not still apply to this tort.

In Della Penna, we did not abandon these elements. Instead, we specifically

stated that “[w]e do not in this case . . . go beyond approving the requirement of a

showing of wrongfulness as part of the plaintiff’s case.” (Della Penna, supra, 11

Cal.4th at p. 378.) In fact, we explicitly approved the trial court’s modified

version of the standard jury instruction on intentional interference with

prospective economic advantage, BAJI No. 7.82. The instruction at issue

articulated the traditional elements of the tort, but changed the third element to

provide that the defendant “ ‘intentionally engaged in [wrongful] acts or conduct

designed to interfere with or disrupt’ the relationship.” (Della Penna, at p. 380,

fn. 1, italics and brackets added.) Rather than overrule the established elements of

this tort, Della Penna merely clarified the plaintiff’s burden as to the third

element, stating that to meet this element, a plaintiff must plead and prove that the

defendant’s acts are wrongful apart from the interference itself. (Id. at p. 393.)

Thus, as the majority of the Courts of Appeal have understood, after Della Penna

the elements of the tort of interference with prospective economic advantage

remain the same, except that the third element also requires a plaintiff to plead

intentional wrongful acts on the part of the defendant designed to disrupt the

relationship.

B.

Having clarified the required elements, we now consider the intent

requirement of this tort. The question is whether a plaintiff must plead and prove

that the defendant engaged in wrongful acts with the specific intent of interfering

with the plaintiff’s business expectancy. We conclude that specific intent is not a

21

required element of the tort of interference with prospective economic advantage.

While a plaintiff may satisfy the intent requirement by pleading specific intent,

i.e., that the defendant desired to interfere with the plaintiff’s prospective

economic advantage, a plaintiff may alternately plead that the defendant knew that

the interference was certain or substantially certain to occur as a result of its

action.

Lockheed Martin argues that specific intent is an established element of this

tort. It contends that to satisfy the tort’s third element—intentional wrongful acts

designed to disrupt the plaintiff’s relationship with its benefactor—a plaintiff must

allege that the defendant purposely sought the disruption. It asserts that the

inclusion of the word “designed” in the typical formulation of the third element is

evidence that a plaintiff is required to plead specific intent. We disagree. The

elements of the tort of interference with prospective economic advantage do not

require a plaintiff to allege that the defendant acted with the specific intent, or

purpose, of disrupting the plaintiff’s prospective economic advantage.

Contrary to Lockheed Martin’s assertion, the inclusion of the word

“designed” in the third element of the tort does not necessarily mean that this tort

contains a specific intent requirement. Our analysis of the intent requirement for

the tort of intentional interference with contract in Quelimane Company, Inc. v.

Stewart Title Guaranty Company (1998) 19 Cal.4th 26 (Quelimane) is

instructive.7 In Quelimane, we articulated the elements of this tort, stating that the


7

The concurring and dissenting opinion argues that we should rely on

Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752,
overruled on other grounds in Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11
Cal.4th 85, 88, rather than on Quelimane, supra, 19 Cal.4th 26. Both cases
discuss the intent requirement for the tort of interference with contract. Yet the
Quelimane court did not consider the earlier per curiam decision in Seaman’s. As

(Footnote continued on next page.)

22

third element requires a plaintiff to plead the “defendant’s intentional acts

designed to induce a breach or disruption of the contractual relationship.” (Id. at

p. 55.) Notwithstanding the presence of the word “designed,” we found that this

tort did not require a plaintiff to plead that the defendant acted with the specific

intent to interfere. (Id. at p. 79.)

In determining that intentional interference with contract does not contain a

specific intent requirement, we relied on the Restatement Second of Torts.

(Quelimane, supra, 19 Cal.4th at p. 56.) The Restatement, section 766, comment

j, makes clear that the tort of intentional interference with contract applies not only

when a defendant acts with the purpose or desire to interfere but that “[i]t applies

also to intentional interference . . . in which the actor does not act for the purpose

of interfering with the contract or desire it but knows that the interference is

certain or substantially certain to occur as a result of his action. The rule applies,

in other words, to an interference that is incidental to the actor’s independent

purpose and desire but known to him to be a necessary consequence of his action.”

(Rest.2d Torts, § 766, com. j, p. 12.)

We similarly look to the Restatement to determine whether the tort at issue

in the present case, intentional interference with prospective economic advantage,



(Footnote continued from previous page.)

we noted in Della Penna, the Seaman’s court “rel[ied] on the first Restatement . . .
without reviewing or even mentioning intervening revaluations of the tort by the
Restatement Second, other state high courts and our own Court of Appeal.”
(Della Penna, supra, 11 Cal.4th at p. 389.) Further, we expressly disapproved of
our language in Seaman’s to the extent that it was inconsistent with Della Penna.
(Della Penna, at p. 393, fn. 5.) Thus, we find in Quelimane, which relies on Della
Penna
and the Second Restatement, a better representation than Seaman’s of the
current state of the law.

23

contains a specific intent requirement. Restatement Second of Torts section 766B,

entitled Intentional Interference with Prospective Contractual Relation,8 explains

in comment d: “The intent required for this Section is that defined in § 8A. The

interference with the other’s prospective contractual relation is intentional if the

actor desires to bring it about or if he knows that the interference is certain or

substantially certain to occur as a result of his action. (See § 766, Comment j).”

(Rest.2d Torts, § 766B, com. d, p. 22.)

In explaining the intent requirement for intentional interference with

prospective economic advantage, the Restatement Second of Torts specifically

refers to the intent requirement for the tort of intentional interference with

contract, as defined in section 766, comment j. We relied on this section of the

Restatement in Quelimane to conclude that this tort contained no specific intent

requirement. (Quelimane, supra, 19 Cal.4th at p. 56.) In addition, the

Restatement refers to the definition of intent in section 8A, which states: “The

word ‘intent’ is used throughout the Restatement [Second] of [Torts] to denote

that the actor desires to cause consequences of his act, or that he believes that the

consequences are substantially certain to derive from it.” (Rest.2d Torts, § 8A.)

Comment b to this section clarifies that “[i]ntent is not, however, limited to

consequences which are desired. If the actor knows that the consequences are

certain, or substantially certain, to result from his act, and still goes ahead, he is


8

This section states: “One who intentionally and improperly interferes with

another’s prospective contractual relation (except a contract to marry) is subject to
liability to the other for pecuniary harm resulting from loss of the benefits of the
relation, whether the interference consists of (a) inducing or otherwise causing a
third person not to enter into or continue the prospective relation or (b) preventing
the other from acquiring or continuing the prospective relation.” (Rest.2d Torts, §
766B, p. 20.)

24

treated by the law as if he had in fact desired to produce the result.” (Rest.2d

Torts, § 8A, com. b, p. 15.)

Based on our reading of the Restatement and our discussion in Quelimane

of the intent requirement, we reject Lockheed Martin’s argument that the tort of

intentional interference with prospective economic advantage contains a

requirement that a plaintiff plead and prove that the defendant acted with the

specific intent, purpose, or design to interfere with the plaintiff’s prospective

advantage. Instead, we agree with the Restatement that it is sufficient for the

plaintiff to plead that the defendant “[knew] that the interference is certain or

substantially certain to occur as a result of his action.” (Rest.2d Torts, § 766B,

com. d, p. 22.)9

C.

We caution that although we find the intent requirement to be the same for

the torts of intentional interference with contract and intentional interference with

prospective economic advantage, these torts remain distinct. We reiterate our

statement in Della Penna that “[o]ur courts should . . . firmly distinguish the two

kinds of business contexts, bringing a greater solicitude to those relationships that

have ripened into agreements, while recognizing that relationships short of that

subsist in a zone where the rewards and risks of competition are dominant.”

(Della Penna, supra, 11 Cal.4th at p. 392.)

We note initially that even though these two torts are distinct, some

plaintiffs may be able to state causes of action for both torts. As we stated in

9

We consider only whether, to state a claim for this tort, a plaintiff need

allege that the defendant acted with a specific intent to interfere with the plaintiff’s
business expectancy. A defendant’s intent, as defined in section 8A of the
Restatement Second of Torts, is still a triable issue of fact. (See Quelimane,
supra
, 19 Cal.4th at p. 57.)

25

Buckaloo, “the tort of interference with contract is merely a species of the broader

tort of interference with prospective economic advantage.” (Buckaloo, supra, 14

Cal.3d at p. 823.) In the present case, KSC’s claim was appropriately stated as

one for interference with prospective economic advantage. KSC did not allege in

its complaint that it had a contractual agreement with MacDonald Dettwiler. KSC

merely alleged that it had an economic expectancy in that it was acting as

MacDonald Dettwiler’s broker and it expected a commission if the contract was

awarded to MacDonald Dettwiler. KSC nowhere pleads that this expectancy

amounted to an enforceable contract.

Moreover, the existence of a contract does not mean that a plaintiff’s claim

must be brought exclusively as one for interference with contract. In Buckaloo,

we concluded that the tort of interference with prospective economic advantage “is

considerably more inclusive than actions based on contract or interference with

contract, and is thus is not dependent on the existence of a valid contract.”

(Buckaloo, supra, 14 Cal.3d at pp 826-827; see id. at p. 823, fn. 6 [“ ‘the basic tort

of interference with economic relations can be established by showing, inter alia,

an interference with an existing contract or a contract which is certain to be

consummated’ ”].)10 Thus, a plaintiff who believes that he or she has a contract

but who recognizes that the trier of fact might conclude otherwise might bring

claims for both torts so that in the event of a finding of no contract, the plaintiff

might prevail on a claim for interference with prospective economic advantage. In


10

The concurring and dissenting opinion contends that the Buckaloo court

made other statements indicating that the two torts were mutually exclusive. But it
is apparent that each of the statements it quotes in support of this contention, when
read in context, are merely made in furtherance of Buckaloo's central thesis: that
the existence of a contract is not necessary to maintain an action for intentional
interference with prospective economic advantage.

26

the present case, even if KSC could have alleged a contractual relationship with

MacDonald Dettwiler, its claim was properly brought as one for interference with

prospective economic advantage. As we explain below, however, a plaintiff that

chooses to bring a claim for interference with prospective economic advantage has

a more rigorous pleading burden since it must show that the defendant’s conduct

was independently wrongful.

As we have made clear in both Della Penna and Quelimane, the distinction

between these two torts is found in the independent wrongfulness requirement of

the tort of interference with prospective economic advantage. We stated in

Quelimane: “Because interference with an existing contract receives greater

solicitude than does interference with prospective economic advantage [citation],

it is not necessary that the defendant’s conduct be wrongful apart from the

interference with the contract itself. [Citation.] [¶] . . . Intentionally inducing or

causing a breach of an existing contract is . . . a wrong in and of itself. Because

this formal economic relationship does not exist and damages are speculative

when remedies are sought for interference in what is only prospective economic

advantage, Della Penna concluded that some wrongfulness apart from the impact

of the defendant’s conduct on that prospect should be required.” (Quelimane,

supra, 19 Cal.4th at pp. 55-56.)

Thus, while intentionally interfering with an existing contract is “a wrong

in and of itself” (Quelimane, supra, 19 Cal.4th at p. 56), intentionally interfering

with a plaintiff’s prospective economic advantage is not. To establish a claim for

interference with prospective economic advantage, therefore, a plaintiff must

plead that the defendant engaged in an independently wrongful act. (See Della

Penna, supra, 11 Cal.4th at p. 393.) An act is not independently wrongful merely

because defendant acted with an improper motive. As we said in Della Penna,

“the law usually takes care to draw lines of legal liability in a way that maximizes

27

areas of competition free of legal penalties.” (Della Penna, supra, 11 Cal.4th at p.

392.) The tort of intentional interference with prospective economic advantage is

not intended to punish individuals or commercial entities for their choice of

commercial relationships or their pursuit of commercial objectives, unless their

interference amounts to independently actionable conduct. (Marin Tug & Barge,

Inc. (9th Cir. 2001) 271 F.3d 825, 832.) We conclude, therefore, that an act is

independently wrongful if it is unlawful, that is if it is proscribed by some

constitutional, statutory, regulatory, common law, or other determinable legal

standard.11 (See Marin Tug & Barge, Inc., supra, at p. 835; see also Della Penna,

supra, 11 Cal.4th at 408 (conc. opn. of Mosk, J.) [“It follows that the tort may be

satisfied by intentional interference with prospective economic advantage by

independently tortious means”].)

Here, KSC has clearly satisfied the independent wrongfulness requirement.

In its complaint, KSC alleged that defendant Kim, as an agent for Loral, engaged

in bribery and offered sexual favors to key Korean officials in order to obtain the

contract from the Republic of Korea. Under the Foreign Corrupt Practices Act, it

is unlawful to pay or offer money or anything of value to a foreign official for the

purposes of influencing any act or decision of the foreign official, or to induce the

foreign official to use his or her influence with a foreign government to affect or

influence any act or decision of the government. (15 U.S.C. § 78dd-1(a)(1)(A),


11

We need not in this case further define which sources of law can be relied

on to determine whether a defendant has engaged in an independently wrongful
act, other than to say that such an act must be wrongful by some legal measure,
rather than merely a product of an improper, but lawful, purpose or motive. To
the extent that the lower courts have determined otherwise, these decisions are
disapproved. (See, e.g., PMC, Inc. v. Saban Entertainment, Inc. (1996) 45
Cal.App.4th 579, 603 [stating that liability may arise from either improper motive
or improper means].)

28

(B).) In addition, the complaint alleges that the commissions paid by Loral to Kim

exceeded the maximum allowable amounts established by the Foreign Corrupt

Practices Act. (15 U.S.C. § 78dd-2(a)(1)(A), (B).) The complaint thus clearly

alleges that defendants engaged in unlawful behavior in order to secure the SAR

contract. KSC has, therefore, sufficiently alleged that defendants’ acts, in addition

to interfering with KSC’s business expectancy, were wrongful in and of

themselves.

D.

It is this independent wrongfulness requirement that makes defendants’

interference with plaintiff’s business expectancy a tortious act. Because we have

determined that the act of interference with prospective economic advantage is not

tortious in and of itself, the requirement of pleading that a defendant has engaged

in an act that was independently wrongful distinguishes lawful competitive

behavior from tortious interference. Such a requirement “sensibly redresses the

balance between providing a remedy for predatory economic behavior and

keeping legitimate business competition outside litigative bounds.” (Della Penna,

supra, 11 Cal.4th at p. 378.)

The independent wrongfulness requirement also differentiates California

law from that of other states and the Restatement Second of Torts. Lockheed

Martin’s reliance on these authorities is unpersuasive since they require a plaintiff

only to plead that the defendant’s interference was improper, and not that the

interference was independently unlawful. As we explain, California’s independent

wrongfulness requirement more narrowly defines actionable conduct under this

tort.

According to the Restatement, there are two requirements for liability under

this tort: The interference must be both intentional and improper. A defendant

who “intentionally and improperly interferes with another’s prospective

29

contractual relation” is subject to liability. (Rest.2d Torts, § 766B.) The intent

requirement, as described above, is that the defendant either desires to bring about

the interference or knows that the interference is certain or substantially certain to

occur as a result of its action. (Rest.2d Torts, § 766B, com. d, p. 22.) In addition

to this general intent, the second requirement is that “[t]he interference . . . must

also be improper. The factors to be considered in determining whether an

interference is improper are stated in § 767. One of them is the actor’s motive and

another is the interest sought to be advanced by him. Together these factors mean

that the actor’s purpose is of substantial significance. If he had no desire to

effectuate the interference by his action but knew that it would be a mere

incidental result of conduct he was engaging in for another purpose, the

interference may be found to be not improper. Other factors come into play here,

however, particularly the nature of the actor’s conduct. If the means used is

innately wrongful, predatory in character, a purpose to produce the interference

may not be necessary. On the other hand, if the sole purpose of the actor is to vent

his ill will, the interference may be improper although the means are less

blameworthy.” (Rest.2d Torts, § 766B, com. d, pp. 22-23, italics added.)

