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, 03/03/2003 | S100136 |
Parties
| 1 | Korea Supply Company (Plaintiff and Appellant) Represented by Maxwell M. Blecher Blecher & Collins 611 W. Sixth Street, Suite 2000 Los Angeles, CA |
| 2 | Korea Supply Company (Plaintiff and Appellant) Represented by David Wayne Kesselman Blecher & Collins, P.C. 611 W. Sixth Street, Suite 2000 Los Angeles, CA |
| 3 | Lockheed Martin Corporation (Defendant and Respondent) Represented by Robert Edwin Willett O'Melveny & Myers, LLP 400 South Hope Street Los Angeles, CA |
| 4 | Lockheed Martin Corporation (Defendant and Respondent) Represented by Marc Forrest Feinstein O'Melveny & Myers 400 South Hope St Los Angeles, CA |
| 5 | Lockheed Martin Corporation (Defendant and Respondent) Represented by Marc Stefan Williams O'Melveny & Myers LLP 400 South Hope Street Los Angeles, CA |
| 6 | Damian 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 |
| 7 | Quality King Distributors, Inc. (Pub/Depublication Requestor) Represented by Mitchell C. Tilner Horvitz & Levy LLP 15760 Ventura Boulevard, 18th Floor Encino, CA |
| 8 | Washington Legal Foundation (Amicus curiae) Represented by James C. Martin Crosby, Heafey, Roach & May 355 S. Grand Avenue, Suite 2900 Los Angeles, CA |
| 9 | United Services Automobile Association (Amicus curiae) Represented by Pamela E. Dunn Robie & Matthai 500 South Grand Avenue, 15th Floor Los Angeles, CA |
| 10 | California Manufacturers & Technology Association (Amicus curiae) Represented by Ronald C. Redcay Arnold & Porter 777 S. Figueroa Street, 44th Floor Los Angeles, CA |
| 11 | California Manufacturers & Technology Association (Amicus curiae) Represented by James F. Speyer Arnold & Porter 777 S Figueroa St., 44th Fl Los Angeles, CA |
| 12 | Civil Justice Association Of California (Amicus curiae) Represented by Fred James Hiestand Attorney At Law 1121 L Street, Suite 404 Sacramento, CA |
| 13 | Bp Oil Supply Company (Amicus curiae) Represented by Alexander Fraser Mackinnon Kirkland & Ellis 777 S Figueroa St #3700 Los Angeles, CA |
| 14 | Bp Oil Supply Company (Amicus curiae) Represented by Ronald C. Redcay Arnold & Porter 777 S. Figueroa Street, 44th Floor Los Angeles, CA |
| 15 | Truck Insurance Exchange (Amicus curiae) Represented by Loren Homer Kraus Horvitz & Levy LLP 15760 Ventura Blvd., 18th Floor Encino, CA |
| 16 | Mid-Century Insurance Company (Amicus curiae) Represented by Loren Homer Kraus Horvitz & Levy LLP 15760 Ventura Blvd., 18th Floor Encino, CA |
| 17 | Aetna Health Of California, Inc. (Amicus curiae) Represented by George Charles Nierlich Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 18 | Cingular Wireless, Llc (Amicus curiae) Represented by George Charles Nierlich Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 19 | At&T Wireless Services, Inc. (Amicus curiae) Represented by George Charles Nierlich Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 20 | State Farm Mutual Automobile Insurance Company (Amicus curiae) Represented by Vanessa Wells Heller Ehrman White & McAuliffe LLP 275 Middlefield Road Menlo Park, CA |
| 21 | Citibank (South Dakota), Na (Amicus curiae) Represented by Raoul D. Kennedy Skadden, Arps, Slate, Meagher And Flom Four Embarcadero Center, Suite 3800 San Francisco, CA |
| 22 | Bank One Corporation (Amicus curiae) Represented by John Woodworth Alden Morrison & Foerster LLP 555 West Fifth Street, Suite 3500 Los Angeles, CA |
| 23 | Bank One Corporation (Amicus curiae) Represented by John Sobieski Morrison & Foerster 555 West Fifth Street, Suite 3500 Los Angeles, CA |
| 24 | Bank One Corporation (Amicus curiae) Represented by Robert Steven Stern Morrison & Foerster 555 West Fifth Street, Suite 3500 Los Angeles, CA |
| 25 | National 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 2003 | Opinion: Affirmed in part/reversed in part |
| Dockets | |
| Aug 24 2001 | Petition for review filed respondent Lockheed Martin Corp |
| Aug 27 2001 | Record requested |
| Aug 28 2001 | Received Court of Appeal record one doghouse |
| Sep 13 2001 | Answer to petition for review filed counsel for appellant Korea Supply Company |
| Sep 14 2001 | Request for Depublication filed (petition/rev. pending) by (non-party) State Farm. |
| Sep 17 2001 | Request for Depublication Filed (another req. pending) by (non-party) Quality King Distributors. **40n** |
| Sep 18 2001 | Request for Depublication Filed (another req. pending) by (non-party) Damian Christopher, Inc.. **40n** |
| Sep 18 2001 | Request for Depublication (another req. pending) counsel for BP Oil Supply [ non-party ] |
| Oct 12 2001 | Time extended to grant or deny review To November 21, 2001. |
| Oct 24 2001 | Petition for Review Granted (civil case) George, C.J., was recused and did not participate. votes: Ken, Bax, Wer, Chi, Brn, Mor JJ. |
| Oct 24 2001 | Letter and form sent to counsel re: certification of interest. Completed form and 7 copies should be returned to us within 15 days. |
| Nov 7 2001 | Certification of interested entities or persons filed by respondents Lockheed Martin Corp & Lockheed Martin Tactical Systems, Inc. |
| Nov 7 2001 | Application for Extension of Time filed by respondents asking to Jan. 22, 2002 to file opening brief on the merits. |
| Nov 13 2001 | Extension of Time application Granted to and including January 22, 2002 to file respondents opening brief on the merits. |
| Nov 15 2001 | Certification of interested entities or persons filed by appellant Korea Supply Co. |
| Jan 22 2002 | Opening brief on the merits filed respondents Lockheed Martin Corporation & Lockheed Martin Tactical Systems, Inc. |
| Jan 28 2002 | Request 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 2002 | Extension of time granted to and including March 25, 2002 for appellant to file answer brief on the merits. |
| Feb 22 2002 | Received: 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 2002 | Answer brief on the merits filed appellant Korea Supply Company |
| Mar 28 2002 | Request 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 2002 | Extension of time granted to and including May 14, 2002 for respondents to file the reply brief on the merits. |
| May 13 2002 | Reply brief filed (case fully briefed) by respondents Lockheed Martin Corporation, et al. |
| Jun 5 2002 | Received 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 2002 | Request 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 2002 | Request 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 2002 | Request 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 2002 | Permission to file amicus curiae brief granted Washington Legal Foundation and National Assoc. of Independent Insurers in support of respondents. |
| Jun 10 2002 | Amicus Curiae Brief filed by: Washington Legal Foundation and National Assoc. of Independent Insurers in support of respondents. Answer due within 20 days. |
| Jun 10 2002 | Request 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 2002 | Opposition 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 2002 | Request 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 2002 | Received application to file Amicus Curiae Brief by Quality King Distributors, Inc. in support of respondent. (appli & brief under same cover) |
| Jun 12 2002 | Request 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 2002 | Received application to file Amicus Curiae Brief State Farm Mutual Auto Insurance Co. in support of respondent. (appli & brief separate) |
| Jun 12 2002 | Received document entitled: Appendix of Non-California Authorities from amicus State Farm Mutual Automobile Insurance Co. |
| Jun 12 2002 | Received application to file Amicus Curiae Brief from Citibank (South Dakota) , N.A. in support of respondent. (appli & brief separate) |
| Jun 13 2002 | Extension 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 2002 | Extension 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 2002 | Extension 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 2002 | Extension 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 2002 | Extension 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 2002 | Extension 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 2002 | Request 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 2002 | Permission to file amicus curiae brief granted State Farm Mutual Auto Insurance Co. in support of respondent. |
| Jun 14 2002 | Amicus Curiae Brief filed by: State Farm Mutual Auto Insurance Co. in support of respondent. Answer due within 20 days. |
| Jun 14 2002 | Filed: Appendix of Non-California Authorities from amicus State Farm Mutual Automobile Insurance Co. |
| Jun 14 2002 | Permission to file amicus curiae brief granted Citibank (South Dakota) , N.A. in support of respondent. |