Unlike California, the Restatement Second of Torts does not require a

plaintiff to plead that a defendant engaged in an independently wrongful act in

order to show “improper” interference. Instead, a general intent plus an actor’s

motive or purpose to interfere is enough to subject a defendant to liability under

the Restatement. In the absence of an independent wrongfulness requirement, a

purpose to interfere with the plaintiff’s business expectancy suffices to distinguish

actionable conduct from behavior that is merely competitive, and therefore

privileged. The Restatement, however, recognizes that when the defendant’s

conduct is innately wrongful, a purpose to interfere may be unnecessary. The

Restatement appreciates that the independent wrongfulness of a defendant’s acts

30

may satisfy the “improper” requirement of the tort without the need to look to the

motive or purpose behind a defendant’s acts.

Thus, while California does follow the Restatement’s general intent

requirement, California law adheres to a narrower interpretation of what conduct is

improper under this tort. After Della Penna, supra, 11 Cal.4th 376, California has

required plaintiffs to show that a defendant has engaged in an independently, or

inherently, wrongful act. Under this requirement, a defendant’s motive or purpose

is relevant only to the extent that it renders the defendant’s conduct unlawful. We

are therefore unconvinced by Lockheed Martin’s reliance on the Restatement in

this regard.

Lockheed Martin’s citation to out-of-state decisions holding that a plaintiff

must plead that the defendant acted with a specific intent or purpose to interfere

with the plaintiff’s economic relations is similarly unpersuasive. Like the

Restatement Second of Torts, the cases cited by Lockheed Martin look to a

defendant’s motive or purpose to distinguish tortious conduct from lawful

behavior. (See, e.g., Ethyl Corp. v. Balter (Fla.Dist.Ct.App. 1980) 386 So.2d

1220, 1223 [finding no interference because the defendant’s purpose or motive

was not directed at the plaintiff]; Bank Computer Network Corp. v. Continental

Illinois Nat’l Bank and Trust Co. (Ill.App.Ct. 1982) 442 N.E.2d 586, 593 [same];

K&K Management v. Lee (Md. 1989) 557 A.2d 965, 975 [same]; Anderson v. The

Regents of the Univ. of California (Wis.Ct.App. 1996) 554 N.W.2d 509, 519

[same].) Unlike California, however, these states do not require a plaintiff to

plead that the defendant has engaged in an independently wrongful act in order to

state a claim for interference with prospective economic advantage. Instead of

independent wrongfulness, a plaintiff is required to plead a purpose or motive to

interfere in order to demonstrate that the defendant’s interference was improper.

31

We additionally reject Lockheed Martin’s reliance on DeVoto v. Pacific

Fidelity Life Insurance Co. (9th Cir. 1980) 618 F.2d 1340 (DeVoto). In that case,

the Ninth Circuit Court of Appeals attempted to anticipate whether California

courts would require a plaintiff to plead that the defendant acted with a specific

purpose or motive to interfere with the plaintiff’s prospective economic advantage.

(Id. at p. 1347.) DeVoto was decided prior to our opinions in Della Penna, supra,

11 Cal.4th 376, and Quelimane, supra, 19 Cal.4th 26, and, as the Ninth Circuit

noted, there was “a scarcity of pertinent authority on this issue.” (DeVoto, at p.

1347.) We agree with the Court of Appeal in the present case that DeVoto “does

not support the requirement of an allegation of purposeful intent directed

specifically at the plaintiff in every case.” Instead, the DeVoto court states:

Where the actor’s conduct is not criminal or fraudulent, and absent some other

aggravating circumstances, it is necessary to identify those whom the actor had a

specific motive or purpose to injure by his interference and to limit liability

accordingly.” (DeVoto, supra, 618 F.2d at p. 1347, italics added.)

The DeVoto court, then, determined that a defendant’s motive or purpose to

interfere is a necessary element only when the defendant’s conduct is not

independently unlawful. After Della Penna, independent wrongfulness has been

recognized as a required element of the tort. Therefore, an additional showing of

specific intent to interfere is not necessary.

E.

Lockheed Martin additionally argues that a specific intent requirement is

necessary to prevent potential plaintiffs with injuries remotely caused by a

defendant’s acts from maintaining standing to sue for this tort. It contends that

since KSC is an indirect victim of defendants’ alleged acts of interference, KSC

should only be able to state a claim if it can show that Lockheed Martin acted with

the purpose of interfering with KSC’s economic expectancy. We disagree. Were

32

we to adopt a specific intent requirement, a plaintiff’s standing would turn on the

subjective intent of a defendant who has committed an independently wrongful

act. Such a requirement would lead to absurd and unfair results. A defendant who

engaged in an unlawful act knowing that it would harm the plaintiff’s business

interest could escape liability if the defendant acted with the purpose of furthering

its own interest, rather than specifically harming the plaintiff’s interest. Standing

for this tort should not be made to turn on such a consideration.

As support for its argument, Lockheed Martin cites section 767 of the

Restatement Second of Torts and argues that a defendant must act with the

specific intent of interfering with a plaintiff’s business expectancy when the

plaintiff is not the direct victim of the interference. We note, however, that section

767 of the Restatement Second of Torts is entitled Factors in Determining

Whether Interference is Improper. This section, then, refers to the element of the

tort that defines when interference is improper, not to the element that defines the

required intent. As stated above, California law does not follow the Restatement’s

definition of when interference is improper. Instead, California law defines

“improper” more narrowly than the Restatement, allowing recovery only when the

defendant’s conduct is independently unlawful.

We further note that even the Restatement, with its broader definition of

improper conduct, recognizes that an indirectly injured plaintiff may state a claim

under this tort without pleading that the defendant acted with the purpose to

interfere with the plaintiff’s business expectancy. Section 767, comment h, of the

Restatement, discussing the proximity or remoteness of the defendant’s conduct to

the interference, supports our conclusion: “This remoteness [between the

defendant’s conduct and the plaintiff’s injury] conduces toward a finding that the

interference was not improper. The weight of this factor, however, may be

controverted by . . . the factor of the actor’s conduct if that conduct was inherently

33

unlawful or independently tortious.” (Rest.2d Torts, § 767, com. h, p. 36, italics

added.)12 If the defendant’s improper conduct constitutes independently wrongful

behavior, the fact that the plaintiff is an indirect victim does not preclude recovery.

Contrary to the arguments of Lockheed Martin and the concurring and

dissenting opinion, we find no sound reason for requiring that a defendant’s

wrongful actions must be directed towards the plaintiff seeking to recover for this

tort. The interfering party is liable to the interfered-with party “when the

independently tortious means the interfering party uses are independently tortious

only as to a third party. Even under these circumstances, the interfered-with party

remains an intended (or at least known) victim of the interfering party—albeit one

that is indirect rather than direct.” (Della Penna, supra, 11 Cal.4th at p. 409

(conc. opn. of Mosk, J) [citing Rest.2d Torts, § 767, com. c, pp. 29-30].) In fact,

“the most numerous of the tortious interference cases are those in which the

disruption is caused by an act directed not at the plaintiff, but at a third person.”

(Perlman, Interference with Contract and Other Economic Expectancies: A Clash

of Contract and Tort Doctrine (1982) 49 U.Chi.L.Rev. 61, 106.)

We do not share the concern of Lockheed Martin and the concurring and

dissenting opinion that our ruling today will expose defendants to an unlimited

number of potential plaintiffs.13 The “substantial certainty” test used in the

12

Contrary to the assertion of the concurring and dissenting opinion, section

767 “applies to each form of the tort,” and is therefore applicable to both
interference with contract and interference with prospective economic advantage.
(Rest.2d Torts, § 767, com. a, p. 27.)
13

Further, we find federal cases discussing antitrust and RICO law to be

inapplicable to the question of whether a plaintiff may state a claim under the
California common law tort of interference with prospective economic advantage.
The federal antitrust cases cited by the concurring and dissenting opinion address
the question of whether the plaintiffs in those cases could maintain standing under
section 4 of the Clayton Act (15 U.S.C. § 15). (Associated General Contractors v.

(Footnote continued on next page.)

34

Restatement, coupled with the independent wrongfulness requirement of Della

Penna, sufficiently limits this tort. It is important to underscore that the

independent wrongfulness requirement of this tort limits the class of potential

defendants; only defendants who have engaged in an unlawful act can be held

liable for this tort. In addition, as described below, each of the five elements of

the tort of interference with prospective economic advantage serves to limit the

number of potential plaintiffs that can state a cause of action for this tort.14

First, a plaintiff that wishes to state a cause of action for this tort must

allege the existence of an economic relationship with some third party that

contains the probability of future economic benefit to the plaintiff. This tort

therefore “protects the expectation that the relationship eventually will yield the


(Footnote continued from previous page.)

California State Council of Carpenters
(1983) 459 U.S. 519, 529.) To answer this
question, these courts engage, inter alia, in an analysis of the statutory language of
the Clayton Act, as well as its relevant legislative history and objectives. (459
U.S. at pp. 529-531, 538-540.) The question of whether a plaintiff has standing to
bring a claim under a California common law tort is not subject to the same
considerations and limitations that were raised in the Clayton Act and RICO cases.
Adopting this federal case law would be a significant departure from our prior
cases discussing this tort, especially Buckaloo, supra, 14 Cal.3d 815, and Della
Penna, supra
, 11 Cal.4th 376. Nevertheless, the concurring and dissenting
opinion points to the Restatement, which states in section 768, comment f, that
“there is therefore interplay between [antitrust] law and the law of tortious
interference with prospective contractual relations.” The concurring and
dissenting opinion fails to include the remainder of this sentence, which continues:
“[antitrust] law is so involved and is so primarily concerned with areas of public
law only tangentially related to tort law that it must be regarded as outside the
scope
of the Restatement of Torts.” (Rest.2d Torts, § 768, com. c, p. 43, italics
added.)
14

We address only plaintiff’s allegations as pleaded in its complaint. We

express no view as to whether plaintiff’s proof will be sufficient to establish these
elements at trial.

35

desired benefit, not necessarily the more speculative expectation that a potentially

beneficial relationship will arise.” (Westside Center Associates v. Safeway Stores

23, Inc., supra, 42 Cal.App.4th at p. 524.) Here, KSC had an agency relationship

with MacDonald Dettwiler under which KSC’s commission was fixed at 15

percent of the contract price. As alleged in the complaint, if MacDonald Dettwiler

had been awarded the contract, KSC’s commission would have exceeded $30

million. This business relationship and corresponding expectancy is sufficient to

meet this first element. Only plaintiffs that can demonstrate an economic

relationship with a probable future economic benefit will be able to state a cause

of action for this tort.

Second, a defendant must have knowledge of the plaintiff’s economic

relationship. KSC alleges that “Loral acted with full knowledge of the

commission relationship between plaintiff and MacDonald Dettwiler.” Again, this

element serves to restrict the class of plaintiffs that can state a claim for this tort.

Third, the defendant must have engaged in intentionally wrongful acts

designed to disrupt the plaintiff’s relationship. As discussed above, this requires a

plaintiff to plead (1) that the defendant engaged in an independently wrongful act,

and (2) that the defendant acted either with the desire to interfere or the knowledge

that interference was certain or substantially certain to occur as a result of its

action. Here, KSC alleges that defendants bribed and offered sexual favors to

Korean officials, and paid excessive commissions, in violation of the Foreign

Corrupt Practices Act. Further, KSC claims that Loral acted “knowing that its

interference with the award of the contract on a competitive basis would cause

plaintiff severe loss.”

This intent requirement is an appropriate limitation on both the potential

number of plaintiffs that may bring a claim under this tort and the remoteness of

these plaintiffs to a defendant’s wrongful conduct. At the very least, a defendant

36

must know that its action is substantially certain to interfere with the plaintiff’s

business expectancy. This interference becomes less certain as the time frame

expands, the identity of potential victims becomes more vague, the causal

sequence becomes more attenuated, and the assumption of easy preventability

becomes less plausible. If the interference is not certain or substantially certain to

occur as a result of the defendant’s acts, then a plaintiff will not be able to state a

claim for intentional interference with prospective economic advantage. However,

if a defendant knows that its wrongful acts are substantially certain to injure the

plaintiff’s business expectancy, the defendant can be held liable, regardless of the

motivation behind its actions.

Liability will not be imposed for unforeseeable harm, since the plaintiff

must prove that the defendant knew that the consequences were substantially

certain to occur. For example, if the president of MacDonald Dettwiler stood to

receive a bonus if the company secured the SAR contract, it would be unlikely that

Lockheed Martin would have known this with substantial certainty. Here,

however, KSC has alleged that defendants had full knowledge of its commission

relationship with MacDonald Dettwiler and that KSC would lose its commission if

Lockheed Martin secured the contract through anticompetitive means.

Fourth, only plaintiffs that can demonstrate actual disruption of their

economic relationship will be able to state a claim for this tort. In this case, KSC

sufficiently pleads actual disruption by alleging that it did not receive its expected

commission, since MacDonald Dettwiler was not awarded the contract.

Fifth, a plaintiff must establish proximate causation. Specifically, this

element requires a plaintiff to show that the economic harm it suffered was

proximately caused by the acts of the defendant. Here, KSC claims that

MacDonald Dettwiler would have been awarded the contract but for Lockheed

Martin’s interference. KSC specifically pleads that MacDonald Dettwiler’s

37

product was superior and that its bid was significantly lower than the bid

submitted by Lockheed Martin. KSC also alleges that its own loss of commission

from MacDonald Dettwiler was directly caused by Lockheed Martin’s tortious

acts. We therefore conclude that KSC has satisfied the proximate cause element.

In other cases, however, this proximate cause requirement will prevent a plaintiff

from recovering for harm that is more remotely connected to a defendant’s

wrongful conduct.

F.

An actor engaging in unlawful conduct with the knowledge that its actions

are certain or substantially certain to interfere with a party’s business expectancy

should be held accountable. Liability for such actions, which are independently

wrongful, should not turn on the subjective intent of the defendant.

We conclude that the Court of Appeal correctly determined that to state a

claim for intentional interference with prospective economic advantage, a plaintiff

need not plead that the defendant acted with the specific intent to interfere with the

plaintiff’s business expectancy.15 Further, we agree that plaintiff in this case has

sufficiently pled that defendants acted with the required intent, that is, the

knowledge that its actions were certain or substantially certain to interfere with

plaintiff’s business expectancy.


15

As noted above, however, we disagree with the Court of Appeal’s

determination that, after Della Penna, supra, 11 Cal.4th 376, it is no longer
appropriate for courts to apply elements of this tort that we first formulated in
Buckaloo, supra, 14 Cal.3d 815, with the addition of the independent
wrongfulness requirement.

38

IV.

We reverse the judgment of the Court of Appeal with respect to its holding

that plaintiff has stated a cause of action under the unfair competition law and we

affirm the judgment of the Court of Appeal with respect to its determination that

plaintiff has stated a cause of action for the tort of interference with prospective

economic advantage. The present case is remanded to the Court of Appeal for

proceedings consistent with this opinion.

MORENO, J.

WE CONCUR: KENNARD, ACTING C. J.
BAXTER,

J.

WERDEGAR,

J.

* RUBIN, J.


*

Honorable Laurence D. Rubin, Associate Justice, Court of Appeal, Second

Appellate District, Division Eight, assigned by the Acting Chief Justice pursuant
to article VI, section 6 of the California Constitution.

39









CONCURRING OPINION BY KENNARD, ACTING C. J.




I concur in the majority opinion.

The majority holds that disgorgement of profits is not an available remedy

under California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et

seq.) when the action is brought by an individual entity on its own behalf. This

conclusion logically follows from this court’s decision in Kraus v. Trinity

Management Services, Inc. (2000) 23 Cal.4th 116 (Kraus). That case held that

disgorgement of profits is not an available remedy in a representative action under

the UCL when the case is not brought as a class action. Kraus explained: “[T]he

Legislature has not expressly authorized monetary relief other than restitution in

UCL actions, but has authorized disgorgement into a fluid recovery fund in class

actions. Although the Legislature is well aware of the distinction between class

actions and representative actions, it has not done so for representative UCL

actions.” (Id. at p. 137.) On this issue, I agreed with the majority in Kraus.

I wrote separately in Kraus, however, because I was troubled by dictum in

that case suggesting “ ‘it may be appropriate . . . to condition payment of

restitution to [nonparty] beneficiaries of a representative UCL action on execution

of acknowledgement that the payment is in full settlement of claims against the

defendant.’ ” (Kraus, supra, 23 Cal.4th at p. 142 (conc. opn. of Kennard, J.)

quoting maj. opn., id. at pp. 138-139.) But here the issue of conditioning payment

of restitution to nonparty beneficiaries in a representative UCL action is not

1

implicated because this case involves an individual entity, the agent of

unsuccessful bidders for a lucrative contract to supply military equipment to the

Republic of Korea. Because plaintiff here paid no money to defendant successful

bidder, I agree with the majority that plaintiff is not entitled to restitution. (Maj.

opn., ante, at p. 14.)

KENNARD,

ACTING

C.

J.

2






CONCURRING OPINION BY WERDEGAR, J.




I agree with the majority that a plaintiff, in order to state a claim for

interference with prospective economic advantage, need not plead that a defendant

acted with the specific intent to interfere with the plaintiff’s business expectancy,

and with the reasoning leading to that conclusion. (Maj. opn., ante, at pp. 2, 19-

38.) Under compulsion of Kraus v. Trinity Management Services, Inc. (2000) 23

Cal.4th 116, from which I dissented, I further agree that nonrestitutionary

disgorgement of profits is not an available remedy in an individual action under

the unfair competition law, Business and Professions Code section 17200 et seq.

(Maj. opn., ante, at p. 18.) Accordingly, I concur in the judgment.

WERDEGAR, J.

1












CONCURRING AND DISSENTING OPINION BY CHIN, J.

I agree with the majority’s conclusion that disgorgement of profits is not a

proper remedy where an individual private plaintiff alleges a violation of

California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.) and the

requested disgorgement would not be restitutionary in nature. However, I dissent

from the majority’s conclusion that recovery for intentional interference with

prospective advantage is available to a plaintiff whose alleged injury only

indirectly and remotely followed from the defendant’s interference with the

prospective economic advantage of a third party with whom the plaintiff had a

contractual relationship. Here, plaintiff Korea Supply Company (KSC) alleges

that it sustained such remote, indirect, and derivative injury as a result of the

interference by defendants Lockheed Martin Tactical Systems, Inc., and Lockheed

Martin Corporation (collectively Lockheed) with the prospective economic

advantage of MacDonald, Dettwiler, and Associates Ltd. (MacDonald). Thus, in

my view, KSC may not state a claim for intentional interference with prospective

economic advantage.

I. KSC’S CLAIM FAILS FOR LACK OF A PROSPECTIVE ECONOMIC

ADVANTAGE.

As a threshold matter, KSC has improperly brought its claim as one for

intentional interference with prospective economic advantage, when it should have

brought the claim, if at all, as one for interference with contract. The “first

1



element” of a claim for intentional interference with prospective economic

advantage is “an economic relationship between the plaintiff and some third

person containing the probability of future economic benefit to the plaintiff.”

(Blank v. Kirwan (1985) 39 Cal.3d 311, 330.) Here, KSC had no existing or

prospective economic relationship with the Republic of Korea, which is the only

entity with which Lockheed had any dealings. As KSC alleged and as the

majority explains (maj. opn., ante, at p. 15), KSC expected to receive payment

from MacDonald, not from the Republic of Korea. Thus, KSC’s only economic

relationship here was its existing contractual relationship with MacDonald, and

KSC alleges that Lockheed’s actions prevented KSC from realizing the benefits of

that existing contract. Given these allegations, KSC’s claim is, in reality, a claim

for interference with contract, not intentional interference with prospective

economic advantage. As the Restatement Second of Torts (Restatement Second)

explains, the latter claim “is concerned only with intentional interference with

prospective contractual relations, not yet reduced to contract.” (Rest.2d, § 766B,

com. a, p. 20, italics added; see also Shoemaker v. Myers (1990) 52 Cal.3d 1, 24

[complaint identifying “no ‘prospective economic advantage’ other than

continuation of [plaintiff’s] employment relationship” is, “in reality,” claim for

inducement of breach of contract].) Thus, as Lockheed argued in its demurrer,

KSC’s claim for prospective economic advantage fails at the threshold because the

complaint fails to allege “a prospective economic relationship between [KSC] and

a third person, and the disruption of that relationship.”

In reaching a contrary conclusion, the majority errs factually in stating that

KSC does “not allege” that it had a contractual agreement with MacDonald. (Maj.

opn., ante, at p. 25.) KSC’s complaint alleges that KSC had a “commission

relationship” with MacDonald providing for KSC to receive “fifteen percent

(15%) of the contract price,” and that Lockheed’s interference caused KSC to lose

2



“its agreed commission.” (Italics added.) At oral argument before us, KSC cited

these allegations in arguing that it had alleged a “contract between” itself and

MacDonald. Similarly, at the hearing on Lockheed’s demurrer, KSC argued that it

could pursue the interference claim because it “had a contract with [MacDonald]

affording [KSC] a 15 percent commission on the contract price if [MacDonald]

won the contract.” (Italics added.) In the Court of Appeal, KSC argued that it

“was contractually entitled to receive fifteen percent (15%) of the contract price”

if MacDonald obtained the contract, that its economic interests were intertwined

with MacDonald “given [its] contractual representation of MacDonald . . . and its

contractual entitlement to a commission” if MacDonald obtained the contract, and

that it could pursue the interference claim “by virtue of its commissionable

contractual interest” in MacDonald’s prospective contract. (Italics added.) Thus,

the record demonstrates that the majority is simply wrong in asserting that KSC

does not allege “an enforceable contract” with MacDonald. (Maj. opn., ante, at p.

26.) Moreover, because this case comes to us after the sustaining of a demurrer,

we must assume, based on these allegations, that KSC had a valid and enforceable

commission contract with MacDonald.

The majority also errs in asserting that “the existence of a contract does not

mean that a plaintiff’s claim must be brought exclusively as one for interference

with contract.” (Maj. opn., ante, at p. 26.) As support for its assertion, the

majority cites dictum in Buckaloo v. Johnson (1975) 14 Cal.3d 815 (Buckaloo).

(Maj. opn., ante, at pp. 25-26.) In generally describing the historical development

of the interference torts, Buckaloo stated that “the tort of interference with contract

is merely a species of the broader tort of interference with prospective economic

advantage.” (Buckaloo, supra, 14 Cal.3d at p. 823.) Buckaloo also stated that the

tort of intentional interference with prospective economic advantage “is

considerably more inclusive than actions based on contract or interference with

3



contract, and thus is not dependent on the existence of a valid contract.” (Id. at pp.

826-827.) Buckaloo also seemingly endorsed a federal district court’s view that

“ ‘[r]ather than characterizing’ ” interference with contract and intentional

interference with prospective business relations “ ‘as separate torts, the more

rational approach seems to be that the basic tort of interference with economic

relations can be established by showing, inter alia, an interference with an existing

contract or a contract which is certain to be consummated . . . .’ ” (Id. at p. 823,

fn. 6.) The majority’s assertion rests exclusively on this dictum. (See maj. opn.,

ante, at p. 26.)

For several reasons, Buckaloo’s dictum is insufficient to support the

majority’s conclusion. First, other statements in Buckaloo contradict the

majority’s analysis. Buckaloo explained that the tort of intentional interference

with prospective advantage applies where “a prospective economic relationship

has not attained the dignity of a legally enforceable agreement . . . .” (Buckaloo,

supra, 14 Cal.3d at p. 827.) Buckaloo also stressed that the “area of activity” this

tort protects “is not a contractual relationship but an economic relationship with

the potential to ripen into contract.” (Id. at p. 830, fn. 7.) It is in this sense—the

protection of noncontractual relationships—that Buckaloo stated that the tort of

intentional interference with prospective advantage “is considerably more

inclusive than” the tort of interference with contract. (Id. at pp. 826-827.) As the

statements I have quoted make clear, Buckaloo was not, as the majority incorrectly

suggests, indicating that the tort of intentional interference with prospective

economic advantage also includes claims based on a valid and enforceable

contract. Thus, several statements in Buckaloo contradict the majority’s view that

4



a plaintiff may base a claim for intentional interference with prospective

advantage on an interference with a valid and enforceable contract.1

Second, the majority’s reliance on Buckaloo’s dictum is also incorrect

because the federal decision Buckaloo endorsed did not, as the majority

erroneously suggests, state that a claim for interference with contract may be

brought as one for intentional interference with prospective economic advantage.

Rather, it suggested that these claims should be recognized not as “ ‘separate

torts,’ ” but as alternative theories for establishing a single, broader tort called

“ ‘interference with economic relations.’ ” (Buckaloo, supra, 14 Cal.3d at p. 823,

fn. 6, quoting Builders Corporation of America v. United States (N.D.Cal. 1957)

148 F.Supp. 482, 484, fn. 1, revd. on other grounds (9th Cir. 1958) 259 F.2d 766.)

Despite Buckaloo’s dictum, we have not recognized this broader tort. On the

contrary, we have stressed the “need to draw and enforce a sharpened distinction

between claims for the tortious disruption of an existing contract and claims that a

prospective contractual or economic relationship has been interfered with by the

defendant.” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th

376, 392 (Della Penna).) Indeed, the majority purports to “reiterate” Della

Penna’s statement that California courts should “ ‘firmly distinguish’ ” between

these two separate torts. (Maj. opn., ante, at pp. 24-25.) Unfortunately, the

majority fails to follow this statement.


1

The majority asserts that these statements were “merely made in

furtherance of Buckaloo’s central thesis: that the existence of a contract is not
necessary to maintain an action for intentional interference with prospective
economic advantage.” (Maj. opn., ante, at p. 26, fn 10.) What the majority fails
to understand, and what the statements I have quoted establish, is that this thesis
does not, as the majority incorrectly concludes, imply that an action for intentional
interference with prospective economic advantage may be brought where there is a
valid contract.

5



Finally, the other statement from Buckaloo the majority cites—that “ ‘the

tort of interference with contract is merely a species of the broader tort of

interference with prospective economic advantage’ ” (maj. opn., ante, at p. 25)—is

both imprecise and incorrect. Buckaloo cited several authorities as establishing

this proposition, but none of them stated that the tort of interference with contract

is a species of the tort of intentional interference with prospective economic

advantage. Rather, to the extent they spoke to this question, consistent with the

federal decision discussed above, they characterized or analyzed interference with

contract and intentional interference with prospective economic advantage as

separate aspects of the broader “subject of interference with commercial or

economic relations.” (Prosser, Torts (4th ed. 1971) § 128, p. 915; see also 1

Harper & James, Torts (1956) § 6.5, p. 489 [interference with contract “is one of

several segments of a large area of the law of tort in which damages may be

recovered for unlawfully causing loss to the plaintiff in connection with his

business relations”]; id. at §§ 6.7, 6.11, pp. 495, 510 [actions for interference with

contract and interference with reasonable economic expectations protect different

rights and interests]; 4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, pp.

2634-2643; Note, Developments in the Law—Competitive Torts (1964) 77 Harv.

L.Rev. 888, 961 [stressing “the difference between the action for inducing breach

of contract and the action for interference with prospective advantage”].)2

Consistent with these authorities, in an extensive historical discussion, we have

previously labeled “interference with contract” and “interference with prospective

economic relations” as, generally, “the so-called ‘interference torts,’ ” and


2

Buckaloo also cited Bernhardt, California Real Estate Transactions

(Cont.Ed.Bar 1974 supp.) section 5.81. (Buckaloo, supra, 14 Cal.3d at p. 823.)
That source did not address the issue or otherwise support Buckaloo’s statement.

6



characterized them as “two torts” that are “sibling[s].” (Della Penna, supra, 11

Cal.4th at p. 381.) Thus, Buckaloo’s dictum is erroneous and it fails to support the

majority’s assertion that KSC may properly base a claim for intentional

interference with prospective economic advantage on allegations that Lockheed

interfered with the existing contract between KSC and MacDonald.

The discussion of this subject in the Restatement Second, on which the

majority heavily relies, fully supports the conclusion that Buckaloo’s dictum, and

the majority’s conclusion based on that dictum, are incorrect. Consistent with the

authorities I have already discussed, the Restatement Second explains that

interference with contract and “interference with prospective advantage” are

separate “form[s]” of the broader subject of “intentional interference with business

relations.” (Rest.2d, § 766A, com. b, p. 18; see also id., § 767, com. j, p. 37

[interference with contract and interference with prospective economic advantage

are separate “forms of interference with business relations”].) The Restatement

Second also explains that, as their names suggest, intentional interference with

contract involves only interference with an “existing contract,” whereas

intentional interference with prospective economic advantage “is concerned only

with intentional interference with prospective contractual relations not yet reduced

to contract.” (Rest.2d, § 766B, com. a, p. 20, italics added.) Thus, the

Restatement Second supports the conclusion that because KSC alleges only a loss

of benefits under its existing contract with MacDonald, and it had no prospective

relationship with the Republic of Korea, its claim for intentional interference with

prospective economic advantage fails at the threshold for lack of a prospective

economic advantage with which Lockheed allegedly interfered. The majority’s

contrary conclusion improperly “blurs the analytical line between interference

with an existing business contract and interference with commercial relations less

7



than contractual,” thus “invit[ing] both uncertainty and unpredictability . . . .”

(Della Penna, supra, 11 Cal.4th at p. 392.)

II. KSC’S ALLEGED INJURIES ARE TOO REMOTE TO WARRANT RECOVERY.

In its demurrer, Lockheed argued that “the economic relationship [it]

allegedly disrupted was MacDonald’s . . . effort to obtain the award of the . . .

contract from” the Republic of Korea, and that KSC’s alleged injury was merely

“an indirect consequence of” this alleged disruption. This indirect injury,

Lockheed continued, “does not give rise to a claim for intentional interference

with prospective economic advantage because [KSC] cannot show that the injury

resulted from the disruption of a prospective economic relationship to which

[KSC] was a party.” In sustaining the demurrer, the trial court agreed with

Lockheed, finding that KSC’s claim failed because it was “secondary and

derivative and indirect and [KSC] has found no case from any U.S. state or federal

jurisdiction giving cognizance to a comparable secondary or derivative or indirect

claim.”