| Jun 14 2002 | Amicus Curiae Brief filed by: Citibank (South Dakota) , N.A. in support of respondent. Answer due within 20 days. |
| Jun 14 2002 | Permission to file amicus curiae brief granted Quality King Distributors, Inc. in support of respondent. |
| Jun 14 2002 | Amicus Curiae Brief filed by: Quality King Distributors, Inc. in support of respondent. Answer due within 20 days. |
| Jun 17 2002 | Request 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 2002 | Extension of time granted to and including June 26, 2002 for amicus Bank One Corporation to file ac brief in support of respondents. |
| Jun 21 2002 | Extension 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 2002 | Received application to file amicus curiae brief; with brief California Manufacturers & Technology Assn and BP Oil Supply Company |
| Jun 26 2002 | Received: reqt for judicial notice w/ac brief of California Manufacturers & Technology Assoc, etal |
| Jun 26 2002 | Received application to file amicus curiae brief; with brief Aetna Health of Calif. Inc., Cingular Wireless LLC, and AT&T Wireless Services, Inc. |
| Jun 26 2002 | Received: amicus brief from Bank One Corporation. (application was included in extension request filed 6/21/02) |
| Jun 27 2002 | Received 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 2002 | Received: 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 2002 | Received application to file amicus curiae brief; with brief United Service Automobile Association in support of respondents. (timely per rule 40k/CA Overnight) |
| Jun 27 2002 | Received: Request for judicial notice from amicus United Service Automobile Association. |
| Jul 1 2002 | Permission to file amicus curiae brief granted California Manufacturers & Technology Assn and BP Oil Supply Company. |
| Jul 1 2002 | Amicus 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 2002 | Request for judicial notice filed (in non-AA proceeding) by amicus California Manufacturers & Technology Assn and BP Oil Supply Company. |
| Jul 1 2002 | Permission to file amicus curiae brief granted Aetna Health of Calif. Inc., Cingular Wireless LLC, and AT&T Wireless Services, Inc. |
| Jul 1 2002 | Amicus 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 2002 | Permission to file amicus curiae brief granted Bank One Corporation. |
| Jul 1 2002 | Amicus Curiae Brief filed by: Bank One Corporation in support of respondents. Answer due by August 8, 2002. |
| Jul 1 2002 | Permission to file amicus curiae brief granted Truck Insurance Truck Insurance Exchange and Mid-Century Ins. Co. |
| Jul 1 2002 | Amicus 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 2002 | Permission to file amicus curiae brief granted Civil Justice Association of California. |
| Jul 1 2002 | Amicus Curiae Brief filed by: Civil Justice Association of California in support of respondent. Answer due by August 8, 2002. |
| Jul 1 2002 | Permission to file amicus curiae brief granted United Service Automobile Association. |
| Jul 1 2002 | Amicus Curiae Brief filed by: United Service Automobile Association in support of respondents. Answer due by August 8, 2002. |
| Jul 1 2002 | Request for judicial notice filed (in non-AA proceeding) by amicus United Service Automobile Association. |
| Aug 8 2002 | Response to amicus curiae brief filed consolidated response to ac briefs>>appellant Korea Supply Company |
| Oct 31 2002 | Case ordered on calendar 12-4-02, 9am, L.A. |
| Nov 5 2002 | Request 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 2002 | Filed letter from: appellant (Korea Supply Co) re additional authorities. (timely filed per rule 40k CRC) |
| Dec 4 2002 | Cause argued and submitted |
| Mar 3 2003 | Opinion 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 2003 | Remittitur issued (civil case) CA2/4 |
| Apr 10 2003 | Received document entitled: Receipt for remittitur from CA2/4. |
| Jun 3 2003 | Note: returned 2 doghouses for the shelf to SF. |
| Briefs | |
| Jan 22 2002 | Opening brief on the merits filed |
| Mar 25 2002 | Answer brief on the merits filed |
| May 13 2002 | Reply brief filed (case fully briefed) |
| Jun 10 2002 | Amicus Curiae Brief filed by: |
| Jun 14 2002 | Amicus Curiae Brief filed by: |
| Jun 14 2002 | Amicus Curiae Brief filed by: |
| Jun 14 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Jul 1 2002 | Amicus Curiae Brief filed by: |
| Aug 8 2002 | Response to amicus curiae brief filed |