The majority rejects this view and holds that “an indirectly injured plaintiff

may state a claim” for intentional interference with prospective economic

advantage, and may do so “without pleading that the defendant acted with the

purpose to interfere with the plaintiff’s business expectancy.” (Maj. opn., ante, at

p. 33.) The majority gives scant attention to this issue. It cites no decisions, from

California or elsewhere, supporting either its analysis or its holding. The sole

authority the majority cites is a portion of comment h to section 767 of the

Restatement Second (comment h). The majority states: “Section 767, comment h,

of the Restatement [Second], discussing the proximity or remoteness of the

defendant’s conduct to the interference, supports our conclusion: ‘This

remoteness [between the defendant’s conduct and the plaintiff’s injury] conduces

toward a finding that the interference was not improper. The weight of this factor,

8



however, may be controverted by . . . the factor of the actor’s conduct if that

conduct was inherently unlawful or independently tortious.’ [Citation.] If the

defendant’s improper conduct constitutes independently wrongful behavior, the

fact that the plaintiff is an indirect victim does not preclude recovery.” (Maj. opn.,

ante, at pp. 33-34, fn. omitted.)

For several reasons, comment h is insufficient support for the majority’s

conclusion that KSC’s status as “an indirect victim does not preclude recovery.”

(Maj. opn., ante, at p. 34.) First, comment h does not, as the majority suggests,

categorically state that a defendant’s commission of an independently wrongful

act does overcome remoteness between the defendant’s conduct and the plaintiff’s

injury. Rather, in decidedly equivocal terms, comment h states that the

significance of remoteness “may be controverted . . . perhaps by the factor of the

actor’s conduct if that conduct was inherently unlawful or independently tortious.”

(Rest.2d, § 767, com. h, p. 36, italics added.) Comment h’s equivocal language

does not support the majority’s categorical holding that where a defendant’s

conduct is independently wrongful, “the fact that the plaintiff is an indirect victim

does not preclude recovery.”3 (Maj. opn., ante, at p. 34.)

Second, comment h addresses proximity and remoteness in the context of

an interference with an existing contract, not an interference with a merely

prospective economic advantage. This fact is clear from the portion of comment h

that immediately precedes the portion the majority quotes, which states: “If . . . A


3

Comment b of section 767 of the Restatement Second makes the same

point. In discussing “the interplay between” a defendant’s “motive” and “the
nature of [his or her] conduct,” it states, in equivocal terms, that “[i]f the conduct
is independently wrongful . . . the desire to interfere with the other’s contractual
relations may be less essential to a holding that the interference is improper.”
(Rest.2d, § 767, com. b, p. 33, italics added.)

9



induces B to sell certain goods to him and thereby causes him not to perform his

contract to supply the goods to C, this may also have the effect of preventing C

from performing his contractual obligations to supply them to D and E. C’s

failure to perform his contracts is a much more indirect and remote consequence

of A’s conduct than B’s breach of his contract with C, even assuming that A was

aware of all contractual obligations and the interference can be called

intentional.” (Rest.2d, § 767, com. h, p. 36, italics added.) This fact is significant

because, as the Restatement Second elsewhere explains, the law affords “greater

protection . . . to the interest in an existing contract than to the interest in acquiring

prospective contractual relations,” and section 767’s “weighing process” therefore

“does not necessarily reach the same result in regard to” these separate “forms of

interference with business relations.” (Rest.2d, § 767, com. j, p. 37; see also id.,

com. a, p. 27 [weight of various factors “may vary considerably” with respect to

different “forms of the tort”].) Thus, comment h’s discussion of the interaction

between independently wrongful means and remoteness in the context of an

interference with an existing contract does not necessarily apply to the same extent

with regard to an interference with a merely prospective economic advantage. By

failing to distinguish between these torts, the majority, in the words of the

Restatement Second, “produce[s] a blurring of the significance of the factors

involved in determining liability.”4 (Rest.2d, ch. 37, Introductory Note, p. 5.)


4

As should be clear, I do not, as the majority states, “assert[]” that section

767 of the Restatement Second does not apply to intentional interference with
prospective economic advantage. (Maj. opn., ante, at p. 34, fn. 12.) What I do
assert is that given the Restatement Second’s caution that “the weight carried by”
the various factors “may vary considerably” with respect to the different
interference torts (Rest.2d, § 767, com. a, p. 27), the majority errs in simply
assuming that comment h’s discussion of remoteness in the context of interference

(Footnote continued on next page.)

10



Third, and most important, the Restatement Second’s sections and

comments regarding interference with contract and intentional interference with

prospective economic advantage do not even purport to address the fundamental

question before us: whether Lockheed’s alleged interference is the legal cause of

the remote, indirect, and derivative injury KSC alleges. The relevant sections of

the Restatement Second state rules for determining whether someone is “subject to

liability.” (Rest.2d, §§ 766, 766B.) Under the Restatement Second, “subject to

liability” means only that “the actor’s conduct is such as to make him liable for

another’s injury, if,” in addition, “the actor’s conduct is a legal cause” of the

injury. (Rest.2d, § 5, italics added.) “Legal cause,” according to the Restatement,

means that “the causal sequence by which the actor’s tortious conduct has resulted

in an invasion of some legally protected interest of another is such that the law

holds the actor responsible for such harm unless there is some defense to liability.”

(Rest.2d, § 9.) Regarding the relationship between these concepts, the

Restatement Second explains: “To become liable . . . under the principles of the

law of Torts, an actor’s conduct must not only be tortious in character but it must

also be a legal cause of the invasion of another’s interest. If the actor has engaged

in conduct which is tortious in character, he thereby subjects himself to liability

. . . . In order that the actor become liable to another, it is necessary, among other

things, that his conduct be the legal cause of the invasion of the other’s interest

. . . .” (Rest.2d, § 9, com. a, p. 16.) “In order that a particular act or omission may

be the legal cause of an invasion of another’s interest, the act or omission must be



(Footnote continued from previous page.)

with contract necessarily applies to the same extent to intentional interference with
prospective economic advantage.

11



a substantial factor in bringing about the harm, and there must be no principle or

rule of law which restricts the actor’s liability because of the manner in which the

act or omission operates to bring about such invasion.” (Rest.2d, § 9, com. b, p.

16.) Thus, a defendant “may be ‘subject to liability’ ” within the meaning of the

Restatement Second “but may escape” liability if his or her conduct is not “the

legal cause of the plaintiff’s harm.” (Rest.2d, § 5, com. b, p. 11.) Because the

Restatement Second’s sections on interference with contract and intentional

interference with prospective economic advantage consider the circumstances only

for determining whether a defendant is “subject to liability” (Rest.2d, §§ 766,

766B), they do not even purport to address the more fundamental question now

before us: whether Lockheed’s alleged interference is the legal cause of the

remote, indirect, and derivative injury KSC alleges. Thus, the majority’s reliance

on the Restatement Second is both inadequate and unpersuasive.

Our prior decisions discuss similar concepts in tort law. As we have

explained, “[p]roximate cause involves two elements. [Citation.] One is cause in

fact. An act is a cause in fact if it is a necessary antecedent of an event.

[Citation.] . . . [¶] To simply say, however, that the defendant’s conduct was a

necessary antecedent of the injury does not resolve the question of whether the

defendant should be liable. . . . ‘[T]he consequences of an act go forward to

eternity, and the causes of an event go back to the dawn of human events, and

beyond. But any attempt to impose responsibility upon such a basis would result

in infinite liability for all wrongful acts, and would “set society on edge and fill

the courts with endless litigation.” ’ [Citation.] Therefore, the law must impose

limitations on liability other than simple causality. These additional limitations

are related not only to the degree of connection between the conduct and the

injury, but also with public policy. [Citation.] As Justice Traynor observed,

proximate cause ‘is ordinarily concerned, not with the fact of causation, but with

12



the various considerations of policy that limit an actor’s responsibility for the

consequences of his conduct.’ [Citation.]” (PPG Industries, Inc. v. Transamerica

Ins. Co. (1999) 20 Cal.4th 310, 315-316 [holding that although the defendant was

cause in fact of the plaintiff ‘s damages, for policy reasons, it was not proximate

cause].) In short, proximate cause is “ ‘a policy-based legal filter on “but for”

causation’ ” that courts apply “ ‘ “to those more or less undefined considerations

which limit liability even where the fact of causation is clearly established.” ’

[Citation.]” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434,

464.) Moreover, to the extent proximate cause involves “limitations imposed

upon liability as a matter of public policy, the issue is for the court” to decide as “a

question of law.” (Mosley v. Arden Farms Co. (1945) 26 Cal.2d 213, 223 (conc.

opn. of Traynor, J.).) Thus, the majority errs in concluding that KSC “has

satisfied the proximate cause element” merely by pleading that its injury “was

directly caused by” Lockheed’s alleged interference. (Maj. opn., ante, at p. 38.)

This allegation does “not . . . render the complaint sufficient” because, as I later

explain, “it affirmatively appears from other allegations that the act[s] made the

basis of liability [are], as a matter of law, not the proximate cause of the injury

complained of.” (Katz v. Helbing (1928) 205 Cal. 629, 633.)

Regarding the more fundamental policy question of legal, or proximate,

cause, the majority has little to say. The majority declares that there is “no sound

reason for requiring that a defendant’s wrongful actions must be directed towards

the plaintiff.” (Maj. opn., ante, at p. 34). To do so, the majority suggests, would

exclude what a law review article describes as “ ‘the most numerous of the tortious

interference cases’ ”—“ ‘those in which the disruption is caused by an act directed

not at the plaintiff, but at a third person.’ ” (Maj. opn., ante, at p. 34.)

This analysis simply attacks a straw man of the majority’s own creation.

Contrary to the majority’s suggestion, no one asserts that we should allow

13



recovery only where the defendant’s wrongful act is “directed towards the

plaintiff.” (Maj. opn., ante, at p. 34.) Rather, the issue here is whether to allow

recovery where the wrongful act is not directed towards the plaintiff or towards

anyone with whom the plaintiff had a prospective economic advantage. As I have

previously explained, Lockheed directed no actions towards either KSC or

MacDonald. It directed its actions only towards the Republic of Korea—with

which KSC has no prospective economic relationship—and KSC’s alleged injury

is only a remote, indirect, and derivative consequence of those alleged acts

towards the Republic of Korea. Moreover, contrary to the majority’s suggestion,

cases involving such derivative injury are not among those that the cited law

review article described as being the “most numerous.” (Perlman, Interference

with Contract and Other Economic Expectancies: A Clash of Tort and Contract

Doctrine (1982) 49 U.Chi. L.Rev. 61, 106.) According to the article, that category

consists of cases in which the defendant’s act of interference was directed towards

a third person who was “in a [r]elationship with the [p]laintiff.” (Ibid.; see also id.

at p. 99.) Again, this is not such a case, because Lockheed’s alleged acts were not

directed towards anyone having either an existing or prospective relationship with

KSC.5

The majority also summarily declares that because, under Della Penna,

supra, 11 Cal.4th 376, a defendant’s liability for intentional interference with

prospective economic advantage requires commission of “an independently

wrongful act,” a plaintiff’s standing to sue should not “turn on” the defendant’s

5

Nor does the passage the majority cites from the concurring opinion in

Della Penna (maj. opn., ante, at p. 34) address recovery where the defendant’s
alleged act of interference is not directed towards the plaintiff or towards anyone
with whom the plaintiff has an existing or prospective economic relationship.
(Della Penna, supra, 11 Cal.4th at p. 409 (conc. opn of Mosk, J.).)

14



“subjective intent.” (Maj. opn., ante, at p. 32.) A contrary conclusion, the

majority reasons, would produce “absurd and unfair results.” (Ibid.) Again, the

majority cites no case law supporting its analysis and conclusion. Moreover, the

majority’s reliance on Della Penna’s wrongful act requirement subverts and

distorts the purpose of that requirement. In Della Penna, we required an

independently wrongful act in order to restrict the scope of the tort. Contrary to

this purpose, the majority here uses that requirement as justification for

significantly expanding the tort’s scope by allowing recovery for remote, indirect,

and derivative injuries. Finally, the majority’s conclusion that it would be unfair

to preclude recovery for indirect and remote injury simply because the defendant

lacked specific intent begs the more fundamental, threshold question of whether a

plaintiff with remote, indirect, and derivative injury should be able to recover even

if the defendant had specific intent.

Regarding this threshold policy question, and lacking governing California

authority, we should follow the substantial body of case law from other courts—

including the United States Supreme Court—that deals with analogous causes of

action and holds that parties with remote, indirect, and derivative injuries may not

recover. The high court has addressed this subject in the context of antitrust law.

Consistent with the causation principles I have previously discussed, the high

court has explained that although “[a]n antitrust violation may be expected to

cause ripples of harm to flow through the Nation’s economy,” “ ‘there is a point

beyond which the wrongdoer should not be held liable.’ [Citation.]” (Blue Shield

of Virginia v. McCready (1982) 457 U.S. 465, 476-477 (Blue Shield).) Like

“common-law” remedies, “the judicial remedy” for an antitrust violation “cannot

encompass every conceivable harm that can be traced to alleged wrongdoing.”

(Associated General Contractors of California, Inc. v. California State Council of

Carpenters (1983) 459 U.S. 519, 535-536 (Associated General).) Thus, in an

15



antitrust case, the “question of which persons have been injured by” the alleged

antitrust violation “is analytically distinct from the question of which persons have

sustained injuries too remote to give them standing to sue for damages . . . .”

(Illinois Brick Co. v. Illinois (1977) 431 U.S. 720, 728, fn. 7 (Illinois Brick); see

also Blue Shield, supra, 457 U.S. at p. 476.)

The high court focused on these questions in Associated General, where

several labor unions sought damages for an alleged antitrust violation by an

employers association. The unions alleged that the employers association illegally

“coerced certain third parties . . . to enter into business relationships with

nonunion firms. This coercion, according to the [unions’] complaint, adversely

affected the trade of certain unionized firms and thereby restrained the business

activities of the unions.” (Associated General, supra, 459 U.S. at pp. 520-521.)

The court of appeals held that the unions “had standing to recover damages for the

injury to their own business activities” because their injury was not only “a

foreseeable consequence of the antitrust violation,” but also “was specifically

intended by the defendants.” (Id. at p. 525.) The high court disagreed and held

that the unions could not maintain their antitrust action notwithstanding their

“allegation of intent to harm.” (Id. at p. 545.)

Notably, in reaching its conclusion, the high court in Associated General

expressly relied on common law principles, which are, of course, applicable in the

case now before us. The court reasoned: “In 1890, notwithstanding general

language in many state constitutions providing in substance that ‘every wrong

shall have a remedy,’ a number of judge-made rules circumscribed the availability

of damages recoveries in both tort and contract litigation—doctrines such as

foreseeability and proximate cause, directness of injury, certainty of damages, and

privity of contract. Although particular common-law limitations were not debated

in Congress, the frequent references to common-law principles [in Congressional

16



debates on the antitrust laws] imply that Congress simply assumed that antitrust

damages would be subject to constraints comparable to well-accepted common-

law rules applied in comparable litigation.” (Associated General, supra, 459 U.S.

at pp. 532-533, fns. omitted.) The court noted that, based on this understanding of

congressional intent, federal judges had “held as a matter of law that neither a

creditor nor a stockholder of a corporation that was injured by a violation of the

antitrust laws could recover” because a “plaintiff’s injury as a stockholder [is]

‘indirect, remote, and consequential.’ [Citation.]” (Id. at p. 533.) “This holding,”

the high court continued, is “consistent with . . . ‘[t]he general tendency of the law,

in regard to damages at least, . . . not to go beyond the first step.’ [Citation.]” (Id.

at p. 534.) Thus, the court reasoned, “as was required in common-law damages

litigation in 1890,” the question of whether the plaintiff “may recover for the

injury it allegedly suffered by reason of the defendants’ coercion against certain

third parties . . . requires . . . evaluat[ion of] the plaintiff’s harm, the alleged

wrongdoing by the defendants, and the relationship between them.” (Id. at p. 535,

fn. omitted.)

In holding that the unions could not maintain their antitrust action, the high

court in Associated General stressed, among other factors, the “indirectness of the

[unions’] asserted injury.” (Associated General, supra, 459 U.S. at p. 540.)

Focusing on the “chain of causation” between the unions’ injury and the alleged

antitrust violation, the high court found “that any such injuries were only an

indirect result of whatever harm may have been suffered by [the] construction

contractors and subcontractors” that lost business due to the defendants’ coercion.

(Id. at pp. 540-541.) “If either these firms, or the immediate victims of coercion

by defendants, have been injured by an antitrust violation, their injuries would be

direct and . . . they would have a right to maintain their own . . . actions against the

defendants. . . . The existence of an identifiable class of persons whose self-

17



interest would normally motivate them to” sue “diminishes the justification for

allowing . . . more remote part[ies] such as the [unions] to” maintain an action.

(Id. at pp. 541-542.) “Denying the [u]nion[s] a remedy on the basis of [the]

allegations in this case is not likely to leave a significant antitrust violation

undetected or unremedied.” (Id. at p. 542.) “Indeed,” the court explained, “if

there is substance to the [u]nion[s’] claim, it is difficult to understand why these

direct victims of the conspiracy have not asserted any claim in their own right.”

(Id. at p. 542, fn. 47.)

In Illinois Brick, the high court applied similar principles in holding that

where the defendant violates the antitrust laws by fixing prices and sells to an

entity that passes the resulting overcharges on to its customers, the injuries of the

customers resulting from the defendant’s antitrust violation are legally too remote

to support recovery. (Illinois Brick, supra, 431 U.S. at pp. 725-729.) The court

acknowledged that this holding “denies recovery to . . . indirect purchasers who

may have been actually injured by antitrust violations.” (Id. at p. 746.) However,

“[i]n view of” the relevant policy “considerations,” the court was “unwilling to

carry the compensation principle to its logical extreme by attempting to allocate

damages among all ‘those within the defendant’s chain of distribution’ [citation]

. . . .” (Ibid.) The considerations the court cited were the defendant’s “interest . . .

in avoiding multiple liability for” the amount of the overcharge, “the interest of

absent potential plaintiffs in protecting their right to recover for the portion of the

[overcharge] allocable to them and the social interest in the efficient

administration of justice and the avoidance of multiple litigation.” (Id. at pp. 737-

738.)

The high court reaffirmed Illinois Brick in Kansas v. Utilicorp United, Inc.

(1990) 497 U.S. 199. There, the court held that where natural gas suppliers

illegally overcharged a public utility and the utility passed on the overcharge to its

18



customers, the customers’ injuries were too remote to support an antitrust action.

(Id. at p. 204.) The court explained that the customers “have the status of indirect

purchasers” because “[i]n the distribution chain, they are not the immediate buyers

from the alleged antitrust violators.” (Id. at p. 207.) The court next observed that

its decision in Illinois Brick “den[ies] relief to consumers who have paid inflated

prices because of their status as indirect purchasers. [Citations.]” (Kansas, supra,

497 U.S. at pp. 211-212.) Finally, the court refused to create an exception to “the

Illinois Brick rule” for cases involving public utilities, “even assuming that any

economic assumptions underlying [that] rule might be disproved in a specific case

. . . .” (Kansas, supra, 497 U.S. at p. 217.)

In Holmes v. Securities Investor Protection Corp. (1992) 503 U.S. 258

(Holmes), the high court applied these same principles to a claim under the

Racketeer Influenced and Corrupt Organizations Act (RICO). In Holmes, plaintiff

Securities Investor Protection Corporation (SIPC) alleged that the defendant, in

violation of RICO, illegally “conspired in a stock-manipulation scheme that

disabled two broker-dealers from meeting obligations to customers,” which in turn

“trigger[ed] SIPC’s statutory duty to advance funds to reimburse the customers.”

(Holmes, supra, 503 U.S. at p. 261.) The court held that SIPC could not maintain

its claim because its injuries were too remote.

In reaching its conclusion, the Holmes court began by finding it “unlikel[y]

that Congress meant to allow all factually injured plaintiffs to recover . . . .”

(Holmes, supra, 503 U.S. at p. 266, fn. omitted.) The court explained that “ ‘[i]n a

philosophical sense, the consequences of an act go forward to eternity, and the

causes of an event go back to the dawn of human events, and beyond. But any

attempt to impose responsibility upon such a basis would result in infinite liability

for all wrongful acts, and would “set society on edge and fill the courts with

endless litigation.” ’ [Citation.]” (Id. at p. 266, fn. 10.) Relying on Associated

19



General, the Holmes court then found that because Congress “incorporate[d]

common-law principles of proximate causation” into RICO, a plaintiff’s right to

recover under RICO “require[s] a showing that the defendant’s violation not only

was a ‘but for’ cause of his injury, but was the proximate cause as well.” (Holmes,

supra, 503 U.S. at p. 268.) The court next explained that one aspect of proximate

cause—which is a generic label for “the judicial tools used to limit a person’s

responsibility for the consequences of [his or her] acts”—is “a demand for some

direct relation between the injury asserted and the injurious conduct alleged.

Thus, a plaintiff who complain[s] of harm flowing merely from the misfortunes

visited upon a third person by the defendant’s acts [i]s generally said to stand at

too remote a distance to recover. [Citation.]” (Id. at pp. 268-269.)

The Holmes court next discussed its application of the proximate cause

concept in antitrust cases. Citing Associated General, the court explained that

“directness of relationship” between the plaintiff’s injury and the defendant’s

conduct is one of the “central elements” of “causation” under antitrust law “for a

variety of reasons. First, the less direct an injury is, the more difficult it becomes

to ascertain the amount of a plaintiff’s damages attributable to the violation, as

distinct from other, independent, factors. [Citation.] Second, quite apart from

problems of proving factual causation, recognizing claims of the indirectly injured

would force courts to adopt complicated rules apportioning damages among

plaintiffs removed at different levels of injury from the violative acts, to obviate

the risk of multiple recoveries. [Citations.] And, finally, the need to grapple with

these problems is simply unjustified by the general interest in deterring injurious

conduct, since directly injured victims can generally be counted on to vindicate the

law as private attorneys general, without any of the problems attendant upon suits

by plaintiffs injured more remotely. [Citation.]” (Holmes, supra, 503 U.S. at pp.

269-270.)

20



Finally, applying these principles to RICO, the Holmes court held that SIPC

could not maintain its RICO action. After noting SIPC’s theory of recovery—that

SIPC was “subrogated to the rights of those customers of the broker-dealers who

did not purchase manipulated securities” (Holmes, supra, 503 U.S. at p. 270)—the

court explained: “[E]ven assuming arguendo, that [SIPC] may stand in the shoes

of nonpurchasing customers, the link is too remote between the stock

manipulation alleged and the customers’ harm, being purely contingent on the

harm suffered by the broker-dealers. That is, the conspirators have allegedly

injured these customers only insofar as the stock manipulation first injured the

broker-dealers and left them without the wherewithal to pay customers’ claims.

Although the customers’ claims are senior (in recourse to ‘customer property’) to

those of the broker-dealers’ general creditors, [citation], the causes of their

respective injuries are the same: The broker-dealers simply cannot pay their bills,

and only that intervening insolvency connects the conspirators’ acts to the losses

suffered by the nonpurchasing customers and general creditors. [¶] As we said,

however, in Associated General Contractors, quoting Justice Holmes, ‘ “The

general tendency of the law, in regard to damages at least, is not to go beyond the

first step[]” ’ [citation], and the reasons that supported conforming [antitrust]

causation to the general tendency apply just as readily to the present facts,

underscoring the obvious congressional adoption of the Clayton Act direct-injury

limitation among the requirements of” RICO. (Holmes, supra, 503 U.S. at pp.

271-272, fns. omitted.) A contrary conclusion would “[a]llow[] suits by those

injured only indirectly,” thereby “open[ing] the door to ‘massive and complex

damages litigation’ ” that would “ ‘not only burde[n] the courts, but [would] also

undermin[e] the effectiveness of treble-damages suits.’ [Citation.]” (Id. at p.

274.)

21



Lower federal courts have applied these principles to preclude recovery for

remote, indirect, and derivative injury in several cases that are relevant here

because they involved commission relationships, bribes, pendent state claims for

interference with prospective economic advantage, and/or allegations of specific

intent to harm. In Brian Clewer, Inc. v. Pan American World Airways, Inc.

(C.D.Cal. 1986) 674 F.Supp. 782, 784-788, the court held that Clewer, a travel

agency, could not maintain an antitrust action against several airlines that had

allegedly conspired to destroy Laker, another airline with which Clewer had a

commission arrangement. Like KSC, Clewer alleged damages in the form of lost

commissions. (Id. at p. 788.) Clewer also alleged that the defendants had acted

“ ‘with the object of . . . damaging [its] business.’ ” (Id. at p. 784.) Despite this

allegation, the court, applying Associated General, found that Clewer could not

maintain the action because “any injury to Clewer [was] only an indirect result of

whatever harm may have been suffered by Laker, and thus Clewer’s injury [was]

derivative of . . . Laker’s.” (Brian Clewer, Inc., supra, at p. 787.) The court

explained that “other potential plaintiffs”—Laker, Laker passengers, former Laker

employees—“stand in a better posture to assert antitrust claims due to a more

direct harm than” Clewer. (Ibid.) Given all of these potential plaintiffs, “if

Clewer and other similarly situated travel agencies are found to have standing” to

sue “for a portion of Laker’s revenues, a possibility exists of duplicative recovery

against the defendants.” (Id. at p. 788.) In concluding, the court explained:

“Clewer stands in the same position as numerous other prospective plaintiffs

whose alleged losses are indirect and derivative, i.e., other travel agencies, other

supplie[r]s of goods and services, food vendors, waste disposal services, and

custodians. . . . Clewer’s injury is too indirect to provide standing under” the

antitrust laws. (Id. at pp. 787-788.)

22



On analogous facts, another federal court reached a similar conclusion in

Fallis v. Pendleton Woolen Mills, Inc. (6th Cir. 1989) 866 F.2d 209. There, the

plaintiff, a sales representative for the defendant, filed an antitrust action alleging

that he lost commissions as a result of the defendant’s alleged price-fixing scheme.

(Id. at pp. 210-211.) The court held that the plaintiff could not maintain his action

because his alleged injury was “derivative; it [was] simply a side effect of [the

defendant’s] alleged antitrust violations. . . . Any injury to [the plaintiff] was

merely incidental to the purposes of the alleged price-fixing arrangement,” which

was “aimed at disciplining retailers and raising consumer prices, not reducing the

commissions earned by salespersons.” (Ibid.) “As is generally true where the

plaintiff’s injury is indirect, more direct victims of the alleged conspiracy exist in

the present case . . . .” (Id. at p. 211.) “ ‘[I]f the court were to allow all indirect

victims standing to sue . . . , the dangers of duplicative recovery and complex

apportionment of damages would become very real.’ [Citations.]” (Id. at pp. 211-

212.) “In light of these factors”—the indirectness of plaintiff’s injury, the

existence of more direct victims, the possibility of duplicative recovery—the court

held that the plaintiff “lack[ed] antitrust standing.” (Id. at p. 212.)

Another case involving analogous facts is Eagle v. Star-Kist Foods, Inc.

(9th Cir. 1987) 812 F.2d 538. There, fishermen alleged that fish canneries had

violated the antitrust laws by conspiring to set tuna prices at artificially low levels.

(Id. at p. 539.) The fishermen worked as crewmembers on vessels owned by

others, who sold the vessels’ catch to the canneries and then paid the fishermen

based on a “share of the catch” or the “price per ton.” (Ibid.) Regarding damages,

the fishermen alleged that the artificially low price levels “result[ed] in a reduction

of the wages” they received. (Ibid.) Applying Associated General, the court held

that the fishermen could not maintain an antitrust action because their alleged

injuries were “derivative of the injuries suffered by the vessel owners.” (Eagle,

23



supra, at p. 541.) In reaching its conclusion, the court rejected the argument that

the fishermen “were directly injured because calculation of their wages . . . was

completely and inextricably intertwined with the artificially low selling prices”

and because “they were joint venturers with the vessel owners . . . .” (Ibid.) The

court explained: “[W]hat exists between the vessel owners and the crewmembers

is an employer-employee relationship. . . . Once a sale has been completed, the

crewmembers are paid their wages . . . either on a ‘share of the catch’ or ‘per-ton’

basis. . . . Thus, any injury [they] suffered . . . is derived from any injury suffered

by the vessel owners . . . . ‘When the employer reacts to [a] loss by terminating

employees, or when employees receive diminished salary or commissions, as a

result of the employers’ weakened market position, these employees suffer

derivative injury only.’ [Citation.]” (Id. at pp. 541-542, first italics added.) The

court also reasoned that “the vessel owners . . . [have] the requisite motivation to

vindicate the public interest” in enforcement of the antitrust laws, and that “[t]he

justification for allowing the crewmembers . . . to bring the action is thereby

diminished because they are more remote parties.”6 (Eagle, supra, at p. 542.)

Still another relevant application of these remoteness principles occurred in

Hawaii Health & Welfare Trust Fund for Operating Engineers v. Philip Morris,

Inc. (D.Hawai’i 1999) 52 F.Supp.2d 1196. There, numerous “multi-employer


6

See also Southwest Suburban Board of Realtors, Inc. v. Beverly Area

Planning Assn. (7th Cir. 1987) 830 F.2d 1374, 1378 (corporate president who may
have lost commissions as a result of alleged antitrust violation may not maintain
antitrust action, because “[m]erely derivative injuries sustained by employees,
officers, stockholders, and creditors of an injured company do not constitute
‘antitrust injury’ sufficient to confer antitrust standing”); Warnick v. Washington
Education Association
(E.D.Wash. 1984) 593 F.Supp. 66, 67-69 (commissions
that sales agents lost due to the defendant’s attempt to restrain trade were
derivative injury and could not support antitrust claim).

24



labor management health and welfare funds,” which paid medical bills for union

workers, filed a RICO action against “the major cigarette manufacturers” alleging

a conspiracy to suppress information regarding the effects of smoking and

claiming damage “in the form of . . . payment of unnecessary medical costs to

[fund] beneficiaries.” (Id. at p. 1197.) Applying Holmes, the court held that “the

‘remoteness doctrine’ ” barred the claim because “the Funds themselves ha[d]

suffered no direct injury.” (Hawaii Health & Welfare Trust Fund for Operating

Engineers, supra, 52 F.Supp.2d at p. 1198.) The court explained that the

remoteness doctrine, “[w]hether analyzed in terms of proximate cause or standing,

. . . generally bars indirect claims where other more directly-injured parties are the

proper plaintiffs. [Citation.]” (Ibid.) The court found the doctrine applicable

because the alleged injuries were “derivative,” not “direct,” in that they were

“ ‘entirely dependent upon injuries sustained by [fund] participants and

beneficiaries, making [the plaintiffs] at least one step removed from the challenged

harmful conduct.’ [Citation.]” (Id. at pp. 1199-1200.) Thus, the plaintiffs were

“seek[ing] recovery for the same injuries to victims represented, or able to be

represented, in other direct suits.” (Id. at p. 1199.) The court’s conclusion is

especially relevant to the case now before us because, in applying the remoteness

doctrine, the court expressly rejected the plaintiffs’ argument that “the[ir] injury

was allegedly intentional and directed specifically to the trust funds because the

[d]efendants knew their fraudulent scheme would cause the trust funds to expend

additional money on health related costs.” (Ibid.)

Carter v. Berger (7th Cir. 1985) 777 F.2d 1173 is relevant here because it

applied these remoteness principles in a case involving alleged bribes. The

plaintiffs in Carter filed a RICO action claiming that the defendant used illegal

bribes to obtain lower property tax assessments, which resulted in higher taxes for

everyone else. (Id. at p. 1174.) The court held that the plaintiffs were “not the

25



right parties to bring th[e] suit” because their “injury derive[d] from the County’s

. . . .” (Ibid.) After describing Illinois Brick’s remoteness analysis, the court

explained: “The same approach prevails throughout the law. . . . ‘[T]he general

tendency of the law, in regard to damages at least, is not to go beyond the first

step.’ [Citations.]” (Carter, supra, at p. 1175.) Thus, “the indirectly injured party

may not sue . . . . If a wrong committed against a firm causes it to become

bankrupt and discharge its employees or discontinue its purchases, the injured

employees and suppliers may not sue.” (Ibid.) “[A]n indirectly injured party

should look to the recovery of the directly injured party, not to the wrongdoer, for

relief.” (Id. at p. 1176; see also National Enterprises, Inc. v. Mellon Financial

Services Corp. Number 7 (5th Cir. 1988) 847 F.2d 251, 252-255 [unpaid creditor

of bankrupt corporation could not pursue RICO action against defendant that

required kickbacks from corporation as a loan condition].)

Finally, among the federal cases, Newton v. Tyson Foods, Inc. (8th Cir.

2000) 207 F.3d 444 is particularly noteworthy here because it involved bribes and

it applied these remoteness principles to claims for a RICO violation and a

pendent state law claim for intentional interference with prospective economic

advantage. In Newton, cattle producers sued a poultry producer, alleging that it

“was able to exempt the poultry industry from strict regulations by providing

illegal payments to” government officials. (Id. at p. 445.) They alleged that this

exemption resulted in lower costs, which enabled poultry producers to lower

poultry prices, which increased demand for poultry and lowered the demand for

beef, which reduced beef sales by packers, which reduced the plaintiffs’ sales to

packers and lowered the price of cattle sold. (Id. at p. 446.) The court first held

that the plaintiffs could not maintain their RICO claim because their alleged

injuries were “far distant along the chain of causation from [the defendant’s]

alleged wrongs and [were] too attenuated and removed from those wrongs to

26



provide a basis for standing under RICO. [Citation.]” (Id. at p. 447.) Noting that

“proximate cause” was also “an element” of the plaintiffs’ claim for “intentional

interference with prospective economic advantage,” the court next held that the

plaintiffs’ “common-law tort claim fail[ed] as a matter of law for the same reasons

that the [plaintiffs] lack[ed] standing to pursue their RICO claim. [Citation.]” (Id.

at p. 448; see also Laborers Local 17 Health and Benefit Fund v. Philip Morris,

Inc. (2d Cir. 1999) 191 F.3d 229, 242-243 [applying RICO remoteness/proximate

cause analysis to dismiss common law claims for fraud and breach of special

duty].)

Given the overlap between antitrust law and the tort of intentional

interference with prospective economic advantage, we should follow these federal

decisions and decline to recognize a tort cause of action for plaintiffs, like KSC,

that allege only remote, indirect, and derivative injury. Liability for both the tort

and an antitrust violation requires an independently wrongful act. Moreover, the

purpose of the tort is similar to the purpose of the antitrust laws: to “provid[e] a

remedy for predatory economic behavior” while “keeping legitimate business

competition outside litigative bounds.” (Della Penna, supra, 11 Cal.4th at p. 378.)

Notably, the Restatement Second expressly recognizes the “interplay between

[antitrust] law and the law of tortious interference with prospective contractual

relations.” (Rest.2d, § 768, com. c, p. 43.) It explains that because a claim for this

tort is often based on an antitrust violation, antitrust legislation “and the very

extensive case law that has developed as a gloss upon it are pertinent to a great

number of the [tort] cases . . . .”7 (Id. at pp. 42-43; see also id., § 767, com. c, p.


7

The significance of the Restatement Second’s discussion is not, as the

majority incorrectly suggests (maj. opn., ante, at p. 35, fn. 13), diminished by the

(Footnote continued on next page.)

27



31 [“conduct that is in violation of antitrust provisions or is in restraint of trade”

may make interference “improper”].) Finally, as I have already explained, the

federal courts have based their proximate causation analysis on common law

principles, which are no less applicable in defining the scope of the common law

tort. Given this overlap, we should follow the extensive antitrust case law and

decline to extend tort liability to plaintiffs, like KSC, that allege only remote,

indirect, and derivative injury.

Moreover, a claim for intentional interference with prospective economic

advantage by a plaintiff with only remote, indirect, and derivative injuries

implicates the same factors the federal courts have cited in precluding antitrust

recovery for such injuries. Allowing recovery under these circumstances creates a

risk of duplicative recovery. Here, for example, the lost commission KSC seeks to

recover represents a percentage of the contract price MacDonald would have paid

to KSC had MacDonald obtained the contract. There are, no doubt, others who

also stood to gain from the award of the contract to MacDonald and who would

have claims to other portions of the contract price. There is “no principled way to

cut off a myriad of other indirect claimants” who can each “claim that their

business was somehow impacted or adversely affected by” MacDonald’s loss of

the contract. (Sharp v. United Airlines, Inc. (10th Cir. 1992) 967 F.2d 404, 409

[dismissing antitrust and prospective economic advantage claims of employees

alleging that the defendant’s illegal conduct destroyed their employer].) Of

course, MacDonald may also sue for the entire contract price. Moreover,



(Footnote continued from previous page.)

Restatement Second’s further observation that complete discussion of antitrust law
is “outside the scope of the Restatement of Torts.” (Rest.2d, § 768, com. f, p. 43.)

28



MacDonald, which is absent from this action, has an interest in protecting its right

to recover. Finally, given MacDonald’s much more direct connection to

Lockheed’s alleged interference, denying KSC a remedy for its alleged remote,

indirect, and derivative injury is not likely to leave tortious conduct undetected or

unremedied. Thus, “the social interest in the efficient administration of justice and

the avoidance of multiple litigation” supports a rule precluding a plaintiff like

KSC from maintaining a claim for intentional interference with prospective

economic advantage where the plaintiff’s injury only remotely and indirectly

follows from a defendant’s alleged interference with the prospective economic

advantage of some third party. (Illinois Brick, supra, 431 U.S. at p. 738.) There is

simply insufficient reason for the law to “shoulder[] these difficulties” when

“those directly injured” can “be counted on to bring suit for the law’s vindication.”

(Holmes, supra, 503 U.S at p. 273.) “The existence of an identifiable class of

persons whose self-interest would normally motivate them to” sue “diminishes the

justification for allowing . . . more remote part[ies],” such as KSC, to maintain an

action. (Associated General, supra, 459 U.S. at p. 542.)

Indeed, courts applying New York law have reached precisely this

conclusion and have held that parties with indirect and remote injuries may not

recover for intentional interference with prospective economic advantage. Like

California, New York precludes recovery for intentional interference with

prospective economic advantage “unless the means employed by [the defendant]

were wrongful.” (NBT Bancorp Inc. v. Fleet/Norstar Financial Group, Inc.

(1996) 641 N.Y.S.2d 581, 585.) In addition, “under New York law, in order for a

party to make out a claim . . . , the defendant must interfere with the business

relationship directly; that is, the defendant must direct some activities towards the

third party and convince the third party not to enter into a business relationship

with the plaintiff. [Citation.]” (Fonar Corp. v. Magnetic Resonance Plus, Inc.

29



(S.D.N.Y. 1997) 957 F.Supp. 477, 482.) Applying this rule, in G.K.A. Beverage

Corp. v. Honickman (2d Cir. 1995) 55 F.3d 762, 768, the court held that soft drink

distributors could not state a claim for intentional interference with prospective

economic advantage by alleging that the defendants’ acts to drive out of business a

bottling company with which the distributors had contracted “interfered with their

relationships with retailers and other final purchasers of soft drinks.” The court

explained: “[The defendants’] alleged goal was to obtain a monopoly in bottling,

and the distributors’ relationship with their retail customers is irrelevant to that

goal. The distributors thus make no allegations that [the defendants] had any

contact with the distributors’ customers or that [the defendants] tried to convince

the customers to make contracts with them rather than the distributors. It is

axiomatic that, in order to prevail on this claim, the distributors would have to

show that the [defendants] intentionally caused the retailers not to enter into a

contractual relationship with them. [Citations.] The distributors cannot allege

such intentional interference, and their claim therefore fails.” (Ibid.)8

In Piccoli A/S v. Calvin Klein Jeanswear Co. (S.D.N.Y 1998) 19 F.Supp.2d

157, 167-168, the court applied similar principles in dismissing a claim for

tortious interference with business relations. The plaintiff alleged that the

defendant exported “surplus Calvin Klein jeans to ‘lower-end stores’ in


8

For similar reasons, the court also held that the distributors’ antitrust claim

failed as a matter of law. The court explained that the distributors’ injury was
“derivative of” the bottling company’s injury, and that “a party in a business
relationship with an entity that failed as a result of an antitrust violation” does “not
have standing to bring an antitrust claim.” (G.K.A. Beverage Corp. v. Honickman,
supra, 55 F.3d at pp. 766-767.) This rule, the court explained, “follows naturally”
from the rule that “ ‘[m]erely derivative injuries sustained by employees, officers,
stockholders, and creditors of an injured company do not . . . confer antitrust
standing.’ [Citation.]” (Id. at p. 766.)

30



Scandinavia and that the presence of these jeans in lower-end stores caused [the

plaintiff’s] exclusively upper-end clients to cease doing business with it.” (Id. at

p. 167, fn. omitted.) The court held “that such an indirect relationship cannot form

the basis of a tortious interference claim. [¶] . . . ‘[U]nder New York law, . . . the

defendant must interfere with the business relationship directly; that is, the

defendant must direct some activities towards the third party and convince the

third party not to enter into a business relationship with the plaintiff.’ [¶] Here,

[the plaintiff’s claim fails because] the defendants’ alleged conduct concededly

was not directed towards any third party with whom [the plaintiff] had an existing

or prospective business relationship.” (Id. at pp. 167-168, fn. omitted.)9

In summary, regarding the fundamental policy question of proximate cause,

we should adopt the approach of the courts applying federal and New York law

and hold that parties who allege only remote, indirect, and derivative injury may

not recover for intentional interference with prospective economic advantage.

Applying this principle here, KSC’s claim fails because Lockheed’s alleged acts

were not directed towards MacDonald or any other third party with which KSC

had a prospective economic advantage; they were directed solely towards the

Republic of Korea.


9

Apparently, under New York law, instead of showing wrongful means, a

plaintiff may alternatively show that the defendant “acted for the sole purpose of
inflicting intentional harm on plaintiffs.” (NBT Bancorp Inc. v. Fleet/Norstar
Financial Group Inc.
(1995) 628 N.Y.S.2d 408, 410.) This fact does not
undermine my conclusion that we should follow New York law regarding
remoteness. On the contrary, it reinforces my conclusion, because a defendant
who acts solely to harm the plaintiff is at least as blameworthy as a defendant who
uses wrongful means and is only substantially certain that the plaintiff will be
harmed.

31



The majority’s explanation for disregarding these decisions is demonstrably

incorrect. The majority asserts that because the federal antitrust decisions

“analy[ze] . . . the statutory language of the Clayton Act, as well as its relevant

legislative history and objectives,” they are “inapplicable” in determining

“standing to bring a claim” for intentional interference with prospective economic

advantage, which is governed by the “common law.” (Maj. opn., ante, at pp. 34-

35, fn. 13.) However, the high court’s decisions in both Blue Shield and

Associated General conclusively refute the majority’s assertion. In Blue Shield,

the court explained that “neither the statutory language nor the legislative history

of [the Clayton Act] offers any focused guidance on the question of which injuries

are too remote” to support recovery. (Blue Shield, supra, 457 U.S. at p. 477.)

“[I]ndeed,” the court observed, the Clayton Act’s “unrestrictive language” and

“the avowed breadth of the congressional purpose, cautions [sic] us not to cabin

[the Clayton Act] in ways that will defeat its broad remedial objective.” (Blue

Shield, supra, at p. 477.) Finding no “direct guidance from Congress” for

determining whether “a particular injury is too remote . . . to warrant . . . standing”

under the Clayton Act, the court turned to the “analysis . . . employed traditionally

by courts at common law with respect to the matter of ‘proximate cause.’

[Citations.]” (Blue Shield, supra, at p. 477, italics added, fn. omitted.) Similarly,

in Associated General, the high court explained that despite the breadth of the

Clayton Act’s statutory language and its legislative history, “common-law rules”

and “constraints” govern remoteness questions in “antitrust damages litigation.”

(Associated General, supra, 459 U.S. at p. 533.) Thus, in addressing remoteness

issues under the Clayton Act, the high court has expressly looked to the common

law, not, as the majority asserts, to the Clayton Act’s statutory language or

legislative history. The majority’s rationale for disregarding the federal cases is,

32



therefore, erroneous. We should follow the federal antitrust cases precisely

because they apply common law remoteness principles.10

III. THE MAJORITY’S SUBSTANTIAL CERTAINTY STANDARD IS INCORRECT

UNDER PRIOR CALIFORNIA DECISIONS.

The majority holds that to state a claim for intentional interference with

prospective economic advantage, a plaintiff need not “plead that the defendant

acted with the specific intent, or purpose, of disrupting the plaintiff’s prospective

economic advantage.” (Maj. opn., ante, at p. 19.) “Instead,” the majority states,

“to satisfy the intent requirement for this tort, it is sufficient to plead that the

defendant knew that the interference was certain or substantially certain to occur

as a result of its action.” (Ibid.)

The majority’s conclusion is incorrect under existing California law. In

Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752,

758 (Seaman’s), we expressly considered whether “ ‘intent’ [is] an element of a

cause of action for intentional interference with contractual relations.” We

answered this question affirmatively, holding: “[I]n an action for inducing breach

of contract it is essential that plaintiff plead and prove that the defendant ‘intended

to induce a breach thereof . . . .’ [Citations.] Similarly, to prevail on a cause of


10

Notably, in the Court of Appeal, even KSC agreed that federal cases

addressing “standing under the antitrust laws provide useful guidance . . . in
determining the reach of the tort of intentional interference with prospective
economic advantage.” Similarly, the law review article on which the majority
relies (maj. opn., ante, at p. 34) states that “[i]n a business competition setting,
antitrust laws . . . may serve as a yardstick for liability,” and it argues for
“[i]ncorporating the fluid doctrines of antitrust into an unlawful means test for
tortious interference . . . .” (Perlman, Interference with Contract and Other
Economic Expectancies: A Clash of Tort and Contract Doctrine
, supra, 49 U.Chi.
L.Rev. at p. 98, fn. omitted.)

33



action for intentional interference with prospective economic advantage, plaintiff

must plead and prove ‘intentional acts on the part of the defendant designed to

disrupt the relationship.’ [Citations.]” (Id. at p. 766.) Thus, we rejected the

plaintiff’s argument “that [the defendant’s] ‘intent’ to interfere with the contract is

not a necessary prerequisite to liability.” (Id. at pp. 766-767, fn. omitted.)

Notably, in defining the intent requirement, we also expressly rejected the

plaintiff’s argument that to establish intent, it is necessarily sufficient to show that

the defendant “knew that interference with the contract was ‘substantially certain’

to result from its conduct.” (Id. at p. 765.) We explained: “Intent, of course, may

be established by inference as well as by direct proof. Thus, the trial court could

properly have instructed the jury that it might infer culpable intent from conduct

‘substantially certain’ to interfere with the contract. Here, though, the jury was

instructed that culpable intent was ‘deemed’ to exist if [the defendant] knew that

its conduct would interfere with the contract. Under the principles outlined above,

this instruction was clearly error.” (Id. at p. 767.) Thus, Seaman’s rejects the very

standard the majority here adopts. Our Courts of Appeal have followed Seaman’s

in this regard. (E.g. Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th

242, 270-271; Savage v. Pacific Gas & Electric Co. (1993) 21 Cal.App.4th 434,

449.)

In reaching its conclusion, the majority virtually ignores our holding in

Seaman’s and relies instead on dictum in Quelimane Co. v. Stewart Title Guaranty

Co. (1998) 19 Cal.4th 26 (Quelimane). (Maj. opn., ante, at pp. 22-25.) In

Quelimane, the only issue the defendant raised in challenging the adequacy of the

plaintiff’s claim for intentional interference with contract was the plaintiff’s failure

to allege that the defendant’s conduct was “wrong.” (Quelimane, supra, 19

Cal.4th at p. 55.) We disagreed, holding that “[w]rongfulness independent of the

inducement to breach the contract is not an element of the tort of intentional

interference with existing contractual relations . . . .” (Ibid.) In dictum, we went

34



on to state: “Moreover, the tort of intentional interference with performance of a

contract does not require that the actor’s primary purpose be disruption of the

contract. As explained in comment j to section 766 of the Restatement Second

. . . : ‘The rule stated in this Section is applicable if the actor acts for the primary

purpose of interfering with the performance of the contract, and also if he desires

to interfere, even though he acts for some other purpose in addition. The rule is

broader, however, in its application than to cases in which the defendant has acted

with this purpose or desire. It applies also to intentional interference, as that term

is defined in § 8A, in which the actor does not act for the purpose of interfering

with the contract or desire it but knows that the interference is certain or

substantially certain to occur as a result of his action. The rule applies, in other

words, to an interference that is incidental to the actor’s independent purpose and

desire but known to him to be a necessary consequence of his action. [¶] The fact

that this interference with the other’s contract was not desired and was purely

incidental in character is, however, a factor to be considered in determining

whether the interference is improper.’ ” (Quelimane, supra, 19 Cal.4th at p. 56,

fn. omitted.)

For several reasons, Quelimane is insufficient authority to support the

majority’s holding. First, as already noted, Quelimane’s discussion of the intent

requirement is dictum because the defendant did not raise this issue. It is dictum

for another reason as well; the complaint in Quelimane “allege[d] that ‘defendants

. . . ha[d] deliberately, willfully, and intentionally interfered with the [plaintiff’s]

contractual relations . . . .’ ” (Quelimane, supra, 19 Cal.4th at p. 57.) Thus, we

had no need in Quelimane to consider whether an allegation of substantial

certainty is enough to state a claim.11 Second, Quelimane’s dictum addressed the


11

The same is true in the case now before us, because KSC’s complaint

alleges that Lockheed “intentionally induc[ed]” the Republic of Korea to award

(Footnote continued on next page.)

35



intent requirement for interference with contract, not intentional interference with

prospective economic advantage. (Id. at p. 56.) As Quelimane also explained,

because existing contracts “receive[] greater solicitude” than merely prospective

economic advantages, the elements of interference with contract and intentional

interference with prospective economic advantage are not identical. (Id. at pp. 55-

56.) We made the same point earlier in Della Penna, explaining that “[e]conomic

relationships short of contractual”—i.e., prospective economic relationships—

“should stand on a different legal footing as far as the potential for tort liability is

reckoned.” (Della Penna, supra, 11 Cal.4th at p. 392.) Logically, because

prospective economic advantages receive less protection than existing contracts,

the intent requirement for intentional interference with prospective economic

advantage should be heightened. Third, Quelimane did not involve a plaintiff, like

KSC, whose alleged injuries were only an indirect and remote consequence of the

defendant’s conduct; the complaint in Quelimane alleged that the defendants

directly interfered with the plaintiffs’ existing land sales contracts by refusing to

issue title insurance. (Quelimane, supra, 19 Cal.4th at pp. 55-57.) Because

remoteness was not a factor in Quelimane, its dictum regarding the intent required

to recover for direct injuries carries even less weight in the case now before us.

Finally, Quelimane did not consider or even cite Seaman’s, which directly

considered the intent question and held that proof of substantial certainty permits

an inference of intent, but that substantial certainty is not a substitute for or an

alternative articulation of intent to interfere.



(Footnote continued from previous page.)

the contract to Lockheed “[i]n order to disrupt” KSC’s relationship with
MacDonald. Thus, it is unnecessary to decide whether a complaint alleging only
substantial certainty adequately states a claim.

36



The majority gives only slightly more consideration to Seaman’s than did

Quelimane; its discussion is as incorrect as it is brief. Relegating Seaman’s to a

mere footnote, the majority states that in Della Penna, “we expressly disapproved

of” Seaman’s “to the extent that it was inconsistent with Della Penna.” (Maj.

opn., ante, at p. 22, fn. 7.) The majority’s statement, though accurate (see Della

Penna, supra, 11 Cal.4th at p. 393, fn. 5), is completely irrelevant because with

regard to the intent requirement, Seaman’s is not in any way inconsistent with

Della Penna. Della Penna never discussed the intent requirement and, as the

majority concedes, did not affect the elements of the tort other than to add the

wrongfulness requirement. (Maj. opn., ante, at pp. 20-21.) Consistent with its

concession, the majority cites nothing in Della Penna to support its (the

majority’s) suggestion that Seaman’s is somehow inconsistent with Della Penna

with regard to the intent requirement. The majority also stresses Della Penna’s

observation that Seaman’s “ ‘rel[ied] on the first Restatement [of Torts] . . .

without reviewing or even mentioning intervening revaluations of the tort by the

Restatement Second, other state high courts and our own Court of Appeal.’

[Citation.]” (Maj. opn., ante, at p. 22, fn. 7.) However, in Seaman’s, we based

our holding regarding the intent requirement on prior decisions of both this court

and our Courts of Appeal, and mentioned the first Restatement of Torts only

briefly. (Seaman’s, supra, 36 Cal.3d at pp. 765-767.) Notably, the majority fails

to cite a single decision from our Courts of Appeal—or from the courts of other

states—that Seaman’s should have, but failed to, consider. Nor did Quelimane

cite a case from either California or from some other jurisdiction to support its

dictum regarding the intent requirement; as I have already explained and as the

majority acknowledges (maj. opn., ante, at p. 22, fn. 7), Quelimane completely

ignored Seaman’s (and the cases following it) and relied instead exclusively on the

Restatement Second. Unlike the majority, I consider a prior holding of this court

to be more binding—and “a better representation” of California law (maj. opn.,

37



ante, at p. 22, fn. 7)—than the Restatement Second, or dictum that relied

exclusively on the Restatement Second.

The other basis for the majority’s conclusion—that specific intent to

interfere is unnecessary in light of Della Penna’s wrongful act requirement for

intentional interference with prospective economic advantage (maj. opn., ante, at

pp. 29-32)—is both questionable and ironic. It is questionable because, as I have

explained and as the majority acknowledges (maj. opn., ante, at pp. 20-21), Della

Penna never discussed the intent requirement or considered whether the wrongful

act requirement would affect the intent requirement. The majority’s analysis is

ironic because, as I have also already explained, our purpose in Della Penna in

adopting the wrongful act requirement was to restrict the scope of the tort of

intentional interference with prospective economic advantage. The majority again

turns Della Penna on its head by citing its wrongful act requirement as

justification for relaxing the intent requirement and greatly expanding the tort’s

scope. Thus, the majority’s conclusion that a plaintiff may state a claim by

pleading “that the defendant knew that the interference was certain or substantially

certain to occur,” and need not “plead that the defendant acted with the specific

intent . . . of disrupting the plaintiff’s prospective economic advantage” (maj. opn.,

ante, at p. 19), is inconsistent with California case law. Under Seaman’s and the

cases following it, a plaintiff who alleges injury that only remotely and indirectly

follows from a defendant’s intentional interference with the prospective economic

advantage of some third party should be allowed to recover, if at all, only upon

pleading and proving that the defendant specifically intended to interfere with the

plaintiff’s prospective economic advantage.

Finally, I disagree with the majority’s assertion that its substantial certainty

requirement “is an appropriate limitation on both the potential number of plaintiffs

that may bring a claim under this tort and the remoteness of these plaintiffs to a

defendant’s wrongful conduct.” (Maj. opn., ante, at p. 36.) As explained in the

38



law review article on which the majority relies, “[e]conomic relationships are

intertwined so intimately that disruption of one may have far-reaching

consequences. Furthermore, the chain reaction of economic harm flows from one

person to another without the intervention of other forces. Courts facing a case of

pure economic loss thus confront the potential for liability of enormous scope,

with no easily marked intermediate points and no ready recourse to traditional

liability-limiting devices such as intervening cause.” (Perlman, Interference with

Contract and Other Economic Expectancies: A Clash of Tort and Contract

Doctrine, supra, 49 U.Chi. L.Rev. at p. 72, fns. omitted.) However, “if a plaintiff

suffering economic loss is required to show that [the defendant] knew of [the

plaintiff’s] contract or expectancy and purposely disrupted it, the number of

successful plaintiffs and the extent of liability are considerably smaller.” (Id. at p.

77, italics added.) Thus, “requiring the plaintiff to show intent by the defendant to

interfere with a particular contract” or expectancy would help “distinguish[] the

plaintiff’s loss from injuries resulting more indirectly from the defendant’s act.”

(Id. at p. 76, fn. omitted.) By contrast, the majority’s relaxed substantial certainty

requirement does little to narrow the enormous scope of potential liability for harm

to economic relationships and offers “no principled way to cut off a myriad of

other indirect claimants” who can each “claim that their business was somehow

impacted or adversely affected by” MacDonald’s loss of the contract.12 (Sharp v.

United Airlines, Inc., supra, 967 F.2d at p. 409.)


12

For example, although the majority states that a defendant’s interference

“becomes less certain as . . . the identity of potential victims becomes more vague”
(maj. opn., ante, at p. 37), at least one California court has held that recovery is
available as long as the plaintiff was “ ‘identified [to the defendant] in some
manner,’ ” even if the defendant did not know “of the injured party’s specific
identity or name.” (Ramona Manor Convalescent Hospital v. Care Enterprises
(1986) 177 Cal.App.3d 1120, 1133.)

39



IV. CONCLUSION.

In “[a]llowing suits by those injured only indirectly,” the majority “open[s]

the door to” greatly expanded liability for intentional interference with prospective

economic advantage. (Holmes, supra, 503 U.S. at p. 274.) Ironically, in doing so,

it relies principally on a requirement—the defendant’s commission of an

independently wrongful act—that we established specifically to restrict liability.

Based on the relevant policy considerations and case law, I would hold that a

plaintiff whose alleged injury only indirectly and remotely follows from the

defendant’s interference with the prospective economic advantage of some third

party may not maintain an action for intentional interference with prospective

economic advantage. Therefore, I would affirm the trial court’s dismissal of

KSC’s claim.

CHIN, J.

I CONCUR:

BROWN, J.

40



See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Korea Supply Company v. Lockheed Martin Corporation
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted
XXX 90 Cal.App.4th 902
Rehearing Granted

__________________________________________________________________________________

Opinion No.
S100136
Date Filed: March 3, 2003

__________________________________________________________________________________

Court:
Superior
County: Los Angeles
Judge: Brett C. Klein

_________________________________________________________________________________

Attorneys for Appellant:

Blecher & Collins, Steven J. Cannata, David W. Kesselman and Maxwell M. Blecher for Plaintiff and
Appellant.




__________________________________________________________________________________

Attorneys for Respondent:

O’Melveny & Myers, Marc F. Feinstein, Marc S. Williams, Robert E. Willett and James W. Colbert III for
Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Law Offices of Jiyoung Kym and Jiyoung Kym for Defendant and Respondent Linda Kim.

Fred J. Hiestand for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants
and Respondents.

Robie & Matthai, Pamela E. Dunn and Daniel J. Koes for United Services Automobile Association as
Amicus Curiae on behalf of Defendants and Respondents.

Gibson, Dunn & Crutcher, Gail E. Lees, Mark A. Perry and G. Charles Nierlich for Aetna Health of
California Inc., Cingular Wireless LLC and AT&T Wireless Services, Inc., as Amici Curiae on behalf of
Defendants and Respondents.

Skadden, Arps, Slate, Meagher & Flom, Raoul D. Kenned, Sheryl C. Medeiros and Benjamin R. Ostapuk
for Citibank (South Dakota), N.A., as Amicus Curiae on behalf of Defendants and Respondents.


1








Page 2 - counsel continued - S100136


Attorneys for Respondent:

Heller Ehrman White & McAuliffe, Vanessa Wells and Andrew C. Byrnes for State Farm Mutual
Automobile Insurance Company as Amicus Curiae on behalf of Defendants and Respondents.

Horvitz & Levy, David M. Axelrad, Lisa Perrochet and Loren H. Kraus for Truck Insurance Exchange and
Mid-Century Insurance Company as Amici Curiae on behalf of Defendants and Respondents Lockheed
Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Horvitz & Levy, Mitchell C. Tilner and William N. Hancock for Quality King Distributors, Inc., as Amici
Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin
Tactical Systems, Inc.

Morrison & Foerster, Robert S. Stern, John Sobieski and John W. (Jack) Alden, Jr., for Bank One
Corporation as Amcius Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation
and Lockheed Martin Tactical Systems, Inc.

Arnold & Porter, James F. Speyer, Ronald C. Redcay; Kirkland & Ellis and Alexander F. Mackinnon for
California Manufacturers and Technology Association and BP Oil Supply Company as Amici Curiae on
behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical
Systems, Inc.

Crosby, Heafey, Roach & May, James C. Martin, Christina J. Imre, Michael K. Brown; Daniel J. Popeo
and Richard A. Samp for Washington Legal Foundation and National Association of Independent Insurers
as Amici Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed
Martin Tactical Systems, Inc.


2







Counsel who argued in Supreme Court (not intended for publication with opinion):

Maxwell M. Blecher
Blecher & Collins
611 West Sixth Street, Suite 2000
Los Angeles, CA 90017
(213) 622-4222

James W. Colbett III
O’Melveny & Myers
400 South Hope Street
Los Angeles, CA 90071-2899
(213) 430-6000

3

Opinion Information
Date:Docket Number:
Mon, 03/03/2003S100136

Parties
1Korea Supply Company (Plaintiff and Appellant)
Represented by Maxwell M. Blecher
Blecher & Collins
611 W. Sixth Street, Suite 2000
Los Angeles, CA

2Korea Supply Company (Plaintiff and Appellant)
Represented by David Wayne Kesselman
Blecher & Collins, P.C.
611 W. Sixth Street, Suite 2000
Los Angeles, CA

3Lockheed Martin Corporation (Defendant and Respondent)
Represented by Robert Edwin Willett
O'Melveny & Myers, LLP
400 South Hope Street
Los Angeles, CA

4Lockheed Martin Corporation (Defendant and Respondent)
Represented by Marc Forrest Feinstein
O'Melveny & Myers
400 South Hope St
Los Angeles, CA

5Lockheed Martin Corporation (Defendant and Respondent)
Represented by Marc Stefan Williams
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA

6Damian Christopher, Inc. (Pub/Depublication Requestor)
Represented by Norman Howard Levine
Greenberg, Glusker, Fields, Claman, et al.
1900 Avenue Of The Stars, Suite 2100
Los Angeles, CA

7Quality King Distributors, Inc. (Pub/Depublication Requestor)
Represented by Mitchell C. Tilner
Horvitz & Levy LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

8Washington Legal Foundation (Amicus curiae)
Represented by James C. Martin
Crosby, Heafey, Roach & May
355 S. Grand Avenue, Suite 2900
Los Angeles, CA

9United Services Automobile Association (Amicus curiae)
Represented by Pamela E. Dunn
Robie & Matthai
500 South Grand Avenue, 15th Floor
Los Angeles, CA

10California Manufacturers & Technology Association (Amicus curiae)
Represented by Ronald C. Redcay
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

11California Manufacturers & Technology Association (Amicus curiae)
Represented by James F. Speyer
Arnold & Porter
777 S Figueroa St., 44th Fl
Los Angeles, CA

12Civil Justice Association Of California (Amicus curiae)
Represented by Fred James Hiestand
Attorney At Law
1121 L Street, Suite 404
Sacramento, CA

13Bp Oil Supply Company (Amicus curiae)
Represented by Alexander Fraser Mackinnon
Kirkland & Ellis
777 S Figueroa St #3700
Los Angeles, CA

14Bp Oil Supply Company (Amicus curiae)
Represented by Ronald C. Redcay
Arnold & Porter
777 S. Figueroa Street, 44th Floor
Los Angeles, CA

15Truck Insurance Exchange (Amicus curiae)
Represented by Loren Homer Kraus
Horvitz & Levy LLP
15760 Ventura Blvd., 18th Floor
Encino, CA

16Mid-Century Insurance Company (Amicus curiae)
Represented by Loren Homer Kraus
Horvitz & Levy LLP
15760 Ventura Blvd., 18th Floor
Encino, CA

17Aetna Health Of California, Inc. (Amicus curiae)
Represented by George Charles Nierlich
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA

18Cingular Wireless, Llc (Amicus curiae)
Represented by George Charles Nierlich
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA

19At&T Wireless Services, Inc. (Amicus curiae)
Represented by George Charles Nierlich
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA

20State Farm Mutual Automobile Insurance Company (Amicus curiae)
Represented by Vanessa Wells
Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, CA

21Citibank (South Dakota), Na (Amicus curiae)
Represented by Raoul D. Kennedy
Skadden, Arps, Slate, Meagher And Flom
Four Embarcadero Center, Suite 3800
San Francisco, CA

22Bank One Corporation (Amicus curiae)
Represented by John Woodworth Alden
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA

23Bank One Corporation (Amicus curiae)
Represented by John Sobieski
Morrison & Foerster
555 West Fifth Street, Suite 3500
Los Angeles, CA

24Bank One Corporation (Amicus curiae)
Represented by Robert Steven Stern
Morrison & Foerster
555 West Fifth Street, Suite 3500
Los Angeles, CA

25National Association Of Independent Insurers (Amicus curiae)
Represented by James C. Martin
Crosby, Heafey, Roach & May
355 S. Grand Avenue, Suite 2900
Los Angeles, CA


Disposition
Mar 3 2003Opinion: Affirmed in part/reversed in part

Dockets
Aug 24 2001Petition for review filed
  respondent Lockheed Martin Corp
Aug 27 2001Record requested
 
Aug 28 2001Received Court of Appeal record
  one doghouse
Sep 13 2001Answer to petition for review filed
  counsel for appellant Korea Supply Company
Sep 14 2001Request for Depublication filed (petition/rev. pending)
  by (non-party) State Farm.
Sep 17 2001Request for Depublication Filed (another req. pending)
  by (non-party) Quality King Distributors. **40n**
Sep 18 2001Request for Depublication Filed (another req. pending)
  by (non-party) Damian Christopher, Inc.. **40n**
Sep 18 2001Request for Depublication (another req. pending)
  counsel for BP Oil Supply [ non-party ]
Oct 12 2001Time extended to grant or deny review
  To November 21, 2001.
Oct 24 2001Petition for Review Granted (civil case)
  George, C.J., was recused and did not participate. votes: Ken, Bax, Wer, Chi, Brn, Mor JJ.
Oct 24 2001Letter and form sent to counsel re:
  certification of interest. Completed form and 7 copies should be returned to us within 15 days.
Nov 7 2001Certification of interested entities or persons filed
  by respondents Lockheed Martin Corp & Lockheed Martin Tactical Systems, Inc.
Nov 7 2001Application for Extension of Time filed
  by respondents asking to Jan. 22, 2002 to file opening brief on the merits.
Nov 13 2001Extension of Time application Granted
  to and including January 22, 2002 to file respondents opening brief on the merits.
Nov 15 2001Certification of interested entities or persons filed
  by appellant Korea Supply Co.
Jan 22 2002Opening brief on the merits filed
  respondents Lockheed Martin Corporation & Lockheed Martin Tactical Systems, Inc.
Jan 28 2002Request for extension of time filed
  appellant Korea Supply Company request to March 25, 2002 to file answer brief/merits. faxed to sf: attn: Debbie
Jan 30 2002Extension of time granted
  to and including March 25, 2002 for appellant to file answer brief on the merits.
Feb 22 2002Received:
  errata notice for opening brief on the merits from counsel for respondents. Withdraw citation In re Tobacco Cases II from page 22 of brief.
Mar 25 2002Answer brief on the merits filed
  appellant Korea Supply Company
Mar 28 2002Request for extension of time filed
  respondent asking to May 14, 2002 to file reply brief on the merits. **ok to grant - order being prepared**
Mar 29 2002Extension of time granted
  to and including May 14, 2002 for respondents to file the reply brief on the merits.
May 13 2002Reply brief filed (case fully briefed)
  by respondents Lockheed Martin Corporation, et al.
Jun 5 2002Received application to file Amicus Curiae Brief
  from Washington Legal Foundation and National Assoc. of Independent Insurers in support of respondents. (appli & brief under same cover)
Jun 7 2002Request for extension of time filed
  Truck Insurance Exchange and Mid-Century Ins. Co. asking to June 26, 2002 to file amicus curiae brief in support of respondent (Lockheed). **Granted to June 26,2002. Order being prepared.**
Jun 7 2002Request for extension of time filed
  BP Oil Supply Company asking to July 12, 2002 to file ac brief in support of respondents. **Granted to June 26,2002. Order being prepared.**
Jun 10 2002Request for extension of time filed
  by Civil Justice Association of CA asking to July 9, 2002 to file ac brief in support of respondents. **Granted to June 26,2002. Order being prepared.**
Jun 10 2002Permission to file amicus curiae brief granted
  Washington Legal Foundation and National Assoc. of Independent Insurers in support of respondents.
Jun 10 2002Amicus Curiae Brief filed by:
  Washington Legal Foundation and National Assoc. of Independent Insurers in support of respondents. Answer due within 20 days.
Jun 10 2002Request for extension of time filed
  California Manufacturers & Technology Assn asking to July 12, 2002 to file ac brief in support of respondents. **Granted to June 26,2002. Order being prepared.**
Jun 11 2002Opposition filed
  by appellant Korea Supply. Opposes requests for extensions to file amicus briefs on behalf of Truck Insurance Exchange et al., Civil Justice Assoc. of CA and BP Oil Supply Co. Received proof of service via fax. Hard copy to follow.
Jun 11 2002Request for extension of time filed
  by United Services Automobile Assoc. asking to July 3, 2002 to file ac brief in support of respondents. **Granted to June 26,2002. Order being prepared.**
Jun 12 2002Received application to file Amicus Curiae Brief
  by Quality King Distributors, Inc. in support of respondent. (appli & brief under same cover)
Jun 12 2002Request for extension of time filed
  Aetna, Cingular Wireless LLC, and AT&T Wireless Services, Inc. asking to June 26, 2002 to file ac brief in support of respondent. **granted-order being prepared**
Jun 12 2002Received application to file Amicus Curiae Brief
  State Farm Mutual Auto Insurance Co. in support of respondent. (appli & brief separate)
Jun 12 2002Received document entitled:
  Appendix of Non-California Authorities from amicus State Farm Mutual Automobile Insurance Co.
Jun 12 2002Received application to file Amicus Curiae Brief
  from Citibank (South Dakota) , N.A. in support of respondent. (appli & brief separate)
Jun 13 2002Extension of time granted
  On application of amicus curiae Truck Insurance Truck Insurance Exchange and Mid-Century Ins. Co., time is extended to June 26, 2002 to file amicus curiae brief in support of respondent (Lockheed). Answer due on or before July 16, 2002.
Jun 13 2002Extension of time granted
  On application of amicus curiae BP Oil Supply Company, time is extended to June 26, 2002 to file amicus curiae brief in support of respondents. Answer due on or before July 16, 2002.
Jun 13 2002Extension of time granted
  On application of amicus curiae Civil Justice Association of California, time is extended to June 26, 2002 to file amicus curiae brief in support of respondents. Answer due on or before July 16, 2002.
Jun 13 2002Extension of time granted
  On application of amicus curiae California Manufacturers & Technology Association, time is extended to June 26, 2002 to file amicus curiae brief in support of respondents. Answer due on or before July 16, 2002.
Jun 13 2002Extension of time granted
  On application of Amicus Curiae United Service Automobile Association, time is extended to and including June 26, 2002 to file amicus brief in support of respondents. Answer due on or before July 16, 2002.
Jun 13 2002Extension of time granted
  On application of amicus curiae Aetna, Cingular Wireless LLC, and AT&T Wireless Services, Inc., time is extended to and including June 26, 2002 to file amicus curiae brief in support of respondent. Answer due on or before July 16, 2002.
Jun 13 2002Request for extension of time filed
  by Bank One Corporation asking to June 26, 2002 to file ac brief in support of respondents. **granted - order being prepared**
Jun 14 2002Permission to file amicus curiae brief granted
  State Farm Mutual Auto Insurance Co. in support of respondent.
Jun 14 2002Amicus Curiae Brief filed by:
  State Farm Mutual Auto Insurance Co. in support of respondent. Answer due within 20 days.
Jun 14 2002Filed:
  Appendix of Non-California Authorities from amicus State Farm Mutual Automobile Insurance Co.
Jun 14 2002Permission to file amicus curiae brief granted
  Citibank (South Dakota) , N.A. in support of respondent.
Jun 14 2002Amicus Curiae Brief filed by:
  Citibank (South Dakota) , N.A. in support of respondent. Answer due within 20 days.
Jun 14 2002Permission to file amicus curiae brief granted
  Quality King Distributors, Inc. in support of respondent.
Jun 14 2002Amicus Curiae Brief filed by:
  Quality King Distributors, Inc. in support of respondent. Answer due within 20 days.
Jun 17 2002Request for extension of time filed
  by appellant & respondents asking to August 8, 2002 to file a single answer to all amici briefs. **granted - order being prepared**
Jun 21 2002Extension of time granted
  to and including June 26, 2002 for amicus Bank One Corporation to file ac brief in support of respondents.
Jun 21 2002Extension of time granted
  On application of appellant and respondents, it is ordered that the time to file a single answer brief to all amicus curiae briefs is extended to and including August 8, 2002.
Jun 26 2002Received application to file amicus curiae brief; with brief
  California Manufacturers & Technology Assn and BP Oil Supply Company
Jun 26 2002Received:
  reqt for judicial notice w/ac brief of California Manufacturers & Technology Assoc, etal
Jun 26 2002Received application to file amicus curiae brief; with brief
  Aetna Health of Calif. Inc., Cingular Wireless LLC, and AT&T Wireless Services, Inc.
Jun 26 2002Received:
  amicus brief from Bank One Corporation. (application was included in extension request filed 6/21/02)
Jun 27 2002Received application to file amicus curiae brief; with brief
  by Truck Insurance Truck Insurance Exchange and Mid-Century Ins. Co. in support of respondents. (timely per rule 40k/FedEx) (appli & brief under same cover)
Jun 27 2002Received:
  Amicus brief by Civil Justice Association of California in support of respondent. (timely per rule 40k/FedEx) (Application was included in extension request filed 6/10/02.)
Jun 27 2002Received application to file amicus curiae brief; with brief
  United Service Automobile Association in support of respondents. (timely per rule 40k/CA Overnight)
Jun 27 2002Received:
  Request for judicial notice from amicus United Service Automobile Association.
Jul 1 2002Permission to file amicus curiae brief granted
  California Manufacturers & Technology Assn and BP Oil Supply Company.
Jul 1 2002Amicus Curiae Brief filed by:
  California Manufacturers & Technology Assn and BP Oil Supply Company in support of respondents. (Appli & brief under same cover) Answer due by August 8, 2002.
Jul 1 2002Request for judicial notice filed (in non-AA proceeding)
  by amicus California Manufacturers & Technology Assn and BP Oil Supply Company.
Jul 1 2002Permission to file amicus curiae brief granted
  Aetna Health of Calif. Inc., Cingular Wireless LLC, and AT&T Wireless Services, Inc.
Jul 1 2002Amicus Curiae Brief filed by:
  Aetna Health of Calif. Inc., Cingular Wireless LLC, and AT&T Wireless Services, Inc. in support of respondents. Answer due by August 8, 2002.
Jul 1 2002Permission to file amicus curiae brief granted
  Bank One Corporation.
Jul 1 2002Amicus Curiae Brief filed by:
  Bank One Corporation in support of respondents. Answer due by August 8, 2002.
Jul 1 2002Permission to file amicus curiae brief granted
  Truck Insurance Truck Insurance Exchange and Mid-Century Ins. Co.
Jul 1 2002Amicus Curiae Brief filed by:
  Truck Insurance Truck Insurance Exchange and Mid-Century Ins. Co. in support of respondents. Answer due by August 8, 2002.
Jul 1 2002Permission to file amicus curiae brief granted
  Civil Justice Association of California.
Jul 1 2002Amicus Curiae Brief filed by:
  Civil Justice Association of California in support of respondent. Answer due by August 8, 2002.
Jul 1 2002Permission to file amicus curiae brief granted
  United Service Automobile Association.
Jul 1 2002Amicus Curiae Brief filed by:
  United Service Automobile Association in support of respondents. Answer due by August 8, 2002.
Jul 1 2002Request for judicial notice filed (in non-AA proceeding)
  by amicus United Service Automobile Association.
Aug 8 2002Response to amicus curiae brief filed
  consolidated response to ac briefs>>appellant Korea Supply Company
Oct 31 2002Case ordered on calendar
  12-4-02, 9am, L.A.
Nov 5 2002Request for judicial notice denied
  The requests for judicial notice filed on July 1, 2002, by California Manufacturers and Technology Association and by BP Oil Supply Company and by United Services Automobile Association are both denied. George, C.J., was recused and did not participate.
Nov 26 2002Filed letter from:
  appellant (Korea Supply Co) re additional authorities. (timely filed per rule 40k CRC)
Dec 4 2002Cause argued and submitted
 
Mar 3 2003Opinion filed: Affirmed in part, reversed in part
  and remanded to CA. Majority Opinion by Moreno, J. joined by Kennard ACJ, Baxter, Werdegar, Rubin, JJ. (Hon. Laurence D. Rubin, AJ CA2/8) Concurring Opinion by Kennard, ACJ. Concurring Opinion by Werdegar, J. Concurring and Dissenting Opinion by Chin, J. joined by Brown, J.
Apr 3 2003Remittitur issued (civil case)
  CA2/4
Apr 10 2003Received document entitled:
  Receipt for remittitur from CA2/4.
Jun 3 2003Note:
  returned 2 doghouses for the shelf to SF.

Briefs
Jan 22 2002Opening brief on the merits filed
 
Mar 25 2002Answer brief on the merits filed
 
May 13 2002Reply brief filed (case fully briefed)
 
Jun 10 2002Amicus Curiae Brief filed by:
 
Jun 14 2002Amicus Curiae Brief filed by:
 
Jun 14 2002Amicus Curiae Brief filed by:
 
Jun 14 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Jul 1 2002Amicus Curiae Brief filed by:
 
Aug 8 2002Response to amicus curiae brief filed
 
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